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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported) November 3, 1997
COMPOST AMERICA HOLDING COMPANY, INC.
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(Exact name of registrant as specified in its charter)
New Jersey 0-27832 22-2603175
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(State or other (Commission (IRS Employer
jurisdiction of File Number) Identification No.)
incorporation)
320 Grand Avenue Englewood, New Jersey 07631
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(Address of principal executive offices) (Zip Code)
(201) 541-9393
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Registrant's telephone number, including area code
N/A
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(Former name or former address, if changed since last report.)
PLEASE ADDRESS ALL CORRESPONDENCE TO: Mark Gasarch, Esq.
1285 Avenue of the Americas
3rd Floor
New York, New York 10019
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Item 2. Acquisition or Disposition of Assets
On November 3, 1997 Compost America Holding Company, Inc. (the
"Company") acquired all of the issued and outstanding shares of R. J. Longo
Construction Co., Inc. ("Longo Construction") of Denville, New Jersey from
its President and sole shareholder, Robert J. Longo ("Longo") for
approximately $33 million. Payments were divided between Longo (Exhibits 2.1,
2.2, 2.3 and 2.4) and the Robert J. and Andrea Longo Charitable Trust ("Longo
Trust") (Exhibit 2.5). Longo Construction, through its division Environmental
Protection Improvement Company ("EPIC"), was recently awarded by the City of
New York a 15-year, $340 million contract for organic waste removal. At the
same time, the Company sold to Wasteco Ventures Limited (Exhibit 2.6), a
British Virgin Islands company ("Wasteco") affiliated with Wafra Investment
Advisory Group, Inc., 11,490,609 shares of its common stock, no par value,
130,000 shares of its newly created Series A Preferred Stock (Exhibit 4.1)
and 70,000 shares of its newly created Series C Preferred Stock (Exhibit 4.3)
for $20 million ("Wasteco Cash"). The Company previously had designated
shares of Series B Preferred Stock (Exhibit 4.2). The $33 million purchase
price paid to Longo and Longo Trust consisted of the $20 million Wasteco
Cash, plus the issuance to Longo of 3,447,182 shares of the Company's common
stock, 39,000 shares of its Series A Preferred Stock and 21,000 shares of its
Series C Preferred Stock, collectively valued at $6 million, and the
assumption by the Company of approximately $7 million of Longo Construction
debt. A Stockholders Agreement among the Company, Wasteco, Longo and certain
principal stockholders of the Company (Exhibit 9.1) requires support of the
election of certain Wasteco and Longo nominees to the Company's Board of
Directors. A Registration Rights Agreement (Exhibit 4.4) grants to Wasteco
and Longo certain demand and piggyback registration rights with regard to
their holdings of the Company's common shares.
In addition, the Company entered into employment agreements with the
three senior executives of Longo (Robert J. Longo - Exhibit 99.1, Jay
Waxenbaum -Exhibit 99.2 and Kevin Walsh - Exhibit 99.3) Roger E. Tuttle,
President of the Company, recently had entered into an amended employment
agreement with the Company (Exhibit 99.4).
Item 5. Other Events
1. On October 30, 1997, the Company amended its Certificate of Incorporation
to allow the number and terms of its directors to be fixed in its By-Laws
(Exhibit 3.1).
2. On October 30, 1997, the Company restated its By-Laws (Exhibit 3.2).
3. The Company's Board of Directors now consists of three persons who were
directors prior to the acquisition (Pasquale Dileo,
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Roger E. Tuttle and Robert E. Wortmann) and five new directors (G. Chris
Andersen, Charles R. Carson, Robert J. Longo, Peter Petrillo and John T.
Shea), for a total of eight directors.
Item 7. Financial Statements and Exhibits
(a) and (b) - where applicable, to be filed within sixty (60) days after the
date of this filing
(c) Exhibits
2.1 - Longo Construction Stock Purchase Agreement*
2.2 - First Amendment to Longo Construction Stock Purchase Agreement
2.3 - Second Amendment to Longo Construction Stock Purchase Agreement
2.4 - Third Amendment to Longo Construction Stock Purchase Agreement
2.5 - Longo Trust Stock Purchase Agreement*
2.6 - Wasteco Stock Purchase Agreement*
3.1 - Amendment to Articles of Incorporation
3.2 - Restated By-Laws
4.1 - Series A Preferred Stock Designation of Rights
4.2 - Series B Preferred Stock Designation of Rights
4.3 - Series C Preferred Stock Designation of Rights
4.4 - Registration Rights Agreement
9.1 - Stockholders Agreement
99.1 - Robert Longo Employment Agreement
99.2 - Jay Waxenbaum Employment Agreement
99.3 - Kevin Walsh Employment Agreement
99.4 - Roger E. Tuttle Amended Employment Agreement
* All material exhibits and schedules are included herewith or as exhibits
elsewhere in this filing. Copies of any other schedules or exhibits may be
obtained from the Company.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
Date: November 17, 1997
COMPOST AMERICA HOLDING COMPANY, INC.
(Registrant)
By /s/ Roger E. Tuttle
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Roger E. Tuttle, President
(Principal Executive Officer)
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Exhibit 2.1
LONGO CONSTRUCTION STOCK PURCHASE AGREEMENT
STOCK PURCHASE AGREEMENT (the "Agreement") dated as of this 17th day of
September, 1997, by and among Robert J. Longo, an individual, residing at 71
Roxitichus Road, Mendham, New Jersey 07945 (the "Seller"), Compost America
Holding Company, Inc., a New Jersey corporation, with principal place of
business at 320 Grand Avenue, Englewood, New Jersey 07631 (the "Purchaser")
and R. J. Longo Construction Co., Inc., a New Jersey corporation, including
its EPIC division, with principal place of business at 305 Palmer Road,
Denville, New Jersey 07834 (the "Corporation").
W I T N E S S E T H :
WHEREAS, the Seller is the beneficial and record owner of the issued and
outstanding shares of common stock, no par value identified on Schedule A
hereto (the "Stock") of the Corporation; and
WHEREAS, the Seller desires to sell and the Purchaser desires to purchase
the Stock upon the terms and subject to the conditions set forth herein.
NOW THEREFORE, in consideration of the mutual covenants, agreements,
representations and warranties contained in this Agreement and intending to
be legally bound hereby, the parties hereto agree as follows:
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ARTICLE ONE
SALE AND PURCHASE OF STOCK
1.01 Sale and Purchase of the Stock. At the Closing (as hereafter
defined), the Seller shall sell, transfer, assign, convey and deliver to the
Purchaser the Stock, free and clear of Liens (as hereinafter defined) and the
Purchaser hereby agrees to purchase and acquire the Stock from the Seller,
for the Purchase Price (as hereinafter defined).
1.02 Deposit. (a) 100,000 shares of the authorized but unregistered
common stock, no par value of the Purchaser (the "CAHC Stock") have already
been delivered to the Seller in consideration of the Seller's execution and
delivery of that certain letter of intent (the "Letter of Intent") dated
April 30, 1997 by and between the Purchaser and the Seller. The Letter of
Intent expired by its terms on July 15, 1997. On August 19, 1997 the parties
agreed to revive, amend, extend and restate the Letter of Intent on the terms
and conditions contained therein (the "Restated Letter of Intent"). To secure
the Purchaser's obligations under this Agreement, the Purchaser has deposited
with Okin, Hollander & DeLuca, L.L.P., the Seller's attorneys, as escrow
agent (the "Escrow Agent"), pursuant to that certain escrow agreement dated
May 5, 1997 (the "Escrow Agreement"), a copy of which is attached hereto as
Schedule 1.02, an additional 400,000 shares of CAHC Stock.
(b) If the Closing shall occur as hereinafter provided, the 400,000
shares of CAHC Stock held by the Escrow Agent shall be returned to the
Purchaser.
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(c) In the event the Closing as provided for herein does not occur as a
result of the Seller's failure or refusal to proceed to Closing, all the CAHC
Stock then held by the Escrow Agent shall be delivered by the Escrow Agent to
the Purchaser, all the CAHC Stock then held by the Seller shall be delivered
by the Seller to the Purchaser and the Seller shall pay to the Purchaser the
sum of Two Hundred Thousand ($200,000) Dollars, all of which shall be
liquidated damages hereunder and which shall be the Purchaser's sole and
exclusive remedy as against the Seller in connection with this Agreement.
For purposes of this paragraph, the 100,000 shares of CAHC Stock returned by
the Seller to the Purchaser shall be deemed to have a value of Three ($3.00)
Dollars per share.
(d) If the Closing as provided for herein does not occur as a result of
the Purchaser's failure or refusal to proceed to Closing, subject to any
conditions to the Purchaser's obligations hereunder, including, without
limitation, the execution and delivery of that certain long term Biosolids
Services Management Agreement by and between the Corporation and the New York
City Department of Environmental Protection (the "New York Contract"), all of
the shares of CAHC Stock then held by the Escrow Agent shall be delivered by
the Escrow Agent to the Seller as liquidated damages, which shall be the
Seller's sole and exclusive remedy as against the Purchaser in connection
with this Agreement; provided, however, that if the Closing does not occur as
herein provided as a result of the Purchaser's failure or refusal to proceed
to Closing, from and after the date hereof to and including September 15,
1998, the
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Seller shall have the option to require the Purchaser to repurchase all of
the CAHC Stock then owned by the Seller at a purchase price of Three ($3.00)
Dollars per share. The Seller shall exercise such option by providing written
notice to the Purchaser of his intent to exercise such option, whereupon
within five (5) days of the date of such notice, the Purchaser shall deliver
to the Seller the Purchaser's promissory note in the principal amount of One
Million Five Hundred Thousand ($1,500,000) Dollars which note shall be due
and payable on September 15, 1998, shall provide for the accrual and payment
of interest on the outstanding principal balance thereof at the floating rate
of Wall Street Prime plus two (2%) percent per annum and such promissory note
shall either: (i) be secured by such property of the Purchaser as is
reasonably satisfactory to the Seller; or (ii) the Purchaser and the Seller
shall enter into a mutually acceptable escrow agreement pursuant to which the
Purchaser shall be required to deposit in an escrow account the sum of
$100,000 per month as security for the payment of the note and the Seller
shall deliver in escrow stock certificates for the shares of CAHC Stock. Upon
payment by the Purchaser of $1,500,000 plus accrued interest, the escrow
agent shall deliver the stock certificates representing the CAHC Stock to the
Purchaser.
1.03 Purchase Price and Payment. The purchase price of Twenty Million
($20,000,000) Dollars (the "Purchase Price") to be paid by the Purchaser to the
Seller for the Stock shall be paid as follows: (i) by the Purchaser's
satisfaction or its confirmation on or
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before the Closing Date (as hereinafter defined) of its obligation to pay the
then outstanding principal balance of equipment debt (the "Equipment Debt")
of the Corporation, identified on Schedule 1.03 hereto, which as of the date
hereof is Seven Million Fifty Six Thousand Two Hundred Ninety Two Dollars and
46/00 ($7,056,292.46) Dollars; (ii) by the issuance to the Purchaser of
$6,000,000 of the Purchaser's Series A and Series C Preferred Stock, as more
fully described in Schedule 1.03(a) hereto (the "CAHC Preferred Stock"); and
(iii) the balance in immediately available funds at the Closing by wire
transfer to a bank account which shall have been designated by the Seller in
writing not less than seven days prior to the Closing Date; provided,
however, that if as of the Closing Date the sum of: (i) the outstanding
principal balance of the Equipment Debt; (ii) $6,000,000 of CAHC Preferred
Stock; and (iii) $7,000,000 in cash, exceeds the Purchase Price, the face
amount of the CAHC Preferred Stock shall be reduced so that the sum of (i),
(ii) and (iii) shall equal Twenty Million ($20,000,000) Dollars.
1.04 The Closing. Upon the terms and subject to the conditions contained
in this Agreement, the transfer of the Stock by the Seller to the Purchaser
and the payment by the Purchaser of the Purchase Price (the "Closing") shall
take place no later than September 30, 1997, at 10:00 a.m. at the offices of
Okin, Hollander & DeLuca, L.L.P., One Parker Plaza, Fort Lee, New Jersey, or
at such other date, time or place as the parties shall mutually agree in
writing (the "Closing Date"). No party hereto may declare time of the essence
in connection with the Closing except on prior
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written notice to the other party delivered at least ten days before the
requested Closing Date.
1.05 Certain Definitions. For purposes of this Agreement, "Material
Adverse Effect" shall mean any circumstance or event which has a material
adverse effect upon the business, operations, affairs, properties, assets,
condition (financial or otherwise), or results of operation of the
Corporation, taken as a whole; provided, however, that Material Adverse
Effect shall not include any cost, loss, damage or liability which, when
aggregated with all other such costs, losses, damages or liabilities, would
be less than $330,000.
ARTICLE TWO
REPRESENTATIONS AND WARRANTIES OF THE
SELLER AS TO HIMSELF
The Seller hereby represents and warrants to the Purchaser as follows:
2.01 Ownership of Stock; Title. The authorized capital stock of the
Corporation consists of 1,000 shares of common stock, no par value of which
the Seller is the owner of record and beneficially of 100 shares, including,
without limitation, the Stock. No other shares of capital stock of the
Corporation are issued and outstanding except as set forth on Schedule 2.01
hereto. The Stock is owned by the Seller free and clear of any claim, levy,
charge, pledge, hypothecation, trust, security interest, proxy, voting
arrangement, conditional sale or title retention contract, or other
encumbrance or restriction of any kind, including restrictions affecting
voting rights, transferability or incidents of record or
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beneficial ownership (each of the foregoing being hereinafter individually
referred to as a "Lien" and collectively, the "Liens"). The consummation of
the sale of the Stock hereunder will convey to the Purchaser good, valid and
marketable title to the Stock free and clear of all Liens. Except as set
forth on Schedule 2.01 hereto, there are no voting trusts, shareholder
agreements, proxies or other agreements or understandings in effect with
respect to the voting or transfer of the Stock to which the Seller is a party
or is bound. Except for this Agreement, there are no outstanding warrants,
options, rights or agreements of any kind to acquire the Stock, or any
portion of the Stock, from the Seller. All of the Stock is duly authorized,
validly issued and fully paid and non-assessable.
2.02 Authority. The Seller has full power, legal right and authority
to execute and deliver this Agreement, to sell the Stock in accordance with
the terms and subject to the conditions of this Agreement, and to consummate
the transactions contemplated hereby. The execution and delivery of this
Agreement and the consummation of the transactions contemplated hereby have
been duly and validly authorized by all requisite action and no other
proceedings on the part of the Seller are necessary to authorize this
Agreement or to consummate the transactions so contemplated. This Agreement
has been duly and validly executed and delivered by the Seller and, assuming
this Agreement has been duly authorized, executed and delivered by the
Purchaser, constitutes a valid and binding agreement of the Seller
enforceable against the Seller in
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accordance with its terms. To the best of the Seller's knowledge: (i) except
for the filing of any notice subsequent to the Closing that may be required
under applicable federal and/or state securities laws (which, if required,
shall be filed on a timely basis as may be so required) or as set forth on
Schedule 2.02 hereto, no consent, approval or authorization of, or
declaration to, or filing with, any public body or governmental authority,
domestic or foreign, is required for the valid authorization, execution,
delivery and performance by the Seller of this Agreement or for the
consummation by the Seller of the transactions contemplated by this
Agreement; provided however, that no representation is made by the Seller
with respect to any filing, permit, authorization, consent or approval,
required by reason of the legal or regulatory status of the Purchaser or by
reason of facts specifically pertaining to the Purchaser. Except as set forth
on Schedule 2.02 hereto, the execution, delivery and performance by the
Seller of this Agreement and the consummation of the transactions
contemplated hereby will not: (i) result in a breach of, or constitute a
default (with or without notice or lapse of time, or both) under, any
provision of (a) any debt instrument, indenture, mortgage agreement or other
instrument or arrangement to which the Seller is a party or by which it is
bound, except for violations, breaches or defaults, which in the aggregate,
would not have a Material Adverse Effect; or (b) any judgment, order or
decree by which the Seller is bound or affected; or (ii) result in the
imposition of any Lien on the Stock.
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2.03 Acquisition for Investment. The Seller is acquiring the CAHC Stock
and the CAHC Preferred Stock for his own account for investment purposes only
and not with a view to the distribution thereof so as to cause a violation of
the Securities Act of 1933, as amended (the "Act"), or any rules or
regulations promulgated thereunder, and agrees that he will not sell,
transfer, distribute or otherwise dispose of any such stock except pursuant
to an effective registration statement under the Act or under an exemption
from the registration requirements of the Act. The Seller understands and
acknowledges that the CAHC Stock and the CAHC Preferred Stock have not been
registered under the Act. The Seller (a) has such knowledge, sophistication
and experience in business and financial matters that he is capable of
evaluating the merits and risks of the transactions hereunder and (b) can
bear the economic risk of his investment in the CAHC Stock and the CAHC
Preferred Stock and can afford a complete loss of such investment.
2.04 Survival of Representations and Warranties. The representations of
the Seller contained in this Article II shall be complete, correct and true
as of the date hereof and as of the date of Closing. Purchaser has entered
into this Agreement based upon its own investigation, evaluations and
forecasts and is not relying upon any representation or inducement which was
or may have been made or implied by Seller or anyone acting on his behalf,
except as expressly set forth in this Agreement. Of the Article II
representations and warranties, only the representations and warranties
contained in Section 2.03 shall survive the execution
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and delivery of this Agreement and the Closing Date; provided, however, that
any claim by the Purchaser with respect to any breach of any such
representation or warranty must be asserted on or before the first
anniversary of the Closing Date or shall be deemed waived.
ARTICLE THREE
REPRESENTATIONS AND WARRANTIES OF
THE SELLER AS TO THE CORPORATION
The Seller represents and warrants to the Purchaser as follows:
3.01 Organization. (a) The Corporation is a corporation duly organized,
validly existing and in good standing under the laws of the State of New
Jersey and has all requisite power and authority to own, lease and operate
its properties and to carry on the business conducted by it as now conducted.
(b) The Corporation is duly qualified or licensed and in good
standing to do business as a foreign corporation in all such jurisdictions,
if any, set forth on Schedule 3.01 (b)(i), in which the conduct of its
business or its ownership, leasing or operation of property requires such
qualification, except for those jurisdictions in which failure to so qualify
would not have a Material Adverse Effect. Complete and correct copies of the
Certificate of Incorporation and By-laws of the Corporation as in effect on
the date hereof, in the form attached hereto as Schedules 3.01 (b) (ii) and
(iii) respectively, have been made available or delivered to the Purchaser
prior to the date of this Agreement.
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3.02 Subsidiaries. Except as set forth on Schedule 3.02 hereto, the
Corporation has no subsidiaries, nor does it own any capital stock or other
proprietary (equity) interest, directly or indirectly, in any corporation,
association, trust, partnership, joint venture or other entity.
3.03 Capitalization. (a) The capitalization of the Corporation consists
of 1,000 authorized shares of common stock, no par value, of which 200 shares
are issued and outstanding and held by the Seller and the shareholders
identified on Schedule 2.01 hereto. All of such shares are duly authorized,
validly issued and outstanding, and are fully paid and non-assessable and
free of preemptive rights.
(b) The Stock represents fifty (50%) percent of the issued and
outstanding capital stock and equity interests in the Corporation and
together with the shares of issued and outstanding common stock described on
Schedule 2.01 hereto, constitutes one hundred (100%) percent of the issued
and outstanding capital stock and equity interests in the Corporation.
Except for this Agreement, there are no outstanding warrants, options, rights
or agreements of any kind to acquire the Stock or any portion of the Stock.
All of the outstanding shares were issued by the Corporation in compliance
with all applicable securities laws. Except as set forth on Schedule 3.03
hereto, there are no voting trusts, shareholder agreements, proxies or other
agreements or understandings in effect with respect to the voting or transfer
of the Stock to which the Corporation is a party. All of the Stock is
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duly authorized, validly issued and fully paid and non-assessable.
3.04. Affiliate Transactions. Schedule 3.04 sets forth a correct and
complete list of all material arrangements, contracts, understandings,
agreements or transactions (whether written or oral) in existence between the
Corporation on the one hand, and the Seller or any affiliate of the Seller or
any business or entity in which the Seller or any affiliate of the Seller has
any direct or indirect controlling interest, that are in effect on the date
hereof and do not pertain to Excluded Assets (as hereinafter defined).
"Affiliate" shall mean any person or entity that directly or indirectly,
through one or more intermediaries, controls or is controlled by or is under
common control with another person or entity.
3.05 Consents and Approvals; No Violations. Except as set forth on
Schedule 3.05 hereto, the execution, delivery and performance by the
Corporation of this Agreement and the consummation of the transactions
contemplated hereby will not: (a) conflict with or result in a breach of any
provision of the Certificate of Incorporation or By-Laws of the Corporation;
(b) result in a breach of, or constitute a default (with or without notice or
lapse of time, or both) under, or require any consent under, any of the
terms, conditions or provisions of any indenture, license, contract,
agreement or other instrument or obligation to which the Corporation is a
party or by which it or any of its properties or assets are bound, including,
without limitation, the New York Contract, except for violations, breaches or
defaults
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which in the aggregate would not have a Material Adverse Effect; or (c) to
the best of the Seller's knowledge, after due investigation, violate any
order, writ, injunction, decree, statute, rule or regulation applicable to
the Corporation, except for violations of statutes, rules or regulations
which in the aggregate would not have a Material Adverse Effect.
3.06 No Brokers. Except with respect to fees payable by the Corporation
to Quirk Carson Peppet Inc., neither the Seller nor the Corporation or any of
its officers, directors, employees, or shareholders has employed any broker
or finder, nor incurred any liability for any investment banking fees,
brokerage fees, commissions or finder's fees in connection with the
transactions contemplated by this Agreement.
3.07 Employee Benefit Plans; ERISA.
(a) Schedule 3.07(a) hereto contains a true and complete list of each
bonus, deferred compensation, incentive compensation, stock purchase, stock
option, severance or termination pay, hospitalization or other medical, life
or other insurance, supplemental unemployment benefits, profit-sharing,
pension, or retirement plan, program, agreement or arrangement in effect on
the Closing Date, and each other employee benefit plan, program, agreement or
arrangement in effect on the Closing Date, sponsored, maintained or
contributed to or required to be contributed to by the Corporation or by any
trade or business, whether or not incorporated (an "ERISA Affiliate"), that
together with the Corporation would be deemed a "single employer" within the
meaning
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of Section 4001(b) (1) of the Employee Retirement Income Security Act of
1974, as amended, and the rules and regulations promulgated thereunder
("ERISA"), for the benefit of any employee or former employee of the
Corporation or any ERISA Affiliate, whether formal or informal and whether
legally binding or not, or with respect to which the Corporation could have
any liability (the "Employee Benefit Plans"). Schedule 3.07(a) identifies
each of the Employee Benefit Plans that is an "employee welfare benefit
plan," or "employee pension benefit plan" as such terms are defined in
Sections 3(1) and 3(2) of ERISA (such plans being hereinafter referred to
collectively as the "ERISA Plans").
(b) With respect to each of the Employee Benefit Plans, the Seller
has heretofore delivered to the Purchaser true and complete copies of each of
the following documents: (i) a copy of the Employee Benefit Plan (including
all amendments thereto) and any other material documents governing the
Employee Benefit Plan; (ii) a copy of the annual report, if required under
ERISA, with respect to each such Employee Benefit Plan for the last three
years; (iii) a copy of the actuarial report, if required under ERISA, with
respect to each such Employee Benefit Plan for the last three years; (iv) the
most recent determination letter or opinion letter received from the Internal
Revenue Service with respect to each Employee Benefit Plan that is intended
to be qualified under Section 401 of the Internal Revenue Code of 1986, as
amended (the "Code"), and each trust intended to be exempt from taxation
within Section 501(c)(9) of the Code; and (v) a copy of all the summary
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plan descriptions and any summary of material modifications with respect to
each Employee Benefit Plan. To the best of the Seller's knowledge, each
financial or other report delivered to the Purchaser pursuant hereto is
complete and accurate in all material respects and except as set forth on
Schedule 3.07 (b),the Seller has received no notice that there have been any
material adverse changes in the financial or other status of any Employee
Benefit Plan since the date of the most recent annual report provided with
respect thereto.
(c) No material liability under Title IV of ERISA has been incurred
by the Corporation or, to the Seller's knowledge, any ERISA Affiliate, since
the effective date of ERISA that has not been satisfied in full, and no
condition exists that presents a material risk to the Corporation or, to the
Seller's knowledge, an ERISA Affiliate, of incurring a material liability
under such Title, other than liability for premiums due the Pension Benefit
Guaranty Corporation ("PBGC"), which payments have been or will be made when
due. Neither the Corporation, nor to the Seller's knowledge, any ERISA
Affiliate, any of the ERISA Plans, any trust created thereunder nor any
trustee or administrator thereof has engaged in a transaction or has taken or
failed to take any action in connection with which the Corporation, any ERISA
Affiliate, any of the ERISA Plans, any such trust, any trustee or
administrator thereof, or any party dealing with the ERISA Plans or any such
trust could be subject to either individually or in the aggregate, material
liability or a civil penalty assessed pursuant to Section
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409, 502(l) or 502(i) of ERISA or a material tax imposed pursuant to any of
Section 4975 through 4980B of the Code. To the best of the Seller's
knowledge, each of the Employee Benefit Plans has been operated and
administered in all material respects in accordance with applicable laws,
including but not limited to ERISA and the Code and each of the ERISA Plans
that is intended to be "qualified" within the meaning of Section 401(a) of
the Code is so qualified.
(d) To the best of the Seller's knowledge, except as set forth on
Schedule 3.07(a), no plans, agreements, understandings or arrangements exist
that could result in the payment to any employee of the Corporation or any
ERISA Affiliate of any money or other property rights or accelerate or
provide any other rights or benefits to any such employee as a result of (i)
the transactions contemplated by this Agreement (whether or not such payment,
acceleration, or provision would constitute a "parachute payment", within the
meaning of Section 280G of the Code, or whether or not some other subsequent
action or event would be required to cause such payment, acceleration or
provision to be triggered) or (ii) the severance, termination or resignation
of any such employee.
(e) Except as set forth on Schedule 3.07 (a) and except with respect to
"multiemployer plans" within the meaning of Section 3(37) of ERISA and with
respect to such plans, to the best of the Seller's knowledge, full payment
has been made of all amounts which the Corporation and any ERISA Affiliate is
required, under applicable law or under any Employee Benefit Plan or any
agreement related to any Employee Benefit Plan to which the Corporation or
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any ERISA Affiliate is a party, to have paid as contributions thereto as of
the last day of the most recent fiscal year of each Employee Benefit Plan
ended prior to the date hereof. Except with respect to multiemployer plans,
and with respect to such plans, to the best of the Seller's knowledge, the
Corporation and each ERISA Affiliate has made adequate provision for reserves
in accordance with generally accepted accounting principles consistently
applied ("GAAP"), to meet contributions that have not been made because they
are not yet due under the terms of any Employee Benefit Plan or related
agreements. Benefits under all Employee Benefit Plans are as represented and
have not been increased subsequent to the date as of which documents with
respect thereto have been provided to the Purchaser.
(f) There is no action, claim or demand of any kind (other than routine
claims for benefits) that has been brought or threatened against any Employee
Benefit Plan or the assets thereof, other than with respect to multiemployer
plans, and as to such plans, the Seller represents that he has not received
any notice of any such action, claim or demand of any kind, against any
fiduciary of such Employee Benefit Plan, or against the Corporation or any
ERISA Affiliate with respect to any Employee Benefit Plan, and neither the
Corporation nor the Seller has received any notice of any investigation or
administrative review that could result in the imposition on the Corporation
or any ERISA Affiliate of any penalty or assessment in connection with any
Employee Benefit Plan.
(g) Except as identified on Schedule 3.07 (a), the Corporation
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does not maintain or participate in, nor is it obligated to contribute to,
any "multiemployer plan" within the meaning of Section 3(37) of ERISA. To the
best of the Seller's knowledge, as of the Closing Date, no withdrawal
liability would be assessed against the Corporation in the event of a
withdrawal from any listed multiemployer plan. The Corporation has not been
notified by the sponsor or administrator of any listed multiemployer plan
that such plan is insolvent, is in reorganization or has been terminated
within the meaning of Title IV of ERISA. To the best of the Seller's
knowledge, all contributions to any listed multiemployer plan that were
required to be made by the Corporation have been made as of the Closing Date.
(h) Except as set forth in Schedule 3.07(a), no Employee Benefit Plan,
other than multiemployer plans, provides any health, life or other welfare
coverage to employees of the Corporation or any ERISA Affiliate beyond
termination of their employment with the Corporation or any ERISA Affiliate
by reason of retirement or otherwise, other than coverage as may be required
under Section 4980B of the Code or part 6 of ERISA or under the continuation
provisions of the laws of any state or locality.
(i) The Corporation has filed or caused to be filed on a timely basis,
all returns, material reports, statements, notices, declarations, and other
documents required by any federal, state, local or foreign governmental
agency (including without limitation, the Internal Revenue Service, the
Department of Labor, the Pension Benefit Guaranty Corporation and the
Securities and Exchange
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Commission) with respect to each Employee Benefit Plan sponsored or
maintained by the Corporation or with respect to which the Corporation or any
ERISA Affiliate has any filing obligation, except with respect to
multiemployer plans, and as to such plans, neither the Corporation nor the
Seller has received notice that it has not filed or caused to be filed on a
timely basis, any such material returns, reports, statements, notices,
declarations and other documents. The Corporation has delivered to or caused
to be delivered to every participant, beneficiary and every other party
entitled to such material, all material plan descriptions, returns, reports,
schedules, notices, statements and similar materials, including without
limitation, summary plan descriptions and reports as are required under Title
I of ERISA or the Code.
(j) Prior to the Closing Date, the Corporation shall take all action
necessary to have the Corporation cease to be a sponsor or participating
employer as of the Closing Date with respect to all of the Employee Benefit
Plans, other than those expressly identified on Schedule 3.07(a) which plans
are intended to continue to cover employees of the Corporation after the
Closing Date. The Corporation has not made any commitment regarding the
continuation of any Employee Benefit Plan, other than multiemployer plans,
after the Closing Date and the Purchaser may, without penalty, amend, cancel,
terminate or otherwise modify in any and all respects, on or after the
Closing Date, any Employee Benefit Plan, other than a multiemployer plan,
that it continues after the Closing Date for the benefit of its employees.
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3.08 Labor Relations; Employees. Except as set forth on Schedule 3.08: (i)
there is no labor strike, slowdown, lockout, work stoppage, arbitration, lawsuit
or administrative proceeding relating to labor or employment matters, or other
labor dispute pending against the Corporation (collectively, "Labor Disputes")
except such Labor Disputes which in the aggregate would not have a Material
Adverse Effect; (ii) there is no unfair labor practice charge or other
proceeding involving the Corporation pending before the National Labor Relations
Board or any similar state or foreign agency; (iii) there are no collective
bargaining agreements with any union to which the Corporation is a party; (iv)
there are no written personnel policies, rules or procedures applicable to
employees of the Corporation; and (v) the Seller has not received any written
notice that the Corporation is not in compliance, in all material respects, with
all applicable laws, regulations and orders relating to the employment of labor,
including all such laws, regulations and orders relating to wages and hours,
labor relations, civil rights, safety and health, and workers' compensation.
3.09 Litigation. Except as set forth on Schedule 3.09 hereto, there is
no action, suit, proceeding, claim, arbitration or investigation (each of the
forgoing being hereinafter referred to as an "Action" and collectively, the
"Actions") pending or, to the best of the Seller's knowledge after due
investigation, threatened, against the Corporation, its activities, properties
or assets which, if adversely determined, would in the aggregate have a
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Material Adverse Effect. Except as set forth on Schedule 3.09 hereto, the
Corporation is not a party to or, to the best of the Seller's knowledge after
due investigation, is not subject to the provisions of any order, writ,
injunction, judgment or decree of any court or government agency or
instrumentality and there is no Action by the Corporation currently pending
or, to the best of the Seller's knowledge, which the Corporation intends to
initiate.
3.10 Title to Assets. (a) All real property owned or leased by the
Corporation (respectively, the "Fee Properties" and the "Leased Properties", and
collectively, the "Real Property") is correctly identified on Schedule 3.10(a)
hereto. Except as set forth on Schedule 3.10(a), the Seller has not created or
permitted to exist any Lien on the Real Property, and, to the best of the
Seller's knowledge, there are no Liens on the Real Property except for Permitted
Encumbrances (as defined below). Except as set forth on Schedule 3.10(a), the
Corporation has (i) good, valid and marketable title to the Fee Properties, (ii)
a valid leasehold interest in the Leased Properties, and (iii) good and valid
title or a valid leasehold interest in (hereinafter, a "Capital Lease"), as the
case may be, to any and all Equipment (as defined below) except for Permitted
Encumbrances.
(b) Schedule 3.10(b) sets forth a correct and complete list of all
equipment, material to the conduct of the business of the Corporation, including
without limitation, machinery, computers, office furniture, motor vehicles,
leasehold improvements and fixtures, owned by the Corporation (each and all of
the foregoing
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items being herein referred to as "Equipment"), other than those
certain assets identified on Schedule 3.10(c) hereto and Excess Cash and Excess
Working Capital, as such terms are defined in Schedule 3.10(c) (collectively,
the "Excluded Assets") being retained by the Seller. The Purchaser has had the
opportunity to examine the Equipment and understands that it is being
transferred "as is" as of the Closing Date. "Permitted Encumbrances" shall mean
Liens which (i) are reflected on the books and records of the Corporation, (ii)
relate to taxes, assessments or governmental charges or levies not yet due or
being contested in good faith by appropriate proceedings, (iii) are imposed by
law, such as landlord's, carriers', warehousemen's and mechanics' liens, with
respect to which the underlying obligations are not delinquent, (iv) identified
on Schedule 3.10 (c) hereto, or (v) easements, rights-of way, restrictions and
other similar encumbrances incurred in the ordinary course of business, do not
materially detract from the value or materially interfere with the present use
of any such property and do not secure obligations for borrowed money or the
deferred portions of the purchase price of acquired property other than as
reflected on the books and records of the Corporation.
3.11 Financial Statements. The Seller has previously delivered to the
Purchaser a complete copy of the audited balance sheets of the Corporation as of
December 31, 1994, December 31, 1995 and December 31, 1996, and the related
statements of operations and statements of cash flows for each fiscal year then
ended (together with the related notes and the related schedules thereto, the
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"Audited Balance Sheet"). The Seller will deliver to the Purchaser on or before
the Closing Date, the unaudited balance sheet of the Corporation as of June 30,
1997 (the "Interim Balance Sheet").
To the best of the Seller's knowledge, the Audited Balance Sheet (i)
is true, correct and complete, (ii) is in accordance with the books and records
of the Corporation, (iii) fairly presents the financial condition of the
Corporation, taken as a whole, as of the dates indicated and the results of
operations and cash flows of the Corporation, taken as a whole, for the period
indicated and has been prepared in accordance with GAAP. The Interim Balance
Sheet is subject to prior reserves, allowances, adjustments and provisions of
any kind in the ordinary course of the Corporation's business, consistent with
past practice and in conformity with GAAP, all of which such reserves,
allowances, adjustments and provisions, in the aggregate, will not have a
Material Adverse Effect. Since December 31, 1996, there have been no material
changes in the Corporation's accounting policies.
3.12 Absence of Undisclosed Liabilities. Except as disclosed in the
Interim Balance Sheet or set forth on Schedule 3.12 hereto, as of the date of
this Agreement, the Corporation has no material liability of any nature (matured
or unmatured, fixed or contingent) which was not provided for therein, which
individually would have a Material Adverse Effect, other than liabilities
arising in the ordinary course of business since the date of the Interim Balance
Sheet.
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3.13 Absence of Material Changes. Except as set forth on Schedule 3.13, or
otherwise contemplated by this Agreement, since the date of the Interim Balance
Sheet (subject to adjustment for the transfer of the Excluded Assets):
(i) to the best of the Seller's knowledge, the Corporation has operated its
business in the ordinary course, consistent with past practice;
(ii) to the best of the Seller's knowledge, the Corporation has not
suffered any material casualty loss to any of its properties not covered by
insurance (excluding deductibles or co-payments);
(iii) the Corporation has not declared, set aside or paid any dividends,
stock divisions, or distributions on the Stock (other than the transfer
to the Seller of the Excluded Assets, as set forth below);
(iv) the Corporation has not amended its Certificate of Incorporation or
By-Laws;
(v) whether or not in the ordinary course of business, the Corporation has
not acquired, transferred or disposed of any property or assets, which in
the aggregate would be deemed material, other than Excluded Assets;
(vi) the Corporation has not incurred any indebtedness for borrowed money
or issued any debt securities or assumed, guaranteed or endorsed the
obligations of any other persons or mortgaged or encumbered any of its
properties or assets which in the aggregate would be deemed material;
(vii) except as otherwise contemplated by this Agreement, the Corporation
has not issued or sold or acquired or redeemed any capital stock (or
securities convertible into capital stock) or granted any options,
warrants, calls or other rights with respect to such capital stock or
convertible securities;
(viii) the Corporation has not made any investment in any new business or
other entity, other than in the ordinary course of its business;
(ix) the Corporation has not made any acquisitions which in the aggregate
would be deemed material, other than in the ordinary course of its
business, consistent with past practice;
(x) the Corporation has not made any individual capital expenditure in
the amount of $100,000 or greater;
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(xi) the Corporation has not written off as uncollectible any notes or
accounts receivable, other than in the ordinary course of business;
(xii) the Corporation has not disposed of, or to the best of the Seller's
knowledge, permitted to lapse, the material rights to use any patent,
trademark or other Intellectual Property (as hereinafter defined), or
disclosed trade secrets to a third party, except as contemplated by the
Letter of Intent, the Restated Letter of Intent, or this Agreement;
(xiii) except for any collective bargaining agreement which the Corporation
has executed and delivered or may be required to execute and deliver on or
before the Closing Date, the Corporation has not increased compensation to
any officer or director nor has the Corporation adopted, granted, extended
or increased the rate or terms of any Employee Benefit Plan;
(xiv) except as listed on Schedule 3.13 hereto, the Corporation has not
suffered any work interruptions, labor grievances or claims filed, or any
similar event or condition;
(xv) the Corporation has not materially changed or modified any accounting
practice or procedure; and
(xvi) to the best of the Seller's knowledge, the Corporation has not agreed
to take any of the foregoing actions.
3.14 Insurance;Payment, Performance and Bid Bonds.
(a) Schedule 3.14(a) sets forth a true and complete listing in all
material respects of each insurance policy (each individually, an "Insurance
Policy" and collectively, the "Insurance Policies") that is maintained by the
Corporation, the purpose of which is to insure against risk of loss to the
Corporation. Such Insurance Policies are of the type and in the amounts as are
maintained by businesses similar to that of the Corporation, and to the best of
the Seller's knowledge, are adequate to insure against reasonably foreseeable
risks of the business of the Corporation.
(b) With respect to each such Insurance Policy: (i) to
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the best of the Seller's knowledge, except as set forth in Schedule 3.14(b)
hereto, the Insurance Policy is in full force and effect on the date hereof;
(ii) the Corporation is not in material breach or default, and no event has
occurred which, with notice or the lapse of time, would constitute such a
breach or default or would permit termination or modification, under the
Insurance Policy; and (iii) no party to the Insurance Policy has repudiated,
or given written notice to the Corporation of an intent to repudiate, any
material provision thereof. The Seller has not received any notice of any
threatened terminations of, or material premium increases with respect to,
any Insurance Policy.
(c) Schedule 3.14 (c) sets forth a true and complete listing in all
material respects of each payment, performance and bid bond (each individually,
a "Bond" and collectively, the "Bonds") that is maintained by the Corporation.
(d) With respect to each such Bond, to the best of the Seller's
knowledge, except as set forth in Schedule 3.14(d) hereto, (i) the Corporation
is not in material breach or default and no event has occurred which, with
notice or the lapse of time would constitute such a breach or default or would
permit termination or modification under the Bond; and (ii) no party to the Bond
has repudiated or given written notice to the Corporation of an intent to
repudiate any material provision thereof.
(e) The Purchaser will provide for the release and replacement of the
Bonds specified on Schedule 3.14 (c) as requiring replacement, prior to the
Closing Date and provide
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evidence of such replacement to the Seller at the Closing.
3.15. Taxes.
(a) All reports, returns, statements, (including estimated reports,
returns, or statements), and other similar filings required to be filed on or
before the Closing Date by the Corporation (the "Tax Returns") with respect to
any Taxes (as defined below) have been timely filed with the appropriate
governmental agencies in all jurisdictions in which such Tax Returns are
required to be filed, and to the best of the Seller's knowledge after due
investigation, all such Tax Returns correctly reflect the liability of the
Corporation for Taxes for the periods, properties, or events covered thereby;
(b) all Taxes payable, which if unpaid would have a Material Adverse
Effect, with respect to the Tax Returns referred to in the preceding clause, and
all Taxes accruable or otherwise attributable to events occurring prior to the
Closing Date, which if unpaid would have a Material Adverse Effect, whether
disputed or not, whether or not shown on any Tax Return, and whether or not
currently due or payable, will have been paid in full prior to the Closing Date,
or an adequate accrual in accordance with GAAP will be provided with respect
thereto by the Corporation on its Interim Balance Sheet;
(c) except as set forth on Schedule 3.15(c) hereto, the Corporation has no
knowledge of any unassessed Tax deficiencies or of any audits or investigations
pending or threatened against the Corporation with respect to any Taxes;
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(d) all Tax Returns of the Corporation for fiscal years ending on or
before December 31, 1994 have been examined by the Internal Revenue Service, and
any assessments with respect to such returns have been fully paid;
(e) except as set forth on Schedule 3.15(e) hereto, there is not in
effect any extension for the filing of any Tax Return and the Corporation has
not extended or waived the application of any statute of limitations of any
jurisdiction regarding the assessment or collection of any Tax;
(f) neither the Seller nor the Corporation has received notice of any
claim which has ever been made by any Tax authority in a jurisdiction in which
the Corporation does not file Tax Returns that the Corporation is or may be
subject to taxation by that jurisdiction;
(g) there are no liens for Taxes upon any asset of the Corporation except
for liens for current Taxes not yet due;
(h) no issues have been raised in any examination by any Tax authority with
respect to the Corporation which, by application of similar principles,
reasonably could be expected to result in a proposed deficiency for any other
period not so examined;
(i) the Corporation is not a party to any Tax allocation or sharing
agreement or otherwise under any obligation to indemnify any person with respect
to any Taxes; and
(j) neither the Seller nor the Corporation has received any notice that
the Corporation has not timely made all deposits required by law to be made with
respect to employees' withholding
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and other payroll, employment, or other withholding taxes, including the
portions of such taxes imposed upon the Corporation.
For purposes of this Agreement, "Taxes" means any taxes, duties,
assessments, fees, levies, or similar governmental charges, together with any
interest, penalties, and additions to tax, imposed by any taxing authority,
wherever located (i.e., whether federal, state, local, municipal, or foreign),
including, without limitation, all net income, gross income, gross receipts, net
receipts, sales, use, transfer, franchise, privilege, profits, social security,
disability, withholding, payroll, unemployment, employment, excise, severance,
property, windfall profits, value added, ad valorem, occupation, or any other
similar governmental charge or imposition.
3.16 Intellectual Property. Schedule 3.16 hereto sets forth all material
permits, licenses, patents, patent applications, trademarks, trademark
applications, trade names, service marks, service mark applications, copyrights
and copyright applications used by the Corporation or relating to its business
(the "Intellectual Property") and to the best of the Seller's knowledge, the
Corporation's right to such Intellectual Property will not cease to be valid
rights by reason of the execution, delivery and performance of this Agreement.
The Corporation has not received any notice of violation or infringement of any
rights of others with respect to the Intellectual Property. The Seller has not
received any notice that any of the Intellectual Property conflicts with,
infringes upon or otherwise violates the rights of any third party.
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The parties hereto agree and acknowledge that as of the date hereof, an
Affiliate of the Seller is an inactive New Jersey corporation using the name
"EPIC". The Seller hereby represents and warrants that upon the request of
the Purchaser, at the Closing, the Seller will file an Amendment to the
Certificate of Incorporation of EPIC to change its name and will cooperate
with the Purchaser in changing the name of the Corporation to EPIC.
3.17 Environmental Compliance. To the best of the Seller's knowledge: (a)
Except as set forth on Schedule 3.17 hereto, the Corporation is in compliance,
in all material respects, with all applicable Environmental Laws (as hereinafter
defined); such compliance includes, without limitation, the holding of all
permits, licenses and approvals of government authorities required under such
laws and compliance with the material terms and conditions of such permits,
licenses and approvals. Except as set forth on Schedule 3.17, the Corporation
has not received any communication, whether from a governmental authority,
citizens group, employee or otherwise, that alleges that the Corporation is not
in such compliance and, to the best of the Seller's knowledge, there are no
circumstances that may prevent or interfere with such compliance in the future.
(b) Except as set forth on Schedule 3.17 hereto, the Seller has not
received any notice of any pending or threatened Environmental Claim (as
hereinafter defined) against the Corporation, or against any person or entity
whose liability for any Environmental Claim the Corporation has or may have
retained or
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assumed either contractually or by operation of law.
(c) Except as set forth on Schedule 3.17 hereto, the Seller has not
received any notice that there are any locations not owned or operated by the
Corporation where Hazardous Substances subject to Transportation and Disposal
Contracts (as hereinafter defined) to which the Corporation is a party, have
been stored, treated, recycled or disposed of. The Corporation represents and
warrants that during its occupancy pursuant to that certain lease (the "Lease")
dated February 25, 1991, as amended, by and between Consolidated Rail
Corporation and R. J. Longo Construction Co., Inc. of those certain premises
known as Brill's Yard in Newark, New Jersey as more fully described in the
Lease, it has not stored, treated, recycled or disposed of Hazardous Substances
on such premises nor has it taken any actions or failed to take any actions,
except in material compliance with all applicable Environmental Laws. For
purposes of this Section 3.17, "Transportation and Disposal Contracts" means
contracts pursuant to which the Corporation is obligated to both transport and
dispose of Hazardous Substances.
(d) The Seller has not received any notice of any Hazardous Substances
located on, contained in or which otherwise form a part of the assets of the
Corporation or properties currently owned or operated by the Corporation, except
for Hazardous Substances handled in the ordinary and normal course of operating
the business (all of which are handled in material compliance with all
applicable Environmental Laws).
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(e) The Seller has not received any notice with respect to any order,
litigation, settlement or citation concerning the existence of Hazardous
Substances with respect to the Corporation or in connection with the operation
of its business.
(f) The Seller has not received any notice with respect to any
environmental investigation conducted by any governmental authority with respect
to the Corporation or in connection with the operation of the business nor, to
the best of the Seller's knowledge, is any such investigation pending.
(g) "Environmental Laws" means all federal, state, local and foreign
laws and regulations relating to pollution or protection of human health or the
environment (including, without limitation, ambient air, surface water, ground
water, land surface or subsurface strata), including, without limitation, laws
and regulations relating to emissions, discharges, releases or threatened
releases of Hazardous Substances or otherwise relating to the manufacture,
processing, distribution, use, treatment, storage, disposal, transport or
handling of Hazardous Substances; "Environmental Claim" means any notice by any
person or entity alleging potential liability (including, without limitation,
potential liability for investigatory costs, cleanup costs, governmental
response costs, natural resources damages, property damages, personal injuries,
or penalties) arising out of, based on or resulting from (i) the presence, or
release into the environment, of Hazardous Substances at any location, whether
or not owned by the Corporation or (ii) circumstances forming the
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basis of any violation, or alleged violation, of any Environmental Law;
"Hazardous Substances" means any substance designated pursuant to section
311(b)(2)(A) of the Federal Water Pollution Control Act (33 USCS sec.
1321(b)(2)(A); any element, compound, mixture, solution, or substance
designated pursuant to section 102 of the Comprehensive Environmental
Response, Compensation and Liability Act (42 USCS sec. 9601 et. seq.); any
hazardous waste having the characteristics identified or listed pursuant to
section 3001 of the Solid Waste Disposal Act (42 USC sec. 6921); any toxic
pollutant listed under section 307(a) of the Federal Water Pollution Control
Act (33 USCS sec. 1317(a)(1); any hazardous air pollutant listed under
section 112 of the Clean Air Act (42 USCS sec. 7412); and any imminently
hazardous chemical substance or mixture with respect to which the
Administrator of the Environmental Protection Agency has taken action
pursuant to section 7 of the Toxic Substances Control Act (15 USCS sec. 2506).
