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STOCK PURCHASE AGREEMENT
between
COMPOST AMERICA HOLDING COMPANY, INC.
and
WASTECO VENTURES LIMITED
Dated as of November 3, 1997
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TABLE OF CONTENTS
ARTICLE I
DEFINITIONS
SECTION 1.01. Definitions................................................... 1
ARTICLE II
PURCHASE AND SALE OF SHARES; CLOSING
SECTION 2.01. Authorization, Purchase and Sale of Shares.................... 9
SECTION 2.02. Closing ..................................................... 9
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
SECTION 3.01. Organization and Qualification; Subsidiaries.................. 10
SECTION 3.02. Certificate of Incorporation and By-Laws...................... 11
SECTION 3.03. Capitalization................................................ 11
SECTION 3.04. Authority..................................................... 12
SECTION 3.05. No Conflict; Required Filings and Consents.................... 12
SECTION 3.06. Common Stock; Preferred Stock................................. 13
SECTION 3.07. Compliance with Laws.......................................... 14
SECTION 3.08. SEC Filings; Financial Statements............................. 14
SECTION 3.09. Financial Statements.......................................... 15
SECTION 3.10. Absence of Undisclosed Liabilities............................ 15
SECTION 3.11. Absence of Certain Changes, Events and Conditions;
Conduct in the Ordinary Course.............................. 15
SECTION 3.12. Employee Benefit Matters...................................... 18
SECTION 3.13. Real Property................................................. 20
SECTION 3.14. Tangible Personal Property.................................... 21
SECTION 3.15. Intellectual Property......................................... 22
SECTION 3.16. Environmental Matters......................................... 25
SECTION 3.17. Litigation.................................................... 27
SECTION 3.18. Insurance..................................................... 27
SECTION 3.19. Material Contracts............................................ 29
SECTION 3.20. Licenses and Permits.......................................... 31
SECTION 3.21. Labor Matters................................................. 31
SECTION 3.22. Taxes ..................................................... 32
SECTION 3.23. Miami Recycling and Composting Project........................ 33
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SECTION 3.24. Newark Recycling and Composting Project....................... 34
SECTION 3.25. Private Offering.............................................. 35
SECTION 3.26. Brokers ..................................................... 35
SECTION 3.27. Accuracy of Information....................................... 35
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
WITH RESPECT TO XXXXX
SECTION 4.01. Financial Information and Material Contracts of Xxxxx......... 36
SECTION 4.02. Railcars, Containers and Equipment............................ 38
SECTION 4.03. The New York City Contract.................................... 38
SECTION 4.04. Licenses and Permits.......................................... 38
SECTION 4.05. Xxxxx Agreements.............................................. 39
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF THE PURCHASER
SECTION 5.01. Corporate Organization........................................ 39
SECTION 5.02. Authority..................................................... 39
SECTION 5.03. No Conflict; Required Filings and Consents.................... 39
SECTION 5.04. Funds ..................................................... 40
SECTION 5.05. Investment Purpose............................................ 40
SECTION 5.06. Brokers ..................................................... 40
ARTICLE VI
COVENANTS
SECTION 6.01. Use of Proceeds............................................... 41
SECTION 6.02. Restrictions on Operation of EPIC............................. 41
SECTION 6.03. Bedminster Matters............................................ 42
ARTICLE VII
TAX MATTERS
SECTION 7.01. Indemnity..................................................... 43
SECTION 7.02. Returns and Payments.......................................... 43
SECTION 7.03. Contests ..................................................... 44
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SECTION 7.04. Time of Payment............................................... 44
SECTION 7.05. Conveyance Taxes.............................................. 44
SECTION 7.06. Miscellaneous................................................. 44
ARTICLE VIII
CONDITIONS TO THE CLOSING
SECTION 8.01. Conditions to Obligations of the Purchaser.................... 45
SECTION 8.02. Conditions to Obligations of the Company...................... 48
ARTICLE IX
INDEMNIFICATION
SECTION 9.01. Survival of Representations and Warranties.................... 49
SECTION 9.02. Indemnification by the Company................................ 49
SECTION 9.03. Indemnification by the Purchaser.............................. 52
SECTION 9.04. Materiality................................................... 53
SECTION 9.05. Time Period; Dollar Threshold................................. 53
SECTION 9.06. Notice and Defense............................................ 53
ARTICLE X
AMENDMENT AND WAIVER
SECTION 10.01. Amendment.................................................... 54
SECTION 10.02. Waiver ..................................................... 54
ARTICLE XI
GENERAL PROVISIONS
SECTION 11.01. Notices ..................................................... 54
SECTION 11.02. Entire Agreement; Assignment................................. 56
SECTION 11.03. Parties in Interest.......................................... 56
SECTION 11.04. Governing Law................................................ 56
SECTION 11.05. Jurisdiction, Etc............................................ 56
SECTION 11.06. Headings..................................................... 56
SECTION 11.07. Counterparts................................................. 57
SECTION 11.08. Specific Performance......................................... 57
SECTION 11.09. Expenses..................................................... 57
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EXHIBIT A Certificate of Designation of Preferred Stocks
EXHIBIT B Opinion of Xxxxxxxxx Traurig
EXHIBIT C Registration Rights Agreement
EXHIBIT D Officer's Certificate of the Company
EXHIBIT E Officer's Certificate of the Purchaser
EXHIBIT F The Xxxxx Agreements
EXHIBIT G New York City Contract Opinion
EXHIBIT H Stockholders Agreement
DISCLOSURE SCHEDULE
STOCK PURCHASE AGREEMENT (this "Agreement"), dated as of November 3,
1997, between COMPOST AMERICA HOLDING COMPANY, INC., a New Jersey corporation
(the "Company"), and WASTECO VENTURES LIMITED, a corporation organized under the
laws of the British Virgin Islands ("Wasteco" or the "Purchaser").
W I T N E S S E T H:
--------------------
WHEREAS, the Company desires to authorize, issue, and sell to the
Purchaser, and the Purchaser desires to purchase from the Company, the Wasteco
Shares and the Wasteco Common Stock (as hereinafter defined) on the terms and
subject to the conditions set forth in this Agreement; and
WHEREAS, the Company intends simultaneously with the Closing of this
Agreement to purchase all of the common stock of X.X. Xxxxx Construction Co.
Inc., a New Jersey corporation ("Xxxxx"), from its shareholders Xxxxxx X. Xxxxx,
an individual ("X.X. Xxxxx"), and The Xxxxxx X. and Xxxxxx Xxxxx Charitable
Trust (the "Trust") (the "Xxxxx Acquisition"); and
WHEREAS, notwithstanding the foregoing, contemporaneously with its sale
of the Xxxxx Common Stock, X.X. Xxxxx will retain certain assets of Xxxxx as
listed in the applicable Schedules of the Xxxxx Agreements and this Agreement
(the "Excluded Assets"); and
WHEREAS, the Company intends to use the Purchase Price proceeds to
finance the Xxxxx Acquisition; and
WHEREAS, upon consummation of the Xxxxx Acquisition, the Company
intends to change the name of Xxxxx (exclusive of the Excluded Assets retained
by X.X. Xxxxx as aforesaid) to EPIC ("EPIC");
NOW, THEREFORE, in consideration of the premises and the mutual
covenants and agreements hereinafter set forth, the parties hereto agree as
follows:
ARTICLE I
DEFINITIONS
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SECTION 1.01. Definitions. As used in this Agreement, the following
terms shall have the following meanings:
"Action" means any claim, action, suit, arbitration, inquiry,
proceeding or investigation by or before any Governmental Authority.
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"Affiliate" of a Person means a Person that directly or indirectly,
through one or more intermediaries, controls, is controlled by or is under
common control with, the first mentioned Person.
"Articles of Incorporation" means the Restated Articles of
Incorporation of the Company, as amended through the date hereof.
"B Preferred Shares" has the meaning specified in Section 2.01.
"Bankruptcy Proceeding" has the meaning specified in Section 8.01.
"Bedminster Miami" has the meaning specified in Section 6.03.
"Board" means the Board of Directors of the Company.
"Business" means the construction or management of enclosed organic
material recycling compost manufacturing plants.
"Business Day" means any day other than a Saturday, Sunday or federal
holiday and consists of the time period from 12:01 a.m. through 12:00 midnight,
Eastern Standard Time.
"By-Laws" means the Restated By-Laws of the Company, as amended through
the date hereof.
"CERCLA" has the meaning specified in the definition of "Environmental
Laws".
"CERCLIS" means the Comprehensive Environmental Responsive,
Compensation and Liability Information System, 42 U.S.C. ss. 9616(a).
"Closing" means the completion of the transactions specified herein
relating to the purchase and sale of the Wasteco Shares and the Wasteco Common
Stock as contemplated by Section 2.01 hereof.
"Closing Date" means the date on which the Closing shall occur.
"Code" means the Internal Revenue Code of 1986, as amended, together
with the rules and regulations promulgated thereunder.
"Collective Bargaining Agreements" has the meaning specified in Section
3.21.
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"Common Stock" means the common stock of the Company, no par value.
"Company Loss" has the meaning specified in Section 9.03.
"Control" (including the terms "controlled by" and "under common
control with") means the possession, directly or indirectly, or as trustee or
executor, of the power to direct or cause the direction of the management and/or
policies of a Person, whether through the ownership of stock, as trustee or
executor, by contract or credit arrangement or otherwise.
"Disclosure Schedule" means the Disclosure Schedule dated as of the
date hereof delivered to the Purchaser by the Company and forming a part of this
Agreement.
"EBITDA" means earnings before interest, income taxes, depreciation and
amortization.
"Encumbrance" means any security interest, pledge, mortgage, lien
(including environmental liens), charge or (as determined to the best of the
Company's knowledge after due inquiry) adverse claim, including, without
limitation, any restriction on the use, voting, transfer, receipt of income or
other exercise of any attributes of ownership, but excluding such Encumbrances
which, individually or in the aggregate, would not have a Material Adverse
Effect.
"Environmental Laws" means any law, now or hereafter in effect and as
amended, and any judicial or administrative interpretation thereof, including
any judicial or administrative order, consent decree or judgment, relating to
pollution or protection of the environment, health, safety or natural resources,
including, without limitation, those relating to the use, handling,
transportation, treatment, storage, disposal, release or discharge of Hazardous
Substances.
"Environmental Permit" means any permit, approval, identification
number, license or other authorization required to operate the Business on the
Real Property under any applicable Environmental Law.
"EPIC" has the meaning specified in the recitals to this Agreement. Any
reference to EPIC, before or after the expected name change referred to in the
recitals to this Agreement, shall mean Xxxxx exclusive of the Excluded Assets.
"EPIC Option" means the option of the Purchaser to convert certain
Wasteco Securities into shares of common stock of Xxxxx as provided in the
Certificate of Designation of the A and C Preferred Stock.
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"Equipment Debt Refinancing" means the refinancing of Xxxxx'x equipment
debt from U.S. Bankcorp in the maximum principal amount of $10,000,000.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended, together with the rules and regulations promulgated thereunder.
"Exchange Act" means the Securities Exchange Act of 1934, as amended,
together with the rules and regulations promulgated thereunder.
"Excluded Assets" has the meaning set forth in the recitals to this
Agreement, as more fully defined in the Xxxxx Agreements.
"Financial Statements" has the meaning specified in Section 3.09.
"GAAP" means U.S. generally accepted accounting principles and
practices in effect from time to time applied consistently throughout the
periods involved.
"Governmental Authority" means any United States federal, state or
local or any foreign governmental, regulatory or administrative authority,
agency or commission or any court, tribunal, judicial or arbitral body.
"Hazardous Substances" means (a) petroleum and petroleum products,
by-products or breakdown products, radioactive materials, asbestos-containing
materials and polychlorinated biphenyls, and (b) any other chemicals, materials
or substances regulated as toxic or hazardous or as a pollutant, contaminant or
waste under any applicable Environmental Law in such levels beyond those
permitted by applicable Environmental Laws.
"Indebtedness" means, with respect to any Person, (a) all indebtedness
of such Person, absolute or contingent, for borrowed money, (b) all obligations
of such Person for the deferred purchase price of property or services, other
than trade obligations incurred in the ordinary course of business, (c) all
obligations of such Person evidenced by notes, bonds, debentures or other
similar instruments, (d) all indebtedness created or arising under any
conditional sale or other title retention agreement with respect to property
acquired by such Person (even though the rights and remedies of the seller or
lender under such agreement in the event of default are limited to repossession
or sale of such property), (e) all obligations of such Person as lessee under
leases that have been or should be, in accordance with GAAP, recorded as capital
leases, (f) all obligations, contingent or otherwise, of such Person under
acceptances, letters of credit or similar facilities, (g) all obligations of
such Person to purchase, redeem, retire, defease or otherwise acquire for value
any capital stock of such Person or any warrants, rights or options to acquire
such capital stock, valued, in the case of redeemable preferred stock, at the
greater of its voluntary or involuntary liquidation
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preference plus accrued and unpaid dividends, (h) all Indebtedness of others
referred to in clauses (a) through (f) above guaranteed directly or indirectly
in any manner by such Person, or in effect guaranteed directly or indirectly by
such Person through an agreement (1) to pay or purchase such Indebtedness or to
advance or supply funds for the payment or purchase of such Indebtedness, (2) to
purchase, sell or lease (as lessee or lessor) property, or to purchase or sell
services, primarily for the purpose of enabling the debtor to make payment of
such Indebtedness or to assure the holder of such Indebtedness against loss, (3)
to supply funds to or in any other manner invest in the debtor (including any
agreement to pay for property or services irrespective of whether such property
is received or such services are rendered), or (4) otherwise to assure a
creditor against loss, and (i) all Indebtedness referred to in clauses (a)
through (f) above secured by (or for which the holder of such Indebtedness has
an existing right, contingent or otherwise, to be secured by) any Encumbrance on
property (including, without limitation, accounts and contract rights) owned by
such Person, even though such Person has not assumed or become liable for the
payment of such Indebtedness.
"Intellectual Property" means patents, patent registrations and patent
applications, trademarks, service marks, trademark rights, trade names, trade
name rights, registered copyrights and trade secrets owned or used by the
Company or any of its Subsidiaries in the conduct of its business.
"Interim Financial Statements" has the meaning specified in Section
3.09.
"IRS" means the United States Internal Revenue Service.
"Leased Real Property" means the real property leased by the Company or
its Subsidiaries, together with, to the extent leased by the Company or its
Subsidiaries, all buildings and other structures, facilities or improvements
presently or hereafter located thereon, all fixtures, systems, equipment and
items of personal property owned by the Company or its Subsidiaries attached or
appurtenant thereto and all easements, licenses, rights and appurtenances
relating to the foregoing.
"Liabilities" means any and all debts, liabilities and obligations,
whether accrued or fixed, absolute or contingent, mature or unmatured or
determined or determinable, including, without limitation, those arising under
any law, rule, regulation or order by a Governmental Authority and those arising
under any contract, agreement, commitment or undertaking.
"Licensed Intellectual Property" means all Intellectual Property
licensed or sublicensed to the Company or any Subsidiary or Xxxxx from a third
party.
"Xxxxx A Preferred Shares" has the meaning specified in Section 2.01.
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"Xxxxx Agreements" means the Stock Purchase Agreement dated September
17, 1997 among X.X. Xxxxx, the Company and Xxxxx together with the Stock
Purchase Agreement dated the same between the Company and the Trust. The Xxxxx
Agreements are incorporated herein in their entirety by reference and form a
part of this Agreement.
"Xxxxx Common Stock" has the meaning specified in Section 2.01.
"Xxxxx C Preferred Shares" has the meaning specified in Section 2.01.
"Xxxxx Shares" has the meaning specified in Section 2.01.
"Loss" has the meaning specified in Section 9.03.
"Material Adverse Effect" means any circumstance, change, event,
transaction, loss, failure, effect or other occurrence that is, or is reasonably
likely to be, materially adverse to the Business, operations, properties
(including intangible properties), condition (financial or otherwise), assets,
Liabilities, results of operations or financial or business prospects of the
Company and its Subsidiaries taken as a whole.
"Miami Project" has the meaning specified in Section 3.23.
"Mortgage Refinancing" means the refinancing of the existing first
mortgage on the Newark Project, such refinancing occurring contemporaneously
with the execution and delivery of this Agreement.
"Multiemployer Plan" has the meaning specified in Section 3.12.
"New York City Contract" means the Supply and Service Agreement between
The City of New York Department of Environmental Protection and X.X. Xxxxx
Construction Company, Inc. d/b/a/ EPIC.
"Newark Project" has the meaning specified in Section 3.24.
"Owned Intellectual Property" means all Intellectual Property in and to
which the Company or any Subsidiary holds, or has a right to hold, any right,
title and interest.
"Owned Real Property" means the real property owned by the Company or
its Subsidiaries, together with all buildings and other structures, facilities
or improvements presently or hereafter located thereon, all fixtures, systems,
equipment and items of personal property of the Company or its Subsidiaries
attached or appurtenant thereto and all easements, licenses, rights and
appurtenances relating to the foregoing.
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"Person" means an individual, corporation, partnership, association,
trust, joint venture, unincorporated organization, other entity or group (as
defined in Section 13(d)(3) of the Exchange Act).
