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EXHIBIT 2
AGREEMENT AND PLAN OF MERGER
BY AND AMONG
SYNAGRO TECHNOLOGIES, INC.,
EWR ACQUISITION CORP.
AND
ENVIRONMENTAL WASTE RECYCLING, INC.,
XXXXX X. XXXXXX
AND
XXXXXX XXXXXX
NOVEMBER 5, 1998
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TABLE OF CONTENTS
Page
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ARTICLE I
THE MERGER...............................................................................................5
Section 1.1. THE MERGER.................................................................5
Section 1.2. EFFECTIVE TIME OF THE MERGER...............................................5
ARTICLE II
THE SURVIVING CORPORATION................................................................................6
Section 2.1. CERTIFICATE OF INCORPORATION...............................................6
Section 2.2. BYLAWS.....................................................................6
Section 2.3. DIRECTORS..................................................................6
Section 2.4. OFFICERS...................................................................6
ARTICLE III
CONVERSION OF SHARES.....................................................................................6
Section 3.1. EFFECT ON CAPITAL STOCK....................................................6
Section 3.2. EXCHANGE OF CERTIFICATES...................................................8
Section 3.3. STOCK TRANSFER BOOKS......................................................8
Section 3.4. NO FURTHER OWNERSHIP RIGHTS IN
COMPANY COMMON STOCK..................................................9
Section 3.5. TAX CONSEQUENCES...........................................................9
Section 3.6. TAKING OF NECESSARY ACTION; FURTHER ACTION.................................9
Section 3.7. CLOSING....................................................................9
ARTICLE IV
REPRESENTATIONS AND
WARRANTIES OF PARENT AND MERGER SUB......................................................................9
Section 4.1. ORGANIZATION AND QUALIFICATION.............................................9
Section 4.2. CAPITALIZATION............................................................10
Section 4.3. AUTHORITY; NON-CONTRAVENTION; APPROVALS...................................10
Section 4.4. REGISTRATION STATEMENT AND PROXY STATEMENT................................11
Section 4.5. REPORTS AND FINANCIAL STATEMENTS..........................................11
ARTICLE V
REPRESENTATIONS AND WARRANTIES
OF THE COMPANY AND THE SHAREHOLDERS.....................................................................12
Section 5.1. ORGANIZATION AND QUALIFICATION............................................12
Section 5.2. CAPITALIZATION............................................................13
Section 5.3. SUBSIDIARIES..............................................................13
Section 5.4. AUTHORITY; NON-CONTRAVENTION; APPROVALS...................................13
Section 5.5. FINANCIAL STATEMENTS......................................................14
Section 5.6. ABSENCE OF UNDISCLOSED LIABILITIES........................................14
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Section 5.7. ABSENCE OF CERTAIN CHANGES OR EVENTS......................................14
Section 5.8. LITIGATION................................................................15
Section 5.9. ACCOUNTS RECEIVABLE.......................................................15
Section 5.10. NO VIOLATION OF LAW; COMPLIANCE WITH AGREEMENTS..........................15
Section 5.11. INSURANCE................................................................15
Section 5.12. TAXES....................................................................16
Section 5.13. EMPLOYEE BENEFIT PLANS...................................................17
Section 5.14. EMPLOYEE AND LABOR MATTERS...............................................18
Section 5.15. ENVIRONMENTAL MATTERS....................................................19
Section 5.16. NON-COMPETITION AGREEMENTS...............................................21
Section 5.17. TITLE TO ASSETS..........................................................21
Section 5.18. CONTRACTS, AGREEMENTS, PLANS AND COMMITMENTS.............................22
Section 5.19. REGISTRATION STATEMENT...................................................23
Section 5.20. BROKERS AND FINDERS......................................................23
Section 5.21. INTELLECTUAL PROPERTY....................................................23
Section 5.22. RELATIONSHIPS............................................................24
Section 5.23. CERTAIN PAYMENTS.........................................................24
Section 5.24. BOOKS AND RECORDS........................................................24
Section 5.25. CONDITION AND SUFFICIENCY OF ASSETS......................................24
Section 5.26. INVESTMENT REPRESENTATIONS...............................................24
ARTICLE VI
CONDUCT OF BUSINESS PENDING THE MERGER..................................................................26
Section 6.1. CONDUCT OF BUSINESS BY THE COMPANY
PENDING THE MERGER...................................................26
Section 6.2. CONTROL OF THE COMPANY'S OPERATIONS.......................................28
Section 6.3. OTHER OFFERS..............................................................28
ARTICLE VII
ADDITIONAL AGREEMENTS...................................................................................28
Section 7.1. ACCESS TO INFORMATION.....................................................28
Section 7.2. REGISTRATION STATEMENT....................................................28
Section 7.3. SYNAGRO LIQUIDITY PROGRAM.................................................29
Section 7.4. EXCHANGE LISTING..........................................................29
Section 7.5. EXPENSES AND FEES.........................................................29
Section 7.6. AGREEMENT TO COOPERATE....................................................29
Section 7.7. PUBLIC STATEMENTS.........................................................29
Section 7.8. NOTIFICATION OF CERTAIN MATTERS...........................................29
ARTICLE VIII
CONDITIONS TO CLOSING...................................................................................30
Section 8.1. CONDITIONS TO EACH PARTY'S OBLIGATION
TO EFFECT THE MERGER.................................................30
Section 8.2. CONDITIONS TO OBLIGATION OF THE COMPANY
TO EFFECT THE MERGER.................................................30
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Section 8.3. CONDITIONS TO OBLIGATIONS OF PARENT AND MERGER
SUB TO EFFECT THE MERGER.............................................31
ARTICLE IX
TERMINATION, AMENDMENT AND WAIVER.......................................................................32
Section 9.1. TERMINATION...............................................................32
Section 9.2. EFFECT OF TERMINATION.....................................................34
Section 9.3. AMENDMENT.................................................................34
Section 9.4. EXTENSIONS; WAIVER........................................................34
ARTICLE X
INDEMNIFICATION.........................................................................................34
Section 10.1. THE SHAREHOLDERS' INDEMNITY OBLIGATIONS..................................34
Section 10.2. PARENT'S INDEMNITY OBLIGATIONS...........................................35
Section 10.3. INDEMNIFICATION PROCEDURES...............................................35
Section 10.4. DETERMINATION OF INDEMNIFIED AMOUNTS.....................................36
Section 10.5. LIMITATION OF SHAREHOLDERS' LIABILITY....................................37
Section 10.6. LIMITATION OF PARENT'S LIABILITY.........................................37
Section 10.7. LIMITATION ON INDEMNIFIED AMOUNTS........................................37
ARTICLE XI
GENERAL PROVISIONS......................................................................................38
Section 11.1. SURVIVAL.................................................................38
Section 11.2. NOTICES..................................................................38
Section 11.3. INTERPRETATION...........................................................39
Section 11.4. MISCELLANEOUS............................................................39
Section 11.5. GOVERNING LAW............................................................39
Section 11.6. BINDING ARBITRATION. ...................................................39
Section 11.7. COUNTERPARTS.............................................................41
Section 11.8. PARTIES IN INTEREST......................................................41
Section 11.9. ENFORCEMENT OF THE AGREEMENT.............................................41
Section 11.10. VALIDITY................................................................42
EXHIBITS
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Exhibit A Glossary
Exhibit B Consulting Agreement - Xxxxx X. Xxxxxx
Exhibit C Covenant Not to Compete Agreement - Xxxxx X. Xxxxxx
Exhibit D Covenant Not to Compete Agreement - Xxxxxx Xxxxxx
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SCHEDULES
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Schedule 2.3 Directors of the Surviving Corporation
Schedule 2.4 Officers of the Surviving Corporation
Schedule 5.2 Capitalization
Schedule 5.4 Authority; Non-Contravention; Approvals
Schedule 5.5 Financial Statements
Schedule 5.6 Absence of Undisclosed Liabilities
Schedule 5.8 Litigation
Schedule 5.11 Insurance
Schedule 5.12 Taxes
Schedule 5.13 Employee Benefit Plans
Schedule 5.14 Employee Schedule
Schedule 5.15 Environmental Matters
Schedule 5.17 Title to Assets
Schedule 5.18 Contracts, Agreements, Plans and Commitments
Schedule 5.22 Relationships
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AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER, dated as of November 5, 1998 (the
"Agreement"), is by and among SYNAGRO TECHNOLOGIES, INC., a Delaware corporation
("Parent"), EWR ACQUISITION CORP., a North Carolina corporation and a wholly
owned subsidiary of Parent ("Merger Sub"), ENVIRONMENTAL WASTE RECYCLING, INC.,
a North Carolina corporation (the "Company"), XXXXX X. XXXXXX and XXXXXX XXXXXX
(collectively, the "Shareholders").
W I T N E S S E T H:
WHEREAS, Parent, Merger Sub, the Company and the Shareholders desire
that Company merge with and into the Merger Sub (the "Merger");
WHEREAS, Parent, Merger Sub and the Company intend the Merger to
qualify as a tax-free reorganization under the provisions of Section 368 of the
Internal Revenue Code of 1986, as amended (the "Code"), and the regulations
thereunder;
WHEREAS, the Company and the Shareholders are making certain
representations, warranties and indemnities as an inducement to Parent and
Merger Sub to enter into this Agreement; and
WHEREAS, capitalized terms used but not otherwise defined herein shall
have the meanings ascribed to them in the Glossary attached as Exhibit A.
NOW, THEREFORE, in consideration of the premises and the
representations, warranties, covenants and agreements contained herein, the
parties hereto, intending to be legally bound, agree as follows:
ARTICLE I
THE MERGER
Section 1.1. THE MERGER. Upon the terms and subject to the conditions
of this Agreement, at the Effective Time (as defined in Section 1.2) in
accordance with the North Carolina Business Corporation Act (the "NCBCA"), the
Company shall be merged with and into Merger Sub and the separate existence of
the Company shall thereupon cease. The Merger Sub shall be the surviving
corporation in the Merger and is hereinafter sometimes referred to as the
"Surviving Corporation."
Section 1.2. EFFECTIVE TIME OF THE MERGER. The Merger shall become
effective at such time (the "Effective Time") as articles of merger are filed by
the Secretary of State of the State of North Carolina in accordance with the
NCBCA (the "Merger Filing"). The Merger Filing shall be made simultaneously with
or as soon as practicable after the Closing (as defined in Section 3.7) in
accordance with Article III. The parties acknowledge that it is their mutual
desire and intent to consummate the Merger as soon as practicable after the date
hereof, and in any event within five (5)
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business days after the satisfaction, or waiver, of all conditions to Closing
set forth in Article VIII hereof, subject to the terms and conditions hereof.
Accordingly, subject to the provisions hereof, the parties shall use all
reasonable efforts to consummate, as soon as practicable, the transactions
contemplated by this Agreement in accordance with Article III.
ARTICLE II
THE SURVIVING CORPORATION
Section 2.1. CERTIFICATE OF INCORPORATION. The Articles of
Incorporation of Merger Sub as in effect immediately prior to the Effective Time
shall be the Articles of Incorporation of the Surviving Corporation after the
Effective Time, as the same may thereafter be amended in accordance with its
terms and as provided under the NCBCA.
Section 2.2. BYLAWS. The Bylaws of Merger Sub as in effect immediately
prior to the Effective Time shall be the Bylaws of the Surviving Corporation
after the Effective Time, as the same may thereafter be amended in accordance
with their terms and as provided by the Certificate of Incorporation of the
Surviving Corporation and the NCBCA.
Section 2.3. DIRECTORS. The directors of the Surviving Corporation
shall be as designated in Schedule 2.3, and such directors shall serve in
accordance with the Bylaws of the Surviving Corporation until their respective
successors are duly elected or appointed and qualified.
Section 2.4. OFFICERS. The officers of the Surviving Corporation shall
be as designated in Schedule 2.4, and such officers shall serve in accordance
with the Bylaws of the Surviving Corporation until their respective successors
are duly elected or appointed and qualified.
ARTICLE III
CONVERSION OF SHARES
Section 3.1. EFFECT ON CAPITAL STOCK. At the Effective Time, by virtue
of the Merger and without any action on the part of the Parent, Merger Sub, the
Company or the Shareholders:
(a) CONVERSION OF SECURITIES. All of the Company's voting
common stock, no par value per share ("Company Voting Common Stock"), and all of
the Company's non-voting common stock, no par value per share ("Company
Nonvoting Common Stock and, collectively with the Company Voting Common Stock,
the "Company Common Stock"), issued and outstanding immediately prior to the
Effective Time (excluding any shares of the Company Common Stock to be canceled
pursuant to Section 3.1(c)) shall be converted, subject to Section 3.1(f), into
the right to receive at Closing in the aggregate:
(i) 865,125 validly issued, fully paid and nonassessable
shares of common stock, par value $.002 per share, of Parent ("Parent Common
Stock"); plus
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(ii) cash equal to $6,560,535 less (1) the aggregate
long-term and short-term indebtedness of the Company for borrowed money as of
Closing, and (2) the amount, if any, by which the Company's Net Working Capital
as of Closing is less than $300,000.
As a result, in exchange for their shares of Company Common Stock,
Xxxxx Xxxxxx shall be entitled to receive 90% and Xxxxxx Xxxxxx 10% of the
Parent Common Stock and cash referenced above in this Section 3.1(a).
(b) EARNOUT. As additional consideration for the Merger, the
Parent will issue Parent Common Stock and pay cash with an aggregate value equal
to $3.19 for each $1.00 of EBITDA realized by the Surviving Corporation in
excess of $1,523,901 for the twelve (12) month period ended following Closing
(such aggregate value being referred to herein as the "Earnout Amount"),
provided, however, that in no event shall such Earnout Amount be greater than
$2,956,216. The Earnout Amount shall be due forty-five (45) days after the date
one year after the Closing and shall be paid 90% to Xxxxx Xxxxxx and 10% to
Xxxxxx Xxxxxx. The Earnout Amount shall consist of 70% cash and 30% Parent
Common Stock which shall be valued based on the Average Parent Common Stock
Price. In the event any of the Jefferson County Contracts, or any contracts
associated with such Jefferson County Contracts, are terminated prior to the
date such Earnout Amount is due and payable, all reasonable expenses required to
move and relocate the equipment and infrastructure associated with such
contracts shall be expensed in calculating EBITDA.
The capitalized terms used in this Section shall have the following
meanings:
"Average Parent Common Stock Price" means the average of the Daily Per
Share Prices for the ten (10) consecutive trading days beginning on the twelfth
(12th) trading day prior to the date one year after the Closing.
"Daily Per Share Price" means the average of the per share closing
prices on the NASDAQ Small Cap Exchange (the "NASDAQ") of Parent Common Stock
(as reported by The Wall Street Journal for that day).
"EBITDA" means the Surviving Corporation's earnings before interest,
taxes, depreciation and amortization as reasonably determined by the Parent and
the Shareholders in accordance with GAAP or, if Parent and the Shareholders are
unable to agree with respect thereto, as reasonably determined in accordance
with Section 11.6 hereof.
(c) CANCELLATION. Each share of Company Common Stock held in
the treasury of the Company and each share of Company Common Stock held by any
direct or indirect wholly owned Subsidiary of the Company, if any, immediately
prior to the Effective Time shall, by virtue of the Merger and without any
action on the part of the holder thereof, cease to be outstanding, be canceled
and retired without payment of any consideration therefor and cease to exist.
(d) CAPITAL STOCK OF MERGER SUB. Each share of Company Common
Stock, issued and outstanding immediately prior to the Effective Time shall be
converted into and
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exchanged for one validly issued, fully paid and nonassessable share of common
stock, no par value per share, of the Surviving Corporation.
(e) ADJUSTMENTS TO MERGER CONSIDERATION. The Merger
Consideration (as defined in Section 3.2(a)) shall be appropriately adjusted to
reflect fully the effect of any stock split, reverse split, stock dividend
(including any dividend of securities convertible into Parent Common Stock),
reorganization, reclassification, recapitalization or other similar change with
respect to Parent Common Stock occurring (including the record date thereof)
after the date hereof and prior to the Effective Time.
(f) FRACTIONAL SHARES. No certificates or scrip representing
less than one share of Parent Common Stock shall be issued upon the surrender
for exchange of a certificate or certificates which immediately prior to the
Effective Time represented outstanding shares of Company Common Stock (the
"Certificates"). In lieu of any such fractional share, each holder of shares of
Company Common Stock who would otherwise have been entitled to a fraction of a
share of Parent Common Stock upon surrender of Certificates for exchange shall
be paid upon such surrender cash (without interest) in an amount equal to such
fraction multiplied by the Daily Per Share Price on the Closing Date.
Section 3.2. EXCHANGE OF CERTIFICATES.
(a) Immediately after the Effective Time, Parent will deliver
to each Shareholder upon surrender of all such Certificates for cancellation
together with such other customary documents as may be required, and the
Shareholders shall be entitled to receive in exchange therefor, (A) certificates
evidencing that number of whole shares of Parent Common Stock and cash in
immediately available funds which such holder has the right to receive in
accordance with Section 3.1 hereof in respect of the shares of Company Common
Stock formerly evidenced by such Certificate, and (B) cash in respect of
fractional shares as provided in Section 3.1(f) (the shares of Parent Common
Stock and cash being, collectively, the "Merger Consideration"), and the
Certificates so surrendered shall forthwith be canceled.
(b) Parent or the Exchange Agent shall be entitled to deduct
and withhold from the Merger Consideration otherwise payable pursuant to this
Agreement to any holder of Company Common Stock such amounts as Parent or the
Exchange Agent is required to deduct and withhold with respect to the making of
such payment under the Code, or any provision of state, local or foreign tax
law. To the extent that amounts are so withheld by Parent or the Exchange Agent,
such withheld amounts shall be treated for all purposes of this Agreement as
having been paid to the holder of the shares of Company Common Stock in respect
of which such deduction and withholding was made by Parent or the Exchange
Agent.
Section 3.3. STOCK TRANSFER BOOKS. At the Effective Time, the stock
transfer books of the Company shall be closed, and there shall be no further
registration of transfers of the Company Common Stock thereafter on the records
of the Company.
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Section 3.4. NO FURTHER OWNERSHIP RIGHTS IN COMPANY COMMON STOCK. The
Merger Consideration delivered upon the surrender for exchange of shares of
Company Common Stock in accordance with the terms hereof shall be deemed to have
been issued in full satisfaction of all rights pertaining to such shares of
Company Common Stock, and there shall be no further registration of transfers on
the records of the Surviving Corporation of shares of Company Common Stock which
were outstanding immediately prior to the Effective Time. If, after the
Effective Time, Certificates are presented to the Surviving Corporation for any
reason, they shall be canceled.
