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EXHIBIT 4.1
AGREEMENT AND PLAN OF REORGANIZATION
This Agreement and Plan of Reorganization (the "Agreement") is made this
28th day of October, 1998 by and among KTI SPECIALTY WASTE SERVICES, INC., a
Maine corporation (the "Purchaser"), XXXXXXX XXXXX COMPANY, CAPITOL CITY
TRANSFER, INC. and TWTS, INC., each a Maine corporation (each a "Seller" and
collectively the "Sellers"), and XXXXXXX X. XXXXX (the "Owner").
RECITALS
WHEREAS, the Sellers own all of the assets used or necessary for use in
Sellers' waste hauling businesses transporting non-hazardous wastes in the State
of Maine (collectively the "Business").
WHEREAS, the Sellers wish to transfer the Business and substantially all
of Sellers' assets to Purchaser, solely in exchange for shares of common stock
of KTI, Inc., parent company of Purchaser, and the assumption by Purchaser of
certain liabilities of Sellers in a transaction intended to qualify as a
"reorganization" within the meaning of Section 368(a)(1)(C) of the 1986 Code, it
being understood by Purchaser that Sellers intend, as an integral part of the
transaction, to distribute the shares of KTI, Inc. to Owner in complete
liquidation of Sellers and to dissolve; and
WHEREAS, the Sellers and the Owner desire to transfer and assign to the
Purchaser and the Purchaser desires to acquire from the Sellers substantially
all of the assets, properties and business of the Sellers, all as hereinafter
provided;
NOW, THEREFORE, In consideration of the premises and the mutual
representations, warranties and covenants and subject to the conditions herein
contained, the parties agree as follows:
[A LIST OF DEFINED TERMS IS PROVIDED IN ARTICLE 9 HEREOF]
1. TRANSFER OF ASSETS; CLOSING.
SECTION 1.1 ACQUIRED ASSETS. The Sellers agree to and will transfer,
convey, assign and deliver to the Purchaser at the Closing (as hereinafter
defined), free and clear of all liens, claims and encumbrances of any kind
whatsoever (except those which the Purchaser has expressly agreed to assume in
Subsection 1.3(a)(2) and (3) or Section 1.5 hereof), all right, title and
interest in all assets of the Sellers of every nature and kind (tangible and
intangible, real, personal and mixed), including all property acquired between
the date hereof and Closing, other than the Excluded Assets (as hereinafter
defined), which assets are hereinafter collectively referred to as the
"Acquired Assets" and including, without limitation, the following:
(a) all machinery, equipment, leasehold improvements, construction in
progress, furniture and fixtures, trucks, vehicles, refuse containers, computer
hardware and software and
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other operating assets owned or leased by the Sellers, and other tangible
property (other than Supplies) including without limitation those assets
identified on Schedule 1.1(a) (the "Operating Assets");
(b) all tools and supplies of the Sellers, including, without limitation,
shop tools and equipment, supplies of fuel, lubricants, tires, spare parts,
office equipment and supplies and other consumable materials, products, and
supplies and inventories (the "Supplies");
(c) all right, title and interest in the commercial, industrial and
residential customer accounts, and construction and demolition customer accounts
(which shall be grouped in an individual category) and other rights to provide
services to customers of the Sellers, including without limitation those
identified on Schedule 1.1(c) (collectively, the "Customer Accounts");
(d) all right, title and interest in Sellers in all contracts relating to
Customer Accounts, and all other contracts, personal property leases,
agreements, insurance contracts, performance bonds, commitments and
understandings (oral or written) to which any Seller is a party, including
without limitation those listed on Schedule 2.9 (the contracts described in this
Section 1.1(d), along with the Leased Real Property lease, being collectively
the "Contracts");
(e) all of the Sellers' permits, licenses, governmental approvals and
authorizations, franchises and franchise rights, patents, trademarks, service
marks, copyrights (and all registrations, applications and other rights
associated with the foregoing, including the right to xxx for past
infringement), trade names, corporate names, telephone and telecopy numbers and
directory listings, designs, plans, trade secrets, inventions, procedures,
research, processes, know how, customer relationships, rights to employ Sellers'
employees and other proprietary rights and intellectual property, including
without limitation those identified on Schedule 1.1(e);
(f) all operating data, books, files, documents and records of the
Sellers, including without limitation customer lists, personnel files,
financial, accounting and credit records, marketing information, warranties,
advertising materials and brochures, correspondence, budgets and other similar
documents and records (the "Records");
(g) all of the Sellers' right, title and interest in and to the leased
real property (the "Leased Real Property") including, but not limited to the
property identified on Schedule 2.4 (collectively, the "Leased Real Property");
(h) all accounts receivable of Xxxxxxx Xxxxx Company as of the Closing
Date which arise from the delivery of services or sale of goods by Xxxxxxx Xxxxx
Company in the ordinary course of operation of the Business as conducted by such
Company, as determined in accordance with generally accepted accounting
principles ("Accounts Receivable"); and
(i) all other known and unknown, liquidated or unliquidated, contingent or
fixed rights, choses in action or causes of action of every nature and kind
which the Sellers have or may have against any third party, including without
limitation all advance payments, deposits and other prepaid items, security
deposits and credits, rights of offset, defenses, judgments, claims and
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demands of any nature, benefits under Sellers' insurance policies and fidelity
and performance bonds with respect to all periods prior to Closing, restrictive
covenants, confidentiality obligations and similar obligations of present and
former shareholders, officers and employees;
(j) all other assets of the Sellers other than Excluded Assets whether or
not specifically referred to herein and whether or not carried on the books of
Sellers as an asset; and
(k) any and all goodwill related to the foregoing.
SECTION 1.2 EXCLUDED ASSETS. Anything to the contrary in Section l.l
notwithstanding, the Acquired Assets shall exclude the following assets of
the Sellers (collectively, the "Excluded Assets"):
(a) the corporate minute books and stock records of the Sellers;
(b) all cash and cash equivalents and investments, whether short-term or
long-term bank accounts, certificates of deposit, treasury bills and securities
of the Sellers (other than prepaid expenses);
(c) all accounts receivables of TWTS, Inc. and Capitol City Transfer,
Inc. arising from services or sales of inventory, each in the ordinary course
of business;
(d) any debt owed to Sellers from its shareholders for shareholder loans;
(e) the cash value of that key man life insurance policy on the life of
Xxxxxxx Xxxxx issued by the New England Life Insurance Company, policy number
08-306985, and all rights to payment and other privileges appurtenant to such
insurance policy;
(f) Sellers' claims to payment under First American Title Insurance
Company Policy No. 30015126 relating to real property located off Bog Road in
Augusta, Maine, and those claims of Sellers and Owners under the third party
complaint filed by certain of the Sellers and Owner against First American Title
Company in Kennebec County Superior Court, entitled Capitol City Transfer, Inc.,
et. al. v. First American Title Company, Docket No. CV95-263; and
(g) that certain real property off Bog Road in Augusta, Maine, and used
in the operations of Capitol City Transfer, Inc. further described
in Schedule 2.4(#1) hereto (the "Augusta Real Property"), except
that the trailer and other personal property and any improvements
thereon shall not constitute Excluded Assets (which Augusta Real
Property shall be leased to Purchaser as provided in Section 1.7(a)
hereof); and
(h) At the option of Purchaser, exercisable on a case-by-case basis (i)
agreements and contracts for which consent of a third party is
required and has not been obtained as of the Closing, and (ii) those
contracts and agreements that Purchaser elects not to purchase and
so specified on Schedule 2.9 hereto.
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SECTION 1.3. ACQUIRED PRICE; RELATED MATTERS.
(a) Acquisition Price. The consideration for the Acquired Assets and the
covenant not to compete contained in Section 4.7 herein shall be the sum of Two
Million Dollars ($2,000,000), payable in a combination of KTI Stock and
assumption or repayment of certain of Sellers' obligations as further described
below, adjusted as set forth in Section 1.3(b) below. The Purchaser agrees,
subject to the terms, conditions and limitations set forth in this Agreement:
(1) to cause to be delivered to Sellers that number of shares of the
unregistered common stock of Purchaser's parent, KTI, Inc. (common
stock of KTI, Inc. being referred to as the "KTI Stock") that has an
aggregate value at Closing of the difference between Two Million
Dollars ($2,000,000) and the face amount of the Assumed Obligations
(the "Aggregate Stock Value"), subject to adjustment as provided in
Section 1.3(b) below. For purposes of determining the number of
shares of KTI Stock to be delivered to Sellers hereunder, each share
of the KTI Stock shall be valued using the average closing price of
the common stock of KTI, Inc. on the NASDAQ system for the ten (10)
business days immediately preceding the date of Closing (the
"Value") as reported in the Wall Street Journal under the heading
"NASDAQ National Market Issues" (Symbol KTIE). The KTI Stock issued
pursuant to this Agreement is referred to herein as the "Shares".
(2) at Purchaser's option, either (ii) to pay and discharge at Closing
the amounts owed by Sellers to those lenders described on Schedule
1.3(a) in the amounts set forth in pay-off letters from such lenders
to be delivered to Purchaser at Closing or (ii) to assume at Closing
the Sellers' obligation to repay amounts due to those lenders
described on Schedule 1.3(a) under those documents described therein
in the amounts set forth on estoppel certificates of such lenders to
be delivered by Sellers to Purchaser at Closing; and
(3) to assume Sellers' obligations to provide vacation pay to those of
Sellers' employees who are listed on Schedule 2.19 and are hired by
Purchaser at Closing with an estimate of such amount set forth on
Schedule 2.19 (with the assumed obligations described, in clauses
1.3(a)(2) and 1.3(a)(3) hereof (collectively the "Assumed
Obligations").
(b) Adjustment to Acquisition Price. The Aggregate Stock Value shall be:
(1) increased by sixty percent (60%) of the amount, if any, by which
Modified Working Capital on the Closing Date is greater than zero
(0) and shall be decreased by 60% of the amount, if any, by which
Modified Working Capital on the Closing Date is less than zero (0)
("Modified Working Capital Adjustment");
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(2) decreased by that amount, if any, equal to Purchaser's reasonable
determination of the fair market value of any assets sold by any
Seller between the date hereof and the Closing (with any such
transfer in any event requiring the consent of Purchaser in any
event pursuant to Subsection 4.1 hereof); and
(3) adjusted by that amount, if any, by which the accrued vacation pay
obligation assumed by Purchaser pursuant to Section 1.3(a)(3)
differs from the estimate set forth on Schedule 2.19 hereto.
A good faith estimate of the Modified Working Capital Adjustment
above (the "Estimated Modified Working Capital Adjustment") shall be
made by Sellers at the Closing based on the accounts receivable and
accounts payable records for the Business as of the business day
prior to the Closing Date. The final Modified Working Capital
Adjustment and any other purchase price adjustments shall be
determined on the one hundred eightieth day after the Closing Date.
Purchaser shall make reasonable efforts to collect the Accounts
Receivable, but shall in no event be obligated to commence
litigation or modify its existing accounts receivable collection
practices.