"Plans" has the meaning specified in Section 3.12.
"Preferred Stock" means the shares of Preferred Stock Series A of the
Company, no par value, the shares of Preferred Stock Series B of the Company, no
par value and the shares of Preferred Stock Series C of the Company, no par
value, which shall have the rights and terms set forth in Exhibit A hereto.
"Preferred Stock Series A" means the Series A Preferred Stock of the
Company, no par value.
"Preferred Stock Series B" means the Series B Preferred Stock of the
Company, no par value.
"Preferred Stock Series C" means the Series C Preferred Stock of the
Company, no par value.
"Purchase Price" has the meaning specified in Section 2.01.
"Purchaser Loss" has the meaning specified in Section 9.02.
"Real Property" means the Leased Real Property and the Owned Real
Property.
"Registration Rights Agreement" means the Registration Rights
Agreement, dated as of November 3, 1997, between the Company and the Purchaser.
"Release" means disposing, discharging, injecting, spilling, leaking,
leaching, dumping, emitting, escaping, emptying, seeping, placing and the like
into or upon any land or water or air or otherwise entering into the
environment.
"Remedial Action" means all action to (i) clean up, remove, treat or
handle in any other way Hazardous Substances in the environment; (ii) prevent
the Release of Hazardous Substances so that they do not migrate, endanger or
threaten to endanger public health or the environment; or (iii) perform remedial
investigations, feasibility studies, corrective actions, closures and
post-remedial or post-closure studies, investigations, operations, maintenance
and monitoring on, about or in any Real Property with respect to any Release of
Hazardous Substances.
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"SEC" means the Securities and Exchange Commission.
"Securities Act" means the Securities Act of 1933, as amended, together
with the rules and regulations promulgated thereunder.
"Stockholders Agreement" means the Stockholders Agreement, dated as of
November 3, 1997, among the Company, the Purchaser and certain shareholders of
the Company.
"Subsidiary" or "Subsidiaries" means any corporation, partnership,
joint venture or other legal entity of which the Company or any other Person, as
the case may be (either alone or through or together with any other Subsidiary),
owns, directly or indirectly, fifty percent or more of the stock or other equity
interests, the holders of which are generally entitled to vote for the election
of the board of directors or other governing body of such corporation or other
legal entity. Xxxxx shall be considered for all purposes to be a Subsidiary of
the Company regardless of whether the Closing or the closing of the Xxxxx
Acquisition has yet taken place.
"Tangible Personal Property" means machinery, equipment, tools,
supplies, furniture, fixtures, vehicles, railcars and other tangible personal
property.
"Tax" or "Taxes" means all income, gross receipts, sales, use,
transfer, employment, franchise, profits, property, excise or other similar
taxes, estimated import duties, fees, stamp taxes and duties, value added taxes,
assessments or charges of any kind whatsoever (whether payable directly or by
withholding), together with any interest and any penalties, additions to tax or
additional amounts imposed by any taxing authority with respect thereto.
"Wasteco A Preferred Shares" has the meaning specified in Section 2.01.
"Wasteco Common Stock" has the meaning specified in Section 2.01.
"Wasteco C Preferred Shares" has the meaning specified in Section 2.01.
"Wasteco Shares" has the meaning specified in Section 2.01.
"Wasteco Securities" means the Wasteco Common Stock and the Wasteco
Shares.
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ARTICLE II
PURCHASE AND SALE OF SHARES; CLOSING
------------------------------------
SECTION 2.01. Authorization, Purchase and Sale of Shares. Upon the
terms and subject to the conditions set forth herein, at the Closing, the
Company shall authorize, issue and sell to the Purchaser, and the Purchaser
shall purchase from the Company, (i) 130,000 shares of Preferred Stock Series A
(the "Wasteco A Preferred Shares") representing 77% of the authorized Preferred
Stock Series A, (ii) 70,000 shares of Preferred Stock Series C (the "Wasteco C
Preferred Shares"), representing 77% of the authorized Preferred Stock Series C
and (iii) 11,490,609 shares of Common Stock (the "Wasteco Common Stock"), for an
aggregate Purchase Price of $20 million. The Wasteco A Preferred Shares and the
Wasteco C Preferred Shares are sometimes hereinafter referred to as the "Wasteco
Shares". The aggregate of the purchase price for the Wasteco A Preferred Shares,
the Wasteco C Preferred Shares and the Wasteco Common Stock is sometimes
hereinafter referred to as the "Purchase Price".
Contemporaneously with the issuance of the Wasteco Shares and the
Wasteco Common Stock, the Company is also issuing to X.X. Xxxxx (i) 39,000
shares of Preferred Stock Series A (the "Xxxxx A Preferred Shares") representing
the remaining 23% of the authorized Preferred Stock Series A, (ii) 21,000 shares
of Preferred Stock Series C (the "Xxxxx C Preferred Shares") representing the
remaining 23% of the authorized Preferred Stock Series C and (iii) 3,447,182
shares of Common Stock (the "Xxxxx Common Stock") for an aggregate purchase
price of $6,000,000. The Xxxxx A Preferred Shares and the Xxxxx C Preferred
Shares are sometimes hereinafter referred to as the "Xxxxx Shares".
The Company also has outstanding 801,000 shares of Preferred Stock
Series B (the "B Preferred Shares").
The Wasteco Shares and the Xxxxx Shares shall have the rights and terms
set forth in Exhibit A hereto.
SECTION 2.02. Closing. (a) The Closing of the purchase and sale of the
Wasteco Shares and the Wasteco Common Stock shall take place upon the
satisfaction of the conditions set forth herein at the offices of Xxxxxxxxx
Xxxxxxx, 000 Xxxx 00xx Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000, or at such other time
and place as the Company and the Purchaser may mutually agree in writing.
(b) At the Closing, the Company shall deliver or cause to be delivered
to the Purchaser: (i) stock certificates evidencing the Wasteco Shares and the
Wasteco Common Stock registered in the name of the Purchaser (or its designee);
(ii) the certificates
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referred to in Sections 8.01(a) and (d); (iii) the legal opinions referred to in
Sections 8.01(k) and (o); (iv) a receipt for the Purchase Price; (v) other
documents referred to in Section 8.01; and (vi) such other documents as the
Purchaser shall reasonably request.
(c) At the Closing, the Purchaser shall deliver to the Company: (i) the
Purchase Price, by wire transfer, to an account or accounts designated by the
Company at least three Business Days prior to the Closing Date; (ii) the
certificate referred to in Section 8.02(a); and (iii) a receipt for the Wasteco
Shares and the Wasteco Common Stock.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
---------------------------------------------
The Company represents and warrants to the Purchaser that:
SECTION 3.01. Organization and Qualification; Subsidiaries. The
Company, Xxxxx and each of its other Subsidiaries is a corporation duly
organized, validly existing and in good standing under the laws of their
respective jurisdictions of incorporation or formation, and has the requisite
power and authority to own, lease and operate their properties and carry on
their business in all material respects as presently owned or conducted. Each of
the Company and its Subsidiaries is duly qualified or licensed as a foreign
corporation to do business, and is in good standing, in each jurisdiction where
the character of its properties owned, leased or operated by it or the nature of
its activities makes such qualification or licensing necessary, except those
jurisdictions, if any, in which the failure to be so duly qualified or licensed
and in good standing would not, taken as a whole, have a Material Adverse
Effect. Schedule 3.01(a) of the Disclosure Schedule sets forth a complete and
correct list of each of the Subsidiaries of the Company and each Affiliate of
the Company, excluding Xxxxx, and Schedule 3.01(b) sets forth the same
information as to Xxxxx and its Subsidiaries and Affiliates. Each such
Subsidiary is wholly owned by the Company, unless otherwise indicated in
Schedule 3.01(a) of the Disclosure Schedule, or by Xxxxx, except as indicated in
Schedule 3.01(b) of the Disclosure Schedule, which Schedules set forth all other
owners of each such Subsidiary not wholly owned by the Company and Xxxxx,
including their percentage of ownership in such entity and further explain any
differences between the percentage of such ownership and any rights of such
owner with respect to the cash flow of such entities and further including all
Persons who have any rights to become such owner in the future. Other than the
Subsidiaries, there are no other corporations, partnerships, joint ventures,
associations or other entities in which the Company or Xxxxx owns, of record or
beneficially, any direct or indirect equity or other interest or any right
(contingent or otherwise) to acquire the same. Other than the Subsidiaries, the
Company or Xxxxx is not a member of (nor is any part of its business
11
conducted through) any partnership, nor is the Company a participant in any
joint venture or similar arrangement.
SECTION 3.02. Certificate of Incorporation and By-Laws. The Company has
heretofore furnished to the Purchaser as to itself and Xxxxx and as to each
other Subsidiary a complete and correct copy of the Certificate of Incorporation
and the By-Laws, each as amended through the date hereof, each of which is in
full force and effect as of the date hereof. The Company is not in violation of
any of the provisions of the Certificate of Incorporation or By-Laws, and Xxxxx
and its other Subsidiaries are not in violation of any of the provisions of
their charters of incorporation, by-laws or equivalent organizational documents.
SECTION 3.03. Capitalization. (a) As of the close of business on
November 2, 1997, the authorized capital stock of the Company consists of (x)
25,000,000 shares of preferred stock, of which 401,000 shares of Preferred Stock
Series B are issued and outstanding, and 800,000 Shares of Preferred Stock
Series B are reserved for issuance upon conversion of convertible notes and (y)
50,000,000 shares of Common Stock, of which (i) 20,487,563 are issued and
outstanding, (ii) no shares of Common Stock are held in the treasury of the
Company, (iii) an aggregate of 1,201,000 shares of Common Stock are reserved for
issuance upon conversion of the Preferred Stock Series B, and (iv) other than
options with respect to the Xxxxx Agreements and employment and consulting
agreements related thereto, 9,336,080 shares of Common Stock are reserved for
options, warrants or other similar rights pursuant to those agreements listed on
Schedule 3.03(b)(1) attached hereto (for a total of 31,024,643 Common Stock
issued and reserved for issuance).
(b) Except as set forth in this Section 3.03 or in Schedule 3.03(b)(1)
of the Disclosure Schedule as to the Company, Schedule 3.03(b)(2) as to Xxxxx
and Schedule 3.03(b)(3) as to other Subsidiaries or Affiliates of the Company,
there are no options, warrants or other rights, agreements, arrangements or
commitments of any character to which the Company, Xxxxx or any of its other
Subsidiaries or Affiliates is a party or obligating the Company, Xxxxx or any of
its other Subsidiaries or Affiliates to issue or sell any shares of capital
stock of, or other equity interests in, the Company, Xxxxx or any of its other
Subsidiaries or Affiliates. Except as set forth in Schedule 3.03(b) of the
Disclosure Schedule, there are no outstanding contractual obligations of the
Company, Xxxxx or any of its other Subsidiaries or Affiliates to repurchase,
redeem or otherwise acquire any of the capital stock of the Company, Xxxxx or
any other Subsidiary or Affiliate or to provide funds to or make any investment
(in the form of a loan, capital contribution or otherwise) in any Subsidiary or
Affiliate or any other entity. Each of the outstanding shares of capital stock
of each of Xxxxx and the Company's other Subsidiaries is duly authorized,
validly issued, fully paid and nonassessable and is owned by the Company,
directly or indirectly, free and clear of all Encumbrances except as set forth
in Schedule 3.03(b)(4) of the Disclosure Schedule.
12
(c) Except as set forth on Schedule 3.03(c) of the Disclosure Schedule
and as set forth herein, neither the Company nor any of its Subsidiaries and
Affiliates or Xxxxx is a party to any agreement granting registration rights to
any Person with respect to any equity or debt securities of the Company.
(d) Schedule 3.03(d) of the Disclosure Schedule contains a complete and
accurate list of the names and the addresses of each Person owning shares of
capital stock of the Company, Xxxxx and each other Subsidiary representing 5% or
more of the outstanding shares of Common or Preferred Stock of such company, as
the case may be, and the corresponding number of shares and the certificate
number evidencing such shares owned by such Person as of September 30, 1997.
(e) Except as otherwise disclosed in the Xxxxx Agreements, none of the
Persons listed on Schedule 3.03(d) of the Disclosure Schedule, and no officer or
director of the Company, Xxxxx or any other Subsidiary and no relative or spouse
who resides with, or is a dependent of, any such Person, has any interest in any
business enterprise (other than the Company or any Subsidiary) which engages in
any of the businesses in which the Company or any of its Subsidiaries engage or
which are suppliers to, or purchasers from, the Company or its Subsidiaries.
(f) Schedule 303(f) of the Disclosure Schedule set forth the terms and
conditions (including, without limitation, any rights and preferences) of the B
Preferred Shares.
SECTION 3.04. Authority. The Company has all necessary corporate power
and authority to execute and deliver this Agreement and to perform its
obligations and to consummate the transactions contemplated hereunder including
the issuance of the Wasteco Shares and the Wasteco Common Stock. The execution
and delivery of this Agreement by the Company and the consummation by the
Company of the transactions contemplated hereby have been duly and validly
authorized by all necessary corporate action and no other corporate proceedings
on the part of the Company are necessary to authorize this Agreement or to
consummate the transactions contemplated by this Agreement. This Agreement has
been duly and validly executed and delivered by the Company and, assuming the
due authorization, execution and delivery hereof by the Purchaser and payment
for the Wasteco Shares and the Wasteco Common Stock as contemplated by this
Agreement, constitutes the legal, valid and binding obligation of the Company
enforceable against the Company in accordance with its terms, subject to
bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and
similar laws of general applicability relating to or affecting creditors' rights
and to general equity principles.
SECTION 3.05. No Conflict; Required Filings and Consents. (a) Assuming
the satisfaction of the conditions set forth in Article VIII hereof, the
execution and delivery
13
of this Agreement by the Company do not, and the performance of this Agreement
(including, without limitation, the consummation of the transactions
contemplated hereunder and the exchange, conversion or redemption, if any, of
the Preferred Stock) will not, (i) conflict with or violate the Certificate of
Incorporation or By-Laws, (ii) conflict with or violate the certificates of
incorporation or by-laws or equivalent organizational documents of Xxxxx or any
of the Company's other Subsidiaries, (iii) conflict with or violate any law,
rule, regulation, order, judgment or decree applicable to the Company, Xxxxx or
any of its other Subsidiaries or by which its or any of their respective
properties are bound or affected, or (iv) result in any breach of or constitute
a default (or an event which with notice or lapse of time or both would become a
default) under, or give to others any rights of termination, amendment,
acceleration or cancellation of, or result in the creation of a lien or
encumbrance on any of the properties or assets of the Company, Xxxxx or any of
its other Subsidiaries pursuant to any note, bond, mortgage, indenture,
contract, agreement, lease, license, permit, insurance policy or other
instrument or obligation to which the Company, Xxxxx or any of its other
Subsidiaries is a party, or by which the Company, Xxxxx or any of its other
Subsidiaries or its or any of their respective properties are bound or affected,
except as disclosed in Schedule 3.05(a) of the Disclosure Schedule and except in
the case of clauses (ii), (iii) and (iv) above for such conflicts which would
not, taken as a whole, have a Material Adverse Effect.
(b) Except as disclosed in Section 3.05(b) of the Disclosure Schedule,
the execution and delivery of this Agreement by the Company do not, and the
performance of this Agreement by the Company (including, without limitation, the
consummation of the transactions contemplated hereunder) will not, require (i)
any consent, approval, authorization or permit of, or filing (other than
filings, if any, required on Form 8-K and Form 10-C with the Securities and
Exchange Commission (the "SEC")) with action by, or notification to, any
governmental or regulatory authority, domestic or foreign, on the part of the
Company or Xxxxx or any of its other Subsidiaries, or (ii) approval by the
holders of any class or series of capital stock of the Company.
SECTION 3.06. Common Stock; Preferred Stock. Assuming all conditions
set forth in Article VIII are satisfied, following the consummation of the
transactions hereunder, all shares of Common Stock and Preferred Stock subject
to issuance pursuant to this Agreement (including, without limitation, the
Common Stock issuable upon conversion of the Series C Preferred Stock), upon
issuance against payment for the shares of Preferred Stock as contemplated by
this Agreement or upon conversion of the Series C Preferred Stock into Common
Stock or upon conversion of the Wasteco Shares and the Wasteco Common Stock into
common stock of Xxxxx, as the case may be, shall (a) be duly authorized, validly
issued, fully paid and nonassessable and (b) not be subject to any Encumbrances.
With respect to the shares of Common Stock, such shares shall have accorded to
them full voting rights in accordance with the Articles of Incorporation of the
Company and New Jersey law. With respect to the shares of Series C Preferred
Stock, such shares will be convertible into
14
shares of Common Stock and will have certain voting rights in accordance with
the terms of the Preferred Stock. With respect to the EPIC Option, shares of the
Preferred Stock will be convertible into shares of Common Stock of Xxxxx in
accordance with the terms of the Preferred Stock.
SECTION 3.07. Compliance with Laws. Except as set forth in Schedule
3.07 of the Disclosure Schedule, neither the Company nor Xxxxx nor any of its
other Subsidiaries is in conflict with, or in violation of, any law, rule,
regulation, order, judgment or decree applicable to the Company or Xxxxx or any
of its other Subsidiaries or by which the Company or Xxxxx or any of its other
Subsidiaries or any of its or their respective properties are bound or affected,
except for any such conflicts or violations which would not, individually or in
the aggregate, have a Material Adverse Effect.