3.18 No Defaults. The Corporation is not in default under its Certificate
of Incorporation or Bylaws, and the Seller has not received any notice that the
Corporation is in default, under any material note, indenture, mortgage, lease,
or any other material contract, agreement or instrument to which it is a party
or by which it or any of its property is bound or affected. The Seller has not
received any notice that the Corporation is in default, with respect to any
order, writ, injunction, judgment or decree of any court or any federal, state,
municipal or other domestic or foreign governmental department, commission,
board, bureau, agency
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or instrumentality and to the best of the Seller's knowledge, there exists no
condition, event or act which constitutes, or which after notice, lapse of
time or both, would constitute, a default under any of the foregoing.
3.19 Compliance. To the best of the Seller's knowledge, the Corporation
(a) has complied in all material respects with all federal, state, local and
foreign laws, ordinances, regulations and orders applicable to its business or
the ownership of its assets; and (b) has or has applied for all material
federal, state, local and foreign governmental licenses and permits necessary or
required to enable it to carry on its business as now conducted and as presently
proposed to be conducted.
3.20 Disclosure. To the best of the Seller's knowledge, neither this
Agreement nor any other written document, certificate, instrument or written
statement furnished or made to the Purchaser by or on behalf of the Seller or
the Corporation in connection with the transactions contemplated hereby contains
any untrue statement of a material fact or omits to state a material fact
necessary in order to make the statements contained herein not misleading.
3.21 Survival of Representations and Warranties. The representations and
warranties of the Seller and the Corporation contained in this Article III shall
be complete, correct and true as of the date hereof and as of the date of the
Closing. Purchaser has entered into this Agreement based upon its own
investigation, evaluations and forecasts and is not relying upon any
representation or inducement which was or may have been made or
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implied by the Seller or the Corporation or anyone acting on his or its
behalf, except as expressly set forth in this Agreement. Only the
representations and warranties contained in Sections 3.04, 3.05, 3.07, 3.08,
3.09, 3.10, 3.11, 3.12, 3.13, 3.15 (only with respect to income and sales
taxes), 3.16, 3.17 (to the extent that the Corporation continues to maintain
insurance coverage with respect to any environmental liability as required by
Section 5.11, in at least the same coverage amounts and of the same types as
the Corporation maintained prior to the Closing Date), 3.18, 3.19 and 3.20 of
this Agreement shall survive the execution and delivery of this Agreement and
the Closing Date; provided however, that any claim by the Purchaser with
respect to any breach of any such representation or warranty (except a breach
of the tax representations and warranties set forth in Section 3.15 and the
environmental warranties set forth in Section 3.17) must be asserted on or
before the first anniversary of the Closing Date or shall be deemed waived
and any breach of any representation or warranty set forth in (a) Section
3.15 with respect to income and sales taxes must be asserted within ninety
(90) days after the applicable statute of limitations has expired and (b) in
Section 3.17 with respect to environmental compliance must be asserted within
two years of the Closing Date.
ARTICLE FOUR
REPRESENTATIONS AND WARRANTIES OF THE PURCHASER
The Purchaser represents and warrants to the Seller as follows:
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4.01 Organization. The Purchaser is a corporation duly organized, validly
existing and in good standing under the laws of the State of New Jersey.
4.02 Authorization. The execution and delivery of this Agreement by the
Purchaser and the consummation of the transactions contemplated hereby, have
been duly and validly authorized by all requisite corporate action by the
Purchaser and no other proceedings on the part of the Purchaser are necessary
to authorize this Agreement or to consummate the transactions so
contemplated. This Agreement has been duly and validly executed and delivered
by the Purchaser and assuming this Agreement has been duly authorized,
executed and delivered by the Seller, constitutes a valid and binding
agreement of the Purchaser, enforceable against the Purchaser in accordance
with its terms. Except as set forth on Schedule 4.02 hereto, the execution,
delivery and performance by the Purchaser of this Agreement and the
consummation of the transactions contemplated hereby will not: result in a
material breach of, or constitute a default (with or without notice or lapse
of time, or both) under, any provision of (a) any debt instrument, indenture,
mortgage agreement or other instrument or arrangement to which the Purchaser
is a party or by which it is bound, except for violations, breaches or
defaults, which in the aggregate would not have a Material Adverse Effect; or
(b) any judgment, order or decree by which the Purchaser is bound or affected.
4.03 Capitalization. The Purchaser's authorized capital stock
consists of 50,000,000 shares of common stock, no par value,
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and 25,000,000 shares of preferred stock, no par value, divided into Series A
and Series B Preferred Stock, of which not less than 15,000,000 shares of
common stock are now issued and outstanding and no shares of preferred stock
are issued and outstanding except as set forth on Schedule 4.03 hereto. The
CAHC Stock and the CAHC Preferred Stock are free and clear of any Liens and
the conveyance of any CAHC Stock or CAHC Preferred Stock to the Seller in
accordance with this Agreement will convey good and marketable title, free
and clear of all Liens. Except as set forth on Schedule 4.03 hereto, there
are no voting trusts, shareholder agreements, proxies or other agreements or
understandings in effect with respect to the voting or transfer of the CAHC
Stock or the CAHC Preferred Stock to which the Purchaser is a party. Except
for this Agreement or as set forth on Schedule 4.03 hereto, there are no
outstanding warrants, options, rights or agreements of any kind to acquire
the CAHC Stock or the CAHC Preferred Stock or any portion of the CAHC Stock
or the Preferred Stock. All of the CAHC Stock and the CAHC Preferred Stock is
fully paid and non-assessable.
4.04 No Brokers. Except with respect to fees payable by the Purchaser
to Quirk Carson Peppet Inc., neither the Purchaser nor any of its officers,
directors, employees or shareholders has employed any investment banker,
broker or finder or incurred any liability for any investment banking fees,
brokerage fees, commissions or finder's fees in connection with the
transactions contemplated by this Agreement.
4.05 Consents or Approvals; No Violations. To the best of the
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Purchaser's knowledge: (i) except for the filing of any notice during the
period subsequent to the date of this Agreement but before the Closing Date,
or from and after the Closing Date, that may be required under applicable
federal and/or state securities laws (which, if required, shall be filed on a
timely basis as may be required) or as set forth on Schedule 4.05 hereto, no
consent, approval or authorization of, or declaration to, or filing with, any
public body or governmental authority, domestic or foreign, is required for
the valid authorization, execution, delivery and performance by the Purchaser
of this Agreement or for the consummation by the Purchaser of the
transactions contemplated by this Agreement; provided, however; that no
representation is made by the Purchaser with respect to any filing, permit,
authorization, consent or approval, required by reason of the legal or
regulatory status of the Seller or the Corporation or by reason of facts
specifically pertaining to either of them.
4.06 Disclosure. Neither this Agreement nor any other written
document, certificate, instrument or written statement furnished or made to
the Seller or the Corporation by or on behalf of the Purchaser in connection
with the transactions contemplated hereby contains any untrue statement of a
material fact or omits to state a material fact necessary in order to make
the statements contained herein and therein not misleading. The Purchaser
hereby represents and warrants that it has consulted with its legal counsel
and has determined that upon the execution of this Agreement by all parties
hereto, it is required to disclose to the
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public, the Securities and Exchange Commission and any applicable state
securities regulatory authority, as part of its ongoing disclosure
obligations as a public company, the fact that the Purchaser has entered into
this Agreement. Consistent with that obligation, the Purchaser has drafted a
press release, attached hereto as Schedule 4.06 which meets the requirements
of such disclosure obligation and hereby represents and warrants that it will
not disseminate such press release to the public until the Seller has
reviewed and approved it; provided, however, that such review and approval
will not unreasonably delay the dissemination of such press release nor will
it cause the Purchaser to violate its disclosure obligation as a public
company.
4.07 Acquisition for Investment. The Purchaser is acquiring the Stock
for its own account for investment and not with a view to the distribution
thereof so as to cause a violation of the Act, or any rules or regulations
promulgated thereunder, and agrees that it will not sell, transfer,
distribute or otherwise dispose of any such Stock except pursuant to an
effective registration statement under the Act or under an exemption from the
registration requirements of the Act. The Purchaser understands and
acknowledges that the Stock has not been registered under the Act.
4.08 Survival of Representations and Warranties. The representations and
warranties of the Purchaser contained in this Article IV shall be complete,
correct and true as of the date hereof and/or the date of the Closing. The
Seller has entered into this Agreement based upon its own investigation,
evaluations and
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forecasts and is not relying upon any representation or inducement which was
or may have been made or implied by the Purchaser or anyone acting on its
behalf, except as expressly set forth in this Agreement. The representations
and warranties of the Purchaser shall survive the execution and delivery of
this Agreement and the Closing Date; provided however, that any claim by the
Seller or the Corporation with respect to any breach of any such
representation must be asserted on or before the first anniversary of the
Closing Date or shall be deemed waived.
ARTICLE FIVE
COVENANTS OF THE PARTIES
5.01 Conduct of Business by the Corporation. From the date of this
Agreement until the Closing Date, the Seller will cause the Corporation to
conduct its business in the ordinary course consistent with past practice,
will maintain its properties and perform all agreements to which it is a
party consistent with past practice and will not incur any obligations for
borrowed money in any one case exceeding $100,000.
5.02 Corporate Existence. The Corporation will maintain its corporate
existence in good standing and comply in all material respects with all
applicable laws and regulations of the United States, of any state or states
thereof, any political subdivision thereof and of any governmental authority.
5.03 Exclusivity. From the date hereof until September 30, 1997 or the
earlier termination of this Agreement (the "Standstill Period"), neither the
Seller nor any employee of the Corporation
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will solicit or negotiate in any way any offer from any other person or
entity to purchase all or any part of the Stock or any material assets of the
Corporation, other than sales of assets in the ordinary course of business.
During the Standstill Period, the Seller will deal exclusively with the
Purchaser with respect to the sale of the Stock and shall not enter into any
written or oral agreement or understanding with respect to acquisition of the
Stock or the Corporation.
5.04 Confidentiality. Except as required by law or as the parties
otherwise agree in writing, this Agreement will be kept strictly
confidential, and neither the Purchaser nor the Seller nor any person on
behalf of the Purchaser or the Seller shall disclose either the Purchaser's
or the Seller's interest in this Agreement, or any of the terms and
conditions thereof.
5.05 Purchaser Due Diligence. Prior to the date of this Agreement, the
Seller has made available to the Purchaser, copies of such documents and
financial statements as shall be reasonably required by the Purchaser in
connection with its execution of this Agreement. All information and
documentation delivered to the Purchaser or its representatives shall be kept
confidential by the Purchaser as required by this Agreement and may be
disclosed by the Purchaser only to its legal, investment banking or
accounting representatives for the sole purpose of its consideration of the
transactions contemplated herein. Any legal, investment banking, accounting
or other representatives to whom information is disclosed will be required to
execute a confidentiality agreement,
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in the form of Schedule 5.05 hereto, before such information is disclosed to
the Purchaser or any of its representatives.
5.06 Seller Due Diligence. Any and all transactions hereunder and the
effectiveness of this Agreement, is contingent upon and subject to the review
and approval by the Seller and his representatives of the securities
representing the CAHC Preferred Stock and the documents authorizing and
relating to the issuance of the CAHC Preferred Stock, which securities shall
be in material compliance with all the terms and conditions with respect to
the CAHC Preferred Stock contained in the Restated Letter of Intent.
Purchaser shall promptly provide to Seller draft copies of all of the
documents representing or in any way relating to the CAHC Preferred Stock,
together with draft copies of all of the documents representing or in any way
relating to the CAHC Preferred Stock to be acquired by Wafra Investment
Advisory Group, Inc. ("Wafra") pursuant to that certain agreement by and
between the Purchaser and Wafra dated August 15, 1997 (collectively, the
"Transactional Documents") and Wafra's comments on its Transactional
Documents. The Transactional Documents to be executed by the Seller shall be
identical in all respects to the Transactional Documents to be executed by
Wafra, except with respect to representation on the Board of Directors of the
Purchaser and the number of shares to be purchased, as provided in the
Restated Letter of Intent. Upon receipt of the Transactional Documents and
Wafra's comments on its Transactional Documents, the Seller shall have a
period of five (5) business days to provide the Purchaser with his comments
on the
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Transactional Documents to be signed by him and advise it as to whether or
not the Transactional Documents are acceptable to him in his sole and
absolute discretion. If the Purchaser fails or refuses to make the changes to
the Transactional Documents requested by the Seller and such changes are in
material compliance with the terms and conditions relating to the CAHC
Preferred Stock contained in the Restated Letter of Intent, such failure or
refusal to make changes shall be deemed a failure or refusal by Purchaser to
proceed to Closing and Seller shall be entitled to liquidated damages as
provided in Section 1.03(d) hereto. Prior to the Closing, the Purchaser will
at all reasonable times, permit full review and investigation by the Seller
and his representatives, accountants, lawyers, appraisers and other advisors,
of such documents as Seller shall reasonably require to satisfy himself that
the CAHC Preferred Stock is in material compliance with all the terms and
conditions of the Restated Letter of Intent and is at least as advantageous
to the Seller as the CAHC Preferred Stock which will be delivered to Wafra is
to Wafra. The Purchaser shall furnish to the Seller and his representatives
access to its officers and employees and such information applicable to the
Purchaser, its facilities or business as the Seller shall reasonably request
and copies of such documents and other materials as the Seller shall
reasonably request, and shall afford such access as the Seller and his
representatives may reasonably require for the purposes of such investigation.
5.07 Rights and Franchises. The Corporation will keep in
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full force and effect all Intellectual Property rights and all franchises,
rights and licenses, with respect to the foregoing or otherwise, now held by
it and that are useful or valuable to the business of the Corporation.
5.08 Reasonable Best Efforts. Subject to the terms and conditions herein
provided, each of the parties hereto agrees to use reasonable best efforts to
take, or cause to be taken, all action, and to do, or cause to be done, all
things necessary, proper or advisable to fulfill the conditions to the
parties' obligations hereunder and to consummate and make effective the
transactions contemplated by this Agreement, including, without limitation,
making all required filings and applications and complying with or responding
to any requests by governmental agencies and obtaining all consents,
approvals, orders, waivers, licenses, permits and authorizations required in
connection with the transactions contemplated hereby. If at any time after
the Closing Date any further action is necessary or desirable to carry out
the purposes of this Agreement, the parties hereto shall take or cause to be
taken all such necessary action, including, without limitation, the execution
and delivery of such further instruments and documents as may be reasonably
requested by the other party for such purposes or otherwise to consummate and
make effective the transactions contemplated hereby.
5.09 Public Announcements. The Seller and the Purchaser will consult with
each other before issuing any press release or otherwise making any public
statements with respect to the
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transactions contemplated by this Agreement, and shall not issue any such
press release or make any such public statement without the prior approval of
the Purchaser or Seller, as the case may be, except as may be required by
law.
5.10 Additional Consideration. The Seller and the Purchaser have
negotiated, executed and delivered an agreement (the "Earn Out Agreement", in
the form set forth as Schedule 5.10 hereto, pursuant to which the Seller will
be entitled to receive, as additional consideration, certain monies earned by
the Corporation in connection with contracts entered into by the Corporation,
or its Affiliates, successors or assigns, as more specifically provided
therein. The Earn Out Agreement will be held in escrow by the Escrow Agent in
accordance with an escrow agreement until the Closing.
5.11 Employment Agreements. The Purchaser has negotiated, executed and
delivered, employment agreements (each individually, an "Employment
Agreement" and collectively, the "Employment Agreements") with Robert J.
Longo, Jay Waxenbaum and Kevin Walsh, current officers of the Corporation, on
terms and conditions and for an employment period satisfactory to the parties
thereto. All Employment Agreements shall be held in escrow by the Escrow
Agent in accordance with an escrow agreement.
5.12 Insurance. The Purchaser covenants to maintain from and after the date
of the Closing, insurance with insurers reasonably satisfactory to the Seller,
in amounts and with the type of protection comparable to the Insurance Policies
currently
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maintained by the Corporation, naming the Seller, the Corporation and the
Corporation's current officers, directors and shareholders additional
insureds, to protect against hazard, environmental and general liability
claims. In the event that the Purchaser fails to maintain such coverage and a
claim is made against the Corporation, the Seller or any of the Corporation's
former officers, directors or shareholders, which claim would otherwise have
been covered by insurance, the Purchaser agrees to indemnify and hold
harmless any such person in connection with such claim.
5.13 Breaches. If any party is aware prior to Closing, that another party
has breached any provisions of this Agreement, the non-breaching party shall
give prompt written notice of such breach and an opportunity to cure such
breach to the breaching party, or such breach shall be deemed waived. If the
Purchaser is aware of a breach by the Seller or the Corporation prior to the
Closing, but nevertheless proceeds to Closing, such breach is deemed waived.
5.14 Release from Bonds. On or before the Closing Date, the Purchaser
will arrange for the Seller to be released from all indemnity agreements,
personal guarantees, performance payments or bid bonds relating to the
Corporation listed on Schedule 5.14 hereto.
5.15 Tax Matters. (a)The Seller and the Purchaser will, to the extent
permitted by applicable law, elect with the relevant taxing authority to
close the taxable period of the Corporation on the Closing Date. In any case
where applicable law does not permit a corporation to close its taxable year
on the Closing Date, then the
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obligation to pay Taxes, if any, attributable to the taxable period of the
Corporation beginning before and ending after the Closing Date shall be
allocated (i) to the Seller for the period up to and including the Closing
Date, and (ii) to the Purchaser for the period subsequent to the Closing
Date. For purposes of this Section 5.15, Taxes for the period up to and
including the Closing Date and for the period subsequent to the Closing Date
shall be determined on the basis of an interim closing of the books of the
Corporation as of the Closing Date, or to the extent not susceptible to such
allocation, by apportionment on the basis of elapsed days.
(b) The Seller shall be responsible for preparing and filing or causing
to be filed all Tax Returns required to be filed by or on behalf of the
Corporation and/or its operations and assets with respect to periods ending
on or before the Closing Date (taking into account applicable extensions) and
the Seller shall pay or cause to be paid any Taxes shown to be due thereon
(except to the extent properly accrued for on the Corporation's Interim
Balance Sheet). The Seller shall prepare all such Tax Returns in a manner
consistent with past practices and shall provide copies of such Tax Returns
to the Purchaser for the Purchaser's review and comment at least twenty (20)
business days prior to filing. The Purchaser shall be responsible for
preparing and filing or causing to be filed all Tax Returns required to be
filed by or on behalf of the Corporation and/or its operations and assets
with respect to periods which include any day after the Closing Date (taking
into
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account applicable extensions) and shall pay or cause to be paid any Taxes
shown to be due thereon subject to the amount of any Taxes that are the
responsibility of the Seller pursuant to this Section 5.15(b).
(c) With respect to any Tax Return of the Corporation required to be
filed by the Purchaser for a taxable period of the Corporation beginning
before and ending on or after the Closing Date, the Purchaser shall provide
the Seller with a statement setting forth the amount of Tax shown on such Tax
Return for which the Seller is responsible pursuant to Section 5.15(b) (the
"Statement") at least twenty (20) business days prior to the due date for
filing of such Tax Return (including extensions). Not later than five (5)
business days before the due date for payment of Taxes with respect to such
Tax Return, the Seller shall pay to the Purchaser an amount equal to the
Taxes shown on the Statement as being the responsibility of the Seller
pursuant to Section 5.15(b) hereof; provided, however, that if the Purchaser
and the Seller disagree with respect to any item on any such Tax Return, such
disagreement shall be conclusively resolved by an independent accounting firm
agreed upon by the Seller and the Purchaser or designated in accordance with
the Commercial Rules of the American Arbitration Association, with the cost
of such firm to be paid one-half by the Purchaser and one-half by the Seller.
No payment pursuant to this Section 5.15(c) shall excuse the Seller from his
indemnification obligations pursuant to Article VIII hereof should the amount
of Taxes as ultimately determined (on audit or
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otherwise), for the periods covered by such Tax Returns and which are the
responsibility of the Seller, exceed the amount of the Seller's payment
under this Section 5.15(c).
(d) The Seller may not file amended Tax Returns or refund claims in
respect of any taxable period of the Corporation ending on or prior to the
Closing Date without the prior written consent of the Purchaser, which
consent will not be unreasonably withheld.
(e) No loss, or any other tax attribute, occurring after the Closing
Date shall be carried back to a prior period, except if required by
applicable law, in which case any refund relating to such carryback shall be
the property of the Purchaser, and if paid to the Seller, the Seller shall
immediately pay such refund over to the Purchaser.
(f) The Seller shall indemnify and hold harmless the Purchaser and the
Corporation from the net amount of any tax liability arising out of a
determination that the basis of any of the Corporation's assets are less than
reflected on its books for tax purposes at the Closing Date.
(g) The Purchaser and the Seller agree to furnish or cause to be
furnished to each other, and each at their own expense, as promptly as
practicable, such information (including access to books and records) and
assistance, including making employees available on a mutually convenient
basis to provide additional information and explanations of any material
provided, relating to the Corporation as is reasonably necessary for the
filing of any Tax Return, for the preparation for any audit and for the
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prosecution or defense of any claim, suit or proceeding relating to any
adjustment or proposed adjustment with respect to Taxes. The Purchaser and
the Seller shall retain all information, records or documents in their
possession relating to the Corporation that might be relevant to computations
or payments required after the Closing Date with respect to Tax matters
relating to any taxable period ending on, prior to or including the Closing
Date until the expiration of the relevant statute of limitations or
extensions thereof or, if a proceeding has been instituted for which the
information, records or documents is required, until there is a final
determination with respect to such proceeding.
(h) The Seller and the Purchaser hereby agree that:
(i) The Purchaser shall promptly notify the Seller upon receipt by
the Purchaser of written notice of any Tax audits of or proposed assessments
against the Corporation or other proceeding which may affect the Seller's tax
liability for taxable periods ending on or prior to the Closing Date;
provided, however, that the failure of the Purchaser to give the Seller
prompt notice as required herein shall not relieve the Seller of any of his
obligations to pay such Taxes except and to the extent that Seller is
actually and materially prejudiced thereby. The Seller shall have the right
to represent the Corporation's interests in any such Tax audit or
administrative or court proceeding and to employ counsel of his choice;
provided that (i) the Seller shall keep the Purchaser apprised of the status
of any Tax audits or administrative or court proceedings and the Purchaser
shall have
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the right to consult with the Seller and his counsel, at the Purchaser's cost
and expense, in connection therewith and (ii) in the event that a settlement
or compromise thereof would obligate either the Corporation or the Purchaser
to make any monetary payment or would otherwise adversely affect either the
Corporation, the Purchaser or any of their respective Affiliates, the Seller
may not agree to such settlement or compromise without the prior consent of
the Purchaser, which consent will not be unreasonably withheld or delayed.
(ii) The Seller shall promptly notify Purchaser upon receipt by the
Seller of written notice of any Tax audit or proposed assessment or other
proposed change or adjustment which may affect either the Corporation or its
Tax attributes. The Seller shall keep Purchaser duly informed of the
progress thereof and, if the results of such Tax audit or proceeding may have
a Material Adverse Effect on the Corporation, Purchaser or any of their
Affiliates for any taxable period, including or ending after the Closing
Date, then the Seller may not agree to a settlement or compromise thereof
without the Purchaser's consent, which consent will not be unreasonably
withheld or delayed.
(i) The Seller shall be liable for and shall pay all sales, use, stamp,
documentary, filing, recording, transfer or similar fees or taxes or
governmental charges (including, without limitation, FCC, FAA, ICC, DOT,
real estate or motor vehicle registration, title recording or filing fees and
other amounts payable in respect of transfer filings) as levied by any taxing
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authority or governmental agency in connection with the transactions
contemplated by this Agreement (other than taxes measured by or with respect
to income imposed on the Seller or its Affiliates). The Seller hereby agrees
to file all necessary documents (including, but not limited to, all Tax
Returns) with respect to all such amounts in a timely manner.
(j) The Seller shall not take or omit to take any action out of the
ordinary course of business consistent with past practice if such action or
omission would have the effect of increasing the Tax liability relating to
the Corporation, the Purchaser, or any of the Purchaser's Affiliates.
ARTICLE SIX
CONDITIONS TO CLOSING
6.01 Conditions to Each Party's Obligations to Consummate the Agreement.
The respective obligations of each party to consummate this Agreement are
subject to the satisfaction or waiver of the following conditions on or
before the Closing Date:
(a) no statute, rule, regulation, executive order, decree, or
injunction shall have been enacted, entered, promulgated, enforced or
threatened by any court or governmental entity which prohibits or restricts
the consummation of this Agreement;
(b) all authorizations, approvals, consents and waivers required to
be obtained from and notices and filings required to be given to or made with
any governmental agency or third party shall have been obtained, given or
made;
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(c) the Employment Agreements shall have been executed and delivered
by the parties thereto and shall be held in escrow by the Escrow Agent until
the Closing; and
(d) the Earn Out Agreement shall have been executed and delivered
by the parties thereto and shall be held in escrow by the Escrow Agent until
the Closing.
6.02 Further Conditions to the Seller's Obligations. The obligation of
the Seller to consummate the transactions contemplated hereby at the Closing
is further subject to satisfaction or waiver by the Seller of the following
conditions on or before the Closing Date:
(a) the representations and warranties of the Purchaser contained
herein shall be true and correct in all material respects as of the date of
this Agreement and at and as of the Closing Date as though such
representations and warranties were made at and as of the date of this
Agreement;
(b) the Purchaser shall have entered into that certain Stock
Purchase Agreement (the "Stock Purchase Agreement") by and between the
Purchaser and The Robert J. and Andrea Longo Charitable Trust (the "Trust")
pursuant to which the Purchaser shall have agreed to acquire all of the
issued and outstanding common stock of the Corporation owned by the Trust, on
the terms and conditions contained in the Stock Purchase Agreement, and the
closing of such transaction shall take place simultaneously with the Closing
under this Agreement, it being the intention of the parties hereto that the
Purchaser shall acquire all of the issued and outstanding
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common stock of the Corporation;
(c) the Purchaser shall have performed and complied in all material
respects with all agreements, obligations, covenants and conditions required
by this Agreement to be performed or complied with by it on or prior to the
Closing;
(d) the Seller shall have received a duly executed certificate of
an authorized officer of the Purchaser to the effect that the conditions in
paragraphs (a) and (c) have been satisfied;
(e) the Purchaser shall have delivered to the Seller an opinion of
Greenberg, Traurig, et. al., counsel to the Purchaser, substantially in the
form of Schedule 6.02(e) hereto;
(f) all corporate actions, proceedings, instruments and documents
of the Purchaser required to carry out the transactions contemplated by this
Agreement or incidental thereto and all other related legal matters shall be
reasonably satisfactory to counsel for the Seller, and such counsel shall
have been furnished with such certified copies of such corporate actions and
proceedings and such other instruments, documents and opinions as it shall
have reasonably requested;
(g) the Seller shall have received evidence satisfactory to him that
he has been released from all indemnity agreements, personal guarantees,
performance, payment or bid bonds relating to the Corporation and identified
on Schedule 5.14 hereto;
(h) the Purchaser shall have tendered to the Seller the Purchase
Price, which shall include the Seller's satisfaction that the Purchaser has
provided for the payment of the Equipment Debt
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and other accrued liabilities identified on the Audited Balance Sheet as of
December 31, 1996 and certificates representing the CAHC Preferred Stock, in
form and substance satisfactory to the Seller in his sole and absolute
discretion;
(i) The Purchaser shall have provided to the Seller draft copies of
all of the Transactional Documents and Wafra's comments on its Transactional
Documents, Seller shall have provided the Purchaser with his comments on the
Transactional Documents within five (5) business days thereafter and shall
have advised Purchaser as to whether or not the Transactional Documents are
acceptable to him in his sole and absolute discretion and Purchaser shall
have made the changes to the Transactional Documents requested by the Seller,
so long as such changes are in material compliance with the terms and
conditions relating to the CAHC Preferred Stock contained in the Restated
Letter of Intent and the Transactional Documents to be executed by the Seller
are identical in all respects to the Transactional Documents to be executed
by Wafra, except with respect to representation on the Board of Directors of
the purchaser and the number of shares to be purchased, as provided in the
Restated Letter of Intent; and
(j) The Seller shall confirm that concurrent with the Closing he has been
elected as a member of the Board of Directors of CAHC and a member of the
Board of Directors of the Corporation as of the Closing Date and binding
written arrangements have been made so that the Seller will have the option
to serve on each of such Boards of Directors until the later of September 30,
2004 or the
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date on which the Seller no longer owns any CAHC Preferred Stock or the
common stock arising from the exercise of warrants or the conversion of the
CAHC Preferred Stock, to the extent permitted by applicable law, all as
required by the Restated Letter of Intent.
6.03 Deliveries by the Seller. At the Closing, the Seller will
deliver the following to the Purchaser:
(a) One or more certificates representing the Stock, accompanied by
stock powers duly endorsed in blank or accompanied by duly executed
instruments of transfer, and any other documents that are necessary to
transfer to the Purchaser good title to all the Stock free and clear of all
Liens;
(b) The stock books, stock ledgers, minute books, other corporate
records and corporate seals of the Corporation;
(c) Certified copies of the resolutions duly adopted by the Board
of Directors of the Corporation, authorizing the execution, delivery and
performance of this Agreement;
(d) An opinion of Okin, Hollander & DeLuca, L.L.P., counsel to the
Seller, substantially in the form attached hereto as Schedule 6.03(d);
(e) Any third party consents required in connection with the
transactions contemplated by this Agreement;
(f) All other documents, instruments and writings required to be
delivered by the Seller at/or prior to the Closing Date pursuant to this
Agreement; and
(g) A fully executed original of the New York Contract.
6.04 Further Conditions to the Purchaser's Obligations. The
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obligation of the Purchaser to consummate the transactions contemplated
hereby at the Closing is further subject to the satisfaction or waiver by the
Purchaser of the following conditions on or before the Closing Date:
(a) the representations and warranties of the Seller contained
herein shall be true and correct in all material respects as of the date of
this Agreement and at and as of the Closing Date as though such
representations and warranties were made at and as of the date of this
Agreement;
(b) the Purchaser shall have entered into the Stock Purchase
Agreement and the closing of the Purchaser's acquisition of all of the issued
and outstanding common stock of the Corporation owned by the Trust shall take
place simultaneously with the Closing under this Agreement;
(c) the Seller shall have performed and complied in all material
respects with all agreements, obligations, covenants and conditions required
by this Agreement to be performed or complied with by him on or prior to the
Closing;
(d) the Purchaser shall have received a duly executed certificate
from the Seller to the effect that the conditions in paragraphs (a) and (c)
have been satisfied;
(e) the Seller shall have delivered to the Purchaser an opinion of
Okin, Hollander & DeLuca, L.L.P. substantially in the form of Schedule
6.03(d) hereto;
(f) the Seller shall have delivered to the Purchaser evidence
satisfactory to the Purchaser that the transaction
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contemplated hereby is not subject to ISRA, or in lieu thereof, evidence
satisfactory to the Purchaser that the requirements of ISRA have been met;
(g) the Seller shall have delivered to the Purchaser certificates
representing all of the Stock, accompanied by stock powers duly endorsed in
blank or accompanied by duly executed instruments of transfer, in each case,
endorsed or executed by the Seller;
(h) all corporate actions, proceedings, instruments and documents
of the Seller required to carry out the transactions contemplated by this
Agreement or incidental thereto, and all other related legal matters shall be
reasonably satisfactory to counsel for the Purchaser, and such counsel shall
have been furnished with such certified copies of such corporate actions and
proceedings and such other instruments, documents and opinions as it shall
have reasonably requested,and the Purchaser shall be satisfied that it has
acquired one hundred (100%) percent of the issued and outstanding stock of
the Corporation together with all the assets and liabilities in connection
therewith; and
(i) the Seller shall have delivered to the Purchaser evidence
satisfactory to the Purchaser that the New York Contract has been executed
and delivered by the parties thereto, is in full force and effect, the
Corporation is not in default thereunder and there are no material defaults
therein on the part of any other party thereto.
6.05 Deliveries by the Purchaser. At the Closing,
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the Purchaser will deliver the following to the Seller:
(a) The Purchase Price including one or more certificates
representing the CAHC Preferred Stock, which certificates are satisfactory to
the Seller in his sole and absolute discretion, and any other documents that
are necessary to transfer to the Seller good title to the CAHC Preferred
Stock, free and clear of all liens;
(b) Certified copies of the resolutions, duly adopted by the Board
of Directors of the Purchaser, authorizing the execution, delivery and
performance of this Agreement;
(c) An opinion of Greenberg, Traurig, et. al., counsel to the
Purchaser, substantially in the form attached hereto as Exhibit 6.02(e);
(d) All other documents, instruments and writings required to be
delivered by the Purchaser at or prior to the Closing Date pursuant to this
Agreement;
(e) Fully executed Employment Agreements; and
(f) The fully executed Earn Out Agreement.
ARTICLE SEVEN
TERMINATION AND ABANDONMENT
7.01 Termination. This Agreement may be terminated at any time prior to
the Closing by the mutual written consent of each of the Purchaser and the
Seller.
7.02 Effect of Termination. In the event of termination of this
Agreement and abandonment of the transactions contemplated
60
<PAGE>
hereby by the parties hereto pursuant to Section 7.01 hereto, this Agreement
shall forthwith become null and void and of no further effect, without any
liability on the part of any party or its directors, officers, partners,
Affiliates, employees, agents or security holders, other than as provided in
Section 5.04 and Article VIII hereof, and the obligation of the parties
hereto to return to the other parties any documents received in connection
with the transactions contemplated herein. Nothing in this Section 7.02
shall relieve any party from any liability for any willful breach of this
Agreement or any intentional tort.
ARTICLE EIGHT
INDEMNIFICATION
8.01. Indemnification. From and after the Closing, the Purchaser shall
indemnify and hold harmless the Seller and the Corporation (for the period
prior to the Closing Date) and their respective members, partners, officers,
directors, Affiliates, shareholders and agents (the "Seller Indemnified
Parties") from and against any costs or expenses (including without
limitation, reasonable attorneys' fees and the reasonable out-of-pocket
expenses of testifying and preparing for testimony and responding to document
and other information requests, and in connection with the enforcement of any
rights hereunder, whether or not a party to such litigation), judgments,
liabilities, fines, amounts paid in settlement, losses, claims and damages,
net of any tax benefits or insurance recoveries actually received by the
Seller Indemnified Party, (collectively, "Damages"), as incurred, to the
extent they
61
<PAGE>
relate to, arise out of or are the result of:
(i) the breach of or any inaccuracy in any of the representations
and warranties of the Purchaser contained in or made pursuant to the Letter
of Intent, the Restated Letter of Intent or this Agreement;
(ii) the breach or nonperformance of any covenant or agreement of
the Purchaser contained in this Agreement;
(iii) any claim or assertion by any lender under the Equipment Debt
that the Seller is indebted to it for any amount as a result of any
transaction, event or occurrence taking place after the Closing Date; and
(iv) any and all Damages arising out of or resulting from any claims
made by any parties in connection with any Action identified on Schedule 3.09
hereto.
(B) From and after the Closing, the Seller shall indemnify and hold
harmless the Purchaser and its members, partners, officers, directors,
Affiliates, shareholders and agents (the "Purchaser Indemnified Parties")
from and against any costs or expenses (including without limitation,
reasonable attorneys' fees and the reasonable out-of-pocket expenses of
testifying and preparing for testimony and responding to document and other
information requests, and in connection with the enforcement of any rights
hereunder, whether or not a party to such litigation, judgment, liabilities,
fines, amounts paid in settlement, losses, claims and damages, net of any tax
benefits or insurance recoveries actually received by the Purchaser
Indemnified Party (collectively,
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<PAGE>
the "Damages"), as incurred, to the extent they relate to, arise out of or
are the result of:
(i) the breach of or any inaccuracy in any of the representations and
warranties of the Seller contained in or made pursuant to this Agreement;
(ii) the breach or nonperformance of any covenant or agreement of the
Purchaser contained in this Agreement;
(iii) any claim or assertion by any lender under the Equipment Debt that
the Seller is indebted to it for any amount as a result of any transaction,
event or occurrence taking place prior to the Closing Date;
(iv) any claim or assertion by any federal, state or local taxing
authority that the Corporation is indebted to it for any sales or income
taxes for the period prior to the Closing Date; and
(v) any claim or assertion by any beneficiary under any Employee Benefit
Plan described on Schedule 3.07 (a) that was in effect prior to the Closing
Date but was replaced by the Purchaser at the Closing, that the Employee
Benefit Plan or its sponsor is liable to him with respect to obligations
arising prior to the Closing Date.
(c) Notwithstanding the foregoing, in the absence of fraud or
intentional misrepresentation by the Seller, the indemnification provided for
in Section 8.01 shall be limited as follows:
(i) The Seller shall not be liable with respect to any claim for
indemnification hereunder unless the aggregate amount of all such claims for
indemnification asserted by the Purchaser
63
<PAGE>
Indemnified Parties exceeds the sum of $330,000 (excluding claims for income
and sales taxes), and the rights of the Purchaser Indemnified Parties to seek
indemnification hereunder shall be limited to the amounts of such claims in
excess of $330,000; and
(ii) the total liability hereunder of Seller for indemnification
shall in no event exceed the aggregate amount of $500,000 (excluding claims
for income and sales taxes).
8.02. Claims. (a) If an Indemnified Party intends to seek
indemnification pursuant to this Article VIII, such Indemnified Party shall
promptly notify the Indemnifying Party, in writing, of such claim describing
such claim in reasonable detail, provided, that the failure to provide such
notice shall not affect the obligations of the Indemnifying Party unless and
only to the extent it is actually prejudiced thereby. In the event that
such claim involves a claim by a third party against the Indemnified Party
which seeks Damages in respect of which indemnification pursuant to this
Article VIII would be available, the Indemnifying Party shall have thirty
(30) days after receipt of such notice to decide whether it will undertake,
conduct and control, through counsel of its own choosing and at its own
expense, the settlement or defense thereof, and if it so decides, the
Indemnified Party shall cooperate with it in connection therewith, provided,
that the Indemnified Party may participate in such settlement or defense
through counsel chosen by it, and provided further, that the fees and
expenses of such counsel shall be borne by the Indemnified Party. The
Indemnifying Party shall not, without the written
64
<PAGE>
consent of the Indemnified Party (which consent shall not be unreasonably
withheld), settle or compromise any action. The Indemnified Party shall have
the right to settle any claim or action without the consent of the
Indemnifying Party; provided, that if the Indemnifying Party does not notify
the Indemnified Party within thirty (30) days after the receipt of the
Indemnified Party's notice of a claim of indemnity hereunder that it elects
to undertake the defense thereof, the Indemnified Party shall have the right
to contest, settle or compromise the claim but shall not thereby waive any
right to indemnity therefor pursuant to this Agreement; provided, further as
long as the Indemnifying Party is contesting any such claim in good faith,
the Indemnified Party shall not pay or settle any such claim without the
consent of the Indemnifying Party (which consent shall not be unreasonably
withheld).
(b) The Indemnifying Party and the Indemnified Party shall
cooperate fully in all aspects of any investigation, defense, pre-trial
activities, trial, compromise, settlement or discharge of any claim in
respect of which indemnity is sought pursuant to Article VIII, including, but
not limited to, by providing the other party with reasonable access to
employees and officers (including as witnesses) and other information.
ARTICLE NINE
MISCELLANEOUS PROVISIONS
9.01 Amendment and Modification. This Agreement may be amended or
modified at any time by the parties hereto, pursuant to
65
<PAGE>
an instrument in writing signed by the Purchaser and the Seller.
9.02 Extension; Waiver. At any time prior to the Closing Date, the
party entitled to the benefit of any respective term or provision hereof may
(a) extend the time for the performance of any of the obligations or other
acts of the other party hereto, (b) waive any inaccuracies in the
representations and warranties contained herein or in any document,
certificate or writing delivered pursuant hereto, or (c) waive compliance
with any obligation, covenant, agreement or condition contained herein. Any
agreement on the part of a party to any such extension or waiver shall be
valid only if set forth in an instrument in writing signed by the party
entitled to the benefits of such extended or waived term or provision.
9.03 Entire Agreement; Assignment. This Agreement and the Schedules
attached hereto and made a part hereof (a) constitute the entire agreement
between the parties hereto with respect to the subject matter hereof and
supersede all other prior agreements and understandings, including the Letter
of Intent and Restated Letter of Intent (except those provisions entitled
"Confidentiality", Indemnification" and "Expenses"), but excluding the Escrow
Agreement, both written and oral, between the parties hereto with respect to
the subject matter hereof and (b) shall not be assigned, by operation of law
or otherwise by a party hereto, without the prior written consent of the
other parties.
9.04 Validity. The invalidity or unenforceability of any term or
provision of this Agreement in any situation or
66
<PAGE>
jurisdiction shall not effect the validity or enforceability of the other
terms or provisions hereof or the validity or enforceability of the offending
term or provision in any other situation or in any other jurisdiction.
9.05 Expenses. Whether or not this Agreement and the transactions
contemplated hereby are consummated, and except as otherwise expressly set
forth herein, all costs and expenses (including legal fees and expenses)
incurred in connection with this Agreement and the transactions contemplated
hereby shall be paid by the party incurring such expenses.
9.06 Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same agreement.
9.07 Successors, Assigns, etc. This Agreement is binding upon the
parties and their heirs, personal representatives, successors and assigns, as
the case may be.
9.08 Governing Law; Jurisdiction. This Agreement shall be construed in
accordance with and governed by the laws of the State of New Jersey without
regard to principles of conflict of laws. The parties agree that any disputes
and matters arising from this agreement shall be brought before the Superior
Court of New Jersey or, if federal jurisdiction exists, before the United
States Court for the District of New Jersey, and each party agrees to submit
to the jurisdiction of said courts, and to waive any defenses based upon
grounds of lack of jurisdiction, improper venue or
67
<PAGE>
convenience.
9.09 Severability. If any part of this Agreement is declared to be
invalid or unenforceable, then such invalidity or unenforceability shall not
affect the remainder of this Agreement which shall continue in full force and
effect.
9.10 Notices. Unless otherwise provided herein, all notices, demands,
requests, consents or other communications required or permitted to be given
or made under this Agreement shall be made in writing and signed by the party
giving the same and shall be deemed to have been given or made when hand
delivered or mailed by United States certified mail, return receipt
requested, postage prepaid, to the following addresses or to any other
addresses of which all parties are notified in writing:
If to the Seller (or the Corporation prior to the Closing Date):
Mr. Robert J. Longo
R.J. Longo Construction Co., Inc.
305 Palmer Road
Denville, New Jersey 07834
copy to:
Paul Hollander, Esq.
Okin, Hollander & DeLuca, L.L.P.
One Parker Plaza
Fort Lee, New Jersey 07024
If to the Purchaser:
Mr. Roger Tuttle, President
Compost America Holding Company, Inc.
320 Grand Avenue
Englewood, New Jersey 07631
copy to:
Theodore Mason, Esq.
68
<PAGE>
Greenberg Traurig
2050 One Commerce Square
2005 Market Street
Philadelphia, PA 19103
9.11 Headings. The subject headings of the sections and subsections of
this Agreement are included for purposes of convenience only, and shall not
affect the construction or interpretation of any of its provisions.
9.12 Parties in Interest. This Agreement shall be binding upon and
inure solely to the benefit of each party hereto and its Affiliates and
nothing in this Agreement, express or implied, is intended by or shall confer
upon any other person any rights, benefits or remedies of any nature
whatsoever under or by reason of this Agreement.
9.13 No Waivers. Except as otherwise expressly provided herein, no
failure to exercise, delay in exercising, or single or partial exercise of
any right, power or remedy by any party, and no course of dealing between the
parties, shall constitute a waiver of any such right, power or remedy.
9.14 Mutual Releases. The Purchaser and the Seller shall have executed
and delivered to each other, general releases, substantially in the form of
Schedule 9.14 hereto, for contractual claims occurring prior to the Closing
Date, in favor of each other and their respective past or present employees,
officers, shareholders, and Affiliates, except for obligations arising under
this Agreement.
9.15. Independent Counsel. The parties hereto have each been represented
by and consulted with their own respective independent
69
<PAGE>
counsel and have resolved with such counsel any questions they may have had
as to the meaning, effect or interpretation of this Agreement and the
Schedules thereto. The decision of the parties to enter into this Agreement
is a fully informed decision, and the parties are aware of all legal and
other ramifications of such decision.
9.16 Construction. In all events, relative words in the singular shall
include the plural and the masculine gender shall include the feminine and
neuter (and vice versa) whenever the context so requires. The parties hereto
agree that the terms and language of this Agreement were the result of
negotiations between the parties and, as a result, there shall be no
presumption that any ambiguities in this Agreement shall be resolved against
any party. Any controversy over the construction of this Agreement shall be
decided neutrally, in light of its purposes, and without regard to events of
authorship or negotiation.
9.17 Further Assurances. The parties hereto agree to execute and deliver
such further instruments and to perform any acts that may be necessary or
reasonably requested in order to give full effect to this Agreement. Each
party, in order to carry out this Agreement, shall use all reasonable efforts
to provide such information, execute such further instruments and documents
and take such actions as maybe reasonably requested by the other and not
inconsistent with the provisions of this Agreement and not involving the
assumption of obligations or liabilities different from or in excess or in
addition to those expressly provided for
70
<PAGE>
herein. From and after the date of this Agreement until the Closing, the
Seller will cooperate with the Purchaser in providing such information to
Wafra in connection with the transactions contemplated herein as Wafra may
reasonably require.
9.18 Waiver of Trial by Jury. The Purchaser, the Seller and the
Corporation in any litigation (whether or not arising out of or relating to
this Agreement or any other obligation owed by them) in which any of the
parties shall be adverse to any of the other parties hereto, hereby
voluntarily, knowingly and irrevocably waive any constitutional or other
right each may have to a trial by jury.
IN WITNESS WHEREOF, the parties have duly executed this Agreement as of
the date and year first above written.
WITNESS:
- ------------------------ ----------------------------
Robert J. Longo
ATTEST: R.J. Longo Construction Co., Inc.
By:
- ------------------------ -------------------------
Robert J. Longo, President
ATTEST: Compost America Holding Company, Inc.
By:
- ------------------------ -------------------------
Roger E. Tuttle, President
71
<PAGE>
GENERAL RELEASE
This Release, dated _______, __, 1997, is given by Compost America Holding
Company, Inc. and R.J. Longo Construction Co., Inc., jointly and severally on
behalf of themselves and their directors, officers and employees (hereinafter
referred to collectively as the "Releasor"), having an address at 320 Grand
Avenue, Englewood, New Jersey 07631 to Roger E. Tuttle, Pasquale DiLeo, Victor
Wortman, Robert Wortman and Compost America Holding Company, Inc. (all of the
preceding being hereinafter referred to collectively as the "Releasee"), having
an address at 320 Grand Avenue, Englewood, New Jersey, 07631.
Background
This Release is being executed and delivered pursuant to the terms and
conditions of a Stock Purchase Agreement (the "Stock Purchase Agreement") dated
September 17, 1997 between Robert J. Longo, ("Seller"), R.J. Longo Construction
Co., Inc. (the "Corporation") and Compost America Holding Company, Inc., (the
"Purchaser") the terms of which are incorporated herein by reference. Terms
used herein which are defined in the Stock Purchase Agreement shall have the
respective meanings set forth in the Stock Purchase Agreement, unless otherwise
defined herein.
In consideration of the mutual covenants and agreements contained in the
Stock Purchase Agreement and herein, the parties hereto agree as follows:
1. Release. Subject to the terms set forth in Paragraph 8 hereof,
Releasor hereby releases and forever discharges Releasee,
<PAGE>
and where applicable their respective directors, officers, employees,
partners, joint venturers, agents, attorneys, heirs or legal representatives
and all who succeed to their rights and responsibilities, such as their
successors and/or assigns, of and from any and all claims, demands,
obligations, contracts, agreements, damages, controversies, suits,
liabilities, actions or causes of action of any kind whatsoever in law or in
equity which the Releasor, its respective administrators, successors or
assigns ever had, now have, or hereinafter can, shall or may have, whether
known or unknown, suspected or unsuspected, relating to, arising out of or in
connection with any matter, event or circumstance which refers, relates to or
arises with respect to the Corporation which has occurred from the beginning
of the world to the date hereof (collectively the "Claims"). The Releasor
does hereby covenant and agree never to institute or cause to be instituted
or to continue prosecution of any suit or other form of action or proceeding
of any kind or nature whatsoever against Releasee and where applicable any of
their respective directors, officers, employees, partners, joint venturers,
agents, attorneys, heirs or legal representatives and all who succeed to
their rights and responsibilities, such as their successors and/or assigns,
based on any Claims. Notwithstanding any contrary term or provision of this
Release, to the extent this Release encompasses a release in favor of a
director, officer, employee, agent or attorney of any corporation referred to
herein, such release shall only extend to the acts of such director, officer,
employee, agent or attorney
2
<PAGE>
performed in the ordinary course of business which were (i) duly authorized
or otherwise ratified by the respective corporation or by Robert J. Longo
individually or on his behalf and (ii) were within the scope of their
respective employment, representation or retention by such corporation or by
Robert J. Longo individually or on his behalf.