If the Modified Working Capital Adjustment is more than the
Estimated Modified Working Capital Adjustment, Purchaser shall cause
to be issued shares of Stock that is equal to such difference, with
such Stock being subject to the restrictions on transfer set forth
in Section 1.3(c) hereof and being valued at the Value. If the
Modified Working Capital Adjustment is less than the Estimated
Modified Working Capital Adjustment, Sellers shall transfer to KTI,
Inc. that number of Shares that is equal to such difference, with
such Stock being valued at the Value. Transfer of such amount shall
be made not later than the one hundred eighty-fifth day after the
Closing Date. Notwithstanding the foregoing, if such difference is
less than One Thousand Dollars ($1,000.00), no adjustment to the
Estimated Modified Working Capital Adjustment shall be made, and the
Estimated Modified Working Capital Adjustment shall constitute the
final Modified Working Capital Adjustment for purposes of this
Agreement. Any adjustment to the purchase price provided for in
Subsections 1.3(b)(1) and (2) hereof shall be made at the time of
determination (and payment, if applicable) of the final Modified
Working Capital Adjustment, with Stock transferred as an adjustment
to the purchase price being valued at the Value.
(c) Restrictions on Transfer of Shares. That number of shares of KTI Stock
to be delivered to Sellers that has a value at Closing of $275,000 shall not be
registered at Closing but shall be transferable without contractual restriction
by Purchaser or KTI after the Closing (but shall be subject to applicable
restrictions under securities laws). The parties hereby agree that the remaining
Shares to be issued to Sellers pursuant to Section 1.3(a) above and any Shares
issued pursuant to Section 1.3(b) above shall not be transferable by Sellers for
a period of three (3) years after the Closing, except the Purchaser and KTI,
Inc. shall not restrict transfer of Shares to
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Xxxxxxx Xxxxx, and (1) in the case of the death of Xxxxxxx Xxxxx, the Shares may
be transferred to the beneficiaries under his will, or (2) in the event of the
divorce of Xxxxxxx Xxxxx, the Shares may be transferred to his spouse pursuant
to a qualified domestic relations order requiring that some portion of the
Shares be transferred to his spouse, provided in each case only that such
transfer is in accordance with applicable restrictions under securities laws and
evidence of such compliance is provided to KTI, Inc. These restrictions on
transfer shall be set forth on the face of the stock certificate(s) to be issued
to Sellers. The Shares shall be subject to a Registration Rights Agreement in
the form attached as Exhibit A (the "Registration Rights Agreement"). KTI, Inc.
shall be a third party beneficiary of this Section 1.4(c).
(d) Taxes. All federal, state, local and other transfer, sales, use and
other taxes applicable to, or imposed upon or arising out of the operation of
the Business prior to the Closing and the sale of the Purchased Assets and the
other transactions contemplated hereby shall be paid by Sellers in a timely
manner, except that fifty percent (50%) of the sales tax on vehicles shall be
paid by Purchaser.
SECTION 1.4 INTENTIONALLY DELETED.
SECTION 1.5 PURCHASER'S OBLIGATIONS UNDER CONTRACTS AND FOR ASSUMED
PAYABLES; LIMITED ASSUMPTION OF LIABILITIES. From and after the date of closing,
Purchaser shall pay, perform and discharge when required thereunder Sellers'
obligations under those certain Contracts that (A) are listed on Schedule 2.9
(other than those marked "not to be assumed"), (B) have been entered into in the
ordinary course of business and can be terminated by Sellers without liability
upon thirty (30) days or less notice, or (C) are entered into between the date
hereof and the Closing and which Purchaser has agreed in writing to assume, but
in each case only to the extent that payment, performance or discharge of
Sellers' obligations is required after the Closing under the terms of such
Contracts, and provided that Purchaser need not assume any liabilities or
obligations of Sellers with respect to a Material Contract (as defined in
Section 6.4 below) for which an estoppel certificate has not been obtained (the
Contracts described in this Subsection 1.5 being referred to herein as the
"Assumed Contract Liabilities").
Purchaser shall also pay and discharge when due the Assumed Payables.
WITH THE EXCEPTION OF THE ASSUMED PAYABLES, THE ASSUMED OBLIGATIONS AND
THE ASSUMED CONTRACT LIABILITIES, PURCHASER DOES NOT AND SHALL NOT ASSUME OR
BECOME OBLIGATED TO PAY, PERFORM OR DISCHARGE ANY DEBT, OBLIGATION OR LIABILITY
OF SELLERS OF ANY KIND OR NATURE WHATSOEVER, WHETHER OR NOT INCURRED OR ARISING
IN CONNECTION WITH THE OPERATION OF THE BUSINESS. Without limiting the
generality of the foregoing statement, Purchaser shall not assume, and Owner and
Sellers shall retain and be responsible for, all liabilities arising from
environmental liability of any nature, the violation of any Environmental Law,
including without limitation, violations requiring the remediation of any real
property or groundwater, or which relates to the generation, collection,
transportation or disposal of any materials, including without limitation
Hazardous Materials, whether prior to or after the Closing, by Owner, Sellers or
any Business predecessor or successor of any of them to or at any
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site or facility whatsoever, whether or not such site or facility was owned,
leased, or operated by any of them at any time.
SECTION 1.6 TIME AND PLACE OF THE CLOSING. The Closing of the sale of the
Acquired Assets (the "Closing") shall take place at the offices of Preti,
Flaherty, Xxxxxxxx and Pachios, LLC, at 10:00 A.M., local time, on a date
determined by Purchaser not more than ten (10) business days after all the
conditions precedent in Sections 6 and 7 have been satisfied (the "Closing
Date"); provided, however, that if Closing has not occurred prior to November
30, 1998 (the "Termination Date"), either Sellers or Purchaser, if the party so
acting is not then in material default of its obligations hereunder, may
terminate this Agreement in accordance with Section 10.1 hereof, and provided
further that the Termination Date may be extended upon mutual written consent of
Purchaser and Sellers.
SECTION 1.7 PROCEDURE AT THE CLOSING, PAYMENT OF ACQUISITION PRICE.
(a) Deliveries at Closing. At the Closing, the following actions will be
taken by the parties and the completion of each action shall be a further
condition to the Closing:
(1) the Sellers shall deliver or cause to be delivered to the Purchaser,
in form reasonably satisfactory to the Purchaser (i) duly executed
bills of sale, endorsements, assignments, estoppel certificates,
receipts, amendment to Sellers' Articles of Incorporation changing
the names of such corporations, terminations of any assumed name,
tradename, trademark or service xxxx filings and other instruments
as shall be sufficient to vest in the Purchaser good and marketable
title to the Acquired Assets, free and clear of all liens, claims
and encumbrances, (except as otherwise expressly contemplated by
this Agreement); (ii) an employment and non-competition agreement
duly executed by Xxxxxxx Xxxxx substantially in the form set forth
in Exhibit B hereof (the "Employment Agreement"); (iii) instructions
duly executed by Sellers and Xxxxxxx Xxxxx concerning the number of
shares of KTI Stock to be issued to each Seller; (iv) a lease for
the Augusta Real Property substantially in the form set forth in
Schedule C hereof (the "Lease"), (v) the legal opinion of Xxxxxx,
Xxxxxx & XxXxxx, counsel to Sellers, substantially in the form set
forth in Exhibit D hereto; and (vi) such other documents as may be
reasonably requested by Purchaser to evidence or fulfill Sellers'
and Owner's obligations hereunder; and
(2) The Purchaser shall deliver to the Sellers and Owner evidence of
payment of the Assumed Obligations and shall cause a duly executed
Registration Rights Agreement to be delivered to Sellers
substantially in the form attached hereto as Exhibit A.
(b) Delivery of Shares. 75,932 of the Shares to be issued pursuant to
Section 1.3(a) hereof shall be delivered within five (5) business days after the
date of Closing. The additional Shares to be issued pursuant to Section 1.3(a)
shall be issued to Sellers at the time that the final Modified Working Capital
Adjustment is determined (and paid, if applicable). The Shares shall be
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allocated among the Sellers in accordance with the written instructions
delivered pursuant to Subsection 1.6(a)(1)(iii) above.
2. REPRESENTATIONS AND WARRANTIES OF THE SELLERS AND THE OWNER. The
Sellers and the Owner jointly and severally make the following representations,
warranties and covenants to Purchaser:
SECTION 2.1 ORGANIZATION, POWER AND AUTHORITY. Each of the Sellers is a
corporation duly incorporated, validly existing and in good standing under the
laws of the State of Maine. Each of the Sellers has full corporate power and
authority (a) to own, lease and operate its properties and to carry on the
Business as it is now being conducted, (b) to enter into this Agreement and to
convey, assign, transfer and deliver the Purchased Assets to the Purchaser as
provided herein, and (c) to carry out the other transactions and agreements
contemplated hereby. Each of the Sellers is legally qualified to transact
business as a foreign corporation in each jurisdiction in which its business or
property is such as to require that it be so qualified, and is in good standing
in each of the jurisdictions in which it is so qualified. The execution,
delivery and performance of this Agreement and all of the documents required
hereby and the consummation of the transactions contemplated hereby have been
duly authorized by all necessary corporate action of each Seller. This Agreement
is, and the other documents required hereby will be, when executed and delivered
by Sellers, the valid and binding obligations of the Sellers enforceable in
accordance with their respective terms. Except as set forth in Schedule 2.1,
none of the Sellers have any subsidiaries or own or otherwise have the power to
exercise a controlling influence with respect to any entity. The Owner is the
only shareholder of the Seller. The Sellers' Federal employer identification
numbers are as listed in Schedule 2.1. During the last five (5) years, the
Sellers have used no names in the conduct of the Business other than the
corporate names of the Sellers as set forth herein and the name "Yarmouth
Rubbish and Recycling".
SECTION 2.2 FINANCIAL STATEMENTS. Attached as Schedule 2.2 are the
following true and complete financial statements of the Seller:
(a) Consolidated compiled balance sheets of the Sellers as of December 31,
1997 and December 31, 1996;
(b) Consolidated compiled income statements of the Sellers for the fiscal
year(s) then ended;
(c) Consolidated compiled balance sheets of the Sellers as of August 31,
1998; and
(d) Consolidated compiled income statements of the Sellers for the period
ended August 31, 1998.
Each of such financial statements present fairly the financial position of the
Sellers at each of the said balance sheet dates and the results of Sellers'
operations for each of the said periods covered. The December 31, 1997 financial
statements have been prepared in conformity with generally
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accepted accounting principles, applied on a consistent basis through the
periods covered thereby. The August 31, 1998 financial statements have been
prepared in conformity with the income tax basis method of accounting applied on
a consistent basis through the periods covered thereby.
SECTION 2.3 INTENTIONALLY DELETED
SECTION 2.4 REAL PROPERTY.
(a) Property, Hazardous Materials. True and complete copies of all leases
(with all amendments, modifications and supplements) relating to each parcel of
the Leased Real Property are listed on Schedule 2.4 and have been delivered to
the Purchaser. All Leased Real Property and the Augusta Real Property
(collectively the "Real Property") and related improvements are in sound
structural condition and free of any material defects, and all improvements
thereon are in good operating condition and repair, performing satisfactory and
are available for immediate use in the Business. No asbestos, waste oil or
Hazardous Materials are on or have been deposited on or under, or are or have
been present on, or released at any of the Real Property. Set forth in Schedule
2.4 is a complete list of the location of all underground storage tanks located
on any of the Real Property, and a list of all documents, notices, test reports
or other information relating thereto known to the Sellers or Owner. No release,
threat of release or disposal of Hazardous Materials exists or has occurred at
any property contiguous to the Real Property.
