COVENANT NOT TO COMPETE AGREEMENT
Compost America Holding Company, Inc.
This Covenant Not to Compete Agreement dated _______________, 2000
(this "Agreement"), is by and between Synagro Technologies, Inc., a Delaware
corporation ("Purchaser"), and Compost America Holding Company, Inc., a New
Jersey corporation ("Compost").
WHEREAS, Purchaser has entered into a Stock Purchase Agreement with
Compost to purchase all the outstanding capital stock of Environmental
Protection & Improvement Company, Inc., a New Jersey corporation (the
"Company"), dated March 31, 2000 (the "Stock Purchase Agreement"); and
WHEREAS, Purchaser wishes to secure from Compost its Agreement Not to
Compete with Purchaser and its agreement to assure the confidentiality of
certain information relating to the Company in order that Purchaser can
successfully operate the business acquired pursuant to the Stock Purchase
Agreement.
NOW, THEREFORE, in consideration of the mutual covenants and the
promises contained herein and in the Stock Purchase Agreement, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto agree as
follows:
1. Acknowledgments and Agreements by Compost. Compost hereby
acknowledges and agrees that:
(a) The Purchaser would not have entered into the Stock Purchase
Agreement if Compost had not executed and delivered this Agreement to
the Purchaser; and
(b) Compost, as the sole shareholder of the Company, has had access
to information that is confidential to the Company and thus 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).
2. Consideration. Compost's obligations under this Agreement are in
consideration for the purchase price set forth in the Stock Purchase Agreement.
3. Non-Competition Covenant.
(a) For a period of four (4) years beginning on the date hereof (the
"Covenant Period"), Compost agrees that it will not, 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,
representative, or in any other capacity:
(i) within southeastern New York (New York City and the counties
of Nassau, Suffolk, Westchester, Rockland, Orange and Xxxxxx),
northern New Jersey (the counties of Monmouth, Xxxxxx, Middlesex,
Hunterdon, Somerset, Union, Warren, Morris, Essex, Hudson, Sussex,
Passaic and Bergen) and southwestern Connecticut (the counties of
Litchfield, Fairfield and New Haven) (collectively, the "Restricted
Area") carry on or be engaged or otherwise take part in the
Transportation Business (as defined below). Notwithstanding this
provision, Purchaser and the Company acknowledge that Compost is or
may become an owner of up to 100% of an intermodal barge-to-rail
development company, American Marine Rail ("AMR"), that currently is
competing for barge-to-rail municipal solid waste transportation and
disposal contracts in the Restricted Area, and agree that such
competition shall not be deemed to violate this Agreement;
(ii) solicit, contact or enter into any agreement or contract
with any current employee or current customer (with respect to the
Company's Biosolids Business within the Restricted Area) of the
Company which results in activities that are competitive with the
Company's Biosolids Business (as defined below); or
(iii) request that any current employee or current customer of
the Company curtail or cancel its business or refrain from doing
business with Purchaser or the Company or any Affiliate of the
Purchaser or the Company in the Biosolids Business or the
Transportation Business in the Restricted Area.
(b) For a period of two (2) years beginning on the date hereof,
Compost agrees that it will not, 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, representative or in any
other capacity hire, or solicit the employment, or cause or attempt to
cause to leave the employment of the Company, any person who is
currently employed by the Company.
(c) The provisions of 3(a) above notwithstanding, Compost may engage
in the Biosolids Business in the Restricted Area if (i) such engagement
is incidental to the establishment or operation of an in-vessel or
outdoor composting facility wherein municipal sludge, municipal solid
waste and/or agricultural or other biosolids are treated and converted
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into a usable compost product and (ii) the volume of municipal sludge
used in such Biosolids Business does not exceed an average of 500 wet
tons for each day that Compost accepts municipal sludge.