2. Consideration. The Releasor has received good, valuable and
sufficient consideration for making this Release. The Releasor agrees that it
will not seek anything further, directly or indirectly, for themselves or any
person, corporation, partnership or other entity including any other payment
from the Releasee with respect to the Claims released pursuant to this Release.
The Releasor further acknowledges and warrants that this Release shall not be
voidable for any reason including, but not limited to, any claim of mistake of
fact or the adequacy or inadequacy of consideration.
3. Binding. The Releasor is bound by this Release. Any person or
corporation, partnership or other entity which succeeds to the Releasor's rights
and responsibilities is also bound. This Release is made for the benefit of the
Releasee, their heirs, legal representatives, agents, employees, consultants and
representatives and their affiliates and all who succeed to their rights and
responsibilities, such as their successors and/or assigns.
4. Effect. This Release is intended to be in the broadest form with
respect to the matters covered hereby. It is understood and agreed that the
Releasor hereby expressly waives any and all
3
<PAGE>
laws or statutes, of any jurisdiction whatsoever, which may provide that a
general release does not extend to claims not known or suspected to exist at
the time of executing a release which if known would have materially affected
the decision to give such release. It is expressly intended and agreed that
this Release is intended to be final and that although Releasor may hereafter
discover facts in addition to or different from those which it now knows or
believes to be true with respect to the matters covered by this Release, it
is the intent of the Releasor to fully, finally and forever release and
discharge the matters described herein notwithstanding the discovery or
existence of such additional or different facts. This Release is not and
shall not be construed as a release of any person or entity not mentioned
herein.
5. Independent Legal Counsel. The Releasor acknowledges that it has had
the opportunity to consult with independent legal counsel regarding the legal
effect of this Release and that it enters into it freely and voluntarily and
under no constraint or coercion.
6. Governing Law. This Release shall be governed by and construed in
accordance with the laws of the State of New Jersey.
7. Entire Agreement. This Release, the Stock Purchase Agreement and the
exhibits annexed thereto or referred to therein shall constitute the entire
agreement of the parties relating to the subject matter of this Release.
8. Survival of Stock Purchase Agreement. Notwithstanding any other
provision contained herein, nothing contained in this
4
<PAGE>
Release shall release or discharge Seller, the Corporation or the Purchaser
with respect to their respective undertakings, warranties or representations
made pursuant to the terms and conditions of the Stock Purchase Agreement
which shall survive the execution and delivery hereof.
9. Captions. Any article, title, paragraph heading or caption contained
in this Release is for convenience only and shall not in any way be construed to
define, describe or limit the terms
hereof.
IN WITNESS WHEREOF, the Releasor has duly executed this Release the day and
year first above written.
ATTEST: COMPOST AMERICA HOLDING
COMPANY, INC.
_______________________ By:____________________________
Roger E. Tuttle, President
ATTEST: R.J. LONGO CONSTRUCTION CO., INC.
_______________________ By:____________________________
Robert J. Longo, President
5
<PAGE>
STATE OF NEW JERSEY }
COUNTY OF }ss.:
BE IT REMEMBERED, that on this ____ day of ________, 1997, before me the
subscriber personally appeared _______________ who, I am satisfied, is the
person who signed the within instrument as the President of
_______________________, the corporation named therein and he thereupon
acknowledged that the said instrument made by the corporation and sealed with
its corporate seal, was signed, sealed with the corporate seal and delivered by
him as such officer and is the voluntary act and deed of the corporation, made
by virtue of authority from its Board of Directors.
______________________________________
6
<PAGE>
SCHEDULE A
<PAGE>
SCHEDULE 1.02
ESCROW AGREEMENT
<PAGE>
SCHEDULE 1.03
EQUIPMENT DEBT
1) U.S. Bancorp dated May 31, 1996
Original Principal Amount of $5,500,000
Note # 7152897443-18
As of 9/30/97 Principal Amount outstanding $5,054,257.87
2) TFC Textron/Assigned to Charter Financial, Inc.
Dated March 28, 1996
Original Principal Amount of $1,091,839.80
Note # Schedule 00003
As of 9/30/97 Principal Amount Outstanding $643,318.66
3) TFC Textron/Assigned to Charter Financial, Inc.
Dated May 3, 1996
Original Principal Amount of $1,489,789.20
Note # Schedule 00004
As of 9/30/97 Principal Amount Outstanding $913,066.06
4) TFC Textron/Assigned to Charter Financial, Inc.
Dated May 14, 1996
Original Principal Amount of $327,981.00
Note # Schedule 00005
As of 9/30/97 Principal Amount Outstanding $197,205.88
5) The CIT Group Dated March 6, 1996
Original Principal Amount of $335,439.44
Note # _______________
As of 9/30.97 Principal Amount Outstanding $248,443.99
Total original principal amount of Equipment Debt $8,745,049.44
Total principal amount outstanding as of 9/30/97 $7,056,292.46
<PAGE>
SCHEDULE 1.03(a)
CAHC Series A and B Preferred Stock
<PAGE>
SCHEDULE 2.01
ADDITIONAL STOCK OWNERSHIP; VOTING ARRANGEMENTS
Additional Stock Ownership
The Robert J. and Andrea Longo Charitable Trust
100 Shares of Common Stock, no par value
Voting Arrangements
None
<PAGE>
SCHEDULE 2.02
CONSENTS, APPRAISALS, BREACHES, DEFAULTS
None
<PAGE>
SCHEDULE 3.01(b)(i)
Jurisdictions in which Corporation is
Authorized to do Business as of 9/17/97
Delaware
Illinois
Maryland
Massachusetts
New Jersey
New York
Tennessee
Texas
The Corporation is currently in the process of qualifying
to do business in Virginia.
<PAGE>
SCHEDULE 3.01(b)(iii)
BYLAWS
<PAGE>
SCHEDULE 3.02
SUBSIDIARIES
None
<PAGE>
SCHEDULE 3.03
VOTING ARRANGEMENTS
None
<PAGE>
Page 1 of 2
SCHEDULE 3.04
AFFILIATE TRANSACTIONS
Agreements of Indemnification and Guaranty
* SAFECO: Cross Indemnification By And Between:
- R.J. LONGO CONSTRUCTION CO., INC.
- STANDARD ENGINEERS AND CONSTRUCTORS, INC.
- ARJAY - STANDARD CORP.
- LONGO - PUERTO RICO, INC.
- ARJAY ASPHALT, INC.
- WEST ESSEX BLASTING CORP.
- DEWATERING UNLIMITED, INC.
- ARJAY AVIATION SERVICES, LTD.
- ROBERT J. LONGO - INDIVIDUALLY
- MICHELE LONGO - INDIVIDUALLY
* FIRST UNION BANK:
Robert J. Longo's Individual Guaranty And Suretyship Agreement
of Borrowings of R.J. Longo Construction Co., Inc., Robert J.
Longo's Guaranty and Suretyship Agreement of Borrowings of
Longo-Puerto Rico, Inc., Grid Note dated June 30, 1995 in the
original principal amount of $6,000,000 by R.J. Longo
Construction Co., Inc. and Longo-Puerto Rico, Inc.
R.J. Longo Construction Co., Inc.'s Agreement of Guaranty and
Suretyship of Borrowings of Longo-Puerto Rico, Inc. and Longo
Puerto Rico, Inc.'s Agreement of Guaranty and Suretyship of
Borrowings of R.J. Longo Construction Co., Inc.
THE CIT GROUP:
* - R.J. Longo Construction Co., Inc. - Corporate Guaranty
of Borrowings By Longo Puerto Rico, Inc.
* GENERAL ELECTRIC CAPITAL CORP. OF P.R.:
- R.J. Longo Construction Co., Inc. Corporate Guaranty
dated 7/16/96 of Borrowings By Longo Puerto Rico, Inc.
Promissory Note dated 12/19/96 in the original principal
amount of $123,356.50
Promissory Note dated 7/16/96 in the original principal
amount of $934,626.50
Promissory Note dated 8/14/96 in the original principal
amount of $704,265,000.
There are also several additional promissory notes to General
Electric Capital Corp. of P.R. which are subject to cross-corporate
guaranties by and between Longo-Puerto Rico, Inc.
and Longo-de Puerto Rico, Inc., all of which will be removed
from this Schedule 3.04 prior to Closing.
<PAGE>
Page 2 of 2
SCHEDULE 3.04
AFFILIATE TRANSACTIONS
* METLIFE CAPITAL:
- R.J. Longo Construction Co., Inc. Corporate Guaranty of
Borrowings by Longo Puerto Rico, Inc.
* will be removed from this Schedule 3.04 prior to Closing
Lease Agreement:
R.J. Longo Construction Co., Inc. leases its offices at
305 Palmer Road, Denville, N.J. from a Trust, the
beneficiaries of which are the children of Robert J. Longo,
Sr.
Other Agreements:
Penske-Ryder - DeWatering Unlimited, Inc. Arrangement
<PAGE>
SCHEDULE 3.04
General Electric Capital Corporation
<PAGE>
SCHEDULE 3.04
METLIFE CAPITAL
<PAGE>
Page 1
of 2
SCHEDULE 3.04
AFFILIATE TRANSACTIONS
* Officer Loan: $768,207.56 Due to R.J. Longo Construction
Co., Inc. from Robert J. Longo (No note)
Agreements of Indemnification and Guaranty
SAFECO: Cross Indemnification By And Between:
- R.J. LONGO CONSTRUCTION CO., INC.
- STANDARD ENGINEERS AND CONSTRUCTORS, INC.
- ARJAY - STANDARD CORP.
- LONGO - PUERTO RICO, INC.
- ARJAY ASPHALT, INC.
- WEST ESSEX BLASTING CORP.
- DEWATERING UNLIMITED, INC.
- ARJAY AVIATION SERVICES, LTD.
- ROBERT J. LONGO - INDIVIDUALLY
- MICHELE LONGO - INDIVIDUALLY
FIRST UNION BANK:
Robert J. Longo's Individual Guaranty And Suretyship Agreement
of Borrowings of R.J. Longo Construction Co., Inc., Robert J.
Longo's Guaranty and Suretyship Agreement of Borrowings of
Longo-Puerto Rico, Inc., Grid Note dated June 30, 1995 in the
original principal amount of $6,000,000 by R.J. Longo
Construction Co., Inc. and Longo-Puerto Rico, Inc.
R.J. Longo Construction Co., Inc.'s Agreement of Guaranty and
Suretyship of Borrowings of Longo-Puerto Rico, Inc. and Longo
Puerto Rico, Inc.'s Agreement of Guaranty and Suretyship of
Borrowings of R.J. Longo Construction Co., Inc.
THE CIT GROUP:
- R.J. Longo Construction Co., Inc. - Corporate Guaranty
of Borrowings By Longo Puerto Rico, Inc.
GENERAL ELECTRIC CAPITAL CORP. OF P.R.:
- R.J. Longo Construction Co., Inc. Corporate Guaranty
dated 7/16/96 of Borrowings By Longo Puerto Rico, Inc.
Promissory Note dated 12/19/96 in the original
principal amount of $123,356.50
Promissory Note dated 7/16/96 in the original principal
amount of $934,626.50
Promissory Note dated 8/14/96 in the original principal
amount of $704,265,000.
METLIFE CAPITAL:
- R.J. Longo Construction Co., Inc. Corporate
<PAGE>
Guaranty of Borrowings by Longo Puerto Rico, Inc.
Page 2 of 2
SCHEDULE 3.04
AFFILIATE TRANSACTIONS
AFFILIATE LOANS:
* Loans Receivable From Affiliates to R.J. Longo
Construction Co., Inc. (No Notes):
Longo Puerto Rico, Inc. $2,594,558.41
DeWatering Unlimited, Inc. 64,892.75
Totowa Constructors, Inc. 39,750.00
Arjay Aviation Services, Inc. 625.00
-------------
Total $2,699.826.16
=============
* Loans Payable from R.J. Longo Construction Co. Inc. to Affiliates
(No Note):
Arjay Asphalt, Inc. $ 37,296.68
-------------
Total $ 37,296.68
=============
Lease Agreement:
R.J. Longo Construction Co., Inc. leases its offices at
305 Palmer Road, Denville, N.J. from a Trust, the
beneficiaries of which are the children of Robert J. Longo,
Sr.
Employee Benefit Plans:
See Schedule 3.07(a)
Management Arrangement with Longo Puerto Rico, Inc. [To
Come]
Penske-Ryder - DeWatering Unlimited, Inc. [To Come]
* Excluded Asset
<PAGE>
SCHEDULE 3.04
AGREEMENT OF INDEMNIFICATION/
CROSS INDEMNIFICATION AND GUARANTIES
SAFECO
<PAGE>
SCHEDULE 3.04
FIRST UNION (f/k/a FIRST FIDELITY BANK, N.A.)
LOAN DOCUMENTS
<PAGE>
SCHEDULE 3.05
BREACHES, DEFAULTS
None
<PAGE>
Exhibit 2.2
FIRST AMENDMENT TO STOCK PURCHASE AGREEMENT dated as of September 30,
1997 (the "First Amendment"), by and among Robert J. Longo (the "Seller"),
Compost America Holding Company, Inc. (the "Purchaser") and R. J. Longo
Construction Co., Inc. (the "Corporation") amending and supplementing that
certain Stock Purchase Agreement dated as of September 17, 1997 (the
"Original Agreement") by and among the Seller, the Purchaser and the
Corporation. Terms defined in the Original Agreement are used herein as
therein defined unless otherwise defined herein.
WITNESSETH:
WHEREAS, the Seller, the Purchaser and the Corporation previously entered
into the Original Agreement and now wish to amend certain provisions of the
Original Agreement in order to facilitate in an orderly fashion the
consummation of the purchase of the Seller's common stock of the Corporation
identified in the Original Agreement (the "Stock").
NOW, THEREFORE, in consideration of the mutual covenants, agreements and
representations and warranties contained in this First Amendment and
intending to be legally bound hereby, the parties hereto agree as follows:
1. The Seller agrees that the Closing Date set forth in Section 1.04 of
the Original Agreement shall be extended to a date that is on or before
October 31, 1997, as determined by the Purchaser. The Seller further agrees
that the Standstill Period defined in Section 5.03 of the Original Agreement
is extended until the earlier to occur of (i) the Closing Date, or (ii) the
close of business on October 31, 1997.
2. There shall be added an additional subparagraph (k) to Section 6.02 of
the Original Agreement which shall make it a condition of the Seller's
obligation to consummate the Original Agreement that the Royalty Agreement
(as hereinafter defined) shall have been executed and delivered by the
parties hereto on or before the Closing Date.
3. In consideration of Seller's consent to the extension of the Closing
Date and the Standstill Period specified in paragraph 1 of this First
Amendment, the Purchaser and the Seller agree that they shall negotiate,
execute and deliver, on or before the Closing Date, a mutually acceptable
agreement (the "Royalty Agreement"), substantially on the terms and
conditions contained on the attached Exhibit A, which shall entitle the
Seller to receive as additional consideration, royalty payments as provided
for in Exhibit A, in connection with that certain New York City Solid Waste
Contract (the "NYCSW Contract"), or any contract in replacement or
substitution thereof, in the event that the
<PAGE>
Corporation shall elect, to proceed with its obligations under the NYCSW
Contract, which election shall be made within fifteen (15) days after the
Closing Date. In no event shall the Corporation obtain the benefits of the
NYCSW Contract without fulfilling its obligations to Seller under the Royalty
Agreement. If the Corporation shall elect to abandon the NYCSW Contract, then
the Royalty Agreement shall be deemed null and void and of no further force
or effect.
4. During the period from the date hereof until the earlier to occur of
(i)the Closing Date, or (ii)October 31, 1997, the Seller and the Corporation
shall be entitled to do any and all things which they in their sole judgment
deem necessary or desirable in connection with the submission of a bid in the
name of the Corporation, including, but not limited to, making deposits or
obtaining required bonds in connection with such bid.
5. Except as amended and supplemented by this First Amendment, the
Original Agreement is ratified and confirmed in all respects.
IN WITNESS WHEREOF, the parties have duly executed this Agreement as of
the date and year first above written.
-------------------------
Robert J. Longo
R. J. Longo Construction Co., Inc.
By:
----------------------
Compost America Holding Company, Inc.
By:
----------------------
<PAGE>
EXHIBIT A
The Seller shall be entitled to submit a bid on behalf of the Corporation
for the NYCSW Contract. Within fifteen (15) days after the Closing Date, the
Purchaser shall have the option to elect to fulfill the Corporation's
obligations under the NYCSW Contract or elect to abandon the NYCSW Contract.
Such election shall be delivered to the Seller in writing within the time
period specified.
If the Corporation elects to fulfill its obligations under the NYCSW
Contract, then Seller shall be entitled to royalty payments in connection
therewith of $2.50 per ton of pre-tax income earned by the Corporation for
each ton of solid waste attributable to the NYCSW Contract after the first
$8.00 per ton of pre-tax income earned by the Corporation in accordance with
the terms of the NYCSW Contract, as more specifically provided in the Royalty
Agreement.
If the Corporation abandons its interest in the NYCSW Contract, then the
Royalty Agreement shall be deemed null and void and of no further force or
effect.
<PAGE>
Exhibit 2.3
SECOND AMENDMENT TO LONGO CONSTRUCTION STOCK PURCHASE AGREEMENT
SECOND AMENDMENT TO STOCK PURCHASE AGREEMENT dated as of 0ctober 31, 1997
(the "Second Amendment"), by and among Robert J. Longo (the "Seller"),
Compost America Holding Company, Inc. (the "Purchaser") and R. J. Longo
Construction Co., Inc. (the "Corporation") amending and supplementing that
certain Stock Purchase Agreement dated as of September 17, 1997, as amended
by that certain First Amendment to Stock Purchase Agreement dated as of
September 30, 1997 (collectively, the "Original Agreement") by and among the
Seller, the Purchaser and the Corporation. Terms defined in the Original
Agreement are used herein as therein defined unless otherwise defined herein.
WITNESSETH:
WHEREAS, the Seller, the Purchaser and the Corporation previously entered
into the Original Agreement and now wish to amend certain provisions of the
Original Agreement in order to facilitate in an orderly fashion the
consummation of the purchase of the Seller's common stock of the Corporation
identified in the Original Agreement (the "Stock").
NOW, THEREFORE, in consideration of the mutual covenants, agreements and
representations and warranties contained in this Second Amendment and
intending to be legally bound hereby, the parties hereto agree as follows:
1. The Seller agrees that the Closing Date set forth in Section 1.04 of
the Original Agreement shall be extended to a date that is on or before
November 3, 1997, as determined by the Purchaser. The Seller further agrees
that the Standstill Period defined in Section 5.03 of the Original Agreement
is extended until the earlier to occur of (i) the Closing Date, or (ii) the
close of business on November 3, 1997.
2. Except as amended and supplemented by this Second Amendment, the
Original Agreement is ratified and confirmed in all respects.
IN WITNESS WHEREOF, the parties have duly executed this Second Amendment
as of the date and year first above written.
-------------------------
Robert J. Longo
R. J. Longo Construction Co., Inc.
By:
----------------------
Compost America Holding Company, Inc.
By:
----------------------
<PAGE>
Exhibit 2.4
THIRD AMENDMENT TO LONGO CONSTRUCTION STOCK PURCHASE AGREEMENT
THIRD AMENDMENT TO STOCK PURCHASE AGREEMENT dated November , 1997
(the "Third Amendment"), by and among Robert J. Longo (the "Seller"), Compost
America Holding Company, Inc. (the "Purchaser") and R. J. Longo Construction
Co., Inc. (the "Corporation") amending and supplementing that certain Stock
Purchase Agreement dated as of September 17, 1997, as amended by that certain
First Amendment to Stock Purchase Agreement dated as of September 30, 1997
and that certain Second Amendment to Stock Purchase Agreement dated as of
October 31, 1997 (collectively, the "Agreement") by and among the Seller, the
Purchaser and the Corporation. Terms defined in the Agreement are used herein
as therein defined unless otherwise defined herein.
WITNESSETH:
WHEREAS, the Seller, the Purchaser and the Corporation previously entered
into the Agreement and now wish to amend certain provisions of the Agreement
in order to facilitate in an orderly fashion the consummation of the purchase
of the Seller's common stock of the Corporation identified in the Agreement
(the "Stock").
NOW, THEREFORE, in consideration of the mutual covenants, agreements and
representations and warranties contained in this Second Amendment and
intending to be legally bound hereby, the parties hereto agree as follows:
1. Schedule 1.03(a) of the Agreement shall be, and hereby is, deleted in
its entirety and shall be of no further force or effect and is replaced by
Schedule A attached hereto and made a part hereof. Any reference to Schedule
1.03(a) in the Agreement or in any related documents from and after the date
hereof shall mean the attached Schedule A.
2. Schedule 2.02 of the Agreement shall be, and hereby is, amended to
add the following:
"Waiver and release of guaranty of Longo Puerto Rico, Inc. by Charter
Financial, Inc."
3. Schedule 3.01(b) of the Agreement shall be, and hereby is, amended to
add the following:
"Maryland- not in good standing for failure to file 1997 personal
property return.
Tennessee-revoked on December 12, 1985 for failure to pay taxes.
Texas-not in good standing for failure to file annual franchise report
due on May 15, 1997."
<PAGE>
4. Schedule 3.05 of the Agreement shall be, and hereby is, amended to add
the following:
"Waiver and Consent of Charter Financial, Inc."
5. Schedule 3.07(a) of the Agreement shall be, and hereby is, amended to
add the following:
"Multiemployer plans required to be maintained pursuant to the following
collective bargaining agreements:
Local 945, IB of T, AFL-CIO (N.J.)
International Union of Operating Engineers AFL-CIO Local 825 (N.J.)
International Union of Operating Engineers A.F. of L.-C.I.O. Local 542 (PA)
Potential withdrawal liability of approximately $7,000 under the
multiemployer plan of the Operating Engineers Local No. 825 Pension Fund.
6. To the extent that Section 4.03 of the Agreement is inconsistent with
the capitalization provisions contained in paragraph 3.03 of Schedule A to
this Third Amendment, paragraph 3.03 of Schedule A shall control.
7. Schedule 4.03 of the Agreement shall be and hereby is, further amended
to add the following:
"That certain Stockholders Agreement dated November 3, 1997 by and among
Compost America Holding Company, Inc., Wasteco Ventures Limited, Robert J.
Longo, Roger E. Tuttle, John B. Fetter, Robert E. Wortmann, Victor D.
Wortmann, Sr., VRH Construction Company, Select Acquisitions and Alfred
Rattie".
8. Section 4.04 of the Agreement shall be and hereby is, amended in its
entirety to read as follows:
"4.04 No Brokers. Except with respect to fees payable by the Purchaser to
Quirk Carson Peppet Inc. and Andersen, Weinroth, & Co., L.P., neither the
Purchaser nor any of its officers, directors, employees or shareholders has
employed any investment banker, broker or finder or incurred any liability
for any investment banking fees, brokerage fees, commissions or finder's fees
in connection with the transactions contemplated by this Agreement."
9. Except as amended and supplemented by this Third Amendment, the
Agreement is ratified and confirmed in all respects.
IN WITNESS WHEREOF, the parties have duly executed this
<PAGE>
Third Amendment as of the date and year first above written.
-------------------------
Robert J. Longo
R. J. Longo Construction Co., Inc.
By:
----------------------
Compost America Holding Company, Inc.
By:
----------------------
<PAGE>
Exhibit 2.5
LONGO TRUST
STOCK PURCHASE AGREEMENT
STOCK PURCHASE AGREEMENT (the "Agreement") dated as of this 17th day of
September, 1997, by and between The Robert J. and Andrea Longo Charitable Trust,
with address at c/o Stephen C. Gilbert, Esq., P.C., P.O. Box 340, 66 MacCulloch
Avenue, Morristown, New Jersey 07963 (the "Seller") and Compost America Holding
Company, Inc., a New Jersey corporation, with principal place of business at 320
Grand Avenue, Englewood, New Jersey 07631 (the "Purchaser").
W I T N E S S E T H:
WHEREAS, the Seller is the beneficial and record owner of one hundred (100)
of the issued and outstanding shares of common stock, no par value (the "Stock")
of R. J. Longo Construction Co., Inc., a New Jersey corporation (the
"Corporation"); and
WHEREAS, the Seller desires to sell and the Purchaser desires to purchase
the Stock upon the terms and subject to the conditions set forth herein.
NOW THEREFORE, in consideration of the mutual covenants, agreements,
representations and warranties contained in this Agreement and intending to be
legally bound hereby, the parties hereto agree as follows:
ARTICLE ONE
SALE AND PURCHASE OF STOCK
1.01 Sale and Purchase of the Stock. At the Closing (as hereafter
defined), the Seller shall sell, transfer, assign, convey
<PAGE>
and deliver to the Purchaser the Stock, free and clear of Liens (as hereinafter
defined) and the Purchaser hereby agrees to purchase and acquire the Stock from
the Seller, for the Purchase Price (as hereinafter defined).
1.02 Purchase Price and Payment. The purchase price (the "Purchase Price")
to be paid by the Purchaser to the Seller for the Stock shall be paid by the
payment of the sum of Thirteen Million and 00/100 ($13,000,000.00) Dollars in
immediately available funds at the Closing by wire transfer to a bank account
which shall have been designated by the Seller in writing not less than seven
days prior to the Closing Date.
1.03 The Closing. Upon the terms and subject to the conditions contained
in this Agreement, the transfer of the Stock by the Seller to the Purchaser and
the payment by the Purchaser of the Purchase Price (the "Closing") shall take
place no later than September 30, 1997, at 10:00 a.m. at the offices of Okin,
Hollander & DeLuca, L.L.P., One Parker Plaza, Fort Lee, New Jersey, or at such
other date, time or place as the parties shall mutually agree in writing (the
"Closing Date"). No party hereto may declare time of the essence in connection
with the Closing except on prior written notice to the other party delivered at
least ten days before the requested Closing Date.
ARTICLE TWO
REPRESENTATIONS AND WARRANTIES OF THE SELLER
The Seller hereby represents and warrants to the Purchaser as follows:
2.01 Ownership of Stock; Title. The Seller is the owner of record and
beneficially of the Stock. The Stock is owned by the
2
<PAGE>
Seller free and clear of any claim, levy, charge, pledge, hypothecation, trust,
security interest, proxy, voting arrangement, conditional sale or title
retention contract, or other encumbrance or restriction of any kind, including
restrictions affecting voting rights, transferability or incidents of record or
beneficial ownership (each of the foregoing being hereinafter individually
referred to as a "Lien" and collectively, the "Liens"). The consummation of the
sale of the Stock hereunder will convey to the Purchaser good, valid and
marketable title to the Stock free and clear of all Liens. There are no voting
trusts, shareholder agreements, proxies or other agreements or understandings in
effect with respect to the voting or transfer of the Stock to which the Seller
is a party or is bound. Except for this Agreement, there are no outstanding
warrants, options, rights or agreements of any kind to acquire the Stock, or any
portion of the Stock, from the Seller and all of the Stock is duly authorized,
validly issued and fully paid and non-assessable.
2.02 Authority. The Seller has full power, legal right and authority to
execute and deliver this Agreement, to sell the Stock in accordance with the
terms and subject to the conditions of this Agreement, and to consummate the
transactions contemplated hereby. The execution and delivery of this Agreement
and the consummation of the transactions contemplated hereby have been duly and
validly authorized by all requisite action and no other proceedings on the part
of the Seller are necessary to authorize this Agreement or to consummate the
transactions so contemplated. This Agreement has
3
<PAGE>
been duly and validly executed and delivered by the Seller and, assuming this
Agreement has been duly authorized, executed and delivered by the Purchaser,
constitutes a valid and binding legal agreement of the Seller enforceable
against the Seller in accordance with its terms. To the best of the Seller's
knowledge: (i) except for the filing of any notice subsequent to the Closing
that may be required under applicable federal and/or state securities laws
(which, if required, shall be filed on a timely basis as may be so required),
no consent, approval or authorization of, or declaration to, or filing with,
any public body or governmental authority, domestic or foreign, is required
for the valid authorization, execution, delivery and performance by the
Seller of this Agreement or for the consummation by the Seller of the
transactions contemplated by this Agreement; provided however, that no
representation is made by the Seller with respect to any filing, permit,
authorization, consent or approval, required by reason of the legal or
regulatory status of the Purchaser or by reason of facts specifically
pertaining to the Purchaser. The execution, delivery and performance by the
Seller of this Agreement and the consummation of the transactions
contemplated hereby will not: (i) result in a breach of, or constitute a
default (with or without notice or lapse of time, or both) under, any
provision of (a) the trust instrument under which the Seller was formed; (b)
any debt instrument, indenture, mortgage agreement or other instrument or
arrangement to which the Seller is a party or by which it is bound; or
(c) any judgment, order or decree by which
4
<PAGE>
the Seller is bound or affected; or (ii) result in the imposition of any Lien
on the Stock.
2.03 No Brokers. The Seller has not employed any broker or finder, nor
incurred any liability for any investment banking fees, brokerage fees,
commissions or finder's fees in connection with the transactions contemplated by
this Agreement.
2.04 Disclosure. To the best of the Seller's knowledge, neither this
Agreement nor any other written document, certificate, instrument or written
statement furnished or made to the Purchaser by or on behalf of the Seller in
connection with the transactions contemplated hereby contains any untrue
statement of a material fact or omits to state a material fact necessary in
order to make the statements contained herein not misleading.
2.05 Survival of Representations and Warranties. The representations of the
Seller contained in this Article II shall be complete, correct and true as of
the date hereof and as of the date of Closing. Purchaser has entered into this
Agreement based upon its own investigation, evaluations and forecasts and is not
relying upon any representation or inducement which was or may have been made or
implied by Seller or anyone acting on his behalf, except as expressly set forth
in this Agreement or in that certain Stock Purchase Agreement (the "Stock
Purchase Agreement") by and among the Purchaser, the Corporation and Robert J.
Longo, executed and delivered simultaneously herewith, a copy of which is
attached hereto as Schedule 2.05. None of the Article II representations and
5
<PAGE>
warranties shall survive the execution and delivery of this Agreement and the
Closing Date.
ARTICLE THREE
REPRESENTATIONS AND WARRANTIES OF THE PURCHASER
The Purchaser represents and warrants to the Seller as follows:
3.01 Organization. The Purchaser is a corporation duly organized, validly
existing and in good standing under the laws of the State of New Jersey.
3.02 Authorization. The execution and delivery of this Agreement by the
Purchaser and the consummation of the transactions contemplated hereby, have
been duly and validly authorized by all requisite corporate action by the
Purchaser and no other proceedings on the part of the Purchaser are necessary to
authorize this Agreement or to consummate the transactions so contemplated.
This Agreement has been duly and validly executed and delivered by the Purchaser
and assuming this Agreement has been duly authorized, executed and delivered by
the Seller, constitutes a valid and binding agreement of the Purchaser,
enforceable against the Purchaser in accordance with its terms. The execution,
delivery and performance by the Purchaser of this Agreement and the consummation
of the transactions contemplated hereby will not: result in a material breach
of, or constitute a default (with or without notice or lapse of time, or both)
under, any provision of (a) any debt instrument, indenture, mortgage agreement
or other instrument or arrangement to which the Purchaser is a party or by
6
<PAGE>
which it is bound; or (b) any judgment, order or decree by which the Purchaser
is bound or affected.
3.03 No Brokers. Except with respect to fees payable by the
Purchaser to Quirk Carson Peppet Inc., neither the Purchaser nor any of its
officers, directors, employees or shareholders has employed any investment
banker, broker or finder or incurred any liability for any investment banking
fees, brokerage fees, commissions or finder's fees in connection with the
transactions contemplated by this Agreement.
3.04 Consents or Approvals; No Violations. To the best of the Purchaser's
knowledge: (i) except for the filing of any notice during the period subsequent
to the date of this Agreement but before the Closing Date, or from and after the
Closing Date, that may be required under applicable federal and/or state
securities laws (which, if required, shall be filed on a timely basis as may be
required), no consent, approval or authorization of, or declaration to, or
filing with, any public body or governmental authority, domestic or foreign, is
required for the valid authorization, execution, delivery and performance by the
Purchaser of this Agreement or for the consummation by the Purchaser of the
transactions contemplated by this Agreement; provided, however; that no
representation is made by the Purchaser with respect to any filing, permit,
authorization, consent or approval, required by reason of the legal or
regulatory status of the Seller or by reason of facts specifically pertaining to
it.
7
<PAGE>
3.05 Disclosure. Neither this Agreement nor any other written document,
certificate, instrument or written statement furnished or made to the Seller by
or on behalf of the Purchaser in connection with the transactions contemplated
hereby contains any untrue statement of a material fact or omits to state a
material fact necessary in order to make the statements contained herein and
therein not misleading. The Purchaser hereby represents and warrants that it has
consulted with its legal counsel and has determined that upon the execution of
this Agreement by all parties hereto, it is required to disclose to the public,
the Securities and Exchange Commission and any applicable state securities
regulatory authority, as part of its ongoing disclosure obligations as a public
company, the fact that the Purchaser has entered into this Agreement. Consistent
with that obligation, the Purchaser has drafted a press release, attached hereto
as Schedule 3.05, which meets the requirements of such disclosure obligation and
hereby represents and warrants that it will not disseminate such press release
to the public until the Seller has reviewed and approved it; provided, however,
that such review and approval will not unreasonably delay the dissemination of
such press release nor will it cause the Purchaser to violate its disclosure
obligation as a public company.
3.06 Acquisition for Investment. The Purchaser is acquiring the Stock for
its own account for investment and not with a view to the distribution thereof
so as to cause a violation of the Securities Act of 1933, as amended (the
"Act"), or any rules or
8
<PAGE>
regulations promulgated thereunder, and agrees that it will not sell, transfer,
distribute or otherwise dispose of any such Stock except pursuant to an
effective registration statement under the Act or under an exemption from the
registration requirements of the Act. The Purchaser understands and
acknowledges that the Stock has not been registered under the Act.
3.07 Insolvency. The Purchaser represents and warrants that: (i) it is not
now insolvent and the execution and delivery by the Purchaser of this Agreement
and the performance by it of any of the actions required by this Agreement will
not render the Purchaser insolvent; (ii) the execution and delivery by the
Purchaser of this Agreement and the performance by it of any of the actions
required by this Agreement will not result in the property remaining in its
hands to be unreasonably small capital; and (iii) the execution and delivery by
the Purchaser of this Agreement and the performance by it of any of the actions
required by this Agreement will not result in the Purchaser incurring any debts
beyond its ability to pay. For purposes of this Section 3.07 "insolvent" shall
mean insolvent within the meaning of any state or federal law relating to
bankruptcy, insolvency, reorganization or relief of debtors.
3.08 Litigation. The Purchaser represents and warrants that there are no
actions, suits, arbitration proceedings or claims (whether or not purportedly on
behalf of the Purchaser) pending, or to the knowledge of the Purchaser,
threatened against or affecting the Purchaser or any of its properties, or
maintained by the Purchaser, at law or in equity which if adversely determined
(i)
9
<PAGE>
would impair the right or ability of the Purchaser to carry on its business
substantially as now conducted; or (ii) would have a material adverse effect on
the financial condition, operations, business or properties of the Purchaser,
except as disclosed by the Purchaser on its most recent Form 10K filed with the
Securities nd Exchange Commission. There are no proceedings pending, or to the
knowledge of the Purchaser, threatened, which call into question the validity
or the enforceability of this Agreement or the Stock Purchase Agreement. There
is no action currently pending, anticipated or threatened pursuant to which the
Purchaser has filed or will file a petition or answer seeking for itself any
reorganization, arrangement, composition, readjustment of debt, liquidation or
dissolution or similar relief under any present or future statute, law or
regulation of any jurisdiction nor has it petitioned or applied to nor does it
intend to petition or apply to, any tribunal for the appointment of any
receiver, liquidator, assignee, custodian, sequestrator or any trustee for any
substantial part of its property.
3.09 Fraudulent Transfer. The execution and delivery by the Purchaser of
this Agreement and the performance by the Purchaser of the transactions
contemplated herein, will not result in a fraudulent transfer of the Purchaser's
assets.
3.10 Survival of Representations and Warranties. The representations and
warranties of the Purchaser contained in this Article III shall be complete,
correct and true as of the date hereof and/or the date of the Closing. The
Seller has entered into
10
<PAGE>
this Agreement based upon its own investigation, evaluations and forecasts and
is not relying upon any representation or inducement which was or may have been
made or implied by the Purchaser or anyone acting on its behalf, except as
expressly set forth in this Agreement. The representations and warranties of the
Purchaser shall survive the execution and delivery of this Agreement and the
Closing Date; provided however, that any claim by the Seller with respect to any
breach of any such representation must be asserted on or before the first
anniversary of the Closing Date or shall be deemed waived.
ARTICLE FOUR
COVENANTS OF THE PARTIES
4.01 Exclusivity. From the date hereof until September 30, 1997 or the
earlier termination of this Agreement (the "Standstill Period"), the Seller will
not solicit or negotiate in any way any offer from any other person or entity to
purchase all or any part of the Stock. During the Standstill Period, the Seller
will deal exclusively with the Purchaser with respect to the sale of the Stock
and shall not enter into any written or oral agreement or understanding with
respect to acquisition of the Stock.
4.02 Confidentiality. Except as required by law or as the parties otherwise
agree in writing, including, without limitation, the provisions of paragraph
3.05 of this Agreement, this Agreement will be kept strictly confidential, and
neither the Purchaser nor the Seller nor any person on behalf of the Purchaser
or the Seller
11
<PAGE>
shall disclose either the Purchaser's or the Seller's interest in this
Agreement, or any of the terms and conditions thereof.
4.03 Reasonable Best Efforts. Subject to the terms and conditions herein
provided, each of the parties hereto agrees to use reasonable best efforts to
take, or cause to be taken, all action, and to do, or cause to be done, all
things necessary, proper or advisable to fulfill the conditions to the parties'
obligations hereunder and to consummate and make effective the transactions
contemplated by this Agreement, including, without limitation, making all
required filings and applications and complying with or responding to any
requests by governmental agencies and obtaining all consents, approvals, orders,
waivers, licenses, permits and authorizations required in connection with the
transactions contemplated hereby. If at any time after the Closing Date any
further action is necessary or desirable to carry out the purposes of this
Agreement, the parties hereto shall take or cause to be taken all such necessary
action, including, without limitation, the execution and delivery of such
further instruments and documents as may be reasonably requested by the other
party for such purposes or otherwise to consummate and make effective the
transactions contemplated hereby.
4.04 Public Announcements. The Seller and the Purchaser will consult with
each other before issuing any press release or otherwise making any public
statements with respect to the transactions contemplated by this Agreement, and
shall not issue any such press release or make any such public statement without
12
<PAGE>
the prior approval of the Purchaser or Seller, as the case may be, except as may
be required by law.
4.05 Breaches. If either party is aware prior to Closing, that the other
party has breached any provisions of this Agreement, the non-breaching party
shall give prompt written notice of such breach and an opportunity to cure such
breach to the breaching party, or such breach shall be deemed waived. If any
party is aware of a breach by any other party prior to the Closing, but
nevertheless proceeds to Closing, such breach is deemed waived.
ARTICLE FIVE
CONDITIONS TO CLOSING
5.01 Conditions to the Seller's Obligations. The obligation of the Seller
to consummate the transactions contemplated hereby at the Closing is subject to
satisfaction or waiver by the Seller of the following conditions on or before
the Closing Date:
(a) the representations and warranties of the Purchaser contained
herein shall be true and correct in all material respects as of the date of this
Agreement and at and as of the Closing Date as though such representations and
warranties were made at and as of the date of this Agreement;
(b) the Purchaser shall have entered into the Stock Purchase Agreement
pursuant to which the Purchaser shall have agreed to acquire all of the issued
and outstanding common stock of the Corporation owned by Robert J. Longo, on the
terms and conditions contained in the Stock Purchase Agreement, and the closing
of such transaction shall take place simultaneously with
13
<PAGE>
the Closing under this Agreement, it being the intention of the parties hereto
that the Purchaser shall acquire all of the issued and outstanding common stock
of the Corporation; provided, however, that the Seller shall have no obligation
in any manner to arrange for, facilitate or cause the closing of the
transactions under the Stock Purchase Agreement nor shall it have liability with
respect to any of Longo's or the Corporation's obligations in respect thereto;
(c) the Purchaser shall have performed and complied in all material
respects with all agreements, obligations, covenants and conditions required by
this Agreement to be performed or complied with by it on or prior to the
Closing;
(d) the Seller shall have received a duly executed certificate of an
authorized officer of the Purchaser to the effect that the conditions in
paragraphs (a) and (c) have been satisfied;
(e) the Purchaser shall have delivered to the Seller an opinion of
Greenberg, Traurig, et. al., counsel to the Purchaser, substantially in the form
of Schedule 5.01(e) hereto;
(f) all corporate actions, proceedings, instruments and documents of
the Purchaser required to carry out the transactions contemplated by this
Agreement or incidental thereto and all other related legal matters shall be
reasonably satisfactory to counsel for the Seller, and such counsel shall have
been furnished with such certified copies of such corporate actions and
proceedings and such other instruments, documents and opinions as it shall have
reasonably requested;
14
<PAGE>
(g) the Stock Purchase Agreement shall have been executed and
delivered by the parties thereto, shall be in full force and effect, and no
material defaults shall exist thereunder on the part of any party thereto; and
(h) the Purchaser shall have tendered to the Seller the Purchase
Price.
5.02 Deliveries by the Seller. At the Closing, the Seller will deliver
the following to the Purchaser:
(a) One or more certificates representing the Stock, accompanied by
stock powers duly endorsed in blank or accompanied by duly executed instruments
of transfer, and any other documents that are necessary to transfer to the
Purchaser good title to all the Stock free and clear of all Liens;
(b) An opinion of Stephen C. Gilbert, Esq., counsel to the Seller,
substantially in the form attached hereto as Schedule 5.02(b); and
(c) All other documents, instruments and writings required to be
delivered by the Seller at/or prior to the Closing Date pursuant to this
Agreement.
5.03 Conditions to the Purchaser's Obligations. The obligations of
the Purchaser to consummate the transactions contemplated hereby at the Closing
is subject to the satisfaction or waiver by the Purchaser of the following
conditions on or before the Closing Date:
(a) the representations and warranties of the Seller contained herein
shall be true and correct in all material respects
15
<PAGE>
as of the date of this Agreement and at and as of the Closing Date as though
such representations and warranties were made at and as of the date of this
Agreement;
(b) the Purchaser shall have entered into the Stock Purchase Agreement
and the closing of the Purchaser's acquisition of all of the issued and
outstanding common stock of the Corporation owned by Longo shall take place
simultaneously with the Closing under this Agreement;
(c) the Seller shall have performed and complied in all material
respects with all agreements, obligations, covenants and conditions required by
this Agreement to be performed or complied with by him on or prior to the
Closing;
(d) the Purchaser shall have received a duly executed certificate
from the Seller to the effect that the conditions in paragraphs (a) and (c) have
been satisfied;
(e) the Seller shall have delivered to the Purchaser an opinion of
Stephen C. Gilbert, Esq., counsel to the Seller, substantially in the form of
Schedule 5.02 (b) hereto;
(f) the Seller shall have delivered to the Purchaser certificates
representing all of the Stock, accompanied by stock powers duly endorsed in
blank or accompanied by duly executed instruments of transfer, in each case,
endorsed or executed by the Seller; and
(g) all actions, proceedings, instruments and documents of the Seller
required to carry out the transactions contemplated by this Agreement or
incidental thereto, and all other related
16
<PAGE>
legal matters shall be reasonably satisfactory to counsel for the Purchaser, and
such counsel shall have been furnished with such certified copies of such
actions and proceedings and such other instruments, documents and opinions as it
shall have reasonably requested.
5.04 Deliveries by the Purchaser. At the Closing, the Purchaser will
deliver the following to the Seller:
(a) The Purchase Price;
(b) Certified copies of the resolutions, duly adopted by the Board of
Directors of the Purchaser, authorizing the execution, delivery and performance
of this Agreement;
(c) An opinion of Greenberg, Traurig, et. al., counsel to the
Purchaser, substantially in the form attached hereto as Schedule 5.01(e); and
(d) All other documents, instruments and writings required to be
delivered by the Purchaser at or prior to the Closing Date pursuant to this
Agreement.
ARTICLE SIX
TERMINATION AND ABANDONMENT
6.01 Termination. This Agreement may be terminated at any time prior to the
Closing by the mutual written consent of each of the Purchaser and the Seller.
6.02 Effect of Termination. In the event of termination of this Agreement
and abandonment of the transactions contemplated hereby by the parties hereto
pursuant to Section 6.01 hereto, this Agreement shall forthwith become null and
void and of no further
17
<PAGE>
effect, without any liability on the part of any party or its directors,
officers, partners, Affiliates, employees, agents or security holders, other
than as provided in Article VII hereof, and the obligation of the parties hereto
to return to the other parties any documents received in connection with the
transactions contemplated herein. No party to this Agreement shall make any
claim for damages against the other with respect to this Agreement and the
parties hereto acknowledge and agree that their right to damages, if any, shall
be limited to those damages expressly provided for in the Stock Purchase
Agreement.
ARTICLE SEVEN
MISCELLANEOUS PROVISIONS
7.01 Amendment and Modification. This Agreement may be amended or
modified at any time by the parties hereto, pursuant to an instrument in writing
signed by the Purchaser and the Seller.
7.02 Extension; Waiver. At any time prior to the Closing Date, the party
entitled to the benefit of any respective term or provision hereof may (a)
extend the time for the performance of any of the obligations or other acts of
the other party hereto, (b) waive any inaccuracies in the representations and
warranties contained herein or in any document, certificate or writing delivered
pursuant hereto, or (c) waive compliance with any obligation, covenant,
agreement or condition contained herein. Any agreement on the part of a party
to any such extension or waiver shall be valid only if set forth in an
instrument in writing signed
18
<PAGE>
by the party entitled to the benefits of such extended or waived term or
provision.
7.03 Entire Agreement; Assignment. This Agreement (a) constitutes the
entire agreement between the parties hereto with respect to the subject matter
hereof and supersedes all other prior agreements and understandings, both
written and oral, between the parties hereto with respect to the subject matter
hereof and (b) shall not be assigned, by operation of law or otherwise by a
party hereto, without the prior written consent of the other party.
7.04 Validity. The invalidity or unenforceability of any term or
provision of this Agreement in any situation or jurisdiction shall not effect
the validity or enforceability of the other terms or provisions hereof or the
validity or enforceability of the offending term or provision in any other
situation or in any other jurisdiction.
7.05 Expenses. Whether or not this Agreement and the transactions
contemplated hereby are consummated, and except as otherwise expressly set forth
herein, all costs and expenses (including legal fees and expenses) incurred in
connection with this Agreement and the transactions contemplated hereby shall be
paid by the party incurring such expenses.
7.06 Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same agreement.
19
<PAGE>
7.07 Successors, Assigns, etc. This Agreement is binding upon the parties
and their heirs, personal representatives, successors and assigns, as the case
may be.
7.08 Governing Law; Jurisdiction. This Agreement shall be construed in
accordance with and governed by the laws of the State of New Jersey without
regard to principles of conflict of laws. The parties agree that any disputes
and matters arising from this agreement shall be brought before the Superior
Court of New Jersey or, if federal jurisdiction exists, before the United States
Court for the District of New Jersey, and each party agrees to submit to the
jurisdiction of said courts, and to waive any defenses based upon grounds of
lack of jurisdiction, improper venue or convenience.
7.09 Severability. If any part of this Agreement is declared to be
invalid or unenforceable, then such invalidity or unenforceability shall not
affect the remainder of this Agreement which shall continue in full force and
effect.
7.10 Notices. Unless otherwise provided herein, all notices, demands,
requests, consents or other communications required or permitted to be given or
made under this Agreement shall be made in writing and signed by the party
giving the same and shall be deemed to have been given or made when hand
delivered or mailed by United States certified mail, return receipt requested,
postage prepaid, to the following addresses or to any other addresses of which
all parties are notified in writing:
20
<PAGE>
If to the Seller:
The Robert J. and Andrea Longo Charitable Trust
c/o Stephen C. Gilbert, Esq.
66 MacCulloch Avenue Box 340
Morristown, New Jersey 07963
copy to:
Stephen C. Gilbert, Esq.
66 MacCulloch Avenue Box 340
Morristown, New Jersey 07963
If to the Purchaser:
Mr. Roger Tuttle, President
Compost America Holding Company, Inc.
320 Grand Avenue
Englewood, New Jersey 07631
copy to:
Theodore Mason, Esq.
Greenberg, Traurig
2050 One Commerce Square
Philadelphia, Pa. 19103
7.11 Headings. The subject headings of the sections and subsections of
this Agreement are included for purposes of convenience only, and shall not
affect the construction or interpretation of any of its provisions.