(b) Other Compliance Matters. Except as set forth in Schedule 2.4, (1)
there are no subleases, tenancy agreements, easements, covenants, restrictions
or any other instruments, agreements or arrangements which create in or confer
upon any party other than the Sellers the right to occupy or possess all or any
portion of the Real Property or any portion thereof or any interest therein; (2)
no party other than Sellers occupy or possess the Real Property or any portion
thereof; (3) there is legal and adequate ingress and egress between the Real
Property and an adjacent public roadway; (4) the Real Property is connected to
usable public sanitary and sewer, public water, and electrical utilities of
adequate capacity for the present use of the Real Property; (5) the Real
Property is properly zoned in order to allow its current use in the Business;
(6) no federal, state or local law, ordinance, regulation or restriction is
violated in any material respect by the continued maintenance, operation or
present use of the Real Property; (7) there is no federal, state or local law,
statute, ordinance, rules, regulation or requirement, court or administrative
law or process (collectively "Laws") which would require any expenditure to
modify or improve any of the Real Property in order to bring it into compliance
therewith; and (8) there are no claims or demands (including eminent domain
proceedings) pending or, to the knowledge of Sellers and the Owner, threatened
by any party which, if valid, would create in, or confer upon, any party other
than the Sellers any right, title or interest in or to the Real Property or any
portion thereof.
SECTION 2.5 ACQUIRED ASSETS. Except as set forth in Schedule 2.5, the
Sellers have good and marketable title to (or if specified as such in Schedule
2.5, a valid leasehold interest in), all of the Acquired Assets, free and clear
of all title defects, liens, security interests, leases, claims or other
encumbrances of any kind or character (whether voluntarily occurred or arising
by operation of law or otherwise), except for liens for current taxes,
assessments and governmental charges nor yet due and payable. Acquired Assets
are located only at the locations set forth on Schedule 1.1(a) hereto.
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SECTION 2.6 CONDITION OF THE ACQUIRED ASSETS. The Operating Assets and
Supplies are in good operating condition and repair, normal wear and tear
excepted, are performing satisfactorily and are available for immediate use in
the operation of the Business. The Supplies consist of items of a quality and
quantity usable in the normal course of the Seller's business consistent with
past practices.
SECTION 2.7 PROPRIETARY RIGHTS. The Sellers possess all of the permits,
licenses, governmental approvals, franchises and franchise rights, patents,
trademarks, trade names, corporate names, authorizations and other proprietary
rights necessary to carry on the Business as now conducted (collectively the
"Proprietary Rights"). Schedule 1.1(e) contains a complete and accurate list of
the Proprietary Rights. Except as disclosed in Schedule 1.1(e), (a) the rights
of the Sellers in and to the Proprietary Rights do not conflict with or infringe
on the rights of any other person or entity and the Sellers have not received
any claim from any person or entity to that effect, (b) the Sellers own (or are
licensed or otherwise have the right to use, all as further described in
Schedule 1.1(e)) all Proprietary Rights, and (c) to the knowledge of Sellers and
the Owner, no other person is infringing or diluting the rights of the Sellers
with respect to the Proprietary Rights. All governmental licenses, permits and
authorizations held by Sellers have been validly issued, are in good standing,
are not subject to any restrictions or conditions that would limit the operation
of the Business as presently conducted, and the Sellers have conducted the
Business in compliance with the terms of all such governmental licenses, permits
and authorizations.
SECTION 2.8 ADEQUACY OF THE ACQUIRED ASSETS. The Acquired Assets
constitute all of the assets, properties and rights of every type and
description (real, personal and mixed, tangible and intangible) necessary for
the conduct of the Business in the manner in which it is currently being
conducted, with the exception of the Excluded Assets. None of the Sellers or the
Owner knows of any fact, event or action which could result in a material
adverse change in the prospects, financial condition or results of operations of
the Business or the operation or ownership of the Purchased Assets. None of the
Sellers or the Owner is restricted by any agreement from carrying on the
Business anywhere in the States of Maine, New Hampshire or the Commonwealth of
Massachusetts.
SECTION 2.9 CONTRACTS.
(a) List of Contracts. Schedule 2.9 contains an accurate and complete list
of the following:
(1) each promissory note, loan agreement, credit agreement, lease,
guarantee, security agreement, service contract with a municipality
or business, contracts with any waste disposal or recycling company
or similar document or instrument to which any Seller is a party or
by which it or its property is bound;
(2) each other agreement, contract or commitment (written or oral) to
which any Seller is a party or by which it or its property is bound
and which is either (i) material to Sellers or the operation of the
Business, or (ii) cannot be terminated without liability on thirty
(30) days or less notice.
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True and complete copies of all such contracts and agreements (including
all amendments, modifications and supplements thereto) have been provided to
Purchaser.
(b) Defaults; Necessary Agreements. None of the Sellers or any party
thereto or bound thereby is in default under any of the Contracts, there is no
outstanding notice of default or termination under any Contract and no act or
event has occurred which with notice or lapse of time, or both, would constitute
such a default. Except for those Contracts listed on Schedule 2.9, no Seller is
a party to, nor is any Seller or any of such Seller's property bound by, any
other agreement or instrument which is material to the continued conduct of the
Business as now being conducted or with respect to which a default might
materially and adversely affect the Business or the properties or financial
condition of Sellers. All contracts, agreements or commitments to which they are
a party that are not listed in Schedule 2.9 do not involve, in the aggregate,
average monthly payments or receipts by the Sellers of more than One Thousand
Dollars ($1,000). The Contracts confer on the Sellers all contractual rights
necessary to enable it to conduct the Business as now being conducted and, in
Sellers' reasonable opinion, impose upon the Sellers no unreasonable obligation.
(c) With respect to all Contracts:
(1) each is in full force and effect and legally binding upon the
parties thereto and is enforceable in accordance with its terms;
(2) no Seller has released any of its rights thereunder nor will any
other party bound thereby be released from its obligations nor will
any obligations of any party thereto be affected as the result of
the transactions contemplated hereby nor will the consent of any
other party be required with respect to the transactions
contemplated hereby; and
(3) no Contract requires the payment or performance of material
consideration by any Seller or its assignee on or after the Closing
without the receipt by such party of consideration of commensurate
value.
SECTION 2.10 INSURANCE. Schedule 2.10 sets forth a true and complete list
of: (a) all current and expired policies of liability, property damage, fire,
workers' compensation/employer's liability, title or other forms of insurance
owned or carried by any Seller or Owner any time within the past six (6) years;
(b) all performance bonds and letters of credit securing any obligations of the
Sellers maintained by the Seller within the past six (6) years in the conduct of
the Business; and (c) the names and addresses of any insurance agents and
brokers providing the items referenced in (a) and (b) above. Each of the Sellers
has at all times within the last six (6) years (1) carried insurance adequate in
character and amount, with reputable insurers in respect of its properties,
assets and business; (2) provided all required performance bonds; and (3)
complied with all applicable terms and conditions, including payment of
premiums, with respect to such insurance policies and performance bonds. No
Seller has received any notification from any insurance carrier denying or
disputing any claim made by such Seller, denying or disputing any coverage for
any such claim, denying or disputing the amount of any claim or premium, or
regarding the possible cancellation of or premium increases with respect to any
policies. No Seller
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has any claim pending or anticipated against any of the insurance carriers under
any of such policies and there has been no actual or alleged occurrence of any
kind which may give rise to any such claim.
SECTION 2.11 LITIGATION. Except as set forth in Schedule 2.11, there are
no actions, suits, claims, judicial, criminal, or administrative proceedings,
investigations or arbitration proceedings pending or, to the knowledge of the
Sellers or the Owner, threatened against or affecting any Seller or any of the
Acquired Assets and, to the best of the knowledge of the Sellers and the Owner,
there is no basis for any of the foregoing. There are no orders, decrees,
judgments, injunctions, writs or stipulations currently in effect issued by any
local, state or federal judicial or quasi-judicial authority in any proceeding
to which any Seller is or was a party or by which any Seller is bound. The
insurance coverages of the Sellers are adequate in character and amount to pay
all liabilities relating to the matters described in Schedule 2.11.
SECTION 2.12 INTENTIONALLY DELETED
SECTION 2.13 CHANGES SINCE LAST BALANCE SHEET. Except as disclosed in
Schedule 2.13, since the date of Sellers' balance sheet dated as of December 31,
1997 and income statements for the fiscal year then ended: (a) there has been no
material adverse change in the property, employee relations, prospects,
financial condition, liabilities, assets or results of operations of the
Business or the Sellers, (b) no bonus or increase in the rate of compensation
has been given to any of the employees, officers or directors of any Sellers nor
has there been any increase in any benefits payable to any of such employees,
officers or directors; (c) the Sellers have not sold or transferred any of their
assets other than in the ordinary course of business; (d) none of the Sellers
has made or obligated itself to make any material capital expenditures; (e) no
material obligations or liabilities (including any indebtedness) have been
incurred and no material transactions have been entered into except for this
Agreement and the transactions contemplated hereby; (f) none of the Sellers has
suffered any theft, damage, destruction, casualty loss or other change, which
has or could materially and adversely affect the Acquired Assets or the
prospects, operations, liabilities, earnings or condition of the Business or the
Sellers; (g) there has not been any material default on the part of Sellers, or
any event which with the lapse of time or the giving of notice, or both, would
constitute such a default under any Contract; (h) there has not been any notice
from any significant supplier or customer as to such party's intention not to
conduct business with Sellers; (i) there has not been any amendment or
termination of any material Contract, to which any Seller is a party, except in
the ordinary course of business; (j) there has not been any event, occurrence,
change in circumstance or other matter of any character materially adverse to
the operations, results or operations or condition (financial or otherwise) of
Sellers or the Business; and (k) no Seller has entered into any agreement or
commitment to take any action described in Subsections 2.13(a) through (k)
above. To the best of knowledge of Sellers and the Owner, there is not any
threatened or prospective event or condition that is likely to have a material
adverse effect on the Sellers, the Business or the Acquired Assets.
SECTION 2.14 COMPLIANCE WITH LAWS. (a) Except as set forth on Schedule
2.14 hereto, at all times during the past six (6) years, Each Seller has
operated the Business, legally and in material compliance with all applicable
Laws. Without limiting the generality of the foregoing, no Seller has
transported, stored, treated or disposed, nor has it allowed or arranged for any
third
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persons to transport, store, treat or dispose any waste including, without
limitation Hazardous Materials, onto or at: (1) any location other than a site
lawfully permitted to receive such waste for such purposes, or (2) any location
that was at the time or has since been designated for remedial action pursuant
to any Environmental Law; nor has it performed, arranged for, or allowed by any
method or procedure, such transportation or disposal in contravention of any Law
or in any other manner which may result in liability for contamination of the
environment. No Seller has disposed, nor has it allowed or arranged for any
third parties to dispose, of upon property owned or leased by it, except as
permitted by Law.
(b) None of Sellers or the Owner has received notification of any past or
present failure by the Seller or the Business to comply with any Laws, permits,
or licenses applicable to it or the Acquired Assets. Without limiting the
generality of the foregoing, none of Sellers or the Owner has received any
notification (including requests for information directed to any Seller or the
Owner) from any governmental agency asserting that any Seller or the Business is
or may be a "potentially responsible person" for a remedial action at a waste
storage, treatment or disposal facility, pursuant to any Environmental Law. None
of the Sellers or the Owner is aware of any circumstances that might interfere
with continued compliance with Environmental Laws and permits or that would give
rise to future enforcement claims.