Section 3.5. TAX CONSEQUENCES. It is intended by the parties hereto
that the Merger shall constitute a reorganization within the meaning of Section
368 of the Code. The parties hereto hereby adopt this Agreement as a "plan of
reorganization" within the meaning of Sections 1.368-2(g) and 1.368-3(a) of the
United States Treasury Regulations.
Section 3.6. TAKING OF NECESSARY ACTION; FURTHER ACTION. Each of
Parent, Merger Sub and the Company will take all such reasonable and lawful
action as may be necessary or appropriate in order to effectuate the Merger in
accordance with this Agreement as promptly as possible. If, at any time after
the Effective Time, any such further action is necessary or desirable to carry
out the purposes of this Agreement and to vest the Surviving Corporation with
full right, title and possession to all assets, property, rights, privileges,
powers and franchises of the Company and Merger Sub, the officers and directors
of the Company and Merger Sub in office immediately prior to the Effective Time
are fully authorized in the name of their respective corporations or otherwise
to take, and will take, all such lawful and necessary action.
Section 3.7. CLOSING. The closing (the "Closing") of the transactions
contemplated by this Agreement shall take place at a location mutually agreeable
to Parent and the Company, as promptly as practicable (but in any event within
five business days) following the date on which the last of the conditions set
forth in Article VIII is fulfilled or waived, or at such other time and place as
Parent and the Company shall agree. The date on which the Closing occurs is
referred to in this Agreement as the "Closing Date."
ARTICLE IV
REPRESENTATIONS AND
WARRANTIES OF PARENT AND MERGER SUB
Parent and Merger Sub each represent and warrant to the Company as
follows, except as set forth in the Parent SEC Reports (defined in Section 4.5):
Section 4.1. ORGANIZATION AND QUALIFICATION. Each of Parent and Merger
Sub is a corporation duly organized, validly existing and in good standing under
the laws of the state of its incorporation and has the requisite corporate power
and authority to own, lease and operate its assets and properties and to carry
on its business as it is now being conducted. Parent is duly qualified to do
business as a foreign corporation and is in good standing in each jurisdiction
in which the properties owned, leased, or operated by it or the nature of the
business conducted by it makes such qualification necessary, except where the
failure to be so qualified and in good standing would not
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have, or could not reasonably be anticipated to have, individually or in the
aggregate, a Material Adverse Effect (as defined in Exhibit A).
Section 4.2. CAPITALIZATION.
(a) As of August 14, 1998, the authorized capital stock of
Parent consisted of 100,000,000 shares of Parent Common Stock, of which
12,382,947 shares were issued and outstanding, and 10,000,000 shares of
preferred stock, par value $.002 per share, of which 500,000 shares have been
designated as "Preferred Stock-Junior Participating Series "A" and reserved for
issuance upon exercise of rights evidenced by the certificates representing all
outstanding shares of Parent Common Stock, but no such shares are issued and
outstanding. All of the issued and outstanding shares of Parent Common Stock
were validly issued and are fully paid, nonassessable and free of preemptive
rights.
(b) As of August 14, 1998, except for options granted pursuant
to Parent incentive or option plans (or to current or former employees of
Parent) and warrants to acquire 600,000 shares of Parent Common Stock, there are
no outstanding (i) securities of Parent convertible into or exchangeable for
shares of capital stock or voting securities of Parent or (ii) options or other
rights to acquire from Parent or other obligations of Parent to issue, any
capital stock, voting securities or securities convertible into or exchangeable
for capital stock or voting securities of Parent.
(c) All of the shares of capital stock of Merger Sub are owned
beneficially and of record by Parent.
(d) The shares of Parent Common Stock to be issued as part of
the Merger Consideration have been duly authorized and when issued and delivered
in accordance with the terms of this Agreement, will have been validly issued
and will be fully paid and non-assessable, and the issuance thereof is not
subject to any preemptive or other similar right.
Section 4.3. AUTHORITY; NON-CONTRAVENTION; APPROVALS.
(a) Parent and Merger Sub each have full corporate power and
authority to execute and deliver this Agreement and, subject to the Parent
Required Statutory Approvals (as defined in Section 4.3(c)), to consummate the
transactions contemplated hereby. This Agreement has been duly executed and
delivered by each of Parent and Merger Sub, and, assuming the due authorization,
execution and delivery hereof by the Company, constitutes a valid and legally
binding agreement of each of Parent and Merger Sub enforceable against each of
them in accordance with its terms, except that such enforcement may be subject
to (i) bankruptcy, insolvency, reorganization, moratorium or other similar laws
affecting or relating to enforcement of creditors' rights generally and (ii)
general equitable principles.
(b) The execution and delivery of this Agreement by each of
Parent and Merger Sub and the consummation by each of Parent and Merger Sub of
the transactions contemplated hereby do not and will not violate or result in a
breach of any provision of, or constitute a default (or an event which, with
notice or lapse of time or both, would constitute a default) under, or result in
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the termination of, or accelerate the performance required by, or result in a
right of termination or acceleration under, or result in the creation of any
lien, security interest, charge or encumbrance upon any of the properties or
assets of Parent or any of its Subsidiaries under any of the terms, conditions
or provisions of (i) the respective charters or bylaws of Parent or any of its
Subsidiaries, (ii) any statute, law, ordinance, rule, regulation, judgment,
decree, order, injunction, writ, permit or license of any court or governmental
authority applicable to Parent or any of its Subsidiaries or any of their
respective properties or assets (assuming compliance with the matters referred
to in Section 4.3(c)) or (iii) any note, bond, mortgage, indenture, deed of
trust, license, franchise, permit, concession, contract, lease or other
instrument, obligation or agreement of any kind to which Parent or any of its
Subsidiaries is now a party or by which Parent or any of its Subsidiaries or any
of their respective properties or assets may be bound or affected except, in the
case of clauses (ii) and (iii), for matters as would not have, or could not
reasonably be anticipated to have, individually or in the aggregate, a Material
Adverse Effect or materially impair the ability of Parent and Merger Sub to
consummate the transactions contemplated by this Agreement.
(c) Except for (i) the filing of the Registration Statement
(as defined in Section 4.4) with the SEC pursuant to the Securities Act, and the
declaration of the effectiveness thereof by the SEC and filings with various
state blue sky authorities, and (ii) the making of the Merger Filing with the
Secretary of State of the State of North Carolina in connection with the Merger
(the filings and approvals referred to in clauses (i) and (ii) are collectively
referred to as the "Parent Required Statutory Approvals"), no declaration,
filing or registration with, or notice to, or authorization, consent or approval
of, any governmental or regulatory body or authority is necessary for the
execution and delivery of this Agreement by Parent or Merger Sub or the
consummation by Parent or Merger Sub of the transactions contemplated hereby,
other than such declarations, filings, registrations, notices, authorizations,
consents or approvals which, if not made or obtained, as the case may be, would
not, have, or could not reasonably be anticipated to have, individually or in
the aggregate, a Material Adverse Effect or materially impair the ability of
Parent or Merger Sub to consummate the transactions contemplated by this
Agreement.
Section 4.4. REGISTRATION STATEMENT AND PROXY STATEMENT. None of the
information to be supplied by Parent or its Subsidiaries for inclusion in the
Registration Statement on Form S-3 to be filed under the Securities Act with the
SEC by Parent pursuant to Section 7.2 of this Agreement for the purpose of
registering the shares of Parent Common Stock to be issued in the Merger (as
amended or supplemented, the "Registration Statement") will, at the time it
becomes effective, contain any untrue statement of a material fact or omit to
state any material fact required to be stated therein or necessary in order to
make the statements therein, in the light of the circumstances under which they
are made, not misleading.
Section 4.5. REPORTS AND FINANCIAL STATEMENTS.
(a) Since January 1, 1997, Parent has filed with the SEC all
material forms, statements, reports and documents (including all exhibits,
amendments and supplements thereto) required to be filed by it under each of the
Securities Act, the Exchange Act and the respective rules and regulations
thereunder, all of which complied in all material respects with all applicable
requirements of the appropriate act and the rules and regulations thereunder.
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(b) Parent has previously made available or delivered to the
Company or its Shareholders copies of its (a) Annual Reports on Form 10-K for
the fiscal year ended December 31, 1997, and for the immediately preceding
fiscal year, as filed with the SEC, (b) proxy and information statements
relating to (i) all meetings of its shareholders (whether annual or special) and
(ii) any actions by written consent in lieu of a shareholders' meeting from
January 1, 1998, until the date hereof, and (c) all other reports, including
quarterly reports, or registration statements filed by Parent with the SEC since
January 1, 1998 (other than Registration Statements filed on Form S-8) (the
documents referred to in clauses (a), (b) and (c), including the exhibits
thereto, collectively referred to as the "Parent SEC Reports").
(c) As of their respective dates, the Parent SEC Reports did
not contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary to make the statements
therein, in the light of the circumstances under which they were made, not
misleading.
(d) The audited consolidated financial statements and
unaudited interim consolidated financial statements of Parent included in such
reports (collectively, the "Parent Financial Statements") have been prepared in
accordance with GAAP (except as may be indicated therein or in the notes
thereto) and fairly present in all material respects the consolidated financial
position of Parent and its Subsidiaries as of the dates thereof and the
consolidated results of their operations and cash flows for the periods then
ended, subject, in the case of the unaudited interim financial statements, to
normal year-end and audit adjustments and any other adjustments described
therein.
ARTICLE V
REPRESENTATIONS AND WARRANTIES
OF THE COMPANY AND THE SHAREHOLDERS
The Company and the Shareholders, jointly and severally, represent and
warrant to Parent and Merger Sub as follows:
Section 5.1. ORGANIZATION AND QUALIFICATION. The Company is a
corporation duly organized, validly existing and in good standing under the laws
of the State of North Carolina and has the requisite corporate power and
authority to own, lease and operate its assets and properties and to carry on
its business as it is now being conducted. The Company is duly qualified to do
business as a foreign corporation and is in good standing in each jurisdiction
in which the properties owned, leased, or operated by it or the nature of the
business conducted by it makes such qualification necessary, except where the
failure to be so qualified and in good standing would not have, or could not
reasonably be anticipated to have, individually or in the aggregate, a Material
Adverse Effect. True, accurate and complete copies of the Company's Articles of
Incorporation, as amended, and Bylaws, in each case as in effect on the date
hereof, including all amendments thereto, have heretofore been delivered to
Parent.
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Section 5.2. CAPITALIZATION.
(a) The authorized capital stock of the Company consists of
50,000 shares of Company Voting Common Stock and 50,000 shares of Company
Nonvoting Common Stock. As of the date of this Agreement there are, and as of
Closing there will be, 90 shares of Company Voting Common Stock and 10 shares of
Company Nonvoting Common Stock issued and outstanding. All of such issued and
outstanding shares of Company Common Stock are validly issued and are fully
paid, nonassessable and free of preemptive rights and are owned beneficially and
of record as set forth on Schedule 5.2. No Subsidiary of the Company holds any
shares of the capital stock of the Company.
(b) Except as set forth on Schedule 5.2, there are no
outstanding (i) subscriptions, options, calls, contracts, commitments,
understandings, restrictions, arrangements, rights or warrants, including any
right of conversion or exchange under any outstanding security, debenture,
instrument or other agreement obligating the Company or any Shareholder to
issue, deliver or sell, or cause to be issued, delivered or sold, additional
shares of the capital stock of the Company or obligating the Company or any
Shareholder to grant, extend or enter into any such agreement or commitment or
(ii) obligations of the Company or any Shareholder to repurchase, redeem or
otherwise acquire any securities referred to in clause (i) above. There are no
voting trusts, proxies or other agreements or understandings to which the
Company or any Shareholder is a party or is bound with respect to the voting of
any shares of capital stock of the Company.
Section 5.3. SUBSIDIARIES. Company does not have any Subsidiaries, nor
does the Company hold any equity interest in or control (directly or indirectly,
through the ownership of securities, by contract, by proxy, alone or in
combination with others, or otherwise) any corporation, limited liability
company, partnership, business organization or other Person.
Section 5.4. AUTHORITY; NON-CONTRAVENTION; APPROVALS.
(a) The Company has full corporate power and authority to
execute and deliver this Agreement and, subject to the Company Required
Statutory Approvals (as defined in Section 5.4(c)), to consummate the
transactions contemplated hereby. This Agreement has been approved by the Board
of Directors of the Company and the Shareholders, and no other corporate
proceedings on the part of the Company or the Shareholders are necessary to
authorize the execution and delivery of this Agreement or the consummation by
the Company and the Shareholders of the transactions contemplated hereby. This
Agreement has been duly executed and delivered by the Company and the
Shareholders, and, assuming the due authorization, execution and delivery hereof
by Parent and Merger Sub, constitutes a valid and legally binding agreement of
the Company and the Shareholders, enforceable against the Company and the
Shareholders in accordance with its terms, except that such enforcement may be
subject to (a) bankruptcy, insolvency, reorganization, moratorium or other
similar laws affecting or relating to enforcement of creditors' rights generally
and (b) general equitable principles.
(b) Except as set forth in Schedule 5.4, the execution and
delivery of this Agreement by the Company and the Shareholders and the
consummation by the Company and the
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Shareholders of the transactions contemplated hereby do not and will not violate
or result in a breach of any provision of, or constitute a default (or an event
which, with notice or lapse of time or both, would constitute a default) under,
or result in the termination of, or accelerate the performance required by, or
result in a right of termination or acceleration under, or result in the
creation of any lien, security interest, charge or encumbrance upon any of the
properties or assets of the Company or the Shareholders under any of the terms,
conditions or provisions of (i) the charter or bylaws of the Company, (ii) any
statute, law, ordinance, rule, regulation, judgment, decree, order, injunction,
writ, permit or license of any court or governmental authority applicable to the
Company or the Shareholders, or any of their respective properties or assets
(assuming compliance with the matters referred to in Section 5.4(c)), or (iii)
any note, bond, mortgage, indenture, deed of trust, license, franchise, permit,
concession, contract, lease or other instrument, obligation or agreement of any
kind to which the Company or the Shareholders is now a party or by which the
Company or the Shareholders or any of their respective properties or assets may
be bound or affected.
(c) Except for the Merger Filing with the Secretary of State
of the State of North Carolina in connection with the Merger (the "Company
Required Statutory Approvals"), no declaration, filing or registration with, or
notice to, or authorization, consent or approval of, any governmental or
regulatory body or authority is necessary for the execution and delivery of this
Agreement by the Company and the Shareholders or the consummation by the Company
and the Shareholders of the transactions contemplated hereby.
Section 5.5. FINANCIAL STATEMENTS. The audited financial statements and
unaudited interim financial statements of the Company attached as Schedule 5.5
(collectively, the "Company Financial Statements") have been prepared in
accordance with GAAP (except as may be indicated therein or in the notes
thereto) and fairly present in all material respects the financial position of
the Company as of the dates thereof and the results of its operations and cash
flows for the periods then ended, subject, in the case of the unaudited interim
financial statements, to normal year-end and audit adjustments and any other
adjustments described therein.
Section 5.6. ABSENCE OF UNDISCLOSED LIABILITIES. Except as disclosed in
Schedule 5.6, the Company has not incurred any liabilities or obligations
(whether absolute, accrued, contingent or otherwise) of any nature, except
liabilities, obligations or contingencies (i) which are accrued or reserved
against the Company Financial Statements or reflected in the notes thereto or
(ii) which were incurred after December 31, 1997, and were incurred in the
ordinary course of business and consistent with past practices.
Section 5.7. ABSENCE OF CERTAIN CHANGES OR EVENTS. Since December 31,
1997, the business of the Company has been conducted in the ordinary course of
business consistent with past practices, and there has not been any event,
occurrence, development or state of circumstances or facts which has had, or
could reasonably be anticipated to have, individually or in the aggregate, a
Material Adverse Effect.
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Section 5.8. LITIGATION. Except as described in Schedule 5.8, there are
no claims, suits, actions, Environmental Claims, inspections, investigations or
proceedings pending or, to the knowledge of the Company, threatened against,
relating to or affecting the Company before any court, governmental department,
commission, agency, instrumentality, authority, or any mediator or arbitrator.
Except as described in Schedule 5.8, the Company is not subject to any judgment,
decree, injunction, rule or order of any court, governmental department,
commission, agency, instrumentality, authority, or any mediator or arbitrator.
Section 5.9. ACCOUNTS RECEIVABLE. All accounts receivable reflected on
the Company Financial Statements represent sales actually made in the ordinary
course of business and are collectible (within 60 days after the applicable
billing date) except as reflected in the reserve for doubtful accounts in the
Company Financial Statements. The reserve for doubtful accounts reflected in the
Company Financial Statements has been determined in accordance with GAAP.
Section 5.10. NO VIOLATION OF LAW; COMPLIANCE WITH AGREEMENTS.
(a) The Company is not in violation of and has not been given
notice or been charged with any violation of, any law, statute, order, rule,
regulation, ordinance or judgment (including, without limitation, any applicable
Environmental Law) of any governmental or regulatory body or authority. No
investigation or review by any governmental or regulatory body or authority is
pending or threatened, nor has any governmental or regulatory body or authority
indicated an intention to conduct the same. The Company has all permits
(including without limitation Environmental Permits), licenses, franchises,
variances, exemptions, orders and other governmental authorizations, consents
and approvals required or necessary to conduct its business as presently
conducted (collectively, the "Company Permits"). The Company is not in violation
of the terms of any Company Permit.
(b) The Company and each of the Shareholders are not in breach
or violation of or in default in the performance or observance of any term or
provision of, and no event has occurred which, with lapse of time or action by a
third party, could result in a default under, (a) the charter, bylaws or similar
organizational instruments of the Company or (b) any contract, commitment,
agreement, indenture, mortgage, loan agreement, note, lease, bond, license,
approval or other instrument to which the Company is a party or by which it is
bound or to which any of its property is subject; provided, however, that the
Company and the Shareholders shall not be in breach or default under the
documents listed in (b) unless such breach or default would have, or could
reasonably be anticipated to have, individually or in the aggregate, a Material
Adverse Effect.