SECTION 3.08. SEC Filings; Financial Statements. The Company has filed
all forms, reports, statements and documents required to be filed with the SEC
since April 30, 1995 (the "Company SEC Reports"). The Company SEC Reports (i)
were each prepared in accordance with, and at the time of filing complied in all
material respects with, the requirements of the Securities Act of 1933, as
amended, together with the rules and regulations promulgated thereunder (the
"Securities Act"), or the Securities Exchange Act of 1934, as amended, together
with the rules and regulations promulgated thereunder (the "Exchange Act"), as
the case may be, and (ii) except as disclosed in Section 3.08 of the Disclosure
Schedule, did not at the time they were filed contain any untrue statement of a
material fact or omit to state a material fact required to be stated therein or
necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading. None of Xxxxx or the
Company's other Subsidiaries is required to file any forms, reports or other
documents with the SEC. Each of the consolidated financial statements
(including, in each case, any related notes thereto) contained in the SEC
Reports has been prepared in accordance with GAAP (except as may be indicated in
the notes thereto), and each presents fairly the consolidated financial position
of the Company and its consolidated Subsidiaries at the respective dates thereof
and the consolidated results of its operations and changes in cash flows for the
periods indicated, except that the unaudited interim financial statements were
or are subject to normal and recurring year-end adjustments. Except as would not
have a Material Adverse Effect, and except for (i) liabilities reflected in the
Company SEC Reports or in Schedule 3.08 of the Disclosure Schedule, (ii)
liabilities incurred in the ordinary course of business of the Company and its
Subsidiaries subsequent to Xxxxx 00, 0000, (xxx) liabilities incurred with
respect to the Mortgage Refinancing and (iv) liabilities incurred with respect
to the Equipment Debt Refinancing, the Company and its Subsidiaries have no
liabilities that are material to the Company and its Subsidiaries, taken as a
whole, and there is no existing condition or set of circumstances that could
reasonably be expected to result in any such liability.
15
SECTION 3.09. Financial Statements. True and complete copies of (i) the
audited consolidated balance sheets of the Company for each of the fiscal years
ended as of April 30, 1996 and April 30, 1997, and the related audited
consolidated statements of income, cash flows and changes in financial position
of the Company, together with all related notes and schedules thereto,
accompanied by the reports thereon or management letters from the Company's
accountants (collectively, the "Financial Statements"), (ii) the unaudited
balance sheets of the Company for the fiscal quarter ended July 31, 1997, and
the related unaudited statements of income cash flows, and changes in financial
positions of the Company for each, together with all related notes and schedules
thereto, which statements include all material known adjustments as of the date
of such statements, subject to ordinary year-end adjustments which in the
aggregate would not be material (collectively referred to herein as the "Interim
Financial Statements") and (iii) the schedule of Indebtedness of the Company
(the "Debt Schedule") as set forth in Schedule 3.09 of the Disclosure Schedule,
as well as an aging of accounts payable, have been delivered by the Company to
the Purchaser (including, without limitation, with respect to each debt, (i) the
amount, (ii) the scheduled principal payments and (iii) the date of maturity of
such instrument) and the Company and its Subsidiaries are current in all their
Indebtedness as set forth in the Debt Schedule. The Financial Statements and the
Interim Financial Statements (i) were prepared in accordance with the books of
account and other financial records of the Company, (ii) present fairly the
financial condition, results of operations and cash flows of the Company as of
the dates thereof or for the periods covered thereby, (iii) have been prepared
in accordance with GAAP applied on a basis consistent with the past practices of
the Company and throughout the periods involved and (iv) include all adjustments
that are necessary for a fair presentation of the consolidated financial
condition of the Company and the Subsidiaries other than Xxxxx, and the results
of the operations and cash flows of the Company and the Subsidiaries other than
Xxxxx as of the dates thereof or for the periods covered thereby (subject, in
the case of Interim Financial Statements, to normal and recurring year-end
adjustments).
SECTION 3.10. Absence of Undisclosed Liabilities. There are no
liabilities or obligations of the Company or its Subsidiaries other than Xxxxx
(whether absolute, accrued, contingent or otherwise) that would be required to
be reflected on a balance sheet or in the footnotes thereto prepared in
accordance with GAAP, other than liabilities (a) reflected in or reserved
against on the Financial Statements or Interim Financial Statements or the notes
thereto, (b) described in Schedule 3.10 of the Disclosure Schedule or otherwise
disclosed in Schedule 3.11 of the Disclosure Schedule or (c) incurred by the
Company or any of its Subsidiaries other than Xxxxx in the ordinary course of
business subsequent to September 30, 1997.
SECTION 3.11. Absence of Certain Changes, Events and Conditions;
Conduct in the Ordinary Course. (a) Since July 31, 1997, except as disclosed in
Schedule 3.11 of the Disclosure Schedule, there has not been any change having a
Material Adverse Effect. Except as disclosed in Schedule 3.11 of the Disclosure
Schedule, there are no
16
conditions known to the Company existing, with respect to the markets, proposed
marketing plans, facilities, capabilities or personnel of the Company, that
reasonably could be expected to have a Material Adverse Effect.
(b) Since July 31, 1997, the Company, Xxxxx and the other Subsidiaries
have been operated, consistent with funds made available to them under their
financing facilities, if any, only in the ordinary course and consistent with
past practice. As amplification and not in limitation of the foregoing, except
as disclosed in Schedule 3.11(b) of the Disclosure Schedule, neither the Company
nor Xxxxx or any of its other Subsidiaries has, since July 31, 1997:
(i) made any change in any method of accounting or accounting
practice or policy used by the Company or Xxxxx, other than such
changes required by GAAP that are identified in Schedule 3.11(b)(i) of
the Disclosure Schedule;
(ii) consistent with funds made available to it under its
financing facilities, if any, made any material changes in the
customary methods of operations of the Company, Xxxxx or any other
Subsidiary, including practices and policies relating to purchasing,
inventory, marketing, selling or pricing;
(iii) failed to maintain the Company's, Xxxxx'x or any other
Subsidiary's Tangible Personal Property in good repair, ordinary wear
and tear excepted;
(iv) redeemed any of the Company's, Xxxxx'x or any other
Subsidiary's capital stock or declared, made or paid any dividends or
distributions (whether in cash, securities or other property) to the
holders of the Company's or any Subsidiary's capital stock or
otherwise other than regular dividends paid by Xxxxx in the ordinary
course of business and consistent with past practice and except as
contemplated by the Xxxxx Agreements;
(v) other than with respect to the Mortgage Refinancing and the
issuance of Preferred Stock Series A, Series B and Series C as listed
in Schedule 3.11(b) of the Disclosure Schedule, issued or sold any
capital stock, notes, bonds or other securities, or any option,
warrant or other right to acquire the same, of, or any other interest
in, the Company, Xxxxx or any other Subsidiary;
(vi) except as disclosed in Schedule 3.11(b) of the Disclosure
Schedule, amended or restated the Company's or Xxxxx'x or any
Subsidiary's Certificate of Incorporation or By-Laws;
(vii) other than with respect to the Xxxxx Acquisition, the
Mortgage Refinancing and the Equipment Debt Refinancing, merged with,
been merged with,
17
entered into a consolidation with or acquired an interest of 5%
or more in any Person, or acquired (by purchase, merger,
consolidation, stock acquisition or otherwise) a substantial portion
of the assets of any Person or any division or line of business
thereof, or otherwise acquired assets other than in the ordinary
course and in accordance with past practice;
(viii) other than with respect to the Xxxxx Acquisition, the
Mortgage Refinancing and the Equipment Debt Refinancing, permitted or
allowed any of the assets or properties (whether tangible or
intangible) of the Company, Xxxxx or any other Subsidiary to be
subjected to any Encumbrance;
(ix) other than with respect to the Xxxxx Acquisition, the
Mortgage Refinancing and the Equipment Debt Refinancing, made any loan
to, guaranteed any indebtedness of or otherwise incurred any
indebtedness on behalf of any Person;
(x) other than with respect to the Xxxxx Acquisition, made any
capital expenditure or commitment for any capital expenditure in
excess of $100,000 individually or $250,000 in the aggregate;
(xi) other than in connection with the Xxxxx Acquisition, entered
into any agreement, arrangement or transaction with any of its
directors, officers, employees or shareholders (or with any relative,
beneficiary, spouse or Affiliate of such Person);
(xii) agreed, whether in writing or otherwise, to take any of the
actions specified in this Section 3.11(b), except for those
contemplated by this Agreement and the Xxxxx Acquisition;
(xiii) allowed any permit or Environmental Permit that was issued
or relates to the Company, Xxxxx or any other Subsidiary, or that
otherwise relates to any Asset, to lapse or terminate, or failed to
renew any such Permit or Environmental Permit or any insurance policy
that is scheduled to terminate or expire within 45 calendar days of
the Closing Date;
(xiv) other than with respect to the Xxxxx Acquisition, the
Mortgage Refinancing, the Equipment Debt Refinancing and the New York
City Contract, incurred any Indebtedness in excess of $100,000
individually or $250,000 in the aggregate;
(xv) amended, modified or consented to the termination of any
Material Contract or the Company's, Xxxxx'x or any other Subsidiary's
rights thereunder;
18
(xvi) disclosed any secret or confidential Intellectual Property
(except by way of issuance of a patent) or permitted to lapse or go
abandoned any Intellectual Property (or any registration or grant
thereof or any application relating thereto) to which, or under which,
the Company, Xxxxx or any other Subsidiary has any right, title,
interest or license;
(xvii) failed to pay any creditor any material amount owed to
such creditor when due;
(xviii) except as contemplated by the Xxxxx Acquisition, sold,
transferred, leased, subleased, licensed or otherwise disposed of any
properties or assets, real, personal or mixed (including, without
limitation, leasehold interests and intangible assets), other than a
sale in the ordinary course of business consistent with past practice;
(xix) except with respect to the employment agreements listed on
Schedule 3.11(b) of the Disclosure Schedule, (A) granted any increase,
or announced any increase, in the wages, salaries, compensation,
bonuses, incentives, pension or other benefits payable by the Company,
Xxxxx or any other Subsidiary to any of its employees, including,
without limitation, any increase or change pursuant to any Plan or (B)
established or increased or promised to increase any benefits under
any Plan, in either case except as required by law or any collective
bargaining agreement and involving ordinary increases consistent with
the past practices of the Company, Xxxxx or such other Subsidiary;
(xx) written down or written up (or failed to write down or write
up in accordance with GAAP consistent with past practice) the value of
any inventories or receivables or revalued any assets of the Company,
Xxxxx or any other Subsidiary other than in the ordinary course of
business consistent with past practice and in accordance with GAAP;
(xxi) except as contemplated by the Xxxxx Acquisition, amended,
terminated, cancelled or compromised any material claims of the
Company, Xxxxx or any other Subsidiary or waived any other rights of
substantial value to the Company, Xxxxx or any other Subsidiary; or
(xxii) suffered any Material Adverse Effect.
SECTION 3.12. Employee Benefit Matters. (a) Plans and Material
Documents. Schedule 3.12(a) of the Disclosure Schedule lists all employee
benefit plans (as defined under Section 3(3) of ERISA) and all bonus, stock
option, stock purchase, restricted stock, incentive, deferred compensation,
retiree medical or life insurance,
19
supplemental retirement, severance or other benefit plans, programs or
arrangements, and all employment, termination, severance or other contracts or
agreements, whether legally enforceable or not, to which the Company, Xxxxx, or
any other Subsidiary is a party, with respect to which the Company, Xxxxx, or
any other Subsidiary has any obligation or which are maintained, contributed to
or sponsored by the Company, Xxxxx, or any other Subsidiary for the benefit of
any current or former employee, officer or director of the Company, Xxxxx, or
any other Subsidiary (collectively, the "Plans"). The Company has furnished the
Purchaser with a complete and accurate copy of each Plan and a complete and
accurate copy of the following: (i) each trust or other funding arrangement,
(ii) each summary plan description and summary of material modifications, (iii)
the most recently filed IRS Form 5500, (iv) the most recently received IRS
determination letter for each such Plan, and (v) the most recently prepared
actuarial report and financial statement in connection with each such Plan, if
applicable. Except as set forth in Schedule 3.12(a) of the Disclosure Schedule,
the Company, Xxxxx or any other Subsidiary does not have any express or implied
commitment, (i) to create, incur liability with respect to or cause to exist any
other employee benefit plan, program or arrangement, (ii) to enter into any
contract or agreement to provide compensation or benefits to any individual or
(iii) to modify, change or terminate any Plan (other than with respect to a
modification, change or termination required by ERISA or the Code), that would
impose any material additional cost on the Company, Xxxxx or any other
Subsidiary.
(b) Absence of Certain Types of Plans. Except as set forth in Schedule
3.12(b) of the Disclosure Schedule, none of the Plans is a multiemployer plan
(within the meaning of Section 3(37) or 4001(a)(3) of ERISA) (a "Multiemployer
Plan"), a single employer pension plan (within the meaning of Section
4001(a)(15) of ERISA) or a plan intended to be qualified under Section 401(a) or
401(k) of the Code. Except as set forth in Schedule 3.12(b) of the Disclosure
Schedule, none of the Plans provides for the payment of separation, severance,
termination or similar-type benefits to any Person or obligates the Company,
Xxxxx or any other Subsidiary to pay separation, severance, termination or
similar-type benefits solely as a result of any transaction contemplated by this
Agreement or as a result of a "change in control" of the Company, within the
meaning of such term under Section 280G of the Code. Except as set forth in
Schedule 3.12(b) of the Disclosure Schedule, none of the Plans provides for or
promises retiree medical, disability or life insurance benefits to any current
or former employee, officer or director of the Company, Xxxxx or any other
Subsidiary except to the extent required by law. Each of the Plans is subject
only to the laws of the United States or a political subdivision thereof.
(c) Compliance with Applicable Law. Each Plan is now and always has
been operated in all material respects in accordance with the requirements of
all applicable law, including, without limitation, ERISA and the Code, and the
Company, Xxxxx and any other Subsidiary and each of their officers, employees
and agents who are "fiduciaries" (within the meaning of Section 3(21) of ERISA)
with respect to the Plans have always acted in accordance with the provisions of
all applicable law, including, without limitation, ERISA
20
and the Code; and the Company, Xxxxx or any other Subsidiary has performed all
material obligations required to be performed by it under, is not in any respect
in material default under or in material violation of, and has no knowledge of
any material default with regard to or material violation by any party to, any
Plan. Except as disclosed on Schedule 3.12(c) of the Disclosure Schedule, no
material legal action, suit or claim is pending or threatened with respect to
any Plan (other than claims for benefits in the ordinary course) and, to the
knowledge of the Company, no fact or event exists that could reasonably be
expected to give rise to any such action, suit or claim.
(d) Absence of Certain Liabilities and Events. There has been no
prohibited transaction (within the meaning of Section 406 of ERISA or Section
4975 of the Code) with respect to any Plan that could give rise to any material
liability being imposed on the Company, Xxxxx or any other Subsidiary. The
Company, Xxxxx or any other Subsidiary has not incurred any material liability
for any penalty or tax arising under Section 4971, 4972, 4980, 4980B or 6652 of
the Code or any material liability under Section 502 of ERISA, and no fact or
event exists which could give rise to any such material liability. Except as set
forth in Schedule 3.12(d) of the Disclosure Schedule, the Company, Xxxxx or any
other Subsidiary has not incurred any material liability under, arising out of
or by operation of Title IV of ERISA (other than liability for premiums to the
Pension Benefit Guaranty Corporation arising in the ordinary course), including,
without limitation, any material liability in connection with (i) the
termination or reorganization of any employee benefit plan subject to Title IV
of ERISA or (ii) the withdrawal from any Multiemployer Plan or any single
employer plan, and, to the best knowledge of the Company after due inquiry, no
fact or event exists which could reasonably be expected to give rise to any such
liability. No complete or partial termination has occurred within the five years
preceding the date hereof with respect to any Plan.
(e) Plan Contributions and Funding. All contributions, premiums or
payments required to be made with respect to any Plan on or before the date of
this Agreement have been made on or before their due dates. All such
contributions have been fully deducted for income tax purposes (to the extent
deductible) and no such deduction has been challenged or disallowed by any
government entity and no fact or event exists which could reasonably be expected
to give rise to any such challenge or disallowance.
SECTION 3.13. Real Property. (a) Schedule 3.13(a) of the Disclosure
Schedule contains a list of all of the Owned Real Property. The Company, Xxxxx
or any other Subsidiary, as the case may be, has valid fee interests in all of
its Owned Real Property and good and marketable title thereto, and such Owned
Real Property is owned by the Company, Xxxxx or such Subsidiary free and clear
of all Encumbrances except (i) as set forth on Schedule 3.13(a) of the
Disclosure Schedule and (ii) Encumbrances for current taxes not yet due and
payable or being contested in good faith by appropriate proceedings.