(c) None of Sellers or the Business uses or has used any Hazardous
Material, asbestos or waste oil in any manner except in compliance with
Environmental Laws.
SECTION 2.15 ABSENCE OF CONFLICTS. Except as set forth in Schedule 2.15,
neither the execution, delivery or performance of this Agreement nor the
consummation of the transactions contemplated hereby does or will, after the
giving of notice, lapse of time or both, or otherwise: (a) conflict with or
violate any provision of the articles of incorporation or bylaws of any Seller
or of any Law which is either applicable to, binding upon or enforceable against
any Seller, the Owner or the Business; (b) result in the creation of any lien or
encumbrance on any of the Purchased Assets; (c) result in any breach of or
default under any Contract, or give any party the right to terminate, amend or
modify any of the foregoing; or (d) impair or in any way limit any governmental
or official license, approval, permit or authorization of any Seller or the
Business, or require the consent, waiver, approval or authorization or filing
with any court or public agency or other governmental authority.
SECTION 2.16 SITES USED BY THE COMPANY, WASTES TRANSPORTED. Set forth on
Schedule 2.16 is a complete and accurate list of (a) all locations to which any
Seller or the Business has ever transported, or ever caused to be transported,
allowed or arranged for any third party to transport, any type of waste material
including without limitation, Hazardous Materials, asbestos and waste oil
generated by any Seller or by any customer of the Business or the Sellers, for
storage, treatment, burning, recycling or disposal, and (b) all storage,
treatment, burning, recycling or disposal activities which any Seller or the
Business has undertaken, at any time, at any portion of the Real Property or any
other locations then or presently owned or occupied by any Seller or the
Business (such list to include address, nature of Sellers' interest in the
property, current owner of the property, nature of the activity conducted at
such location, type and form of waste, estimated volume of waste disposal on or
in ground and period of time the activity was
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conducted). Schedule 2.16 contains a list of all municipalities in which Sellers
conduct business, along with an estimate of the amount of waste hauled annually
from each of their locations.
None of the Sellers does, or has in the past, transported or hauled any
Hazardous Material. Except as described on Schedule 2.16. Sellers have not
transported any septage or special waste (as those terms are defined in Code of
Maine Regulation Section 06 096 411 003(c)) or scrap tires or
construction/demolition debris. Sellers have, at all times, transported waste
only to facilities properly licensed to receive and dispose of such waste.
SECTION 2.17 CUSTOMER ACCOUNTS. Seller's Customer Accounts are listed on
Schedule 1.1(c) as of the date(s) specified on such lists. Copies of all
Customer Account contracts have been provided to Purchaser. Neither any Seller
nor the Owner has any knowledge that any customer under any Customer Account has
ceased, or plans to cease, purchasing services from the Sellers or has
substantially reduced, or plans to substantially reduce, the use of Seller's
services. Since the dates specified on such list(s), no customers under the
Customer Accounts have canceled or otherwise terminated their relationships with
or decreased their purchase of services from, or delivery of materials to,
Sellers in a manner which has resulted in, or can reasonably be expected to
result in, a material adverse change, nor are Sellers or Owner aware of any
intention of any such customer to take such action. None of the Customer
Accounts of the Sellers have been designated by any appropriate governmental
authority as "small business set-aside" contracts, minority set-aside contracts,
women-owned business set-aside contracts, or other similar designation which
could adversely affect the Purchaser's ability to continue to service such
accounts. None of the Customer Accounts are billed or serviced except through
Sellers directly and no Owner bills or services any Customer Accounts.
SECTION 2.18 TAXES. Except as disclosed on Schedule 2.18:
(a) All federal, state and local tax returns and tax reports required to
be filed by any Seller have been filed with the appropriate governmental
agencies in all jurisdictions in which such returns and reports are required to
be filed. All federal, state and local income, profits, franchise, withholding
and sales, use, occupation, property, excise and other taxes (including interest
and penalties) due from Sellers in accordance with such returns and reports have
been fully paid. Each item reflected on Sellers' federal and state tax returns
is complete, accurate and correct in all material respects.
(b) No issues have been asserted by the IRS or any other taxing authority
in connection with an examination of any of the returns and reports referred to
above which might, if determined adversely to Sellers, affect the financial
condition of Business or Sellers, and to best knowledge of Sellers and the
Owner, there is no basis for any such assertions. No waivers of statutes of
limitation with respect to the collection or assessment of any taxes have been
given with respect to Sellers.
(c) There are no tax deficiencies (including penalties and interest) of
any kind assessed against or relating to Sellers with respect to any taxable
periods of a character or nature that would result in liens or encumbrances on
any of the Acquired Assets or on Purchaser's title or use of the Acquired Assets
or that might result in any claim against Purchaser.
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SECTION 2.19 EMPLOYEES. Employment by Sellers of all of its employees and
management personnel is on an at-will basis. Schedule 2.19 contains a true and
complete list showing the names of all employees of Sellers, which list includes
the material terms of any personnel benefits or policies in effect, including
but not limited to employer contributions to hospitalization or other insurance
programs, and vacation and sick leave policies. Schedule 2.19 contains a true
and complete list of Sellers' employee benefit and health plans, and Sellers
have no other employee benefits or obligations with respect to any employee, and
there is no written or unwritten severance policy with respect to the employees
of Sellers. Schedule 2.19 also contains a true and complete list of the vacation
time owned to Sellers' employees as of the Closing Date.
SECTION 2.20 LABOR RELATIONS. Sellers have complied in all material
respects with all applicable laws and regulations relating to the employment of
labor, including those related to wages, hours, severance, collective
bargaining, discrimination, employee pension and welfare benefit plans, and the
payment of Social Security or similar taxes, and Sellers are not liable for any
penalties for failure to comply with any of the foregoing. Neither any of the
employees of the Business nor any of the Sellers is subject to or bound by any
collective bargaining agreement or any similar agreement under state or federal
law and there are no unfair labor practice claims or charges, pending or, to
best knowledge of Sellers or Owner, threatened, involving the Business or its
employees. To the best knowledge of Sellers and the Owner, there is no union
campaign being conducted to solicit cards from employees to authorize a union to
request an NLRB certification election with respect to any employees of the
Business, or request for union representation pending, nor is there now pending
or, to the best knowledge of Sellers and the Owner, threatened, any labor
dispute, controversy, strike, or other employee or labor controversy which may
affect the operations or employees of the Business.
SECTION 2.21 EMPLOYEE BENEFIT PLANS. Except as set forth in Schedule 2.21,
Sellers have not at any time maintained or been a party to or made contributions
to any of the following: (i) any "employee pension benefit plan," as such term
is defined in Section 3(2) of ERISA; or (ii) any "employee welfare benefit
plan," as such term is defined in Section 3(l) of ERISA, whether written or
oral, or (iii) any multi-employer plan as such term is defined in Section 3(37)
of ERISA or any multiple employer pension or welfare benefit plan. All employee
benefit plans maintained by any Seller or to which any Seller is obligated to
contribute, are, and have in the past been, in all material respects maintained,
funded and administered in compliance with ERISA and other applicable laws.
Neither any Seller nor any employee benefit plan maintained by any Seller within
the meaning of Section 3(3) of ERISA is or has been in violation of the
provisions of ERISA or Internal Revenue Code of 1996, as amended (including the
regulations and published interpretations thereunder, collectively, the "Code").
All contributions to all plans required to be made and all reports, statements
and other documents required to be given to the Internal Revenue Service, the
U.S. Department of Labor, the Pension Benefit Guaranty Corporation, or to
participants and beneficiaries, or any of them, under ERISA or the Code, have
been made or given by Sellers in a timely manner, including without limitation
all so-called "COBRA" medical continuation notices, all 5500 annual reports
(except as stated in Schedule 2.1), and all so-called "top-hat" letter notices
to the DOL relating to any and all deferred compensation agreements and other
compensation programs, even if maintained for only one employee. No Seller has
ever maintained a defined benefit plan or a multi-employer defined benefit plan.
None of the Sellers, or to the best knowledge of Sellers and the Owner, any plan
fiduciary, has engaged in any "prohibited
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transaction," as defined in Section 406 of ERISA, or in Section 4975 of the Code
with respect to any employee benefit plan of Sellers. A true and correct copy of
the plans and arrangements listed on Schedule 2.21, as in effect on the date
hereof, has been supplied to Purchaser.
SECTION 2.22 TRANSACTIONS WITH AFFILIATES. Seller is not involved in any
arrangement or relationship relating to the Business with any affiliate of
Sellers, and no affiliate of any Seller owns any property or right, tangible or
intangible, which is used in the Business.
SECTION 2.23 INSOLVENCY. No insolvency proceedings of any character,
including without limitation, bankruptcy, receivership, reorganization,
composition or arrangement with creditors, voluntary or involuntary, affecting
any Seller or affiliates thereof or any of their assets or properties are
pending or, to the best knowledge of Sellers and Owner, threatened. None of the
Sellers or their affiliates has made any assignment for the benefit of creditors
or taken any action with a view to, or which would constitute the basis for the
institution of, any such insolvency proceedings.
SECTION 2.24 BROKERS. Neither this Agreement nor the sale and purchase of
the Acquired Assets or any other transaction contemplated by this Agreement was
induced or procured through any party acting on behalf of or representing any
Seller or Owner as broker, finder, investment banker, financial advisor or in
any similar capacity.
SECTION 2.25 ACCOUNTS RECEIVABLE. All Accounts Receivable of Xxxxxxx Xxxxx
Company have arisen from bona fide transactions in the ordinary course of the
Business, and all such Accounts Receivable will be collectible when due without
resort to litigation and in the aggregate face amounts thereof, except to the
extent of normal allowance for doubtful accounts described on the Closing Date.
SECTION 2.26 YEAR 2000 COMPLIANCE. Sellers have conducted a review of all
computer systems, software and programs used or useful in the operation of its
business to determine their ability to define the year 2000 properly, and
Sellers have no knowledge, as a result of such review or otherwise, that Sellers
will be materially adversely affected by any year 2000 computer system,
software, or program problems.
SECTION 2.27 ACCURACY OF INFORMATION FURNISHED. No representation,
statement or information made or furnished by any Seller or the Owner to the
Purchaser, including those contained in this Agreement, in the Schedules and in
the Exhibits to this Agreement, or in other information and statements furnished
by any Seller or the Owner to the Purchaser, contains or shall contain any
untrue statement of a material facts or omits or shall omit any material fact
necessary to make the information not misleading. There is no fact known to any
Seller (other than information affecting the waste business generally) which has
resulted in, or could reasonably be expected to result in, a material adverse
change in the Business.
SECTION 2.28 SURVIVAL. The representations and warranties contained in
this Article 2 shall survive a period of three years after Closing, except with
respect (a) to Section 2.13 [taxes] which shall survive for the period of the
applicable statute of limitations and (b) to the provisions
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relating to environmental matters (including pertinent portions of Sections 2.4,
2.14, 2.15 and 2.16) which shall not terminate.