Section 5.11. INSURANCE. Schedule 5.11 hereto sets forth a list of all
insurance policies owned by the Company or by which the Company or any of its
properties or assets is covered against present losses, all of which are now in
full force and effect. No insurance has been refused with respect to any
operations, properties or assets of the Company nor has coverage of any
insurance been limited by any insurance carrier that has carried, or received
any application for, any such insurance during the last three years. No
insurance carrier has denied any claims made against any of the policies listed
on Schedule 5.11 hereto.
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Section 5.12. TAXES.
(a) Except as set forth on Schedule 5.12, (i) the Company has
(x) duly filed (or there has been filed on its behalf) with the appropriate
taxing authority all Tax Returns (as hereinafter defined) required to be filed
by it on or prior to the date hereof, and (y) duly paid in full or made adequate
provision therefor on its financial statements in accordance with GAAP (or there
has been paid or adequate provision has been made on its behalf) for the payment
of all Taxes (as hereinafter defined) for all periods ending prior to the date
hereof; (ii) all such Tax Returns filed by or on behalf of the Company are true,
correct and complete in all material respects; (iii) the liabilities and
reserves for Taxes reflected in the most recent balance sheet included in the
Company Financial Statements to cover all Taxes for all periods ending at or
prior to the date of such balance sheet have been determined in accordance with
GAAP, and there is no material liability for Taxes for any period beginning
after such date other than Taxes arising in the ordinary course of business;
(iv) there are no liens for Taxes upon any property or assets of the Company,
except for liens for Taxes not yet due; (v) the Company has not made any change
in accounting methods since December 31, 1997; (vi) the Company has not received
a ruling from any taxing authority or signed an agreement with any taxing
authority; (vii) the Company has complied in all respects with all applicable
laws, rules and regulations relating to the payment and withholding of Taxes
(including, without limitation, withholding of Taxes pursuant to Sections 1441
and 1442 of the Code, as amended or similar provisions under any foreign laws)
and has, within the time and the manner prescribed by law, withheld from
employee wages and paid over to the appropriate taxing authority all amounts
required to be so withheld and paid over under all applicable laws; (viii) no
federal, state, local or foreign audits or other administrative proceedings or
court proceedings are presently pending with regard to any Taxes or Tax Returns
of the Company, and as of the date of this Agreement the Company has not
received a written notice of any pending audits or proceedings; (ix) the federal
income Tax Returns of the Company have been examined by the Internal Revenue
Service ("IRS") (which examination has been completed) or the statute of
limitations for the assessment of federal income Taxes of the Company has
expired, for all periods through and including December 31, 1994, and no
deficiencies were asserted as a result of such examinations which have not been
resolved and fully paid; and (x) no adjustments or deficiencies relating to Tax
Returns of the Company have been proposed, asserted or assessed by any taxing
authority, except for such adjustments or deficiencies which have been fully
paid or finally settled.
(b) There are no outstanding requests, agreements, consents or
waivers to extend the statute of limitations applicable to the assessment of any
Taxes or deficiencies against the Company, and no power of attorney granted by
the Company with respect to any Taxes is currently in force. The Company is not
a party to any agreement providing for the allocation or sharing of Taxes with
any entity that is not directly or indirectly, a wholly-owned corporate
Subsidiary of the Company. The Company has not, with regard to any assets or
property held, acquired or to be acquired by it, filed a consent to the
application of Section 341(f) of the Code, or agreed to have Section 341(f)(2)
of the Code apply to any disposition of a subsection (f) asset (as such term is
defined in Section 341(f)(4) of the Code) owned by the Company. The Company (i)
has not been a member of an affiliate group filing a consolidated federal income
Tax Return (other than a group the common parent of which was the Company) and
(ii) has no liability for Taxes of any person (other than any of the Company and
its Subsidiaries) under Section 1.1502-6 of the United States
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Treasury Regulations (or any similar provision of state, local or foreign law),
as a transferee or successor, by contract, or otherwise.
Section 5.13. EMPLOYEE BENEFIT PLANS.
(a) Each Plan and each Benefit Program (as such terms are
defined below) is listed on Schedule 5.13 hereto. No Plan or Benefit Program is
or has been (i) covered by Title IV of the Employer Retirement Income Security
Act of 1974, as amended ("ERISA"), (ii) subject to the minimum funding
requirements of Section 412 of the Code or (iii) a "multi-employer plan" as
defined in Section 3(37) of ERISA, nor has the Company contributed to, or ever
had any obligation to contribute to, any multi-employer plan. Each Plan and
Benefit Program intended to be qualified under Section 401(a) of the Code is
designated as a tax-qualified plan on Schedule 5.13 and is so qualified. No Plan
or Benefit Program provides for any retiree health benefits for any employees or
dependents of the Company other than as required by COBRA (as hereinafter
defined). There are no claims pending with respect to, or under, any Plan or any
Benefit Program, other than routine claims for benefits, and there are no
disputes or litigation pending or, to the knowledge of the Company, threatened,
with respect to any such Plans or Benefit Programs.
(b) The Company has heretofore delivered to Parent true and
correct copies of the following, if any:
(i) each Plan and each Benefit Program listed on
Schedule 5.13, all amendments thereto as of the date hereof and all current
summary plan descriptions provided to employees regarding the Plans and Benefit
Programs;
(ii) each trust agreement and annuity contract (or
any other funding instruments) pertaining to any of the Plans or Benefit
Programs, including all amendments to such documents to the date hereof;
(iii) each management or employment contract or
contract for personal services and a complete description of any understanding
or commitment between the Company and any officer, consultant, director,
employee or independent contractor of the Company; and
(iv) a complete description of each other plan,
policy, contract, program, commitment or arrangement providing for bonuses,
deferred compensation, retirement payments, profit sharing, incentive pay,
commissions, hospitalization or medical expenses or insurance or any other
benefits for any officer, consultant, director, annuitant, employee or
independent contractor of the Company as such or members of their families
(other than directors' and officers' liability policies), whether or not insured
(a "Benefit Program"). For purposes of this Agreement, "Plan" means an "employee
benefit plan" (as defined in Section 3(3) of ERISA) which is or has been
established or maintained, or to which contributions are or have been made, by
the Company or by any trade or business, whether or not incorporated, which,
together with the Company, is under common control, as described in Section
414(b) or (c) of the Code.
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(c) Each Plan and Benefit Program has been maintained and
administered in all material respects in compliance with its terms and in
accordance with all applicable laws, rules and regulations. The Company has no
commitment or obligation to establish or adopt any new or additional Plans or
Benefit Programs or to increase the benefits under any existing Plan or Benefit
Program.
(d) Except as set forth in Schedule 5.13, neither the
execution and delivery of this Agreement, nor the consummation of the
transactions contemplated hereby will (i) result in any payment to be made by
the Company, including, without limitation, severance, unemployment
compensation, golden parachute (defined in Section 280G of the Code) or
otherwise, becoming due to any employee of the Company, or (ii) increase any
benefits otherwise payable under any Plan or any Benefit Program.
Section 5.14. EMPLOYEE AND LABOR MATTERS.
(a) Company has provided Parent with a true and complete list
dated as of June 30, 1998 (the "Employee Schedule ") of all employees of the
Company listing the title or position held, base salary or wage rate and any
bonuses, commissions, profit sharing, the Company's vehicles, club memberships
or other compensation or perquisites payable, all employee benefits received by
such employees and any other material terms of any written agreement with the
Company. As of the date of this Agreement and as of the Closing Date, the
combined projected annual payroll for the calendar year ending December 31, 1998
of the Company required to operate its business is not materially different from
that as listed on the Employee Schedule, and the Company has not entered into
any agreement or agreements pursuant to which the combined annual payroll of the
Company, including projected pay increases, overtime and fringe benefit costs,
required to operate its business (including all administrative and support
personnel) would be greater than as listed on the Employee Schedule. Set forth
on Schedule 5.14 is a detailed description of all health, dental, life and
disability insurance plans of the Company and a description of the cost per
employee under each such plan for individual coverage as well as for coverage of
such employee's dependents.
(b) Except as set forth on Schedule 5.14, the Company is not a
party to or bound by any written employment agreements or commitments, other
than on an at-will basis. The Company is in compliance in all material respects
with all applicable laws respecting the employment and employment practices,
terms and conditions of employment and wages and hours of its employees and is
not engaged in any unfair labor practice. To the best knowledge of the Company,
all employees of the Company who work in the United States are lawfully
authorized to work in the United States according to federal immigration laws.
There is no labor strike or labor disturbance pending or, to the knowledge of
the Company, threatened against the Company with respect to the Business and,
during the past five years, the Company has not experienced a work stoppage.
(c) Except as set forth on Schedule 5.14, (i) the Company is
not a party to or bound by the terms of any collective bargaining agreement or
other union contract applicable to any employee of the Company and no such
agreement or contract has been requested by any employee
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or group of employees of the Company, nor has there been any discussion with
respect thereto by management of the Company with any employees of the Company,
(ii) the Company is not aware of any union organizing activities or proceedings
involving, or any pending petitions for recognition of, a labor union or
association as the exclusive bargaining agent for, or where the purpose is to
organize, any group or groups of employees of the Company, or (iii) there is not
currently pending, with regard to any of its facilities, any proceeding before
the National Labor Relations Board, wherein any labor organization is seeking
representation of any employees of the Company.
Section 5.15. ENVIRONMENTAL MATTERS. Without in any manner limiting any
other representations and warranties set forth in this Agreement:
(a) Neither the Company nor any of its Business Facilities, is
in violation of, or has violated, or has been or is in non-compliance with, any
Environmental Laws in connection with the ownership, use, maintenance or
operation of, or conduct of the business of the Company or any of its Business
Facilities.
(b) Without in any manner limiting the generality of (a)
above:
(i) Except in compliance with Environmental Laws
(including, without limitation, by obtaining necessary Environmental Permits),
neither the Company nor the Shareholders have any knowledge, and the Company and
the Shareholders could not reasonably be expected to have any knowledge, that
Materials of Environmental Concern (as defined in Exhibit A) have been used,
generated, extracted, mined, beneficiated, manufactured, stored, treated, or
disposed of, or in any other way released (and no release is threatened), on,
under or about any Business Facility (as defined in Exhibit A) or transferred or
transported to or from any Business Facility, and neither the Company nor the
Shareholders have any knowledge, and the Company and the Shareholders could not
reasonably be expected to have any knowledge, that Materials of Environmental
Concern have been generated, manufactured, stored or treated or disposed of, or
in any other way released (and no release is threatened), on, under, about or
from any property adjacent to any current Business Facility;
(ii) The Company is not now, and will not be in the
future, as a result of the operation or condition of the business of the Company
on or prior to the date of Closing, subject to any: (a) contingent liability in
connection with any release or threatened release of any Materials of
Environmental Concern into the environment whether on or off any Business
Facility; (b) reclamation, decontamination or Remediation (as defined in Exhibit
A) requirements under Environmental Laws, or any reporting requirements related
thereto; or (c) consent order, compliance order or administrative order relating
to or issued under any Environmental Law;
(iii) There are no Environmental Claims known,
pending or, to the knowledge of the Company and the Shareholders, threatened
against the Company or any of its Business Facilities, and there is no basis for
same;
(iv) The Company and all of its current Business
Facilities have and have timely filed applications for renewal of all
Environmental Permits; the Company has all
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environmental and pollution control equipment necessary to comply with all
Environmental Laws (including, without limitation, compliance with all
applicable Environmental Permits) and operation of the business of the Company
as presently conducted, and the Company and its current Business Facilities are
in compliance with all terms and conditions of such Environmental Permits;
(v) Regarding all Environmental Permits for which
renewal, amendment, or modification is sought or pending, no material
expenditures, capital improvements, or changes in operation will be necessary as
a condition or as a result of such renewal, amendment, or modification.
(vi) The Company has received no notice and has no
knowledge that any occupant or tenant of any current Business Facility (a) is in
violation of any Environmental Law; (b) is the subject of any Environmental
Claims; or (c) does not have or has not reviewed any Environmental Permits
applicable to its assets or operations.
(vii) Except as set forth on Schedule 5.15, there are
no, nor have there ever been any, storage tanks or solid waste management units
located on or under any Business Facility of the Company or any of its
Subsidiaries, and there are no Materials of Environmental Concern on any
Business Facility of the Company in an amount exceeding background levels for
such geographic area or which would require reporting to any governmental
authority or Remediation to comply with Requirements of Environmental Laws (as
defined in Exhibit A);
(viii) To the knowledge of the Company and the
Shareholders, none of the off-site locations where Materials of Environmental
Concern generated from any Business Facility of the Company or for which the
Company has arranged for their disposal has been stored, treated, recycled,
disposed of or released has been nominated or identified as a facility which is
subject to an existing or potential claim under Environmental Laws;
(ix) The Company has not been named as a potentially
responsible party under, and no Business Facility of the Company has been
nominated or identified as a facility which is subject to an existing or
potential claim under CERCLA or comparable Environmental Laws, and no Business
Facility of the Company is subject to any lien arising under Environmental Laws;
(x) The Company has not received any notice of any
release or threatened release of Materials of Environmental Concern, or of any
violation of, noncompliance with, or remedial obligation under, Environmental
Laws or Permits, relating to the ownership, use, maintenance, operation of any
Business Facility of the Company, nor is there any basis for any of the
foregoing, nor has the Company voluntarily undertaken Remediation or other
decontamination or cleanup of any facility or site or entered into any agreement
for the payment of costs associated with such activity;
(xi) To the knowledge of the Company and the
Shareholders, there is no Requirement of Environmental Laws that will require
future compliance costs on the part of the Company in excess of $10,000 above
costs currently expended in the ordinary course of business;
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(xii) To the knowledge of the Company and the
Shareholders, there are no present or past events, conditions, circumstances,
activities, practices, incidents, actions or plans which may interfere with or
prevent continued compliance by the Company with Requirements of Environmental
Laws or which may give rise to any common law or statutory liability under
Environmental Laws or form the basis of an Environmental Claim against the
Company;
(xiii) There are no obligations, undertakings or
liabilities arising out of or relating to Environmental Laws which the Company
has agreed to, assumed or retained, by contract or otherwise.
(xiv) The Company has filed all notices,
notifications, financial security, waste managements plans, or applications
which are required to be obtained or filed by the Company for the operation of
its business or the use or operation of any Business Facility of the Company;
(xv) The Company and all Business Facilities are in
compliance in all material respects with all other applicable limitations,
restrictions, conditions, schedules and timetables contained in Environmental
Laws or contained in any plan, order, decree, judgment, notice or demand letter
issued, entered, promulgated or approved thereunder; and
(xvi) No current Business Facility (or equipment
thereon) of the Company contains any asbestos containing materials or
polychlorinated biphenyls in any form nor any wetland areas or other land
subject to restricted development under Environmental Laws.
For purposes of this Section, the "Company" shall include any entity which is,
in whole or in part, a predecessor of the Company and all of its former
Subsidiaries and their predecessors.
Section 5.16. NON-COMPETITION AGREEMENTS. Except as set forth in
Sections 8.3(m) and 8.3(n) of this Agreement, neither the Company nor any
Shareholder is a party to any agreement which purports to restrict or prohibit
any of them from, directly or indirectly, engaging in any business currently
engaged in by the Company. None of the Company's shareholders, officers,
directors, or key employees is a party to any agreement which, by virtue of such
person's relationship with the Company, restricts the Company or any Subsidiary
of the Company from, directly or indirectly, engaging in any of the businesses
described above.
Section 5.17. TITLE TO ASSETS. The Company has good and marketable
title in fee simple to all its real property and good title to all its leasehold
interests and other properties, as reflected in the most recent balance sheet
included in the Company Financial Statements, except for properties and assets
that have been disposed of in the ordinary course of business since the date of
the latest balance sheet included therein, free and clear of all mortgages,
liens, pledges, charges or encumbrances of any nature whatsoever, except (i)
liens for current taxes, payments of which are not yet delinquent, (ii) such
imperfections in title and easements and encumbrances, if any, as are not
substantial in character, amount or extent and do not detract from the value, or
interfere with the present use of the property subject thereto or affected
thereby, or otherwise impair the Company's business operations (in the manner
presently carried on by the Company), or (iii) any lien securing any debt or
obligation described on Schedule 5.17 which is expressly referenced as being
secured.
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All leases under which the Company leases any real property have been delivered
to Parent and are in good standing, valid and effective in accordance with their
respective terms, and there is not, under any of such leases, any existing
default or event which with notice or lapse of time or both would become a
default by or on behalf of the Company or its Subsidiaries, or by or on behalf
of any third party.
Section 5.18. CONTRACTS, AGREEMENTS, PLANS AND COMMITMENTS. Schedule
5.18 hereto sets forth a complete list of the following contracts, agreements,
plans and commitments (collectively, the "Contracts") to which the Company is a
party or by which the Company or any of its properties is bound as of the date
hereof:
(a) any contract, commitment or agreement that involves
aggregate expenditures by the Company of more than $10,000 per year;
(b) any contract or agreement (including any such contracts or
agreements entered into with any Governmental Authority) relating to the
maintenance or operation of the business that involves aggregate expenditures by
the Company of more than $10,000;
(c) any indenture, loan agreement or note under which the
Company has outstanding indebtedness, obligations or liabilities for borrowed
money;
(d) any lease or sublease for the use or occupancy of real
property;
(e) any agreement that restricts the right of the Company to
engage in any type of business;
(f) any guarantee, direct or indirect, by any person of any
contract, lease or agreement entered into by the Company;
(g) any partnership, joint venture or construction and
operation agreement;
(h) any agreement of surety, guarantee or indemnification with
respect to which the Company is the obligor, outside of the ordinary course of
business;
(i) any contract that requires the Company to pay for goods or
services substantially in excess of its estimated needs for such items or the
fair market value of such items;
(j) any contract, agreement, agreed order or consent agreement
that requires the Company to take any actions or incur expenses to remedy
non-compliance with any Environmental Law; and
(k) any other contract material to the Company or its
business.
True, correct and complete copies of each of such contracts, agreements, plans
and commitments have been delivered to or made available for inspection by
Parent. All such contracts, agreements,
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plans and commitments (i) were duly and validly executed and delivered by the
Company and the other parties thereto and (ii) are valid and in full force and
effect. The Company has fulfilled all material obligations required of the
Company under each such contract, agreement, plan or commitment to have been
performed by it prior to the date hereof, including timely paying all interest
on its debt as such interest has become due and payable. Except as set forth on
Schedule 5.18, the Company and the Shareholders are unaware of any counterclaims
or offsets under any of such contracts, agreements, plans and commitments. The
consummation of the Merger will vest in the Survivor Corporation all rights and
benefits under the Contracts and the right to operate the Company's business and
assets under the terms of the Contracts in the manner currently operated and
used by the Company.