7.12 Parties in Interest. This Agreement shall be binding upon and inure
solely to the benefit of each party hereto and its Affiliates and nothing in
this Agreement, express or implied, is intended by or shall confer upon any
other person any rights, benefits or remedies of any nature whatsoever under or
by reason of this Agreement.
7.13 No Waivers. Except as otherwise expressly provided herein, no
failure to exercise, delay in exercising, or single or partial exercise of any
right, power or remedy by any party, and no
21
<PAGE>
course of dealing between the parties, shall constitute a waiver of any such
right, power or remedy.
7.14 Mutual Releases. The Purchaser and the Seller shall have executed and
delivered to each other, general releases, substantially in the form of Schedule
8.15 hereto, for contractual claims occurring prior to the Closing Date, in
favor of each other and their respective past or present employees, officers,
trustees, shareholders, and Affiliates, except for obligations arising under
this Agreement.
7.15. Independent Counsel. The parties hereto have each been represented
by and consulted with their own respective independent counsel and have resolved
with such counsel any questions they may have had as to the meaning, effect or
interpretation of this Agreement and the Schedules thereto. The decision of the
parties to enter into this Agreement is a fully informed decision, and the
parties are aware of all legal and other ramifications of such decision.
7.16 Construction. In all events, relative words in the singular shall
include the plural and the masculine gender shall include the feminine and
neuter (and vice versa) whenever the context so requires. The parties hereto
agree that the terms and language of this Agreement were the result of
negotiations between the parties and, as a result, there shall be no presumption
that any ambiguities in this Agreement shall be resolved against either party.
Any controversy over the construction of this Agreement
22
<PAGE>
shall be decided neutrally, in light of its purposes, and without regard to
events of authorship or negotiation.
7.17 Further Assurances. The parties hereto agree to execute and deliver
such further instruments and to perform any acts that may be necessary or
reasonably requested in order to give full effect to this Agreement. Each party,
in order to carry out this Agreement, shall use all reasonable efforts to
provide such information, execute such further instruments and documents and
take such actions as may be reasonably requested by the other and not
inconsistent with the provisions of this Agreement and not involving the
assumption of obligations or liabilities different from or in excess or in
addition to those expressly provided for herein.
7.18 Waiver of Trial by Jury. The Purchaser and the Seller in any
litigation (whether or not arising out of or relating to this Agreement or any
other obligation owed by them) in which the Purchaser or the Seller shall be
adverse parties, hereby voluntarily, knowingly and irrevocably waive any
constitutional or other right each may have to a trial by jury.
IN WITNESS WHEREOF, the parties have duly executed this Agreement as of the
date and year first above written.
WITNESS: The Robert J. and Andrea Longo
Charitable Trust
________________________ By:__________________________
, Trustee
ATTEST: Compost America Holding Company, Inc.
_______________________ By:_______________________
23
<PAGE>
Roger E. Tuttle, President
24
<PAGE>
November 3, 1997
Compost America Holding Company, Inc.
320 Grand Avenue
Englewood, New Jersey 07631
Gentlemen:
We have acted as special counsel to Robert J. Longo (the "Seller") and R.J.
Longo Construction Co., Inc. (the "Corporation") in connection with the
preparation, authorization, execution and delivery of, and the consummation of
the transactions contemplated by the Stock Purchase Agreement (the "Stock
Purchase Agreement") dated September 17, 1997, by and among the Seller, the
Corporation and Compost America Holding Company, Inc. (the "Purchaser") as the
same has been amended by three subsequent amendments thereto. The Seller is the
owner of fifty (50%) percent of the stock of the Corporation. The remaining
fifty (50%) percent of the stock of the Corporation is owned by The Robert J.
and Andrea Longo Charitable Trust (the "Trust"). Terms defined in the Stock
Purchase Agreement and not otherwise defined herein are used herein with the
meanings so defined in the Stock Purchase Agreement.
In so acting, we have examined originals or copies certified or otherwise
identified to our satisfaction, of the Stock Purchase Agreement and the Exhibits
thereto (such documents being collectively referred to herein as the "Seller's
Documents") and such records, corporate records, agreements, documents and other
instruments, and such certificates or comparable documents of the Seller and
officers and representatives of the Corporation and have made such inquiries of
the Seller and such officers and representatives of the Corporation as we deemed
relevant and necessary as a basis for the opinions hereinafter set forth.
In such examination, we have assumed the genuineness of all signatures, the
authenticity of all documents submitted to us as originals, the conformity to
original documents of documents submitted to us as certified or photostatic
copies and the authenticity of the originals of such latter documents. As to
all questions of fact material to this opinion that have not been independently
established, we have relied upon certificates or
<PAGE>
Compost America Holding Company, Inc.
November 3, 1997
Page 2
comparable documents of Seller or officers and representatives of the
Corporation and upon the representations and warranties of the Seller and the
Corporation contained in the Stock Purchase Agreement.
Based on the foregoing, and subject to the qualifications stated herein, we
are of the opinion that:
1. The Seller is an individual who resides in the State of New Jersey.
2. The Corporation is a corporation duly organized, validly existing and
in good standing under the laws of the State of New Jersey.
3. The Seller has the requisite power and authority to execute and
deliver the Seller's Documents to which he is a party and to perform his
respective obligations thereunder. The Seller's Documents to which the Seller
is a party have been duly and validly executed and delivered by the Seller and
(assuming the due authorization, execution and delivery thereof by Purchaser)
constitute the valid and binding obligation of the Seller enforceable against
the Seller in accordance with their respective terms, subject to applicable
bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium and
similar laws affecting creditors' rights and remedies generally, and subject, as
to enforceability, to general principles of equity, including principles of
commercial reasonableness, good faith and fair dealing (regardless of whether
enforcement is sought in a proceeding at law or in equity) and subject to the
qualification that we express no opinion with respect to those provisions of the
employment agreement of the Seller regarding specific performance thereof
(Section 15) and the restrictive covenant provisions (Sections 13, 14 and 15)
contained therein.
4. The Corporation has the requisite corporate power and authority to
execute and deliver the Seller's Documents to which it is a party and to perform
its respective obligations thereunder. The execution, delivery and performance
by the Corporation of the Seller's Documents to which it is a party and the
consummation by the Corporation of the transactions contemplated thereby have
been duly authorized by the necessary corporate action on the part of the
Corporation. The Seller's Documents to which the Corporation is a party have
been duly and validly executed and delivered by the Corporation and (assuming
the due authorization, execution and delivery thereof by Purchaser) constitute
the valid and binding obligation of the Corporation, enforceable against the
Corporation in accordance with their respective terms, subject to applicable
bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium and
similar laws affecting creditors' rights and
<PAGE>
Compost America Holding Company, Inc.
November 3, 1997
Page 3
remedies generally, and subject, as to enforceability, to general principles of
equity, including principles of commercial reasonableness, good faith and fair
dealing (regardless of whether enforcement is sought in a proceeding at law or
in equity).
5. The execution and delivery of the Seller's Documents, the consummation
of the transactions contemplated thereby and compliance by the Seller and the
Corporation with any of the material provisions thereof will not materially
conflict with, constitute a material default under or materially violate (i) any
of the terms, conditions or provisions of the certificate of incorporation or
bylaws of the Corporation; (ii) to the best of our knowledge based upon the
matters disclosed in the representations and warranties of the Seller and the
Corporation contained in the Stock Purchase Agreement, any judgment, writ,
injunction, decree, order or ruling of any court or governmental authority
binding on the Seller or the Corporation; and (iii) to the best of our knowledge
(except as otherwise disclosed in the Stock Purchase Agreement), any of the
agreements which are described in Schedule 4.01 of that certain Stock Purchase
Agreement between the Purchaser and Wasteco Ventures Limited ("Wasteco"), dated
as of November 3, 1997 (the "Wasteco Agreement"), other than the New York
Contract as to which we express no opinion.
6. To the best of our knowledge after inquiry of the Seller, but without
any independent investigation, no consent, approval, waiver, license or
authorization or other action by or filing with any New Jersey or federal
governmental authority is required in connection with the execution and delivery
by the Seller and the Corporation of the Seller's Documents or the consummation
by the Seller and the Corporation of the transactions contemplated thereby,
except for federal and state securities or blue sky laws, as to which we express
no opinion. We express no opinion with respect to the sale by the Trust of its
stock in the Corporation. We express no opinion regarding the due authorization
of any securities issued in connection with the Stock Purchase Agreement, the
marketability of any such securities or the Purchaser's compliance with
applicable securities laws in connection therewith. We express no opinion and
assume no responsibility with respect to any financial statements or other
financial data regarding the Seller or the Corporation which has been delivered
by or on behalf of the Seller or the Corporation. We have not conducted an
audit or investigation of the representations or warranties of Seller or
Corporation as set forth in the Seller's Documents, the assets, liabilities,
operation or affairs of the Seller or the Corporation and we do not render any
opinion in connection therewith; however, in the course of our representation of
the Seller and the Corporation nothing has come to our actual knowledge that has
caused us to determine that any of the representations or warranties of the
Seller or the Corporation are untrue. This
<PAGE>
Compost America Holding Company, Inc.
November 3, 1997
Page 4
opinion is limited to matters expressly stated herein and no opinion is implied
or may be inferred beyond the matters expressly stated herein. We express no
opinion as to circumstances which may occur subsequent to the date hereof.
The opinions herein are limited to and based upon the laws of the State of
New Jersey and the federal laws of the United States as of the date hereof and
are subject to any amendment, repeal or other modification of the applicable
laws that serve as the basis of our opinion, or laws or judicial decisions
hereinafter enacted or rendered. Our engagement with respect to this opinion
does not require and shall not be construed to require or constitute a
continuing obligation on our part to notify or inform the addressee hereof or
any other party of the amendment, repeal or other modification of the applicable
laws or judicial decisions that served as the basis for our opinion or laws or
judicial decisions hereinafter enacted or rendered which impact on our opinion.
We have not examined and we do not express any opinion as to the laws of any
other jurisdiction, whether applicable directly or through New Jersey law.
This opinion is rendered solely for your benefit in connection with the
transactions described above. This opinion may not be used or relied upon by
any other person and may not be disclosed, quoted, filed with a governmental
agency or otherwise referred to without our prior written consent, except that
this opinion may be disclosed to and relied upon by Wasteco solely in connection
with the closing of the Wasteco Agreement.
Very truly yours,
OKIN, HOLLANDER & DeLUCA, L.L.P.
<PAGE>
Exhibit 2.6
================================================================================
STOCK PURCHASE AGREEMENT
between
COMPOST AMERICA HOLDING COMPANY, INC.
and
WASTECO VENTURES LIMITED
Dated as of November 3, 1997
================================================================================
<PAGE>
TABLE OF CONTENTS
ARTICLE I
DEFINITIONS
SECTION 1.01. Definitions.............................................. 1
ARTICLE II
PURCHASE AND SALE OF SHARES; CLOSING
SECTION 2.01. Authorization, Purchase and Sale of Shares............... 9
SECTION 2.02. Closing.................................................. 9
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
SECTION 3.01. Organization and Qualification; Subsidiaries............. 10
SECTION 3.02. Certificate of Incorporation and By-Laws................. 11
SECTION 3.03. Capitalization........................................... 11
SECTION 3.04. Authority................................................ 12
SECTION 3.05. No Conflict; Required Filings and Consents............... 12
SECTION 3.06. Common Stock; Preferred Stock............................ 13
SECTION 3.07. Compliance with Laws..................................... 14
SECTION 3.08. SEC Filings; Financial Statements........................ 14
SECTION 3.09. Financial Statements..................................... 15
SECTION 3.10. Absence of Undisclosed Liabilities....................... 15
SECTION 3.11. Absence of Certain Changes, Events and Conditions;
Conduct in the Ordinary Course.......................... 15
SECTION 3.12. Employee Benefit Matters................................. 18
SECTION 3.13. Real Property............................................ 20
SECTION 3.14. Tangible Personal Property............................... 21
SECTION 3.15. Intellectual Property.................................... 22
SECTION 3.16. Environmental Matters.................................... 25
SECTION 3.17. Litigation............................................... 27
SECTION 3.18. Insurance................................................ 27
SECTION 3.19. Material Contracts....................................... 29
SECTION 3.20. Licenses and Permits..................................... 31
SECTION 3.21. Labor Matters............................................ 31
SECTION 3.22. Taxes.................................................... 32
SECTION 3.23. Miami Recycling and Composting Project................... 33
<PAGE>
ii
SECTION 3.24. Newark Recycling and Composting Project.................. 34
SECTION 3.25. Private Offering......................................... 35
SECTION 3.26. Brokers.................................................. 35
SECTION 3.27. Accuracy of Information.................................. 35
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
WITH RESPECT TO LONGO
SECTION 4.01. Financial Information and Material Contracts of Longo.... 36
SECTION 4.02. Railcars, Containers and Equipment....................... 38
SECTION 4.03. The New York City Contract............................... 38
SECTION 4.04. Licenses and Permits..................................... 38
SECTION 4.05. Longo Agreements......................................... 39
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF THE PURCHASER
SECTION 5.01. Corporate Organization................................... 39
SECTION 5.02. Authority................................................ 39
SECTION 5.03. No Conflict; Required Filings and Consents............... 39
SECTION 5.04. Funds.................................................... 40
SECTION 5.05. Investment Purpose....................................... 40
SECTION 5.06. Brokers.................................................. 40
ARTICLE VI
COVENANTS
SECTION 6.01. Use of Proceeds.......................................... 41
SECTION 6.02. Restrictions on Operation of EPIC........................ 41
SECTION 6.03. Bedminster Matters....................................... 42
ARTICLE VII
TAX MATTERS
SECTION 7.01. Indemnity................................................ 43
SECTION 7.02. Returns and Payments..................................... 43
SECTION 7.03. Contests................................................. 44
<PAGE>
iii
SECTION 7.04. Time of Payment.......................................... 44
SECTION 7.05. Conveyance Taxes......................................... 44
SECTION 7.06. Miscellaneous............................................ 44
ARTICLE VIII
CONDITIONS TO THE CLOSING
SECTION 8.01. Conditions to Obligations of the Purchaser............... 45
SECTION 8.02. Conditions to Obligations of the Company................. 48
ARTICLE IX
INDEMNIFICATION
SECTION 9.01. Survival of Representations and Warranties............... 49
SECTION 9.02. Indemnification by the Company........................... 49
SECTION 9.03. Indemnification by the Purchaser......................... 52
SECTION 9.04. Materiality.............................................. 53
SECTION 9.05. Time Period; Dollar Threshold............................ 53
SECTION 9.06. Notice and Defense....................................... 53
ARTICLE X
AMENDMENT AND WAIVER
SECTION 10.01. Amendment............................................... 54
SECTION 10.02. Waiver.................................................. 54
ARTICLE XI
GENERAL PROVISIONS
SECTION 11.01. Notices................................................. 54
SECTION 11.02. Entire Agreement; Assignment............................ 56
SECTION 11.03. Parties in Interest..................................... 56
SECTION 11.04. Governing Law........................................... 56
SECTION 11.05. Jurisdiction, Etc....................................... 56
SECTION 11.06. Headings................................................ 56
SECTION 11.07. Counterparts............................................ 57
SECTION 11.08. Specific Performance.................................... 57
SECTION 11.09. Expenses................................................ 57
<PAGE>
iv
EXHIBIT A Certificate of Designation of Preferred Stocks
EXHIBIT B Opinion of Greenberg Traurig
EXHIBIT C Registration Rights Agreement
EXHIBIT D Officer's Certificate of the Company
EXHIBIT E Officer's Certificate of the Purchaser
EXHIBIT F The Longo Agreements
EXHIBIT G New York City Contract Opinion
EXHIBIT H Stockholders Agreement
DISCLOSURE SCHEDULE
<PAGE>
STOCK PURCHASE AGREEMENT (this "Agreement"), dated as of November 3,
1997, between COMPOST AMERICA HOLDING COMPANY, INC., a New Jersey corporation
(the "Company"), and WASTECO VENTURES LIMITED, a corporation organized under the
laws of the British Virgin Islands ("Wasteco" or the "Purchaser").
W I T N E S S E T H:
WHEREAS, the Company desires to authorize, issue, and sell to the
Purchaser, and the Purchaser desires to purchase from the Company, the Wasteco
Shares and the Wasteco Common Stock (as hereinafter defined) on the terms and
subject to the conditions set forth in this Agreement; and
WHEREAS, the Company intends simultaneously with the Closing of this
Agreement to purchase all of the common stock of R.J. Longo Construction Co.
Inc., a New Jersey corporation ("Longo"), from its shareholders Robert J. Longo,
an individual ("R.J. Longo"), and The Robert J. and Andrea Longo Charitable
Trust (the "Trust") (the "Longo Acquisition"); and
WHEREAS, notwithstanding the foregoing, contemporaneously with its
sale of the Longo Common Stock, R.J. Longo will retain certain assets of Longo
as listed in the applicable Schedules of the Longo Agreements and this Agreement
(the "Excluded Assets"); and
WHEREAS, the Company intends to use the Purchase Price proceeds to
finance the Longo Acquisition; and
WHEREAS, upon consummation of the Longo Acquisition, the Company
intends to change the name of Longo (exclusive of the Excluded Assets retained
by R.J. Longo as aforesaid) to EPIC ("EPIC");
NOW, THEREFORE, in consideration of the premises and the mutual
covenants and agreements hereinafter set forth, the parties hereto agree as
follows:
ARTICLE I
DEFINITIONS
SECTION 1.01. Definitions. As used in this Agreement, the following
terms shall have the following meanings:
"Action" means any claim, action, suit, arbitration, inquiry,
proceeding or investigation by or before any Governmental Authority.
<PAGE>
2
"Affiliate" of a Person means a Person that directly or indirectly,
through one or more intermediaries, controls, is controlled by or is under
common control with, the first mentioned Person.
"Articles of Incorporation" means the Restated Articles of
Incorporation of the Company, as amended through the date hereof.
"B Preferred Shares" has the meaning specified in Section 2.01.
"Bankruptcy Proceeding" has the meaning specified in Section 8.01.
"Bedminster Miami" has the meaning specified in Section 6.03.
"Board" means the Board of Directors of the Company.
"Business" means the construction or management of enclosed organic
material recycling compost manufacturing plants.
"Business Day" means any day other than a Saturday, Sunday or
federal holiday and consists of the time period from 12:01 a.m. through 12:00
midnight, Eastern Standard Time.
"By-Laws" means the Restated By-Laws of the Company, as amended
through the date hereof.
"CERCLA" has the meaning specified in the definition of
"Environmental Laws".
"CERCLIS" means the Comprehensive Environmental Responsive,
Compensation and Liability Information System, 42 U.S.C. ss. 9616(a).
"Closing" means the completion of the transactions specified herein
relating to the purchase and sale of the Wasteco Shares and the Wasteco Common
Stock as contemplated by Section 2.01 hereof.
"Closing Date" means the date on which the Closing shall occur.
"Code" means the Internal Revenue Code of 1986, as amended, together
with the rules and regulations promulgated thereunder.
"Collective Bargaining Agreements" has the meaning specified in
Section 3.21.
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"Common Stock" means the common stock of the Company, no par value.
"Company Loss" has the meaning specified in Section 9.03.
"Control" (including the terms "controlled by" and "under common
control with") means the possession, directly or indirectly, or as trustee or
executor, of the power to direct or cause the direction of the management and/or
policies of a Person, whether through the ownership of stock, as trustee or
executor, by contract or credit arrangement or otherwise.
"Disclosure Schedule" means the Disclosure Schedule dated as of the
date hereof delivered to the Purchaser by the Company and forming a part of this
Agreement.
"EBITDA" means earnings before interest, income taxes, depreciation
and amortization.
"Encumbrance" means any security interest, pledge, mortgage, lien
(including environmental liens), charge or (as determined to the best of the
Company's knowledge after due inquiry) adverse claim, including, without
limitation, any restriction on the use, voting, transfer, receipt of income or
other exercise of any attributes of ownership, but excluding such Encumbrances
which, individually or in the aggregate, would not have a Material Adverse
Effect.
"Environmental Laws" means any law, now or hereafter in effect and
as amended, and any judicial or administrative interpretation thereof, including
any judicial or administrative order, consent decree or judgment, relating to
pollution or protection of the environment, health, safety or natural resources,
including, without limitation, those relating to the use, handling,
transportation, treatment, storage, disposal, release or discharge of Hazardous
Substances.
"Environmental Permit" means any permit, approval, identification
number, license or other authorization required to operate the Business on the
Real Property under any applicable Environmental Law.
"EPIC" has the meaning specified in the recitals to this Agreement.
Any reference to EPIC, before or after the expected name change referred to in
the recitals to this Agreement, shall mean Longo exclusive of the Excluded
Assets.
"EPIC Option" means the option of the Purchaser to convert certain
Wasteco Securities into shares of common stock of Longo as provided in the
Certificate of Designation of the A and C Preferred Stock.
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4
"Equipment Debt Refinancing" means the refinancing of Longo's
equipment debt from U.S. Bankcorp in the maximum principal amount of
$10,000,000.
"ERISA" means the Employee Retirement Income Security Act of 1974,
as amended, together with the rules and regulations promulgated thereunder.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended, together with the rules and regulations promulgated thereunder.
"Excluded Assets" has the meaning set forth in the recitals to this
Agreement, as more fully defined in the Longo Agreements.
"Financial Statements" has the meaning specified in Section 3.09.
"GAAP" means U.S. generally accepted accounting principles and
practices in effect from time to time applied consistently throughout the
periods involved.
"Governmental Authority" means any United States federal, state or
local or any foreign governmental, regulatory or administrative authority,
agency or commission or any court, tribunal, judicial or arbitral body.
"Hazardous Substances" means (a) petroleum and petroleum products,
by-products or breakdown products, radioactive materials, asbestos-containing
materials and polychlorinated biphenyls, and (b) any other chemicals, materials
or substances regulated as toxic or hazardous or as a pollutant, contaminant or
waste under any applicable Environmental Law in such levels beyond those
permitted by applicable Environmental Laws.
"Indebtedness" means, with respect to any Person, (a) all
indebtedness of such Person, absolute or contingent, for borrowed money, (b) all
obligations of such Person for the deferred purchase price of property or
services, other than trade obligations incurred in the ordinary course of
business, (c) all obligations of such Person evidenced by notes, bonds,
debentures or other similar instruments, (d) all indebtedness created or arising
under any conditional sale or other title retention agreement with respect to
property acquired by such Person (even though the rights and remedies of the
seller or lender under such agreement in the event of default are limited to
repossession or sale of such property), (e) all obligations of such Person as
lessee under leases that have been or should be, in accordance with GAAP,
recorded as capital leases, (f) all obligations, contingent or otherwise, of
such Person under acceptances, letters of credit or similar facilities, (g) all
obligations of such Person to purchase, redeem, retire, defease or otherwise
acquire for value any capital stock of such Person or any warrants, rights or
options to acquire such capital stock, valued, in the case of redeemable
preferred stock, at the greater of its voluntary or involuntary liquidation
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5
preference plus accrued and unpaid dividends, (h) all Indebtedness of others
referred to in clauses (a) through (f) above guaranteed directly or indirectly
in any manner by such Person, or in effect guaranteed directly or indirectly by
such Person through an agreement (1) to pay or purchase such Indebtedness or to
advance or supply funds for the payment or purchase of such Indebtedness, (2) to
purchase, sell or lease (as lessee or lessor) property, or to purchase or sell
services, primarily for the purpose of enabling the debtor to make payment of
such Indebtedness or to assure the holder of such Indebtedness against loss, (3)
to supply funds to or in any other manner invest in the debtor (including any
agreement to pay for property or services irrespective of whether such property
is received or such services are rendered), or (4) otherwise to assure a
creditor against loss, and (i) all Indebtedness referred to in clauses (a)
through (f) above secured by (or for which the holder of such Indebtedness has
an existing right, contingent or otherwise, to be secured by) any Encumbrance on
property (including, without limitation, accounts and contract rights) owned by
such Person, even though such Person has not assumed or become liable for the
payment of such Indebtedness.
"Intellectual Property" means patents, patent registrations and
patent applications, trademarks, service marks, trademark rights, trade names,
trade name rights, registered copyrights and trade secrets owned or used by the
Company or any of its Subsidiaries in the conduct of its business.
"Interim Financial Statements" has the meaning specified in Section
3.09.
"IRS" means the United States Internal Revenue Service.
"Leased Real Property" means the real property leased by the Company
or its Subsidiaries, together with, to the extent leased by the Company or its
Subsidiaries, all buildings and other structures, facilities or improvements
presently or hereafter located thereon, all fixtures, systems, equipment and
items of personal property owned by the Company or its Subsidiaries attached or
appurtenant thereto and all easements, licenses, rights and appurtenances
relating to the foregoing.
"Liabilities" means any and all debts, liabilities and obligations,
whether accrued or fixed, absolute or contingent, mature or unmatured or
determined or determinable, including, without limitation, those arising under
any law, rule, regulation or order by a Governmental Authority and those arising
under any contract, agreement, commitment or undertaking.
"Licensed Intellectual Property" means all Intellectual Property
licensed or sublicensed to the Company or any Subsidiary or Longo from a third
party.
"Longo A Preferred Shares" has the meaning specified in Section
2.01.
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6
"Longo Agreements" means the Stock Purchase Agreement dated
September 17, 1997 among R.J. Longo, the Company and Longo together with the
Stock Purchase Agreement dated the same between the Company and the Trust. The
Longo Agreements are incorporated herein in their entirety by reference and form
a part of this Agreement.
"Longo Common Stock" has the meaning specified in Section 2.01.
"Longo C Preferred Shares" has the meaning specified in Section
2.01.
"Longo Shares" has the meaning specified in Section 2.01.
"Loss" has the meaning specified in Section 9.03.
"Material Adverse Effect" means any circumstance, change, event,
transaction, loss, failure, effect or other occurrence that is, or is reasonably
likely to be, materially adverse to the Business, operations, properties
(including intangible properties), condition (financial or otherwise), assets,
Liabilities, results of operations or financial or business prospects of the
Company and its Subsidiaries taken as a whole.
"Miami Project" has the meaning specified in Section 3.23.
"Mortgage Refinancing" means the refinancing of the existing first
mortgage on the Newark Project, such refinancing occurring contemporaneously
with the execution and delivery of this Agreement.
"Multiemployer Plan" has the meaning specified in Section 3.12.
"New York City Contract" means the Supply and Service Agreement
between The City of New York Department of Environmental Protection and R.J.
Longo Construction Company, Inc. d/b/a/ EPIC.
"Newark Project" has the meaning specified in Section 3.24.
"Owned Intellectual Property" means all Intellectual Property in and
to which the Company or any Subsidiary holds, or has a right to hold, any right,
title and interest.
"Owned Real Property" means the real property owned by the Company
or its Subsidiaries, together with all buildings and other structures,
facilities or improvements presently or hereafter located thereon, all fixtures,
systems, equipment and items of personal property of the Company or its
Subsidiaries attached or appurtenant thereto and all easements, licenses, rights
and appurtenances relating to the foregoing.
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7
"Person" means an individual, corporation, partnership, association,
trust, joint venture, unincorporated organization, other entity or group (as
defined in Section 13(d)(3) of the Exchange Act).
"Plans" has the meaning specified in Section 3.12.
"Preferred Stock" means the shares of Preferred Stock Series A of
the Company, no par value, the shares of Preferred Stock Series B of the
Company, no par value and the shares of Preferred Stock Series C of the Company,
no par value, which shall have the rights and terms set forth in Exhibit A
hereto.
"Preferred Stock Series A" means the Series A Preferred Stock of the
Company, no par value.
"Preferred Stock Series B" means the Series B Preferred Stock of the
Company, no par value.
"Preferred Stock Series C" means the Series C Preferred Stock of the
Company, no par value.
"Purchase Price" has the meaning specified in Section 2.01.
"Purchaser Loss" has the meaning specified in Section 9.02.
"Real Property" means the Leased Real Property and the Owned Real
Property.
"Registration Rights Agreement" means the Registration Rights
Agreement, dated as of November 3, 1997, between the Company and the Purchaser.
"Release" means disposing, discharging, injecting, spilling,
leaking, leaching, dumping, emitting, escaping, emptying, seeping, placing and
the like into or upon any land or water or air or otherwise entering into the
environment.
"Remedial Action" means all action to (i) clean up, remove, treat or
handle in any other way Hazardous Substances in the environment; (ii) prevent
the Release of Hazardous Substances so that they do not migrate, endanger or
threaten to endanger public health or the environment; or (iii) perform remedial
investigations, feasibility studies, corrective actions, closures and
post-remedial or post-closure studies, investigations, operations, maintenance
and monitoring on, about or in any Real Property with respect to any Release of
Hazardous Substances.
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8
"SEC" means the Securities and Exchange Commission.
"Securities Act" means the Securities Act of 1933, as amended,
together with the rules and regulations promulgated thereunder.
"Stockholders Agreement" means the Stockholders Agreement, dated as
of November 3, 1997, among the Company, the Purchaser and certain shareholders
of the Company.
"Subsidiary" or "Subsidiaries" means any corporation, partnership,
joint venture or other legal entity of which the Company or any other Person, as
the case may be (either alone or through or together with any other Subsidiary),
owns, directly or indirectly, fifty percent or more of the stock or other equity
interests, the holders of which are generally entitled to vote for the election
of the board of directors or other governing body of such corporation or other
legal entity. Longo shall be considered for all purposes to be a Subsidiary of
the Company regardless of whether the Closing or the closing of the Longo
Acquisition has yet taken place.
"Tangible Personal Property" means machinery, equipment, tools,
supplies, furniture, fixtures, vehicles, railcars and other tangible personal
property.
"Tax" or "Taxes" means all income, gross receipts, sales, use,
transfer, employment, franchise, profits, property, excise or other similar
taxes, estimated import duties, fees, stamp taxes and duties, value added taxes,
assessments or charges of any kind whatsoever (whether payable directly or by
withholding), together with any interest and any penalties, additions to tax or
additional amounts imposed by any taxing authority with respect thereto.
"Wasteco A Preferred Shares" has the meaning specified in Section
2.01.
"Wasteco Common Stock" has the meaning specified in Section 2.01.
"Wasteco C Preferred Shares" has the meaning specified in Section
2.01.
"Wasteco Shares" has the meaning specified in Section 2.01.
"Wasteco Securities" means the Wasteco Common Stock and the Wasteco
Shares.
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9
ARTICLE II
PURCHASE AND SALE OF SHARES; CLOSING
SECTION 2.01. Authorization, Purchase and Sale of Shares. Upon the
terms and subject to the conditions set forth herein, at the Closing, the
Company shall authorize, issue and sell to the Purchaser, and the Purchaser
shall purchase from the Company, (i) 130,000 shares of Preferred Stock Series A
(the "Wasteco A Preferred Shares") representing 77% of the authorized Preferred
Stock Series A, (ii) 70,000 shares of Preferred Stock Series C (the "Wasteco C
Preferred Shares"), representing 77% of the authorized Preferred Stock Series C
and (iii) 11,490,609 shares of Common Stock (the "Wasteco Common Stock"), for an
aggregate Purchase Price of $20 million. The Wasteco A Preferred Shares and the
Wasteco C Preferred Shares are sometimes hereinafter referred to as the "Wasteco
Shares". The aggregate of the purchase price for the Wasteco A Preferred Shares,
the Wasteco C Preferred Shares and the Wasteco Common Stock is sometimes
hereinafter referred to as the "Purchase Price".
Contemporaneously with the issuance of the Wasteco Shares and the
Wasteco Common Stock, the Company is also issuing to R.J. Longo (i) 39,000
shares of Preferred Stock Series A (the "Longo A Preferred Shares") representing
the remaining 23% of the authorized Preferred Stock Series A, (ii) 21,000 shares
of Preferred Stock Series C (the "Longo C Preferred Shares") representing the
remaining 23% of the authorized Preferred Stock Series C and (iii) 3,447,182
shares of Common Stock (the "Longo Common Stock") for an aggregate purchase
price of $6,000,000. The Longo A Preferred Shares and the Longo C Preferred
Shares are sometimes hereinafter referred to as the "Longo Shares".
The Company also has outstanding 801,000 shares of Preferred Stock
Series B (the "B Preferred Shares").
The Wasteco Shares and the Longo Shares shall have the rights and
terms set forth in Exhibit A hereto.
SECTION 2.02. Closing. (a) The Closing of the purchase and sale of
the Wasteco Shares and the Wasteco Common Stock shall take place upon the
satisfaction of the conditions set forth herein at the offices of Greenberg
Traurig, 153 East 53rd Street, New York, New York 10022, or at such other time
and place as the Company and the Purchaser may mutually agree in writing.
(b) At the Closing, the Company shall deliver or cause to be
delivered to the Purchaser: (i) stock certificates evidencing the Wasteco Shares
and the Wasteco Common Stock registered in the name of the Purchaser (or its
designee); (ii) the certificates
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referred to in Sections 8.01(a) and (d); (iii) the legal opinions referred to in
Sections 8.01(k) and (o); (iv) a receipt for the Purchase Price; (v) other
documents referred to in Section 8.01; and (vi) such other documents as the
Purchaser shall reasonably request.
(c) At the Closing, the Purchaser shall deliver to the Company: (i)
the Purchase Price, by wire transfer, to an account or accounts designated by
the Company at least three Business Days prior to the Closing Date; (ii) the
certificate referred to in Section 8.02(a); and (iii) a receipt for the Wasteco
Shares and the Wasteco Common Stock.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to the Purchaser that:
SECTION 3.01. Organization and Qualification; Subsidiaries. The
Company, Longo and each of its other Subsidiaries is a corporation duly
organized, validly existing and in good standing under the laws of their
respective jurisdictions of incorporation or formation, and has the requisite
power and authority to own, lease and operate their properties and carry on
their business in all material respects as presently owned or conducted. Each of
the Company and its Subsidiaries is duly qualified or licensed as a foreign
corporation to do business, and is in good standing, in each jurisdiction where
the character of its properties owned, leased or operated by it or the nature of
its activities makes such qualification or licensing necessary, except those
jurisdictions, if any, in which the failure to be so duly qualified or licensed
and in good standing would not, taken as a whole, have a Material Adverse
Effect. Schedule 3.01(a) of the Disclosure Schedule sets forth a complete and
correct list of each of the Subsidiaries of the Company and each Affiliate of
the Company, excluding Longo, and Schedule 3.01(b) sets forth the same
information as to Longo and its Subsidiaries and Affiliates. Each such
Subsidiary is wholly owned by the Company, unless otherwise indicated in
Schedule 3.01(a) of the Disclosure Schedule, or by Longo, except as indicated in
Schedule 3.01(b) of the Disclosure Schedule, which Schedules set forth all other
owners of each such Subsidiary not wholly owned by the Company and Longo,
including their percentage of ownership in such entity and further explain any
differences between the percentage of such ownership and any rights of such
owner with respect to the cash flow of such entities and further including all
Persons who have any rights to become such owner in the future. Other than the
Subsidiaries, there are no other corporations, partnerships, joint ventures,
associations or other entities in which the Company or Longo owns, of record or
beneficially, any direct or indirect equity or other interest or any right
(contingent or otherwise) to acquire the same. Other than the Subsidiaries, the
Company or Longo is not a member of (nor is any part of its business
<PAGE>
11
conducted through) any partnership, nor is the Company a participant in any
joint venture or similar arrangement.
SECTION 3.02. Certificate of Incorporation and By-Laws. The Company
has heretofore furnished to the Purchaser as to itself and Longo and as to each
other Subsidiary a complete and correct copy of the Certificate of Incorporation
and the By-Laws, each as amended through the date hereof, each of which is in
full force and effect as of the date hereof. The Company is not in violation of
any of the provisions of the Certificate of Incorporation or By-Laws, and Longo
and its other Subsidiaries are not in violation of any of the provisions of
their charters of incorporation, by-laws or equivalent organizational documents.
SECTION 3.03. Capitalization. (a) As of the close of business on
November 2, 1997, the authorized capital stock of the Company consists of (x)
25,000,000 shares of preferred stock, of which 401,000 shares of Preferred Stock
Series B are issued and outstanding, and 800,000 Shares of Preferred Stock
Series B are reserved for issuance upon conversion of convertible notes and (y)
50,000,000 shares of Common Stock, of which (i) 20,487,563 are issued and
outstanding, (ii) no shares of Common Stock are held in the treasury of the
Company, (iii) an aggregate of 1,201,000 shares of Common Stock are reserved for
issuance upon conversion of the Preferred Stock Series B, and (iv) other than
options with respect to the Longo Agreements and employment and consulting
agreements related thereto, 9,336,080 shares of Common Stock are reserved for
options, warrants or other similar rights pursuant to those agreements listed on
Schedule 3.03(b)(1) attached hereto (for a total of 31,024,643 Common Stock
issued and reserved for issuance).
(b) Except as set forth in this Section 3.03 or in Schedule
3.03(b)(1) of the Disclosure Schedule as to the Company, Schedule 3.03(b)(2) as
to Longo and Schedule 3.03(b)(3) as to other Subsidiaries or Affiliates of the
Company, there are no options, warrants or other rights, agreements,
arrangements or commitments of any character to which the Company, Longo or any
of its other Subsidiaries or Affiliates is a party or obligating the Company,
Longo or any of its other Subsidiaries or Affiliates to issue or sell any shares
of capital stock of, or other equity interests in, the Company, Longo or any of
its other Subsidiaries or Affiliates. Except as set forth in Schedule 3.03(b) of
the Disclosure Schedule, there are no outstanding contractual obligations of the
Company, Longo or any of its other Subsidiaries or Affiliates to repurchase,
redeem or otherwise acquire any of the capital stock of the Company, Longo or
any other Subsidiary or Affiliate or to provide funds to or make any investment
(in the form of a loan, capital contribution or otherwise) in any Subsidiary or
Affiliate or any other entity. Each of the outstanding shares of capital stock
of each of Longo and the Company's other Subsidiaries is duly authorized,
validly issued, fully paid and nonassessable and is owned by the Company,
directly or indirectly, free and clear of all Encumbrances except as set forth
in Schedule 3.03(b)(4) of the Disclosure Schedule.
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12
(c) Except as set forth on Schedule 3.03(c) of the Disclosure
Schedule and as set forth herein, neither the Company nor any of its
Subsidiaries and Affiliates or Longo is a party to any agreement granting
registration rights to any Person with respect to any equity or debt securities
of the Company.
(d) Schedule 3.03(d) of the Disclosure Schedule contains a complete
and accurate list of the names and the addresses of each Person owning shares of
capital stock of the Company, Longo and each other Subsidiary representing 5% or
more of the outstanding shares of Common or Preferred Stock of such company, as
the case may be, and the corresponding number of shares and the certificate
number evidencing such shares owned by such Person as of September 30, 1997.
(e) Except as otherwise disclosed in the Longo Agreements, none of
the Persons listed on Schedule 3.03(d) of the Disclosure Schedule, and no
officer or director of the Company, Longo or any other Subsidiary and no
relative or spouse who resides with, or is a dependent of, any such Person, has
any interest in any business enterprise (other than the Company or any
Subsidiary) which engages in any of the businesses in which the Company or any
of its Subsidiaries engage or which are suppliers to, or purchasers from, the
Company or its Subsidiaries.
(f) Schedule 303(f) of the Disclosure Schedule set forth the terms
and conditions (including, without limitation, any rights and preferences) of
the B Preferred Shares.
SECTION 3.04. Authority. The Company has all necessary corporate
power and authority to execute and deliver this Agreement and to perform its
obligations and to consummate the transactions contemplated hereunder including
the issuance of the Wasteco Shares and the Wasteco Common Stock. The execution
and delivery of this Agreement by the Company and the consummation by the
Company of the transactions contemplated hereby have been duly and validly
authorized by all necessary corporate action and no other corporate proceedings
on the part of the Company are necessary to authorize this Agreement or to
consummate the transactions contemplated by this Agreement. This Agreement has
been duly and validly executed and delivered by the Company and, assuming the
due authorization, execution and delivery hereof by the Purchaser and payment
for the Wasteco Shares and the Wasteco Common Stock as contemplated by this
Agreement, constitutes the legal, valid and binding obligation of the Company
enforceable against the Company in accordance with its terms, subject to
bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and
similar laws of general applicability relating to or affecting creditors' rights
and to general equity principles.
SECTION 3.05. No Conflict; Required Filings and Consents. (a)
Assuming the satisfaction of the conditions set forth in Article VIII hereof,
the execution and delivery
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13
of this Agreement by the Company do not, and the performance of this Agreement
(including, without limitation, the consummation of the transactions
contemplated hereunder and the exchange, conversion or redemption, if any, of
the Preferred Stock) will not, (i) conflict with or violate the Certificate of
Incorporation or By-Laws, (ii) conflict with or violate the certificates of
incorporation or by-laws or equivalent organizational documents of Longo or any
of the Company's other Subsidiaries, (iii) conflict with or violate any law,
rule, regulation, order, judgment or decree applicable to the Company, Longo or
any of its other Subsidiaries or by which its or any of their respective
properties are bound or affected, or (iv) result in any breach of or constitute
a default (or an event which with notice or lapse of time or both would become a
default) under, or give to others any rights of termination, amendment,
acceleration or cancellation of, or result in the creation of a lien or
encumbrance on any of the properties or assets of the Company, Longo or any of
its other Subsidiaries pursuant to any note, bond, mortgage, indenture,
contract, agreement, lease, license, permit, insurance policy or other
instrument or obligation to which the Company, Longo or any of its other
Subsidiaries is a party, or by which the Company, Longo or any of its other
Subsidiaries or its or any of their respective properties are bound or affected,
except as disclosed in Schedule 3.05(a) of the Disclosure Schedule and except in
the case of clauses (ii), (iii) and (iv) above for such conflicts which would
not, taken as a whole, have a Material Adverse Effect.
(b) Except as disclosed in Section 3.05(b) of the Disclosure
Schedule, the execution and delivery of this Agreement by the Company do not,
and the performance of this Agreement by the Company (including, without
limitation, the consummation of the transactions contemplated hereunder) will
not, require (i) any consent, approval, authorization or permit of, or filing
(other than filings, if any, required on Form 8-K and Form 10-C with the
Securities and Exchange Commission (the "SEC")) with action by, or notification
to, any governmental or regulatory authority, domestic or foreign, on the part
of the Company or Longo or any of its other Subsidiaries, or (ii) approval by
the holders of any class or series of capital stock of the Company.
SECTION 3.06. Common Stock; Preferred Stock. Assuming all conditions
set forth in Article VIII are satisfied, following the consummation of the
transactions hereunder, all shares of Common Stock and Preferred Stock subject
to issuance pursuant to this Agreement (including, without limitation, the
Common Stock issuable upon conversion of the Series C Preferred Stock), upon
issuance against payment for the shares of Preferred Stock as contemplated by
this Agreement or upon conversion of the Series C Preferred Stock into Common
Stock or upon conversion of the Wasteco Shares and the Wasteco Common Stock into
common stock of Longo, as the case may be, shall (a) be duly authorized, validly
issued, fully paid and nonassessable and (b) not be subject to any Encumbrances.
With respect to the shares of Common Stock, such shares shall have accorded to
them full voting rights in accordance with the Articles of Incorporation of the
Company and New Jersey law. With respect to the shares of Series C Preferred
Stock, such shares will be convertible into
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14
shares of Common Stock and will have certain voting rights in accordance with
the terms of the Preferred Stock. With respect to the EPIC Option, shares of the
Preferred Stock will be convertible into shares of Common Stock of Longo in
accordance with the terms of the Preferred Stock.
SECTION 3.07. Compliance with Laws. Except as set forth in Schedule
3.07 of the Disclosure Schedule, neither the Company nor Longo nor any of its
other Subsidiaries is in conflict with, or in violation of, any law, rule,
regulation, order, judgment or decree applicable to the Company or Longo or any
of its other Subsidiaries or by which the Company or Longo or any of its other
Subsidiaries or any of its or their respective properties are bound or affected,
except for any such conflicts or violations which would not, individually or in
the aggregate, have a Material Adverse Effect.
SECTION 3.08. SEC Filings; Financial Statements. The Company has
filed all forms, reports, statements and documents required to be filed with the
SEC since April 30, 1995 (the "Company SEC Reports"). The Company SEC Reports
(i) were each prepared in accordance with, and at the time of filing complied in
all material respects with, the requirements of the Securities Act of 1933, as
amended, together with the rules and regulations promulgated thereunder (the
"Securities Act"), or the Securities Exchange Act of 1934, as amended, together
with the rules and regulations promulgated thereunder (the "Exchange Act"), as
the case may be, and (ii) except as disclosed in Section 3.08 of the Disclosure
Schedule, did not at the time they were filed contain any untrue statement of a
material fact or omit to state a material fact required to be stated therein or
necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading. None of Longo or the
Company's other Subsidiaries is required to file any forms, reports or other
documents with the SEC. Each of the consolidated financial statements
(including, in each case, any related notes thereto) contained in the SEC
Reports has been prepared in accordance with GAAP (except as may be indicated in
the notes thereto), and each presents fairly the consolidated financial position
of the Company and its consolidated Subsidiaries at the respective dates thereof
and the consolidated results of its operations and changes in cash flows for the
periods indicated, except that the unaudited interim financial statements were
or are subject to normal and recurring year-end adjustments. Except as would not
have a Material Adverse Effect, and except for (i) liabilities reflected in the
Company SEC Reports or in Schedule 3.08 of the Disclosure Schedule, (ii)
liabilities incurred in the ordinary course of business of the Company and its
Subsidiaries subsequent to April 30, 1997, (iii) liabilities incurred with
respect to the Mortgage Refinancing and (iv) liabilities incurred with respect
to the Equipment Debt Refinancing, the Company and its Subsidiaries have no
liabilities that are material to the Company and its Subsidiaries, taken as a
whole, and there is no existing condition or set of circumstances that could
reasonably be expected to result in any such liability.
<PAGE>
15
SECTION 3.09. Financial Statements. True and complete copies of (i)
the audited consolidated balance sheets of the Company for each of the fiscal
years ended as of April 30, 1996 and April 30, 1997, and the related audited
consolidated statements of income, cash flows and changes in financial position
of the Company, together with all related notes and schedules thereto,
accompanied by the reports thereon or management letters from the Company's
accountants (collectively, the "Financial Statements"), (ii) the unaudited
balance sheets of the Company for the fiscal quarter ended July 31, 1997, and
the related unaudited statements of income cash flows, and changes in financial
positions of the Company for each, together with all related notes and schedules
thereto, which statements include all material known adjustments as of the date
of such statements, subject to ordinary year-end adjustments which in the
aggregate would not be material (collectively referred to herein as the "Interim
Financial Statements") and (iii) the schedule of Indebtedness of the Company
(the "Debt Schedule") as set forth in Schedule 3.09 of the Disclosure Schedule,
as well as an aging of accounts payable, have been delivered by the Company to
the Purchaser (including, without limitation, with respect to each debt, (i) the
amount, (ii) the scheduled principal payments and (iii) the date of maturity of
such instrument) and the Company and its Subsidiaries are current in all their
Indebtedness as set forth in the Debt Schedule. The Financial Statements and the
Interim Financial Statements (i) were prepared in accordance with the books of
account and other financial records of the Company, (ii) present fairly the
financial condition, results of operations and cash flows of the Company as of
the dates thereof or for the periods covered thereby, (iii) have been prepared
in accordance with GAAP applied on a basis consistent with the past practices of
the Company and throughout the periods involved and (iv) include all adjustments
that are necessary for a fair presentation of the consolidated financial
condition of the Company and the Subsidiaries other than Longo, and the results
of the operations and cash flows of the Company and the Subsidiaries other than
Longo as of the dates thereof or for the periods covered thereby (subject, in
the case of Interim Financial Statements, to normal and recurring year-end
adjustments).
SECTION 3.10. Absence of Undisclosed Liabilities. There are no
liabilities or obligations of the Company or its Subsidiaries other than Longo
(whether absolute, accrued, contingent or otherwise) that would be required to
be reflected on a balance sheet or in the footnotes thereto prepared in
accordance with GAAP, other than liabilities (a) reflected in or reserved
against on the Financial Statements or Interim Financial Statements or the notes
thereto, (b) described in Schedule 3.10 of the Disclosure Schedule or otherwise
disclosed in Schedule 3.11 of the Disclosure Schedule or (c) incurred by the
Company or any of its Subsidiaries other than Longo in the ordinary course of
business subsequent to September 30, 1997.
SECTION 3.11. Absence of Certain Changes, Events and Conditions;
Conduct in the Ordinary Course. (a) Since July 31, 1997, except as disclosed in
Schedule 3.11 of the Disclosure Schedule, there has not been any change having a
Material Adverse Effect. Except as disclosed in Schedule 3.11 of the Disclosure
Schedule, there are no
<PAGE>
16
conditions known to the Company existing, with respect to the markets, proposed
marketing plans, facilities, capabilities or personnel of the Company, that
reasonably could be expected to have a Material Adverse Effect.