SECTION 2.29 SECURITIES LAW MATTERS. (a) Each Seller and the Owner:
(i) understands that the Shares to be issued as provided in this
Agreement have not been, and, except as the same may be effected pursuant
to the Registration Rights Agreement, will not be, registered under the
Securities Act of 1933, as amended (the "Securities Act"), or under any
state securities laws (collectively and together with the Securities Act,
the "Securities Laws"), and are being offered and sold in reliance upon
federal and state exemptions for transactions not involving any public
offering, the availability of which exemptions is dependent in part upon
the representations and warranties of the Owner as set forth herein;
(ii) understands that the Shares will constitute "restricted
securities" under the Securities Act and as such may not be sold by the
Owner (even after expiration of the three year period set forth in Section
1.3(c) that applies to a portion of the Shares) unless they are registered
under the Securities Laws or are sold pursuant to an exemption from
registration;
(iii) is familiar with the provisions of Rules 144 and 145 of the
Securities and Exchange Commission, including without limitation the
minimum holding period and maximum sale amounts thereunder;
(iv) is acquiring the Shares solely for his own account for
investment purposes, and not with a view to the resale or distribution
thereof;
(v) is a sophisticated investor with knowledge and experience in
business and financial matters who is capable of evaluating the merits and
risks of owning the Shares;
(vi) has received certain information concerning KTI, Inc.,
identified in subsection (b) hereof and has had the opportunity to obtain
additional information as desired, including the opportunity to ask
questions of KTI's management in order to evaluate the merits and the
risks inherent in holding the Shares;
(vii) is able to bear the economic risk and lack of liquidity
inherent in holding the Shares;
(viii)understands that no federal or state agency has passed upon
the Shares to be issued as provided in this Agreement or made any finding
or determination as to the fairness of this transaction;
(ix) understands that there are substantial risks incident to an
investment in the Shares;
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(x) understands that the holders of the Shares, including the Owner
are not assured of any return on an investment in the Shares;
(xi) is not relying on KTI, Inc. or Purchaser with respect to any
economic considerations involved in this transaction; and
(xii) acknowledges that the Shares may, in order to prevent
transfers in violation of the Securities Laws or in breach of Section
1.3(c) be the subject of a "stop transfer" or contain a legend as follows:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE
SECURITIES LAWS. THESE SECURITIES HAVE BEEN ACQUIRED FOR INVESTMENT AND
NOT WITH A VIEW TOWARD DISTRIBUTION OR RESALE AND MAY NOT BE SOLD,
MORTGAGED, PLEDGED OR OTHERWISE TRANSFERRED WITHOUT AN EFFECTIVE
REGISTRATION STATEMENT FOR SUCH SECURITIES UNDER THE SECURITIES ACT OF
1933, AS AMENDED, AND ANY APPLICABLE STATE SECURITIES LAWS, OR PURSUANT TO
AN EXEMPTION FROM REGISTRATION AND [WITH RESPECT ONLY TO APPLICABLE
SHARES] ARE FURTHER SUBJECT TO RESTRICTIONS ON TRANSFER FOR A PERIOD OF
THREE YEARS BEGINNING [DATE] UNDER AN AGREEMENT DATED [DATE], A COPY OF
WHICH MAY BE OBTAINED UPON WRITTEN REQUEST BY THE HOLDER OF RECORD OF THIS
CERTIFICATE TO THE SECRETARY OF THE CORPORATION AT ITS PRINCIPAL EXECUTIVE
OFFICES.
(b) The Owner has been furnished, has carefully read and has understood
the following documents:
(i) This Agreement (including the Exhibits and Schedules hereto);
and
(ii) KTI, Inc. Forms 10-K for the year ended December 31, 1997,
10-Qs for the quarters ended March 31, 1998 and June 30, 1998, and 8-Ks
filed after June 30, 1998 and the KTI, Inc. Proxy Statement dated April
16, 1998, all of which have been delivered by KTI, Inc. to Sellers or
their attorney (collectively the "KTI Documents").
(c) The Owner is an "Accredited Investor" as such term is defined under
the Securities Act or 1933, as amended (the "Securities Act"), and the rules and
regulations promulgated thereunder, as he falls within at least one of the
following categories:
(i) a natural person whose individual net worth, or joint net worth
with that person's spouse, at the time of his or her purchase exceeds
$1,000,000; or
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(ii) a natural person who had an individual income in excess of
$200,000 in each of the two most recent years or joint income with that
person's spouse in excess of $300,000 in each of those years and who has a
reasonable expectation of reaching the same income level in the current
year.
(d) THE SELLERS AND OWNER ACKNOWLEDGE THAT THEY ARE NOT RELYING ON
PURCHASER WITH RESPECT TO TAX OR OTHER ADVICES OR REPRESENTATIONS CONCERNING THE
TRANSACTIONS CONTEMPLATED HEREBY, INCLUDING WITHOUT LIMITATION, THE
QUALIFICATION OF SUCH TRANSACTIONS AS A SO-CALLED "C REORGANIZATION" UNDER THE
INTERNAL REVENUE CODE.
3. REPRESENTATIONS AND WARRANTIES OF PURCHASER. The Purchaser makes the
following representations and warranties:
SECTION 3.1 ORGANIZATION, POWER AND AUTHORITY. The Purchaser is a
corporation duly incorporated, validly existing and in good standing under the
laws of the State of Maine, with full corporate power and authority to enter
into this Agreement and perform its obligations hereunder.
SECTION 3.2 DUE AUTHORIZATION; BINDING OBLIGATION. Upon the approval of
the Board of Directors of its sole shareholder, KTI, Inc., the execution,
delivery and performance of this Agreement and all other documents required
hereby and the consummation of the transactions contemplated hereby shall have
been duly authorized by all necessary corporate action on the part of the
Purchaser. This Agreement is, and the other documents required hereby will be,
when executed and delivered by the Purchaser, the valid and binding obligation
of the Purchaser enforceable in accordance with their respective terms.
SECTION 3.3 BROKERS. Neither this Agreement nor the sale and purchase of
the Purchased Assets or any other transaction contemplated by this Agreement was
induced or procured through any party acting on behalf of or representing
Purchaser as broker, finder, investment banker, financial advisor or in any
similar capacity.
SECTION 3.4 INSOLVENCY. No insolvency proceeding of any character,
including without limitation, bankruptcy, receivership, reorganization,
composition or arrangement with creditors, voluntary or involuntary, affecting
Purchaser or affiliates thereof or any of their assets or properties are pending
or, to the best knowledge of Purchaser, threatened. Neither Purchase nor any of
its affiliates has made any assignment for the benefit of creditors or taken any
action with a view to, or which would constitute the basis for the institution
of, any such insolvency proceedings.
4. ADDITIONAL AGREEMENTS OF THE SELLERS AND OWNER.
SECTION 4.1 CONDUCT OF BUSINESS PENDING THE CLOSING. From and after the
date hereof and until the Closing, except as otherwise provided by the prior
written consent of the Purchaser, the Sellers will conduct the Business in
accordance with past practice and consistent
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with their contractual obligation to Purchaser, and will (a) preserve the
Business organization intact, (b) use their best efforts to keep available to
the Purchaser the services of Sellers' officers, employees, agents, (c) use
their best efforts to preserve Sellers' relationships with customers and
suppliers of the Business; (d) maintain their books and records in accordance
with past practices and furnish to Purchaser such financial information
concerning the Business as Purchaser may reasonably request; (e) maintain the
Supplies at a level consistent with past practice; (f) request a written
statement from the Maine State Tax Assessor with respect to the amount of any
"trust fund taxes" (as that term is used in 36 M.R.S.A. Section 177(d)) and
unemployment taxes owed by Sellers; and (g) use their best efforts to procure
estoppel certificates with respect to Material Contracts and consents to
assignment with respect to those Contracts for which consent is required
pursuant to the terms thereof. Sellers will not, from and after the date hereof
and until the Closing, except as otherwise provided by the prior written consent
of the Purchaser (1) enter into any Contract other than those in the ordinary
course of business that are terminable without liability on thirty (30) days
notice or less; (2) create, assume or permit to arise any lien or encumbrance of
any sort with respect to the Acquired Assets; (3) sell, assign, lease, transfer
or otherwise dispose of any of the Purchased Assets, except for substitutions
and replacement in the ordinary course of the Business; (4) increase the
compensation or benefits payable to any of Sellers' employees, officers or
agents, except for increases substantially in accordance with existing
employment practices; or (5) effect any changes in Sellers' management and
personnel policies.
SECTION 4.2 ACCESS TO THE SELLERS' PLANTS, PROPERTIES AND RECORDS.
(a) From and after the date hereof until the date of Closing, the Sellers
will afford to the representatives of the Purchaser access, during normal
business hours and upon reasonable notice, to the Sellers' premises, and to the
books and records pertaining to the Acquired Assets and the Business, and the
Sellers will furnish to such representatives during such period all such
information relating to the foregoing as the Purchaser may reasonably request;
provided, however, that any furnishing of such information to the Purchaser and
any investigation by the Purchaser shall not affect the right of the Purchaser
to rely on the representations and warranties made by the Sellers and the Owner
in or pursuant to this Agreement.
(b) Purchaser agrees to preserve and keep the books and records of Sellers
delivered to Purchaser hereunder (either as delivered or on microfilm) for a
period of three years from the Closing Date, and to make them available, during
normal business hours and upon reasonable request, to the directors, officers,
and stockholders of Sellers, or their representatives, in connection with any
claims, legal proceedings, or IRS audits by or against the Sellers or its
directors, officers, or stockholders. Purchaser shall give Xxxxx thirty (30)
days' written notice of any intention of Purchaser to dispose of such records
after the end of such period but prior to the seventh anniversary of the Closing
Date, and shall turn over such records to Xxxxx at his request.
SECTION 4.3 RETENTION OF SHARES. The Owner will not, prior to the Time of
Closing, sell, assign, transfer, pledge, encumber or otherwise dispose of any of
the shares of capital stock of the Sellers or any interest therein.
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SECTION 4.4 LIABILITY FOR EXPENSES. The Sellers and the Owner will pay all
expenses incurred by the Sellers and the Owner, in connection with the
negotiation, execution and performance of this Agreement, whether or not the
transactions contemplated hereby are consummated, including the fees and
expenses of agents, representatives, accountants and counsel for the Sellers and
the Owner.
SECTION 4.5 INDEMNIFICATION. From and after the Closing, the Sellers and
the Owner jointly and severally agree to defend, indemnify and hold the
Purchaser and its affiliates or any of the directors, agents, or employees of
any of them (collectively "Affiliates") harmless from and against all Claims and
Damages. "Claims and Damages" means all claims, demands, obligations, orders,
actions, suits, proceedings, regulatory compliance requirements, and all
expenses, losses, assessments, judgments, costs, deficiencies, liabilities, and
damages (including reasonable attorneys' fees and court costs and costs incurred
in enforcing this indemnity) incurred or suffered by the Purchaser or any of its
Affiliates, as a result of or in connection with: (a) any breach of any
representation or warranty made by the Sellers or the Owner in or pursuant to
this Agreement; (b) any default in the performance of any covenant or agreement
made by the Sellers or the Owner in this Agreement; (c) any failure of the
Sellers to pay, discharge or perform any liability or obligation relating to the
Business, the Sellers or the Acquired Assets, other than the Assumed
Liabilities, or any asserted liability resulting from any dispute or claim
against Purchaser concerning any of the Excluded Assets; or (d) any matter
relating to the Sellers or the operation of the Business prior to the Closing,
including, without limitation (1) all liabilities or obligations under any
Contract to the extent such performance, satisfaction or compliance is required
under the terms thereof on or prior to the Closing, and (2) any disposal by
Sellers of waste at any disposal site or other location, regardless of whether
such disposal constitutes a breach of Seller's representations hereunder,
including without limitation the EWS site located in Saco, Maine. Purchaser
shall use reasonable commercial efforts to provide notice of Claims and Damages
to Sellers and/or Owner as promptly as practicable; provided, however, that
failure to give such notice shall not be deemed a waiver of any of Purchaser's
rights hereunder.