Section 5.19. REGISTRATION STATEMENT. None of the information to be
supplied by the Company or the Shareholders for inclusion in the Registration
Statement will contain any untrue statement of any material fact or omit to
state any material fact required to be stated therein or necessary in order to
make the statements therein, in the light of the circumstances under which they
are made, not misleading. The Registration Statement will comply, as of its
effective date and thereafter while effective, as to form in all material
respects with all applicable laws, including the provisions of the Securities
Act and the rules and regulations promulgated thereunder, except that no
representation is made by the Company or the Shareholders with respect to
information supplied by Parent or Merger Sub for inclusion therein.
Section 5.20. BROKERS AND FINDERS. Neither the Company nor the
Shareholders have entered into any contract, arrangement or understanding with
any person or firm which may result in the obligation of the Company to pay any
finder's fees, brokerage or agent commissions or other like payments in
connection with the transactions contemplated hereby. There is no claim for
payment by the Company of any investment banking fees, finder's fees, brokerage
or agent commissions or other like payments in connection with the negotiations
leading to this Agreement or the consummation of the transactions contemplated
hereby.
Section 5.21. INTELLECTUAL PROPERTY. The Company has rights to use,
whether through ownership, licensing or otherwise, all patents, trademarks,
service marks, trade names, copyrights, software, trade secrets and other
proprietary rights and processes that are material to its business as now
conducted (collectively the "Intellectual Property Rights"). The Company does
not own any patents. The Company has no knowledge of any infringement by any
other person of any of the Intellectual Property Rights, and the Company has not
entered into any agreement to indemnify any other party against any charge of
infringement of any of the Intellectual Property Rights. The Company has not and
does not violate or infringe any intellectual property right of any other
person, and the Company has not received any communication alleging that it
violates or infringes the intellectual property right of any other person. The
Company has not been sued for infringing any intellectual property right of
another person. There is no claim or demand of any person pertaining to, or any
proceeding which is pending or, to the knowledge of the Company, threatened,
that challenges the rights of the Company in respect of any Intellectual
Property Rights, or that claims that any default exists under any Intellectual
Property Rights. None of the Intellectual Property Rights is subject to any
outstanding order, ruling, decree, judgment or stipulation by or with any court,
tribunal, arbitrator, or other governmental authority.
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Section 5.22. RELATIONSHIPS. Except as set forth on Schedule 5.22, the
Company has not received notice from any customer, supplier or any party to any
Contract involving more than $10,000 annually with the Company (each a "Contract
Party"), during the past two years that such customer, supplier or Contract
Party intends to discontinue doing business with the Company, and no customer,
supplier or Contract Party during the past two years has indicated any intention
(a) to terminate its existing business relationship with the Company or (b) not
to continue its business relationship with the Company, whether as a result of
the transactions contemplated hereby or otherwise. The Company has not entered
into any related party transaction during the past three years.
Section 5.23. CERTAIN PAYMENTS. Neither the Company nor any
shareholder, officer, director or employee of the Company has paid or received
or caused to be paid or received, directly or indirectly, in connection with the
business of the Company (a) any bribe, kickback or other similar payment to or
from any domestic or foreign government or agency thereof or any other person or
(b) any contribution to any domestic or foreign political party or candidate
(other than from personal funds of such shareholder, officer, director or
employee not reimbursed by the Company or as permitted by applicable law).
Section 5.24. BOOKS AND RECORDS. The corporate minute books, and other
corporate records of the Company are correct and complete in all material
respects and the signatures appearing on all documents contained therein are the
true signatures of the person purporting to have signed the same. All actions
reflected in said books and records were duly and validly taken in compliance
with the laws of the applicable jurisdiction and no meeting of the board of
directors of the Company or any committee thereof has been held for which
minutes have not been prepared and are not contained in the minute books. To the
extent that they exist, all personnel files, reports, strategic planning
documents, financial forecasts, accounting and tax records and all other records
of every type and description that relate to the business of the Company have
been prepared and maintained in accordance with good business practices and,
where applicable, in conformity with GAAP and applicable laws and regulations.
All such books and records are located in the offices of the Company.
Section 5.25. CONDITION AND SUFFICIENCY OF ASSETS. All buildings,
improvements and equipment owned or leased by the Company are structurally
sound, are in good operating condition and repair (subject to normal wear and
tear) and are adequate for the uses to which they are being put, and none of
such buildings, improvements or equipment is in need of maintenance or repairs
except for ordinary, routine maintenance and repairs that are not material in
nature or cost.
Section 5.26. INVESTMENT REPRESENTATIONS. Each of the Company and the
Shareholders acknowledges, represents and agrees that:
(a) (i) Parent has made available to the Company and the
Shareholders the information and documents described in Section 4.5 hereof, (ii)
the Shareholders understand the risks associated with ownership of Parent Common
Stock, and (iii) the Shareholders are capable of bearing the financial risks
associated with such ownership;
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(b) the Parent Common Stock included within the Merger
Consideration (the "Parent Shares") have not been registered under the
Securities Act or registered or qualified under any applicable state securities
laws;
(c) The Parent Shares are being issued to the Shareholders in
reliance upon exemptions from such registration or qualification requirements,
and the availability of such exemptions depends in part upon the Shareholders'
bona fide investment intent with respect to the Parent Shares;
(d) Each Shareholder's acquisition of the Parent Shares is
solely for its own account for investment, and such Shareholder is not acquiring
such Parent Shares for the account of any other person or with a view toward
resale, assignment, fractionalization, or distribution thereof;
(e) The Shareholders shall not offer for sale, sell, transfer,
pledge, hypothecate or otherwise dispose of any of the Parent Shares except in
accordance with this Agreement and (i) the registration requirements of the
Securities Act and applicable state securities laws or (ii) upon delivery to
Parent of an opinion of legal counsel reasonably satisfactory to Parent that an
exemption from registration is available or pursuant to an effective
registration statement covering the Parent Shares to be sold;
(f) The Shareholders have such knowledge and experience in
financial and business matters that they are capable of evaluating the merits
and risks of an investment in the Parent Shares, and to make an informed
investment decision with respect thereto;
(g) The Shareholders have had the opportunity to ask questions
of, and receive answers from Parent's officers and directors concerning the
Shareholders' acquisition of the Parent Shares and to obtain such other
information concerning Parent and the Parent Shares, to the extent Parent's
officers and directors possessed the same or could acquire it without
unreasonable effort or expense, as the Shareholders deemed necessary in
connection with making an informed investment decision; and
(h) In addition to any other legends required by law or the
other agreements entered into in connection herewith, each certificate
evidencing the Parent Shares will bear a conspicuous restrictive legend
substantially as follows:
THE SECURITIES EVIDENCED HEREBY HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT
OF 1933, AS AMENDED ("ACT"), OR UNDER ANY
APPLICABLE STATE SECURITIES LAWS, AND THEY
CANNOT BE OFFERED FOR SALE, SOLD,
TRANSFERRED, PLEDGED OR OTHERWISE
HYPOTHECATED EXCEPT IN ACCORDANCE WITH THE
REGISTRATION REQUIREMENTS OF THE ACT AND
SUCH OTHER STATE LAWS OR UPON DELIVERY TO
THIS CORPORATION OF AN OPINION OF LEGAL
COUNSEL
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SATISFACTORY TO THE CORPORATION THAT AN
EXEMPTION FROM REGISTRATION IS AVAILABLE.
ARTICLE VI
CONDUCT OF BUSINESS PENDING THE MERGER
Section 6.1. CONDUCT OF BUSINESS BY THE COMPANY PENDING THE MERGER.
After the date hereof and prior to the Closing Date, unless Parent shall
otherwise agree in writing, the Company shall:
(a) conduct its businesses in the ordinary and usual course of
business and consistent with past practice;
(b) not (i) amend or propose to amend its charters or bylaws,
(ii) split, combine, reorganize, reclassify, recapitalize or take any similar
action with respect to their outstanding capital stock or (iii) declare, set
aside or pay any dividend or distribution payable in cash, stock, property or
otherwise;
(c) not issue, sell, pledge or dispose of, or agree to issue,
sell, pledge or dispose of, any additional share of, or any options, warrants or
rights of any kind to acquire any share of, their capital stock of any class or
any debt or equity securities convertible into or exchangeable for such capital
stock;
(d) not (i) incur or become contingently liable with respect
to any indebtedness for borrowed money, (ii) redeem, purchase, acquire or offer
to redeem, purchase or acquire any shares of its capital stock or any options,
warrants or rights to acquire any of its capital stock or any security
convertible into or exchangeable for its capital stock, (iii) make any
acquisition of any assets or businesses other than expenditures for fixed or
capital assets in the ordinary course of business not exceeding $10,000 in any
instance or $50,000 in the aggregate, (iv) sell, pledge, dispose of or encumber
any assets or businesses other than sales in the ordinary course of business or
(v) enter into any contract, agreement, commitment or arrangement with respect
to any of the foregoing;
(e) use all reasonable efforts to preserve intact its business
organizations and goodwill, keep available the services of their respective
present officers and key employees, and preserve the goodwill and business
relationships with customers and others having business relationships with them
and not engage in any action, directly or indirectly, with the intent to
adversely impact the transactions contemplated by this Agreement;
(f) not enter into or amend any employment, severance, special
pay arrangement with respect to termination of employment or other similar
arrangements or agreements with any directors, officers or key employees;
(g) not adopt, enter into or amend any bonus, profit sharing,
compensation, stock option, pension, retirement, deferred compensation, health
care, employment or other employee
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benefit plan, agreement, trust fund or arrangement for the benefit or welfare of
any employee or retiree, except as required to comply with changes in applicable
law;
(h) use commercially reasonable efforts to maintain with
financially responsible insurance companies insurance on its tangible assets and
its businesses in such amounts and against such risks and losses as are
consistent with past practice;
(i) not make, change or revoke any material Tax election or
make any material agreement or settlement regarding Taxes with any taxing
authority;
(j) not make any change in the Company's financial Tax or
accounting methods, practices or policies, or in any assumption underlying such
a method, practice or policy;
(k) give prompt written notice to Parent of the commencement
of any Environmental Claim, or non-routine inspection by any governmental
authority with responsibility for enforcing or implementing any applicable
Environmental Laws, and provide to Parent such information as Parent may
reasonably request regarding such Environmental Claim, any developments in
connection therewith, and, as applicable, the Company's anticipated or actual
response thereto;
(l) use its commercially reasonable efforts to cause the
transfer of Environmental Permits (on the same terms and conditions), and any
financial assurance required thereunder to Parent or Merger Sub as may be
necessary under applicable Environmental Laws in connection with the
consummation of the transactions under this Agreement to allow Parent or Merger
Sub to conduct the business of the Company, as currently conducted;
(m) not enter into or assume any contracts or agreements
having a value or imposing an obligation upon the Company in excess of $10,000
annually and all contracts or agreements having a value to or imposing an
obligation on the Company that have remaining obligations of $50,000 or more,
regardless of the annual payment;
(n) maintain its books of account and records in the usual,
regular and ordinary manner consistent with past policies and practice;
(o) not compromise, settle, grant any waiver or release
relating to or otherwise adjust any litigation or claims of any nature
whatsoever pending against the Company;
(p) not take any action or omit to take any action, which
action or omission would result in a breach of any of the representations and
warranties set forth in this Agreement; and
(q) not make or commit to make any capital expenditures,
except for capital expenditures in the ordinary course of business not in excess
of $50,000 in the aggregate.
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Section 6.2. CONTROL OF THE COMPANY'S OPERATIONS. Nothing contained in
this Agreement shall give to Parent, directly or indirectly, rights to control
or direct the Company's operations prior to the Effective Time. Prior to the
Effective Time, the Company shall exercise, consistent with the terms and
conditions of this Agreement, complete control and supervision of its
operations.
Section 6.3. OTHER OFFERS. Except in connection with the transactions
contemplated by this Agreement, from and after the date hereof, the Company and
the Shareholders shall not, and shall not permit any of the Company's
shareholders, officers, directors, employees, Affiliates, representatives or
agents to, directly or indirectly, (i) solicit, initiate or knowingly encourage
any offer or proposal for, or any indication of interest in, a merger or
business combination involving the Company or the acquisition of an equity
interest in, or any substantial portion of the assets of, the Company or (ii)
engage in negotiations with or disclose any nonpublic information relating to
the Company or Parent, or afford access to the properties, books or records of
the Company, to any Person. The Company shall promptly notify and provide copies
to Parent of any offer, proposal or indication of interest, or communication
with respect thereto, delivered to or received from any third party.
ARTICLE VII
ADDITIONAL AGREEMENTS
Section 7.1. ACCESS TO INFORMATION. The Company shall afford to Parent
and Merger Sub and their respective accountants, counsel, financial advisors and
other representatives (the "Parent Representatives") full access during normal
business hours throughout the period prior to the Effective Time to all of its
respective properties (including without limitation to conduct soil,
groundwater, ambient air or other environmental testing or analyses), books,
contracts, personnel, representatives of or contacts with governmental or
regulatory authorities, agencies or bodies, commitments, and records (including,
but not limited to, Tax Returns and any and all records or documents which are
within the possession of governmental or regulatory authorities, agencies or
bodies, and the disclosure of which the Company can facilitate or control) and,
during such period, shall furnish promptly to Parent and Merger Sub all such
information concerning its respective businesses, properties and personnel as
Parent or Merger Sub, as the case may be, shall request. No investigation
pursuant to this Section shall affect any representation or warranty made by any
party.
Section 7.2. REGISTRATION STATEMENT. Parent shall file with the SEC
promptly upon receipt of written request from any Shareholder (provided that
such request may be made or delivered no earlier than October 1, 1999), the
Registration Statement and shall use reasonable efforts to have the Registration
Statement declared effective by the SEC as promptly as reasonably practicable.
Parent shall also take any action required to be taken under applicable state
blue sky or securities laws in connection with the issuance of Parent Common
Stock pursuant hereto. Parent and the Company shall promptly furnish to each
other all information, and take such other actions, as may reasonably be
requested in connection with any action by any of them in connection with this
Section. Notwithstanding any other provisions set forth herein, except for
Parent Shares issued pursuant to Section 3.1(b), no Parent Shares may be
transferred or sold during the 12 months following Closing.
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Section 7.3. SYNAGRO LIQUIDITY PROGRAM. Notwithstanding any other
provision set forth herein, with respect to all sales by the Shareholders of
Parent Shares through the NASDAQ or any such other exchange, the Shareholders
may only sell such shares on any day after the first sale of Parent Common Stock
has occurred through the NASDAQ or such other exchange on such day and
thereafter the Shareholders may only sell 1,000 Parent Shares in the aggregate
for each 1,000 shares of Parent Common Stock sold by unrelated third parties
through the NASDAQ or such other exchange on such day. In no event shall the
plan of distribution of Parent Shares include the use of a contractual
underwriter, nor shall Parent have any obligation to enter into an underwriting
agreement with any investment banking firm participating as a broker in the
execution of any such resales. Parent agrees that it will furnish to the
Shareholders such number of prospectuses, prospectus supplements, or other
documents incident to any registration, qualification or compliance referred to
herein as the Shareholders from time to time may reasonably request.
Section 7.4. EXCHANGE LISTING. Parent shall use its reasonable efforts
to effect, at or before the effective date of the Registration Statement,
authorization for listing on NASDAQ, upon official notice of issuance, of the
shares of Parent Common Stock to be issued pursuant to the Merger.
Section 7.5. EXPENSES AND FEES. All costs and expenses incurred by
Parent and Merger Sub in connection with this Agreement and the transactions
contemplated hereby (including but not limited to attorneys and accountants fees
and expenses) shall be paid by Parent; all such costs and expenses incurred by
the Company shall be paid by the Company; and all such costs and expenses
incurred by the Shareholders shall be paid by the Shareholders.
Section 7.6. AGREEMENT TO COOPERATE. Subject to the terms and
conditions herein provided, each of the parties hereto shall use all reasonable
efforts to take, or cause to be taken, all action and to do, or cause to be
done, all things necessary, proper or advisable under applicable laws and
regulations to consummate and make effective the transactions contemplated by
this Agreement, including using its reasonable efforts to obtain all necessary,
proper or advisable waivers, consents and approvals under applicable laws and
regulations to consummate and make effective the transactions contemplated by
this Agreement, including using its reasonable efforts to obtain all necessary
or appropriate waivers, consents or approvals of third parties required in order
to preserve material contractual relationships of the Company.
Section 7.7. PUBLIC STATEMENTS. The parties shall consult with each
other prior to issuing any press release or any written public statement with
respect to this Agreement or the transactions contemplated hereby and shall not
issue any such press release or written public statement prior to such
consultation.
Section 7.8. NOTIFICATION OF CERTAIN MATTERS. Each of the Company,
Parent and Merger Sub agrees to give prompt notice to each other of, and to use
their respective reasonable best efforts to prevent or promptly remedy, (i) the
occurrence or failure to occur or the impending or threatened occurrence or
failure to occur, of any event which occurrence or failure to occur would be
likely to cause any of its representations or warranties in this Agreement to be
untrue or inaccurate in any material respect (or in all respects in the case of
any representation or warranty containing any materiality qualification) at any
time from the date hereof to the Effective Time and (ii) any material
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failure (or any failure in the case of any covenant, condition or agreement
containing any materiality qualification) on its part to comply with or satisfy
any covenant, condition or agreement to be complied with or satisfied by it
hereunder; provided, however, that the delivery of any notice pursuant to this
Section shall not limit or otherwise affect the remedies available hereunder to
the party receiving such notice.
ARTICLE VIII
CONDITIONS TO CLOSING
Section 8.1. CONDITIONS TO EACH PARTY'S OBLIGATION TO EFFECT THE
MERGER. The respective obligations of each party to effect the Merger shall be
subject to the fulfillment or waiver, if permissible, at or prior to the
Effective Time of the following conditions:
(a) no preliminary or permanent injunction or other order or
decree by any federal or state court which prevents the consummation of the
Merger shall have been issued and remain in effect (each party agreeing to use
its reasonable efforts to have any such injunction, order or decree lifted); and
(b) no action shall have been taken, and no statute, rule or
regulation shall have been enacted, by any state or federal government or
governmental agency in the United States which would prevent the consummation of
the Merger or make the consummation of the Merger illegal.