(b) Since July 31, 1997, the Company, Longo and the other
Subsidiaries have been operated, consistent with funds made available to them
under their financing facilities, if any, only in the ordinary course and
consistent with past practice. As amplification and not in limitation of the
foregoing, except as disclosed in Schedule 3.11(b) of the Disclosure Schedule,
neither the Company nor Longo or any of its other Subsidiaries has, since July
31, 1997:
(i) made any change in any method of accounting or accounting
practice or policy used by the Company or Longo, other than such changes
required by GAAP that are identified in Schedule 3.11(b)(i) of the
Disclosure Schedule;
(ii) consistent with funds made available to it under its financing
facilities, if any, made any material changes in the customary methods of
operations of the Company, Longo or any other Subsidiary, including
practices and policies relating to purchasing, inventory, marketing,
selling or pricing;
(iii) failed to maintain the Company's, Longo's or any other
Subsidiary's Tangible Personal Property in good repair, ordinary wear and
tear excepted;
(iv) redeemed any of the Company's, Longo's or any other
Subsidiary's capital stock or declared, made or paid any dividends or
distributions (whether in cash, securities or other property) to the
holders of the Company's or any Subsidiary's capital stock or otherwise
other than regular dividends paid by Longo in the ordinary course of
business and consistent with past practice and except as contemplated by
the Longo Agreements;
(v) other than with respect to the Mortgage Refinancing and the
issuance of Preferred Stock Series A, Series B and Series C as listed in
Schedule 3.11(b) of the Disclosure Schedule, issued or sold any capital
stock, notes, bonds or other securities, or any option, warrant or other
right to acquire the same, of, or any other interest in, the Company,
Longo or any other Subsidiary;
(vi) except as disclosed in Schedule 3.11(b) of the Disclosure
Schedule, amended or restated the Company's or Longo's or any Subsidiary's
Certificate of Incorporation or By-Laws;
(vii) other than with respect to the Longo Acquisition, the Mortgage
Refinancing and the Equipment Debt Refinancing, merged with, been merged
with,
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17
entered into a consolidation with or acquired an interest of 5% or more in
any Person, or acquired (by purchase, merger, consolidation, stock
acquisition or otherwise) a substantial portion of the assets of any
Person or any division or line of business thereof, or otherwise acquired
assets other than in the ordinary course and in accordance with past
practice;
(viii) other than with respect to the Longo Acquisition, the
Mortgage Refinancing and the Equipment Debt Refinancing, permitted or
allowed any of the assets or properties (whether tangible or intangible)
of the Company, Longo or any other Subsidiary to be subjected to any
Encumbrance;
(ix) other than with respect to the Longo Acquisition, the Mortgage
Refinancing and the Equipment Debt Refinancing, made any loan to,
guaranteed any indebtedness of or otherwise incurred any indebtedness on
behalf of any Person;
(x) other than with respect to the Longo Acquisition, made any
capital expenditure or commitment for any capital expenditure in excess of
$100,000 individually or $250,000 in the aggregate;
(xi) other than in connection with the Longo Acquisition, entered
into any agreement, arrangement or transaction with any of its directors,
officers, employees or shareholders (or with any relative, beneficiary,
spouse or Affiliate of such Person);
(xii) agreed, whether in writing or otherwise, to take any of the
actions specified in this Section 3.11(b), except for those contemplated
by this Agreement and the Longo Acquisition;
(xiii) allowed any permit or Environmental Permit that was issued or
relates to the Company, Longo or any other Subsidiary, or that otherwise
relates to any Asset, to lapse or terminate, or failed to renew any such
Permit or Environmental Permit or any insurance policy that is scheduled
to terminate or expire within 45 calendar days of the Closing Date;
(xiv) other than with respect to the Longo Acquisition, the Mortgage
Refinancing, the Equipment Debt Refinancing and the New York City
Contract, incurred any Indebtedness in excess of $100,000 individually or
$250,000 in the aggregate;
(xv) amended, modified or consented to the termination of any
Material Contract or the Company's, Longo's or any other Subsidiary's
rights thereunder;
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18
(xvi) disclosed any secret or confidential Intellectual Property
(except by way of issuance of a patent) or permitted to lapse or go
abandoned any Intellectual Property (or any registration or grant thereof
or any application relating thereto) to which, or under which, the
Company, Longo or any other Subsidiary has any right, title, interest or
license;
(xvii) failed to pay any creditor any material amount owed to such
creditor when due;
(xviii) except as contemplated by the Longo Acquisition, sold,
transferred, leased, subleased, licensed or otherwise disposed of any
properties or assets, real, personal or mixed (including, without
limitation, leasehold interests and intangible assets), other than a sale
in the ordinary course of business consistent with past practice;
(xix) except with respect to the employment agreements listed on
Schedule 3.11(b) of the Disclosure Schedule, (A) granted any increase, or
announced any increase, in the wages, salaries, compensation, bonuses,
incentives, pension or other benefits payable by the Company, Longo or any
other Subsidiary to any of its employees, including, without limitation,
any increase or change pursuant to any Plan or (B) established or
increased or promised to increase any benefits under any Plan, in either
case except as required by law or any collective bargaining agreement and
involving ordinary increases consistent with the past practices of the
Company, Longo or such other Subsidiary;
(xx) written down or written up (or failed to write down or write up
in accordance with GAAP consistent with past practice) the value of any
inventories or receivables or revalued any assets of the Company, Longo or
any other Subsidiary other than in the ordinary course of business
consistent with past practice and in accordance with GAAP;
(xxi) except as contemplated by the Longo Acquisition, amended,
terminated, cancelled or compromised any material claims of the Company,
Longo or any other Subsidiary or waived any other rights of substantial
value to the Company, Longo or any other Subsidiary; or
(xxii) suffered any Material Adverse Effect.
SECTION 3.12. Employee Benefit Matters. (a) Plans and Material
Documents. Schedule 3.12(a) of the Disclosure Schedule lists all employee
benefit plans (as defined under Section 3(3) of ERISA) and all bonus, stock
option, stock purchase, restricted stock, incentive, deferred compensation,
retiree medical or life insurance,
<PAGE>
19
supplemental retirement, severance or other benefit plans, programs or
arrangements, and all employment, termination, severance or other contracts or
agreements, whether legally enforceable or not, to which the Company, Longo, or
any other Subsidiary is a party, with respect to which the Company, Longo, or
any other Subsidiary has any obligation or which are maintained, contributed to
or sponsored by the Company, Longo, or any other Subsidiary for the benefit of
any current or former employee, officer or director of the Company, Longo, or
any other Subsidiary (collectively, the "Plans"). The Company has furnished the
Purchaser with a complete and accurate copy of each Plan and a complete and
accurate copy of the following: (i) each trust or other funding arrangement,
(ii) each summary plan description and summary of material modifications, (iii)
the most recently filed IRS Form 5500, (iv) the most recently received IRS
determination letter for each such Plan, and (v) the most recently prepared
actuarial report and financial statement in connection with each such Plan, if
applicable. Except as set forth in Schedule 3.12(a) of the Disclosure Schedule,
the Company, Longo or any other Subsidiary does not have any express or implied
commitment, (i) to create, incur liability with respect to or cause to exist any
other employee benefit plan, program or arrangement, (ii) to enter into any
contract or agreement to provide compensation or benefits to any individual or
(iii) to modify, change or terminate any Plan (other than with respect to a
modification, change or termination required by ERISA or the Code), that would
impose any material additional cost on the Company, Longo or any other
Subsidiary.
(b) Absence of Certain Types of Plans. Except as set forth in
Schedule 3.12(b) of the Disclosure Schedule, none of the Plans is a
multiemployer plan (within the meaning of Section 3(37) or 4001(a)(3) of ERISA)
(a "Multiemployer Plan"), a single employer pension plan (within the meaning of
Section 4001(a)(15) of ERISA) or a plan intended to be qualified under Section
401(a) or 401(k) of the Code. Except as set forth in Schedule 3.12(b) of the
Disclosure Schedule, none of the Plans provides for the payment of separation,
severance, termination or similar-type benefits to any Person or obligates the
Company, Longo or any other Subsidiary to pay separation, severance, termination
or similar-type benefits solely as a result of any transaction contemplated by
this Agreement or as a result of a "change in control" of the Company, within
the meaning of such term under Section 280G of the Code. Except as set forth in
Schedule 3.12(b) of the Disclosure Schedule, none of the Plans provides for or
promises retiree medical, disability or life insurance benefits to any current
or former employee, officer or director of the Company, Longo or any other
Subsidiary except to the extent required by law. Each of the Plans is subject
only to the laws of the United States or a political subdivision thereof.
(c) Compliance with Applicable Law. Each Plan is now and always has
been operated in all material respects in accordance with the requirements of
all applicable law, including, without limitation, ERISA and the Code, and the
Company, Longo and any other Subsidiary and each of their officers, employees
and agents who are "fiduciaries" (within the meaning of Section 3(21) of ERISA)
with respect to the Plans have always acted in accordance with the provisions of
all applicable law, including, without limitation, ERISA
<PAGE>
20
and the Code; and the Company, Longo or any other Subsidiary has performed all
material obligations required to be performed by it under, is not in any respect
in material default under or in material violation of, and has no knowledge of
any material default with regard to or material violation by any party to, any
Plan. Except as disclosed on Schedule 3.12(c) of the Disclosure Schedule, no
material legal action, suit or claim is pending or threatened with respect to
any Plan (other than claims for benefits in the ordinary course) and, to the
knowledge of the Company, no fact or event exists that could reasonably be
expected to give rise to any such action, suit or claim.
(d) Absence of Certain Liabilities and Events. There has been no
prohibited transaction (within the meaning of Section 406 of ERISA or Section
4975 of the Code) with respect to any Plan that could give rise to any material
liability being imposed on the Company, Longo or any other Subsidiary. The
Company, Longo or any other Subsidiary has not incurred any material liability
for any penalty or tax arising under Section 4971, 4972, 4980, 4980B or 6652 of
the Code or any material liability under Section 502 of ERISA, and no fact or
event exists which could give rise to any such material liability. Except as set
forth in Schedule 3.12(d) of the Disclosure Schedule, the Company, Longo or any
other Subsidiary has not incurred any material liability under, arising out of
or by operation of Title IV of ERISA (other than liability for premiums to the
Pension Benefit Guaranty Corporation arising in the ordinary course), including,
without limitation, any material liability in connection with (i) the
termination or reorganization of any employee benefit plan subject to Title IV
of ERISA or (ii) the withdrawal from any Multiemployer Plan or any single
employer plan, and, to the best knowledge of the Company after due inquiry, no
fact or event exists which could reasonably be expected to give rise to any such
liability. No complete or partial termination has occurred within the five years
preceding the date hereof with respect to any Plan.
(e) Plan Contributions and Funding. All contributions, premiums or
payments required to be made with respect to any Plan on or before the date of
this Agreement have been made on or before their due dates. All such
contributions have been fully deducted for income tax purposes (to the extent
deductible) and no such deduction has been challenged or disallowed by any
government entity and no fact or event exists which could reasonably be expected
to give rise to any such challenge or disallowance.
SECTION 3.13. Real Property. (a) Schedule 3.13(a) of the Disclosure
Schedule contains a list of all of the Owned Real Property. The Company, Longo
or any other Subsidiary, as the case may be, has valid fee interests in all of
its Owned Real Property and good and marketable title thereto, and such Owned
Real Property is owned by the Company, Longo or such Subsidiary free and clear
of all Encumbrances except (i) as set forth on Schedule 3.13(a) of the
Disclosure Schedule and (ii) Encumbrances for current taxes not yet due and
payable or being contested in good faith by appropriate proceedings.
<PAGE>
21
(b) Schedule 3.13(b) of the Disclosure Schedule contains a list of
all of the Leased Real Property and a list of all leases and subleases
pertaining to such Leased Property including all agreements in which the
Company, Longo or any other Subsidiary has an option to purchase or Lease any
real property. Except as described in such Section of the Disclosure Schedule,
(i) there is no material violation of any law, rule or regulation by the
Company, Longo or any other Subsidiary, as the case may be, or known to the
Company, Longo or any other Subsidiary, as the case may be, relating to any of
the Leased Real Property, (ii) the Company, Longo or any other Subsidiary, as
the case may be, is in peaceful and undisturbed possession of the Leased Real
Property, and, so long as the lease remains in effect, there are no contractual
or legal restrictions that preclude or restrict the ability to use the premises
for the purposes for which they are currently being used and (iii) the Company,
Longo or any other Subsidiary, as the case may be, has not leased or subleased
any parcel or any portion of any parcel of Leased Real Property to any other
Person, nor has the Company, Longo or any other Subsidiary assigned its interest
under any lease or sublease listed in Schedule 3.13(b) of the Disclosure
Schedule to any third party.
(c) The Company has, or has caused to be, delivered to the Purchaser
true and complete copies of all leases and subleases listed in Schedule 3.13(b)
of the Disclosure Schedule. Each of such leases and subleases is in full force
and effect and constitutes a legal, valid and binding obligation of the
respective parties thereto, and, except as set forth on Schedule 3.13(c) of the
Disclosure Schedule, the Company, Longo or any other Subsidiary, as the case may
be, is not in material default or breach of (with or without the giving of
notice or the passage of time) any such leases or subleases. To the knowledge of
the Company, no third party is in material breach of any of such leases or
subleases.
SECTION 3.14. Tangible Personal Property. (a) Schedule 3.14(a) of
the Disclosure Schedule contains a list of all Tangible Personal Property valued
at $5,000 or more used in the Business or owned or leased by the Company, Longo
and its other Subsidiaries. Except for changes made in the ordinary course of
business since April 30, 1995, the Company, Longo or any such Subsidiary owns
such Tangible Personal Property reflected on the Financial Statements, free and
clear of all Encumbrances, except as described in Schedule 3.14(a) of the
Disclosure Schedule.
(b) Schedule 3.14(b) of the Disclosure Schedule contains a list of
all leased Tangible Personal Property requiring lease payments of $25,000 or
more per year leased by the Company, Longo and its other Subsidiaries. Except
for changes made in the ordinary course of business since April 30, 1997 as
would not materially adversely affect the present use of such leased Tangible
Personal Property or as would not have a Material Adverse Effect, with respect
to each such lease:
<PAGE>
22
(i) such lease is in full force and effect and is a legal, valid and
binding obligation of the Company, Longo or the Subsidiary party thereto,
and is enforceable by the Company, Longo or such Subsidiary in accordance
with its terms;
(ii) the Company, Longo or such Subsidiary is in peaceful and
undisturbed possession of the Tangible Personal Property subject to such
lease; and
(iii) there has been no notice of default under any lease received
by the Company, Longo or such Subsidiary that is still in effect; none of
the Company, Longo or any other Subsidiary is in material breach or
default of any such lease; and no event has occurred that, with a notice
or lapse or time or both, would constitute such a material default or
permit the termination, modification or acceleration of such lease.
SECTION 3.15. Intellectual Property. (a) Schedule 3.15(a)(i) of the
Disclosure Schedule sets forth a true and complete list and a brief description,
including a complete identification of each patent and patent application and
each trademark registration or application for trademark registration thereof,
of all Owned Intellectual Property (except unregistered copyrights), and
Schedule 3.15(a)(ii) of the Disclosure Schedule sets forth a true and complete
list and a brief description, including a description of any license or
sublicense thereof, of all Licensed Intellectual Property. Except as otherwise
described in Schedule 3.15(a)(i) of the Disclosure Schedule, in each case where
a trademark registration or patent or application for trademark registration or
patent listed in Schedule 3.15(a)(i) of the Disclosure Schedule is held by
assignment, the assignment has been duly recorded with the state or national
Trademark Office from which the original trademark registration issued or before
which the application for trademark registration is pending, or the assignment
has been duly recorded in the national or international Patent Office from which
the original patent issued or before which the application for patent is
pending. Except as disclosed in Schedule 3.15(a)(iii) of the Disclosure
Schedule, to the best knowledge of the Company after due inquiry, the rights of
the Company, Longo or any other Subsidiary, as the case may be, in or to such
Intellectual Property do not conflict with or infringe on the rights of any
other Person, and none of the Company, Longo or any other Subsidiary has
received any claim or written notice from any Person to such effect.
(b) Except as disclosed in Schedule 3.15(b) of the Disclosure
Schedule, (i) all the Owned Intellectual Property is owned by the Company, Longo
or another Subsidiary, as the case may be, free and clear of any Encumbrance and
the Company, Longo or such Subsidiary, as the case may be, holds the entire
right, title, and interest in and to same, and (ii) no claim, action, suit,
arbitration, inquiry, proceeding or investigation by or before a Governmental
Authority has been made or asserted or is pending (or, to the best knowledge of
the Company after due inquiry, threatened) against the Company, Longo or any
other Subsidiary either (A) based upon, or challenging or seeking to deny or
restrict the
<PAGE>
23
use by the Company, Longo or any such Subsidiary of, any of the Owned
Intellectual Property or (B) alleging that any services provided, or products
manufactured or sold by the Company, Longo or any such Subsidiary are being
provided, manufactured or sold in violation of any rights of any Person. To the
best knowledge of the Company after due inquiry, no Person is using any
trademarks, service marks, trade names or similar property that is confusingly
similar to the Owned Intellectual Property, and no Person is making, using,
selling, publishing or copying anything that infringes upon the Owned
Intellectual Property or upon the rights of the Company, Longo or any other
Subsidiary therein. Except as disclosed in Schedule 3.15(b) of the Disclosure
Schedule, none of the Company, Longo or any other Subsidiary has granted any
license or other right to any other Person with respect to the Owned
Intellectual Property. The consummation of the transactions contemplated by this
Agreement will not result in the termination or impairment of any of the Owned
Intellectual Property or Licensed Intellectual Property.
(c) The Company represents and warrants to the Purchaser that,
except as disclosed in Schedule 3.15(c) of the Disclosure Schedule, none of the
Company, Longo, or any other Subsidiary nor any operation of the business of the
Company, Longo or any other Subsidiary infringes any patent, trademark, service
mark, copyright or similar right of any Person, nor has the Company, Longo or
any other Subsidiary misappropriated or wrongfully disclosed any trade secret,
proprietary right or similar right of any Person.
(d) The Company represents and warrants to the Purchaser that, to
the best knowledge of the Company after due inquiry, except as disclosed in
Schedule 3.15(d) of the Disclosure Schedule, no Person has made any claim or
allegation that any of the Company, Longo or any other Subsidiary infringes any
patent, trademark, service mark, copyright or similar right of any Person or has
misappropriated or wrongfully disclosed any trade secret, proprietary right or
similar right of any person.
(e) With respect to all Licensed Intellectual Property and Owned
Intellectual Property, to the best knowledge of the Company after due inquiry,
the registered user provisions of all nations requiring such registrations have
been complied with in all material respects. With respect to all owned
Intellectual Property and Licensed Intellectual Property, all required
maintenance fees or annuities have been paid in a timely manner.
(f) The Company has, or has caused to be, delivered to the Purchaser
correct and complete copies of all the material licenses and sublicenses for all
Licensed Intellectual Property listed in Schedule 3.15(a)(ii) of the Disclosure
Schedule and any and all ancillary documents pertaining thereto (including, but
not limited to, all amendments, consents and evidence of commencement dates and
expiration dates). With respect to each of such licenses and sublicenses:
<PAGE>
24
(i) such license or sublicense, together with all ancillary
documents delivered pursuant to the first sentence of this Section
3.15(f), is valid and binding and in full force and effect and represents
the entire agreement between the respective licensor and licensee with
respect to the subject matter of such license or sublicense;
(ii) except as otherwise set forth in Schedule 3.15(a)(ii) of the
Disclosure Schedule, such license or sublicense will not cease to be valid
and binding and in full force and effect on terms identical to those
currently in effect as a result of the consummation of the transactions
contemplated by this Agreement, nor will the consummation of the
transactions contemplated by this Agreement constitute a breach or default
under such license or sublicense or otherwise give the licensor or
sublicensor a right to terminate such license or sublicense;
(iii) except as otherwise disclosed in Schedule 3.15(a)(ii) of the
Disclosure Schedule, with respect to each such license or sublicense: (A)
none of the Company, Longo or any other Subsidiary has received any notice
or threat of termination or cancellation under such license or sublicense
and no licensor or sublicensor has any right of termination or
cancellation under such license or sublicense except in connection with
the default of the Company, Longo or any such Subsidiary thereunder, (B)
none of the Company, Longo or any other Subsidiary has received any notice
of a breach of or default under such license or sublicense, which breach
or default has not been cured, and (C) none of the Company, Longo or any
such Subsidiary has granted to any other Person any rights, adverse or
otherwise, under such license or sublicense;
(iv) none of the Company, Longo, any other Subsidiary or (to the
best knowledge of the Company after due inquiry) any other party to such
license or sublicense is in breach or default in any material respect,
and, to the best knowledge of the Company after due inquiry, no event has
occurred that, with notice or lapse of time would constitute such a breach
or default or permit termination, modification or acceleration under such
license or sublicense;
(v) no claim, action, suit, arbitration, inquiry, proceeding or
investigation by or before any Governmental Authority has been made or
asserted or is pending (or, to the best knowledge of the Company after due
inquiry, threatened) against the Company, Longo or any other Subsidiary
either (A) based upon or challenging or seeking to deny or restrict the
use by the Company, Longo or any such Subsidiary of any of the Licensed
Intellectual Property or (B) alleging that any Licensed Intellectual
Property is being licensed, sublicensed or used in violation of any
patents or trademarks or in violation of any other rights of any Person;
and
<PAGE>
25
(vi) except as set forth on Schedule 3.15(f) of the Disclosure
Schedule, to the best knowledge of the Company after due inquiry, no
Person is using any trademarks, service marks, trade names or similar
property that is confusingly similar to the Licensed Intellectual
Property, and no Person is making, using, selling, publishing or copying
anything that infringes upon the Licensed Intellectual Property or upon
the rights of the Company, Longo or any other Subsidiary thereto.
(g) The Company is not aware of anything or any reason that would
prevent any pending applications to register trademarks, service marks or
copyrights or any pending patent applications from being granted.
(h) The Intellectual Property described in Schedules 3.15(a)(i) and
(ii) of the Disclosure Schedule constitutes all the Intellectual Property used
or held or intended to be used by the Company, Longo or any other Subsidiary and
constitutes all such Intellectual Property necessary for the conduct of the
Business, and there are no other items of Intellectual Property that are
material to the Company, Longo or any other Subsidiary or the Business.
SECTION 3.16. Environmental Matters. Except as set forth on Schedule
3.16 of the Disclosure Schedule:
(a) All facilities and property presently owned or leased by the
Company, Longo or any of its other Subsidiaries are, and continue to be,
owned and operated by the Company, Longo and its other Subsidiaries in
material compliance with all applicable Environmental Laws. All past
noncompliance with Environmental Laws or Environmental Permits has been
resolved without any material pending, ongoing or future obligation, cost
or liability, and except as to Environmental Permits not yet obtained for
facilities under development or proposed for acquisition, there is no
requirement proposed for adoption or implementation under any
Environmental Law or Environmental Permit that is reasonably expected to
be material to the Company, Longo or any other Subsidiary or the Business.
(b) None of the Company, Longo or any of its other Subsidiaries has
received notice of any pending or threatened claims, complaints or
requests for information with respect to any alleged violation of any
Environmental Laws, and there are no circumstances that can reasonably be
expected to form the basis of any such environmental claim, complaint or
request.
(c) There have been no material releases, as defined under any
Environmental Laws, of Hazardous Substances that give rise to necessary
costs of response at, on, from or under any property now or previously
owned or leased by
<PAGE>
26
the Company, Longo or any of its other Subsidiaries during the period in
which any such property was owned or leased by the Company, Longo or any
other Subsidiary.
(d) Except as to Environmental Permits not yet obtained for
facilities under development or proposed for acquisition, the Company,
Longo and its other Subsidiaries have been issued and are in material
compliance with all Environmental Permits, orders, administrative consent
orders and any other authorizations, approvals or consents relating to
Environmental Laws or Hazardous Substances material to the operation of
their businesses.
(e) None of the Company, Longo or any of its other Subsidiaries has
received notice that property presently owned or leased, or previously
owned or leased, by the Company or any of its Subsidiaries is listed or
proposed for listing in the National Priorities List created pursuant to
CERCLA or on the CERCLIS or any similar state list of sites requiring
investigation or cleanup.
(f) None of the Company, Longo or any of its other Subsidiaries has
transported or arranged for the transportation of any Hazardous Substances
to any location that is listed on the National Priorities List or any
similar state list, nor has any of them received notice of pending or
threatened claims as a result of transporting or arranging to transport
Hazardous Substances to any location, except insofar as such
transportation or arrangement is not likely to be material to the Company,
Longo or any other Subsidiary or the Business.
(g) Except as is not likely to be material to the Company, Longo or
any other Subsidiary or the Business, there are no polychlorinated
biphenyls (other than those that may be contained in lighting ballasts or
electrical transformers that are labeled, operated and maintained in
accordance with all Environmental Laws) or asbestos-containing materials
present at any property now or previously owned or leased by the Company
or by Longo or by any other Subsidiary during the period in which any such
property was owned or leased by the Company or by Longo or by another
Subsidiary.
(h) To the best of the Company's knowledge after due inquiry, none
of the Company, Longo or any of its other Subsidiaries has received notice
of pending or threatened claims against the Company, Longo or any of its
other Subsidiaries arising out of any operations, action, inaction or
status of any previously divested property, whether or not the subject of
any indemnity, under any Environmental Laws or involving any Hazardous
Substances.
(i) The Company has provided the Purchaser with copies of (a) any
environmental assessment or audit reports or other similar studies or
analyses with
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27
respect to the Company, Longo and its other Subsidiaries relating to the
Business and the Real Property, and (b) all insurance policies issued at
any time that may provide coverage to the Company, Longo or any other
Subsidiary or the Business for environmental matters.
(j) Neither the execution of this Agreement nor the consummation of
the transactions contemplated herein will require any remedial action or
notice to or consent of Governmental Authorities or third parties pursuant
to any applicable Environmental Law or Environmental Permit, including,
without limitation, the New Jersey Industrial Site Recovery Act.
SECTION 3.17. Litigation. Schedule 3.17 of the Disclosure Schedule
sets forth any pending or, to the best knowledge of the Company or any of its
Subsidiaries after due inquiry, threatened Actions by or against the Company,
Longo or any other Subsidiary or Affiliate before any Governmental Authority, or
to which any of the respective properties of the Company, Longo or any other
Subsidiary or any Affiliate is or would be subject, except for Actions known to
the best knowledge of the Company after due inquiry by executives of the Company
relating to product warranty or safety claims, involving claims for damages of
not more than $20,000 and the Excluded Assets. Schedule 3.17 of the Disclosure
Schedule also indicates those Actions that (a) if adversely determined, could
reasonably be expected to have a Material Adverse Effect or (b) relate to, or
could affect the legality or validity of, this Agreement or the transactions
contemplated hereby. Except as set forth in Schedule 3.17 of the Disclosure
Schedule, there are no material citations, fines or penalties heretofore
asserted against the Company, Longo or its other Subsidiaries under any federal,
state or local law that remain unpaid or that otherwise bind the assets of the
Company, Longo or its other Subsidiaries.
SECTION 3.18. Insurance. (a) Schedule 3.18(a) of the Disclosure
Schedule sets forth the following information with respect to each insurance
policy (including policies providing property, casualty, liability, workers'
compensation, and bond and surety arrangements) under which the Company, Longo
or any other Subsidiary has been an insured, a named insured or otherwise the
principal beneficiary of coverage at any time within the past three years:
(i) the name, address and telephone number of the agent or broker;
(ii) the name of the insurer and the names of the principal insured
and each named insured;
(iii) the policy number and the period of coverage;
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28
(iv) the type, scope (including an indication of whether the
coverage was on a claims-made, occurrence or other basis) and amount of
coverage (including a description of how deductibles, retentions and
aggregates are calculated and operate); and
(v) the premium charged for the policy, including, without
limitation, a description of any retroactive premium adjustments or other
loss-sharing arrangements.
(b) Except as disclosed in Schedule 3.18(b) of the Disclosure
Schedule, with respect to each such insurance policy: (i) except for policies
that have expired under their terms in the ordinary course, it is in full force
and effect; (ii) neither the Company nor Longo nor any other Subsidiary is in
breach or default (including any breach or default with respect to the payment
of premiums or the giving of notice), and no event has occurred that, with
notice or the lapse of time, would constitute such a breach or default or permit
termination or modification, under the policy; (iii) no party to the policy has
repudiated, or given notice of an intent to repudiate, any provision thereof;
and (iv) to the best knowledge of the Company after due inquiry, no insurer on
the policy has been declared insolvent or placed in receivership,
conservatorship or liquidation or currently has a rating of "B+" or below from
A.M. Best & Co. or a claims paying ability rating of "BBB" or below from
Standard & Poor's, Inc.
(c) Schedule 3.18(c) of the Disclosure Schedule sets forth all risks
against which the Company, Longo or any other Subsidiary is self-insured or that
are covered under any risk-retention program in which the Company, Longo or any
other Subsidiary participates, together with details for the last five years of
the Company's, Longo's and each other Subsidiary's loss experience with respect
to such risks.
(d) Except as disclosed in Schedule 3.18(d) of the Disclosure
Schedule, all material assets, properties and risks of the Company, Longo and
each other Subsidiary are, and for the past five years have been, covered by
valid and, except for policies that have expired under their terms in the
ordinary course, currently effective insurance policies or binders of insurance
(including, without limitation, general liability insurance, property insurance
and workers' compensation insurance) issued in favor of the Company, Longo or
such Subsidiary, as the case may be, in each case with responsible insurance
companies, in such types and amounts and covering such risks as are consistent
with customary practices and standards of companies engaged in businesses and
operations similar to those of the Company, Longo or such other Subsidiary, as
the case may be.
(e) At no time subsequent to April 30, 1995 has the Company, Longo
or any other Subsidiary (i) been denied any insurance or indemnity bond coverage
that it has requested, (ii) made any material reduction in the scope or amount
of its insurance coverage,
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29
or, except as set forth in Schedule 3.18(e) of the Disclosure Schedule, received
notice from any of its insurance carriers that any insurance premiums will be
subject to increase in an amount materially disproportionate to the amount of
the increases with respect thereto (or with respect to similar insurance) in
prior years or that any insurance coverage listed in Schedule 3.18(a) of the
Disclosure Schedule will not be available in the future substantially on the
same terms as are now in effect or (iii) suffered any extraordinary increase in
premium for renewed coverage. To the best knowledge of the Company after due
inquiry, since April 30, 1995, no insurance carrier has cancelled, failed to
renew or materially reduced any insurance coverage for the Company, Longo or any
other Subsidiary or given any notice or other indication of its intention to
cancel, not renew or reduce any such coverage.
(f) At the time of the Closing, all insurance policies currently in
effect will be outstanding and duly in force.
(g) To the best knowledge of the Company after due inquiry, no
insurance policy listed in Section 3.18(a) of the Disclosure Schedule will cease
to be legal, valid, binding and enforceable in accordance with its terms and in
full force and effect on terms identical to those in effect as of the date
hereof as a result of the consummation of the transactions contemplated by this
Agreement.
SECTION 3.19. Material Contracts. (a) Schedule 3.19(a) of the
Disclosure Schedule lists each of the following contracts and agreements
(including, without limitation, oral and informal arrangements) of the Company
and the Subsidiaries other than Longo (such contracts and agreements, together
with all contracts, agreements, leases and subleases concerning the management
or operation of any Real Property (including, without limitation, brokerage
contracts) listed or otherwise disclosed in Schedule 3.13(a) or 3.13(b) of the
Disclosure Schedule to which the Company or any Subsidiary other than Longo is a
party and all agreements relating to Intellectual Property set forth in Schedule
3.15(a) of the Disclosure Schedule, being "Material Contracts"):
(i) each contract and agreement for the purchase of inventory, spare
parts, other materials or personal property with any supplier or for the
furnishing of services to the Company or any Subsidiary other than Longo
or otherwise related to the Business that (A) is likely to pay or
otherwise give consideration of more than $100,000 in the aggregate during
the calendar year ended April 30, 1997 or (B) is likely to pay or
otherwise give consideration of more than $100,000 in the aggregate over
the remaining term of such contract;
(ii) each contract and agreement for the sale of inventory or other
personal property or for the furnishing of services by the Company or any
Subsidiary other than Longo that (A) is likely to pay or otherwise give
consideration of more than
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30
$100,000 in the aggregate during the calendar year ended April 30, 1997 or
(B) is likely to pay or otherwise give consideration of more than $100,000
in the aggregate over the remaining term of such contract;
(iii) all broker, distributor, dealer, manufacturer's
representative, franchise, agency, sales promotion, market research,
marketing consulting and advertising contracts and agreements to which the
Company or any Subsidiary other than Longo is a party;
(iv) all management contracts and contracts with independent
contractors or consultants (or similar arrangements) to which the Company
or any Subsidiary other than Longo is a party and that are not cancelable
without penalty or further payment and without more than 30 days' notice;
(v) all contracts and agreements relating to Indebtedness of the
Company or any Subsidiary other than Longo;
(vi) all contracts and agreements with any Governmental Authority to
which the Company or any Subsidiary other than Longo is a party;
(vii) all contracts and agreements that limit or purport to limit
the ability of the Company or any Subsidiary other than Longo to compete
in any line of business or with any Person or in any geographic area or
during any period of time;
(viii) all contracts and agreements between or among the Company or
any Subsidiary other than Longo or any Affiliate of the Company; and
(ix) all other contracts and agreements, whether or not made in the
ordinary course of business that are material to the Company, any
Subsidiary other than Longo or the conduct of the Business, or the loss of
which contract or agreement would have a Material Adverse Effect.
For purposes of this Section 3.19 and Sections 3.13, 3.14 and 3.15,
the term "lease" shall include any and all leases, subleases, sale/leaseback
agreements or similar arrangements.
(b) Each Material Contract (i) is valid and binding on the Company
and/or any Subsidiary, as applicable, and, to the best knowledge of the Company
after due inquiry, on the other parties thereto and is in full force and effect
and (ii) upon consummation of the transactions contemplated by this Agreement,
except to the extent that any consents set forth in Schedule 3.05(b) of the
Disclosure Schedule are not obtained, shall continue in full force
<PAGE>
31
and effect without penalty or other adverse consequence. Neither the Company nor
any Subsidiary is in breach of, or default under, any Material Contract.
(c) There is no continuing act of nonperformance by any other party
to any Material Contract that constitutes a breach thereof or a default
thereunder.
(d) Except as set forth in Schedule 3.19(d) of the Disclosure
Schedule (including but not limited to the Excluded Assets), there is no
contract, agreement or other arrangement granting any Person any preferential
right to purchase, other than in the ordinary course of business consistent with
past practice, any of the properties or assets of the Company or any Subsidiary.
SECTION 3.20. Licenses and Permits. Except as would not have a
Material Adverse Effect, the Company has all governmental licenses, permits and
other governmental authorizations and approvals required for the conduct of its
businesses as now conducted, and all such material licenses, permits,
authorizations and approvals will remain in full force and effect immediately
following the consummation of the transactions hereunder.
SECTION 3.21. Labor Matters. Except for the agreements listed in
Schedule 3.21 of the Disclosure Schedule (the "Collective Bargaining
Agreements"), none of the Company, Longo or any other Subsidiary is a party to
any currently effective collective bargaining or other labor union contract. To
the best knowledge of the Company after due inquiry, except as disclosed on
Schedule 3.21 of the Disclosure Schedule, none of the Company, Longo or any
other Subsidiary has materially breached or otherwise materially failed to
comply with any provision of any Collective Bargaining Agreement. To the best
knowledge of the Company after due inquiry, except as set forth in Schedule 3.21
of the Disclosure Schedule, there are presently no (a) material violations of
any federal, state or local statutes, laws, ordinances, rules, regulations,
orders or directives with respect to the employment of individuals by, or the
employment practices or work conditions of, or the terms and conditions of
employment, wages and hours of the Company, Longo or any other Subsidiary; (b)
unfair labor practices or other unlawful employment practices and no charges of
unfair labor practices or other employee-related complaints pending or
threatened against the Company, Longo or any other Subsidiary before the
National Labor Relations Board, the Equal Employment Opportunity Commission, the
Occupational Safety and Health Review Commission, the Department of Labor or any
other federal, state, local or other governmental authority; (c) strikes,
picketings, slowdowns or work stoppages or organizational attempts actually
pending, threatened against or involving the Company, Longo or any other
Subsidiary; or (d) material issues with respect to union representation pending
or threatened with respect to the employees of the Company, Longo or any other
Subsidiary.
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32
SECTION 3.22. Taxes. (a) Except as set forth in Schedule 3.22 of the
Disclosure Schedule, (i) (A) all returns and reports in respect of Taxes ("Tax
Returns" or "Returns") required to be filed with respect to the Company and each
Subsidiary (including any consolidated federal income Tax Returns and state and
local income or franchise Tax Returns that include the Company or any Subsidiary
on a consolidated, combined or unitary ("combined") basis) have been timely
filed; (B) all Taxes shown to be payable on such Returns or otherwise due, and
all assessments of Tax made against the Company and each Subsidiary with respect
to such Returns, have been paid; (C) all such Returns are true, correct and
complete in all material respects; and (D) no adjustment relating to such
Returns has been proposed formally or informally by any Tax authority and, to
the best knowledge of the Company or any Subsidiary, after due inquiry, no basis
exists for any such adjustment; (ii) there are no pending or, to the best
knowledge of the Company and/or any Subsidiary after due inquiry, threatened
actions or proceedings for the assessment or collection of Taxes against the
Company or any Subsidiary; (iii) there are no Tax liens on any assets of the
Company or any Subsidiary; (iv) there are no outstanding waivers or agreements
extending the statute of limitations with respect to any Tax to which the
Company or any Subsidiary may be subject; (v) there are no outstanding requests
for information made by a Tax authority to the Company or any Subsidiary; (vi)
neither the Company nor any Subsidiary has been advised by any Tax authority of
any proposed reassessments of the value (or other Tax base) of any property
owned by the Company or any Subsidiary that could materially increase the amount
of a property Tax to which the Company or any Subsidiary would be subject; (vii)
the Company and any Subsidiary have made all payments of estimated Taxes
required to be made under section 6655 of the Code and any comparable state or
local Tax provision; (viii) all Taxes required to be withheld, collected or
deposited by or with respect to the Company or any Subsidiary have been timely
withheld, collected or deposited, as the case may be, and, to the extent
required, have been paid to the relevant Tax authority; (ix) neither the Company
nor any Subsidiary is doing business in, or engaged in a trade or business in,
any jurisdiction in which it has not filed all required Tax Returns; (x) the
Company is not, is not likely to be and has not been subject to Tax in any
foreign jurisdiction; and (xi) no Subsidiary organized under the laws of any
foreign jurisdiction is, is likely to be or has been engaged in the conduct of a
trade or business in the United States for purposes of section 864, 875, 882 or
884 of the Code.
(b) Except as set forth in Schedule 3.22(b) of the Disclosure
Schedule, (i) no consent under section 341(f) of the Code has been filed with
respect to the Company or any Subsidiary; (ii) at the Closing Date the Company
will not be a "United States real property holding corporation" within the
meaning of section 897(c)(2) of the Code; (iii) neither the Company nor any
Subsidiary has income reportable for a taxable period ending after the Closing
Date, but attributable to a transaction (e.g., an installment sale) occurring
in, or a change in accounting method made for, a taxable period ending on or
prior to such date, that resulted in a deferred reporting of income from such
transaction or change; (iv) neither the Company nor any Subsidiary has been a
"passive foreign investment
<PAGE>
33
company" within the meaning of section 1296 of the Code, and (v) neither the
Company nor any Subsidiary has been, at any time after April 30, 1995, a member
of any partnership or joint venture or the holder of a beneficial interest in
any trust for any period for which the statute of limitations for any Tax has
not expired.
(c) Schedule 3.22(c) of the Disclosure Schedule (i) lists by type
all income, franchise and other material Tax Returns or extensions thereof
(federal, state, local, and foreign) filed with respect to each of the Company
and any Subsidiary for taxable periods ended on or after April 30, 1995; (ii)
indicates for which jurisdictions Returns have been filed on a combined basis
for the taxable period ended on or after April 30, 1997, and the companies
joining in such Returns; (iii) indicates the most recent income, franchise, or
other material Tax Returns for each relevant jurisdiction for which an audit has
been completed or the statute of limitations has lapsed, and (iv) indicates all
Tax Returns that currently are the subject of an audit.
(d) Schedule 3.22(d) of the Disclosure Schedule lists the amount and
expiration dates of any net operating loss, net capital loss, unused business
credit, unused foreign tax credit or excess charitable contribution allocable to
the Company and each Subsidiary as of December 31, 1996.
(e) Except as set forth on Schedule 3.22(e) of the Disclosure
Schedule, reserves and allowances have been provided on the Financial Statements
and the Interim Financial Statements that are adequate to satisfy all
Liabilities for Taxes relating to the Company and any Subsidiary for periods
through the date of such financial statements.
(f) The Company has delivered or made available to the Purchaser
correct and complete copies of all federal, state and local Tax Returns of the
Company or extensions thereof and any Subsidiary for periods ending on or after
April 30, 1995, and correct and complete copies (or summaries) of all
examination reports, correspondence with Tax authorities, statements of
deficiencies assessed against, or agreed to by, the Company or any Subsidiary
since April 30, 1995, and correct and complete copies of any formal or informal
tax sharing arrangement to which the Company or any Subsidiary is a party.
SECTION 3.23. Miami Recycling and Composting Project (the "Miami
Project"). The Company, through its subsidiary, Miami Recycling and Composting
Company ("MRCC"), is duly negotiating with (i) Black & Veatch with respect to
providing the engineering, design, procurement, construction, start-up and
testing of the Miami Project at a guaranteed price, with a guaranteed completion
date, and including Black and Veatch's responsibility for liquidated damages,
and (ii) Professional Services Group with respect to the provision of
operations, maintenance and management services for the Miami Project. The
Company, through MRCC, has obtained the following material permits and
approvals: (i) a Solid Waste Recycling Facility permit from the Florida
Department of Environmental
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34
Protection ("FDEP") that requires only minor modification; (ii) an approval for
the issuance of a Class VI permit from the Dade County Department of
Environmental Resource Management ("DERM") for storm water management; and (iii)
a determination by the Dade County Building and Planning Department that the
modified plan is "substantially in accordance" with the original submission,
which will allow previous permits and approvals regarding site configuration to
retain validity. The Company, through MRCC, is in the process of obtaining the
following material permits and approvals that will be obtained before the Miami
Project startup: (i) a Joint Air Permit from FDEP and DERM; (ii) an approval for
its Wetlands Mitigation Plan from FDEP, DERM and the U.S. Army Corps of
Engineers; (iii) a Management and Storage of Storm Water Permit from FDEP; (iv)
an approval for the railroad crossing leading to the Miami Project site from the
Florida Department of Transportation; and (v) an approval for the final Miami
Project plat from the Dade County Planning Department and the Dade County
Department of Public Works. The Company, through MRCC, has procured a 30-year
put-or-pay contract from the City of Miami for a guaranteed supply of about 80%
of the Miami Project's permitted municipal solid waste volume, at the cost of a
one-time host fee of $1,000,000 which has been paid. Other contracts for the
supply of waste materials are in the process of being procured.
SECTION 3.24. Newark Recycling and Composting Project (the "Newark
Project"). The Company, through Newark Recycling and Composting Company
("NRCC"), is duly negotiating with (i) Black & Veatch with respect to providing
the engineering, design, procurement, construction, start-up and testing of the
Newark Project at a guaranteed price, with a guaranteed completion date, and
including Black and Veatch's responsibility for liquidated damages, and (ii)
Professional Services Group with respect to the provision of operations,
maintenance and management services for the Newark Project. The Company, through
NRCC, has obtained the following material permits and approvals: (i) from the
City of Newark and local authorities (A) Final Site Plan Approval, (B) Soil
Erosion and Sediment Control Permit and (C) Treatment Works Approval; (ii) from
Essex County, approval for inclusion in the Essex County Solid Waste Plan; and
(iii) from the State of New Jersey (A) NJPDES Permit, (B) Air Quality Permit,
(C) Treatment Works Approval, (D) Stream Encroachment Waiver, (E) General Permit
11, (F) inclusion in the State Solid Waste Plan and (G) Disclosure Statement
Review. The Company, through NRCC, is in the process of obtaining the following
permits and approvals: (i) from the City of Newark and local authorities (A)
Uniform Construction Permit for modified Facility design through Black and
Veatch, (B) approval for Sewer Extension from Domestic Treatment Works and (C)
Industrial User Permit and (ii) a Class C Recycling Permit from the State of New
Jersey. The Company, through NRCC, is in the process of procuring contracts for
the supply of biosolids from municipalities and other generators of waste
materials, including the City of New York. Some existing permits may need to be
modified based on the facility's final configuration.
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35
SECTION 3.25. Private Offering. (a) Assuming the accuracy of the
representations and warranties of the Purchaser, the sale of the Wasteco Shares
and the Wasteco Common Stock hereunder is exempt from the registration and
prospectus delivery requirements of the Securities Act.
(b) Other than a press release with respect to the Longo
Acquisition, no form of general solicitation or general advertising (including,
without limitation, advertisements, articles, notices or other communications
published in any newspaper, magazine or other medium or broadcast over
television or radio, or any seminar or meeting whose attendees have been invited
by any general solicitation or general advertising) was used by the Company or
any other Person acting on behalf of the Company in respect of the Wasteco
Shares and the Wasteco Common Stock or in connection with the offer and sale of
the Wasteco Shares and the Wasteco Common Stock.
SECTION 3.26. Brokers. Except for Andersen, Weinroth & Co., L.P. and
Quirk Carson Peppet Inc., no broker, finder or investment banker is entitled to
any brokerage, finder's or other fee or commission in connection with the
transactions hereunder based upon arrangements made by or on behalf of the
Company. Such fee or commission is the sole responsibility of the Company.
SECTION 3.27. Accuracy of Information. The Company has provided the
Purchaser with all the information reasonably available to it that the Purchaser
has requested for deciding whether to purchase the Wasteco Shares and the
Wasteco Common Stock and all information that the Company believes is reasonably
necessary to enable the Purchaser to make such decision. The Company is not
aware of any facts pertaining to the Company, Longo or any other Subsidiary or
its business that could have a Material Adverse Effect and that have not been
disclosed in this Agreement, the Disclosure Schedule of the Financial Statements
or otherwise disclosed to the Purchaser in writing. Neither this Agreement nor
any other written statements or certificates made or delivered in connection
herewith contain any untrue statement of a material fact or omit to state a
material fact necessary to make the statements herein or therein not misleading.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
WITH RESPECT TO LONGO
In addition to the representations and warranties in Article III,
the Company further represents and warrants to the Purchaser that:
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36
SECTION 4.01. Financial Information and Material Contracts of Longo.
(a) True and complete copies of (i) the audited balance sheet of Longo for each
of the fiscal years ended as of December 31, 1995 and December 31, 1996 and the
related audited statements of income, retained earnings, stockholders' equity
and changes in financial position of Longo, together with all related notes and
schedules thereto, accompanied by the reports thereon of Longo's accountants,
and (ii) the unaudited balance sheet of Longo as of June 30, 1997, and the
related unaudited statements of income, retained earnings, stockholders' equity
and changes in financial position of Longo, together with all related notes and
schedules thereto, have been delivered by the Company to the Purchaser. Such
financial statements (i) were prepared in accordance with the books of account
and other financial records of Longo, (ii) present fairly the consolidated
financial condition and results of operations of Longo as of the dates thereof
or for the periods covered thereby, (iii) have been prepared in accordance with
U.S. GAAP applied on a basis consistent with the past practices of Longo and
(iv) include all adjustments (consisting only of normal recurring accruals) that
are necessary for a fair presentation of the financial condition of Longo and
the results of operations of Longo as of the dates thereof or for the periods
covered thereby.
(b) True and complete copies of (i) the unaudited combining balance
sheet of Longo, reflecting Longo's construction operations combined with its
EPIC operations, for each of the fiscal years ended as of December 31, 1995 and
December 31, 1996 and the related unaudited combining statement of income of
Longo, and (ii) the unaudited combining balance sheet of Longo, reflecting
Longo's construction operations combined with its EPIC operations as of June 30,
1997, and the related unaudited combining statement of income of Longo have been
delivered by the Company to the Purchaser. Such combining statements (i) were
prepared in accordance with the books of account and other financial records of
Longo, (ii) present fairly the combined financial condition and results of
operations of Longo as of the dates thereof or for the periods covered thereby,
(iii) have been prepared in accordance with U.S. GAAP applied on a basis
consistent with the past practices of Longo, (iv) include all adjustments
(consisting only of normal recurring accruals) that are necessary for a fair
presentation of the financial condition of Longo and the results of operations
of Longo as of the dates thereof or for the periods covered thereby, and (v)
present fairly the financial condition and results of operations of EPIC, as set
forth in the column designated for EPIC operations, as of the dates thereof or
for the periods covered.