SECTION 4.6 SPECIAL INDEMNIFICATION. Capitol City Transfer, Inc. and
others are defendants in a certain action filed in Kennebec County Superior
Court, entitled Xxxxxx and Xxxxx Xxxxxx v. Capitol City Transfer, Inc., Docket
No. CV95-263 (the "Penney Litigation"), which contains causes of action
including trespass and demands for relocation of a right-of-way and other
matters, all relating to the Augusta Real Property. From and after the date
hereof, the Sellers and Owner jointly and severally agree to defend, indemnify
and hold harmless the Purchaser and its Affiliates from and against all Claims
and Damages incurred or suffered by the Purchaser or any of its Affiliates, in
any manner whatsoever relating to or arising out of the Penney Litigation.
Without limiting the generality of the foregoing, Sellers and Owner shall
jointly and severally (a) defend against and pay any expenses, judgments or
liabilities that may arise in connection with any joinder of Purchaser or any of
its Affiliates to the Penney Litigation; and (b) any and all expenses of
Purchaser arising out of the Penney Litigation, including without limitation
expenses incurred by Purchaser in the event that the Penney Litigation results
in any inability of the Purchaser to use the Augusta Real Property (including
the right-of-way thereto) at any time during which the Purchaser is in
possession of such property under the terms of the Lease (including, but not
limited to, any and all expenses incurred by Purchaser in arranging
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alternative facilities during any such period in which Purchaser is prevented
from using the Augusta Real Property).
SECTION 4.7 COVENANT NOT TO COMPETE. The Sellers and the Owner jointly and
severally agree that for a period of five (5) years from and after the date of
Closing none of the Sellers or the Owner will (a) manage, operate, control or
finance, or (b) act as an employee, agent, representative of, or consultant to,
or (c) have any ownership interest, direct or indirect, in any person, firm,
corporation or association business that is (1) in competition with the Business
of Sellers, as that business is constituted as of the date hereof (whether or
not such business is subsequently carried on by the Purchaser or by any
successor or subsequent purchaser of such business), or (2) in the waste hauling
business within the States of Maine, New Hampshire, Boston and that portion of
Massachusetts that is northerly of Boston and the Massachusetts Turnpike;
provided, however, that this Covenant-Not-to-Compete shall not prevent the
Sellers or the Owner from acquiring and holding less than five percent (5%) of
the outstanding shares of any corporation engaged in such a competitive business
if such shares are available to the general public on a national securities
exchange. In the event of a breach of any covenant contained in this covenant
not to compete, the Purchaser shall be entitled to an injunction restraining
such breach, in addition to any other remedies provided by law or equity. In the
event that any part of this Agreement shall be held to be unenforceable or
invalid, the remaining parts hereof shall nevertheless continue to be valid and
enforceable as though the invalid portions were not a part hereof. Specifically,
and without limitation, the parties acknowledge that the period and geographic
extent of the restrictions imposed in this Agreement are fair and reasonable and
are reasonably required for the protection of Purchaser. Nevertheless, in the
event that any provisions of this Agreement relating to the period or geographic
area of the restrictions shall exceed the maximum which a court of competent
jurisdiction has finally determined is valid and enforceable, then the time or
geographic area, as the case may be, for purposes of this Agreement shall be
deemed to be such maximum time or geographic area as a court of competent
jurisdiction has determined to be valid and enforceable.
In the event that any part of this Agreement shall be held to be
unenforceable or invalid, the remaining parts hereof shall nevertheless continue
to be valid and enforceable as though the invalid portions were not a part
hereof. Specifically, and without limitation, the parties acknowledge that the
period and geographic extent of the restrictions imposed in this Agreement are
fair and reasonable and are reasonably required for the protection of Purchaser.
Nevertheless, in the event that any provisions of this Agreement relating to the
period or geographic area of the restrictions shall exceed the maximum which a
court of competent jurisdiction has finally determined is valid and enforceable,
then the time or geographic area, as the case may be, for purposes of this
Agreement shall be deemed to be such maximum time or geographic area as a court
of competent jurisdiction has determined to be valid and enforceable.
SECTION 4.8 NOTICE OF MATERIAL DEVELOPMENTS. From and after the date
hereof until the Closing, the Sellers will give prompt written notice to the
Purchaser of any material development affecting the Acquired Assets, the
Business or the prospects, financial condition or results of operation of the
Sellers.
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SECTION 4.9 NO DISCLOSURE.
(a) No Publicity. Sellers and Owner shall not release any publicity about
the proposed transaction without the consent of the other, which consent shall
not be unreasonably withheld, except that any party may release such information
as may be required by law.
(b) No Disclosure. Without the prior written consent of the Purchaser, the
Sellers or Owner will not disclose the existence of or any term or condition of
this Agreement to any person or entity except that such disclosure may be made
(a) to the Sellers' attorneys or accountants and any lender to or other person
in a business relationship with Sellers to whom such disclosure is necessary in
order to satisfy any of the conditions to the consummation of the transactions
contemplated hereby, and (b) to the extent the party making such disclosure
believes in good faith that such disclosure is required by law (in which case
such party will consult with the Purchaser prior to making such disclosure).
Notwithstanding the foregoing, Sellers and Owner may disclose information
available (1) from public records or other sources in accordance with law or (2)
to Sellers which is in or enters the public domain other than through disclosure
by Sellers or Owner.
SECTION 4.10 NO OTHER DISCUSSIONS. None of the Sellers or Owner will,
prior to the Closing Date, enter into or continue discussions with, or negotiate
with or accept the unsolicited offer of any other person or entity concerning
the potential sale of all or any part of the assets or stock of the Sellers to,
or the merger or consolidation of the Sellers with, any person other than the
Purchaser. None of the Sellers or Owner shall disclose, directly or indirectly,
any information concerning the Sellers' business to, or afford any access to the
Sellers' properties, books or records to, any party in connection with any
possible proposal for such acquisition, merger or consolidation. In the event
Sellers or Owner receives any offer, formal or informal, with respect to the
potential sale of all or any part of the assets or shares of Sellers, or any
merger, consolidation or similar transaction of any type, Sellers shall
immediately inform Purchaser of the offer including the terms, proposed price,
the parties involved and all other information as requested by Purchaser.
SECTION 4.11 COVENANTS CONCERNING STOCK TRANSFERS. Each Seller holding
Shares and any permitted assignee, by acceptance thereof, agrees to comply in
all respects with the provisions of Section 1.3(c) of this Agreement. Prior to
any proposed sale, assignment, transfer or pledge of any Shares, unless there is
in effect a registration statement under the 1933 Act covering the proposed
transfer, the holder thereof shall give written notice to KTI, Inc. of such
holder's intention to effect such transfer, sale, assignment or pledge. Each
such notice shall describe the manner and circumstances of the proposed
transfer, sale, assignment or pledge in sufficient detail, and shall be
accompanied at such holder's expense by a written opinion of legal counsel who
shall, and whose legal opinion shall be, reasonably satisfactory to KTI, Inc.
addressed to KTI, Inc., to the effect that the proposed transfer of the Shares
may be effected without registration under the 1933 Act. Each certificate
evidencing the Shares transferred as above provided shall bear, except if such
transfer is made pursuant to Rule 144, the appropriate restrictive legend set
forth in Section 2.27 above, except that such certificate shall not bear such
restrictive legend if in the opinion of counsel for such holder and the Company
such legend is not required in order to establish compliance with any provisions
of the 1933 Act or this Agreement.
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SECTION 4.12 TAX COVENANTS. In the event that Sellers or Xxxxx shall take
any action that causes the transactions described herein to be taxable events,
Purchaser shall be entitled to take all actions (including filing of amended tax
returns) that will also entitle it to treat this transaction as taxable. Sellers
and Xxxxx agree that Purchaser and KTI, Inc. shall have no liability to Sellers
or Xxxxx in the event that the transactions are deemed to be taxable by the
Internal Revenue Services or in the case of any other adverse tax consequences
to Sellers or Owner.
5. ADDITIONAL AGREEMENTS OF THE PURCHASER.
SECTION 5.1 LIABILITY FOR EXPENSES. The Purchaser will pay all expenses
incurred by it in connection with the negotiation, execution and performance of
this Agreement, whether or not the transactions contemplated hereby is
consummated, including the fees and expenses of its counsel and auditors.
SECTION 5.2 EMPLOYEES. Xxxxxxx Xxxxx, in his capacity as an employee of
Purchaser or an Affiliate, shall determine at Closing which of Sellers'
employees are to be hired by Purchaser or its Affiliate. Any individuals so
hired shall be employees-at-will of Purchaser or its Affiliate.
6. CONDITIONS TO THE OBLIGATIONS OF THE PURCHASER. The obligation of the
Purchaser to purchase the Acquired Assets shall be subject to the fulfillment at
or prior to the Closing of each of the following conditions, unless waived in
writing by Purchaser in its sole discretion:
SECTION 6.1 CLOSING CERTIFICATE. The representations and warranties of the
Sellers and the Owner contained in this Agreement shall have been true, complete
and correct in all material respects as of the date hereof, and they shall be
true and correct as of the Closing, as though each such representation and
warranty were made at and as of such time. The Sellers and the Owner shall have
performed and complied in all material respects with all of their obligations
required by this Agreement to be performed or complied with at or prior to the
Closing. The Sellers and the Owner shall have delivered to the Purchaser a
certificate, dated as of the date of the Closing, certifying that such
representations and warranties are true, complete and correct in all material
respects and that all such obligations have been performed and complied with in
all material respects.
SECTION 6.2 CERTIFIED RESOLUTIONS. The Sellers shall have delivered to the
Purchaser copies of resolutions adopted by the board of directors and the
shareholders of the Sellers authorizing the transactions contemplated by this
Agreement, certified in each case as of the Closing by the Clerk of the Sellers.
SECTION 6.3 LICENSES AND PERMITS. Purchaser shall have obtained all
licenses, permits and governmental authorizations necessary or desirable to
conduct the Business.
SECTION 6.4 RECEIPT OF NECESSARY CONSENTS. All necessary consents or
approvals of third parties to any of the transactions contemplated hereby, the
absence of which would
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adversely affect the Purchaser's rights hereunder or the ownership or use of the
Acquired Assets following Closing, shall have been obtained and evidenced by
written documentation satisfactory to the Purchaser, including, without
limitation, estoppel certificates and the consents from the other parties to
those Contracts marked as "Material" on Schedule 2.9 hereof ("Material
Contracts").
SECTION 6.5 NO ADVERSE LITIGATION. There shall not be pending or
threatened any action or proceeding by or before any court or other governmental
body which shall seek to restrain, prohibit or invalidate the transfer of the
Acquired Assets to the Purchaser or any other transaction contemplated hereby,
or which might affect the right of the Purchaser to own or control the Acquired
Assets or to operate the Business.
SECTION 6.6 COMPLETION OF REVIEW BY THE PURCHASER. The Purchaser shall
have completed its business, accounting, environmental and legal review of the
Sellers' business and assets and obligations thereunder, and the Purchaser
shall, in its sole discretion, be satisfied with the results of such
investigation. The Contracts of Sellers shall be satisfactory to the Purchaser
in its sole discretion.