21
(b) Schedule 3.13(b) of the Disclosure Schedule contains a list of all
of the Leased Real Property and a list of all leases and subleases pertaining to
such Leased Property including all agreements in which the Company, Xxxxx or any
other Subsidiary has an option to purchase or Lease any real property. Except as
described in such Section of the Disclosure Schedule, (i) there is no material
violation of any law, rule or regulation by the Company, Xxxxx or any other
Subsidiary, as the case may be, or known to the Company, Xxxxx or any other
Subsidiary, as the case may be, relating to any of the Leased Real Property,
(ii) the Company, Xxxxx or any other Subsidiary, as the case may be, is in
peaceful and undisturbed possession of the Leased Real Property, and, so long as
the lease remains in effect, there are no contractual or legal restrictions that
preclude or restrict the ability to use the premises for the purposes for which
they are currently being used and (iii) the Company, Xxxxx or any other
Subsidiary, as the case may be, has not leased or subleased any parcel or any
portion of any parcel of Leased Real Property to any other Person, nor has the
Company, Xxxxx or any other Subsidiary assigned its interest under any lease or
sublease listed in Schedule 3.13(b) of the Disclosure Schedule to any third
party.
(c) The Company has, or has caused to be, delivered to the Purchaser
true and complete copies of all leases and subleases listed in Schedule 3.13(b)
of the Disclosure Schedule. Each of such leases and subleases is in full force
and effect and constitutes a legal, valid and binding obligation of the
respective parties thereto, and, except as set forth on Schedule 3.13(c) of the
Disclosure Schedule, the Company, Xxxxx or any other Subsidiary, as the case may
be, is not in material default or breach of (with or without the giving of
notice or the passage of time) any such leases or subleases. To the knowledge of
the Company, no third party is in material breach of any of such leases or
subleases.
SECTION 3.14. Tangible Personal Property. (a) Schedule 3.14(a) of the
Disclosure Schedule contains a list of all Tangible Personal Property valued at
$5,000 or more used in the Business or owned or leased by the Company, Xxxxx and
its other Subsidiaries. Except for changes made in the ordinary course of
business since April 30, 1995, the Company, Xxxxx or any such Subsidiary owns
such Tangible Personal Property reflected on the Financial Statements, free and
clear of all Encumbrances, except as described in Schedule 3.14(a) of the
Disclosure Schedule.
(b) Schedule 3.14(b) of the Disclosure Schedule contains a list of all
leased Tangible Personal Property requiring lease payments of $25,000 or more
per year leased by the Company, Xxxxx and its other Subsidiaries. Except for
changes made in the ordinary course of business since April 30, 1997 as would
not materially adversely affect the present use of such leased Tangible Personal
Property or as would not have a Material Adverse Effect, with respect to each
such lease:
22
(i) such lease is in full force and effect and is a legal, valid
and binding obligation of the Company, Xxxxx or the Subsidiary party
thereto, and is enforceable by the Company, Xxxxx or such Subsidiary
in accordance with its terms;
(ii) the Company, Xxxxx or such Subsidiary is in peaceful and
undisturbed possession of the Tangible Personal Property subject to
such lease; and
(iii) there has been no notice of default under any lease
received by the Company, Xxxxx or such Subsidiary that is still in
effect; none of the Company, Xxxxx or any other Subsidiary is in
material breach or default of any such lease; and no event has
occurred that, with a notice or lapse or time or both, would
constitute such a material default or permit the termination,
modification or acceleration of such lease.
SECTION 3.15. Intellectual Property. (a) Schedule 3.15(a)(i) of the
Disclosure Schedule sets forth a true and complete list and a brief description,
including a complete identification of each patent and patent application and
each trademark registration or application for trademark registration thereof,
of all Owned Intellectual Property (except unregistered copyrights), and
Schedule 3.15(a)(ii) of the Disclosure Schedule sets forth a true and complete
list and a brief description, including a description of any license or
sublicense thereof, of all Licensed Intellectual Property. Except as otherwise
described in Schedule 3.15(a)(i) of the Disclosure Schedule, in each case where
a trademark registration or patent or application for trademark registration or
patent listed in Schedule 3.15(a)(i) of the Disclosure Schedule is held by
assignment, the assignment has been duly recorded with the state or national
Trademark Office from which the original trademark registration issued or before
which the application for trademark registration is pending, or the assignment
has been duly recorded in the national or international Patent Office from which
the original patent issued or before which the application for patent is
pending. Except as disclosed in Schedule 3.15(a)(iii) of the Disclosure
Schedule, to the best knowledge of the Company after due inquiry, the rights of
the Company, Xxxxx or any other Subsidiary, as the case may be, in or to such
Intellectual Property do not conflict with or infringe on the rights of any
other Person, and none of the Company, Xxxxx or any other Subsidiary has
received any claim or written notice from any Person to such effect.
(b) Except as disclosed in Schedule 3.15(b) of the Disclosure Schedule,
(i) all the Owned Intellectual Property is owned by the Company, Xxxxx or
another Subsidiary, as the case may be, free and clear of any Encumbrance and
the Company, Xxxxx or such Subsidiary, as the case may be, holds the entire
right, title, and interest in and to same, and (ii) no claim, action, suit,
arbitration, inquiry, proceeding or investigation by or before a Governmental
Authority has been made or asserted or is pending (or, to the best knowledge of
the Company after due inquiry, threatened) against the Company, Xxxxx or any
other Subsidiary either (A) based upon, or challenging or seeking to deny or
restrict the
23
use by the Company, Xxxxx or any such Subsidiary of, any of the Owned
Intellectual Property or (B) alleging that any services provided, or products
manufactured or sold by the Company, Xxxxx or any such Subsidiary are being
provided, manufactured or sold in violation of any rights of any Person. To the
best knowledge of the Company after due inquiry, no Person is using any
trademarks, service marks, trade names or similar property that is confusingly
similar to the Owned Intellectual Property, and no Person is making, using,
selling, publishing or copying anything that infringes upon the Owned
Intellectual Property or upon the rights of the Company, Xxxxx or any other
Subsidiary therein. Except as disclosed in Schedule 3.15(b) of the Disclosure
Schedule, none of the Company, Xxxxx or any other Subsidiary has granted any
license or other right to any other Person with respect to the Owned
Intellectual Property. The consummation of the transactions contemplated by this
Agreement will not result in the termination or impairment of any of the Owned
Intellectual Property or Licensed Intellectual Property.
(c) The Company represents and warrants to the Purchaser that, except
as disclosed in Schedule 3.15(c) of the Disclosure Schedule, none of the
Company, Xxxxx, or any other Subsidiary nor any operation of the business of the
Company, Xxxxx or any other Subsidiary infringes any patent, trademark, service
xxxx, copyright or similar right of any Person, nor has the Company, Xxxxx or
any other Subsidiary misappropriated or wrongfully disclosed any trade secret,
proprietary right or similar right of any Person.
(d) The Company represents and warrants to the Purchaser that, to the
best knowledge of the Company after due inquiry, except as disclosed in Schedule
3.15(d) of the Disclosure Schedule, no Person has made any claim or allegation
that any of the Company, Xxxxx or any other Subsidiary infringes any patent,
trademark, service xxxx, copyright or similar right of any Person or has
misappropriated or wrongfully disclosed any trade secret, proprietary right or
similar right of any person.
(e) With respect to all Licensed Intellectual Property and Owned
Intellectual Property, to the best knowledge of the Company after due inquiry,
the registered user provisions of all nations requiring such registrations have
been complied with in all material respects. With respect to all owned
Intellectual Property and Licensed Intellectual Property, all required
maintenance fees or annuities have been paid in a timely manner.
(f) The Company has, or has caused to be, delivered to the Purchaser
correct and complete copies of all the material licenses and sublicenses for all
Licensed Intellectual Property listed in Schedule 3.15(a)(ii) of the Disclosure
Schedule and any and all ancillary documents pertaining thereto (including, but
not limited to, all amendments, consents and evidence of commencement dates and
expiration dates). With respect to each of such licenses and sublicenses:
24
(i) such license or sublicense, together with all ancillary
documents delivered pursuant to the first sentence of this Section
3.15(f), is valid and binding and in full force and effect and
represents the entire agreement between the respective licensor and
licensee with respect to the subject matter of such license or
sublicense;
(ii) except as otherwise set forth in Schedule 3.15(a)(ii) of the
Disclosure Schedule, such license or sublicense will not cease to be
valid and binding and in full force and effect on terms identical to
those currently in effect as a result of the consummation of the
transactions contemplated by this Agreement, nor will the consummation
of the transactions contemplated by this Agreement constitute a breach
or default under such license or sublicense or otherwise give the
licensor or sublicensor a right to terminate such license or
sublicense;
(iii) except as otherwise disclosed in Schedule 3.15(a)(ii) of
the Disclosure Schedule, with respect to each such license or
sublicense: (A) none of the Company, Xxxxx or any other Subsidiary has
received any notice or threat of termination or cancellation under
such license or sublicense and no licensor or sublicensor has any
right of termination or cancellation under such license or sublicense
except in connection with the default of the Company, Xxxxx or any
such Subsidiary thereunder, (B) none of the Company, Xxxxx or any
other Subsidiary has received any notice of a breach of or default
under such license or sublicense, which breach or default has not been
cured, and (C) none of the Company, Xxxxx or any such Subsidiary has
granted to any other Person any rights, adverse or otherwise, under
such license or sublicense;
(iv) none of the Company, Xxxxx, any other Subsidiary or (to the
best knowledge of the Company after due inquiry) any other party to
such license or sublicense is in breach or default in any material
respect, and, to the best knowledge of the Company after due inquiry,
no event has occurred that, with notice or lapse of time would
constitute such a breach or default or permit termination,
modification or acceleration under such license or sublicense;
(v) no claim, action, suit, arbitration, inquiry, proceeding or
investigation by or before any Governmental Authority has been made or
asserted or is pending (or, to the best knowledge of the Company after
due inquiry, threatened) against the Company, Xxxxx or any other
Subsidiary either (A) based upon or challenging or seeking to deny or
restrict the use by the Company, Xxxxx or any such Subsidiary of any
of the Licensed Intellectual Property or (B) alleging that any
Licensed Intellectual Property is being licensed, sublicensed or used
in violation of any patents or trademarks or in violation of any other
rights of any Person; and
25
(vi) except as set forth on Schedule 3.15(f) of the Disclosure
Schedule, to the best knowledge of the Company after due inquiry, no
Person is using any trademarks, service marks, trade names or similar
property that is confusingly similar to the Licensed Intellectual
Property, and no Person is making, using, selling, publishing or
copying anything that infringes upon the Licensed Intellectual
Property or upon the rights of the Company, Xxxxx or any other
Subsidiary thereto.
(g) The Company is not aware of anything or any reason that would
prevent any pending applications to register trademarks, service marks or
copyrights or any pending patent applications from being granted.
(h) The Intellectual Property described in Schedules 3.15(a)(i) and
(ii) of the Disclosure Schedule constitutes all the Intellectual Property used
or held or intended to be used by the Company, Xxxxx or any other Subsidiary and
constitutes all such Intellectual Property necessary for the conduct of the
Business, and there are no other items of Intellectual Property that are
material to the Company, Xxxxx or any other Subsidiary or the Business.
SECTION 3.16. Environmental Matters. Except as set forth on Schedule
3.16 of the Disclosure Schedule:
(a) All facilities and property presently owned or leased by the
Company, Xxxxx or any of its other Subsidiaries are, and continue to
be, owned and operated by the Company, Xxxxx and its other
Subsidiaries in material compliance with all applicable Environmental
Laws. All past noncompliance with Environmental Laws or Environmental
Permits has been resolved without any material pending, ongoing or
future obligation, cost or liability, and except as to Environmental
Permits not yet obtained for facilities under development or proposed
for acquisition, there is no requirement proposed for adoption or
implementation under any Environmental Law or Environmental Permit
that is reasonably expected to be material to the Company, Xxxxx or
any other Subsidiary or the Business.
(b) None of the Company, Xxxxx or any of its other Subsidiaries
has received notice of any pending or threatened claims, complaints or
requests for information with respect to any alleged violation of any
Environmental Laws, and there are no circumstances that can reasonably
be expected to form the basis of any such environmental claim,
complaint or request.
(c) There have been no material releases, as defined under any
Environmental Laws, of Hazardous Substances that give rise to
necessary costs of response at, on, from or under any property now or
previously owned or leased by
26
the Company, Xxxxx or any of its other Subsidiaries during the
period in which any such property was owned or leased by the Company,
Xxxxx or any other Subsidiary.
(d) Except as to Environmental Permits not yet obtained for
facilities under development or proposed for acquisition, the Company,
Xxxxx and its other Subsidiaries have been issued and are in material
compliance with all Environmental Permits, orders, administrative
consent orders and any other authorizations, approvals or consents
relating to Environmental Laws or Hazardous Substances material to the
operation of their businesses.
(e) None of the Company, Xxxxx or any of its other Subsidiaries
has received notice that property presently owned or leased, or
previously owned or leased, by the Company or any of its Subsidiaries
is listed or proposed for listing in the National Priorities List
created pursuant to CERCLA or on the CERCLIS or any similar state list
of sites requiring investigation or cleanup.
(f) None of the Company, Xxxxx or any of its other Subsidiaries
has transported or arranged for the transportation of any Hazardous
Substances to any location that is listed on the National Priorities
List or any similar state list, nor has any of them received notice of
pending or threatened claims as a result of transporting or arranging
to transport Hazardous Substances to any location, except insofar as
such transportation or arrangement is not likely to be material to the
Company, Xxxxx or any other Subsidiary or the Business.
(g) Except as is not likely to be material to the Company, Xxxxx
or any other Subsidiary or the Business, there are no polychlorinated
biphenyls (other than those that may be contained in lighting ballasts
or electrical transformers that are labeled, operated and maintained
in accordance with all Environmental Laws) or asbestos-containing
materials present at any property now or previously owned or leased by
the Company or by Xxxxx or by any other Subsidiary during the period
in which any such property was owned or leased by the Company or by
Xxxxx or by another Subsidiary.
(h) To the best of the Company's knowledge after due inquiry,
none of the Company, Xxxxx or any of its other Subsidiaries has
received notice of pending or threatened claims against the Company,
Xxxxx or any of its other Subsidiaries arising out of any operations,
action, inaction or status of any previously divested property,
whether or not the subject of any indemnity, under any Environmental
Laws or involving any Hazardous Substances.
(i) The Company has provided the Purchaser with copies of (a) any
environmental assessment or audit reports or other similar studies or
analyses with
27
respect to the Company, Xxxxx and its other Subsidiaries relating
to the Business and the Real Property, and (b) all insurance policies
issued at any time that may provide coverage to the Company, Xxxxx or
any other Subsidiary or the Business for environmental matters.
(j) Neither the execution of this Agreement nor the consummation
of the transactions contemplated herein will require any remedial
action or notice to or consent of Governmental Authorities or third
parties pursuant to any applicable Environmental Law or Environmental
Permit, including, without limitation, the New Jersey Industrial Site
Recovery Act.
SECTION 3.17. Litigation. Schedule 3.17 of the Disclosure Schedule sets
forth any pending or, to the best knowledge of the Company or any of its
Subsidiaries after due inquiry, threatened Actions by or against the Company,
Xxxxx or any other Subsidiary or Affiliate before any Governmental Authority, or
to which any of the respective properties of the Company, Xxxxx or any other
Subsidiary or any Affiliate is or would be subject, except for Actions known to
the best knowledge of the Company after due inquiry by executives of the Company
relating to product warranty or safety claims, involving claims for damages of
not more than $20,000 and the Excluded Assets. Schedule 3.17 of the Disclosure
Schedule also indicates those Actions that (a) if adversely determined, could
reasonably be expected to have a Material Adverse Effect or (b) relate to, or
could affect the legality or validity of, this Agreement or the transactions
contemplated hereby. Except as set forth in Schedule 3.17 of the Disclosure
Schedule, there are no material citations, fines or penalties heretofore
asserted against the Company, Xxxxx or its other Subsidiaries under any federal,
state or local law that remain unpaid or that otherwise bind the assets of the
Company, Xxxxx or its other Subsidiaries.
SECTION 3.18. Insurance. (a) Schedule 3.18(a) of the Disclosure
Schedule sets forth the following information with respect to each insurance
policy (including policies providing property, casualty, liability, workers'
compensation, and bond and surety arrangements) under which the Company, Xxxxx
or any other Subsidiary has been an insured, a named insured or otherwise the
principal beneficiary of coverage at any time within the past three years:
(i) the name, address and telephone number of the agent or
broker;
(ii) the name of the insurer and the names of the principal
insured and each named insured;
(iii) the policy number and the period of coverage;
28
(iv) the type, scope (including an indication of whether the
coverage was on a claims-made, occurrence or other basis) and amount
of coverage (including a description of how deductibles, retentions
and aggregates are calculated and operate); and
(v) the premium charged for the policy, including, without
limitation, a description of any retroactive premium adjustments or
other loss-sharing arrangements.