Section 8.2. CONDITIONS TO OBLIGATION OF THE COMPANY TO EFFECT THE
MERGER. Unless waived by the Company, the obligation of the Company to effect
the Merger shall be subject to the fulfillment at or prior to the Effective Time
of the following additional conditions:
(a) Parent and Merger Sub shall have performed in all material
respects (or in all respects in the case of any agreement containing any
materiality qualification) their agreements contained in this Agreement required
to be performed on or prior to the Closing Date;
(b) the representations and warranties of Parent and Merger
Sub contained in this Agreement shall be true and correct in all material
respects (or in all respects in the case of any representation or warranty
containing any materiality qualification) on and as of the date made and on and
as of the Closing Date as if made at and as of such date;
(c) the Company shall have received a certificate executed on
behalf of Parent by the Chief Executive Officer or a Vice President of Parent
and on behalf of Merger Sub by the President or a Vice President of Merger Sub
with respect to (a) and (b) above; and
(d) the Company shall have received an opinion from Parent's
in-house counsel or Liddell, Sapp, Zivley, Hill & XxXxxx, L.L.P., in form
reasonably satisfactory to the Company.
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Section 8.3. CONDITIONS TO OBLIGATIONS OF PARENT AND MERGER SUB TO
EFFECT THE MERGER. Unless waived by Parent and Merger Sub, the obligations of
Parent and Merger Sub to effect the Merger shall be subject to the fulfillment
at or prior to the Effective Time of the additional following conditions:
(a) the Company shall have performed in all material respects
(or in all respects in the case of any agreement containing any materiality
qualification) its agreements contained in this Agreement required to be
performed on or prior to the Closing Date;
(b) the representations and warranties of the Company
contained in this Agreement shall be true and correct in all material respects
(or in all respects in the case of any representation or warranty containing any
materiality qualification) on and as of the date made and on and as of the
Closing Date as if made at and as of such date;
(c) since the date hereof, there shall have been no changes
that constitute, and no event or events shall have occurred which have resulted
in or constitute, a Material Adverse Effect;
(d) all governmental waivers, consents, orders, permit
transfers (including without limitation Environmental Permits) and approvals
legally required for the consummation of the Merger and the transactions
contemplated hereby or to permit Parent to carry on the business of the Company
after Closing in accordance with past customs and practice shall have been
obtained and be in effect at the Closing Date, and no governmental authority
shall have promulgated any statute, rule or regulation which, when taken
together with all such promulgations, would materially impair the value of the
Company to Parent;
(e) all waivers, consents and approvals from third parties
necessary for the transfer of any material contracts, financial assurances and
any other rights and benefits in connection with the Merger, or necessary for
the consummation of the Merger and the transactions contemplated hereby shall
have been obtained and be in effect at the Closing Date;
(f) all transactions, contracts, agreements and guarantees
between the Company and any Shareholder or any Affiliate of the Company or any
Shareholder shall have been terminated and all amounts owed by the Shareholders
and their Affiliates to the Company shall have been paid in full;
(g) the Company shall have distributed the building and real
property located at 000 Xxxxx Xxxx, Xxxxxxxxxx, Xxxxx Xxxxxxxx to Xxxxx Xxxxxx,
Xxxxx Xxxxxx shall have assumed all indebtedness with respect thereto and the
Company shall have entered into new long-term real property leases with respect
to such facility and any real property and other properties owned by any
Shareholder or any of their Affiliates and used in the business of the Company
in form and upon terms satisfactory to Parent; provided, however, in no event
shall such lease payments under such leases exceed the aggregate amount paid for
such properties under current leases;
(h) the Company shall have minimum tangible net worth at
Closing shall be $2,450,000.
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(i) the officers and directors of the Company shall deliver to
Parent an instrument dated the Closing Date releasing the Company from any and
all claims of such officers and directors (except as to accrued compensation
prior to the Closing Date in accordance with the terms of the Agreement);
(j) Parent shall have completed its due diligence review
regarding the Company and its business, operations, assets, liabilities, taxes,
insurance, contracts, prospects and environmental and other matters as Parent
deems relevant and Parent shall not have discussed any condition with respect to
such matters materially and adversely different from the representations and
warranties in Article V hereof;
(k) the Board of Directors of Parent shall approve this
Agreement and the closing of the transactions contemplated herein;
(l) Parent shall have received a legal opinion from Xxxxxx
Xxxxxxx Xxxxxxxxx & Xxxx, PLLC, in form reasonably satisfactory to Parent;
(m) Xxxxx X. Xxxxxx shall have entered into a Consulting
Agreement in the form attached hereto as Exhibit B, and a Covenant Not to
Compete Agreement in the form attached hereto as Exhibit C. Xxxxx X. Xxxxxx'x
Consulting Agreement shall be for an initial term of two years and require full
time involvement for the six month period after Closing with annual compensation
of $120,000 during the first year and $100,000 during the second year.
(n) Xxxxxx Xxxxxx shall have entered into a Covenant Not to
Compete Agreement in the form attached hereto as Exhibit D;
(o) Xxxxx Xxxxxx shall have purchased the Winnebago RV for the
Company's book value and shall have assumed all debt and lease obligations with
respect to such Winnebago RV and the Jaguar automobile lease; and
(p) Parent shall have received a certificate executed on
behalf of the Company by the President or Chief Executive Officer of the Company
and each of the Shareholders with respect to (a) through (h) above.
ARTICLE IX
TERMINATION, AMENDMENT AND WAIVER
Section 9.1. TERMINATION. This Agreement may be terminated at any time
prior to the Effective Time as follows:
(a) The Company shall have the right to terminate this
Agreement:
(i) if the representations and warranties of Parent
and Merger Sub shall fail to be true and correct in all material respects (or in
all respects in the case of any representation
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or warranty containing any materiality qualification) on and as of the date made
or, except in the case of any such representations and warranties made as of a
specified date, on and as of any subsequent date as if made at and as of
subsequent date and such failure shall not have been cured in all material
respects (or in all respects in the case of any representation or warranty
containing any materiality qualification) within 30 days after written notice of
such failure is given to Parent by the Company;
(ii) if the Merger is not completed by November 6,
1998 (provided that the right to terminate this Agreement under this Section
9.1(a)(ii) shall not be available to the Company if the failure of the Company
or the Shareholders to fulfill any obligation to Parent under or in connection
with this Agreement has been the cause of or resulted in the failure of the
Merger to occur on or before such date);
(iii) if the Merger is enjoined by a final,
unappealable court order; or
(iv) if Parent or Merger Sub (A) fails to perform in
any material respect any of its covenants (or in all respects in the case of any
covenant containing any materiality qualification) in this Agreement and (B)
does not cure such default in all material respects (or in all respects in the
case of any covenant containing any materiality qualification) within 30 days
after notice of such default is given to Parent by the Company.
(b) Parent shall have the right to terminate this Agreement;
(i) if the representations and warranties of the
Company and the Shareholders shall fail to be true and correct in all material
respects (or in all respects in the case of any representation or warranty
containing any materiality qualification) on and as of the date made or, except
in the case of any such representations and warranties made as of a specified
date, on and as of any subsequent date as if made at and as of such subsequent
date and such failure shall not have been cured in all material respects (or in
all respects in the case of any representation or warranty containing any
materiality qualification) within 30 days after written notice of such failure
is given to the Company by Parent;
(ii) if the Merger is not completed by November 6,
1998 (provided that the right to terminate this Agreement under this Section
9.1(b)(ii) shall not be available to Parent if the failure of Parent to fulfill
any obligation to the Company under or in connection with this Agreement has
been the cause of or resulted in the failure of the Merger to occur on or before
such date); or
(iii) if the Company or the Shareholders (A) fail to
perform in any material respect (or in all respects in the case of any covenant
containing any materiality qualification) any of its covenants in this Agreement
and (B) do not cure such default in all material respects (or in all respects in
the case of any covenant containing any materiality qualification) within 30
days after notice of such default is given to the Company by Parent.
(c) The Board of Directors of the Company and Parent mutually
agree.
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Section 9.2. EFFECT OF TERMINATION. In the event of termination of this
Agreement by either Parent or the Company pursuant to the provisions of Section
9.1, this Agreement shall forthwith become void and there shall be no further
obligations on the part of the Company, Parent, Merger Sub or their respective
officers or directors.
Section 9.3. AMENDMENT. This Agreement may not be amended except by an
instrument in writing signed on behalf of all of the parties.
Section 9.4. EXTENSIONS; WAIVER. At any time prior to the Effective
Time, the parties hereto may (a) extend the time for the performance of any of
the obligations or other acts of the other parties hereto, (b) waive any
inaccuracies in the representations and warranties contained herein or in any
document delivered pursuant thereto and (c) waive compliance with any of the
agreements or conditions herein. Any agreement on the part of a party hereto to
any such extension or waiver shall be valid if set forth in an instrument in
writing signed on behalf of such party.
ARTICLE X
INDEMNIFICATION
Section 10.1. THE SHAREHOLDERS' INDEMNITY OBLIGATIONS. The Shareholders
shall severally and not jointly, indemnify and hold harmless the Company, Parent
and the Company's and Parent's respective officers, directors, stockholders,
employees, agents, representatives and Affiliates (each a "Parent Indemnified
Party") from and against any and all claims (including without limitation,
Environmental Claims), actions, causes of action, arbitrations, proceedings,
losses, damages, remediations, liabilities, strict liabilities, judgments,
fines, penalties and expenses (including, without limitation, reasonable
attorneys' fees) (collectively, the "Indemnified Amounts") incurred by a Parent
Indemnified Party or for which a Parent Indemnified Party bears responsibility
as a result of (a) any breach or misrepresentation in any of the representations
and warranties made by or on behalf of the Company and/or the Shareholders in
this Agreement, including without limitation with respect to environmental
matters, or any certificate or instrument delivered in connection with this
Agreement, (b) any violation or breach by the Company and/or the Shareholders of
or default by the Company and/or the Shareholders under the terms of this
Agreement or any certificate or instrument delivered in connection with this
Agreement, (c) any act or omission by the Company, the Shareholders or any
officer, director, employee, agent or representative of the Company, occurring
on or prior to the Closing Date (including any claim by a third party, including
employees and customers arising out of or related to any act or omission by the
Company, any of the Shareholders or any shareholder, officer, director,
employee, agent or representative of the Company occurring on or prior to the
Closing Date, or (d) any Environmental Claim and/or any violation of any
Requirements of Environmental Law if such Environmental Claim or violation
relates, directly or indirectly, to events, conditions, operations, facts or
circumstances which occurred or commenced on or prior to the Closing Day. For
purposes of this Section 10.1, Indemnified Amounts shall include without
limitation those Indemnified Amounts ARISING OUT OF THE STRICT LIABILITY
(INCLUDING BUT NOT LIMITED TO STRICT LIABILITY ARISING PURSUANT TO ENVIRONMENTAL
LAWS) OR NEGLIGENCE OF ANY PARTY (EXCLUDING THE PARENT, ITS OFFICERS, DIRECTORS,
STOCKHOLDERS, EMPLOYEES, AGENTS,
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REPRESENTATIVES AND AFFILIATES), WHETHER SUCH NEGLIGENCE BE SOLE, JOINT OR
CONCURRENT, ACTIVE OR PASSIVE.
Section 10.2. PARENT'S INDEMNITY OBLIGATIONS. Parent shall indemnify
and hold harmless the Shareholders and the Shareholders' agents, representatives
and Affiliates (each a "Shareholders' Indemnified Party") from and against any
and all Indemnified Amounts incurred by a Shareholders' Indemnified Party as a
result of (a) any breach or misrepresentation in any of the representations and
warranties made by or on behalf of Parent or Merger Sub in this Agreement or any
certificate or instrument delivered in connection with this Agreement, or (b)
any violation or breach by Parent or Merger Sub of or default by Parent under
the terms of this Agreement or any certificate or instrument delivered in
connection with this Agreement.
Section 10.3. INDEMNIFICATION PROCEDURES. All claims for
indemnification under this Agreement shall be asserted and resolved as follows:
(a) A party claiming indemnification under this Agreement (an
"Indemnified Party") shall with reasonable promptness (i) notify the party from
whom indemnification is sought (the "Indemnifying Party") of any third-party
claim or claims asserted against the Indemnified Party ("Third Party Claim") for
which indemnification is sought and (ii) transmit to the Indemnifying Party a
copy of all papers served with respect to such claim (if any) and a written
notice ("Claim Notice") containing a description in reasonable detail of the
nature of the Third Party Claim, an estimate of the amount of damages
attributable to the Third Party Claim to the extent feasible (which estimate
shall not be conclusive of the final amount of such claim) and the basis of the
Indemnified Party's request for indemnification under this Agreement.
Within 15 days after receipt of any Claim Notice (the "Election
Period"), the Indemnifying Party shall notify the Indemnified Party (i) whether
the Indemnifying Party disputes its potential liability to the Indemnified Party
with respect to such Third Party Claim and (ii) whether the Indemnifying Party
desires, at the sole cost and expense of the Indemnifying Party, to defend the
Indemnified Party against such Third Party Claim.
If the Indemnifying Party notifies the Indemnified Party within the
Election Period that the Indemnifying Party elects to assume the defense of the
Third Party Claim, then the Indemnifying Party shall have the right to defend,
at its sole cost and expense, such Third Party Claim by all appropriate
proceedings, which proceedings shall be prosecuted diligently by the
Indemnifying Party to a final conclusion or settled at the discretion of the
Indemnifying Party in accordance with this Section 10.3(a). The Indemnifying
Party shall have full control of such defense and proceedings. The Indemnified
Party is hereby authorized, at the sole cost and expense of the Indemnifying
Party, to file, during the Election Period, any motion, answer or other
pleadings that the Indemnified Party shall reasonably deem necessary or
appropriate to protect its interests. If requested by the Indemnifying Party,
the Indemnified Party agrees to cooperate with the Indemnifying Party and its
counsel in contesting any Third Party Claim that the Indemnifying Party elects
to contest, including, without limitation, the making of any related
counterclaim against the person asserting the Third Party Claim or any
cross-complaint against any person. Except as otherwise provided herein, the
Indemnified Party may participate in, but not control, any defense or settlement
of any Third Party
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claim controlled by the Indemnifying Party pursuant to this Section 10.3 and
shall bear its own costs and expenses with respect to such participation.
If the Indemnifying Party fails to notify the Indemnified Party within
the Election Period that the Indemnifying Party elects to defend the Indemnified
Party pursuant to the preceding paragraph, or if the Indemnifying Party elects
to defend the Indemnified Party but fails to prosecute or settle the Third Party
Claim as herein provided or if the Indemnified Party reasonably objects to such
election on the grounds that counsel for such Indemnifying Party cannot
represent both the Indemnified Party and the Indemnifying Parties because such
representation would be reasonably likely to result in a conflict of interest,
then the Indemnified Party shall have the right to defend, at the sole cost and
expense of the Indemnifying Party, the Third Party Claim by all appropriate
proceedings, which proceedings shall be promptly and vigorously prosecuted by
the Indemnified Party to a final conclusion or settled. The Indemnified Party
shall have full control of such defense and proceedings. The Indemnifying Party
may participate in, but not control, any defense or settlement controlled by the
Indemnified Party pursuant to this Section 10.3, and the Indemnifying Party
shall bear its own costs and expenses with respect to such participation.
The Indemnifying Party shall not settle or compromise any Third Party
Claim unless (i) the terms of such compromise or settlement require no more than
the payment of money (i.e., such compromise or settlement does not require the
Indemnified Party to admit any wrongdoing or take or refrain from taking any
action), (ii) the full amount of such monetary compromise or settlement will be
paid by the Indemnifying Party, and (iii) the Indemnified Party receives as part
of such settlement a legal, binding and enforceable unconditional satisfaction
and/or release, in form and substance reasonably satisfactory to it, providing
that such Third Party Claim and any claimed lability of the Indemnified Party
with respect thereto is being fully satisfied by reason of such compromise or
settlement and that the Indemnified Party is being released from any and all
obligations or liabilities it may have with respect thereto. The Indemnified
Party shall not settle or admit liability to any Third Party Claim without the
prior written consent of the Indemnifying Party unless (x) the Indemnifying
Party has disputed its potential liability to the Indemnified Party, and such
dispute either has not been resolved or has been resolved in favor of the
Indemnifying Party or (y) the Indemnifying Party has failed to respond to the
Indemnified Party's Claim Notice.
(b) In the event any Indemnified Party should have a claim
against any Indemnifying Party hereunder that does not involve a Third Party
Claim, the Indemnified Party shall transmit to the Indemnifying Party a written
notice (the "Indemnity Notice") describing in reasonable detail the nature of
the claim, an estimate of the amount of damages attributable to such claim to
the extent feasible (which estimate shall not be conclusive of the final amount
of such claim) and the basis of the Indemnified Party's request for
indemnification under this Agreement.
Section 10.4. DETERMINATION OF INDEMNIFIED AMOUNTS. The Indemnified
Amounts payable by an Indemnifying Party hereunder shall be determined (i) by
the written agreement of the parties, (ii) by mediation, (iii) by binding
arbitration pursuant to Section 11.6 hereof, (iv) by a final judgment or decree
of any court of competent jurisdiction, or (v) by any other means agreed to in
writing by the parties. A judgment or decree of a court shall be deemed final
when the time for appeal, if any, shall have expired and no appeal shall have
been taken or when all appeals taken have been fully
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determined. In calculating or determining the Indemnified Amounts, such
calculation or determination shall take into account the actual receipt of any
amounts from any third party and the reductions to such Indemnified Amounts in
Section 10.7.
Section 10.5. LIMITATION OF SHAREHOLDERS' LIABILITY.
(a) Notwithstanding anything to the contrary contained in
Article X, the aggregate liability of the Shareholders for any event or
occurrence giving rise to the Shareholders being required to indemnify Parent
Indemnified Parties pursuant to Section 10.1 of this Agreement shall be limited
to the sum of the Merger Consideration plus the amounts deducted from the cash
portion of the Merger Consideration pursuant to Section 3.1(a)(ii)(1) and (2).
(b) Parent Indemnified Parties are entitled to indemnification
pursuant to Section 10.1 only to the extent that the amount of any Indemnified
Amount, individually or in the aggregate, exceeds $25,000 and then to the full
amount of such Indemnified Amount.
Section 10.6. LIMITATION OF PARENT'S LIABILITY.