(c) Schedule 4.01 of the Disclosure Schedule lists each of the
following contracts and agreements (including, without limitation, oral and
informal arrangements) of Longo (such contracts and agreements to which Longo is
a party, being "Material Contracts of Longo"):
(i) each contract and agreement for the purchase of inventory, spare
parts, other materials or personal property with any supplier or for the
furnishing of services to Longo which (A) is likely to pay or otherwise
give consideration of more than
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37
$100,000 in the aggregate during the calendar year ending December 31,
1997 or (B) is likely to pay or otherwise give consideration of more than
$100,000 in the aggregate over the remaining term of such contract;
(ii) each contract and agreement for the sale of inventory or other
personal property or for the furnishing of services by Longo which (A) is
likely to pay or otherwise give consideration of more than $100,000 in the
aggregate during the calendar year ending December 31, 1997, or (B) is
likely to pay or otherwise give consideration of more than $100,000 in the
aggregate over the remaining term of such contract;
(iii) all broker, distributor, dealer, manufacturer's
representative, franchise, agency, sales promotion, market research,
marketing consulting and advertising contracts and agreements to which
Longo is a party;
(iv) all management contracts and contracts with independent
contractors or consultants (or similar arrangements) to which Longo is a
party and which are not cancelable without penalty or further payment and
without more than 30 days' notice;
(v) all contracts and agreements relating to the indebtedness of
Longo;
(vi) all contracts and agreements with any Governmental Authority to
which Longo is a party;
(vii) all contracts and agreements that limit or purport to limit
the ability of Longo to compete in any line of business or with any Person
or in any geographic area or during any period of time;
(viii) all contracts and agreements between or among Longo and EPIC
or R.J. Longo or the Trust or any Affiliate of R.J. Longo or the Trust;
(ix) all contracts and agreements between or among Longo or R.J.
Longo and the Company or any Subsidiary of the Company;
(x) all other contracts and agreements, whether or not made in the
ordinary course of business, which are material to Longo, or the loss of
which contract or agreement would have an effect materially adverse to
Longo's business, operations, properties (including intangible
properties), condition (financial or otherwise), assets, liabilities,
results of operations or prospects of Longo taken as a whole; and
(xi) the New York City Contract.
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(d) Each Material Contract of Longo: (i) is valid and binding on
Longo and, to the best knowledge of the Company after due inquiry, on the other
parties thereto and is in full force and effect and (ii) upon consummation of
the transactions contemplated by this Agreement shall continue in full force and
effect without penalty or other adverse consequence. Longo is not in breach of,
or in default under, any Material Contract of Longo.
(e) To the best knowledge of the Company after due inquiry, there is
no continuing act of nonperformance by any other party to any Material Contract
of Longo which constitutes a breach thereof or a default thereunder.
(f) There is no contract, agreement or other arrangement granting
any Person any preferential right to purchase, other than in the ordinary course
of business consistent with past practice, any of the properties or assets of
Longo.
(g) Except as set forth on Schedule 4.01 of the Disclosure Schedule,
there are no Material Contracts of Longo (as hereinabove defined) or agreements
(including, without limitation, oral and informal arrangements) to which Longo
is a party.
SECTION 4.02. Railcars, Containers and Equipment. Schedule 4.02 of
the Disclosure Schedule lists all equipment owned by Longo which is material to
the conduct of the businesses of Longo. Such equipment of Longo, including, but
not limited to, all railcars and containers of Longo (the "Longo Equipment"),
(i) is structurally sound, in good operating condition and repair, and suitable
for the purposes for which it is used and intended; (ii) has been maintained in
accordance with good business practices and is sufficient for the continued
conduct of Longo's businesses consistent with past practice of Longo; and (iii)
is not in need of maintenance, repair or replacement except for ordinary,
routine maintenance and repairs that are not material in nature or cost.
SECTION 4.03. The New York City Contract. The New York City Contract
(i) has been executed and delivered by the parties thereto and is in full force
and effect (ii) no defaults exist thereunder, (iii) the Company has received
notice to proceed from the City of New York and (iv) upon consummation of the
transactions contemplated by this Agreement, shall continue in full force and
effect without penalty or other adverse consequence.
SECTION 4.04. Licenses and Permits. (a) Schedule 4.04 of the
Disclosure Schedule lists all governmental licenses, permits and other
governmental authorizations and approvals required for Longo's usage of
railroads and other channels of interstate commerce in its business as now
conducted.
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39
(b) Longo has all governmental licenses, permits and other
governmental authorizations and approvals required for the conduct of its
business and its usage of all national railroads and other channels of
interstate commerce in its businesses (including the EPIC business) as now
conducted, and all such material licenses, permits, authorizations and approvals
will remain in full force and effect immediately following the consummation of
the transactions hereunder.
SECTION 4.05. Longo Agreements. The Longo Agreements attached hereto
as Exhibit F are hereby incorporated by reference as part of this Agreement and
are an authentic, true and complete copy of the Longo Agreements as executed.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF THE PURCHASER
The Purchaser represents and warrants to the Company that:
SECTION 5.01. Corporate Organization. The Purchaser is a corporation
duly organized, validly existing and in good standing under the laws of the
British Virgin Islands, organized for the purpose of investing in the Company,
and has the requisite corporate power and authority and any necessary
governmental authority to own, operate or lease the properties that it purports
to own, operate or lease and to carry on its business as it is now being
conducted. The Purchaser agrees that it will not enter into or become involved
in any business that would be in competition with the Business.
SECTION 5.02. Authority. The Purchaser has all necessary corporate
power and authority to execute and deliver this Agreement, to perform its
obligations and to consummate the transactions contemplated hereunder. The
execution and delivery of this Agreement by the Purchaser and the purchase of
the Wasteco Shares and the Wasteco Common Stock as provided in Section 2.01
hereof by the Purchaser hereunder have been duly and validly authorized by all
necessary corporate action of the Purchaser and no other corporate proceedings
on the part of the Purchaser are necessary to authorize this Agreement or the
purchase of the Wasteco Shares and the Wasteco Common Stock by the Purchaser as
contemplated hereby. This Agreement has been duly and validly executed and
delivered by the Purchaser and, assuming its due authorization, execution and
delivery by the Company, constitutes the legal, valid and binding obligation of
the Purchaser enforceable against the Purchaser in accordance with its terms.
SECTION 5.03. No Conflict; Required Filings and Consents. (a) The
execution and delivery of this Agreement by the Purchaser do not, and the
performance of
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40
this Agreement by the Purchaser will not, (i) conflict with or violate the
articles of incorporation or by-laws or equivalent organizational documents of
the Purchaser, (ii) conflict with or violate any law, rule, regulation, order,
judgment or decree applicable to the Purchaser or by which it or its properties
are bound or affected or (iii) result in any breach of or constitute a default
(or an event which with notice or lapse of time or both would become a default)
under, or give to others any rights of termination, amendment, acceleration or
cancellation of, or result in the creation of a lien or encumbrance on any of
the property or assets of the Purchaser pursuant to, any note, bond, mortgage,
indenture, contract, agreement, lease, license, permit, franchise or other
instrument or obligation to which the Purchaser is a party or by which the
Purchaser or any of its properties is bound or affected, except, in the case of
this clause (iii) and clause (ii) above, for any such breaches, defaults or
other occurrences which would not, individually or in the aggregate, have a
material adverse effect on the business, operations, properties (including
intangible properties), condition (financial or otherwise), assets or
liabilities of the Purchaser.
(b) The execution and delivery of this Agreement by the Purchaser do
not, and the performance of this Agreement by the Purchaser (including, without
limitation, the consummation of the transactions hereunder) will not, require
any consent, approval, authorization or permit of, or filing with or
notification to, any governmental or regulatory authority, domestic or foreign.
SECTION 5.04. Funds. The Purchaser has and, immediately prior to the
Closing, will have the funds necessary to consummate the purchase of the Wasteco
Shares and the Wasteco Common Stock hereunder.
SECTION 5.05. Investment Purpose. The Wasteco Shares and the Wasteco
Common Stock purchased by the Purchaser pursuant to this Agreement are being
acquired for investment only and not with a view to any sale or distribution
(within the meaning of the Securities Act) of the Wasteco Shares and the Wasteco
Common Stock or any part thereof other than a contemplated transfer of the
Wasteco Shares and the Wasteco Common Stock to a partnership to be incorporated
under the laws of Delaware, as soon as practicable after the Closing. The
Purchaser agrees at all times to sell or otherwise dispose of all or any part of
the Wasteco Shares and the Wasteco Common Stock so acquired by the Purchaser
(and any securities issued in exchange therefor) only pursuant to a registration
or exemption therefrom, under the Securities Act and in compliance with
applicable state securities laws.
SECTION 5.06. Brokers. No broker, finder or investment banker is
entitled to any brokerage, finder's or other fee or commission in connection
with the transactions hereunder based upon arrangements made by or on behalf of
the Purchaser.
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41
ARTICLE VI
COVENANTS
SECTION 6.01. Use of Proceeds. (a) The Company covenants and agrees
that the Purchase Price proceeds shall be used, in full accordance with the
Longo Agreements, exclusively to finance the Longo Acquisition and any remaining
funds thereof shall be used solely as working capital of the Company and (b)
before distributing any dividends from the Equipment Debt Refinancing to the
Company, the Company shall use the proceeds from the Equipment Debt Refinancing
to repay in full (i) all equipment debt of EPIC outstanding on October 31, 1997
and (ii) the loan of R.J. Longo for $1,000,000.
SECTION 6.02. Restrictions on Operation of EPIC. The Company
covenants and agrees that, prior to the expiration of the EPIC Option, without
the prior written consent of the Purchaser, neither the Company nor any
Subsidiary will perform, with respect to EPIC, (i) any of the actions enumerated
in clauses (i), (ii), (iii), (v), (vi), (vii), (viii), (xii), (xvi), (xvii),
(xviii), (xx) and (xxi) of Section 3.11(b) and (ii) the following actions:
(A) redeem any of Longo's capital stock or declare, make or pay any
dividends or distributions (whether in cash, securities or other property)
to the holders of the Company's or any Subsidiary's capital stock or
otherwise except (i) as contemplated by the Longo Agreements and (ii) the
following:
1. upon receipt, up to a maximum of $2,000,000 of Equipment
Debt Refinancing proceeds and the $1,000,000 loan of R.
J. Longo shall be distributed to the Company;
2. monthly dividends inclusive of tax distributions no
greater than 75% of EBITDA less capital expenditures
incurred for maintenance and less debt service including
principal and interest on all EPIC debts (excluding
existing secured equipment debts and the $1,000,000 loan
of R. J. Longo to be repaid out of the Equipment Debt
Refinancing proceeds) until June 30, 1998;
3. effective July 1, 1998 monthly dividends inclusive of
tax distributions no greater than 40% of EBITDA less
capital expenditures incurred for maintenance and less
debt service, including principal and interest on all
EPIC debts until the difference between the 75% set
forth in subsection (2) above and the 40% set forth in
this subsection (3) equals $3,000,000; and
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42
4. after $3,000,000 has been accumulated pursuant to
subsection (3) above, dividends up to 75% of EBITDA less
capital expenditures incurred for maintenance and less
debt services including principal and interest on all
EPIC debts may be paid,
(B) other than with respect to the Longo Acquisition, the Mortgage
Refinancing and the Equipment Debt Refinancing, make any loan to,
guarantee any indebtedness of or otherwise incur any indebtedness on
behalf of any Person in excess of $50,000 individually or $100,000 in the
aggregate;
(C) other than with respect to the Longo Acquisition, make any
capital expenditure or commitment for any capital expenditure in excess of
$250,000 individually or $500,000 in the aggregate;
(D) other than with respect to the Longo Acquisition, enter into any
agreement, arrangement or transaction with any of its directors, officers,
employees (other than in connection with their employment agreements) or
shareholders (or with any relative, beneficiary, spouse or Affiliate of
any such Person);
(E) other than with respect to the Longo Acquisition, the Mortgage
Refinancing, the Equipment Debt Refinancing and the New York City
Contract, incur any Indebtedness in excess of $250,000 individually or
$500,000 in the aggregate;
(F) materially amend, modify or consent to the termination of any
Material Contract or Longo's or rights thereunder or enter into any new
Material Contract on behalf of Longo; or
(G) except with respect to the employment agreements listed on
Schedule 3.11(b) of the Disclosure Schedule (A) grant any increase, or
announce any increase, in the wages, salaries, compensation, bonuses,
incentives, pension or other benefits payable by Longo to any of its
senior management employees, including, without limitation, any increase
or change pursuant to any Plan or (B) establish or increase or promise to
increase any benefits for such senior management under any Plan, in either
case except as required by law or any collective bargaining agreement and
involving ordinary increases consistent with the past practices of Longo.
SECTION 6.03. Bedminster Matters. The Company covenants and agrees
that it will enter into a legally enforceable agreement with Bedminster Seacor
Services Miami Corporation ("Bedminster Miami") limiting and restricting
Bedminster Miami's interest in the Miami Project to not more than $145,000 of
cash payments in any fiscal year. Any amount in excess of such payment in any
fiscal year, shall be considered a Loss for purposes of Section 9.02(a)(x).
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43
ARTICLE VII
TAX MATTERS
SECTION 7.01. Indemnity. (a) The Company and any Subsidiary agree to
indemnify and hold harmless the Purchaser against the following Taxes and
against any loss (including, without limitation, loss of value of the
Purchaser's stock investment in the Company), damage, liability or expense,
including reasonable fees for attorneys and other outside consultants, incurred
in contesting or otherwise in connection with any such Taxes: (i) Taxes imposed
on the Company or any Subsidiary with respect to taxable periods of such
corporation ending on or before the Closing Date; and (ii) Taxes imposed on any
member of any affiliated group with which any of the Company and any Subsidiary
file or have filed a Tax Return on a consolidated, combined or unitary basis for
a taxable period ending on or before the Closing Date (together, hereinafter
"Purchaser Tax Loss").
(b) The right of the Purchaser to be indemnified pursuant to this
Section 7.01 shall be subject to the dollar limitations contained in Section
9.05(b). Claims relating to Tax matters and claims for indemnity covered by
Article IX shall be aggregated for the purpose of applying those limitations.
(c) The amount of any Purchaser Tax Loss shall be the amount of
Taxes and other items described in Section 7.01 multiplied by a factor equal to
the percentage interest of the Purchaser in the Preferred Stock Series A of the
Company at the date of the Closing, except that in the event of a Loss arising
out of the acquisition of Longo, for which there is not a full indemnification
to the Company by R.J. Longo, the amount shall be 100% of such claim.
SECTION 7.02. Returns and Payments. The Company shall prepare and
file or otherwise furnish to the appropriate Tax authority (or cause to be
prepared and filed or so furnished) in a timely manner all Tax Returns, reports
or forms relating to the Company and any Subsidiary that are due on or before,
or relate to any taxable period ending on or before, the Closing Date. Returns
of the Company and any Subsidiary not yet filed for any taxable period that
begins before the Closing Date shall be prepared, and each item thereon treated,
in a manner consistent with past practices employed with respect to the Company
and any Subsidiary (except to the extent counsel for the Company determines
there is no reasonable basis in law therefor or determines that a Return cannot
be so prepared and filed or an item so reported without being subject to
penalties).
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44
SECTION 7.03. Contests. (a) After the Closing, the Company (or any
Subsidiary) shall promptly notify the Purchaser in writing of any written notice
of a proposed assessment or claim in an audit or administrative or judicial
proceeding involving the Company or any Subsidiary which, if determined
adversely to the taxpayer, would be grounds for indemnification under this
Article VII.
(b) The Purchaser shall have the right to participate in any audit
or administrative or judicial proceedings to which the Company (or any
Subsidiary) may become a party that are reasonably likely to result in an
obligation on the part of the Company (or any Subsidiary) to the Purchaser under
this Article VII.
(c) The Company (or any Subsidiary) shall not enter into any
compromise or agree to settle any claim pursuant to any Tax audit or proceeding
which would adversely affect the Purchaser for such year or a subsequent year
without the written consent of the Purchaser, which consent may not be
unreasonably withheld.
SECTION 7.04. Time of Payment. Payment by the Company to the
Purchaser of any amounts due under this Article VII in respect of Taxes shall be
made within three Business Days following the earliest of (i) an agreement
between the Company (or any Subsidiary) and the Purchaser that an indemnity
amount is payable; (ii) payment by the Company or any Subsidiary of any Taxes
which payment gives rise to an indemnity obligation pursuant to this Article
VII; or (iii) a "determination" as defined in section 1313(a) of the Code giving
rise to an indemnity obligation pursuant to this Article VII. If liability under
this Article VII is in respect of costs or expenses other than Taxes, payment by
the Company (or any Subsidiary) of any amounts due under this Article VII shall
be made as soon as the amount can reasonably be determined.
SECTION 7.05. Conveyance Taxes. The Company shall be liable for and
shall hold the Purchaser harmless against any transfer, recording, registration,
and other fees, and any similar Taxes which become payable in connection with
the transactions contemplated hereby, and shall file such applications and
documents as shall permit any such Tax to be assessed and paid on or prior to
the Closing Date in accordance with any available pre-sale filing procedure. The
Purchaser shall execute and deliver all instruments and certificates necessary
to enable the Company to comply with the foregoing.
SECTION 7.06. Miscellaneous. (a) The Company (and any Subsidiary)
and the Purchaser agree to treat all payments made to the Purchaser under this
Article VII, under other indemnity provisions of this Agreement and for any
misrepresentations or breach of warranties or covenants as adjustments to the
purchase price or as capital contributions for Tax purposes and that such
treatment shall govern for purposes hereof except to the extent that the laws of
a particular jurisdiction provide otherwise, in which case such payments shall
be made in an amount sufficient to indemnify the relevant party on an after-Tax
basis.
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45
(b) Notwithstanding any provision herein to the contrary, the
obligations of the Company and any Subsidiary to indemnify and hold harmless the
Purchaser pursuant to this Article VII, and the representations and warranties
contained in Section 3.22, shall terminate at the close of business on the 180th
day following the expiration of the applicable statute of limitations with
respect to the Tax liabilities in question (giving effect to any waiver,
mitigation or extension thereof).
(c) From and after the date hereof, the Company and any Subsidiary
shall not without the prior written consent of the Purchaser (which may, in its
sole and absolute discretion, withhold such consent) make or revoke, or cause or
permit to be made or revoked, any Tax election, or adopt or change any method of
accounting, that would affect the Company or any Subsidiary.
ARTICLE VIII
CONDITIONS TO THE CLOSING
SECTION 8.01. Conditions to Obligations of the Purchaser. The
obligations of the Purchaser to effect the Closing shall be subject to the prior
fulfillment of each of the following conditions:
(a) Representations and Warranties; Agreements and Covenants. (i)
The representations and warranties of the Company contained in this
Agreement which are qualified as to materiality shall be true and correct
in all respects and all other representations and warranties shall be true
and correct in all material respects on and as of the Closing, with the
same force and effect as if made as of the Closing, (ii) all the
agreements and covenants contained in this Agreement to be performed or
complied with by the Company at or before the Closing shall have been
performed or complied with in all material respects and (iii) the
Purchaser shall have received a certificate of the Company in the form of
Exhibit D hereto, signed by the Chief Executive Officer thereof, as to the
fulfillment of the conditions set forth in the foregoing clauses (i) and
(ii).
(b) Litigation. There shall have been no order or preliminary or
permanent injunction entered in any action or proceeding before any
federal, state or foreign court or governmental, administrative or
regulatory authority or agency, and no other action taken or threatened,
or statute, rule, regulation, legislation, interpretation, judgment or
order enacted, entered, enforced, promulgated, amended, issued or deemed
applicable to the Purchaser, the Company, Longo or any of its other
Subsidiaries or Affiliates, by any federal, state or foreign legislative
body, court,
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46
government or governmental, administrative or regulatory authority or
agency which shall have remained in effect and which shall have had the
effect of: (i) making illegal, materially delaying or otherwise directly
or indirectly restraining or prohibiting the consummation of the
transactions hereunder (including, without limitation, the purchase of the
Wasteco Shares and the Wasteco Common Stock and the conversion or
redemption of the Preferred Stock); (ii) prohibiting or materially
limiting the ownership of the Wasteco Shares and the Wasteco Common Stock;
(iii) imposing material limitations on the ability of the Purchaser to
exercise full rights of ownership of any of the Wasteco Shares and the
Wasteco Common Stock, including, without limitation, the right to vote any
shares of Common Stock; (iv) requiring divestiture by the Purchaser of any
Wasteco Shares or the Wasteco Common Stock; or (v) preventing the
Purchaser from consummating the transactions contemplated hereby.
(c) Resolutions. The Purchaser shall have received a true and
complete copy, certified by the Secretary of the Company, of the
resolutions duly and validly adopted by the Board evidencing its
authorization of the execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby.
(d) Incumbency Certificate of the Company. The Purchaser shall have
received a certificate of the Secretary or an Assistant Secretary of the
Company certifying the names and signatures of the officers of the Company
authorized to sign this Agreement and the other documents to be delivered
hereunder.
(e) Consents and Approvals. The Purchaser and the Company shall have
received, each in form and substance satisfactory to the Purchaser in its
sole and absolute discretion, all authorizations, consents, orders and
approvals of all Governmental Authorities and officials and all
third-party consents and estoppel certificates identified to the Company,
which the Purchaser in its sole and absolute discretion deems necessary or
desirable for the consummation of the transactions contemplated by this
Agreement.
(f) Organizational Documents. The Purchaser shall have received a
copy of (i) the Certificates of Incorporation, as amended (or similar
organizational documents), of the Company, Longo and of each other
Subsidiary, certified by the secretary of state of the jurisdiction in
which each such entity is incorporated or organized, as of a date not
earlier than five Business Days prior to the Closing Date and accompanied
by a certificate of the Secretary or Assistant Secretary of each such
entity, dated as of the Closing Date, stating that no amendments have been
made to such Certificates of Incorporation (or similar organizational
documents) since such date other than an amendment to the Certificate of
Incorporation of the Company filed contemporaneously with the execution of
this Agreement with respect to the number
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47
of Board members and the filing of the Certificates of Designation with
respect to the Wasteco A Preferred Shares, the Wasteco C Preferred Shares,
and the Longo Shares and (ii) the By-laws (or similar organizational
documents) of the Company, Longo and of each Subsidiary, certified by the
Secretary or Assistant Secretary of each such entity.
(g) Good Standing; Qualification to Do Business. The Purchaser shall
have received good standing certificates for the Company, for Longo and
for each other Subsidiary from the secretary of state of the jurisdiction
in which each such entity is incorporated or organized and from the
secretary of state of each other jurisdiction in which the properties
owned or leased by any of the Company, Longo or any other Subsidiary, or
the operation of its business in such jurisdiction, requires the Company
or Longo or any other Subsidiary to qualify to do business as a foreign
corporation, in each case dated as of a date not earlier than fifteen (15)
Business Days prior to the Closing Date and accompanied by bring-down
telegrams dated the Closing Date.
(h) Calamities. There shall not have occurred and be continuing (i)
any general suspension of, or limitation on prices for or trading in
securities on any United States securities exchange, (ii) a declaration of
a banking moratorium or any suspension of payments in respect of banks in
the United States, (iii) any limitation (whether or not mandatory) by any
government or governmental, administrative or regulatory authority or
agency, domestic or foreign, or other event that materially adversely
affects the ability of the Purchaser to purchase the Wasteco Shares and
the Wasteco Common Stock hereunder, or (iv) a commencement of a war or
armed hostilities or other national or international calamity directly
involving the United States.
(i) Bankruptcy; Insolvency; Etc. No proceeding shall have been
instituted or consented to by or against the Company or Longo or any other
subsidiary seeking to adjudicate it bankrupt or insolvent, or seeking
liquidation, winding-up, reorganization, arrangement, adjustment,
protection, relief or composition of its debts under any law relating to
bankruptcy, insolvency or reorganization or relief of debtors, or seeking
the entry of an order for relief or the appointment of a receiver,
trustee, custodian or other similar official for it or any substantial
part of its property (each such action being a "Bankruptcy Proceeding"),
and none of the Company, Longo or any other subsidiary shall have taken
any corporate action to authorize any Bankruptcy Proceeding.
(j) No Material Adverse Effect. No fact, event or condition
(financial or otherwise) shall have occurred with respect to the Company,
Longo or any of its other Subsidiaries having, individually or in the
aggregate, a Material Adverse Effect.
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48
(k) Opinion. The Purchaser shall have received an opinion from
Greenberg Traurig Hoffman Lipoff Rosen & Quentel, P.A., a professional
corporation, substantially to the effect of Exhibit B hereto.
(l) Registration Rights Agreement. The Registration Rights
Agreement, in the form of Exhibit C, shall have been executed and
delivered by the parties thereto.
(m) Filing of Corporate Certificates; Adoption of By-laws. The
Company shall have adopted and filed with the Secretary of State of New
Jersey a certificate of incorporation in a form satisfactory to the
Purchaser. Further, the Company shall have adopted By-laws in a form
satisfactory to the Purchaser.
(n) Due Diligence. The Purchaser shall have completed all its
business, legal, accounting and environmental due diligence with respect
to the Company and the Subsidiaries and shall, in its sole and absolute
judgment, be satisfied with the results thereof.
(o) New York Contract Opinion. The Purchaser shall have received an
opinion from Fischbein, Badillo, Wagner and Itzler, a professional
corporation, substantially to the effect of Exhibit G hereto.
(p) Phase I Environmental Study. The Phase I Environmental Study on
the Miami Project shall have been completed and the Purchaser shall have
received such study and shall, in its sole and absolute judgment, be
satisfied with the results thereof.
(q) Stockholders Agreement. The Stockholders Agreement, in the form
of Exhibit H, shall have been executed and delivered by the parties
thereto.
SECTION 8.02. Conditions to Obligations of the Company. The
obligations of the Company to effect the Closing shall be subject to the prior
fulfillment of each of the following conditions:
(a) Representations and Warranties. (i) The representations and
warranties of the Purchaser contained in this Agreement and in any
certificates or agreements of the Purchaser delivered pursuant hereto
shall be true and correct in all material respects on and as of the
Closing, with the same force and effect as if made as of the Closing, (ii)
all the agreements and covenants contained in this Agreement and in any
certificates or agreements of the Purchaser delivered pursuant hereto to
be performed or complied with by the Purchaser at or before the Closing
shall have been performed or complied with in all material respects and
(iii) the Company shall have received a certificate of the Purchaser in
the form of Exhibit E hereto, signed by a duly
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49
authorized officer thereof, as to the fulfillment of the conditions set
forth in the foregoing clauses (i) and (ii).
(b) Litigation. There shall have been no order or preliminary or
permanent injunction entered in any action or proceeding before any
federal, state or foreign court or governmental, administrative or
regulatory authority or agency by any federal, state or foreign
legislative body, court, government or governmental, administrative or
regulatory authority or agency which shall have remained in effect and
which shall have had the effect of making illegal the consummation of any
of the transactions hereunder.
ARTICLE IX
INDEMNIFICATION
SECTION 9.01. Survival of Representations and Warranties. The
representations and warranties of the Company in this Agreement, and all
statements contained in this Agreement, the Exhibits to this Agreement, the
Disclosure Schedule and any certificate, Financial Statement, Interim Financial
Statement or report or other document delivered pursuant to this Agreement or in
connection with the transactions contemplated by this Agreement (collectively,
the "Acquisition Documents") shall survive the Closing until the second
anniversary of the Closing Date, except that the covenants contained in Section
6.03 and all claims arising by reason of or in connection with a failure by the
Company to issue sufficient shares of Common Stock to the Purchaser (as further
set forth in section 9.02(c)) shall survive the closing until the seventh
anniversary of the Closing Date. Neither the period of survival nor the
liability of any party with respect to the parties' representations and
warranties shall be reduced by any investigation made at any time by or on
behalf of any party.
SECTION 9.02. Indemnification by the Company. (a) The Purchaser, its
Affiliates and their successors and assigns and the officers, directors,
employees and agents of the Purchaser, its Affiliates and their successors and
assigns (each, an "Indemnified Party") shall be indemnified and held harmless by
the Company for any and all Liabilities, losses, depreciation in value, damages,
claims, costs and expenses, interest, awards, judgments and penalties
(including, without limitation, reasonable attorneys' and consultants' fees and
expenses) suffered or incurred by them (including, without limitation, any
Action brought or otherwise initiated by any of them) (hereinafter, a "Purchaser
Loss") arising out of or resulting from:
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(i) the material breach of any representation or warranty made by
the Company contained in the Acquisition Documents; or
(ii) the material breach of any covenant or agreement by the Company
contained in the Acquisition Documents; or
(iii) material liabilities of the Company or any Subsidiary not
reflected on the Financial Statements or the Interim Financial Statements,
whether arising before or after the Closing Date, arising from or relating
to the ownership or actions or inactions of the Company or such Subsidiary
or the conduct of their respective businesses prior to the Closing; or
(iv) material liabilities of the Company, Longo or any other
Subsidiary, whether arising before or after the Closing Date, arising from
or relating to any of the Disclosure Schedules or listed in Articles III
and IV herein; or
(v) material liabilities of Longo not reflected in Longo and EPIC
financial statements delivered to Purchaser in accordance with Section
4.01 herein, whether arising before or after the Closing Date, arising
from or relating to the ownership or actions or inactions of Longo on the
conduct of its respective businesses prior to the Closing; or
(vi) any and all Losses suffered or incurred by the Purchaser, the
Company, Longo or any other Subsidiary by reason of or in connection with
any claim or cause of action of any third party to the extent arising out
of any action, inaction, event, condition, liability or obligation of the
Company or Longo occurring or existing prior to the Closing; or
(vii) any and all Losses suffered or incurred by the Purchaser, the
Company, Longo or any other Subsidiary by reason of or in connection with
any claim, cause of action, cancellation, breach or invalidity of the New
York City Contract; or
(viii) (A) any and all Remedial Actions after the Closing relating
to any Release of Hazardous Materials into the Environment or on or about
the Real Property prior to the Closing to the extent any such Remedial
Action is required under any Environmental Law or by any Governmental
Authority or is necessary to prevent or abate a significant risk to human
health or the environment; (B) any and all Environmental Claims arising at
any time that relate to the business or the operation of the Company or
Longo or any other Subsidiary prior to the Closing; or (C) any and all
noncompliances with or violations of any applicable Environmental Law or
Environmental Permit by the Company or Longo or any other Subsidiary prior
to the Closing;
<PAGE>
51
(ix) any diminution in value of any asset of the Company, Longo or
any other subsidiary as a result of an expense incurred by the Company,
Longo or any other subsidiary arising out or resulting from the causes
enumerated in this Section 9.02(a); or
(x) any and all losses, suffered or incurred by the Purchaser, the
Company, or any Subsidiary by reason of or in connection with any breach
of the covenants contained in Section 6.03.
To the extent that the Company's undertakings set forth in this Section 9.02 may
be unenforceable, the Company shall contribute the maximum amount that it is
permitted to contribute under applicable law to the payment and satisfaction of
all Losses incurred by the Purchaser, the Company, Longo and the Subsidiaries.
Notwithstanding anything to the contrary in this Article IX, the
rights and obligations of the parties with respect to any and all Tax matters
shall be governed by Article VII. In particular, this Article IX shall not apply
to any indemnity to which the Purchaser may be entitled under Section 7.01
(relating to Taxes), except to the extent specified therein.
(b) An Indemnified Party shall give the Company notice of any matter
which an Indemnified Party has determined has given or could give rise to a
right of indemnification under this Agreement, within 60 days of such
determination, stating the amount of the Loss, if known, and the method of
computation thereof, and containing a reference to the provisions of this
Agreement in respect of which such right of indemnification is claimed or
arises. The obligations and Liabilities of the Company under this Article IX
with respect to Losses arising from claims of any third party which are subject
to the indemnification provided for in this Article IX ("Third Party Claims")
shall be governed by and contingent upon the following additional terms and
conditions: (i) if an Indemnified Party shall receive notice of any Third Party
Claim, the Indemnified Party shall give the Company notice of such Third Party
Claim within 30 days of the receipt by the Indemnified Party of such notice,
provided, however, that the failure to provide such notice shall not release the
Company from any of its obligations under this Article IX except to the extent
the Company is materially prejudiced by such failure and shall not relieve the
Company from any other obligation or Liability that it may have to any
Indemnified Party otherwise than under this Article IX and (ii) if the Company
acknowledges in writing its obligation to indemnify the Indemnified Party
hereunder against any Losses that may result from such Third Party Claim, then
the Company shall be entitled to assume and control the defense of such Third
Party Claim at its expense and through counsel of its choice if it gives notice
of its intention to do so to the Indemnified Party within five days of the
receipt of such notice from the Indemnified Party, provided, however, that if
there exists or is reasonably likely to exist a conflict of interest that would
make it inappropriate in the
<PAGE>
52
judgment of the Indemnified Party, in its sole and absolute discretion, for the
same counsel to represent both the Indemnified Party and the Company, then the
Indemnified Party shall be entitled to retain its own counsel, in each
jurisdiction for which the Indemnified Party determines counsel is required, at
the expense of the Company. In the event the Company exercises the right to
undertake any such defense against any such Third Party Claim as provided above,
the Indemnified Party shall cooperate with the Company in such defense and make
available to the Company, at the Company's expense, all witnesses, pertinent
records, materials and information in the Indemnified Party's possession or
under the Indemnified Party's control relating thereto as is reasonably required
by the Company. Similarly, in the event the Indemnified Party is, directly or
indirectly, conducting the defense against any such Third Party Claim, the
Company shall cooperate with the Indemnified Party in such defense and make
available to the Indemnified Party, at the Company's expense, all such
witnesses, records, materials and information in the Company's possession or
under the Company's control relating thereto as is reasonably required by the
Indemnified Party. No such Third Party Claim may be settled by the Company
without the prior written consent of the Indemnified Party.
(c) Purchaser Loss as to any matter arising under clauses (i)
through (x) of Section 9.02(a) shall be conclusively measured by the Loss to the
Company, Longo or the other Subsidiary incurring such Loss multiplied by the
percentage interest of the Purchaser in the Preferred Stock Series A of the
Company at Closing, except that, in the event of a Loss arising out of the
Acquisition of Longo, for which there is not a full indemnification to the
Company by R.J. Longo, the Loss shall be 100% of such claim, and in the event of
a failure by the Company to issue sufficient shares of Common Stock to the
Purchaser, the Loss shall be 100% of such claim which may be settled in the sole
and absolute discretion of the Purchaser in the form of issuance of additional
shares of Common Stock to the Purchaser by the Company.
SECTION 9.03. Indemnification by the Purchaser. The Company, and its
Affiliates, officers, directors, employees, agents, successors and assigns,
shall be indemnified and held harmless by the Purchaser for any and all
Liabilities, losses, damages, claims, costs and expenses, interest, awards,
judgments and penalties (including, without limitation, legal costs and
expenses) actually suffered or incurred by them (hereinafter, a "Company Loss"
and, together with a Purchaser Loss, a "Loss"), arising out of or resulting
from:
(a) the breach of any representation or warranty made by the
Purchaser contained herein or in any document delivered by the Purchaser
hereunder at the Closing; or
(b) the breach of any covenant or agreement by the Purchaser
contained herein.
<PAGE>
53
SECTION 9.04. Materiality. Notwithstanding anything in this
Agreement to the contrary, for purposes of application of the indemnity
provisions of this Article IX, the amount of any Purchaser Loss or Company Loss
arising from the breach of such representation, warranty, covenant or agreement
shall be the entire amount of any such Loss actually incurred by the respective
indemnitee as a result of such breach and not just that portion of such Loss
that exceeds the relevant level of materiality.
SECTION 9.05. Time Period; Dollar Threshold. (a) The indemnification
obligations of the Company and the Purchaser under this Article IX shall
continue for the same period of survival specified in Section 9.01 for each such
representation and warranty and shall terminate with the expiration of the
applicable survival period for each such representation, warranty and covenant.
Any claim or demand against the Company or the Purchaser which is pending or
asserted at or prior to the expiration of any survival period may continue to be
asserted and indemnified against.
(b) Neither the Company nor the Purchaser shall be entitled to
indemnification under this Article IX unless and until the aggregate amount of
the claims against the other party exceeds $500,000. If the aggregate amount of
such claims against either party exceeds $750,000, then that party may claim
indemnification for the entire aggregate amount of such claims. Notwithstanding
the foregoing, the dollar limitations contained in this Section 9.05(b) shall
not apply to the claims for indemnity covered by Section 9.02(a)(x).
(c) Notwithstanding anything to the contrary contained in this
Agreement, the maximum amount of indemnifiable Losses which may be recovered
from the Company arising out of or resulting from the causes enumerated in
Section 9.02(a) shall be $5,000,000. Notwithstanding the foregoing, the dollar
limitations contained in this Section 9.05(c) shall not apply to any claims for
indemnity covered by Section 9.02(a)(x).
(d) Notwithstanding anything to the contrary contained in this
Agreement, any claim for Indemnifiable Losses which may be recovered from the
Company arising out or resulting from the failure of the Company to issue to the
Purchaser sufficient shares of Common Stock shall not be subject to the dollar
limitations contained in Section 9.05(b) and (c).
SECTION 9.06. Notice and Defense. Each party shall within 90 days of
learning of any asserted liability or damage claimed to give rise to
indemnification hereunder notify the party obligated to indemnify it hereof in
writing provided, however, that the failure of the indemnified party to so
notify the indemnifying party shall not relieve the indemnifying party of its
obligations hereunder unless, and only to the extent that, such failure to
notify prejudices the indemnifying party. Thereafter, the indemnifying party
shall have, at its election, the right to compromise or defend any such matter
at its sole cost and
<PAGE>
54
expense through counsel chosen by it. If the indemnifying party so undertakes to
compromise and defend, the indemnifying party shall notify the other party of
its intention to do so. If the indemnifying party fails to defend such matter
diligently, the indemnified party may assume control of the defense of such
matter. Each party agrees in all cases to cooperate with the defending party and
its counsel in the compromise of or defending of any such liabilities or claims.
The defending party and the nondefending party may be represented by the same
counsel unless such representation would be inappropriate due to actual or
potential differing interests between them. In addition, the nondefending party
shall at all times be entitled to monitor such defense through the appointment
of counsel of its own choosing, at it own cost and expense.
ARTICLE X
AMENDMENT AND WAIVER
SECTION 10.01. Amendment. This Agreement may not be amended except
by an instrument in writing signed by the parties hereto.
SECTION 10.02. Waiver. Either party hereto may (a) extend the time
for the performance of any of the obligations or other acts of the other party
hereto, (b) waive any inaccuracies in the representations and warranties
contained herein or in any document delivered pursuant hereto and (c) waive
compliance with any of the agreements or conditions contained herein. Any such
extension or waiver shall be valid if set forth in an instrument in writing
signed by the party to be bound thereby. The failure of either party to assert
any of its rights hereunder shall not constitute a waiver of any such rights.
ARTICLE XI
GENERAL PROVISIONS
SECTION 11.01. Notices. All notices, requests, claims, demands and
other communications hereunder shall be in writing and shall be given (and shall
be deemed to have been duly given upon receipt) by delivery in person, by cable,
telecopy, telegram or telex or by registered or certified mail (postage prepaid,
return receipt requested) to the respective parties at the following addresses
(or at such other address for a party as shall be specified by like notice):
<PAGE>
55
(a) if to the Purchaser:
Wasteco Ventures Limited
Citco Building, Wickhams Cay
P.O. Box 662
Road Town
Tortola, British Virgin Islands
with copies to:
Wafra Investment Advisory Group Inc.
9 West 57th Street, 38th Floor
New York, New York 10019
Attention: Mr. John T. Shea
Fax: (212) 486-2678
Telephone: (212) 759-3700
and
Shearman & Sterling
599 Lexington Avenue
New York, New York 10022
Attention: Arthur Norman Field, Esq.
Fax: (212) 848-7179
Telephone: (212) 848-4000
(b) if to the Company:
Compost America Holding Company, Inc.
320 Grand Avenue
Englewood, New Jersey 07631
Fax: (201) 541-1303
Telephone: (201) 541-9393
with a copy to:
Greenberg Traurig
2005 Market Street
Suite 2050
Philadelphia, PA 19103
Fax: (215) 988-7801
Telephone: (215) 988-7805
<PAGE>
56
SECTION 11.02. Entire Agreement; Assignment. This Agreement
constitutes the entire agreement between the parties with respect to the subject
matter hereof and supersedes all prior agreements and undertakings, both written
and oral, between the parties with respect to the subject matter hereof,
including the Letter of Intent dated August 15, 1997 between Wafra Investment
Advisory Group, Inc. and the Company. This Agreement shall not be assigned by
operation of law or otherwise, except that the Purchaser may assign all or any
of its rights and obligations hereunder to an Affiliate without the consent of
the Company.
SECTION 11.03. Parties in Interest. This Agreement shall be binding
upon and inure solely to the benefit of each party hereto, and nothing in this
Agreement, express or implied, is intended to or shall confer upon any other
Person any rights, benefits or remedies of any nature whatsoever under or by
reason of this Agreement.
SECTION 11.04. Governing Law. This Agreement shall be governed by,
and construed in accordance with, the laws of the State of New York.
SECTION 11.05. Jurisdiction, Etc. (a) Each of the parties hereto
hereby irrevocably and unconditionally submits, for itself and its property, to
the nonexclusive jurisdiction of any New York state court or federal court of
the United States of America sitting in New York City, and any appellate court
from any thereof, in any action or proceeding arising out of or relating to this
Agreement, or for recognition or enforcement of any judgment, and each of the
parties hereto hereby irrevocably and unconditionally agrees that all claims in
respect of any such action or proceeding may be heard and determined in any such
New York state court or, to the extent permitted by law, in such federal court.
Each of the parties hereto agrees that a final judgment in any such action or
proceeding shall be conclusive and may be enforced in other jurisdictions by
suit on the judgment or in any other manner provided by law. Nothing in this
Agreement shall affect any right that any party may otherwise have to bring any
action or proceeding relating to this Agreement in the courts of any
jurisdiction.
(b) Each of the parties hereto irrevocably and unconditionally
waives, to the fullest extent it may legally and effectively do so, any
objection that it may now or hereafter have to the laying of venue of any suit,
action or proceeding arising out of or relating to this Agreement in any such
New York state court or federal court. Each of the parties hereto hereby
irrevocably waives, to the fullest extent permitted by law, the defense of an
inconvenient forum to the maintenance of such action or proceeding in any such
court.
SECTION 11.06. Headings. The descriptive headings contained in this
Agreement are included for convenience of reference only and shall not affect in
any way the meaning or interpretation of this Agreement.
<PAGE>
57
SECTION 11.07. Counterparts. This Agreement may be executed in one
or more counterparts, and by the different parties hereto in separate
counterparts, each of which when executed shall be deemed to be an original but
all of which taken together shall constitute one and the same agreement.
Delivery of an executed counterpart of a signature page to this Agreement by
telecopier shall be as effective as delivery of a manually executed counterpart
of this Agreement.
SECTION 11.08. Specific Performance. The parties hereto agree that
irreparable damage would occur in the event any of the provisions of this
Agreement were not to be performed in accordance with the terms hereof and that
the parties shall be entitled to specific performance of the terms hereof, in
addition to any other remedy at law or equity.
SECTION 11.09. Expenses. Except as otherwise specified in this
Agreement, all costs and expenses, including, without limitation, fees and
disbursements of counsel, financial advisors and accountants, incurred in
connection with this Agreement and the transactions contemplated hereby shall be
paid by the party incurring such costs and expenses whether or not the Closing
shall have occurred.
<PAGE>
58
IN WITNESS WHEREOF, the Purchaser and the Company have each caused
this Agreement to be executed by its duly authorized officer as of the date
first written above.
COMPOST AMERICA HOLDING COMPANY, INC.
By:
---------------------------------------
Title:
WASTECO VENTURES LIMITED
By:
---------------------------------------
Title:
<PAGE>
EXHIBIT A
Certificate of Designation of Preferred Stocks
<PAGE>
EXHIBIT B
Opinion of Greenberg Traurig
<PAGE>
EXHIBIT C
Registration Rights Agreement
<PAGE>
EXHIBIT D
Officer's Certificate of the Company
COMPOST AMERICA HOLDING COMPANY, INC.
Officer's Certificate
I, Roger E. Tuttle, President, Chief Executive Officer and Treasurer
of Compost America Holding Company, Inc., a New Jersey corporation (the
"Company"), hereby certify after due inquiry, that:
1. The representations and warranties of the Company in the Stock
Purchase Agreement, dated as of November 3, 1997 (the "Stock Purchase
Agreement"), between the Company and Wasteco Ventures Limited, a
corporation organized under the laws of the British Virgin Islands, are
true and correct as of the date hereof in all material respects.
2. The Company has complied, in all material respects, with all of
the agreements to be complied with by the Company pursuant to the Stock
Purchase Agreement at or prior to the date hereof.
IN WITNESS WHEREOF, I have hereunto signed my name as of the 3rd day
of November, 1997.
----------------------------------------
Name: Roger E. Tuttle
Title: President, Chief Executive
Officer and Treasurer
<PAGE>
EXHIBIT E
Officer's Certificate of the Purchaser
WASTECO VENTURES LIMITED
Officer's Certificate
I, John T. Shea, attorney-in-fact of Wasteco Ventures Limited, a
corporation organized in the British Virgin Islands (the "Purchaser"), hereby
certify after due inquiry, that:
1. The representations and warranties of the Purchaser in the Stock
Purchase Agreement, dated as of November 3, 1997 (the "Stock Purchase
Agreement"), between the Purchaser and Compost America Holding Company,
Inc., a New Jersey corporation, are true and correct as of the date hereof
in all material respects.
2. The Purchaser has complied, in all material respects, with all of
the agreements to be complied with by the Purchaser pursuant to the Stock
Purchase Agreement at or prior to the date hereof.
IN WITNESS WHEREOF, I have hereunto signed my name as of the 3rd day
of November, 1997.
----------------------------------------
Name: John T. Shea
Title: Attorney-in-fact
<PAGE>
EXHIBIT F
The Longo Agreements
<PAGE>
EXHIBIT G
New York City Contract Opinion
<PAGE>
Schedule 3.01(a)
List of Subsidiaries and Affiliates
1. Compost America Technologies, Inc.
2. Compost America Company of New Jersey, Ltd.
3. Garden Life Sales Company, Inc.
4. Philadelphia Recycling & Composting Company, Inc.
5. Chicago Recycling and Composting Company, Inc.
6. Miami Recycling & Composting Company, Inc. owned 80.1% by the Company and
19.9% by Thomas Mestre
7. Monmouth Recycling & Composting Co., Inc.
8. Gloucester Recycling and Composting Company, Inc.
9. Bedminster Seacor Services Miami Corporation
10. American Soil, Inc.
11. Newark Recycling & Composting Co., Inc. - Owned 75% by the Company and 25%
Prince George's Contractors, Inc. d/b/a Potomac Technologies.
12. American Bio-Ag Corporation- Owned by Newark Recycling & Composting, Inc.
See chart attached showing cash flows to the Company and breakdown of ownership
structure
<PAGE>
Schedule 3.01(b)
Longo Subsidiaries and Affiliates
NONE
<PAGE>
Schedule 3.03(b)(1)
Options, Warrants, Rights, Agreements
1. Agreement with Berwyn Capital Corporation dated December 2, 1996.
Fee for arrangement of equity and debt includes options to buy up to
100,000 shares at $2.50 per share within 5 years from grant of options
based on raising $3,000,000 of equity or $5,000,000 of debt. Only 33,334
options have been issued as of October 31, 1997, together with piggyback
registration rights during the 5 years and "demand" registration rights at
end of 5 year period.
2. Consulting Agreement with Robert Tardy dated December 1, 1995, as amended
by First Amendment dated June 23, 1997. Provides for payment for services
rendered in shares of Company stock. Additional compensation at the rate
of $120 per hour paid in unregistered common stock for service in excess
of basic service of 40 hours per month.
3. Lock-up Agreement with William Hurtt, as Trustee, dated October 1, 1996.
Lock up of 100,000 shares of common stock of the Company. Consideration
for the lock-up can be up to 50,000 additional shares.
4. Aryeh Trading Corp. Subscription Agreements
a. August 1997 First Agreement sells, for $500,000, 250,000
shares of CAHC common stock and options to purchase 100,000
shares of CAHC common stock at $2.00 per share through July
31, 2002
b. September 1997 First Agreement sells, for $500,000, 250,000
shares of CAHC common stock and options to purchase 100,000
shares of CAHC common stock at $2.00 per share through July
31, 2002
c. August 5, 1997 Letter Agreement granting Aryeh Trading the
right to do this two more times
5. Adam S. Gottbetter, Esq. Consulting Agreement
a. May 21, 1997 Agreement: add "at $1.50 per share" after
"common stock".