(d) Without limiting the generality of the provisions of this
Section 3, Compost shall be deemed to be engaged in the Biosolids
Business or the Transportation Business if it (whether alone or in
association with one or more other persons) is an owner, proprietor,
partner, stockholder, independent contractor, 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 3, Compost may
own, solely as an investment, securities of entities in the Biosolids
Business or the Transportation Business if Compost (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 such
securities are a part.
(e) Compost 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.
(f) "Affiliate" means, with respect to a specified person, 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, of 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. None of
Wasteco and its affiliates shall be deemed an affiliate of Xxxxx or his
affiliates. None of Xxxxx and his affiliates shall be deemed an
affiliate of Wasteco or its affiliates. The term "Affiliate" as used
with respect to Wasteco shall include only the Private Investment
Division (and no other part) of Wafra Investment Advisory Group, Inc.
and persons or entities controlled by that Division. The term Wasteco
shall include Wafra Acquisition Fund 7, L.P. and persons or entities
controlled by that entity.
(g) "Biosolids Business" means the management of biosolids, limited
to the collection, rail transportation, land application and/or
landfilling of municipal sludge, agricultural and other biosolids.
(h) "Transportation Business" means transporting biosolids,
incinerator ash and/or soils by intermodel rail hauling for landfilling
or for land application or beneficial reuse.
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4. Confidential Information. During the Covenant Period and thereafter,
Compost 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 4, 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 Stock Purchase Agreement, that is not publicly available.
Compost shall not use such confidential information except for the sole benefit
of the Purchaser and to consummate the transactions contemplated by the Stock
Purchase Agreement.
5. Remedies. Purchaser and Compost hereby agree that if Compost
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, Compost acknowledges that if
it 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 Compost of any provision of this Agreement
or to compel specific performance by Compost of one or more of its obligations
under this Agreement (any requirement for the posting of a bond for such
injunction is 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 Compost for any damage
to the Purchaser that may result from any breach by Compost of any provision of
this Agreement.
6. Reformation of Covenants. Compost acknowledges that the covenants
contained in Sections 3 and 4 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 Compost.
7. 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.
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(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
Compost.
(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 Xxxxxx Xxxxx, Xxxxx 0000
Xxxxxxx, Xxxxx 00000
Attention: Xx. Xxxxx X. Xxxxxx XX
Telecopy No.: 713/369-1760
With copies (which shall not constitute notice) to:
Xxxxx Liddell & Xxxx LLP
3400 Chase Tower
000 Xxxxxx Xx.
Xxxxxxx, Xxxxx 00000
Attention: Xx. Xxxxxxx X. Xxxxxx
Telecopy No.: 713/223-3717
(ii) If to Compost, to:
Compost America Holding Company, Inc.
Xxx Xxxxxxx Xxxxxx, 00xx Xxxxx
Xxxxxx, Xxx Xxxxxx 00000
Attention: Office of the President
Telecopy: 973/297-5454
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with a copy (which shall not constitute notice) to:
Xxxxxxxxx Xxxxxxx
0000 Xxx Xxxxxxxx Xxxxxx
0000 Xxxxxx Xxxxxx
Xxxxxxxxxxxx, Xxxxxxxxxxxx 00000
Attention: Xxxxxxxx X. Xxxxx, Esq.
Telecopy: 215/988-7801
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
Compost 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.
(h) Legal Fees. Should Purchaser seek to enforce this Agreement by
court action and fail to obtain a decree or judgment in its favor,
Purchaser shall pay to Compost all of Compost's reasonable costs of
defense, including reasonable counsel fees.
[Signature Page Follows]
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IN WITNESS WHEREOF, the parties have executed this Agreement on the
date first above written.
SYNAGRO TECHNOLOGIES, INC.
By:_______________________________________________
Xxxx X. Rome, Executive Vice President
COMPOST AMERICA HOLDING COMPANY, INC.
By:_______________________________________________
Xxxxxxxxxxx X. Xxxxxxx, Office of the President
By:_______________________________________________
Xxxxxx X. Xxxxxxx, Office of the President
By:_______________________________________________
Xxxxxxx X. Xxxxxx, Assistant Secretary
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