(b) Except as disclosed in Schedule 3.18(b) of the Disclosure Schedule,
with respect to each such insurance policy: (i) except for policies that have
expired under their terms in the ordinary course, it is in full force and
effect; (ii) neither the Company nor Xxxxx nor any other Subsidiary is in breach
or default (including any breach or default with respect to the payment of
premiums or the giving of notice), and no event has occurred that, with notice
or the lapse of time, would constitute such a breach or default or permit
termination or modification, under the policy; (iii) no party to the policy has
repudiated, or given notice of an intent to repudiate, any provision thereof;
and (iv) to the best knowledge of the Company after due inquiry, no insurer on
the policy has been declared insolvent or placed in receivership,
conservatorship or liquidation or currently has a rating of "B+" or below from
A.M. Best & Co. or a claims paying ability rating of "BBB" or below from
Standard & Poor's, Inc.
(c) Schedule 3.18(c) of the Disclosure Schedule sets forth all risks
against which the Company, Xxxxx or any other Subsidiary is self-insured or that
are covered under any risk-retention program in which the Company, Xxxxx or any
other Subsidiary participates, together with details for the last five years of
the Company's, Xxxxx'x and each other Subsidiary's loss experience with respect
to such risks.
(d) Except as disclosed in Schedule 3.18(d) of the Disclosure Schedule,
all material assets, properties and risks of the Company, Xxxxx and each other
Subsidiary are, and for the past five years have been, covered by valid and,
except for policies that have expired under their terms in the ordinary course,
currently effective insurance policies or binders of insurance (including,
without limitation, general liability insurance, property insurance and workers'
compensation insurance) issued in favor of the Company, Xxxxx or such
Subsidiary, as the case may be, in each case with responsible insurance
companies, in such types and amounts and covering such risks as are consistent
with customary practices and standards of companies engaged in businesses and
operations similar to those of the Company, Xxxxx or such other Subsidiary, as
the case may be.
(e) At no time subsequent to April 30, 1995 has the Company, Xxxxx or
any other Subsidiary (i) been denied any insurance or indemnity bond coverage
that it has requested, (ii) made any material reduction in the scope or amount
of its insurance coverage,
29
or, except as set forth in Schedule 3.18(e) of the Disclosure Schedule, received
notice from any of its insurance carriers that any insurance premiums will be
subject to increase in an amount materially disproportionate to the amount of
the increases with respect thereto (or with respect to similar insurance) in
prior years or that any insurance coverage listed in Schedule 3.18(a) of the
Disclosure Schedule will not be available in the future substantially on the
same terms as are now in effect or (iii) suffered any extraordinary increase in
premium for renewed coverage. To the best knowledge of the Company after due
inquiry, since April 30, 1995, no insurance carrier has cancelled, failed to
renew or materially reduced any insurance coverage for the Company, Xxxxx or any
other Subsidiary or given any notice or other indication of its intention to
cancel, not renew or reduce any such coverage.
(f) At the time of the Closing, all insurance policies currently in
effect will be outstanding and duly in force.
(g) To the best knowledge of the Company after due inquiry, no
insurance policy listed in Section 3.18(a) of the Disclosure Schedule will cease
to be legal, valid, binding and enforceable in accordance with its terms and in
full force and effect on terms identical to those in effect as of the date
hereof as a result of the consummation of the transactions contemplated by this
Agreement.
SECTION 3.19. Material Contracts. (a) Schedule 3.19(a) of the
Disclosure Schedule lists each of the following contracts and agreements
(including, without limitation, oral and informal arrangements) of the Company
and the Subsidiaries other than Xxxxx (such contracts and agreements, together
with all contracts, agreements, leases and subleases concerning the management
or operation of any Real Property (including, without limitation, brokerage
contracts) listed or otherwise disclosed in Schedule 3.13(a) or 3.13(b) of the
Disclosure Schedule to which the Company or any Subsidiary other than Xxxxx is a
party and all agreements relating to Intellectual Property set forth in Schedule
3.15(a) of the Disclosure Schedule, being "Material Contracts"):
(i) each contract and agreement for the purchase of inventory,
spare parts, other materials or personal property with any supplier or
for the furnishing of services to the Company or any Subsidiary other
than Xxxxx or otherwise related to the Business that (A) is likely to
pay or otherwise give consideration of more than $100,000 in the
aggregate during the calendar year ended April 30, 1997 or (B) is
likely to pay or otherwise give consideration of more than $100,000 in
the aggregate over the remaining term of such contract;
(ii) each contract and agreement for the sale of inventory or
other personal property or for the furnishing of services by the
Company or any Subsidiary other than Xxxxx that (A) is likely to pay
or otherwise give consideration of more than
30
$100,000 in the aggregate during the calendar year ended April 30, 1997
or (B) is likely to pay or otherwise give consideration of more than
$100,000 in the aggregate over the remaining term of such contract;
(iii) all broker, distributor, dealer, manufacturer's
representative, franchise, agency, sales promotion, market research,
marketing consulting and advertising contracts and agreements to which
the Company or any Subsidiary other than Xxxxx is a party;
(iv) all management contracts and contracts with independent
contractors or consultants (or similar arrangements) to which the
Company or any Subsidiary other than Xxxxx is a party and that are not
cancelable without penalty or further payment and without more than 30
days' notice;
(v) all contracts and agreements relating to Indebtedness of the
Company or any Subsidiary other than Xxxxx;
(vi) all contracts and agreements with any Governmental Authority
to which the Company or any Subsidiary other than Xxxxx is a party;
(vii) all contracts and agreements that limit or purport to limit
the ability of the Company or any Subsidiary other than Xxxxx to
compete in any line of business or with any Person or in any
geographic area or during any period of time;
(viii) all contracts and agreements between or among the Company
or any Subsidiary other than Xxxxx or any Affiliate of the Company;
and
(ix) all other contracts and agreements, whether or not made in
the ordinary course of business that are material to the Company, any
Subsidiary other than Xxxxx or the conduct of the Business, or the
loss of which contract or agreement would have a Material Adverse
Effect.
For purposes of this Section 3.19 and Sections 3.13, 3.14 and 3.15, the
term "lease" shall include any and all leases, subleases, sale/leaseback
agreements or similar arrangements.
(b) Each Material Contract (i) is valid and binding on the Company
and/or any Subsidiary, as applicable, and, to the best knowledge of the Company
after due inquiry, on the other parties thereto and is in full force and effect
and (ii) upon consummation of the transactions contemplated by this Agreement,
except to the extent that any consents set forth in Schedule 3.05(b) of the
Disclosure Schedule are not obtained, shall continue in full force
31
and effect without penalty or other adverse consequence. Neither the Company nor
any Subsidiary is in breach of, or default under, any Material Contract.
(c) There is no continuing act of nonperformance by any other party to
any Material Contract that constitutes a breach thereof or a default thereunder.
(d) Except as set forth in Schedule 3.19(d) of the Disclosure Schedule
(including but not limited to the Excluded Assets), there is no contract,
agreement or other arrangement granting any Person any preferential right to
purchase, other than in the ordinary course of business consistent with past
practice, any of the properties or assets of the Company or any Subsidiary.
SECTION 3.20. Licenses and Permits. Except as would not have a Material
Adverse Effect, the Company has all governmental licenses, permits and other
governmental authorizations and approvals required for the conduct of its
businesses as now conducted, and all such material licenses, permits,
authorizations and approvals will remain in full force and effect immediately
following the consummation of the transactions hereunder.
SECTION 3.21. Labor Matters. Except for the agreements listed in
Schedule 3.21 of the Disclosure Schedule (the "Collective Bargaining
Agreements"), none of the Company, Xxxxx or any other Subsidiary is a party to
any currently effective collective bargaining or other labor union contract. To
the best knowledge of the Company after due inquiry, except as disclosed on
Schedule 3.21 of the Disclosure Schedule, none of the Company, Xxxxx or any
other Subsidiary has materially breached or otherwise materially failed to
comply with any provision of any Collective Bargaining Agreement. To the best
knowledge of the Company after due inquiry, except as set forth in Schedule 3.21
of the Disclosure Schedule, there are presently no (a) material violations of
any federal, state or local statutes, laws, ordinances, rules, regulations,
orders or directives with respect to the employment of individuals by, or the
employment practices or work conditions of, or the terms and conditions of
employment, wages and hours of the Company, Xxxxx or any other Subsidiary; (b)
unfair labor practices or other unlawful employment practices and no charges of
unfair labor practices or other employee-related complaints pending or
threatened against the Company, Xxxxx or any other Subsidiary before the
National Labor Relations Board, the Equal Employment Opportunity Commission, the
Occupational Safety and Health Review Commission, the Department of Labor or any
other federal, state, local or other governmental authority; (c) strikes,
picketings, slowdowns or work stoppages or organizational attempts actually
pending, threatened against or involving the Company, Xxxxx or any other
Subsidiary; or (d) material issues with respect to union representation pending
or threatened with respect to the employees of the Company, Xxxxx or any other
Subsidiary.
32
SECTION 3.22. Taxes. (a) Except as set forth in Schedule 3.22 of the
Disclosure Schedule, (i) (A) all returns and reports in respect of Taxes ("Tax
Returns" or "Returns") required to be filed with respect to the Company and each
Subsidiary (including any consolidated federal income Tax Returns and state and
local income or franchise Tax Returns that include the Company or any Subsidiary
on a consolidated, combined or unitary ("combined") basis) have been timely
filed; (B) all Taxes shown to be payable on such Returns or otherwise due, and
all assessments of Tax made against the Company and each Subsidiary with respect
to such Returns, have been paid; (C) all such Returns are true, correct and
complete in all material respects; and (D) no adjustment relating to such
Returns has been proposed formally or informally by any Tax authority and, to
the best knowledge of the Company or any Subsidiary, after due inquiry, no basis
exists for any such adjustment; (ii) there are no pending or, to the best
knowledge of the Company and/or any Subsidiary after due inquiry, threatened
actions or proceedings for the assessment or collection of Taxes against the
Company or any Subsidiary; (iii) there are no Tax liens on any assets of the
Company or any Subsidiary; (iv) there are no outstanding waivers or agreements
extending the statute of limitations with respect to any Tax to which the
Company or any Subsidiary may be subject; (v) there are no outstanding requests
for information made by a Tax authority to the Company or any Subsidiary; (vi)
neither the Company nor any Subsidiary has been advised by any Tax authority of
any proposed reassessments of the value (or other Tax base) of any property
owned by the Company or any Subsidiary that could materially increase the amount
of a property Tax to which the Company or any Subsidiary would be subject; (vii)
the Company and any Subsidiary have made all payments of estimated Taxes
required to be made under section 6655 of the Code and any comparable state or
local Tax provision; (viii) all Taxes required to be withheld, collected or
deposited by or with respect to the Company or any Subsidiary have been timely
withheld, collected or deposited, as the case may be, and, to the extent
required, have been paid to the relevant Tax authority; (ix) neither the Company
nor any Subsidiary is doing business in, or engaged in a trade or business in,
any jurisdiction in which it has not filed all required Tax Returns; (x) the
Company is not, is not likely to be and has not been subject to Tax in any
foreign jurisdiction; and (xi) no Subsidiary organized under the laws of any
foreign jurisdiction is, is likely to be or has been engaged in the conduct of a
trade or business in the United States for purposes of section 864, 875, 882 or
884 of the Code.
(b) Except as set forth in Schedule 3.22(b) of the Disclosure Schedule,
(i) no consent under section 341(f) of the Code has been filed with respect to
the Company or any Subsidiary; (ii) at the Closing Date the Company will not be
a "United States real property holding corporation" within the meaning of
section 897(c)(2) of the Code; (iii) neither the Company nor any Subsidiary has
income reportable for a taxable period ending after the Closing Date, but
attributable to a transaction (e.g., an installment sale) occurring in, or a
change in accounting method made for, a taxable period ending on or prior to
such date, that resulted in a deferred reporting of income from such transaction
or change; (iv) neither the Company nor any Subsidiary has been a "passive
foreign investment
33
company" within the meaning of section 1296 of the Code, and (v) neither the
Company nor any Subsidiary has been, at any time after April 30, 1995, a member
of any partnership or joint venture or the holder of a beneficial interest in
any trust for any period for which the statute of limitations for any Tax has
not expired.
(c) Schedule 3.22(c) of the Disclosure Schedule (i) lists by type all
income, franchise and other material Tax Returns or extensions thereof (federal,
state, local, and foreign) filed with respect to each of the Company and any
Subsidiary for taxable periods ended on or after April 30, 1995; (ii) indicates
for which jurisdictions Returns have been filed on a combined basis for the
taxable period ended on or after April 30, 1997, and the companies joining in
such Returns; (iii) indicates the most recent income, franchise, or other
material Tax Returns for each relevant jurisdiction for which an audit has been
completed or the statute of limitations has lapsed, and (iv) indicates all Tax
Returns that currently are the subject of an audit.
(d) Schedule 3.22(d) of the Disclosure Schedule lists the amount and
expiration dates of any net operating loss, net capital loss, unused business
credit, unused foreign tax credit or excess charitable contribution allocable to
the Company and each Subsidiary as of December 31, 1996.
(e) Except as set forth on Schedule 3.22(e) of the Disclosure Schedule,
reserves and allowances have been provided on the Financial Statements and the
Interim Financial Statements that are adequate to satisfy all Liabilities for
Taxes relating to the Company and any Subsidiary for periods through the date of
such financial statements.
(f) The Company has delivered or made available to the Purchaser
correct and complete copies of all federal, state and local Tax Returns of the
Company or extensions thereof and any Subsidiary for periods ending on or after
April 30, 1995, and correct and complete copies (or summaries) of all
examination reports, correspondence with Tax authorities, statements of
deficiencies assessed against, or agreed to by, the Company or any Subsidiary
since April 30, 1995, and correct and complete copies of any formal or informal
tax sharing arrangement to which the Company or any Subsidiary is a party.
SECTION 3.23. Miami Recycling and Composting Project (the "Miami
Project"). The Company, through its subsidiary, Miami Recycling and Composting
Company ("MRCC"), is duly negotiating with (i) Black & Xxxxxx with respect to
providing the engineering, design, procurement, construction, start-up and
testing of the Miami Project at a guaranteed price, with a guaranteed completion
date, and including Black and Veatch's responsibility for liquidated damages,
and (ii) Professional Services Group with respect to the provision of
operations, maintenance and management services for the Miami Project. The
Company, through MRCC, has obtained the following material permits and
approvals: (i) a Solid Waste Recycling Facility permit from the Florida
Department of Environmental
34
Protection ("FDEP") that requires only minor modification; (ii) an approval for
the issuance of a Class VI permit from the Dade County Department of
Environmental Resource Management ("DERM") for storm water management; and (iii)
a determination by the Dade County Building and Planning Department that the
modified plan is "substantially in accordance" with the original submission,
which will allow previous permits and approvals regarding site configuration to
retain validity. The Company, through MRCC, is in the process of obtaining the
following material permits and approvals that will be obtained before the Miami
Project startup: (i) a Joint Air Permit from FDEP and DERM; (ii) an approval for
its Wetlands Mitigation Plan from FDEP, DERM and the U.S. Army Corps of
Engineers; (iii) a Management and Storage of Storm Water Permit from FDEP; (iv)
an approval for the railroad crossing leading to the Miami Project site from the
Florida Department of Transportation; and (v) an approval for the final Miami
Project plat from the Dade County Planning Department and the Dade County
Department of Public Works. The Company, through MRCC, has procured a 30-year
put-or-pay contract from the City of Miami for a guaranteed supply of about 80%
of the Miami Project's permitted municipal solid waste volume, at the cost of a
one-time host fee of $1,000,000 which has been paid. Other contracts for the
supply of waste materials are in the process of being procured.
SECTION 3.24. Newark Recycling and Composting Project (the "Newark
Project"). The Company, through Newark Recycling and Composting Company
("NRCC"), is duly negotiating with (i) Black & Xxxxxx with respect to providing
the engineering, design, procurement, construction, start-up and testing of the
Newark Project at a guaranteed price, with a guaranteed completion date, and
including Black and Veatch's responsibility for liquidated damages, and (ii)
Professional Services Group with respect to the provision of operations,
maintenance and management services for the Newark Project. The Company, through
NRCC, has obtained the following material permits and approvals: (i) from the
City of Newark and local authorities (A) Final Site Plan Approval, (B) Soil
Erosion and Sediment Control Permit and (C) Treatment Works Approval; (ii) from
Essex County, approval for inclusion in the Essex County Solid Waste Plan; and
(iii) from the State of New Jersey (A) NJPDES Permit, (B) Air Quality Permit,
(C) Treatment Works Approval, (D) Stream Encroachment Waiver, (E) General Permit
11, (F) inclusion in the State Solid Waste Plan and (G) Disclosure Statement
Review. The Company, through NRCC, is in the process of obtaining the following
permits and approvals: (i) from the City of Newark and local authorities (A)
Uniform Construction Permit for modified Facility design through Black and
Xxxxxx, (B) approval for Sewer Extension from Domestic Treatment Works and (C)
Industrial User Permit and (ii) a Class C Recycling Permit from the State of New
Jersey. The Company, through NRCC, is in the process of procuring contracts for
the supply of biosolids from municipalities and other generators of waste
materials, including the City of New York. Some existing permits may need to be
modified based on the facility's final configuration.
35
SECTION 3.25. Private Offering. (a) Assuming the accuracy of the
representations and warranties of the Purchaser, the sale of the Wasteco Shares
and the Wasteco Common Stock hereunder is exempt from the registration and
prospectus delivery requirements of the Securities Act.