(a) Notwithstanding anything to the contrary contained in
Article X, the aggregate liability of Parent for any event or occurrence giving
rise to Parent being required to indemnify Shareholders' Indemnified Parties
pursuant to Section 10.2 shall be limited to $2,000,000.
(b) Shareholders' Indemnified Parties are entitled to
indemnification pursuant to Section 10.2 only to the extent that the amount of
any Indemnified Amount, individually or in the aggregate, exceeds $25,000 and
then to the full amount of such Indemnified Amount.
Section 10.7. LIMITATION ON INDEMNIFIED AMOUNTS. Notwithstanding any
provision of this Article X to the contrary, Indemnified Amounts owed by an
Indemnifying Party to an Indemnified Party shall be reduced by the amount of any
mitigating recovery or benefit (net of reasonable expenses and tax and other
costs incurred in obtaining such recovery or benefit) an Indemnified Party shall
have received or otherwise enjoyed with respect thereto from: (i) any recovery
under any insurance policies, without regard to whether the Indemnified Party or
another person paid the premiums therefor; and (ii) the amount of tax or other
economic benefit (if any) to any Indemnified Party or its affiliate occurring in
connection with the occurrence of any action, cause of action, arbitration,
proceeding, loss, damage, remediation, liability, strict liability, judgment,
fine, penalty and expense in connection with an event leading to the accrual of
Indemnified Amounts. If such a mitigating recovery or benefit set forth in
Section 10.7(i) and (ii) above is received or enjoyed by an Indemnified Party
after it receives payment or other credit under this Agreement with respect to
Indemnified Amounts, then a refund equal in aggregate amount to the mitigating
recovery, net of reasonable expenses and tax or other costs incurred in
obtaining recovery, shall be made promptly to the Indemnifying Party.
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ARTICLE XI
GENERAL PROVISIONS
Section 11.1. SURVIVAL. The representations and warranties set forth in
this Agreement and in any certificate or instrument delivered in connection
herewith shall be continuing and shall survive the Closing for a period of two
years following the Closing Date; provided, however, that in the case of all
representations and warranties, there shall be no such termination with respect
to any such representation or warranty as to which a bona fide claim has been
asserted by written notice of such claim delivered to the party or parties
making such representation or warranty prior to the expiration of the survival
period; provided, further, that the representations and warranties set forth in
Sections 5.2 and 5.15 hereof shall survive the Closing indefinitely, the
representations and warranties set forth in Sections 5.8, 5.10, 5.12, 5.19 and
5.23 shall survive the Closing for the greater of three years or the statutory
survival period, and the representations and warranties set forth in Section 5.5
shall survive the Closing for three years. The covenants and agreements,
including but not limited to indemnification obligations, set forth in this
Agreement and in any certificate or instrument delivered in connection herewith
shall be continuing and survive Closing; provided, however, that the
indemnification obligations of the parties hereto (i) set forth in Sections
10.1(a) and 10.2(a) with respect to a breach of a representation or warranty
shall terminate at the time such particular representation or warranty shall
terminate, and (ii) set forth in Sections 10.1(b) and 10.2(b) shall terminate
three years following the Closing Date. The indemnification obligations of the
Shareholder set forth in Sections 10.1(c) and (d) shall survive the Closing
indefinitely.
Section 11.2. NOTICES. All notices and other communications hereunder
shall be in writing and shall be deemed given if delivered personally, mailed by
registered or certified mail (return receipt requested) or sent via facsimile to
the parties at the following addresses (or at such other address for a party as
shall be specified by like notice):
(a) If to Parent or Merger Sub to:
Synagro Technologies, Inc.
0000 Xxx Xxxxxx, Xxxxx 000
Xxxxxxx, Xxxxx 00000
Attention: Xxxx X. Rome
Telecopy: 713/706-6181
with a copy to:
Liddell, Sapp, Zivley, Hill & XxXxxx, L.L.P.
0000 Xxxxx Xxxxx
000 Xxxxxx
Xxxxxxx, Xxxxx 00000
Attention: Xxxxxxx X. Xxxxxx
Telecopy: 713/223-3717
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(b) if to the Company (prior to Closing) or the Shareholders,
to:
Xxxxx X. Xxxxxx
000 Xxxxxxxxx
Xxxxxxx, Xxxxx Xxxxxxxx 00000
Telecopy: 336/940-5021
Xxxxxx Xxxxxx
------------------------------
------------------------------
with a copy to:
Xxxxxx X. Xxxxxxx, Xx.
Xxxxxx Xxxxxxx Xxxxxxxxx & Xxxx, PLLC
000 Xxxx 0xx Xxxxxx
Xxxxxxx-Xxxxx, Xxxxx Xxxxxxxx 00000
Telecopy: 336/733-8388
Section 11.3. INTERPRETATION. The headings contained in this Agreement
are for reference purposes only and shall not affect in any way or
interpretation of this Agreement. In this Agreement, unless a contrary intention
appears, (i) the words "herein", "hereof" and "hereunder" and other words of
similar import refer to this Agreement as a whole and not to any particular
Article, Section or other subdivision and (ii) reference to any Article or
Section means such Article or Section hereof. No provision of this Agreement
shall be interpreted or construed against any party hereto solely because such
party or its legal representative drafted such provision.
Section 11.4. MISCELLANEOUS. This Agreement (including the documents
and instruments referred to herein) (a) constitutes the entire agreement and
supersedes all other prior agreements and understandings, both written and oral,
among the parties, or any of them, with respect to the subject matter hereof,
and (b) shall not be assigned by operation of law or otherwise except that
Merger Sub may assign this Agreement to any other wholly-owned Subsidiary of
Parent, but no such assignment shall relieve the Parent or the Merger Sub, as
the case may be, of its obligations hereunder.
Section 11.5. GOVERNING LAW. EXCEPT FOR APPLICATION OF THE NCBCA TO THE
MERGER, THIS AGREEMENT SHALL BE GOVERNED IN ALL RESPECTS, INCLUDING VALIDITY,
INTERPRETATION AND EFFECT, BY THE LAWS OF THE STATE OF TEXAS APPLICABLE TO
CONTRACTS EXECUTED AND TO BE PERFORMED WHOLLY WITHIN SUCH STATE.
Section 11.6. BINDING ARBITRATION.
(a) GENERAL. Notwithstanding any provision of this Agreement
to the contrary, upon the request of any party (defined for the purpose of this
provision to include affiliates, principles and agents of any such party), any
dispute, controversy or claim arising out of, relating to, or in connection
with, this Agreement or any agreement executed in connection herewith or
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41
contemplated hereby, or the breach, termination, interpretation, or validity
hereof or thereof (hereinafter referred to as a "Dispute"), shall be finally
resolved by mandatory and binding arbitration in accordance with the terms
hereof. Any party to this Agreement may bring an action in court to compel
arbitration of any Dispute. Any party who fails or refuses to submit any Dispute
to binding arbitration following a lawful demand by the opposing party shall
bear all costs and expenses incurred by the opposing party in compelling
arbitration of such Dispute.
(b) GOVERNING RULES. The arbitration shall be conducted in
accordance with the Commercial Arbitration Rules of the American Arbitration
Association in effect at the time of the arbitration, except as they may be
modified herein or by mutual agreement of the parties. The seat of the
arbitration shall be Houston, Texas. Notwithstanding Section 11.5, the
arbitration and this clause shall be governed by the Federal Arbitration Act, 9
U.S.C. xx.xx. 1 et seq. (the "Federal Arbitration Act"). The arbitrator shall
award all reasonable and necessary costs (including the reasonable fees and
expenses of counsel) incurred in conducting the arbitration to the prevailing
party in any such Dispute. The parties expressly waive all rights whatsoever to
file an appeal against or otherwise to challenge any award by the arbitrators
hereunder; provided, that the foregoing shall not limit the rights of either
party to bring a proceeding in any applicable jurisdiction to confirm, enforce
or enter judgment upon such award (and the rights of the other party, if such
proceeding is brought to contest such confirmation, enforcement or entry of
judgment, but only to the extent permitted by the Federal Arbitration Act).
(c) NO WAIVER; PRESERVATION OF REMEDIES. No provision of, nor
the exercise of any rights under this Agreement shall limit the right of any
party to apply for injunctive relief or similar equitable relief with respect to
the enforcement of this Agreement or any agreement executed in connection
herewith or contemplated hereby, and any such action shall not be deemed an
election of remedies. Such rights can be exercised at any time except to the
extent such action is contrary to a final award or decision in any arbitration
proceeding. The institution and maintenance of an action for injunctive relief
or similar equitable relief shall not constitute a waiver of the right of any
party, including without limitation the plaintiff, to submit any Dispute to
arbitration nor render inapplicable the compulsory arbitration provisions of
this Agreement.
(d) ARBITRATION PROCEEDING. In addition to the authority
conferred on the arbitration tribunal by the rules specified above, the
arbitration tribunal shall have the authority to order reasonable discovery,
including the deposition of party witnesses and production of documents. The
arbitral award shall be in writing, state the reasons for the award, and be
final and binding on the parties. All statutes of limitations that would
otherwise be applicable shall apply to any arbitration proceeding. Any
attorney-client privilege and other protection against disclosure of
confidential information, including without limitation any protection afforded
the work-product of any attorney, that could otherwise be claimed by any party
shall be available to and may be claimed by any such party in any arbitration
proceeding. No party waives any attorney-client privilege or any other
protection against disclosure of confidential information by reason of anything
contained in or done pursuant to or in connection with this Agreement. Each
party agrees to keep all Disputes and arbitration proceedings strictly
confidential, except for disclosures of information to the parties' legal
counsel or auditors or those required by applicable law. The arbitrators shall
determine the
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matters in dispute in accordance with the substantive law of Texas, without
regard to conflict of law rules.
(e) APPOINTMENT OF ARBITRATORS. The arbitration shall be
conducted by three (3) arbitrators. The party initiating arbitration (the
"Claimant") shall appoint its arbitrator in its request for arbitration (the
"Request"). The other party (the "Respondent") shall appoint its arbitrator
within thirty (30) days after receipt of the Request and shall notify the
Claimant of such appointment in writing. If the Respondent fails to appoint an
arbitrator within such thirty (30) day period, the arbitrator named in the
Request shall decide the controversy or claim as sole arbitrator. Otherwise, the
two (2) arbitrators appointed by the parties shall appoint a third (3rd)
arbitrator within thirty (30) days after the Respondent has notified Claimant of
the appointment of the Respondent's arbitrator. When the third (3rd) arbitrator
has accepted the appointment, the two (2) party-appointed arbitrators shall
promptly notify the parties of the appointment. If the two (2) arbitrators
appointed by the parties fail to appoint a third (3rd) arbitrator or so to
notify the parties within the time period prescribed above, then the appointment
of the third (3rd) arbitrator shall be made by the American Arbitration
Association, which shall promptly notify the parties of the appointment. The
third (3rd) arbitrator shall act as Chair of the panel.
(f) OTHER MATTERS. This arbitration provision constitutes the
entire agreement of the parties with respect to its subject matter and
supersedes all prior discussions, arrangements, negotiations and other
communications on dispute resolution. This arbitration provision shall survive
any termination, amendment, renewal, extension or expiration of this Agreement
or any agreement executed in connection herewith or contemplated hereby unless
the parties otherwise expressly agree in writing. The obligation to arbitrate
any dispute shall be binding upon the successors and assigns of each of the
parties.
Section 11.7. COUNTERPARTS. This Agreement may be executed in two or
more counterparts, each of which shall be deemed to be an original, but all of
which shall constitute one and the same agreement.
Section 11.8. PARTIES IN INTEREST. This Agreement shall be binding upon
and inure solely to the benefit of each party hereto, and nothing in this
Agreement, express or implied, is intended to confer upon any other person any
rights or remedies of any nature whatsoever under or by reason of this
Agreement.
Section 11.9. ENFORCEMENT OF THE AGREEMENT. The parties hereto agree
that irreparable damage would occur in the event that any of the provisions of
this Agreement were not performed in accordance with their specific terms or
were otherwise breached. It is accordingly agreed that the parties shall be
entitled to an injunction or injunctions to prevent breaches of this Agreement
and to enforce specifically the terms and provisions hereof.
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Section 11.10. VALIDITY. The invalidity or unenforceability of any
provision of this Agreement shall not affect the validity or enforceability of
any other provisions of this Agreement, which shall remain in full force and
effect.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
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IN WITNESS WHEREOF, Parent, Merger Sub and the Company have caused this
Agreement to be signed by their respective officers and attested to as of the
date first written above.
SYNAGRO TECHNOLOGIES, INC.
By: /s/ Xxxx X. Pattern
----------------------------------------
Name: Xxxx X. Xxxxxx
--------------------------------------
Title: Chairman and CEO
-------------------------------------
EWR ACQUISITION CORP.
By: /s/ Xxxx X. Xxxxxx
----------------------------------------
Name: Xxxx X. Xxxxxx
--------------------------------------
Title: Chairman and CEO
-------------------------------------
ENVIRONMENTAL WASTE RECYCLING, INC.
By: /s/ Xxxxx X. Xxxxxx
----------------------------------------
Xxxxx X. Xxxxxx, President
THE SHAREHOLDERS
/s/ Xxxxx X. Xxxxxx
-------------------------------------------
Xxxxx X. Xxxxxx, Individually
/s/ Xxxxxx Xxxxxx
------------------------------------------
Xxxxxx Xxxxxx, Individually
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45
EXHIBIT A
GLOSSARY
For purposes of this Agreement, the following terms shall have the
meaning specified or referred to below when capitalized (or if not capitalized,
unless the context clearly requires otherwise) when used in this Agreement.
"Business Facility" includes any property (whether real or personal)
which the Company or any of its Subsidiaries currently leases, operates, or owns
or manages in any manner or which the Company or any of its Subsidiaries or any
of their respective organizational predecessors formerly leased, operated, owned
or managed in any manner.
"Environmental Claim" means any claim; litigation; demand; action;
cause of action; suit; loss; cost, including, but not limited to, attorneys'
fees, diminution in value, and expert's fees; damage; punitive damage; fine,
penalty, expense, liability, criminal liability, strict liability, judgment,
governmental or private investigation and testing; notification of status of
being potentially responsible for clean-up of any facility or for being in
violation or in potential violation of any Requirement of Environmental Law;
proceeding; consent or administrative orders, agreements or decrees; lien;
personal injury or death of any person; or property damage, whether threatened,
sought, brought or imposed, that is related to or that seeks to recover losses,
damages, costs, expenses and/or liabilities related to, or seeks to impose
liability for: (i) improper use or treatment of wetlands, pinelands or other
protected land or wildlife; (ii) noise; (iii) radioactive materials (including
naturally occurring radioactive materials ["NORM"]; (iv) explosives; (v)
pollution, contamination, preservation, protection, decontamination, remediation
or clean-up of the air, surface water, groundwater, soil or protected lands;
(vi) solid, gaseous or liquid waste generation, handling, discharge, release,
threatened release, treatment, storage, disposal or transportation; (vii)
exposure of persons or property to Materials of Environmental Concern and the
effects thereof; (viii) the release or threatened release (into the indoor or
outdoor environment), generation, extraction, mining, beneficiating,
manufacture, processing, distribution in commerce, use, transfer,
transportation, treatment, storage, disposal of Remediation of Materials of
Environmental Concern; (ix) injury to, death of or threat to the health or
safety of any person or persons caused directly or indirectly by Materials of
Environmental Concern; (x) destruction caused directly or indirectly by
Materials of Environmental Concern or the release or threatened release of any
Materials of Environmental Concern or any property (whether real or personal);
(xi) the implementation of spill prevention and/or disaster plans relating to
Material of Environmental Concern; (xiii) community right-to-know and other
disclosure laws; or (xiii) maintaining, disclosing or reporting information to
Governmental Authorities of any other third person under any Environmental Law.
The term, "Environmental Claim," also includes, without limitation, any losses,
damages, costs, expenses and/or liabilities incurred in testing.
"Environmental Law" means any federal, state, local or foreign law,
statute, ordinance, rule, regulation, code, license, permit, authorization,
approval, consent, legal doctrine, guidance document, order, consent agreement,
order or consent judgment, decree, injunction, requirement or agreement with any
governmental entity or any judicial or administrative decision relating to (x)
the
46
protection, preservation or restoration of the environment (including, without
limitation, air, water, vapor, surface water, groundwater, drinking water
supply, surface land, subsurface land, plant and animal life or any other
natural resource) or to human health or safety, (y) the exposure to, or the use,
storage, recycling, treatment, generation, transportation, processing, handling,
labeling, production, release or disposal of Materials of Environmental Concern,
in each case as amended from time to time, or (z) health, worker protection or
community's right to know. The term "Environmental Law" includes, without
limitation, (i) the Federal Comprehensive Environmental Response Compensation
and Liability Act of 1980, the Superfund Amendments and Reauthorization Act, the
Federal Water Pollution Control Act of 1972, the Federal Clean Air Act, the
Federal Clean Water Act, the Federal Resource Conservation and Recovery Act of
1976 (including the hazardous and Solid Waste Amendments thereto), the Federal
Solid Waste Disposal Act and the Federal Toxic Substances Control Act, the
Federal Insecticide, Fungicide and Rodenticide Act, and the Federal Occupational
Safety and Health Act of 1970, each as amended from time to time, and (ii) any
common law or equitable doctrine (including, without limitation, injunctive
relief and tort doctrines such as negligence, nuisance, trespass and strict
liability) that may impose liability or obligations for injuries or damages due
to, or threatened as a result of, the presence of, effects of or exposure to any
Materials of Environmental Concern.
"Environmental Permits" means all permits, licenses, certificates,
registrations, identification numbers, applications, consents, approvals,
variances, notices of intent, and exemptions necessary for the ownership, use
and/or operation of any current Business Facility to comply with Requirements of
Environmental Laws.
"GAAP" means generally accepted accounting principles applied on a
consistent basis.
"Intellectual Property" includes all fictitious business names, trade
names, brand names, registered and unregistered trademarks, service marks and
applications, all patents and patent applications, all copyrights in both
published works and unpublished works, and all inventions, processes, formulas,
patterns, designs, know-how, trade secrets, confidential information, software,
technical information, process technology, plans, drawings and blue prints
owned, used or licensed by the Company or its Subsidiaries as licensee or
licensor.