SECTION 6.7 PHASE I ENVIRONMENTAL REPORT. Purchaser shall have obtained a
Phase I Environmental Report on the Real Property and operations of Sellers
satisfactory in form and substance to Purchaser in its sole discretion.
SECTION 6.8 NO MATERIAL ADVERSE CHANGE. Between the date of this Agreement
and the Closing, except as otherwise contemplated in this Agreement, there shall
have been no material adverse change in the financial condition or results of
operation of the Business or any material adverse changes in the condition of
the Acquired Assets, including without limitation any uncured default under the
terms of any of the Material Contracts. Without limiting the generality of the
foregoing, Sellers' failure to deliver Contracts at Closing for waste haulage
for tonnage of at least equal to the tonnage hauled by Sellers for the same
month in 1997 shall constitute a material adverse change.
SECTION 6.9 BOARD APPROVAL. The Board of Directors of KTI, Inc. shall
have approved the execution of this Agreement and the transactions
contemplated hereby.
SECTION 6.10 EVENT OF LOSS. Between the date of this Agreement and the
Closing, neither the Business nor the Acquired Assets shall have sustained any
loss, taking, condemnation, damage, destruction, which individually or in the
aggregate would cost in excess of $25,000.00 to repair.
SECTION 6.11 DELIVERIES AT CLOSING. Sellers and Owner shall have delivered
or cause to be delivered to the Purchaser all documents, each properly executed
and dated as of the Closing date, required pursuant to Section 1.7 hereof.
SECTION 6.12 ASSUMED OBLIGATIONS. The Assumed Obligations shall not exceed
Six Hundred Twenty Three Thousand Dollars ($623,000), and Purchaser shall have
received evidence
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satisfactory to it in its sole discretion that Purchaser with respect to all
amounts payable with respect thereto.
7. CONDITIONS TO OBLIGATIONS OF THE SELLERS. The obligations of the
Sellers to transfer the Acquired Assets shall be subject to the fulfillment at
or prior to the Closing of each of the following conditions unless waived in
writing by Sellers in their sole discretion:
SECTION 7.1 CLOSING CERTIFICATE. The representations and warranties of the
Purchaser contained in this Agreement shall have been true and correct in all
material respects as of the date hereof, and they shall be true and correct in
all material respects as of the Closing, as though each such representation and
warranty were made at and as of such time. The Purchaser shall have performed
and complied with all of its obligations required by this Agreement to be
performed or complied with in all material respects at or prior to the Time of
Closing. The Purchaser shall have delivered to the Sellers a certificate, dated
as of the date of the Closing, certifying that such representations and
warranties are true and correct in all material respects and that all such
obligations have been performed and complied with in all material respects.
SECTION 7.2 NO ADVERSE LITIGATION. There shall not be pending or
threatened any action or proceeding before any court of other governmental body
which shall seek to restrain, prohibit or invalidate the sale of the Acquired
Assets to the Purchaser, the performance by Owner under his Employment
Agreement, or any other transaction contemplated hereby.
8. ADDITIONAL AGREEMENTS OF THE PARTIES.
SECTION 8.1 CUSTOMER ACCOUNT PAYMENTS. At Closing, each party shall
designate the address to which Customer Account payments for such party's
services shall be sent. With respect to the Customer Accounts:
(a) Purchaser shall be entitled to all income generated from the sale of
products and the rendering of services with respect to said accounts on and
after the Closing;
(b) Purchaser shall promptly pay to Seller any amount collected on any
Customer Account transferred hereunder that is accrued with respect to the sale
of products or the rendering of services by Seller prior to the Closing;
(c) Sellers and Owner shall promptly pay to Purchaser any amount collected
on any Customer Account transferred hereunder that is accrued for sale of
products or services rendered on or after the Closing; and
(d) Neither Purchaser nor Seller shall be obligated to collect any
Customer Accounts on behalf of the other, provided, however, that Purchaser
shall use commercially reasonable efforts to assist Seller in collecting the
accounts receivable outstanding at the Time of Closing.
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Designations of customers with respect to the invoice(s) being paid shall
determine how amounts paid on such invoices shall be allocated between Seller
and Purchaser. If a customer does not designate payment to a specific invoice,
Purchaser may not (but need not) make inquiry of the customer with respect to
the invoice being paid. Collections of Customer Accounts not otherwise so
designated by the payor shall be allocated on a first-in-first-out basis unless
the customer disputes the amount of the Customer Account in question, in which
event the foregoing allocation shall only apply to the amount of the Customer
Account that is not in dispute and the balance thereof shall be applied against
the most recent invoice.
SECTION 8.2 PRORATIONS. Any prepaid revenue, prepaid expense, deposits,
refunds, deferred or unearned revenue, accrued income and accrued expenses of
the Business as of the end of the day immediately preceding the Closing Date
that have not been included within the Modified Working Capital Adjustment
shall, except as otherwise expressly provided herein, be adjusted and allocated
between Sellers and Purchaser to reflect the principle that all expenses
incurred and income earned arising from the operation of the Business before the
Closing Date shall be for the account of Sellers, and all expenses incurred and
income earned arising from the operation of the Business on and after the
Closing Date shall be for the account of the Purchaser. Without limiting the
generality of the foregoing, items to be adjusted and allocated include wages,
bonuses, commissions, payroll taxes, accrued vacation and sick pay and other
fringe benefits of employees of Sellers. The allocations made pursuant to this
Section shall be made in accordance with generally accepted accounting
principles to the extent not inconsistent with the express provisions of this
Agreement.
SECTION 8.3 POST-CLOSING COVENANTS. From and after the Closing, upon the
reasonable request of the Purchaser, the Sellers and the Owner shall execute,
acknowledge and deliver all such further documents as may be required to convey
and transfer to and vest in the Purchaser and protect its right, title and
interest in all of the Acquired Assets, and as may be appropriate otherwise to
carry out the transactions contemplated by this Agreement, including without
limitation, the required consent to assignment of Sellers' contract with the
Town of Vienna. In addition, Sellers shall provide Purchaser with a complete
copy of Sellers' contract with the Town of Falmouth and shall obtain any
required consents thereto. Sellers shall pay in a timely manner all obligations
of Sellers pertaining to the Business due and outstanding as of the Closing
other than the Assumed Liabilities, (including without limitation prompt payment
of all "trust fund taxes" [as that term is used in 36 M.R.S.A. Section 177(6)]
and unemployment taxes owed by Sellers for the period through the Closing).
SECTION 8.4 SUBROGATION OF THE PURCHASER. Sellers shall cause Purchaser,
and Key Bank, N.A., agent for lenders to Purchaser, to be named as additional
named insureds on all of Sellers' liability insurance policies.
SECTION 8.5 PURCHASER OBLIGATION. From and after the Closing, Purchaser
agrees to indemnify, defend and hold the Sellers and Owner harmless for all
expenses, losses, costs, deficiencies, liabilities and damages incurred or
suffered by Sellers or Owner arising out of third party claims resulting from
Purchaser's operation of the Acquired Assets subsequent to the Closing.
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SECTION 9. DEFINITIONS. Unless otherwise stated in this Agreement,
capitalized terms used in this Agreement shall have the following meanings:
Accounts Receivable shall have the meaning set forth in Section 1.1(h) hereof.
Acquired Assets shall have the meaning set forth in Section 1.1 hereof.
Affiliates shall have the meaning set forth in Section 4.5 hereof.
Aggregate Stock Value shall have the meaning set forth in Section 1.3(a)(1
hereof.
Agreement shall have the meaning set forth in the first paragraph of this
Agreement.
Assumed Contract Liabilities shall have the meaning set forth in Section 1.5
hereof.
Assumed Obligations shall have the meaning set forth in Section 1.3(a)(3)
hereof.
Assumed Payables shall mean the payable accounts of Xxxxxxx Xxxxx Company
accrued as of the Closing Date in those current liability categories listed on
SCHEDULE 9 hereto.
Augusta Real Property shall have the meaning set forth in Section 1.2(g) hereof.
Business shall have the meaning set forth in the recitals to this Agreement.
Claims and Damages shall have the meaning set forth in Section 4.5 hereof.
Closing shall have the meaning set forth in Section 1.6 hereof.
Closing Date shall have the meaning set forth in Section 1.6 hereof.
Contracts shall have the meaning set forth in Section 1.1(d) hereof.
Customer Accounts shall have the meaning set forth in Section 1.1(c) hereof.
Employment Agreement shall have the meaning set forth in Section 1.7(a)(1)(ii)
hereof.
Environmental Laws means Laws in any manner addressing Hazardous Materials.
ERISA means the Employee Retirement Income Security Act of 1974, as amended.
Estimated Modified Working Capital Adjustment shall have the meaning set forth
in Section 1.3(b) hereof.
Excluded Assets shall have the meaning set forth in Section 1.2 hereof.
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Hazardous Material means asbestos, waste oil or any hazardous or toxic chemical,
waste, byproduct, pollutant, contaminant, compound product or substance, the
exposure to, or manufacture, possession, presence, use, generation, storage,
transportation, treatment, release, disposal, abatement, clean up, removal or
remediation of which is prohibited, controlled, regulated or required by Law
pertaining to the protection of the environment, health or safety of persons,
natural resources, conservation, wildlife, waste management.
KTI documents shall have the meaning set forth in Section 2.27 hereof.
KTI Stock shall have the meaning set forth in Section 1.3(a)(1) hereof.
Laws shall have the meaning set forth in Section 2.4 hereof.
Lease shall have the meaning set forth in Section 1.7(a)(1)(iv) hereof.
Leased Real Property shall have the meaning set forth in Section 1.1(g) hereof.
Modified Working Capital shall mean the difference, as a positive or negative
amount, between (a) the Accounts Receivable actually collected (and retained) by
Purchaser by the 180th day after the Closing Date minus (b) the sum of the (i)
Assumed Payables actually paid by Purchaser by such date, and (ii) any other
Assumed Payables that remain outstanding as of such date. Modified Working
Capital shall be based on amounts accrued as of the Closing Date, but shall be
adjusted to reflect accounts receivable actually collected as described above.
Modified Working Capital Adjustment shall have the meaning set forth in Section
1.3(b)(1) hereof.
Operating Assets shall have the meaning set forth in Section 1.1(a) hereof.
Owner shall have the meaning set forth in the first paragraph of this Agreement.
Penney Litigation shall have the meaning set forth in Section 4.6 hereof.
Proprietary Rights shall have the meaning set forth in Section 1.1(e) hereof.
Purchaser shall have the meaning set forth in the first paragraph of this
Agreement.
Real Property shall have the meaning set forth in Section 2.4 hereof.
Records shall have the meaning set forth in Section 1.1(f) hereof.
Registration Rights Agreement shall have the meaning set forth in Section 1.3(c)
hereof.
Securities Act shall have the meaning set forth in Section 2.27 hereof.
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Securities Law shall have the meaning set forth in Section 2.27 hereof.
Seller shall have the meaning set forth in the first paragraph of this
Agreement.
Shares shall have the meaning set forth in Section 1.3(a)(1) hereof.
Supplies shall have the meaning set forth in Section 1.1(b) hereof.
Termination Date shall have the meaning set forth in Section 1.6 hereof.
Value shall have the meaning set forth in Section 1.3(a)(1) hereof.