(b) Other than a press release with respect to the Xxxxx Acquisition,
no form of general solicitation or general advertising (including, without
limitation, advertisements, articles, notices or other communications published
in any newspaper, magazine or other medium or broadcast over television or
radio, or any seminar or meeting whose attendees have been invited by any
general solicitation or general advertising) was used by the Company or any
other Person acting on behalf of the Company in respect of the Wasteco Shares
and the Wasteco Common Stock or in connection with the offer and sale of the
Wasteco Shares and the Wasteco Common Stock.
SECTION 3.26. Brokers. Except for Xxxxxxxx, Xxxxxxxx & Co., L.P. and
Xxxxx Xxxxxx Peppet Inc., no broker, finder or investment banker is entitled to
any brokerage, finder's or other fee or commission in connection with the
transactions hereunder based upon arrangements made by or on behalf of the
Company. Such fee or commission is the sole responsibility of the Company.
SECTION 3.27. Accuracy of Information. The Company has provided the
Purchaser with all the information reasonably available to it that the Purchaser
has requested for deciding whether to purchase the Wasteco Shares and the
Wasteco Common Stock and all information that the Company believes is reasonably
necessary to enable the Purchaser to make such decision. The Company is not
aware of any facts pertaining to the Company, Xxxxx or any other Subsidiary or
its business that could have a Material Adverse Effect and that have not been
disclosed in this Agreement, the Disclosure Schedule of the Financial Statements
or otherwise disclosed to the Purchaser in writing. Neither this Agreement nor
any other written statements or certificates made or delivered in connection
herewith contain any untrue statement of a material fact or omit to state a
material fact necessary to make the statements herein or therein not misleading.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
---------------------------------------------
WITH RESPECT TO XXXXX
---------------------
In addition to the representations and warranties in Article III, the
Company further represents and warrants to the Purchaser that:
36
SECTION 4.01. Financial Information and Material Contracts of Xxxxx.
(a) True and complete copies of (i) the audited balance sheet of Xxxxx for each
of the fiscal years ended as of December 31, 1995 and December 31, 1996 and the
related audited statements of income, retained earnings, stockholders' equity
and changes in financial position of Xxxxx, together with all related notes and
schedules thereto, accompanied by the reports thereon of Xxxxx'x accountants,
and (ii) the unaudited balance sheet of Xxxxx as of June 30, 1997, and the
related unaudited statements of income, retained earnings, stockholders' equity
and changes in financial position of Xxxxx, together with all related notes and
schedules thereto, have been delivered by the Company to the Purchaser. Such
financial statements (i) were prepared in accordance with the books of account
and other financial records of Xxxxx, (ii) present fairly the consolidated
financial condition and results of operations of Xxxxx as of the dates thereof
or for the periods covered thereby, (iii) have been prepared in accordance with
U.S. GAAP applied on a basis consistent with the past practices of Xxxxx and
(iv) include all adjustments (consisting only of normal recurring accruals) that
are necessary for a fair presentation of the financial condition of Xxxxx and
the results of operations of Xxxxx as of the dates thereof or for the periods
covered thereby.
(b) True and complete copies of (i) the unaudited combining balance
sheet of Xxxxx, reflecting Xxxxx'x construction operations combined with its
EPIC operations, for each of the fiscal years ended as of December 31, 1995 and
December 31, 1996 and the related unaudited combining statement of income of
Xxxxx, and (ii) the unaudited combining balance sheet of Xxxxx, reflecting
Xxxxx'x construction operations combined with its EPIC operations as of June 30,
1997, and the related unaudited combining statement of income of Xxxxx have been
delivered by the Company to the Purchaser. Such combining statements (i) were
prepared in accordance with the books of account and other financial records of
Xxxxx, (ii) present fairly the combined financial condition and results of
operations of Xxxxx as of the dates thereof or for the periods covered thereby,
(iii) have been prepared in accordance with U.S. GAAP applied on a basis
consistent with the past practices of Xxxxx, (iv) include all adjustments
(consisting only of normal recurring accruals) that are necessary for a fair
presentation of the financial condition of Xxxxx and the results of operations
of Xxxxx as of the dates thereof or for the periods covered thereby, and (v)
present fairly the financial condition and results of operations of EPIC, as set
forth in the column designated for EPIC operations, as of the dates thereof or
for the periods covered.
(c) Schedule 4.01 of the Disclosure Schedule lists each of the
following contracts and agreements (including, without limitation, oral and
informal arrangements) of Xxxxx (such contracts and agreements to which Xxxxx is
a party, being "Material Contracts of Xxxxx"):
(i) each contract and agreement for the purchase of inventory,
spare parts, other materials or personal property with any supplier or
for the furnishing of services to Xxxxx which (A) is likely to pay or
otherwise give consideration of more than
37
$100,000 in the aggregate during the calendar year ending
December 31, 1997 or (B) is likely to pay or otherwise give
consideration of more than $100,000 in the aggregate over the
remaining term of such contract;
(ii) each contract and agreement for the sale of inventory or
other personal property or for the furnishing of services by Xxxxx
which (A) is likely to pay or otherwise give consideration of more
than $100,000 in the aggregate during the calendar year ending
December 31, 1997, or (B) is likely to pay or otherwise give
consideration of more than $100,000 in the aggregate over the
remaining term of such contract;
(iii) all broker, distributor, dealer, manufacturer's
representative, franchise, agency, sales promotion, market research,
marketing consulting and advertising contracts and agreements to which
Xxxxx is a party;
(iv) all management contracts and contracts with independent
contractors or consultants (or similar arrangements) to which Xxxxx is
a party and which are not cancelable without penalty or further
payment and without more than 30 days' notice;
(v) all contracts and agreements relating to the indebtedness of
Xxxxx;
(vi) all contracts and agreements with any Governmental Authority
to which Xxxxx is a party;
(vii) all contracts and agreements that limit or purport to limit
the ability of Xxxxx to compete in any line of business or with any
Person or in any geographic area or during any period of time;
(viii) all contracts and agreements between or among Xxxxx and
EPIC or X.X. Xxxxx or the Trust or any Affiliate of X.X. Xxxxx or the
Trust;
(ix) all contracts and agreements between or among Xxxxx or X.X.
Xxxxx and the Company or any Subsidiary of the Company;
(x) all other contracts and agreements, whether or not made in
the ordinary course of business, which are material to Xxxxx, or the
loss of which contract or agreement would have an effect materially
adverse to Xxxxx'x business, operations, properties (including
intangible properties), condition (financial or otherwise), assets,
liabilities, results of operations or prospects of Xxxxx taken as a
whole; and
(xi) the New York City Contract.
38
(d) Each Material Contract of Xxxxx: (i) is valid and binding on Xxxxx
and, to the best knowledge of the Company after due inquiry, on the other
parties thereto and is in full force and effect and (ii) upon consummation of
the transactions contemplated by this Agreement shall continue in full force and
effect without penalty or other adverse consequence. Xxxxx is not in breach of,
or in default under, any Material Contract of Xxxxx.
(e) To the best knowledge of the Company after due inquiry, there is no
continuing act of nonperformance by any other party to any Material Contract of
Xxxxx which constitutes a breach thereof or a default thereunder.
(f) There is no contract, agreement or other arrangement granting any
Person any preferential right to purchase, other than in the ordinary course of
business consistent with past practice, any of the properties or assets of
Xxxxx.
(g) Except as set forth on Schedule 4.01 of the Disclosure Schedule,
there are no Material Contracts of Xxxxx (as hereinabove defined) or agreements
(including, without limitation, oral and informal arrangements) to which Xxxxx
is a party.
SECTION 4.02. Railcars, Containers and Equipment. Schedule 4.02 of the
Disclosure Schedule lists all equipment owned by Xxxxx which is material to the
conduct of the businesses of Xxxxx. Such equipment of Xxxxx, including, but not
limited to, all railcars and containers of Xxxxx (the "Xxxxx Equipment"), (i) is
structurally sound, in good operating condition and repair, and suitable for the
purposes for which it is used and intended; (ii) has been maintained in
accordance with good business practices and is sufficient for the continued
conduct of Xxxxx'x businesses consistent with past practice of Xxxxx; and (iii)
is not in need of maintenance, repair or replacement except for ordinary,
routine maintenance and repairs that are not material in nature or cost.
SECTION 4.03. The New York City Contract. The New York City Contract
(i) has been executed and delivered by the parties thereto and is in full force
and effect (ii) no defaults exist thereunder, (iii) the Company has received
notice to proceed from the City of New York and (iv) upon consummation of the
transactions contemplated by this Agreement, shall continue in full force and
effect without penalty or other adverse consequence.
SECTION 4.04. Licenses and Permits. (a) Schedule 4.04 of the Disclosure
Schedule lists all governmental licenses, permits and other governmental
authorizations and approvals required for Xxxxx'x usage of railroads and other
channels of interstate commerce in its business as now conducted.
39
(b) Xxxxx has all governmental licenses, permits and other governmental
authorizations and approvals required for the conduct of its business and its
usage of all national railroads and other channels of interstate commerce in its
businesses (including the EPIC business) as now conducted, and all such material
licenses, permits, authorizations and approvals will remain in full force and
effect immediately following the consummation of the transactions hereunder.
SECTION 4.05. Xxxxx Agreements. The Xxxxx Agreements attached hereto as
Exhibit F are hereby incorporated by reference as part of this Agreement and are
an authentic, true and complete copy of the Xxxxx Agreements as executed.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF THE PURCHASER
-----------------------------------------------
The Purchaser represents and warrants to the Company that:
SECTION 5.01. Corporate Organization. The Purchaser is a corporation
duly organized, validly existing and in good standing under the laws of the
British Virgin Islands, organized for the purpose of investing in the Company,
and has the requisite corporate power and authority and any necessary
governmental authority to own, operate or lease the properties that it purports
to own, operate or lease and to carry on its business as it is now being
conducted. The Purchaser agrees that it will not enter into or become involved
in any business that would be in competition with the Business.
SECTION 5.02. Authority. The Purchaser has all necessary corporate
power and authority to execute and deliver this Agreement, to perform its
obligations and to consummate the transactions contemplated hereunder. The
execution and delivery of this Agreement by the Purchaser and the purchase of
the Wasteco Shares and the Wasteco Common Stock as provided in Section 2.01
hereof by the Purchaser hereunder have been duly and validly authorized by all
necessary corporate action of the Purchaser and no other corporate proceedings
on the part of the Purchaser are necessary to authorize this Agreement or the
purchase of the Wasteco Shares and the Wasteco Common Stock by the Purchaser as
contemplated hereby. This Agreement has been duly and validly executed and
delivered by the Purchaser and, assuming its due authorization, execution and
delivery by the Company, constitutes the legal, valid and binding obligation of
the Purchaser enforceable against the Purchaser in accordance with its terms.
SECTION 5.03. No Conflict; Required Filings and Consents. (a) The
execution and delivery of this Agreement by the Purchaser do not, and the
performance of
40
this Agreement by the Purchaser will not, (i) conflict with or violate the
articles of incorporation or by-laws or equivalent organizational documents of
the Purchaser, (ii) conflict with or violate any law, rule, regulation, order,
judgment or decree applicable to the Purchaser or by which it or its properties
are bound or affected or (iii) result in any breach of or constitute a default
(or an event which with notice or lapse of time or both would become a default)
under, or give to others any rights of termination, amendment, acceleration or
cancellation of, or result in the creation of a lien or encumbrance on any of
the property or assets of the Purchaser pursuant to, any note, bond, mortgage,
indenture, contract, agreement, lease, license, permit, franchise or other
instrument or obligation to which the Purchaser is a party or by which the
Purchaser or any of its properties is bound or affected, except, in the case of
this clause (iii) and clause (ii) above, for any such breaches, defaults or
other occurrences which would not, individually or in the aggregate, have a
material adverse effect on the business, operations, properties (including
intangible properties), condition (financial or otherwise), assets or
liabilities of the Purchaser.
(b) The execution and delivery of this Agreement by the Purchaser do
not, and the performance of this Agreement by the Purchaser (including, without
limitation, the consummation of the transactions hereunder) will not, require
any consent, approval, authorization or permit of, or filing with or
notification to, any governmental or regulatory authority, domestic or foreign.
SECTION 5.04. Funds. The Purchaser has and, immediately prior to the
Closing, will have the funds necessary to consummate the purchase of the Wasteco
Shares and the Wasteco Common Stock hereunder.
SECTION 5.05. Investment Purpose. The Wasteco Shares and the Wasteco
Common Stock purchased by the Purchaser pursuant to this Agreement are being
acquired for investment only and not with a view to any sale or distribution
(within the meaning of the Securities Act) of the Wasteco Shares and the Wasteco
Common Stock or any part thereof other than a contemplated transfer of the
Wasteco Shares and the Wasteco Common Stock to a partnership to be incorporated
under the laws of Delaware, as soon as practicable after the Closing. The
Purchaser agrees at all times to sell or otherwise dispose of all or any part of
the Wasteco Shares and the Wasteco Common Stock so acquired by the Purchaser
(and any securities issued in exchange therefor) only pursuant to a registration
or exemption therefrom, under the Securities Act and in compliance with
applicable state securities laws.
SECTION 5.06. Brokers. No broker, finder or investment banker is
entitled to any brokerage, finder's or other fee or commission in connection
with the transactions hereunder based upon arrangements made by or on behalf of
the Purchaser.
41
ARTICLE VI
COVENANTS
---------
SECTION 6.01. Use of Proceeds. (a) The Company covenants and agrees
that the Purchase Price proceeds shall be used, in full accordance with the
Xxxxx Agreements, exclusively to finance the Xxxxx Acquisition and any remaining
funds thereof shall be used solely as working capital of the Company and (b)
before distributing any dividends from the Equipment Debt Refinancing to the
Company, the Company shall use the proceeds from the Equipment Debt Refinancing
to repay in full (i) all equipment debt of EPIC outstanding on October 31, 1997
and (ii) the loan of X.X. Xxxxx for $1,000,000.
SECTION 6.02. Restrictions on Operation of EPIC. The Company covenants
and agrees that, prior to the expiration of the EPIC Option, without the prior
written consent of the Purchaser, neither the Company nor any Subsidiary will
perform, with respect to EPIC, (i) any of the actions enumerated in clauses (i),
(ii), (iii), (v), (vi), (vii), (viii), (xii), (xvi), (xvii), (xviii), (xx) and
(xxi) of Section 3.11(b) and (ii) the following actions:
(A) redeem any of Xxxxx'x capital stock or declare, make or pay
any dividends or distributions (whether in cash, securities or other
property) to the holders of the Company's or any Subsidiary's capital
stock or otherwise except (i) as contemplated by the Xxxxx Agreements
and (ii) the following:
1. upon receipt, up to a maximum of $2,000,000
of Equipment Debt Refinancing proceeds and
the $1,000,000 loan of X. X. Xxxxx shall be
distributed to the Company;
2. monthly dividends inclusive of tax
distributions no greater than 75% of EBITDA
less capital expenditures incurred for
maintenance and less debt service including
principal and interest on all EPIC debts
(excluding existing secured equipment debts
and the $1,000,000 loan of X. X. Xxxxx to be
repaid out of the Equipment Debt Refinancing
proceeds) until June 30, 1998;
3. effective July 1, 1998 monthly dividends
inclusive of tax distributions no greater
than 40% of EBITDA less capital expenditures
incurred for maintenance and less debt
service, including principal and interest on
all EPIC debts until the difference between
the 75% set forth in subsection (2) above
and the 40% set forth in this subsection (3)
equals $3,000,000; and
42
4. after $3,000,000 has been accumulated
pursuant to subsection (3) above, dividends
up to 75% of EBITDA less capital
expenditures incurred for maintenance and
less debt services including principal and
interest on all EPIC debts may be paid,
(B) other than with respect to the Xxxxx Acquisition, the
Mortgage Refinancing and the Equipment Debt Refinancing, make any loan
to, guarantee any indebtedness of or otherwise incur any indebtedness
on behalf of any Person in excess of $50,000 individually or $100,000
in the aggregate;
(C) other than with respect to the Xxxxx Acquisition, make any
capital expenditure or commitment for any capital expenditure in
excess of $250,000 individually or $500,000 in the aggregate;
(D) other than with respect to the Xxxxx Acquisition, enter into
any agreement, arrangement or transaction with any of its directors,
officers, employees (other than in connection with their employment
agreements) or shareholders (or with any relative, beneficiary, spouse
or Affiliate of any such Person);
(E) other than with respect to the Xxxxx Acquisition, the
Mortgage Refinancing, the Equipment Debt Refinancing and the New York
City Contract, incur any Indebtedness in excess of $250,000
individually or $500,000 in the aggregate;
(F) materially amend, modify or consent to the termination of any
Material Contract or Xxxxx'x or rights thereunder or enter into any
new Material Contract on behalf of Xxxxx; or
(G) except with respect to the employment agreements listed on
Schedule 3.11(b) of the Disclosure Schedule (A) grant any increase, or
announce any increase, in the wages, salaries, compensation, bonuses,
incentives, pension or other benefits payable by Xxxxx to any of its
senior management employees, including, without limitation, any
increase or change pursuant to any Plan or (B) establish or increase
or promise to increase any benefits for such senior management under
any Plan, in either case except as required by law or any collective
bargaining agreement and involving ordinary increases consistent with
the past practices of Xxxxx.