NOTE: Paragraph 7 grants options to purchase 40,000
unregistered shares of common stock through June 30,
2000
b. June 12, 1997 Letter Agreement committing not to accept
Anderson Weinroth arranged financing until Gottbetter
compensation (in cash and options) has been paid
c. Letter Agreement dated November 2, 1997 replacing June 12,
1997 Letter Agreement
6. Convertible Note with Bruce Boltuch dated October 9, 1996 and options as
per letter dated May 19, 1997.
$50,000 6-month Note at 10% interest maturing April 9, 1997. Coversion at
maturity at $3.00 principal amount for one share of unregistered common
stock.
Boltuch's letter dated May 19, 1997 states he was granted option to
purchase 7500 shares of registered stock at $2.00 per share and 2500
additional shares for granting extension
7. Lock-up of Insiders Shares Agreements dated September, 1996 through
October, 1996
8. a. Convertible Note with Brokerage Services Management, Inc. dated October
15, 1996. $53,000 2-month Note at 10% maturing December 15, 1996.
Conversion at maturity at $3.00 principal amount for one share of
unregistered common stock.
b. Convertible Note with Brokerage Services Management dated 12/15/1996.
$41,000 2-month Note at 10% maturing February 15, 1997. Conversion at
maturity at $3.00 for one share of unregistered common stock.
<PAGE>
9. Option Agreement with Berwyn Capital Investments dated November 24, 1996.
Fee for arrangement of equity and debt includes options to buy 100,000
shares at $2.50 per share within 5 years from grant of options based on
raising $3,000,000 of equity or $5,000,000 of debt. Only 33,334 options
have been issued as of October 31, 1997, together with tag-along
registration rights during the 5 years and "demand" registration rights at
end of 5 year period.
10. a. Convertible 8.0% Note with Dr. Paul Smalheiser dated March 26, 1997.
Option to purchase 25,000 shares @ $2.00 March 31,2000 expiration.
Conversion Option: Convert Note and Interest into 12,500 shares @ $2.00
b. Convertible 8% Note w/ Mark G. Milask
Option to purchase 50,000 shares @ $2.00 March 31,2000 expiration.
Conversion Option: Convert Note and Interest into 12,500 shares @
$2.00
c. Convertible 10% Note w/ Phil Wanger.
Option to purchase 50,000 shares @$2.00, March 31, 2002 expiration
Conversion Option: Convert Note and Interest into 12,500 shares @
$2.00
11. Option 10.0% Note with Donald A. Kaplan.
Option to purchase 100,000 shares @ $2.00, March 31, 2002 expiration
Conversion Option: Convert Note & Interest into 25,000 shares @ $2.00
12. Second Amendment to Stock Purchase Agreement between the Company, Robert
F. Young, Jr. And American Soil, Inc. dated October 2, 1996 whereby the
Company purchased from Young all of American Soil stock and issued to
Young 100,000 shares of restricted common stock of the Company.
13. Subscription Documents of Walter E. Piene dated May 14, 1997. Includes
$22,500 one-year note at 9% convertible into common shares at $2.50 per
share
$22,500 Note at 9% maturing earlier of one year from issue date or first
closing of municipal bond financing for any of the Company's composting
facilities.
14. Subscription Documents of Helen S. Janklow Trust dated June 1, 1997.
Includes $22,500 9% one-year note at 9% convertible into common shares at
$2.50 per share
$22,500 Note at 9% maturing earlier of one year from issue date or first
closing of municipal bond financing for any of the Company's composting
facilities.
15. Subscription Documents of Richard J. Verge dated June 1, 1997. Includes
$22,500 one-year note at 9% convertible into common shares at $2.50 per
share
$22,500 Note at 9% maturing earlier of one year from issue date or first
closing of municipal bond financing for any of the Company's composting
facilities.
16. Letter Agreements with David J. Egarian extending expiration date of
warrants to purchase 150,000 common shares at $1.17 per share through
February 15, 2000
17. Consulting Agreement dated May 21, 1997 with J. Mark Strong. NOTE:
Paragraph 7 grants rights to receive certain options.
Fee include 5,000 shares of every 100,000 shares of Class A Preferred
issued and options for 150,000 unregistered common shares for $2.00 per
share until June 30, 2001.
<PAGE>
18. Mike Pisani Documents
a. Pisani Settlement Agreement dated February 9, 1997
NOTE: Paragraph 1 grants Pisani option to purchase 25,000 common
shares at $2.50 per share through February 9, 2000.
b. Pisani Lock-Up Agreement
19. Consulting Agreement with Mark Gasarch. NOTE: Paragraph 14 grants options
to purchase 200,000 shares at $2.50 per share through May 2001, with
cashless exercise, demand and piggyback registration rights the same as
Roger E. Tuttle.
20. Consulting Agreement with Michael A. Benages dated June 1, 1997. Paragraph
5 grants Benages options to purchase 50,000 shares at $2.00 per share
through December 31, 2001.
21. Consulting Agreement with Peter Coker dated June 24, 1996 Paragraph 7
grants
25,000 shares of common stock with options for 100,000 shares at $2.00,
50,000 shares at $5.00 and 50,000 shares at $9.00, all expiring June 30,
2001.
22. Consulting Agreement with Andersen, Weinroth & Co. dated June 30, 1997,
which grants options if Andersen, Weinroth finds Wafra or other financing
or Chris Andersen joins the Board of the Company
Paragraph 3b) grants fees ranging from 0.375% to 2.5% plus from 1,790 to
9,620 options for each $250,000 of financing. The options are for $2.00
per share and for 5 years.
Paragraph 3d): If G. Chris Andersen joins Company's board, AW will receive
5-year options of $3.00 per share for 300,000 shares of common stock.
23. Consulting Agreement with Quirk Carson Peppet dated January 23, 1997
Fee include warrants to acquire common stock at same price as private
placement exercisable within 5 years from date of issuance. Warrants for
100,000 shares at $2.50. Also, other possible warrants if more than one
closing.
24. $2,000,000 Note to Paul F. Harron or designee convertible into 800,000
shares of Series B Preferred Stock
25. Class B Preferred Stock Agreement for 1,000 shares with Mark Gasarch dated
September 13, 1997 convertible into 1,000 shares of common stock
26. Lionhart Investments Limited Subscription Agreement for 400,000 Shares of
Series B Preferred Stock (convertible into 400,000 shares of common stock)
(Not executed but was funded and shares were issued)
27. Employment Agreement with Robert J. Longo (undated)
NOTE: Paragraph 6 permits Longo to be paid in cash or unregistered
common shares of the Company Paragraph 7 grants Longo "piggyback"
registration rights. Compensation include options at $1.00 per share
for a total of 1,500,000 shares of unregistered common stock:
500,000 vest at execution, 200,000 thereafter each year on September
15 until 2002. All options expire on September 16, 2002. Longo's
bonus may be paid in cash or stock.
28. Employment Agreement with Kevin Walsh (undated)
NOTE: Paragraph 7 grants options to purchase 300,000 shares of the
Company's common stock at $1.00 per share through September 15, 2002
<PAGE>
29. Employment Agreement with Jay Waxenbaum dated July 31, 1997
NOTE: Paragraph 7 grants options to purchase 300,000 shares of the
Company's common stock at $1.00 per share through September 15, 2002
(options vest 50,000 upon execution and 50,000 on September 15th of
each calendar year)
30. First Amendment to Employment Agreement with Roger E. Tuttle dated May 1,
1997
NOTE: Paragraph 4.3 allows Tuttle to take bonus in cash or stock.
Paragraph 7 grants options to purchase 1,000,000 shares at $1.50 per
share through July 11, 2007. Paragraph 7.1 allows "cashless
exercise:. Paragraph 7.3 grants "demand" and "piggyback"
registration rights. Paragraph 7 grants options at $2.50 per share
for 1,000,000 shares of unregistered common stock until August 1,
2004.
31. Lionhart Investments Limited - $1,000,000 Convertible Debenture
a. Debentures Purchase Agreement
b. First Amendment to Debentures Purchase Agreement dated November 27,
1996
c. Series 1 of 10 $100,000 Convertible Debentures (there are 9 others
identical) dated November 27, 1996
d. May 20, 1997 Notice of Conversion of $200,000 of Debentures - Shares
Issued September 8, 1997 Notice of Conversion of $200,000 of
debentures - Shares Not Yet Issued. NOTE: Remaining $600,000 of
Notes have conversion rights into registered shares as per formula
in Debenture
32. Robert Jones Certificate for 75,000 warrants to purchase 75,000 common
shares at $1.17 per share through February 15, 2000
33. Intentionally Omitted.
34. Consulting Agreement with Canterbury Company dated July 9, 1997
160,000 shares of restricted common stock issued to Cantebury as
additional compensation.
35. Warrants issued to Robert W. Jones III for 75,000 shares at $1.17 per
share, expires February 15, 2000 as per letter from Mark Gasarch dated
February 15, 1997
36. Consulting Agreement dated November 15, 1996 with Jose Ferre
NOTE: Paragraph 5 grants options to purchase 5,000 shares at $2.00 per
share through December 31, 2001.
37. Consulting Agreement dated November 15, 1996 with Erelio Pena
NOTE: Paragraph 5 grants options to purchase 5,000 shares at $2.00 per
share through December 31, 2001.
38. Consulting Agreement dated November 15, 1996 with Pedro Roig
NOTE: Paragraph 5 grants options to purchase 5,000 shares at $2.00 per
share through December 31, 2001.
39. Consulting Agreement dated November 15, 1996 with Julio Rebull
NOTE: Paragraph 5 grants options to purchase 5,000 shares at $2.00 per
share through December 31, 2001.
40. Consulting Agreement dated November 15, 1996 with Orlando Garcia, Jr.
NOTE: Paragraph 5 grants options to purchase 5,000 shares at $2.00 per
share through December 31, 2001.
<PAGE>
41. Consulting Agreement dated November 15, 1996 with Armando Oliveros
NOTE: Paragraph 5 grants options to purchase 5,000 shares at $2.00 per
share through December 31, 2001.
42. Consulting Agreement dated November 15, 1996 with Anthony Zamora
NOTE: Paragraph 5 grants options to purchase 5,000 shares at $2.00 per
share through December 31, 2001.
43. Consulting Agreement with Arsenio Milian dated November 15, 1996 granting
options to purchase 5,000 shares at $2.00 per share through December 31,
2001
44. Consulting Agreement dated April 17, 1997 with Antonio Junior
NOTE: Paragraph 5 grants options to purchase 5,000 shares at $2.00 per
share for two years after closing of financing for Miami Project.
45. Consulting Agreement dated May 2, 1997 with Jorge Luis Lopez
NOTE: Paragraph 5 agrees to issue 50,000 unregistered common shares upon
closing of financing for Miami Project. (PENDING AGREEMENT)
46. Consulting Agreement dated May 2, 1997 with Herman Echevarria
NOTE: Paragraph 5 agrees to issue 50,000 unregistered common shares upon
closing of financing for Miami Project.(PENDING AGREEMENT)
47. Consulting Agreement dated September 15, 1996 with Milian Swain &
Associates, Inc.
NOTE: Paragraph 7 provides for the issuance of 25,000 unregistered shares
upon commercial startup of Miami Project, and 25,000 additional
unregistered shares upon the commercial startup of any other Florida
composting facility.
48. Employment Agreement dated September 1, 1996 with Allan S. Miller
NOTE: Paragraph 7 grants options to purchase 100,000 shares at $2.00 per
share through September 15, 2002. Paragraph 5 grants options to purchase
50,000 shares at $2.00 per share and 50,000 shares at $4.00 per share
through December 31, 2001.
49. Employment Agreement dated July, 1997 with Robert T. Schlaak
NOTE:Paragraph 7 contemplates the granting of stock options. Paragraph 5
grants options to purchase 10,000 shares at $2.00 per share and 10,000
shares at $4.00 per share through December 31, 2001.
50. Settlement Agreement with Ehmann, Van Denbergh & Trainor ("EVT") dated
July 31, 1996
NOTE: Paragraph 4 grants the Company an option to purchase 500,000 shares
owned by EVT at $4.00 per share through October 31, 1997.
51. Consulting Agreement with Robert Young dated October 2, 1996
NOTE:Paragraph 7 provides for the issuance of shares under certain
circumstances. Registration Rights Agreement dated October 8, 1996 gives
Young demand registration rights for 150,000 shares of common stock and
50,000 shares of common stock.
52. Agreement dated May 31, 1996 between Miami Recycling and Dade County
Bioconversion Corp.
NOTE: Paragraph 3 provides for the issuance of 25,000 shares upon the
financial closing of the Miami Project
<PAGE>
53. Consulting Agreement dated February 21, 1997 with Tomas Mestre
NOTE:Paragraph 5 provides for the payment of 200,000 shares. Paragraph 5
grants options for 500,000 shares at $2.00 per share until December 31,
2007. Upon financial closing of North Dade County facility and each
additional facility: 100,000 additional shares at $2.00 per share. Upon
commencement of operation at the North Dade facility, the company will
grant options to purchase 75,000 shares @ $2.00 per share.
54. Consulting Agreement dated September 7, 1996 with Robert W. Jones III
NOTE:Paragraph 5 grants options to purchase 50,000 shares at $2.00 per
share through December 31, 2001 and 50,000 shares at $3.00 per share
through December 31, 2001.
55. Consulting Agreement among CAHC, Miami Recycling, Bedminster Seacor
Services Miami and Compost Consultants Company dated August 28, 1996
NOTE: Paragraph 5 grants 100,000 common shares upon closing of financing
for the Miami Project
56. Agreement with Francisco Ferre dated February 22, 1995 granting option
rights to purchase 15% ownership interest in the Miami facility.
57. Consulting Agreement with Antonio Zamora, Erelio Pena and Pedro Roig
dated May 31, 1996 Compensation include 1,752 shares of unregistered
common stock per month.
58. Consulting Agreement with Deborah Swain dated September 15, 1996
Compensation include 18,000 shares of common stock.
59. Consulting Agreement with Antonio Zamora dated March 25, 1997
Compensation include 35,000 unregistered shares of common stock upon the
closing of the Miami bond allocation.
60. Letter Agreement with Anderson, Weinroth & Co. dated August 6, 1997
regarding option rights with respect to G.E. Capital financing. Placement
fee include 5-year options for 100,000 shares at $2.00 per share.
61. Consulting Agreement s with Michael Marchese dated March 1, 1995 and
October 2, 1996. Compensation include a total of 18,000 shares of
unrestricted common stock and total additional bonuses of up to 25,000
shares of such common stock.
<PAGE>
Schedule 3.03(b)(2)
Longo Options, Warrants, Rights, Agreements
EPIC Option referred to in the Agreement
<PAGE>
Schedule 3.03(b)(3)
Options, Warrants, Rights, Agreements for Subsidiaries
Consulting Agreement between Miami Recycling & Composting, Inc. with Dade County
Bioconversion Corporation dated May 31, 1996
Consulting Agreement with Antonio Zamura, Ereleo Pena and Pedro Roig dated May
31, 1996
Robert Jones certificate for 75,000 warrants to purchase 75,000 common shares at
$1.17 per share through February 15, 2000.
Consulting Agreement among CAHC, Miami Recycling, Bedminster Seacor Services
Miami and Compost Consultants Company dated August 28, 1996
NOTE: Paragraph 5 grants 100,000 common shares upon closing of financing for the
Miami Project
Agreement with Francisco Ferre dated February 22, 1995 granting option rights to
purchase 15% ownership interest in the Miami facility
Registration Rights Agreement attached hereto as Exhibit C
<PAGE>
Schedule 3.03(b)(4)
Encumbrances on Shares of Stock
None
<PAGE>
Schedule 3.03(c)
Registration Rights for Company, Longo Shares
Convertible Notes dated April 7, 1997, options with registration rights in favor
of Donald Kaplan in the principal amount of $50,000
Consulting Agreement with Mark Gasarch. NOTE: Paragraph 14 grants options to
purchase 200,000 shares at $2.50 per share through May 2001, with cashless
exercise, demand and piggyback registration rights the same as Roger E. Tuttle
First Amendment to Employment Agreement with Roger E. Tuttle dated May 1, 1997
NOTE: Paragraph 4.3 allows Tuttle to take bonus in cash or stock. Paragraph 7
grants options to purchase 1,000,000 shares at $1.50 per share through July 11,
2007. Paragraph 7.1 allows cashless exercise. Paragraph 7.3 grants demand and
piggyback registration rights.
Consulting Agreement with Robert Young dated October 2, 1996
NOTE: Paragraph 7 provides for the issuance of shares under certain
circumstances. Registration Rights Agreement dated October 8, 1996 gives Young
demand registration rights for 150,000 shares of common stock and 50,000 shares
of common stock
Convertible Note dated April 30, 1997 and options in favor of Mark G. Milask
Convertible Note dated April 30, 1997 and options in favor of Philip Wanger
Convertible Note dated April 30, 1997 and options in favor of Dr. Paul
Smalheiser
Options contained in Consulting Agreement with Anderson, Weinroth and Co. dated
June 30, 1997
Employment Agreement with Robert J. Longo
Lionhart Investments Limited $1,000,000 Debenture convertible into registered
common shares
Registration Rights Agreement attached hereto as Exhibit C
<PAGE>
Schedule 3.03(d)
Names and Addresses of Shareholders With Greater than 5% Interest
and Number of Shares Owned,
ALL CALCULATIONS CURRENT AS OF 9/30/97
Nominee
CEDE & Co
P.O. Box 20
Bowling Green Station
New York, NY 2,725,691
- --------------------------------------------------------------------------------
John B. Fetter 2,528,612 2,648,612
820 Gatemore Road
Bryn Mawr, PA 19010
John B. Fetter Custodian
John Theodore Fetter
Under the PA Uniform Transfers to Minors Act 10,000
820 Gatemore Road
Bryn Mawr, PA 19010-2937
John B. Fetter Custodian
Katherine Elizabeth Fetter
Under the PA Uniform Transfers to Minors Act 10,000
820 Gatemore Road
Bryn Mawr, PA 19010-2937
Marilyn S. Fetter 100,000
820 Gatemore Road
Bryn Mawr, PA 19010-2937
(1)
*Elizabeth Fetter Eastman, Custodian
Christopher Robert Fetter
Eastman under the MN Uniform Transfers to
Minors Act 10,000
2229 Edgcumbe Road
St. Paul, MN 55116-2473
*Elizabeth Fetter Eastman 21,000
2229 Edgcumbe Road
St. Paul, MN 55116-2473
*Theodore W. Fetter Custodian
John Walker Fetter
Under the MD Uniform Transfers to Minors Act 10,000
8204 Hackamore Drive
Potomac, MD 20854-3874
- ----------
(1) Remainder of Fetter family controlled by John B. Fetter.
<PAGE>
*Ruth H. Fetter 15,000
535 Gradyville Road, V-160
Newtown Square, PA 19073-2815
*Gordon R. Fetter 310,000
*Theodore S. Fetter
Tr UA Dec. 22, 1992
Theodore S. Fetter 60,000
1606 Lark Lane
Villanova, PA 19085-1908
*Theodore W. Fetter 10,000
8204 Hackamore Drive
Potomac, MD 20854-3874
*Theodore W. Fetter Custodian
Theodore Walker Fetter, II Under
the MD Uniform Transfers to Minors Act 10,000
8204 Hackamore Drive
Potomac, MD 20854-3874
*The S W and T S Fetter
Grandchildren Trust 30,000
Peter J. May Trustee
P.O. Box 902
Bryn Mawr, PA 19010-0902
*Sarah W. Fetter Trust UA Dec 22, 1992
Sarah W. Fetter Trust 10,000
1606 Lark Lane
Villanova, Pa 19085-1908
*
Roger E. Tuttle 2,333,509 2,439,509
3105 Gibson Lane
Doylestown, PA 18901
Elizabeth J. Tuttle 100,000
3105 Gibson Lane
Doylestown, PA 18901
William Tuttle 6,000
264 Deerfield Court
New Hope, PA 18938-1075
(2)
Robert E. Wortmann 807,500 1,499,929
80 Knollwood Road
Upper Saddle River, NJ 07158
- ----------
* Remainder of Fetter family which are not controlled by John B. Fetter.
(2) Shares controlled by Roger Tuttle.
<PAGE>
Andrea Wortmann 150,000
80 Knollwood Road
Upper Saddle River, NJ 07158
Erika Wortmann 150,000
80 Knollwood Road
Upper Saddle River, NJ 07158
Mary Wortmann 40,000
80 Knollwood Road
Upper Saddle River, NJ 07158
Robert Wortmann, Jr. 150,000
80 Knollwood Road
Upper Saddle River, NJ 07158
VRH Construction 202,429
(3)
Victor D. Wortmann, Sr. 817,500 1,419,929
47 Mill Glen Road
Upper Saddle River, NJ 07158
Victor Wortmann, Jr. 200,000
47 Mill Glen Road
Upper Saddle River, NJ 07158
Susan Ann Curran 200,000
47 Mill Glen Road
Upper Saddle River, NJ 07158
VRH Construction 202,429
(4)
Ownership of Longo
Pre-closing 50% owned by Robert J. Longo,
50% owned by The Robert J. And Andrea Longo Charitable Trust.
- ----------
(3) VRH Construction Company has a total number of 404,858 shares and is
controlled 50-50 by Robert and Victor Wortmann.
(4) VRH Construction Company has a total number of 404,858 shares and is
controlled 50-50 by Robert and Victor Wortmann.
<PAGE>
Schedule 3.03(e)
Andrea Longo is employed by EMAR Group, Inc. Which provides insurance services
to Longo.
<PAGE>
Schedule 3.03(f)
Description of Terms and Conditions of Preferred Stock Series B
See Amendment to Certificate of Incorporation authorizing Series B Preferred
Stock dated June 13, 1997 and filed June 13, 1997 with the Secretary of State of
New Jersey.
<PAGE>
Schedule 3.05(a)
Conflicts by Performance of Agreement
Waiver and consent by Charter Financial, Inc.
<PAGE>
Schedule 3.05(b)
Consents, Approvals, Filings Required
None
<PAGE>
Schedule 3.07
Violations of Laws, Rules, Orders by Company, Longo, or Subsidiaries
None
<PAGE>
Schedule 3.08
Liabilities not Listed in SEC Reports that
are Material to the Company or Subsidiaries
See items shown on Schedule 3.11
Demand for taxes payable by American Soil, Inc. delivered to Purchaser.
Failure to properly identify the number and names of Directors of the Company in
SEC filings, including John Fetter and Victor Wortmann
<PAGE>
Schedule 3.09
Schedule of Indebtedness
1. Working capital loans from VRH Construction totaling $4,086,688, plus
accrued interest
Face Amt: $4,086,688
Int.: $ 885,219
Total: $4,971,907
Maturity: 12/31/98
Rate: 10%
2. Working capital loans from Select Acquisitions, Inc. totaling $78,060,
plus accrued interest
Face Amt: $78,060
Int.: $ 9,774
Total: $87,834
Maturity: 9/30/98
Rate: 10%
3. Working capital loan from Roger Tuttle totaling $115,000, plus accrued
interest
Face Amt: $115,000
Int.: $ 14,399
Total: $129,399
Maturity: 9/30/98
Rate: 10%
4. Unsecured Demand Note payable to John B. Fetter totaling $40,000, plus
accrued interest (delinquent). Unsecured Demand Note payable to John B.
Fetter dated 7/1/96. $40,000 Note at 10% APR due at the earlier of (i) the
Company receiving cash deposit in the aggregate of $500,000 or (ii) the
EDA Bond closing for the Newark Project.
Foundation Systems, Inc.
Face Amt: $40,000
Int.: $ 5,008
Total: $45,008
Maturity: 9/30/98
Rate: 10%
5. Working capital loan payable to John Fetter totaling $50,000, plus accrued
interest.
Face Amt: $50,000
Int.: $ 5,425
Total: $55,425
Maturity: 9/30/98
Rate: 10%
<PAGE>
6. $3,730,870.75 Note payable to Rinker Materials, Inc. dated March 29, 1996
and maturing April 1, 1998, secured by mortgage on Miami property. Note
payable to Rinker Materials, Inc. dated March 29, 1996. . . . at 7%
interest rate.
Face Amt: $3,730,871
Int.: $ 444,736
Total: $4,175,607
Maturity: 4/1/98
Rate: 7%
7. Development Agreement Amendment 1 dated January 15, 1995 between the
Company and Teepak, Inc. reciting various loans from Teepak in the amounts
of $64,871.49 and $200,000 respectively
Face Amt: $264,871
Int.: $ 63,439
Total: $328,310
Maturity: 12/31/98
Rate: 10.50%
8. Revolving Line of Credit payable to Summit Bank, as extended by Agreement
dated October 15, 1997. Revolving Line of Credit payable to Summit Bank
extended as of 10/15/97. $100,000 line of credit. . .
Face Amt: $100,000
Int.: Paid Monthly
Total: $100,000
Maturity: 7/31/98
Rate: 9.50%
9. Working capital loan from Mark Stella maturing December 31, 1997
(delinquent)
Face Amt: $15,000
Int.: None
Total: $15,000
Maturity: 12/31/97
Rate: N/A
10. Working capital loan from Peter May maturing December 31, 1997
(delinquent)
Face Amt: $15,000
Int.: None
Total: $15,000
Maturity: 12/31/97
Rate: N/A
11. Convertible Note payable to Bruce Boltuch dated October 9, 1996 in
original principal amount of $50,000 (paid but in dispute re: shares).
Convertible Note payable to Bruce Boltuch dated 10/9/96. $50,000 6-month
Note at 10% maturing April 9, 1997 (paid but in dispute re: shares).
- Paid see documentation attached
<PAGE>
12. Convertible Note payable to Brokerage Services Management, Inc. dated
October 15, 1996 in the original principal amount of $53,000, plus accrued
interest; current balance is $33,000, plus accrued interest (delinquent).
Convertible Note payable to Brokerage Services Management, Inc. dated
10/15/96. $53,000 2-month Note at 10% maturing December 15, 1996. . .
Face Amt: $33,000
Int.: $ 2,749
Total: $35,749
Maturity: 7/31/98
Rate: 10%
13. Management fees and expenses payable to Roger Tuttle, John Fetter and Al
Rattie representing accrued salaries in the following amounts: Roger
Tuttle $419,750, Al Rattie $177,500 and John Fetter $147,500.
14. Three (3) Convertible Notes to Mark Milask, Dr. Paul Smalheiser and Philip
Wanger dated April 30, 1997 in the original principal amount of $25,000
each (notes mature September 30, 1998)
<TABLE>
<CAPTION>
Mark Milask Dr. Smallheiser Philip Wanger
----------- --------------- -------------
<S> <C> <C> <C> <C> <C>
Face Amt: $25,000 Face Amt: $25,000 Face Amt: $25,000
Int.: $ 1,466 Int.: $ 1,466 Int.: $ 1,466
Total: $26,466 Total: $26,466 Total: $26,466
Maturity: 9/30/98 Maturity: 9/30/98 Maturity: 9/30/98
Rate: 8% Rate: 8% Rate: 10%
</TABLE>
14a. Convertible Note w/Paul Smalheiser dated 3/26/1997. $25,000 Note at 8%
maturing October 30, 1998. Conversion at $2.00 for one common share until
maturity.
b. Convertible Note w/Mark G. Milask dated April __, 1997. $25,000 Note at
8% maturing September 30, 1998. Conversion at $2.00 for one common share
until maturity.
c. Convertible Note w/Phil Wanger dated April __, 1997. $25,000 Note at
10% maturing September 30, 1998. Conversion at $2.00 for one common share
until maturity.
15. Note payable to Donald Kaplan dated April 7, 1997 in original principal
amount of $50,000 (matures September 30, 1998).
Convertible Note w/Donald A. Kaplan dated April 7, 1997.
$50,000 Note at 10% maturing September 30, 1998. Conversion at $2.00 for
one unregistered common share through March 31, 2002.
Face Amt: $50,000
Int.: $ 2,932
Total: $52,932
Maturity: 9/30/98
Rate: 10%
16. Monthly rent obligation of $100 payable under Lease between City of
Gloucester and Gloucester Recycling and Composting Company, Inc. dated
July 1, 1995 and expiring March 7, 1998.
Lease between City of Gloucester and Gloucester Recycling and Composting
Company, Inc. dated 6/1/95.
24-month lease with rent of $100 per month.
<PAGE>
17. $132,500 owed to Robert F. Young pursuant to Consulting Agreement dated
October 2, 1996
Maturity: 8/1/97
o to be paid by check or 50,000 shares of unregistered common stock
18. $407,500 contingent liability owed to Bio-Services, Inc. dated October 2,
1996 pursuant to Asset Purchase Replacement Agreement; payable upon
completion of all permitting for an in vessel composting facility in
Monmouth County, New Jersey
19. Subscription Documents of Walter E. Piene dated May 14, 1997. Includes
$22,500 9% one-year note convertible into common shares at $2.50 per
share.
Subscription agreement w/Walter E. Piene dated 5/14/97 and Convertible
Note dated June 1, 1997. $22,500 Note at 9% maturing earlier of one year
from issue date or first closing of municipal bond financing for any of
the Company's composting facilities; convertible to common shares at $2.5
per share.
Face Amt: $22,500
Int.: $ 1,021
Total: $23,521
Maturity: 5/31/98
Rate: 9%
20. Subscription Documents of Helen S. Janklow Trust. Includes $22,500 9%
one-year note dated 5/1/97 convertible into common shares at $2.50 per
share.
Subscription agreement w/Helen S. Janklow dated 5/15/97 and Convertible
Note dated June 1, 1997.
$22,500 Note at % maturing earlier of one year from issue date or first
closing of municipal bond financing for any of the Company's composting
facilities; convertible to common shares at $2.5 per share.
Face Amt: $22,500
Int.: $ 1,021
Total: $23,521
Maturity: 5/31/98
Rate: 9%
21. Subscription Documents of Richard J. Verge. Includes $22,500 9% one-year
note dated 5/1/97 convertible into common shares at $2.50 per share.
Subscription agreement w/Richard J. Verge dated 6/11/97 and Convertible
Note dated June 1, 1997.
$22,500 Note at 9% maturing earlier of one year from issue date or first
closing of municipal bond financing for any of the Company's composting
facilities; convertible to common shares at $2.5 per share.
Face Amt: $22,500
Int.: $ 849
Total: $23,349
Maturity: 5/31/98
Rate: 9%
<PAGE>
22. $400,000 Note payable to Ehmann, Van Denbergh & Trainor pursuant to
Settlement Agreement. Currently owed $100,000 matures March 15, 1998.
Note payable to Ehmann, Van Denbergh & Trainor dated 7/31/96.
$400,000 Note maturing April 1, 1998, secured by assets of Newark
Recycling and Composting Company, Inc., Monmouth Recycling and Composting
Company, Inc., and Miami Recycling and Composting Company, Inc.
23. Obligations under Doylestown lease
Court of Common Pleas/Bucks County, PA
Robert M. Fellheimer vs. Compost America of New Jersey
Action No. 97004277-05
Judgment in Confession
Entered: 6/6/97
Amount: $18,240.31
24. $53,500 payable to Center Capital Corp. pursuant to equipment note dated
February 5, 1997 and maturing February 5, 2002
Face Amt: $53,500
Current balance: $49,455.66
Int. Rate: 11.875%
Maturity: 2/5/02
25. $202,995 payable to Concord Commercial pursuant to equipment note dated
April 9, 1997 maturing April 9, 2000
Equipment Note payable to Concord Commercial dated 4/9/97.
$202,995 Note at 8.95% maturing April 9, 2000.
Face Amt: $202,995
Current balance: $172,818.45
Int. Rate: 8.95%
Maturity: 4/9/00
26. $59,920 payable to General Electric Capital pursuant to equipment note
dated February 24, 1995 maturing February 23, 1999
Equipment Note payable to General Electric Capital dated 2/24/95.
$59,920 Note at 10.75% maturing February 23, 1999.
Face Amt: $59,920
Current balance: $24,205.80
Int. Rate: 10.75%
Maturity: 2/23/99
27. $88,507.08 ($76,750 plus $11,757.08 in interest) payable to Orix Credit
Alliance pursuant to equipment note dated July 18, 1996 maturing July 20,
1999
Face Amt: $76,750
Current balance: $49,460.46
Int. Rate: 9.50%
Maturity: 7/20/99
<PAGE>
Schedule 3.10
Undisclosed Liabilities Since September 30, 1997
None
<PAGE>
Schedule 3.11(a)
Changes Having Material Adverse Effect
None
<PAGE>
Schedule 3.11(b)
Changes in Accounting Methods Since July 31, 1997
Failures to Maintain Property
Redemption of Company or Longo Stock
Sales or Issuances of Stock
Insider Transactions
Capital Expenditures in Excess of $100,000
Additional Loans or Guarantees by Company or Longo
Additional Encumbrances on Assets or Properties
Amendments to Bylaws or Certificate of Incorporation
Modifications to Material Contracts
Failures to Pay Creditors Amounts Due
Sales or Leases of Property or Assets
400,000 shares of Series B Preferred Stock issued to Paul F. Harron dated
September 9, 1997.
Amendments to By-laws and Certificate of Incorporation necessary to increase
number of Directors of the Company
First Mortgage and Security Agreement to Paul F. Harron entity dated _________,
1997 encumbering the Newark property (Pending)
Delinquent Notes referenced on Schedule 3.09 hereto.
400,000 shares of Series B Preferred Stock issued to Lionhart Investments, Ltd.
dated July 3, 1997.
1,000 shares of Series B Preferred Stock issued to Mark Gasarch dated September
13, 1997.
*See attached Exhibit "A" Common Shares outstanding as of October 22, 1997
*See attached Exhibit "B" Series B Preferred Shares Outstanding as of October
22, 1997
Car leases listed on Schedule 3.14(a)
Summit Bank extension listed on Schedule 3.09
Aging and cash flow report dated October 28, 1997 provided to Purchaser.
<PAGE>
Schedule 3.12 (a)
Employee Benefit Plans
Company
Compost America Corp.
Health Insurance Plan with the Principal Financial Group, Inc.
covers Roger Tuttle, Rich Kish, Al Raltie, Robert Schlaak, Renee Benes
Health Insurance Plan with Principal Financial Group, Inc.
Covers Renee Beites, Richard Kish, Alfred Rattie, Rutherford, Roger Tuttle and
William Tuttle.
LONGO
Longo Puerto Rico, Inc.
Employee Health & Life Insurance Plan Document with East Core, Inc.
This plan covers R.J. Longo Construction Co., Inc. employees
Standard Trust Agreement dated January 1, 1996 by and between Longo Puerto Rico,
Inc. and Kevin K. Walsh, as Trustee.
Longo Puerto Rico, Inc.
Flexible Benefit Plan
This plan covers R.J. Longo Construction Co., Inc. employees
Pursuant to the Longo Agreements, the Company must replace these plans prior to
closing the Longo Acquisition.
Copies of all insurance plans for Longo have been provided to Wasteco
Multiemployer Plans
Local 945
Local 542
Potential withdrawal liability of $7,000 under multiemployer plan
<PAGE>
Schedule 3.12(b)
Separation, Severance or Termination Benefits Provided by Plans
None
<PAGE>
Schedule 3.12(c)
Litigation Pending or Threatened with Respect to any Plan
None
<PAGE>
Schedule 3.13(a)
List of Owned Real Property
Miami property owned by Miami Recycling and Composting, Inc. located in Medley,
Florida.
Newark property owned by Newark Recycling and Composting, Inc. located in
Newark, New Jersey
LONGO
Texas Property known as Tract 6-A, East Texas Center
Owentown, Smith Colony, Texas
<PAGE>
Schedule 3.13(b)
List of Leased Real Property
Lease for 320 Grand Avenue, Englewood, New Jersey between Company and VRH
Construction dated May 1, 1996
Lease dated July 1, 1995 between City of Gloucester and Gloucester Recycling and
Composting Company, Inc. for property located in Gloucester, New Jersey
Lease of office space located in Doylestown, New Jersey dated November 15, 1997,
as amended.
Lease of 10.462 acre parcel and 8.296 acre parcel located in Monmouth, New
Jersey
LONGO
Lease dated February 25, 1991, as amended, between Consolidated Rail Corporation
and R.J. Longo Construction Co., Inc. and located on 4.11 acres known as Brills
Yard, Newark, New Jersey (see schedule 4.01(c)(i) for document).
Oral Lease month-to-month lease between Trust f/b/o children of Robert J. Longo,
as Landlord, and R.J. Longo Construction Co., Inc., as Tenant covering premises
located at 305 Palmer Road, Denville, New Jersey.
Tyler, Texas title policy- See Longo Stock Purchase Agreement
With respect to "peaceful; undisturbed possession" - except as provided in the
Conrail Lease.
<PAGE>
Schedule 3.13(c)
Defaults or Breaches under Leases or Subleases
Alleged default under Doylestown lease referred to in Schedule 3.09
<PAGE>
Schedule 3.14(a)
List of Tangible Personal Property Used in Business Owned or Leased
1. Items securing note payable to Center Capital Corp. pursuant to equipment
note dated February 5, 1997 and maturing February 5, 2002
Wildcat Turner
This equipment has a $53,500.00 note with Center Capital Corp. maturing
February 5, 2002.
Current Balance is $49,455.66
The note interest rate is 11.875 APR
2. Items securing note payable to Concord Commercial pursuant to equipment
note dated April 9, 1997 maturing April 9, 2000
Tromel (Screen)
This equipment has a $202,995.00 note with Concord Commercial, maturing
April 9, 2000.
Current balance is $172,818.45
The note interest rate is 8.95 APR
3. Items securing note payable to General Electric Capital pursuant to
equipment note dated February 24, 1995 maturing February 23, 1999
Cat Excavator
This equipment has a $59,920.00 note with G.E. Capital, maturing February
23, 1999.
Current balance is $24,205.80
The note interest rate is 10.75 APR
4. Items securing note payable to Orix Credit Alliance pursuant to equipment
note dated July 18, 1996 maturing July 20, 1999
Cat 966 Loader
This equipment has a $76,750.00 note with ORIX Credit Allowance maturing
July 20, 1999.
Current balance is $49,460.46
The note interest rate is 9.50 APR
5. Car Lease with GMAC dated August 11, 1995
The GMAC car lease is for a 1995 Tahoe. The 3 year lease ends August 1998.
The monthly payment is $593.00
The buyout is approximately $20,000.
6. Car Lease/Note with Mazda American Credit dated July 11, 1997
The Mazda car loan is with Mazda American Credit. The car is a 1993 Mazda
929.
The monthly payment is $495.
7. Car Lease with Fred Beans Ford dated August 23, 1997 and maturing August
23, 2000
The Ford car lease is a 1997 Explorer. The 3 year lease ends August 2000.
The monthly payment is $540.
<PAGE>
8. Items securing note payable to Capital Innovations, Inc. dated June 8,
1995 and maturing July 10, 2000.
This equipment has a $110,563.30 note with Capital Innovations, Inc.,
maturing July 10, 2000.
Current balance is $67,419.58. The note interest rate is 12.53 APR.
9. Xerox copy machine Lease Agreement maturing , 2000
The Xerox copy machine is four months old. The total value was $31,000.
The monthly payment is $730.00 and ends July 2000.
EPIC
See Equipment Schedule 3.10(b) of the Longo Stock Purchase Agreement (copy
attached).
<PAGE>
Schedule 3.14(b)
Lease Payments of $25,000 or more per year
1. Items securing note payable to Concord Commercial pursuant to equipment
note dated April 9, 1997 maturing April 9, 2000
2. Items securing note payable to Orix Credit Alliance pursuant to equipment
note dated July 18, 1996 maturing July 20, 1999
3. Truck Lease and Service Agreement between R.J. Longo Construction Co.,
Inc. d/b/a EPIC dated February 14, 1995.
<PAGE>
Schedule 3.15(a)(i)
Patents, Trademarks, Owned Intellectual Property of Company, Longo Subsidiaries
COMPOST
Patents
None
Permits
City of Newark & Local Authorities
Final Site Plan Approval
Application No. SP75-2094
Applicant: Newark Recycling & Composting Co., Inc.
Soil Erosion and Sediment Control Permit
Permit #101164
Owner: Newark Recycling & Composting, Inc.
Local Treatment Works Approval
NJPDES
Owner: Newark Recycling & Composting Company
Sewer Extension Letter
*A permit issued by PVSC prior to the commencement of the facility construction
is not required
Essex County
Inclusion in Essex County Solid Waste Plan
Ordinance #0-96-0027
Ordinance - amending the Solid Waste Management Plan to include Newark Recycling
and Composting Company
State Approvals
New Jersey Pollutant Discharge Elimination System
Permit #NJ0108821
Permittee: Newark Recycling & Composting
Air Quality Permit
Permittee: Newark Recycling & Composting Co., Inc.
BNSR Log Number: 01-96-4480
Stack Designation: 001
APC Plant ID No.: 06715
State Treatment Works Approval
Permit #96-0229-4
Applicant: Newark Recycling Co.
Stream Encroachment Waiver
Letter from State of New Jersey "No stream encroachment permit other than this
letter will be required for the proposed construction."
<PAGE>
General Permit 11
Authorization for Freshwater Wetlands Statewide General Permit, Water Quality
Certification and Waiver of Transition Area for Access
File No.: 0714-91-0001.5
Applicant: Compost America
Block: 5060 Lots: 106 and 116
Inclusion in State Solid Waste Plan
Certification of the December 26, 1996 Amendment to the Essex County District
Solid Waste Management Plan
Disclosure Statement Review Letter
Letter stating that Newark Recycling and Composting Co., Inc. d/b/a Passaic
Valley Mgt. Group and Agricycle has been issued an A-901 license.
LONGO
Patents:
Municipal Solid Waste Landfill System
Robert J. Longo, Sr., Applicant
Application #08/661,336
Application Assigned to R. J. Longo Construction Co., Inc. d/b/a EPIC
Permits:
NJDEP Registration No. 17244
Intermodal Container Facility Permit
USDOT No. 568451
Solid Waste Transporter License
USEPA ID No. NJD 986647501
NJBPU Certificate of Public Convenience & Necessity No. SW 1889
NJPDES Permit No. NJ0081361
Container Storage Site
NJSA 13.1E-126
Solid/Hazardous Waste Transporter License (A-901)
ICC Carrier's Certificate
Inermodal Container Facility Permit
(State of New Jersey, Division of Solid Waste Management)
<PAGE>
Schedule 3.15(a)(ii)
Licensed Intellectual Property of Company, Longo, Subsidiaries
None
<PAGE>
Schedule 3.15(a)(iii)
None
<PAGE>
Schedule 3.15(b)
Encumbrances, Claims and Carve-outs from Intellectual Property Representations
None
<PAGE>
Schedule 3.15(c)
Infringements on Intellectual Property
None
<PAGE>
Schedule 3.15(d)
Claims or Notices of Intellectual Property Claims
None
<PAGE>
Schedule 3.15(f)
Knowledge of Company Regarding Use of Similar Trademarks
None
<PAGE>
Schedule 3.16
Carve-outs to Environmental Representations
Declaration of Environmental Restrictions on Newark property dated December 23,
1994 and recorded in the Office of the Clerk of the Circuit Court of Essex
County, New Jersey in Deed Book 5348, page 922.
Matters shown on Phase I Environmental Report for Newark property dated October,
1997
Matters shown on Phase I Environmental Report for Miami property dated January
12, 1995 updated on October 15, 1997
Matters shown on Phase I Environmental Report for Brill Yard leased property
dated October, 1997
Permitting required for purchase of Redland, Florida site
Transportation of source material from Brill Yard, Newark, New Jersey
Matters shown on Phase I Environmental Report dated October, 1997 for Tyler,
Texas property owned by Longo
<PAGE>
Schedule 3.17
Litigation
Foreclosure in case entitled Praxair, Inc. v. Newark Recycling & Composting
Company, Inc., Superior Court of NJ, Chancery Division, Essex County, Docket No.
F-314-97
Complaint Filed 1/7/97
Summons 1/7/97
Acknowledgment 1/28/97
Answer 2/25/97
Summons 4/1/97
Letter from Bruce Boltuch dated September 19, 1997 threatening litigation.
Demand for back taxes payable by American Soil, Inc. referenced in Schedule 3.08
Except as provided for with respect to the Excluded Assets
<PAGE>
Schedule 3.18(a)
Insurance
COMPOST
-------
<TABLE>
<CAPTION>
LIMITS POLICY DEDUCTIBLE
- ------ ------ ----------
<C> <C> <C>
$2,000,000 Aggregate/ Reissuance Corp. of NY
$1,000,000 Per Occurrence No. GLR005398 n/a
Commerical General Liability
$100,000/$500,000 New Jersey Reinsurance Co.
Worker's Compensation n/a
No. G00776-5-96
$150,000 per Item Continental Insurance Co. $1,000
or Occurrence Contractor's Equipment
No. IM0948443
Business Auto ITT Hartford $500
$1,000,000 Business Auto Coverage Form
No. 39 UEC LE 2178
$2,000,000 General Hartford Spectrum $1,000 Per Occurrence
Aggregate Business Insurance Policy
$100,000 limit No. 39 SBA DX3761
$25,000 Commercial Island Marine $1,000
ITT Hartford
Contractor's Equipment
#39 MSC 4V2776
<CAPTION>
LONGO
-----
LIMITS POLICY DEDUCTIBLE
- ------ ------ ----------
<C> <C> <C>
$1,000,000 Automobile (Other than Texas) *
#CA7665102RA (7/1/97-8)
$1,000,000 Automobile (Texas) *
#CA7665103RA (7/1/97-8)
$1,000,000 General Liability (Other than Texas) nil
Occurrence #GL3409003RA (7/1/97-8)
$2,000,000 General Liability (Texas) nil
Aggregate #GL3409004RA (7/1/97-8)
$1,596,000 Property
Values #9CP30002829003 (7/1/97-8) - $1,000 except EDP = $500
$1,000,000 Worker's Compensation n/a
#WC5715405 (4/1/97-8)
</TABLE>
<PAGE>
<TABLE>
<C> <C> <C>
$5,000 Motor Truck Cargo $1,000
#3AE58644602 (3/1/97-8)
$1,000,000 Boiler and Machinery $500
#BM1NY858940910 (11/6/96-7)
$5,000,000 Pollution Legal Liability $50,000
#PLS5292583 (12/13/96-99)
$5,000,000 Per Investment
$10,000,000 Aggregate
$35,000,000 Commercial Umbrella $10,000
N/A New York Disability N/A
(See Attached Contractor's Equipment (See Attached
Schedule) Texas Property (See Attached Schedules) Schedule)
$1,000 all vehicles except tractors (Code 50499), which is $3,000
</TABLE>
<PAGE>
Schedule 3.18(b)
Carve-outs to Insurance Representations
None
<PAGE>
Schedule 3.18(c)
Self-Insured Risks for Past Three Years
Self-insured health insurance coverage with respect to Longo
<PAGE>
Schedule 3.18(d)
Uninsured Material Assets of Company, Longo or Subsidiaries in Past Five Years
None
<PAGE>
Schedule 3.18(e)
Increases in Insurance Premiums, Denials of Coverage
None
<PAGE>
Schedule 3.19(a)
Material Contracts
Over $100,000 for services, personalty, etc.
Management Contracts
Contracts with Contractors
Brokerage and Marketing Agreements
All Longo Material Contracts
COMPOST
See list of Consulting Agreements and Stock Agreements in Schedule 3.03(b)(1)
See list of indebtedness in Schedule 3.09
See equipment leases listed in Schedule 3.14(a)
LONGO
See schedule 4.01 for Longo Material Contracts
<PAGE>
Schedule 3.19(d)
Agreements to Purchase Assets or Properties of Company or Subsidiary
Excluded Assets from Longo Stock Purchase Agreement (see list below)
Equipment Cost Basis
- --------- ----------
Construction Equipment - Exhibit A $2,488,168.79
Vehicles - Exhibit B 359,130.55
Leasehold Improvements - Exhibit C 239,171.16
Office Equipment - Exhibit D 200,042.49
<PAGE>
Schedule 3.21
List of Collective Bargaining Agreements; Material Violations
COMPOST
None
LONGO LABOR-RELATED UNION AGREEMENTS:
Local 945, IB of T, AFL-CIO (NJ)
Agreement Period 4/1/91 - 3/31/97
Status - Active - Currently in Negotiations
International Union of Operating Engineers
AFL-Cio Local 825 (NJ)
Agreement Period 4/1/94 - 3/31/01
Status - Active
International Union Of Operating Engineers
A.F. of L. - C.I.O.
Local 542 - (PA)
Agreement Period 3/1/95-4/7/99
Status-Active
Heavy & General Local 472 and 172 (NJ) Agreement Period 3/1/92 - 2/28/95 Status
- - No Signed Agreement - 2 Active Employees
International Brotherhood of Teamsters Local Union No. 42
Agreement Period 5/1/96 - 4/30/99
Chauffeurs Warehouse Men & Helpers of America
Local Union #42 (MA)
Status - In Effect - No Current Employees
LABOR DISPUTES PENDING:
R.J. Longo Construction Co., Inc. d/b/a EPIC and Teamsters
Local 42, Grievance filed by William Barry
None for Company or Subsidiaries
<PAGE>
Schedule 3.22(a)
Carve-outs to Tax Representations
American Soil
941 Payroll taxes (See Attached Documentation)
Compost America Holding of New Jersey, Ltd.