10. GENERAL PROVISIONS.
SECTION 10.1 TERMINATION RIGHTS.
(a) Grounds for Termination. This Agreement may be terminated by either
Sellers and Owner, on the one hand, or Purchaser on the other, provided
such party(ies) so acting is not then in material default hereunder, upon
written notice to the other party(ies):
(1) If the Closing hereunder has not occurred on or before the
Termination Date; or
(2) If any judgment, decree or order which would prevent or make
unlawful the Closing under this Agreement has not been rescinded or
dismissed on or before the Termination Date, or
(3) In the event of a casualty loss described in Subsection 6.10
hereof; or
(4) If any necessary governmental approval or consent will not be
obtained within a reasonable time period; or
(5) If the other party shall at any time be in material default with
respect to any of its warranties, representations or covenants
contained herein or shall make an assignment for the benefit of
creditors or any proceeding shall have been instituted by or against
such party seeking to adjudicate such party a bankrupt or insolvent,
or seeking liquidation, winding up or reorganization, arrangement,
adjustment, protection, relief or composition of its debts under any
law relating to bankruptcy, insolvency or reorganization.
Termination pursuant to Clause (5) shall not be effective before the
effective date of any termination pursuant to Clauses (1), (2), (3)
or (4) unless the party seeking a termination shall have given to
the other party at least thirty (30) days' advance notice of the
claim of default or defaults involved so as to afford the other
party an opportunity to cure such default or defaults.
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(b) Post-Termination Liability. If this Agreement is terminated pursuant
to Subsection 10.1(a), all parties shall be released and discharged of all
obligations under this Agreement, unless the non-terminating party has defaulted
in its obligations set forth in this Agreement and such default has caused the
Closing not to occur in accordance with the terms of this Agreement.
SECTION 10.2 SPECIFIC PERFORMANCE. The parties recognize that if Sellers
refuse to perform their obligations under this Agreement, monetary damages alone
would not be adequate to compensate Purchaser for its injury. Purchaser shall
therefore have the right, in addition to any other remedies that may be
available, to obtain specific performance of the terms of this Agreement. In the
event of any action or arbitration proceeding to enforce this Agreement, Sellers
hereby waive the defense that there is an adequate remedy at law.
SECTION 10.3 INTENTIONALLY DELETED
SECTION 10.4 BROKERS' COMMISSION. Each party hereto will indemnify and
hold harmless each other party from any commission, fee or claim of any person,
firm, or corporation employed or retained or claiming to be employed or retained
by the indemnifying party to bring about, or to represent it in, the
transactions contemplated hereby.
SECTION 10.5 AMENDMENT AND MODIFICATION. The parties hereto may amend,
modify and supplement this Agreement in such manner as may be agreed upon by
them in writing.
SECTION 10.6 ARBITRATION. Any dispute arising out or related to this
Agreement that Sellers and Owner, on the one hand, and Purchaser, on the other,
are unable to resolve by themselves shall be settled by arbitration in Portland,
Maine, with Sellers and Owner constituting a single party for purposes of this
Section 10.6. Either party may initiate arbitration by giving written notice to
the other, setting forth the matter or matters in dispute with reasonable
particularity and designating a disinterested arbitrator. The other party shall
have ten (10) business days following its receipt of the initiating party's
notice within which to give written notice to the party initiating such
arbitration, setting forth any other matters that the second party wishes to
submit to arbitration and, if the second party so elects, designating a second
disinterested arbitrator. If the second party elects not to designate a second
arbitrator, or if the second party fails to give its notice within said period,
the arbitrator selected by the first party shall arbitrate the dispute. If the
second party designates a second arbitrator, the dispute shall be arbitrated by
a panel of three arbitrators, with the two arbitrators designated by Purchaser
and Sellers selecting the third arbitrator within ten (10) business days after
the designation of the second arbitrator.
The arbitration hearing shall be conducted in accordance with the
Commercial Arbitration Rules of the American Arbitration Association to the
extent such rules are not inconsistent with the provisions of this Section 10.6.
The arbitrator(s) shall have the power to issue any award, judgment, decree or
order of relief that a court of law or equity could issue under Maine law,
subject to the liquidated damages provisions and other limitations on liability
and remedies set forth in this Agreement. In no event shall the arbitrator(s)
have power or authority to award
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punitive or exemplary damages or damages for pain and suffering, or
consequential damages arising from a pre-Closing breach of this Agreement. The
written decision of the single arbitrator or a majority of the panel of
arbitrators, as applicable, shall be final and binding on Sellers and Purchaser.
Judgment of a monetary award, if it is not paid within thirty (30) days, or
enforcement of injunctive or specific performance relief granted by the
arbitrator(s) pursuant to the Non-Competition Agreements may be entered in any
court having jurisdiction over the matter.
No action at law or suit in equity based on any claim required to be
arbitrated under this Agreement shall be instituted in any court by Sellers or
Purchaser against the other except (a) an action to compel arbitration pursuant
to this Section 10.6, (b) an action to enforce the award of the arbitration
panel rendered in accordance with this Section 10.6, or (c) an action for
injunctive relief under Section 4.7 hereof.
SECTION 10.7 BINDING EFFECT. This Agreement shall be binding upon and
inure to the benefit of the parties hereto and their respective successors,
assigns, heirs and legal representatives; provided that this Agreement shall not
be assignable by the Sellers or the Owners without the Purchaser's prior written
consent. Notwithstanding the foregoing, Sellers acknowledge and agree that this
Agreement shall be collaterally assigned by Purchaser to Key Bank, National
Association, as agent under that certain Revolving Credit Agreement dated July
10, 1998 among KTI, Inc., Key Bank, N.A. and others.
SECTION 10.8 ENTIRE AGREEMENT. This Agreement, the Schedules and the
Exhibits attached hereto contain the entire agreement of the parties hereto with
respect to the purchase of the Acquired Assets and the other transactions
contemplated herein, and supersede all prior understandings and agreements of
the parties with respect to the subject matter hereof. Any reference herein to
this Agreement shall be deemed to include the Schedules and the Exhibits
attached hereto.
SECTION 10.9 HEADINGS, INTERPRETATION. The descriptive headings in this
Agreement are inserted for convenience only and do not constitute a part of this
Agreement. The materiality standard set forth in Section 6.8 hereof was
specifically negotiated by the parties and shall not be used in any manner as a
standard for "material," "materiality," "material adverse change," or for any
other purpose other than is expressly set forth above.
SECTION 10.10 EXECUTION IN COUNTERPARTS. This Agreement may be executed
in any number of counterparts, each of which shall be deemed on original.
SECTION 10.11 NOTICES. Any notice, request, information or other document
to be given hereunder to any of the parties by any other party shall be in
writing and shall be hand delivered or sent by certified or registered mail,
postage prepaid, or by overnight courier service requesting evidence of receipt
as part of its service, as follows:
(a) If to the Sellers or the Owner, addressed to:
Xxxxxxx X. Xxxxx
00
00
00 Xxxxxxx Xxxx
Xxxxxx, Xxxxx 00000
Copy to:
Xxxx X. Xxxxxxxx, Esq.
Xxxxxx, Xxxxxx & XxXxxx
000 Xxxxxxxx Xxxxxx
X.X. Xxx 0000
Xxxxxxxx, Xxxxx 00000-0000
Telecopier No.: 207-775-0806
(b) If to the Purchaser, addressed to:
Xxxxxxx X. Xxxxxx, Executive Vice President
and Treasurer
KTI, Inc.
0000 Xxxxxxxxx Xxxx
Xxxxxxxxxx, XX 00000
Copy to:
Xxxxx X. XxXxxxxxx, Esq.
Preti, Flaherty, Xxxxxxxx & Pachios, LLC
Xxx Xxxx Xxxxxx
X.X. Xxx 0000
Xxxxxxxx, Xxxxx 00000-0000
Telecopier No.: 207-791-3111
Any party may change the address to which notices hereunder are to be sent to it
by giving written notice of such change of address as herein provided. Any
notice given hereunder shall be deemed given on the date of mailing.
SECTION 10.12 SEVERABILITY. If any provision of this Agreement is
determined to be illegal or unenforceable, such provision will be deemed amended
to the extent necessary to conform to applicable law or, if it cannot be so
amended without materially altering the intention of the parties, it will be
deemed stricken and the remainder of the Agreement will remain in full force and
effect.
SECTION 10.13 RELIANCE, NO STRICT CONSTRUCTION. No third party other than
KTI, Inc. is entitled to rely on any of the representations, warranties or
covenants of the parties contained in this Agreement, and any arbitrator(s)
interpreting or construing this Agreement shall not apply a presumption that the
terms hereof shall be more strictly construed against one party, it being agreed
that agents of both Sellers and Owners, on the one hand, and Purchaser, on the
other hand, participated in the preparation hereof.
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SECTION 10.14 GOVERNING LAW. This Agreement shall be governed by and
construed in accordance with the laws of the State of Maine applicable to
contracts made and to be performed therein.
THE NEXT PAGE IS THE SIGNATURE PAGE TO THIS AGREEMENT AND
PLAN OF REORGANIZATION.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed as of the date and year first above written.
KTI SPECIALTY WASTE SERVICES, INC.
/s/ Xxxxx X. XxXxxxxxx By: /s/ Xxxxxx X. Xxxxxx
---------------------- ------------------------
Witness Its Senior Vice President
XXXXXXX XXXXX COMPANY
/s/ Xxxx X. Xxxxxxxx By: /s/ Xxxxxxx Xxxxx
-------------------- ---------------------
Witness Its
CAPITOL CITY TRANSFER, INC.
/s/ Xxxx X. Xxxxxxxx By: /s/ Xxxxxxx Xxxxx
-------------------- ---------------------
Witness Its
TWTS, INC.
/s/ Xxxx X. Xxxxxxxx By: /s/ Xxxxxxx Xxxxx
-------------------- ---------------------
Witness Its
/s/ Xxxx X. Xxxxxxxx /s/ Xxxxxx X. Xxxxx
-------------------- -------------------
Witness Xxxxxxx X. Xxxxx
SIGNATURE PAGE TO AGREEMENT AND PLAN OF REORGANIZATION
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LIST OF EXHIBITS
Exhibit A Registration Rights Agreement
Exhibit B Employment and Non-Competition Agreement of Xxxxxxx Xxxxx
Exhibit C Lease
Exhibit D Legal Opinion of Counsel to Sellers and Owner addressed to
Purchaser and Key Bank, N.A., as agent.
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LIST OF SCHEDULES
Schedule 1.1(a) List of Operating Assets
Schedule 1.1(c) List of Customers Accounts
Schedule 1.1(e) List of Proprietary Rights
Schedule 1.3(a)(2) Obligations to Lenders
Schedule 2.1 Federal Employee Identification Numbers; Subsidiaries
Schedule 2.2 Financial Statements
Schedule 2.4 Real Property
Schedule 2.5 Liens
Schedule 2.9 Contracts
Schedule 2.10 Insurance
Schedule 2.11 Litigation
Schedule 2.13 Changes Since Last Balance Sheet
Schedule 2.14 Compliance with Laws
Schedule 2.15 Absence of Conflicts
Schedule 2.16 Sites Used by Company, Waste and Transport
Schedule 2.18 Taxes
Schedule 2.19 Employee Matters
Schedule 2.21 Employee Benefit Matters
Schedule 9 Assumed Payables
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