When used in this Agreement in connection with the Company and its
Subsidiaries, or Parent and its Subsidiaries, as the case may be, "Material
Adverse Effect" means any event, occurrence, fact, condition, change,
development or effect that is or could reasonably be anticipated to be
materially adverse to the business, assets (including intangible assets),
liabilities, financial condition, results of operations, properties (including
intangible properties) or business prospects of the Company and all of its
Subsidiaries or the Parent and all of its Subsidiaries, as applicable, taken as
a whole.
"Materials of Environmental Concern" means: (i) those substances
included within the statutory and/or regulatory definitions or listings of
"hazardous substance," "medical waste," "special waste," "hazardous waste,"
"extremely hazardous substance," "regulated substance," "hazardous materials,"
or "toxic substances," under any Environmental Law; (ii) any material, waste or
substance which is or contains: (A) petroleum, oil or a fraction thereof, (B)
explosives, (C)
47
radioactive materials (including naturally occurring radioactive materials), or
(D) solid wastes that pose imminent and substantial endangerment to health or
the environment; and (iii) such other substances, materials, or wastes that are
or become classified or regulated as hazardous or toxic under any applicable
federal, state or local law or regulation. To the extent that the laws or
regulations of any applicable state or local jurisdiction establish a meaning
for any term defined herein through reference to federal Environmental Laws
which is broader than the meaning under such federal Environmental Laws, such
broader meaning shall apply.
"Net Working Capital" means current assets less current liabilities as
determined in accordance with GAAP.
"Remediation" means any action necessary to: (i) comply with and ensure
compliance with the Requirements of Environmental Laws and (ii) the taking of
all reasonably necessary precautions to protect against and/or respond to,
remove or remediate or monitor the release or threatened release of Materials of
Environmental Concern at, on, in, about, under, within or near the air, soil,
surface water, groundwater or soil vapor at any Business Facility of the Company
or any of its Subsidiaries or of any property affected by the business of the
Company or any of its Subsidiaries.
"Requirement(s) of Environmental Law(s)"means all requirements,
conditions, restrictions or stipulations of Environmental Laws imposed upon or
related to the Company or any of its Subsidiaries or the assets, Business
Facilities and/or the business of the Company or any of its Subsidiaries.
"Subsidiary" shall mean, when used with reference to an entity, any
other entity of which securities or other ownership interests having ordinary
voting power to elect a majority of the board of directors or other persons
performing similar functions, or a majority of the outstanding voting securities
of which, are owned directly or indirectly by such entity.
"Taxes" shall mean any and all taxes, charges, fees, levies or other
assessments, including, without limitation, income, gross receipts, excise, real
or personal property, sales, withholding, social security, occupation, use,
service, service use, license, net worth, payroll, franchise, transfer and
recording taxes, fees and charges, imposed by the IRS or any other taxing
authority (whether domestic or foreign including, without limitation, any state,
county, local or foreign government or any subdivision or taxing agency thereof
(including a United States possession)), whether computed on a separate,
consolidated, unitary, combined or any other basis; and such term shall include
any interest whether paid or received, fines, penalties or additional amounts
attributable to, or imposed upon, or with respect to, any such taxes, charges,
fees, levies or other assessments.
"Tax Return" shall mean any report, return, document, declaration or
other information or filing required to be supplied to any taxing authority or
jurisdiction (foreign or domestic) with respect to Taxes, including, without
limitation, information returns and documents (i) with respect to or
accompanying payments of estimated Taxes or (ii) with respect to or accompanying
requests for the extension of time in which to file any such report, return,
document, declaration or other information.
48
EXHIBIT B
CONSULTING AGREEMENT - XXXXX X. XXXXXX
49
CONSULTING AGREEMENT
THIS CONSULTING AGREEMENT (this "Agreement") dated as of October ___, 1998 is
entered into by and between Synagro Technologies, Inc., a Delaware corporation
(the "Company"), and Xxxxx Xxxxxx ("Consultant").
ARTICLE I
Consultant agrees to be engaged by the Company, and the Company agrees
to engage Consultant, to provide consulting services to the Company on the
following terms.
1. Initial Term -
For a period of six (6) months beginning on the date of closing of
Company's merger with Environmental Waste Recycling, Inc. ("Initial Term")
Consultant shall devote a minimum of forty (40) hours per week to the business
of the Company. Consultant shall perform such services for the Company at the
Company's request relating to matters determined by the Company from time to
time, including aiding in Environmental Waste Recycling , Inc.'s ("EWR, Inc.")
transition to a Company subsidiary. Consultant agrees to be available to perform
the duties requested by Company at such times as are reasonably required by
Company during the Initial Term. Consultant shall also speak as a representative
of Company at two (2) industry conferences during the initial term. It shall be
Consultant's responsibility to identify the conferences and have them approved
by Company in advance (such approval not to be unreasonably withheld).
2. Remaining Term -
Beginning immediately after the Initial Term and continuing for a
period of eighteen (18) months ("Remaining Term") Consultant agrees to perform
such duties as:
(i) Speaking at industry conferences identified by
Consultant and approved by Company (such approval not
to be unreasonably withheld);
(ii) Speaking and meeting with EWR, Inc.'s existing and
future clients to promote Company and to identify and
to attempt to ascertain solutions to any problems
adversely affecting Company's business relationships
with such clients;
(iii) Speaking and meeting with potential clients of
Company for purposes of soliciting new business for
Company and attempting to identify new business
opportunities for Company;
(iv) Using her best efforts to identify and present bid
proposals to potential Company clients;
(v) Serving on the advisory board of Company and, upon
reasonable prior written notice of such meetings
provided by Company, attending meetings of such board
when her attendance is necessary;
50
(vi) Providing monthly written reports to Company's CEO
explaining her performance of the duties set forth in
(ii) through (iv) above, and providing other periodic
oral reports as necessary.
Notwithstanding the foregoing, Consultant shall be required to dedicate
no more than 40 hours per month during the Remaining Term for the
performance of the above duties.
During both the Initial Term and the Remaining Term (collectively the
"Term") Consultant also agrees to actively, through telephone calls, letters and
personal visits, assist Company's efforts to maintain, renew, extend, expand and
develop the following EWR, Inc. contracts:
1) Jefferson County, Alabama Project;
2) City of Winston-Salem Project;
3) WestPoint Xxxxxxx Contract;
4) Xxxxx Dye & Finishing Contract; and
5) Monsanto Contract
Consultant agrees to include in her monthly written report an
explanation of each of her contacts and communications with the clients in
charge of the above-referenced contracts. Consultant agrees to perform such
other acts, as reasonably requested by Company, as well as assist the Company's
efforts to develop, maintain, renew, expand and extend the above contracts (and
all related contracts and leases), including, but not limited to, making herself
available to participate, in person, in all negotiations and meetings related to
the contract renewals.
Subject to earlier termination as provided in Article IV, the term of
this Agreement will commence on the closing date and continue for a period of
twenty four (24) months which shall include the entire Term. Either party may
terminate this Agreement for any reason whatsoever, with or without cause, upon
30 days' written notice, provided that the effective date of termination is a
date after the expiration of the Term.
ARTICLE II
In consideration for the services provided by Consultant to the Company
hereunder, the Company shall pay to Consultant during the term of this Agreement
the compensation specified on Exhibit A hereto which is incorporated herein by
reference. Consultant shall at all times be deemed to be an independent
contractor, and Consultant shall in no sense be considered an employee or agent
of the Company. Consultant shall have no power, authority or right to enter into
contracts or commitments on behalf of the Company. Consultant hereby warrants
and represents that her engagement as a Consultant pursuant to this Agreement,
and the performance of her duties as required by this Agreement, do not violate
any agreements or relationships existing between Consultant and any other
person.
ARTICLE III
Consultant agrees to and hereby does waive participation in and receipt
of benefits under any "employee benefit plan" as defined in ERISA Section 3(3)
sponsored or maintained by the Company, EWR, Inc. or any member of the
controlled group of corporations with the Company (within the meaning of Section
414(b) of the Internal Revenue Code of 1986). It is the intent of Consultant and
the Company that this provision supersede any "benefit plan" provision which
might otherwise provide benefits to Consultant.
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ARTICLE IV
The Company can terminate Consultant for cause at any time immediately
upon written notice to Consultant, upon:
1. Consultant's failure or refusal to perform the consulting services
referred to in this Agreement;;
2. Consultant's conviction of, or entry of a plea of guilty or nolo
contendre to, a felony;
3. Consultant's perpetration of an act of fraud against, or
Consultant's theft of property from Company or any affiliate of Company;
4. Consultant's violation of any material federal or state law or
regulation applicable to the business of Company or any affiliate of Company;
5. Consultant's violation of any material provision of her Covenant Not
to Compete Agreement with Company, dated as of the date hereof;
6. Consultant's disability, if Consultant is unable to perform her
duties hereunder for 30 days in any 45-day period during the Term of this
Agreement due to such disability (for purposes of this Agreement "disability"
shall be deemed to exist at all times that Consultant is considered unable by
reason of physical or mental incapacity, impairment or infirmity, to perform her
duties set forth herein and the determination of the existence or nonexistence
of such disability shall be made by a medical doctor who is licensed to practice
medicine in North Carolina or Texas but is not otherwise employed by or
affiliated with Company and who shall be selected by the Board of Directors of
Company in good faith; or
7. Consultant's death.
ARTICLE V
During the Term of this Agreement and thereafter, Consultant shall hold
in strict confidence, and shall not disclose to any person (other than the
Company or an affiliate of the Company designated by the Company) any
confidential information of the Company or any affiliate or subsidiary of the
Company. For purposes of this Article V the term "confidential information"
shall include, without limitation, trade secrets, customer and supplier lists,
customer and supplier contracts, Consultant contracts and the details thereof,
pricing policies, operational methods, marketing plans or strategies, business
acquisition plans, personnel acquisition plans and all other information
pertaining to the business of the Company or any affiliate of the Company that
is not generally available to the public, and Consultant shall not use such
confidential information except for the sole benefit of the Company or an
affiliate of the Company designated by the Company.
52
ARTICLE VI
Consultant and the Company acknowledge that damages are an inadequate
remedy at law for the breach of the terms of Article V hereof and, accordingly,
the Company is hereby granted and shall have the right of injunction (any
requirements for posting of bonds for injunction are hereby expressly waived)
and such other and further relief, both in law and in equity, as the Company may
be entitled to receive under the laws of the State of Texas, in the event
Consultant breaches or threatens to breach any of the covenants or agreements
contained in Article V hereof. In the event any provisions hereof shall be
modified or held ineffective by any Court in any respect, such adjudication
shall not invalidate or render ineffective the balance of the provisions hereof,
and the provisions hereof shall be enforced to the maximum extent allowed by
law. This Agreement shall be governed by the laws of the State of Texas. This
Agreement and all of the provisions hereof shall be binding upon and inure to
the benefit of the parties hereto and their respective executors,
administrators, heirs, successors and permitted assigns, but neither this
Agreement nor any of the rights, interests, duties and obligations hereunder
shall be assigned by Consultant without the prior written consent of the
Company. However, the Company may assign, in whole or in part, its rights,
duties and obligations under this Agreement to any of its affiliates,
subsidiaries, purchasers or successors in interest. The parties hereto have read
the terms and conditions of this Agreement before signing the same, and hereby
agree that this Agreement supersedes in its entirety all other agreements and
understandings, written or oral, between Consultant and the Company with respect
to Consultant's engagement and that no statement, agreement or understanding,
whether oral or written, not contained herein will be recognized or enforced.
Consultant acknowledges that on the date hereof Consultant has no claims of any
nature against the Company, whether direct or indirect. This Agreement may not
be amended except by a written agreement executed by the Company and Consultant
which makes specific reference to this Agreement.
IN WITNESS WHEREOF, the undersigned have set their hands as of the date first
written above.
------------------------ ------------------------------
Synagro Technologies, Inc. Xxxxx Xxxxxx, Consultant
By: Xxxx X. Xxxxxx, President and CEO
53
EXHIBIT A
(1) The Company shall pay to Consultant a gross consulting payment of
$10,000.00 per month, payable on the last day of each month during the
Initial Term and the first six (6) months of the Remaining Term of this
Agreement.
(2) The Company shall pay to Consultant a gross consulting payment of
$8,333.33 per month, payable on the last day of each month during the
last twelve (12) months of the Remaining Term of this Agreement.
(3) The Company shall promptly reimburse Consultant for all pre-approved
business expenses incurred by Consultant in connection with the
performance of Consultant's services under this Agreement.
54
EXHIBIT C
COVENANT NOT TO COMPETE AGREEMENT - XXXXX X. XXXXXX
55
COVENANT NOT TO COMPETE AGREEMENT
Xxxxx X. Xxxxxx
This Covenant Not to Compete Agreement dated November __, 1998 ( this
"Agreement"), is by and between Synagro Technologies, Inc., a Delaware
corporation ("Purchaser"), and Xxxxx Xxxxxx ("Shareholder").
WHEREAS, Purchaser has entered into an Agreement and Plan of Merger
with Environmental Waste Recycling, Inc. (the "Company") and the shareholders of
the company (the "Shareholders"), including Shareholder, dated as of November
__, 1998 (the "Merger Agreement"); and
WHEREAS, Purchaser wishes to secure from Shareholder her Agreement Not
to Compete with Purchaser and not to disclose certain information belonging to
Purchaser in order that Purchaser can successfully operate the business acquired
pursuant to the Merger Agreement.
NOW, THEREFORE, in consideration of the mutual covenants and the
promises contained herein and in the Merger Agreement, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto agree as
follows:
1. Acknowledgments and Agreements by Shareholder. Shareholder
hereby acknowledges and agrees that:
(a) The Purchaser would not have acquired the Company
pursuant to the Merger Agreement if Shareholder had not
executed and delivered this Agreement to the Purchaser;
(b) Shareholder, as an officer, director and
shareholder of the Company, has had access to information that
is confidential to the Purchaser, that constitutes a valuable,
special and unique asset of the Purchaser, and with respect to
which the Purchaser is entitled to the protections afforded by
this Agreement and to the remedies for enforcement of this
Agreement provided by law or in equity (including, without
limitation, those remedies the availability of which may be
within the discretion of the court or arbitrator that presides
over any action for enforcement of this Agreement is brought);
and
(c) In consideration of the merger transaction
contemplated by the Merger Agreement, the Shareholder received
from Purchaser substantial consideration, the receipt of which
by Shareholder will enable the Shareholder to fully support
herself in financial independence in a manner at least
consistent with her past practices and without the necessity
of engaging in any business of a type conducted by the Company
or Xxxxxxxxx.
00
(x) As additional consideration of Shareholder's
non-competition and non-disclosure agreements set forth
herein, the Purchaser will pay Shareholder an aggregate of
$200,000, payable quarterly in eight equal installments of
$25,000 each, commencing November __, 2000. No interest will
accrue on any installment. Payments shall be made to
Shareholder at the address specified in Section 6(e).
2. Non-Competition Covenant.
(a) Commencing on the date hereof and continuing for
a period of two (2) years following the termination of the
Shareholder's consulting relationship with the Purchaser and
its Affiliates pursuant to the Consulting Agreement between
EWR Acquisition Corp. and the Shareholder dated November 5,
1998 (the "Covenant Period"), Shareholder agrees that she will
not, and shall cause each of her Affiliates not to, directly
or indirectly, acting alone or as a member of a partnership,
as a holder or owner of any security, as an employee, agent,
advisor, consultant to, representative, or in any other
capacity:
(i) within the United States, carry on or be
engaged or otherwise take part in (whether for her
own account or for the account of any other person,
other than the Purchaser or its Affiliates), or
render any service (whether for or without
compensation) to any person (other than the Purchaser
or its Affiliates) who or which is directly or
indirectly engaged in, management services related to
biosolids, animal manure and other organic waste
streams or any type of business that is competitive
with any business heretofore conducted by the
Company, the Purchaser or any Affiliate of the
Company or the Purchaser (collectively, the
"Business"); provided, however, anything in this
entire Agreement to the contrary notwithstanding, the
Business shall not be deemed to include, and the
Shareholder and her Affiliates shall not be limited
in any way by this Agreement from engaging in, solely
the development of technology for sludge
stabilization or biosolids treatment in the manner
now being pursued by the Shareholder's Affiliate,
Innovative Environmental Solutions, Inc. (the "IES
Business");
(ii) share in the earnings of, or
beneficially own or hold any security issued by, or
otherwise own or hold any interest in, any person who
or which is directly or indirectly engaged in any
type of business that is competitive with the
Business in any state in the United States other than
the IES Business;
(iii) solicit, contact or enter into any
agreement or contract with any employee, agent,
independent contractor, customer or Prospective
Customer (as defined below) of the Purchaser or the
Company which results in activities that are
competitive with the Business; provided, however,
that solicitations, contacts or the entering into of
agreements or contracts with
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57
customers or Prospective Customers of the Purchaser
and the Company relating solely to products or
services currently offered by the IES Business shall
not be deemed a breach of this Section 2(a)(iii).
Shareholder agrees to provide written notice to the
Purchaser before soliciting, contacting, or entering
into any agreement or contract with any such customer
or Prospective Customer previously identified by
written notice from Purchaser to Shareholder to be a
customer or Prospective Customer. For purposes of
this Section 2(a), the term "Prospective Customer"
shall mean a person or entity from which the
Purchaser or the Company is actively soliciting
business or has concrete plans to solicit business as
of the commencement of the Covenant Period;
(iv) request that any present or future
employee, agent, independent contractor, customer or
Prospective Customer of Purchaser or the Company or
any Affiliate of the Purchaser or the Company curtail
or cancel its business or refrain from doing business
with Purchaser or the Company or any Affiliates of
the Purchaser or the Company; or
(v) directly or indirectly hire, or solicit
the employment or services of, or cause or attempt to
cause to leave the employment or service of the
Purchaser, the Company or any Affiliate of the
Purchaser or the Company, any person who or which is
employed by, or otherwise engaged to perform services
for the Purchaser, the Company or any Affiliate of
the Purchaser or the Company (whether in the capacity
of employee, consultant, independent contractor or
otherwise).
(b) Without limiting the generality of the provisions
of this Section 2, Shareholder shall be deemed to be engaged
in a particular business if she (whether alone or in
association with one or more other persons) is an owner,
proprietor, partner, stockholder, officer, employee,
independent contractor, director or joint venturer of, or a
consultant or lender to, or an investor in any manner in, any
person who or which is directly or indirectly engaged in such
business. Notwithstanding the foregoing provisions of this
Section 2, Shareholder may own, solely as an investment,
securities if Shareholder (i) is not an affiliate of the
issuer of such securities and (ii) does not, directly or
indirectly, beneficially own more than 5% of the class of
which securities are a part.