SECTION 6.03. Bedminster Matters. The Company covenants and agrees that
it will enter into a legally enforceable agreement with Bedminster Seacor
Services Miami Corporation ("Bedminster Miami") limiting and restricting
Bedminster Miami's interest in the Miami Project to not more than $145,000 of
cash payments in any fiscal year. Any amount in excess of such payment in any
fiscal year, shall be considered a Loss for purposes of Section 9.02(a)(x).
43
ARTICLE VII
TAX MATTERS
-----------
SECTION 7.01. Indemnity. (a) The Company and any Subsidiary agree to
indemnify and hold harmless the Purchaser against the following Taxes and
against any loss (including, without limitation, loss of value of the
Purchaser's stock investment in the Company), damage, liability or expense,
including reasonable fees for attorneys and other outside consultants, incurred
in contesting or otherwise in connection with any such Taxes: (i) Taxes imposed
on the Company or any Subsidiary with respect to taxable periods of such
corporation ending on or before the Closing Date; and (ii) Taxes imposed on any
member of any affiliated group with which any of the Company and any Subsidiary
file or have filed a Tax Return on a consolidated, combined or unitary basis for
a taxable period ending on or before the Closing Date (together, hereinafter
"Purchaser Tax Loss").
(b) The right of the Purchaser to be indemnified pursuant to this
Section 7.01 shall be subject to the dollar limitations contained in Section
9.05(b). Claims relating to Tax matters and claims for indemnity covered by
Article IX shall be aggregated for the purpose of applying those limitations.
(c) The amount of any Purchaser Tax Loss shall be the amount of Taxes
and other items described in Section 7.01 multiplied by a factor equal to the
percentage interest of the Purchaser in the Preferred Stock Series A of the
Company at the date of the Closing, except that in the event of a Loss arising
out of the acquisition of Xxxxx, for which there is not a full indemnification
to the Company by X.X. Xxxxx, the amount shall be 100% of such claim.
SECTION 7.02. Returns and Payments. The Company shall prepare and file
or otherwise furnish to the appropriate Tax authority (or cause to be prepared
and filed or so furnished) in a timely manner all Tax Returns, reports or forms
relating to the Company and any Subsidiary that are due on or before, or relate
to any taxable period ending on or before, the Closing Date. Returns of the
Company and any Subsidiary not yet filed for any taxable period that begins
before the Closing Date shall be prepared, and each item thereon treated, in a
manner consistent with past practices employed with respect to the Company and
any Subsidiary (except to the extent counsel for the Company determines there is
no reasonable basis in law therefor or determines that a Return cannot be so
prepared and filed or an item so reported without being subject to penalties).
44
SECTION 7.03. Contests. (a) After the Closing, the Company (or any
Subsidiary) shall promptly notify the Purchaser in writing of any written notice
of a proposed assessment or claim in an audit or administrative or judicial
proceeding involving the Company or any Subsidiary which, if determined
adversely to the taxpayer, would be grounds for indemnification under this
Article VII.
(b) The Purchaser shall have the right to participate in any audit or
administrative or judicial proceedings to which the Company (or any Subsidiary)
may become a party that are reasonably likely to result in an obligation on the
part of the Company (or any Subsidiary) to the Purchaser under this Article VII.
(c) The Company (or any Subsidiary) shall not enter into any compromise
or agree to settle any claim pursuant to any Tax audit or proceeding which would
adversely affect the Purchaser for such year or a subsequent year without the
written consent of the Purchaser, which consent may not be unreasonably
withheld.
SECTION 7.04. Time of Payment. Payment by the Company to the Purchaser
of any amounts due under this Article VII in respect of Taxes shall be made
within three Business Days following the earliest of (i) an agreement between
the Company (or any Subsidiary) and the Purchaser that an indemnity amount is
payable; (ii) payment by the Company or any Subsidiary of any Taxes which
payment gives rise to an indemnity obligation pursuant to this Article VII; or
(iii) a "determination" as defined in section 1313(a) of the Code giving rise to
an indemnity obligation pursuant to this Article VII. If liability under this
Article VII is in respect of costs or expenses other than Taxes, payment by the
Company (or any Subsidiary) of any amounts due under this Article VII shall be
made as soon as the amount can reasonably be determined.
SECTION 7.05. Conveyance Taxes. The Company shall be liable for and
shall hold the Purchaser harmless against any transfer, recording, registration,
and other fees, and any similar Taxes which become payable in connection with
the transactions contemplated hereby, and shall file such applications and
documents as shall permit any such Tax to be assessed and paid on or prior to
the Closing Date in accordance with any available pre-sale filing procedure. The
Purchaser shall execute and deliver all instruments and certificates necessary
to enable the Company to comply with the foregoing.
SECTION 7.06. Miscellaneous. (a) The Company (and any Subsidiary) and
the Purchaser agree to treat all payments made to the Purchaser under this
Article VII, under other indemnity provisions of this Agreement and for any
misrepresentations or breach of warranties or covenants as adjustments to the
purchase price or as capital contributions for Tax purposes and that such
treatment shall govern for purposes hereof except to the extent that the laws of
a particular jurisdiction provide otherwise, in which case such payments shall
be made in an amount sufficient to indemnify the relevant party on an after-Tax
basis.
45
(b) Notwithstanding any provision herein to the contrary, the
obligations of the Company and any Subsidiary to indemnify and hold harmless the
Purchaser pursuant to this Article VII, and the representations and warranties
contained in Section 3.22, shall terminate at the close of business on the 180th
day following the expiration of the applicable statute of limitations with
respect to the Tax liabilities in question (giving effect to any waiver,
mitigation or extension thereof).
(c) From and after the date hereof, the Company and any Subsidiary
shall not without the prior written consent of the Purchaser (which may, in its
sole and absolute discretion, withhold such consent) make or revoke, or cause or
permit to be made or revoked, any Tax election, or adopt or change any method of
accounting, that would affect the Company or any Subsidiary.
ARTICLE VIII
CONDITIONS TO THE CLOSING
-------------------------
SECTION 8.01. Conditions to Obligations of the Purchaser. The
obligations of the Purchaser to effect the Closing shall be subject to the prior
fulfillment of each of the following conditions:
(a) Representations and Warranties; Agreements and Covenants. (i)
The representations and warranties of the Company contained in this
Agreement which are qualified as to materiality shall be true and
correct in all respects and all other representations and warranties
shall be true and correct in all material respects on and as of the
Closing, with the same force and effect as if made as of the Closing,
(ii) all the agreements and covenants contained in this Agreement to
be performed or complied with by the Company at or before the Closing
shall have been performed or complied with in all material respects
and (iii) the Purchaser shall have received a certificate of the
Company in the form of Exhibit D hereto, signed by the Chief Executive
Officer thereof, as to the fulfillment of the conditions set forth in
the foregoing clauses (i) and (ii).
(b) Litigation. There shall have been no order or preliminary or
permanent injunction entered in any action or proceeding before any
federal, state or foreign court or governmental, administrative or
regulatory authority or agency, and no other action taken or
threatened, or statute, rule, regulation, legislation, interpretation,
judgment or order enacted, entered, enforced, promulgated, amended,
issued or deemed applicable to the Purchaser, the Company, Xxxxx or
any of its other Subsidiaries or Affiliates, by any federal, state or
foreign legislative body, court,
46
government or governmental, administrative or regulatory
authority or agency which shall have remained in effect and which
shall have had the effect of: (i) making illegal, materially delaying
or otherwise directly or indirectly restraining or prohibiting the
consummation of the transactions hereunder (including, without
limitation, the purchase of the Wasteco Shares and the Wasteco Common
Stock and the conversion or redemption of the Preferred Stock); (ii)
prohibiting or materially limiting the ownership of the Wasteco Shares
and the Wasteco Common Stock; (iii) imposing material limitations on
the ability of the Purchaser to exercise full rights of ownership of
any of the Wasteco Shares and the Wasteco Common Stock, including,
without limitation, the right to vote any shares of Common Stock; (iv)
requiring divestiture by the Purchaser of any Wasteco Shares or the
Wasteco Common Stock; or (v) preventing the Purchaser from
consummating the transactions contemplated hereby.
(c) Resolutions. The Purchaser shall have received a true and
complete copy, certified by the Secretary of the Company, of the
resolutions duly and validly adopted by the Board evidencing its
authorization of the execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby.
(d) Incumbency Certificate of the Company. The Purchaser shall
have received a certificate of the Secretary or an Assistant Secretary
of the Company certifying the names and signatures of the officers of
the Company authorized to sign this Agreement and the other documents
to be delivered hereunder.
(e) Consents and Approvals. The Purchaser and the Company shall
have received, each in form and substance satisfactory to the
Purchaser in its sole and absolute discretion, all authorizations,
consents, orders and approvals of all Governmental Authorities and
officials and all third-party consents and estoppel certificates
identified to the Company, which the Purchaser in its sole and
absolute discretion deems necessary or desirable for the consummation
of the transactions contemplated by this Agreement.
(f) Organizational Documents. The Purchaser shall have received a
copy of (i) the Certificates of Incorporation, as amended (or similar
organizational documents), of the Company, Xxxxx and of each other
Subsidiary, certified by the secretary of state of the jurisdiction in
which each such entity is incorporated or organized, as of a date not
earlier than five Business Days prior to the Closing Date and
accompanied by a certificate of the Secretary or Assistant Secretary
of each such entity, dated as of the Closing Date, stating that no
amendments have been made to such Certificates of Incorporation (or
similar organizational documents) since such date other than an
amendment to the Certificate of Incorporation of the Company filed
contemporaneously with the execution of this Agreement with respect to
the number
47
of Board members and the filing of the Certificates of
Designation with respect to the Wasteco A Preferred Shares, the
Wasteco C Preferred Shares, and the Xxxxx Shares and (ii) the By-laws
(or similar organizational documents) of the Company, Xxxxx and of
each Subsidiary, certified by the Secretary or Assistant Secretary of
each such entity.
(g) Good Standing; Qualification to Do Business. The Purchaser
shall have received good standing certificates for the Company, for
Xxxxx and for each other Subsidiary from the secretary of state of the
jurisdiction in which each such entity is incorporated or organized
and from the secretary of state of each other jurisdiction in which
the properties owned or leased by any of the Company, Xxxxx or any
other Subsidiary, or the operation of its business in such
jurisdiction, requires the Company or Xxxxx or any other Subsidiary to
qualify to do business as a foreign corporation, in each case dated as
of a date not earlier than fifteen (15) Business Days prior to the
Closing Date and accompanied by bring-down telegrams dated the Closing
Date.
(h) Calamities. There shall not have occurred and be continuing
(i) any general suspension of, or limitation on prices for or trading
in securities on any United States securities exchange, (ii) a
declaration of a banking moratorium or any suspension of payments in
respect of banks in the United States, (iii) any limitation (whether
or not mandatory) by any government or governmental, administrative or
regulatory authority or agency, domestic or foreign, or other event
that materially adversely affects the ability of the Purchaser to
purchase the Wasteco Shares and the Wasteco Common Stock hereunder, or
(iv) a commencement of a war or armed hostilities or other national or
international calamity directly involving the United States.
(i) Bankruptcy; Insolvency; Etc. No proceeding shall have been
instituted or consented to by or against the Company or Xxxxx or any
other subsidiary seeking to adjudicate it bankrupt or insolvent, or
seeking liquidation, winding-up, reorganization, arrangement,
adjustment, protection, relief or composition of its debts under any
law relating to bankruptcy, insolvency or reorganization or relief of
debtors, or seeking the entry of an order for relief or the
appointment of a receiver, trustee, custodian or other similar
official for it or any substantial part of its property (each such
action being a "Bankruptcy Proceeding"), and none of the Company,
Xxxxx or any other subsidiary shall have taken any corporate action to
authorize any Bankruptcy Proceeding.
(j) No Material Adverse Effect. No fact, event or condition
(financial or otherwise) shall have occurred with respect to the
Company, Xxxxx or any of its other Subsidiaries having, individually
or in the aggregate, a Material Adverse Effect.
48
(k) Opinion. The Purchaser shall have received an opinion from
Xxxxxxxxx Xxxxxxx Xxxxxxx Xxxxxx Xxxxx & Xxxxxxx, P.A., a professional
corporation, substantially to the effect of Exhibit B hereto.
(l) Registration Rights Agreement. The Registration Rights
Agreement, in the form of Exhibit C, shall have been executed and
delivered by the parties thereto.
(m) Filing of Corporate Certificates; Adoption of By-laws. The
Company shall have adopted and filed with the Secretary of State of
New Jersey a certificate of incorporation in a form satisfactory to
the Purchaser. Further, the Company shall have adopted By-laws in a
form satisfactory to the Purchaser.
(n) Due Diligence. The Purchaser shall have completed all its
business, legal, accounting and environmental due diligence with
respect to the Company and the Subsidiaries and shall, in its sole and
absolute judgment, be satisfied with the results thereof.
(o) New York Contract Opinion. The Purchaser shall have received
an opinion from Fischbein, Badillo, Xxxxxx and Itzler, a professional
corporation, substantially to the effect of Exhibit G hereto.
(p) Phase I Environmental Study. The Phase I Environmental Study
on the Miami Project shall have been completed and the Purchaser shall
have received such study and shall, in its sole and absolute judgment,
be satisfied with the results thereof.
(q) Stockholders Agreement. The Stockholders Agreement, in the
form of Exhibit H, shall have been executed and delivered by the
parties thereto.
SECTION 8.02. Conditions to Obligations of the Company. The obligations
of the Company to effect the Closing shall be subject to the prior fulfillment
of each of the following conditions:
(a) Representations and Warranties. (i) The representations and
warranties of the Purchaser contained in this Agreement and in any
certificates or agreements of the Purchaser delivered pursuant hereto
shall be true and correct in all material respects on and as of the
Closing, with the same force and effect as if made as of the Closing,
(ii) all the agreements and covenants contained in this Agreement and
in any certificates or agreements of the Purchaser delivered pursuant
hereto to be performed or complied with by the Purchaser at or before
the Closing shall have been performed or complied with in all material
respects and (iii) the Company shall have received a certificate of
the Purchaser in the form of Exhibit E hereto, signed by a duly
49
authorized officer thereof, as to the fulfillment of the
conditions set forth in the foregoing clauses (i) and (ii).
(b) Litigation. There shall have been no order or preliminary or
permanent injunction entered in any action or proceeding before any
federal, state or foreign court or governmental, administrative or
regulatory authority or agency by any federal, state or foreign
legislative body, court, government or governmental, administrative or
regulatory authority or agency which shall have remained in effect and
which shall have had the effect of making illegal the consummation of
any of the transactions hereunder.
ARTICLE IX
INDEMNIFICATION
---------------
SECTION 9.01. Survival of Representations and Warranties. The
representations and warranties of the Company in this Agreement, and all
statements contained in this Agreement, the Exhibits to this Agreement, the
Disclosure Schedule and any certificate, Financial Statement, Interim Financial
Statement or report or other document delivered pursuant to this Agreement or in
connection with the transactions contemplated by this Agreement (collectively,
the "Acquisition Documents") shall survive the Closing until the second
anniversary of the Closing Date, except that the covenants contained in Section
6.03 and all claims arising by reason of or in connection with a failure by the
Company to issue sufficient shares of Common Stock to the Purchaser (as further
set forth in section 9.02(c)) shall survive the closing until the seventh
anniversary of the Closing Date. Neither the period of survival nor the
liability of any party with respect to the parties' representations and
warranties shall be reduced by any investigation made at any time by or on
behalf of any party.
SECTION 9.02. Indemnification by the Company. (a) The Purchaser, its
Affiliates and their successors and assigns and the officers, directors,
employees and agents of the Purchaser, its Affiliates and their successors and
assigns (each, an "Indemnified Party") shall be indemnified and held harmless by
the Company for any and all Liabilities, losses, depreciation in value, damages,
claims, costs and expenses, interest, awards, judgments and penalties
(including, without limitation, reasonable attorneys' and consultants' fees and
expenses) suffered or incurred by them (including, without limitation, any
Action brought or otherwise initiated by any of them) (hereinafter, a "Purchaser
Loss") arising out of or resulting from:
50
(i) the material breach of any representation or warranty made by
the Company contained in the Acquisition Documents; or
(ii) the material breach of any covenant or agreement by the
Company contained in the Acquisition Documents; or
(iii) material liabilities of the Company or any Subsidiary not
reflected on the Financial Statements or the Interim Financial
Statements, whether arising before or after the Closing Date, arising
from or relating to the ownership or actions or inactions of the
Company or such Subsidiary or the conduct of their respective
businesses prior to the Closing; or
(iv) material liabilities of the Company, Xxxxx or any other
Subsidiary, whether arising before or after the Closing Date, arising
from or relating to any of the Disclosure Schedules or listed in
Articles III and IV herein; or
(v) material liabilities of Xxxxx not reflected in Xxxxx and EPIC
financial statements delivered to Purchaser in accordance with Section
4.01 herein, whether arising before or after the Closing Date, arising
from or relating to the ownership or actions or inactions of Xxxxx on
the conduct of its respective businesses prior to the Closing; or
(vi) any and all Losses suffered or incurred by the Purchaser,
the Company, Xxxxx or any other Subsidiary by reason of or in
connection with any claim or cause of action of any third party to the
extent arising out of any action, inaction, event, condition,
liability or obligation of the Company or Xxxxx occurring or existing
prior to the Closing; or
(vii) any and all Losses suffered or incurred by the Purchaser,
the Company, Xxxxx or any other Subsidiary by reason of or in
connection with any claim, cause of action, cancellation, breach or
invalidity of the New York City Contract; or
(viii) (A) any and all Remedial Actions after the Closing
relating to any Release of Hazardous Materials into the Environment or
on or about the Real Property prior to the Closing to the extent any
such Remedial Action is required under any Environmental Law or by any
Governmental Authority or is necessary to prevent or xxxxx a
significant risk to human health or the environment; (B) any and all
Environmental Claims arising at any time that relate to the business
or the operation of the Company or Xxxxx or any other Subsidiary prior
to the Closing; or (C) any and all noncompliances with or violations
of any applicable Environmental Law or Environmental Permit by the
Company or Xxxxx or any other Subsidiary prior to the Closing;
51
(ix) any diminution in value of any asset of the Company, Xxxxx
or any other subsidiary as a result of an expense incurred by the
Company, Xxxxx or any other subsidiary arising out or resulting from
the causes enumerated in this Section 9.02(a); or
(x) any and all losses, suffered or incurred by the Purchaser,
the Company, or any Subsidiary by reason of or in connection with any
breach of the covenants contained in Section 6.03.
To the extent that the Company's undertakings set forth in this Section 9.02 may
be unenforceable, the Company shall contribute the maximum amount that it is
permitted to contribute under applicable law to the payment and satisfaction of
all Losses incurred by the Purchaser, the Company, Xxxxx and the Subsidiaries.
Notwithstanding anything to the contrary in this Article IX, the rights
and obligations of the parties with respect to any and all Tax matters shall be
governed by Article VII. In particular, this Article IX shall not apply to any
indemnity to which the Purchaser may be entitled under Section 7.01 (relating to
Taxes), except to the extent specified therein.
(b) An Indemnified Party shall give the Company notice of any matter
which an Indemnified Party has determined has given or could give rise to a
right of indemnification under this Agreement, within 60 days of such
determination, stating the amount of the Loss, if known, and the method of
computation thereof, and containing a reference to the provisions of this
Agreement in respect of which such right of indemnification is claimed or
arises. The obligations and Liabilities of the Company under this Article IX
with respect to Losses arising from claims of any third party which are subject
to the indemnification provided for in this Article IX ("Third Party Claims")
shall be governed by and contingent upon the following additional terms and
conditions: (i) if an Indemnified Party shall receive notice of any Third Party
Claim, the Indemnified Party shall give the Company notice of such Third Party
Claim within 30 days of the receipt by the Indemnified Party of such notice,
provided, however, that the failure to provide such notice shall not release the
Company from any of its obligations under this Article IX except to the extent
the Company is materially prejudiced by such failure and shall not relieve the
Company from any other obligation or Liability that it may have to any
Indemnified Party otherwise than under this Article IX and (ii) if the Company
acknowledges in writing its obligation to indemnify the Indemnified Party
hereunder against any Losses that may result from such Third Party Claim, then
the Company shall be entitled to assume and control the defense of such Third
Party Claim at its expense and through counsel of its choice if it gives notice
of its intention to do so to the Indemnified Party within five days of the
receipt of such notice from the Indemnified Party, provided, however, that if
there exists or is reasonably likely to exist a conflict of interest that would
make it inappropriate in the
52
judgment of the Indemnified Party, in its sole and absolute discretion, for the
same counsel to represent both the Indemnified Party and the Company, then the
Indemnified Party shall be entitled to retain its own counsel, in each
jurisdiction for which the Indemnified Party determines counsel is required, at
the expense of the Company. In the event the Company exercises the right to
undertake any such defense against any such Third Party Claim as provided above,
the Indemnified Party shall cooperate with the Company in such defense and make
available to the Company, at the Company's expense, all witnesses, pertinent
records, materials and information in the Indemnified Party's possession or
under the Indemnified Party's control relating thereto as is reasonably required
by the Company. Similarly, in the event the Indemnified Party is, directly or
indirectly, conducting the defense against any such Third Party Claim, the
Company shall cooperate with the Indemnified Party in such defense and make
available to the Indemnified Party, at the Company's expense, all such
witnesses, records, materials and information in the Company's possession or
under the Company's control relating thereto as is reasonably required by the
Indemnified Party. No such Third Party Claim may be settled by the Company
without the prior written consent of the Indemnified Party.
(c) Purchaser Loss as to any matter arising under clauses (i) through
(x) of Section 9.02(a) shall be conclusively measured by the Loss to the
Company, Xxxxx or the other Subsidiary incurring such Loss multiplied by the
percentage interest of the Purchaser in the Preferred Stock Series A of the
Company at Closing, except that, in the event of a Loss arising out of the
Acquisition of Xxxxx, for which there is not a full indemnification to the
Company by X.X. Xxxxx, the Loss shall be 100% of such claim, and in the event of
a failure by the Company to issue sufficient shares of Common Stock to the
Purchaser, the Loss shall be 100% of such claim which may be settled in the sole
and absolute discretion of the Purchaser in the form of issuance of additional
shares of Common Stock to the Purchaser by the Company.
SECTION 9.03. Indemnification by the Purchaser. The Company, and its
Affiliates, officers, directors, employees, agents, successors and assigns,
shall be indemnified and held harmless by the Purchaser for any and all
Liabilities, losses, damages, claims, costs and expenses, interest, awards,
judgments and penalties (including, without limitation, legal costs and
expenses) actually suffered or incurred by them (hereinafter, a "Company Loss"
and, together with a Purchaser Loss, a "Loss"), arising out of or resulting
from:
(a) the breach of any representation or warranty made by the
Purchaser contained herein or in any document delivered by the
Purchaser hereunder at the Closing; or
(b) the breach of any covenant or agreement by the Purchaser
contained herein.
53
SECTION 9.04. Materiality. Notwithstanding anything in this Agreement
to the contrary, for purposes of application of the indemnity provisions of this
Article IX, the amount of any Purchaser Loss or Company Loss arising from the
breach of such representation, warranty, covenant or agreement shall be the
entire amount of any such Loss actually incurred by the respective indemnitee as
a result of such breach and not just that portion of such Loss that exceeds the
relevant level of materiality.
SECTION 9.05. Time Period; Dollar Threshold. (a) The indemnification
obligations of the Company and the Purchaser under this Article IX shall
continue for the same period of survival specified in Section 9.01 for each such
representation and warranty and shall terminate with the expiration of the
applicable survival period for each such representation, warranty and covenant.
Any claim or demand against the Company or the Purchaser which is pending or
asserted at or prior to the expiration of any survival period may continue to be
asserted and indemnified against.
(b) Neither the Company nor the Purchaser shall be entitled to
indemnification under this Article IX unless and until the aggregate amount of
the claims against the other party exceeds $500,000. If the aggregate amount of
such claims against either party exceeds $750,000, then that party may claim
indemnification for the entire aggregate amount of such claims. Notwithstanding
the foregoing, the dollar limitations contained in this Section 9.05(b) shall
not apply to the claims for indemnity covered by Section 9.02(a)(x).
(c) Notwithstanding anything to the contrary contained in this
Agreement, the maximum amount of indemnifiable Losses which may be recovered
from the Company arising out of or resulting from the causes enumerated in
Section 9.02(a) shall be $5,000,000. Notwithstanding the foregoing, the dollar
limitations contained in this Section 9.05(c) shall not apply to any claims for
indemnity covered by Section 9.02(a)(x).
(d) Notwithstanding anything to the contrary contained in this
Agreement, any claim for Indemnifiable Losses which may be recovered from the
Company arising out or resulting from the failure of the Company to issue to the
Purchaser sufficient shares of Common Stock shall not be subject to the dollar
limitations contained in Section 9.05(b) and (c).
SECTION 9.06. Notice and Defense. Each party shall within 90 days of
learning of any asserted liability or damage claimed to give rise to
indemnification hereunder notify the party obligated to indemnify it hereof in
writing provided, however, that the failure of the indemnified party to so
notify the indemnifying party shall not relieve the indemnifying party of its
obligations hereunder unless, and only to the extent that, such failure to
notify prejudices the indemnifying party. Thereafter, the indemnifying party
shall have, at its election, the right to compromise or defend any such matter
at its sole cost and
54
expense through counsel chosen by it. If the indemnifying party so undertakes to
compromise and defend, the indemnifying party shall notify the other party of
its intention to do so. If the indemnifying party fails to defend such matter
diligently, the indemnified party may assume control of the defense of such
matter. Each party agrees in all cases to cooperate with the defending party and
its counsel in the compromise of or defending of any such liabilities or claims.
The defending party and the nondefending party may be represented by the same
counsel unless such representation would be inappropriate due to actual or
potential differing interests between them. In addition, the nondefending party
shall at all times be entitled to monitor such defense through the appointment
of counsel of its own choosing, at it own cost and expense.
ARTICLE X
AMENDMENT AND WAIVER
--------------------
SECTION 10.01. Amendment. This Agreement may not be amended except by
an instrument in writing signed by the parties hereto.
SECTION 10.02. Waiver. Either party hereto may (a) extend the time for
the performance of any of the obligations or other acts of the other party
hereto, (b) waive any inaccuracies in the representations and warranties
contained herein or in any document delivered pursuant hereto and (c) waive
compliance with any of the agreements or conditions contained herein. Any such
extension or waiver shall be valid if set forth in an instrument in writing
signed by the party to be bound thereby. The failure of either party to assert
any of its rights hereunder shall not constitute a waiver of any such rights.
ARTICLE XI
GENERAL PROVISIONS
------------------
SECTION 11.01. Notices. All notices, requests, claims, demands and
other communications hereunder shall be in writing and shall be given (and shall
be deemed to have been duly given upon receipt) by delivery in person, by cable,
telecopy, telegram or telex or by registered or certified mail (postage prepaid,
return receipt requested) to the respective parties at the following addresses
(or at such other address for a party as shall be specified by like notice):
55
(a) if to the Purchaser:
Wasteco Ventures Limited
Citco Building, Wickhams Cay
X.X. Xxx 000
Xxxx Xxxx
Xxxxxxx, Xxxxxxx Xxxxxx Xxxxxxx
with copies to:
Wafra Investment Advisory Group Inc.
0 Xxxx 00xx Xxxxxx, 00xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xx. Xxxx X. Xxxx
Fax: (000) 000-0000
Telephone: (000) 000-0000
and
Shearman & Sterling
000 Xxxxxxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxxx Xxxxxx Field, Esq.
Fax: (000) 000-0000
Telephone: (000) 000-0000
(b) if to the Company:
Compost America Holding Company, Inc.
000 Xxxxx Xxxxxx
Xxxxxxxxx, Xxx Xxxxxx 00000
Fax: (000) 000-0000
Telephone: (000) 000-0000
with a copy to:
Xxxxxxxxx Traurig
0000 Xxxxxx Xxxxxx
Xxxxx 0000
Xxxxxxxxxxxx, XX 00000
Fax: (000) 000-0000
Telephone: (000) 000-0000
56
SECTION 11.02. Entire Agreement; Assignment. This Agreement constitutes
the entire agreement between the parties with respect to the subject matter
hereof and supersedes all prior agreements and undertakings, both written and
oral, between the parties with respect to the subject matter hereof, including
the Letter of Intent dated August 15, 1997 between Wafra Investment Advisory
Group, Inc. and the Company. This Agreement shall not be assigned by operation
of law or otherwise, except that the Purchaser may assign all or any of its
rights and obligations hereunder to an Affiliate without the consent of the
Company.
SECTION 11.03. Parties in Interest. This Agreement shall be binding
upon and inure solely to the benefit of each party hereto, and nothing in this
Agreement, express or implied, is intended to or shall confer upon any other
Person any rights, benefits or remedies of any nature whatsoever under or by
reason of this Agreement.
SECTION 11.04. Governing Law. This Agreement shall be governed by, and
construed in accordance with, the laws of the State of New York.
SECTION 11.05. Jurisdiction, Etc. (a) Each of the parties hereto hereby
irrevocably and unconditionally submits, for itself and its property, to the
nonexclusive jurisdiction of any New York state court or federal court of the
United States of America sitting in New York City, and any appellate court from
any thereof, in any action or proceeding arising out of or relating to this
Agreement, or for recognition or enforcement of any judgment, and each of the
parties hereto hereby irrevocably and unconditionally agrees that all claims in
respect of any such action or proceeding may be heard and determined in any such
New York state court or, to the extent permitted by law, in such federal court.
Each of the parties hereto agrees that a final judgment in any such action or
proceeding shall be conclusive and may be enforced in other jurisdictions by
suit on the judgment or in any other manner provided by law. Nothing in this
Agreement shall affect any right that any party may otherwise have to bring any
action or proceeding relating to this Agreement in the courts of any
jurisdiction.
(b) Each of the parties hereto irrevocably and unconditionally waives,
to the fullest extent it may legally and effectively do so, any objection that
it may now or hereafter have to the laying of venue of any suit, action or
proceeding arising out of or relating to this Agreement in any such New York
state court or federal court. Each of the parties hereto hereby irrevocably
waives, to the fullest extent permitted by law, the defense of an inconvenient
forum to the maintenance of such action or proceeding in any such court.
SECTION 11.06. Headings. The descriptive headings contained in this
Agreement are included for convenience of reference only and shall not affect in
any way the meaning or interpretation of this Agreement.
57
SECTION 11.07. Counterparts. This Agreement may be executed in one or
more counterparts, and by the different parties hereto in separate counterparts,
each of which when executed shall be deemed to be an original but all of which
taken together shall constitute one and the same agreement. Delivery of an
executed counterpart of a signature page to this Agreement by telecopier shall
be as effective as delivery of a manually executed counterpart of this
Agreement.
SECTION 11.08. Specific Performance. The parties hereto agree that
irreparable damage would occur in the event any of the provisions of this
Agreement were not to be performed in accordance with the terms hereof and that
the parties shall be entitled to specific performance of the terms hereof, in
addition to any other remedy at law or equity.
SECTION 11.09. Expenses. Except as otherwise specified in this
Agreement, all costs and expenses, including, without limitation, fees and
disbursements of counsel, financial advisors and accountants, incurred in
connection with this Agreement and the transactions contemplated hereby shall be
paid by the party incurring such costs and expenses whether or not the Closing
shall have occurred.
58
IN WITNESS WHEREOF, the Purchaser and the Company have each caused this
Agreement to be executed by its duly authorized officer as of the date first
written above.
COMPOST AMERICA HOLDING COMPANY, INC.
By: /s/ Xxxxx X. Xxxxxx
-----------------------------------------
Title: President
WASTECO VENTURES LIMITED
By: /s/ Xxxx X. Xxxx
-----------------------------------------
Title:
EXHIBIT A
Certificate of Designation of Preferred Stocks
----------------------------------------------
EXHIBIT B
Opinion of Xxxxxxxxx Xxxxxxx
----------------------------
EXHIBIT C
Registration Rights Agreement
-----------------------------
EXHIBIT D
Officer's Certificate of the Company
------------------------------------
COMPOST AMERICA HOLDING COMPANY, INC.
Officer's Certificate
---------------------
I, _________________, [President and Chief Executive Officer] of
Compost America Holding Company, Inc., a New Jersey corporation (the "Company"),
hereby certify after due inquiry, that:
1. The representations and warranties of the Company in the Stock
Purchase Agreement, dated as of November 3, 1997 (the "Stock Purchase
Agreement"), between the Company and Wasteco Ventures Limited, a
corporation organized under the laws of the British Virgin Islands,
are true and correct as of the date hereof in all material respects.
2. The Company has complied, in all material respects, with all
of the agreements to be complied with by the Company pursuant to the
Stock Purchase Agreement at or prior to the date hereof.
IN WITNESS WHEREOF, I have hereunto signed my name as of the 3rd day of
November, 1997.
____________________________________
Name: ______________________________
Title: [President and Chief
Executive Officer]
EXHIBIT E
Officer's Certificate of the Purchaser
--------------------------------------
WASTECO VENTURES LIMITED
Officer's Certificate
---------------------
I, Xxxx X. Xxxx, attorney-in-fact of Wasteco Ventures Limited, a
corporation organized in the British Virgin Islands (the "Purchaser"), hereby
certify after due inquiry, that:
1. The representations and warranties of the Purchaser in the
Stock Purchase Agreement, dated as of November 3, 1997 (the "Stock
Purchase Agreement"), between the Purchaser and Compost America
Holding Company, Inc., a New Jersey corporation, are true and correct
as of the date hereof in all material respects.
2. The Purchaser has complied, in all material respects, with all
of the agreements to be complied with by the Purchaser pursuant to the
Stock Purchase Agreement at or prior to the date hereof.
IN WITNESS WHEREOF, I have hereunto signed my name as of the 3rd day of
November, 1997.
Name: Xxxx X. Xxxx
Title: Attorney-in-fact
EXHIBIT F
The Xxxxx Agreements
--------------------
EXHIBIT G
New York City Contract Opinion
------------------------------
EXHIBIT H
Stockholders Agreement
----------------------