(c) Shareholder acknowledges and agrees that the
limitations imposed by this Non-Competition Covenant as to
time, geographical area, and scope of activity being
restrained are reasonable and do not impose a greater
restraint than is necessary to protect the goodwill or other
business interest of the Purchaser.
(d) "Affiliate" means, with respect to a specified
person, (a) any entity of which such person is an executive
officer, director, partner, trustee or other fiduciary
3
58
or is directly or indirectly the beneficial owner of 10% or
more of any class of equity security thereof or other
financial interest therein; (b) if such person is an
individual, any relative or spouse of such individual, or any
relative of such spouse (such relative being related to the
individual in question within the second degree) and any
entity of which any such relative, spouse, or relative of
spouse is an executive officer, director, partner, trustee or
other fiduciary or is directly or indirectly the beneficial
owner of 10% or more of any class of equity security thereof
or other financial interest therein; (c) if such person is an
entity, any director, executive officer, partner, trustee or
other fiduciary or any direct or indirect beneficial owner of
10% or more of any class of equity security of, or other
financial interest in, such entity; or (d) any person that
directly, or indirectly through one or more intermediaries,
controls, is controlled by, or is under common control with
the person specified. For purposes of this definition,
"control" (including "controlling", "controlled by" and "under
common control with") means the possession, direct or
indirect, or the power to direct or cause the direction of the
management and policies of a person, whether through the
ownership of voting securities, by contract or otherwise.
3. Confidential Information. During the Covenant Period and
thereafter, Shareholder shall hold in strict confidence, and shall not
disclose to any person (other than officers, directors, employees,
agents and consultants of the Purchaser) any confidential information
of the Purchaser, its Affiliates or the Company. For purposes of this
Section 3, the term "confidential information" shall include, without
limitation, trade secrets, client and customer lists, client or
consultant contracts and the details thereof, pricing policies,
operational methods, marketing plans or strategies, business
acquisition and expansion plans, personnel acquisition plans and all
other information pertaining to the business of the Purchaser, its
Affiliates or the Company, whether previously existing or pursuant to
operation of the businesses purchased pursuant to the Merger Agreement,
that is not publicly available. Shareholder shall not use such
confidential information except for the sole benefit of the Purchaser.
4. Remedies. Purchaser and Shareholder hereby agree that if
Shareholder violates or threatens to violate any of the provisions of
this Agreement, it would be difficult to determine the entire cost,
damage or injury which the Purchaser would sustain. Notwithstanding the
above, Shareholder acknowledges that if she violates or threatens to
violate any of the provisions of this Agreement, the Purchaser may have
no adequate remedy at law. In that event, the Purchaser shall have the
right, in addition to any other rights that may be available to it, to
obtain in any court of competent jurisdiction injunctive relief to
restrain any violation or threatened violation by Shareholder of any
provision of this Agreement or to compel specific performance by
Shareholder of one or more of her obligations under this Agreement (any
requirements for posting of bonds for injunction are hereby expressly
waived). The seeking or obtaining by the Purchaser of such injunctive
relief shall not foreclose or in any way limit the right of the
Purchaser to obtain a money judgment against Shareholder for any damage
to the Purchaser that may result from any breach by Shareholder of any
provision of this Agreement. Amounts payable to Shareholder
4
59
hereunder are subject to offset against any amounts owed to Purchaser
or any of the Parent Indemnified Parties pursuant to and as such term
is defined in the Merger Agreement.
5. Reformation of Covenants. Shareholder acknowledges that the
covenants contained in Sections 2 and 3 are reasonable in geographical
and temporal scope and in all other respects. If any court determines
that any of such covenants, or any part thereof, are unenforceable,
then (a) the remainder of such covenants shall not be affected by such
determination and (b) those of such covenants that are determined to be
unenforceable because of the duration or scope thereof shall be
reformed by the court to reduce their duration or scope so as to render
the same enforceable against Shareholder.
6. Miscellaneous.
(a) Severability. The unenforceability of any
provision of this Agreement shall not affect the validity or
enforceability of any other provision of this Agreement.
(b) Waivers. No delay or omission by the Purchaser in
exercising any right of the Purchaser under this Agreement
shall operate as a waiver of that or any other right. A waiver
by the Purchaser on any one occasion of any particular right
shall be effective only in that particular instance and shall
not be construed as a waiver of that or any other right on any
other occasion.
(c) Amendment of this Agreement. This Agreement may
be amended only by an amendment hereto in writing that is
executed by the Purchaser and Shareholder.
(d) Headings for Convenience Only. The headings
contained in this Agreement are intended solely for the
convenience of the parties to this Agreement and shall not
affect their rights.
(e) Notices. All notices and other communications
required or permitted to be delivered pursuant to any
provision of this Agreement shall be in writing and addressed
as follows:
(i) If to the Purchaser:
Synagro Technologies, Inc.
0000 Xxx Xxxxxx, Xxxxx 000
Xxxxxxx, Xxxxx 00000
Attention: Xx. Xxxx X. Rome
Telecopy No.: 713/706-6181
5
60
With copies (which shall not constitute
notice) to:
Liddell, Sapp, Zivley,
Hill & XxXxxx, L.L.P.
0000 Xxxxx Xxxxxxxx Tower
000 Xxxxxx Xx.
Xxxxxxx, Xxxxx 00000
Attention: Xx. Xxxxxxx X. Xxxxxx
Telecopy No.: 713/223-3717
If to Shareholder, to her at:
Xxxxx X. Xxxxxx
000 Xxxxxxxxx
Xxxxxxx, Xxxxx Xxxxxxxx 00000
Telecopy: 336/940-5021
With copies (which shall not constitute
notice) to:
Xxxxxx X. Xxxxxxx, Xx.
Womble, Carlyle, Xxxxxxxxx & Rice,
PLLC
P. O. Xxxxxx 00
Xxxxxxx-Xxxxx, Xxxxx Xxxxxxxx 00000
Telecopy: 336/733-8388
The address of either party set forth above may be changed by such
party by delivering notice of such change to the other party to this
Agreement. Any notice mailed shall be deemed to have been given and
received on the third business day following the day of deposit in the
United States mail.
(f) Assignments. The rights and obligations of the
parties under this Agreement may not be assigned without the
consent of the parties hereto; provided, however, that in the
event of any reorganization or restructuring of the Purchaser
in which the business of the Purchaser or the Company is
transferred to an Affiliate, this Agreement and the rights and
obligations of the Purchaser hereunder shall automatically be
assigned to such Affiliate, and the rights and obligations of
Shareholder hereunder shall continue in effect.
(g) Governing Law. This Agreement shall be governed
by and construed in accordance with the laws of the State of
Texas (regardless of the laws that might otherwise govern
under applicable Texas principles of conflicts of law) as to
all matters, including without limitation matters of validity,
construction, effect, performance and remedies.
6
61
IN WITNESS WHEREOF, the parties have executed this Agreement on the
date first above written.
SYNAGRO TECHNOLOGIES, INC.
By:
----------------------------------------------
Name:
--------------------------------------------
Title:
-------------------------------------------
-------------------------------------------------
Xxxxx X. Xxxxxx, Individually
7
62
EXHIBIT D
COVENANT NOT TO COMPETE AGREEMENT - XXXXXX XXXXXX
63
COVENANT NOT TO COMPETE AGREEMENT
Xxxxxx Xxxxxx
This Covenant Not to Compete Agreement dated November __, 1998 ( this
"Agreement"), is by and between Synagro Technologies, Inc., a Delaware
corporation ("Purchaser"), and Xxxxxx Xxxxxx ("Shareholder").
WHEREAS, Purchaser has entered into an Agreement and Plan of Merger
with Environmental Waste Recycling, Inc. (the "Company") and the shareholders of
the company (the "Shareholders"), including Shareholder, dated as of November
__, 1998 (the "Merger Agreement"); and
WHEREAS, Purchaser wishes to secure from Shareholder his Agreement Not
to Compete with Purchaser and not to disclose certain information belonging to
Purchaser in order that Purchaser can successfully operate the business acquired
pursuant to the Merger Agreement.
NOW, THEREFORE, in consideration of the mutual covenants and the
promises contained herein and in the Merger Agreement, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto agree as
follows:
1. Acknowledgments and Agreements by Shareholder. Shareholder
hereby acknowledges and agrees that:
(a) The Purchaser would not have acquired the Company
pursuant to the Merger Agreement if Shareholder had not
executed and delivered this Agreement to the Purchaser;
(b) Shareholder, as an officer, director and
shareholder of the Company, has had access to information that
is confidential to the Purchaser, that constitutes a valuable,
special and unique asset of the Purchaser, and with respect to
which the Purchaser is entitled to the protections afforded by
this Agreement and to the remedies for enforcement of this
Agreement provided by law or in equity (including, without
limitation, those remedies the availability of which may be
within the discretion of the court or arbitrator that presides
over any action for enforcement of this Agreement is brought);
and
(c) In consideration of the merger transaction
contemplated by the Merger Agreement, the Shareholder received
from Purchaser substantial consideration, the receipt of which
by Shareholder will enable the Shareholder to fully support
himself in financial independence in a manner at least
consistent with his past practices and without the necessity
of engaging in any business of a type conducted by the Company
or Purchaser.
1
64
2. Non-Competition Covenant.
(a) For a period of four (4) years beginning on the
date hereof (the "Covenant Period"), Shareholder agrees that
he will not, and shall cause each of his Affiliates not to,
directly or indirectly, acting alone or as a member of a
partnership, as a holder or owner of any security, as an
employee, agent, advisor, consultant to, representative, or in
any other capacity:
(i) within the United States, carry on or be
engaged or otherwise take part in (whether for his
own account or for the account of any other person,
other than the Purchaser or its Affiliates), or
render any service (whether for or without
compensation) to any person (other than the Purchaser
or its Affiliates) who or which is directly or
indirectly engaged in, management services related to
biosolids, animal manure and other organic waste
streams or any type of business that is competitive
with any business heretofore conducted by the
Company, the Purchaser or any Affiliate of the
Company or the Purchaser (collectively, the
"Business");
(ii) share in the earnings of, or
beneficially own or hold any security issued by, or
otherwise own or hold any interest in, any person who
or which is directly or indirectly engaged in any
type of business that is competitive with the
Business in any state in the United States;
(iii) solicit, contact or enter into any
agreement or contract with any employee, agent,
independent contractor, customer or Prospective
Customer (as defined below) of the Purchaser or the
Company which results in activities that are
competitive with the Business. For purposes of this
Section 2(a), the term "Prospective Customer" shall
mean a person or entity from which the Purchaser or
the Company is actively soliciting business or has
concrete plans to solicit business as of the
commencement of the Covenant Period;
(iv) request that any present or future
employee, agent, independent contractor, customer or
Prospective Customer of Purchaser or the Company or
any Affiliate of the Purchaser or the Company curtail
or cancel its business or refrain from doing business
with Purchaser or the Company or any Affiliates of
the Purchaser or the Company; or
(v) directly or indirectly hire, or solicit
the employment or services of, or cause or attempt to
cause to leave the employment or service of the
Purchaser, the Company or any Affiliate of the
Purchaser or the Company, any person who or which is
employed by, or otherwise engaged to perform services
for the Purchaser, the Company or any Affiliate of
the
2
65
Purchaser or the Company (whether in the capacity of
employee, consultant, independent contractor or
otherwise).
(b) Without limiting the generality of the provisions
of this Section 2, Shareholder shall be deemed to be engaged
in a particular business if he (whether alone or in
association with one or more other persons) is an owner,
proprietor, partner, stockholder, officer, employee,
independent contractor, director or joint venturer of, or a
consultant or lender to, or an investor in any manner in, any
person who or which is directly or indirectly engaged in such
business. Notwithstanding the foregoing provisions of this
Section 2, Shareholder may own, solely as an investment,
securities if Shareholder (i) is not an affiliate of the
issuer of such securities and (ii) does not, directly or
indirectly, beneficially own more than 5% of the class of
which securities are a part.
(c) Shareholder acknowledges and agrees that the
limitations imposed by this Non-Competition Covenant as to
time, geographical area, and scope of activity being
restrained are reasonable and do not impose a greater
restraint than is necessary to protect the goodwill or other
business interest of the Purchaser.
(d) "Affiliate" means, with respect to a specified
person, (a) any entity of which such person is an executive
officer, director, partner, trustee or other fiduciary or is
directly or indirectly the beneficial owner of 10% or more of
any class of equity security thereof or other financial
interest therein; (b) if such person is an individual, any
relative or spouse of such individual, or any relative of such
spouse (such relative being related to the individual in
question within the second degree) and any entity of which any
such relative, spouse, or relative of spouse is an executive
officer, director, partner, trustee or other fiduciary or is
directly or indirectly the beneficial owner of 10% or more of
any class of equity security thereof or other financial
interest therein; (c) if such person is an entity, any
director, executive officer, partner, trustee or other
fiduciary or any direct or indirect beneficial owner of 10% or
more of any class of equity security of, or other financial
interest in, such entity; or (d) any person that directly, or
indirectly through one or more intermediaries, controls, is
controlled by, or is under common control with the person
specified. For purposes of this definition, "control"
(including "controlling", "controlled by" and "under common
control with") means the possession, direct or indirect, or
the power to direct or cause the direction of the management
and policies of a person, whether through the ownership of
voting securities, by contract or otherwise.
3. Confidential Information. During the Covenant Period and
thereafter, Shareholder shall hold in strict confidence, and shall not
disclose to any person (other than officers, directors, employees,
agents and consultants of the Purchaser) any confidential information
of the Purchaser, its Affiliates or the Company. For purposes of this
Section 3, the term "confidential information" shall include, without
limitation, trade secrets, client and customer lists, client or
consultant contracts and the details thereof, pricing policies,
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operational methods, marketing plans or strategies, business
acquisition and expansion plans, personnel acquisition plans and all
other information pertaining to the business of the Purchaser, its
Affiliates or the Company, whether previously existing or pursuant to
operation of the businesses purchased pursuant to the Merger Agreement,
that is not publicly available. Shareholder shall not use such
confidential information except for the sole benefit of the Purchaser.
4. Remedies. Purchaser and Shareholder hereby agree that if
Shareholder violates or threatens to violate any of the provisions of
this Agreement, it would be difficult to determine the entire cost,
damage or injury which the Purchaser would sustain. Notwithstanding the
above, Shareholder acknowledges that if he violates or threatens to
violate any of the provisions of this Agreement, the Purchaser may have
no adequate remedy at law. In that event, the Purchaser shall have the
right, in addition to any other rights that may be available to it, to
obtain in any court of competent jurisdiction injunctive relief to
restrain any violation or threatened violation by Shareholder of any
provision of this Agreement or to compel specific performance by
Shareholder of one or more of his obligations under this Agreement (any
requirements for posting of bonds for injunction are hereby expressly
waived). The seeking or obtaining by the Purchaser of such injunctive
relief shall not foreclose or in any way limit the right of the
Purchaser to obtain a money judgment against Shareholder for any damage
to the Purchaser that may result from any breach by Shareholder of any
provision of this Agreement.
5. Reformation of Covenants. Shareholder acknowledges that the
covenants contained in Sections 2 and 3 are reasonable in geographical
and temporal scope and in all other respects. If any court determines
that any of such covenants, or any part thereof, are unenforceable,
then (a) the remainder of such covenants shall not be affected by such
determination and (b) those of such covenants that are determined to be
unenforceable because of the duration or scope thereof shall be
reformed by the court to reduce their duration or scope so as to render
the same enforceable against Shareholder.
6. Miscellaneous.
(a) Severability. The unenforceability of any
provision of this Agreement shall not affect the validity or
enforceability of any other provision of this Agreement.
(b) Waivers. No delay or omission by the Purchaser in
exercising any right of the Purchaser under this Agreement
shall operate as a waiver of that or any other right. A waiver
by the Purchaser on any one occasion of any particular right
shall be effective only in that particular instance and shall
not be construed as a waiver of that or any other right on any
other occasion.
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(c) Amendment of this Agreement. This Agreement may
be amended only by an amendment hereto in writing that is
executed by the Purchaser and Shareholder.
(d) Headings for Convenience Only. The headings
contained in this Agreement are intended solely for the
convenience of the parties to this Agreement and shall not
affect their rights.
(e) Notices. All notices and other communications
required or permitted to be delivered pursuant to any
provision of this Agreement shall be in writing and addressed
as follows:
(i) If to the Purchaser:
Synagro Technologies, Inc.
0000 Xxx Xxxxxx, Xxxxx 000
Xxxxxxx, Xxxxx 00000
Attention: Xx. Xxxx X. Rome
Telecopy No.: 713/706-6181
With copies (which shall not constitute
notice) to:
Liddell, Sapp, Zivley,
Hill & XxXxxx, L.L.P.
0000 Xxxxx Xxxxxxxx Tower
000 Xxxxxx Xx.
Xxxxxxx, Xxxxx 00000
Attention: Xx. Xxxxxxx X. Xxxxxx
Telecopy No.: 713/223-3717
(ii) If to Shareholder, to him at:
--------------------------
--------------------------
With copies (which shall not constitute
notice) to:
--------------------------
--------------------------
--------------------------
Attention:
----------------
Telecopy No.
--------------
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The address of either party set forth above may be changed by such
party by delivering notice of such change to the other party to this
Agreement. Any notice mailed shall be deemed to have been given and
received on the third business day following the day of deposit in the
United States mail.
(f) Assignments. The rights and obligations of the
parties under this Agreement may not be assigned without the
consent of the parties hereto; provided, however, that in the
event of any reorganization or restructuring of the Purchaser
in which the business of the Purchaser or the Company is
transferred to an Affiliate, this Agreement and the rights and
obligations of the Purchaser hereunder shall automatically be
assigned to such Affiliate, and the rights and obligations of
Shareholder hereunder shall continue in effect.
(g) Governing Law. This Agreement shall be governed
by and construed in accordance with the laws of the State of
Texas (regardless of the laws that might otherwise govern
under applicable Texas principles of conflicts of law) as to
all matters, including without limitation matters of validity,
construction, effect, performance and remedies.
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IN WITNESS WHEREOF, the parties have executed this Agreement on the
date first above written.
SYNAGRO TECHNOLOGIES, INC.
By:
--------------------------------------
Name:
------------------------------------
Title:
-----------------------------------
-----------------------------------------
Xxxxxx Xxxxxx, Individually
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