Levy placed on old checking acct. in the amount of $1,996.76 with interest for a
total amount of $2,122.55
<PAGE>
Schedule 3.22(b)
341(f) Consents
Excess Parachute Payments
Holding Company Representations
Foreign Corporation Rights
Other Tax Carve-outs to Representations
None
<PAGE>
Schedule 3.22(c)
List of Tax Returns Filed for Company, Longo and all Subsidiaries since 4/30/95
See attached Schedule
<PAGE>
Schedule 3.22(d)
Amounts and Expiration Dates of NOLs, Net Capital Losses,
Unused Business Credits, ETCs
See attached Schedule
<PAGE>
Schedule 3.22(e)
Reserves and Allowances not Provided for in Interim Financial Statements
Potential contingent liability for taxes related to acquisition of RC Land
Company, Inc.
<PAGE>
Schedule 4.01
Material Contracts of Longo
Schedule 4.01
Material Contracts and Agreements of Longo
4.01(c)(i): Purchase Contracts and Agreements
1. Agreement between Local 542-C International Union of Operating Engineers,
A.F. of L. -C.I.O. and Longo EPIC dated March 1, 1995.
2. Agreement between EPIC , R.J. Longo Construction, Inc. and Virotech
Systems, Inc. and Local 945, I. B. of %., AFL-CIO dated April 1, 1991 as
amended April 1, 1994.
3. Shop Agreement between R. J. Longo Construction, Inc. t/a EPIC and
International Union of Operating Engineers, AFL-CIO Local Union No. 825
dated April 1, 1997 and Expires March 31, 2001.
4. Truck Lease and Service Agreement between R.J. Longo Construction Co.,
Inc. d/b/a EPIC dated February 14, 1995.
5. Lease Agreement dated February 25, 1991 between R.J. Longo Construction
Co., Inc. and Consolidated Rail Corporation for real property known as
Brill's Yard, Newark, New Jersey as amended January 30, 1995, February 16,
1995, August 23, 1995, November 1, 1995 and July 30, 1996.
6. Chemical Waste Transportation Contract between Consolidated Rail
Corporation and Union Pacific Railroad Company and EPIC No. CR-X-02094
dated September 17, 1996 (this contract may have expired).
7. Chemical Waste Transportation Contract between Consolidated Rail
Corporation and Norfolk Southern Railway Company and Consolidated
Subsidiaries and EPIC No. CR-X-02175 dated March 31, 1997
8. Environmental Services Agreement dated January 18, 1995 between R.J. Longo
Construction Co., Inc. d/b/a Environmental Protection & Improvement
Company and Geological Reclamation Operations and Waste Systems, Inc.
<PAGE>
4.01(c)(ii): Contracts and Agreements for Sale
1. Agreement with Bergen County Utilities Authority and R. J. Longo
Construction Co., Inc. d/b/a EPIC dated January 19, 1995
2. New York City Contract for Biosolids Management Services dated September
9, 1997 for land application of biosolids (already provided)
3. Letter Agreement with SpectraServ dated July 26, 1996 for transportation
of sludge
4. Contract with IEM/Sealand for transportation of low-level radioactive
soils from Brill's Yard, Newark, New Jersey
5. Subcontract with Sevenson Environmental Services, Inc. dated February 22,
1996 for transportation of soils from Brill's Yard, Newark, New Jersey
6. Rail car Equipment Agreement Lease with USPCI/Laidlaw dated April 1, 1997
for rail cars and containers
<PAGE>
4.01(c)(iii): Contracts and Agreements with Brokers, etc.
1. Contract with Quirk Carson Peppet, Inc. for financial advisory services
dated February 21, 1997 as amended February 28, 1997
<PAGE>
4.01(c)(iv): Management Contracts
Employment Agreements with Robert J. Longo, Jay Waxenbaum and Kevin K. Walsh
referred to in Schedule 3.03(b)(1)
<PAGE>
4.01(c)(v): Indebtedness of Longo (current as of 10/23/97)
1. Note payable to U.S. Bancorp in the original principal amount of
$5,500,000.00 dated May 31, 1996
2. Note payable to TFC Textron in the original principal amount of
$1,091,839.80 dated March 28, 1996
3. Note payable to TFC Textron in the original principal amount of
$1,489,789.20 dated May 3, 1996
4. Note payable to TFC Textron in the original principal amount of
$327,981.00 dated May 14, 1996
5. Note payable to The CIT Group in the original principal amount of
$335,439.44 dated March 6, 1996
6. $1,000 Toll Bond payable to the New York State Thruway Authority dated
August 13, 1996
7. $1,000 Toll Bond payable to the Massachussetts Turnpike Authority dated
July 10, 1996
8. $5,000 Toll Bond payable to the Maine Turnpike Authority dated September
20, 1995
9. $32,000 Toll Bond payable to the New Jersey State Turnpike Authority dated
March 6, 1995
10. $5,000,000 Performance Bond payable to the Bergen County Utilities
Authority dated January 26, 1995
11. $15,000 Permit Bond payable to the State of Texas dated August 11, 1992
12. $1,000 Permit Bond payable to the Texas Highway Authority dated September
1, 1991
13. $1,000,000 Performance Bond payable to the City of New York.
<PAGE>
4.01(c)(vi): Government Contracts
1. Contract No. 94-39 with Bergen County Utilities Authority dated January
19, 1995
2. Contract with New York City for Biosolids Management Services.
3. Contract with Camden County Municipal Utilities Authority dated January
13, 1997 approving final Settlement Agreement
<PAGE>
4.01(c)(vii): Agreements Not to Compete
None
<PAGE>
4.01(c)(viii): Agreements Between Longo, EPIC, Robert Longo and Trust
1. R. J. Longo Employment Agreement referred to in Schedule 3.03(b)(1)
2. Earn Out Agreement between Robert J. Longo and the Company [dated as of
the Closing Date] regarding Hempstead Contract.
3. Earn Out Agreement between Robert J. Longo and the Company regarding the
New York City Municipal Solid Waste Contract (pending)
<PAGE>
4.01(c)(ix): Agreements between Longo, Robert Longo, EPIC and Trust
Same as 4.01(c)(viii)
<PAGE>
4.01(c)(x): Other Material Contracts and Permits
1. NJDEP Intermodal Container Facility Permit Reg. No. 17244
2. USDOT Solid Waste Transportation License No. 568451
3. USEPA Permit, No. NJD986647501
4. NJBPU Certificate of Public Convenience and Necessity No. SW1889
5. NJPDES Permit No. NJ0081361 for container storage site
6. Solid/Hazardous Waste Transportation License A-901 pursuant to N.J.S.A.
13.1E-126
7. ICC Carrier's Certificate No. MC281734
8. Intermodal Container Facility Permit from State of New Jersey Division of
Solid Waste Management
<PAGE>
Schedule 4.02
List of Longo Equipment
See attached Schedule 3.10(b) from Longo Stock Purchase Agreement
<PAGE>
Schedule 4.04
List of Longo Licenses and Permits
See list of permits in Schedule 4.01(c)(x)
<PAGE>
Exhibit H
Longo Agreements
<PAGE>
Exhibit C
Registration Rights Agreement
<PAGE>
Exhibit G
Certificate of Purchaser
<PAGE>
Exhibit 3.1
Federal Employer Identification No. 22-2603175
Certificate of Amendment to the
Certificate of Incorporation
of
COMPOST AMERICA HOLDING COMPANY, INC.
Pursuant to the provisions of Section 14A: 9-2(4) and Section 14A:9-4(3),
Corporations, General, of the New Jersey Statutes, the undersigned corporation
executes the following Certificate of Amendment to its Certificate of
Incorporation:
1. The name of the corporation is COMPOST AMERICA HOLDING COMPANY, INC.
2. The following amendment to the Certificate of Incorporation was
approved by the board of directors and thereafter duly adopted by
the shareholders of the corporation on the 30th day of October,
1997.
RESOLVED, that Article FIFTH of the Certificate of Incorporation be
amended to read as follows:
The number of directors of the corporation and the length of the
term of each such director shall be as set forth in the By-Laws of
the corporation.
3. The number of shares outstanding at the time of the adoption of the
amendment was 20,487,563. The total number of shares entitled to
vote thereon was 19,828,777.
4. The number of shares voting for and against such amendment is as
follows:
Number of Shares Number of Shares
Voting For Amendment Voting Against Amendment
-------------------- ------------------------
12,467,150 - 0 -
COMPOST AMERICA HOLDING COMPANY, INC.
By /s/ Roger E. Tuttle
------------------------------------
Roger E. Tuttle, President
Dated this 30th day of October, 1997.
<PAGE>
Exhibit 3.2
BY-LAWS
of
COMPOST AMERICA HOLDING COMPANY, INC.
(As amended October 30, 1997)
- --------------------------------------------------------------------------------
Section 1. Annual Meeting of Shareholders. The annual meeting of shareholders
shall be held at 10:00 a.m. on October 1 of each year upon not less than 10 nor
more than 60 days written notice of the time, place and purposes of the meeting
at the principal office of the Corporation (or at such time and place as shall
be specified in the notice of the meeting) in order to elect directors of the
Corporation and transact such other business as shall come before the meeting.
If that date is a legal holiday or falls upon the weekend, the meeting shall be
held at the same hour on the next succeeding business day.
Section 2. Special Meeting of Shareholders. Special meetings of shareholders may
be called for any reason by the President or a majority of the Board. Special
meetings shall be held at such place and time as shall be specified in the
notice of meeting which shall be forwarded to all shareholders not less than 10
nor more than 60 days prior to the meeting date.
Section 3. Action without Shareholders Meeting. Meetings of the shareholders may
be dispensed with, and any action requiring shareholder approval accomplished,
by the execution of a written consent in lieu of such meeting signed by all
shareholders who have been entitled to vote upon such action if the meeting had
been held.
Section 4. Board of Directors; Regular Meeting. The number of Directors shall be
not more than fifteen (15) nor less than three (3). A regular meeting of the
Board of Directors for the election of officers and such other business as may
come before the meeting shall be heard without notice immediately following the
annual shareholders meeting and at such place. The Board may provide for
additional meetings, without notice, as called by the President or approved by
resolution adopted at any meeting of the Board.
Section 5. Special Meeting of the Board. Special meetings of the Board may be
called, for any reason, by the President or a majority of the Board. Such
meetings shall be held upon two days notice given personally or by telephone.
Such notice shall specify the time and place of the meeting.
Section 6. Action Without a Meeting. The Board may act without a meeting if,
prior to or subsequent to such action, each member of the Board shall consent in
writing to such action.. Such written consent shall be filed with the minutes of
the Corporation.
Section 7. Quorum of Board of Directors. A majority of the Board of Directors,
which shall include the Corporation's President, shall constitute a quorum.
<PAGE>
Section 8. Vacancies in the Board of Directors. Any vacancy shall be filled by a
majority vote of the Directors.
Section 9. Waiver of Notice. Any notice required by these By-Laws, the
Certificate of Incorporation, or by the New Jersey Business Corporation Act or
any other such legislation or laws, may be waived by a writing signed by the
person(s) entitled to such notice either by or after the time state therein. Any
Director or Shareholder attending a meeting without protest, prior to its
conclusion, shall be deemed to have waived any protest for or about such lack of
notice.
Section 10. Officers. At its regular meeting following the annual meeting of
Shareholders, the Board shall elect a Chairman, a President, a Treasurer, a
Secretary and such other officers as it shall deem necessary. One person may
hold two or more positions. The Chairman and the President shall be Directors
but other officers need not be Directors.
Section 11. Duties and Authority of Chairman of the Board. The Chairman of the
Board shall chair all meetings of the Board of Directors and Shareholders. The
Chairman shall carry out the additional responsibilities which are specially
assigned to the Chairman by the Board of Directors and shall have such other
powers as are usually incident to the position as authorized or required by law.
Section 12. Duties and Authority of President. The President shall be the
executive officer of the Corporation. That person shall have general charge and
supervision over and responsibility for the business and affairs of the
Corporation. Unless otherwise directed by the Board, all other officers, except
the Chairman of the Board, shall be subject to the authority and supervision of
the President. The President may enter into and execute in the name of the
Corporation contracts or other instruments in the regular course of business, or
contracts or other instruments not in the regular course of business which are
authorized, either generally or specifically by the Board. The President shall
have the general powers and duties of management usually vested in the office of
a President of a Corporation.
Section 13. Duties and Authority of Treasurer. The Treasurer shall have the
custody of funds and securities of the Corporation and shall keep or cause to be
kept regular books of account for the Corporation. The Treasurer shall perform
such other duties and possess such other powers as are incident to the office or
as shall be assigned by the President or the Board.
Section 14. Duties and Authority of Secretary. The Secretary shall cause notices
of all meetings to be served as prescribed in these By-Laws and shall keep or
cause to be kept the minutes of all meetings of the shareholders and the Board.
The Secretary shall have charge of the seal of the Corporation, co-sign all
contracts or other instruments binding the Corporation as witness, co-sign all
checks in excess of $5,000.00, and perform such other duties as are incident to
the office or assigned by the President or the Board.
<PAGE>
Section 15. Amendments to By-Laws. These By-Laws may be altered, amended or
repealed by the Shareholders or the Board. Any By-Laws adopted, altered, amended
or repealed by the Shareholders may be amended by the Board, unless the
resolution of the Shareholders adopting such By-Laws expressly reserves the
right to amend or repeal it to the Shareholders.
Section 16. Fiscal Year. The Fiscal Year of the Corporation shall be the
calendar year.
Section 17. Force and Effect of By-Laws. These By-Laws are subject to the
provisions of the New Jersey Business Corporation Act, as amended from time to
time, and the Corporation's Certificate of Incorporation, as it may also be
amended. If any provision in these By-Laws is inconsistent with a provision of
the Act or the Certificate of Incorporation, the provision of the Act or
Certificate of Incorporation shall govern to the extent of such inconsistency.
<PAGE>
Exhibit 4.1
CERTIFICATE OF DESIGNATIONS OF RIGHTS AND PREFERENCES
OF
SERIES A EXCHANGEABLE REDEEMABLE PREFERRED STOCK
(No Par Value Per Share)
OF
COMPOST AMERICA HOLDING COMPANY, INC.
New Jersey Business Corporation Act
Roger E. Tuttle hereby certifies that he is the Chairman of the Board,
President, Chief Executive Officer and Treasurer, of Compost America Holding
Company, Inc. (the "Company"), a corporation organized and existing under the
New Jersey Business Corporation Act, as amended, and further certify:
That pursuant to the authority conferred upon the Board of Directors by
the Certificate of Incorporation of the Company, as amended (the "Certificate of
Incorporation"), the Board of Directors of the Company (the "Board of
Directors") on October 30, 1997, adopted the following resolutions creating a
series of shares of Series A Exchangeable Redeemable Preferred Stock, no par
value per share.
RESOLVED, that pursuant to the authority expressly granted to and vested
in the Board of Directors by the provisions of the Certificate of Incorporation,
as amended, and the New Jersey Business Corporation Act, as amended, the Company
is authorized to issue an aggregate of 25,000,000 shares of the Company's
preferred stock, no par value per share (the "Preferred Stock"), in such series
and with such rights, designations, and privileges as the Board of Directors of
the Corporation may, from time to time determine; and
FURTHER, RESOLVED, that the Board of Directors be and the same hereby is
authorized, and the Board of Directors hereby fixes the voting powers,
designations, preferences, limitations, restrictions and relative rights, and
the qualifications limitations and restrictions of such rights, of the shares of
such series of Preferred Stock (in addition to the voting powers, designations,
preferences, limitations, restrictions and relative rights, and the
qualifications, limitations and restrictions of such rights, set forth in the
Certificate of Incorporation that may be applicable to the Preferred Stock) as
follows:
1. Designation and Rank. The designation of such series of the Preferred Stock
shall be the Series A Exchangeable Redeemable Preferred Stock, no par value per
share (the "Series A Preferred Stock"). The maximum number of shares of Series A
Preferred Stock (the "Shares") shall be One Hundred Sixty Nine Thousand. The
Series A Preferred Stock shall rank (i) prior to the common stock, no par value
per share, of the Company (the "Common Stock"), (ii) on a
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parity with all shares of the Company's Series C Convertible Redeemable
Preferred Stock (the "Series C Preferred Stock"); (iii) subordinate and junior
to all indebtedness of the Company now or hereafter existing, and (iv) prior to
the Series B Preferred Stock as to liquidation and other payment rights as
provided in Section 4(d) and to any other class or series of capital stock of
the Company hereafter created (unless it specifically, by its terms, ranks on a
parity with the Series A Preferred Stock) (each such junior class or series of
capital stock and the Common Stock being hereinafter referred to as the "Junior
Stock"), in each case as to dividends and distributions of assets upon
liquidation, dissolution or winding up of the Company, whether voluntary or
involuntary.
2. Cumulative Dividends; Priority.
(a) The holders of record of shares of Series A Preferred Stock are
entitled to a cumulative noncompounded dividend equal to 8% per annum, payable
when and if declared by the Company's Board of Directors, and upon any exchange
or redemption of the Series A Preferred Stock. Dividends shall be payable
semi-annually by the Company, on June 30th and December 31st of each year.
Through November 3, 1999, dividends on the Series A Preferred Stock may be paid
either in cash or, at the election of the Company, by delivery of additional
shares of Common Stock having an aggregate "Market Value" (as hereinafter
defined) equal to the amount of such dividend, or in any combination of cash and
shares of Common Stock. For purposes of dividend payments, each share of Common
Stock will be deemed to have a "Market Value" equal to ninety percent (90%) of
the "Average Share Price" as defined in Section 5(a) for the ten (10)
consecutive trading days preceding the dividend payment date. After November 3,
1999, all dividends on the Series A Preferred Stock must be paid in cash.
Dividends on shares of the Series A Preferred Stock will be cumulative on a
daily basis from the date of initial issuance of such shares of Series A
Preferred Stock. Dividends will be payable, in arrears, to holders of record as
they appear on the stock books of the Company on such record dates, not more
than 60 days nor less than 10 days preceding the payment dates thereof, as shall
be fixed by the Board of Directors. The amount of dividends payable for each
full dividend period shall be computed by dividing the annual dividend payment
by two. The amount of dividends payable for the initial dividend period or any
period shorter or longer than a full dividend period shall be calculated on the
basis of a 360-day year of twelve 30-day months. No dividends may be declared or
paid or set apart for payment on any parity stock with regard to the payment of
dividends unless there shall also be or have been declared and paid or set apart
for payment on the Series A Preferred Stock, like dividends for all dividend
payment periods of the Series A Preferred Stock ending on or before the dividend
payment date of such parity stock, ratably in proportion to the respective
amounts of dividends (x) accumulated and unpaid or payable on such parity stock,
on the one hand, and (y) accumulated and unpaid through the dividend payment
period or periods of Series A Preferred Stock next preceding such dividend
payment date, on the other hand.
Except as set forth in the preceding sentence, unless full cumulative
dividends on the Series A Preferred Stock have been paid, no dividends (other
than in Common Stock of the Company) may be paid or declared or set aside for
payment or other distribution made upon the Common Stock or any other Junior
Stock of the Company or on a parity with the Series A
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Preferred Stock as to dividends, nor may any Common Stock or any other Junior
Stock or parity stock of the Company be redeemed, purchased or otherwise
acquired for any consideration (or any payment be made to or available for a
sinking fund for the redemption of any shares of such stock); provided that any
such Junior Stock or parity stock may be converted into or exchanged for stock
of the Company ranking junior to the Series A Preferred Stock as to dividends.
3. Voting Rights.
(a) The Series A Preferred Stock shall have the following class voting
rights. So long as any shares of the Series A Preferred Stock remain
outstanding, the Company shall not, without the affirmative vote or consent of
the holders of at least a sixty-six and 2/3 (66-2/3%) percent of the shares of
the Series A Preferred Stock outstanding at the time, given in person or by
proxy, either in writing or at a meeting, in which the holders of the Series A
Preferred Stock vote separately as a class: (i) authorize, create or issue
(other than the Series C Preferred Stock outstanding on November 3, 1997), or
increase the authorized or issued amount of any class or series of stock ranking
prior to or on a parity with the Series A Preferred Stock, with respect to
payment of dividends or the distribution of assets on liquidation, dissolution
or winding up; (ii) amend, alter or repeal the provisions of the Series A
Preferred Stock, whether by merger, consolidation or otherwise, so as to affect
materially and adversely any right, preference, privilege or voting power of the
Series A Preferred Stock; provided, however, that any creation and issuance of
other series of Junior Stock shall not be deemed to materially and adversely
affect such rights, preferences, privileges or voting powers; (iii) repurchase,
or pay cash dividends on, shares of the Company's Junior Stock; provided, that
dividends may be paid on Junior Stock so long as at the time of such payment (A)
all dividends on the Series A Preferred Stock shall have been paid in full, and
(B) if dividends on Junior Stock are payable in cash, all dividends on the
Series A Preferred Stock thereafter paid shall similarly be paid in cash, or
(iv) amend the Certificate of Incorporation or By-Laws of the Company so as to
affect materially and adversely any right, preference, privilege or voting power
of the Series A Preferred Stock; provided, however, that any creation and
issuance of other series of Junior Stock shall not be deemed to materially and
adversely affect such rights, preferences, privileges or voting powers.
(b) Except as provided above and except as otherwise required by New
Jersey law, the Series A Preferred Stock shall have no voting rights.
4. Liquidation Preference.
(a) In the event of the liquidation, dissolution or winding up of the
affairs of the Company, whether voluntary or involuntary, after payment or
provision for payment of the debts and other liabilities of the Company, the
holders of shares of the Series A Preferred Stock then outstanding, pari passu
with the holders of shares of the Series C Preferred Stock, shall be entitled to
receive, out of the assets of the Company whether such assets are capital or
surplus of any nature, before any distribution shall be made to the holders of
the Common Stock or any other Junior Stock, an amount (the "Liquidation
Preference") per share equal to $100 per share of the Series A Preferred Stock,
plus cumulative and unpaid dividends at the rate of 8% per annum, through the
date of liquidation, dissolution or winding up, whether or not declared, and no
more,
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before any payment shall be made or any assets distributed to the holders of the
Common Stock or any other Junior Stock. If the assets of the Company are not
sufficient to pay in full the liquidation payment payable to the holders of
outstanding shares of the Series A Preferred Stock and any series of preferred
stock or any other class of stock on a parity, as to rights on liquidation,
dissolution or winding up, with the Series A Preferred Stock (the "Parity
Securities"), provided that the holders of a majority of the shares of Series A
Preferred Stock approve such Parity Securities (other than the shares of Series
C Preferred Stock outstanding on November 3, 1997) in accordance with Section
3(a) hereof, then the holders of outstanding shares of the Series A Preferred
Stock are entitled to be paid on a pro-rata basis together with the other Parity
Securities, based on the relative liquidation value of shares of Series A
Preferred Stock and the Parity Securities. The liquidation payment with respect
to each outstanding fractional share of Series A Preferred Stock shall be equal
to a ratably proportionate amount of the liquidation payment with respect to
each outstanding share of Series A Preferred Stock. All payments for which this
Section 4(a) provides shall be in cash, property (valued at its fair market
value as determined by an independent nationally recognized investment banking
firm) or a combination thereof; provided, however, that no cash shall be paid to
holders of Junior Stock unless each holder of the outstanding shares of Series A
Preferred Stock and each holder of Parity Securities has been paid in cash the
full amount of the Liquidation Preference to which such holder is entitled as
provided herein. After payment of the full amount of the Liquidation Preference
to which each holder is entitled, such holders of shares of Series A Preferred
Stock will not be entitled to any further participation as such in any
distribution of the assets of the Company.
(b) A consolidation or merger of the Company with or into any other
corporation or corporations, or a sale of all or substantially all of the assets
of the Company, shall not be deemed to be a liquidation, dissolution, or winding
up within the meaning of this Section 4.
(c) Written notice of any voluntary or involuntary liquidation,
dissolution or winding up of the affairs of the Company, stating a payment date
and the place where the distributable amounts shall be payable, shall be given
by mail, postage prepaid, no less than 30 days prior to the payment date stated
therein, to the holders of record of the Series A Preferred Stock at their
respective addresses as the same shall appear on the books of the Company.
(d) Together with the Series C Preferred Stock of the Company issued of
even date herewith, the liquidation preference set forth in this Paragraph 4,
and all other payment rights hereunder, shall be senior and prior in all events
to any other preferred stock now or hereafter issued by the Company, including
without limitation, the Series B Preferred Stock of the Company.
5. Miscellaneous.
(a) Average Share Price. As used herein, the term "Average Share Price"
shall mean the average of the last sale price per share of the Company's shares
of Common Stock as reported by Bloomberg, L.P. ("Bloomberg"), on any one of the
following securities markets on which such Common Stock shall then be quoted;
namely, (a) the AMEX, (b) the NASDAQ National Market System ("NASDAQ NMS"), (c)
the NASDAQ System (other than the NASDAQ NMS), (d) the
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New York Stock Exchange, or (e) the National Quotation Bureau, Inc. for quotes
on the Electronic Bulletin or the "Pink Sheets", as the case may be, for the
applicable number of consecutive trading days immediately preceding the dividend
payment date.
(b) No Impairment. The Company shall not, by amendment of its Certificate
of Incorporation or through any reorganization, transfer of assets,
consolidation, merger, dissolution, issue or sale of securities or any other
voluntary action, avoid or seek to avoid the observance or performance of any of
the terms to be observed or performed hereunder by the Company.
(c) Notices. All notices and other communications hereunder shall be in
writing and shall be deemed given (i) on the same date, if delivered personally
or by facsimile by not later than 5:00 p.m. New York time (provided, that a copy
of such facsimile shall be simultaneously sent to Compost America Holding
Company, Inc. at 320 Grand Avenue, Englewood, New Jersey 07631), or (ii) three
business days following being mailed by certified or registered mail, postage
prepaid, return-receipt requested, addressed to the holder of record at its
address appearing on the books of the Company.
6. Redemptions.
(a) Voluntary Redemption. Subject to the right of the holders of Series A
Preferred Stock to effect an exchange of their shares of Series A Preferred
Stock at any time prior to 5:00 p.m. New York City time on the date fixed for
redemption and subject to compliance with the provisions of this Section 6(a),
the Company shall have the right, exercisable at any time on not more than sixty
(60) days and not less than fifteen (15) days prior written notice to the
holders of Series A Preferred Stock (the "Voluntary Redemption Notice"), to
redeem all or any portion of the Shares of Series A Preferred Stock at a
redemption price for each Share of Series A Preferred Stock to be redeemed (the
"Voluntary Redemption Price") which shall equal to the sum of (i) $100 per
Share, and (ii) all accrued dividends on such Share to the date fixed for
redemption (the "Voluntary Redemption Date"). If the Company redeems less than
all of the outstanding shares of Series A Preferred Stock on any Voluntary
Redemption Date, such redemption shall be effected on a pro-rata basis among the
holders of record.
(b) Mandatory Redemption. On November 3, 2004 (the "Mandatory Redemption
Date"), the Company shall redeem all of the Shares of Series A Preferred Stock
then outstanding at a redemption price for each Share of Series A Preferred
Stock to be redeemed (the "Mandatory Redemption Price") equal to the sum of (i)
$100 per Share, and (ii) all accrued dividends on such Share to the Mandatory
Redemption Date.
(c) Method of Payment. The Company shall pay an aggregate amount for all
Shares of Series A Preferred Stock to be redeemed hereunder (the "Redemption
Payment"), calculated by multiplying the number of Shares so redeemed by the
applicable Voluntary Redemption Price or Mandatory Redemption Price, as the case
may be, on the Voluntary Redemption Date or Mandatory Redemption Date, as
applicable, by payment of the Voluntary Redemption Price or the Mandatory
Redemption Price, as applicable, by bank cashiers' or certified check payable to
the applicable holders of the Series A Preferred Stock or wire transfer of
immediately available funds
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to accounts designated in writing by such holders received by the Company at
least five (5) business days prior thereto. In the event that, for any reason,
the full applicable Redemption Payment is not timely made pursuant to this
Section 6(c), such defaulted Redemption Payment shall thereafter bear default
interest at the rate of 15% per annum until paid in full.
(d) Delivery of Series A Preferred Stock. The holders of Series A
Preferred Stock whose Shares are to be redeemed pursuant to this Section 6 shall
deliver to the Company, against receipt of the applicable Voluntary Redemption
Payment or Mandatory Redemption Payment, all of their Shares of Series A
Preferred Stock to be redeemed, duly endorsed in blank for transfer or
accompanied by a duly executed stock power with the signature of the record
owner guaranteed by a bank or member firm of the New York Stock Exchange.
7. No Preemptive Rights. Except as provided in Sections 8 and 9 hereof, no
holder of the Series A Preferred Stock shall be entitled as of right to
subscribe for, purchase or receive any part of any new or additional shares of
any class, whether now or hereafter authorized, or any bonds or debentures, or
other evidences of indebtedness convertible into or exchangeable for shares of
any class, but all such new or additional shares of any class or bonds or
debentures, or other evidences of indebtedness convertible into or exchangeable
for shares may be issued and disposed of by the Board of Directors on such terms
and for such consideration (to the extent permitted by law), and to such person
or persons as the Board of Directors in its absolute discretion may deem
advisable.
8. Exchange for Senior Subordinated Notes. At any time after November 3, 2000,
the Series A Preferred Stock will be exchangeable for 9% Senior Subordinated
Notes of the Company due November 3, 2004, at the rate of $100 principal amount
of such notes for each share of Series A Preferred Stock. The exchanging holder
shall furnish to the Company irrevocable written notice of such exchange,
together with the certificates evidencing the shares of Series A Preferred Stock
to be exchanged, duly endorsed in blank for transfer or accompanied by a duly
executed stock power, with the signature of the record holder guaranteed by a
bank or a member of the firm of the New York Stock Exchange.
9. Exchange for Longo Common Stock. (a) Notwithstanding any other provision of
this Certificate of Designations, if at any time when shares of Series A
Preferred Stock remain issued and outstanding, the Company shall be in default
in the observance of any covenant or in the making of any payment when due,
whether of principal, interest, premium, or otherwise, with respect to any
secured or unsecured debt (contingent or otherwise) for an obligation in excess
of $100,000, then, at their option, the holders of Series A Preferred Stock
shall have the right to exchange all of its shares of Series A Preferred Stock
for all shares of common stock ("Longo Common Stock") of R.J. Longo Construction
Co., Inc., a New Jersey corporation ("Longo"), outstanding at such time. In
addition, and whether or not the Company shall be in default as aforesaid at the
time, at their option, the holders of Series A Preferred Stock shall have the
same right as aforesaid, on the same basis and at the same exchange rate, to
exchange shares of Series A Preferred Stock for Longo Common Stock during each
of the following time periods:
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(1) From November 1, 1999 through October 31, 2000, but only if Series C
Preferred Stock is then outstanding.
(2) From October 1, 1998 through September 30, 1999; provided, however,
that the option granted by this subparagraph shall be null and void if (i) prior
to March 31, 1998, there is delivered by bond counsel satisfactory to the
Company and Holders an opinion to the effect that the Supply and Service
Agreement between the City of New York Department of Environmental Protection
and R.J. Longo Construction Company, Inc. d/b/a EPIC (the "New York Contract")
is a valid and binding obligation of the City of New York enforceable in
accordance with its terms, or (ii) the financial closing for the Company's
recycling and composting project in Newark, New Jersey (the "Newark Project")
occurs prior to October 1, 1998 on terms no less favorable than financial
results contained in the Paine Webber report for the Newark Project as presented
in the Compost America Holding Company, Inc. Projected Consolidated Financial
Statements, Seven Year Forecast, 1997 to 2003, rev. 8/05/97, or (iii) prior to
June 20, 1998, the Company has entered into supply contracts that in the
aggregate achieve the financial results for the Newark Project contained in said
Paine Webber report;
provided, however, that as conditions of the exercise of the foregoing exchange
rights, (i) all holders of the Company's Series C Preferred Stock shall tender
such Series C Preferred Stock to Common Stock held by Longo and by Wasteco
Ventures Limited on the date of issuance of the Series A Preferred Stock, being
14,937,791 shares of the Company's Common Stock. The Longo Common Stock is
currently limited to 200 shares with no rights and no other Longo Common Stock
will be issued prior to the exercise of the foregoing option. If the Series C
Preferred Stock has been redeemed in whole or in part at the time of exercise of
this right, in lieu of a surrender of such Series C Preferred Stock, the Holders
shall acquire 66-2/3% of the Common Stock of EPIC rather than 100% thereof.
(b) No payment or adjustment shall be made on account of any dividends on
Longo Common Stock delivered upon such exchange.
(c) To exchange shares of Series A Preferred Stock, a holder must follow
the procedures described in Section 5 of the Certificate of Designations of
Rights and Preferences for the Series C Preferred Stock (the "Series C Preferred
Certificate") for conversions to the extent such procedures are equally
applicable, and the mechanical provisions in Section 5 of the Series C Preferred
Certificate for conversions shall apply mutatis mutandis to exchanges to the
extent they are apt and are not superseded by provisions of this Section 9.
(d) So long as the possibility exists of exchanging Series A Preferred
Stock for Longo Common Stock (or reclassifications thereof), the Company shall
at all times keep available free for issue the full number of shares of Longo
Common Stock (or reclassifications thereof) then exchangeable for all shares of
Series A Preferred Stock then outstanding.
(e) In order to fully preserve the exchange rights of the Series A
Preferred Stock, other than ordinary periodic cash dividends, without the
affirmative vote or consent of at least 66 2/3% of the shares of Series A
Preferred Stock outstanding at the time, voting separately as a
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class, the Company will not permit the payment of dividends on the Longo Common
Stock, will not permit the issuance of additional shares of Longo Common Stock
or securities convertible into or exchangeable for shares of Longo Common Stock
or permit the consolidation, merger or transfer of substantial assets of Longo.
10. Change in Control.
(a) Upon the occurrence of a "Change in Control", each holder of Series A
Preferred Stock shall have the right to require the redemption of its Series A
Preferred Stock by the Company in cash, pursuant to the offer described below
(the "Change in Control Offer") at a price equal to 101% of the par value per
share plus a sum equal to all dividends accrued and unpaid thereon (if any) to
the related Change in Control Redemption Date. A "Change in Control" shall mean
(i) a merger, consolidation or reorganization of the Company, if, after giving
effect thereto, the holders of the Common Stock prior to such transactions shall
fail to own at least 51% of the capital stock entitled to vote for the election
of directors in the successor entity, (ii) the sale of a majority or more of the
assets of the Company in any single transaction or in any series of related
transactions, or (iii) a change in the composition of the Board of Directors of
the Company such that during any period of two consecutive years the individuals
who at the beginning of such period were directors of the Company shall cease
for any reason to constitute a majority of the directors then in office (and not
designated to the Board by any holder of Preferred Stock) unless the individuals
replacing such directors were elected or nominated by the Board of Directors of
the Company.
(b) Within 30 days of any Change in Control the Company shall mail a
notice (the "Change in Control Notice") to each holder of record of the Series A
Preferred Stock stating:
(i) that a Change in Control has occurred, that the Change in
Control Offering is being made pursuant to the terms of the Series A
Preferred Stock and that all shares of Series A Preferred Stock validly
tendered will be accepted for redemption;
(ii) the redemption price and the date of redemption (which shall be
a business day no earlier than 30 days nor later than 60 days from the
date such notice is mailed) (the "Change in Control Redemption Date");
(iii) that any shares of Series A Preferred Stock not tendered will
continue to accumulate dividends;
(iv) that, unless the Company defaults in the payment of the Change
in Control redemption price, any shares of Series A Preferred Stock
accepted for redemption pursuant to the Change in Control Offer shall
cease to accumulate dividends after the Change in Control Redemption Date;
(v) that holders of Series A Preferred Stock electing to have any
shares of Series A Preferred Stock redeemed pursuant to the Change in
Control Offer will be required to surrender the certificates representing
such shares of Series A Preferred Stock
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to the transfer agent for the Series A Preferred Stock at the address
specified in the notice prior to 1:00 P.M., New York City time, on the
business day immediately preceding the Change in Control Redemption Date;
and
(vi) that holders whose shares of Series A Preferred Stock are being
redeemed only in part will be issued new certificates representing shares
of Series A Preferred Stock equal in number to the unredeemed portion of
the shares of Series A Preferred Stock surrendered; provided that each
certificate representing shares of Series A Preferred Stock redeemed and
each new certificate representing shares of Series A Preferred Stock
issued shall be in whole shares.
(c) On or about the Change in Control Redemption Date:
(i) the transfer agent for the Series A Preferred Stock shall
deliver to the Corporation a certificate specifying the aggregate number
of shares of Series A Preferred Stock delivered for purchase by the
holders of Series A Preferred Stock prior to the Change in Control
Redemption Date pursuant to the Change in Control Offer;
(ii) The Company shall accept for redemption shares of Series A
Preferred Stock or portions thereof so accepted; and
(iii) The Company shall deposit with the transfer agent for the
Series A Preferred Stock money sufficient to Pay the Change in Control
redemption price of all shares of Series A Preferred Stock or portions thereof
accepted for payment by the Company.
(iv) The Company shall deliver, or cause to be delivered, to the
transfer agent for the Series A Preferred Stock an officers' certificate
specifying the shares of Series A Preferred Stock or portions thereof accepted
for payment by the Company.
(d) The transfer agent for the Series A Preferred Stock shall promptly
mail to the holders of Series A Preferred Stock so accepted payment in an amount
equal to the Change in Control redemption price, and the transfer agent for the
Series A Preferred Stock shall promptly authenticate and mail to such holders of
Series A Preferred Stock a new certificate representing shares of Series A
Preferred Stock equal in number to any unredeemed shares of Series A Preferred
Stock surrendered; provided that each share of Series A Preferred stock redeemed
and each new certificate representing shares of Series A Preferred Stock issued
shall be in whole shares. The Company will notify the holders of Series A
Preferred Stock of the results of the Change in Control offer on or as soon as
practicable after the Change in Control Redemption Date.
IN WITNESS WHEREOF, the undersigned have executed this certificate as of
the 3rd day of November, 1997.
COMPOST AMERICA HOLDING
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COMPANY, INC.
By:
--------------------------------------------
Name: Roger F. Tuttle
Title: Chairman of the Board, President,
Chief Executive Officer and Treasurer
By:
--------------------------------------------
Name: Robert E. Wortmann
Title: Secretary
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Exhibit 4.2
COMPOST AMERICA HOLDING COMPANY, INC.
Series B Preferred Stock.
1. Designation; Number of Shares; Stated Value.
The designation of said series of the Preferred Stock shall be $2.50
Series B Convertible Preferred Stock (the "Series B Preferred Stock"). The
number of shares of Series B Preferred Stock shall be 5,000,000. The liquidation
value of the Series B Preferred Stock shall be $2.50 per share, together with
any accrued and unpaid dividends if there is a sale of substantially all of the
stock or assets of the Corporation in a non-public transaction or liquidation of
the Corporation. The shares of Series B Preferred Stock shall be issued as full
shares and shall have no par value.
2. Conversion.
(a) Each share of Series B Preferred Stock is convertible into one
share of Common Stock (rounded to the nearest whole share) (the
"Conversion Rate") at any time after September 15, 1997, or as otherwise
may be agreed by the holder and the Corporation at the option of the
holder or sooner as to any shares of Series B Preferred Stock which have
been called for redemption by the Corporation pursuant to Section 7 below.
(b) The Conversion Rate shall be subject to adjustment as follows:
(i) In case the Corporation shall (A) pay a dividend on its
Common Stock in shares of its Common Stock, (B) subdivide its
outstanding shares of Common Stock or (C) combine its outstanding
shares of Common Stock into a smaller number of shares, the
conversion rate in effect at the time of such dividend, subdivision,
or combination shall be proportionately adjusted so that the holder
of the Series B Preferred Stock surrendered for conversion after
such time shall be entitled to receive the number and kind of shares
which he would have owned or have been entitled to receive had such
Series B Preferred Stock been converted immediately prior to such
time. Such adjustment shall be made successively whenever any event
listed above shall occur.
(ii) In case of any consolidation of the Corporation into, or
merger of the Corporation with or into, any other corporation, or in
case of any sale or transfer of all or substantially all of the
assets of the Corporation, or in case of any reclassification of its
shares of Common Stock, the holder of each share of Series B
Preferred Stock then outstanding shall have the right thereafter to
convert such share into the kind and
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amount of shares of stock and other securities, cash and other
property receivable upon such consolidation, merger, sale, transfer
or reclassification by a holder of the number of shares of Common
Stock of the Corporation into which such share of Series B Preferred
Stock might have been converted immediately prior to such
consolidation, merger, sale, transfer or reclassification. In any
such event, effective provision shall be made in the articles or
certificate of incorporation of the resulting or surviving
corporation or other corporation issuing or delivering such shares,
other securities cash or other property or otherwise so that the
provisions set forth herein for the protection of the conversion
rights of the Series B Preferred Stock shall thereafter be
applicable, as nearly as reasonably may be, to any such other shares
of stock and other securities, cash and other property deliverable
upon conversion of the Series B Preferred Stock remaining
outstanding or other convertible stock or securities received by the
holders in place thereof; and any such resulting or surviving
corporation or other corporation issuing or delivering such shares,
other securities, cash or other property shall expressly assume the
obligation to deliver, upon the exercise of the conversion
privilege, such shares, securities, cash or other property as the
holders of the Series B Preferred Stock remaining outstanding, or
other convertible stock or securities received by the holders in
place thereof, shall be entitled to receive pursuant to the
provisions hereof and to make provision for the protection of the
conversion right as above provided. In case shares, securities, cash
or other property other than Common Stock shall be issuable or
deliverable upon conversion as aforesaid, then all references to
Common Stock in this paragraph 2(b) shall be deemed to apply, so far
as provided and as nearly as is reasonable, to any such shares,
other securities, cash or other property.
(iii) No fractional interests in Common Stock shall be issued
upon conversion of shares of Series B Preferred Stock. Instead of
any fractional share of Common Stock which would otherwise be
issuable upon conversion of any share of Series B Preferred Stock,
the Corporation shall issue an additional share of Common Stock by
rounding the fractional interest to the nearest whole share.
(iv) In the event that at any time, as a result of any
adjustment made pursuant to this paragraph 2(b), the holder of any
share of Series B Preferred Stock thereafter surrendered for
conversion shall become entitled to receive any shares of the
Corporation other than shares of its Common Stock, the number of
such other
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shares so receivable upon conversion of any share of Series B
Preferred Stock shall be subject to adjustment from time to time in
a manner and on terms as nearly equivalent as practicable to the
provision with respect to the Common Stock contained in subdivision
(i), above, with respect to the Common Stock.
(v) Whenever any adjustment is required in the number of
shares into which each share of Series B Preferred Stock is
convertible, the Corporation shall forthwith cause to be mailed to
the holders of record of the Series B Preferred Stock a copy of a
statement describing in reasonable detail the method of calculation
used in the adjustment.
(c) Upon any conversion of shares of Series B Preferred Stock, the
shares so converted shall have the status of authorized and unissued
shares of Preferred Stock, unclassified as to series, and the number of
shares of Preferred Stock which the Corporation shall have authority to
issue shall not be decreased by the conversion of shares of Series B
Preferred Stock. The Corporation shall at times reserve and keep
available, out of its authorized and unissued stock or stock held as
treasury stock, solely for the purpose of effecting the conversion of the
Series B Preferred Stock, such number of shares of its Common Stock as
shall from time to time be sufficient to effect the conversion of all
shares of Series B Preferred Stock form time to time outstanding. For the
purpose of this paragraph 2(c), the full number of shares of Common Stock
issuable upon the conversion of all outstanding shares of Series B
Preferred Stock shall be computed as if at the time of computation of such
number of shares of Common Stock all outstanding shares of Series B
Preferred Stock were held by a single holder. The Corporation shall form
time to time, in accordance with the laws of the State of New Jersey,
increase the authorized number of shares of its Common Stock if at any
time the number of shares of its Common Stock not outstanding shall not be
sufficient to permit the conversion of all the then outstanding Series B
Preferred Stock.
(d) The Corporation will pay any and all issue or other taxes that
may be payable in respect of any issue or delivery of shares of Common
Stock on conversion of Series B Preferred Stock pursuant hereto. The
Corporation shall not, however, be required to pay any tax which may be
payable in respect of any transfer involved in the issue or delivery of
Common Stock in the name other than that in which the Series B Preferred
Stock so converted was registered, and no such issue or delivery shall be
made unless and until the person requesting such issue has paid to the
Corporation the amount of such tax, or has established, to the
satisfaction of the Corporation, that
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such tax has been paid.
(e) Before taking any action which would cause an adjustment
reducing the conversion rate such that the conversion price would be below
the then par value of the Common Stock, the Corporation will take any
corporate action which may, in the opinion of its counsel, be necessary in
order that the Corporation may validly and legally issue fully paid and
nonassessable shares of Common Stock at the conversion rate as so
adjusted.
3. Number of Shares.
The Board of Directors reserves the right, by subsequent amendment of this
resolution, from time to time to decrease the number of shares which constitute
the Series B Preferred Stock (but not below the number of shares thereof then
outstanding) and, subject to anything to the contrary set forth in the
Certificate of Incorporation applicable to the Preferred Stock, to subdivide the
number of shares, the stated value per share and the liquidation value per share
of the Series B Preferred Stock and in other respects to amend, within the
limitations provided by law, this resolution and the Certificate of
Incorporation.
4. Liquidation Rights.
Upon the sale of substantially all of the stock and assets of the
Corporation in a non-public transaction or dissolution, liquidation or winding
up of the Corporation, whether voluntary or involuntary, the holders of Series B
Preferred Stock shall be entitled, subject to the rights of the Corporation's
$2.50 Series A Preferred Stock or any other class of preferred stock having a
superior liquidation preference, to receive out of the assets of the Corporation
available for distribution to stockholders the amount equal to their original
investment of $2.50 per share, plus any accrued and unpaid dividends before any
payment or distribution shall be made on the Common Stock or on any other class
of stock. If upon such liquidation, dissolution or winding up of the Corporation
whether voluntary or involuntary, the assets of the Corporation shall be
insufficient to permit payment to the holders of Series B Preferred Stock of the
amount distributable as aforesaid, then the entire assets of the Corporation to
be distributed to the holders of Capital Stock of the Corporation shall be
distributed rateably among the holders of the Series B Preferred Stock, in
proportion to the liquidation preference payable under this paragraph 4. For
purposes of this paragraph 4, the merger or consolidation of the Corporation or
the sale of all or substantially all of the Corporation's assets shall be deemed
to be a liquidation, dissolution or winding up of the Corporation. After the
payment to the holders of the shares of the Series B Preferred Stock of the full
preferential amounts provided for in this paragraph 4, the preferred shares have
no further rights and
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no right or claim to any remaining assets of the Corporation.
5. Voting Rights.
(a) The shares of Series B Preferred Stock shall have no voting rights
except for those provided for by law. In exercising the voting rights granted by
operation of law, each share of Series B Preferred Stock shall be entitled to
one vote. In addition, the Corporation may not, without the prior written
consent of at least fifty (50%) percent of the holders of the Series B Preferred
Stock:
(i) amend the Certificate of Incorporation or any certificate or
statement of the designations of the powers, preferences and
rights of any classes of stock to in any way affect the rights
and preferences of holders of the Series B Preferred Stock.
6. Dividends.
(a) (1) The holders of the Series B Preferred Stock shall be entitled to
receive dividends, per annum, at the rate of one (1) share of common stock, no
par value, of the Corporation, for every ten (10) shares of the Series B
Preferred Stock held (the "Dividend Rate"), payable once a year each year on the
last business day of the month of April commencing in 1998 (the "Dividend
Payment Date"). Such dividends shall be paid to the holders of record at the
close of business on the date ten business days prior to the Dividend Payment
Date. Each such annual dividend shall be fully cumulative and shall accrue
(whether or not declared), without interest, from the first day of the annual
period in which such dividend may be payable as herein provided, except that
with respect to the first annual dividend, such dividend with respect to any
outstanding shares of Series B Preferred Stock shall accrue from the date of the
purchase of said shares of Series B Preferred Stock from the Corporation. No
fractional shares of common stock shall be issued as a dividend pursuant to this
section; instead, all fractional shares shall be rounded to the nearest whole
share.
(a) (2) The Dividend Rate shall be subject to adjustment as follows:
(i) In case the Corporation shall (A) pay a dividend on its
Common Stock in shares of its Common Stock, (B) subdivide its
outstanding shares of Common Stock or (C) combine its outstanding
shares of Common Stock into a smaller number of shares, the Dividend
Rate in effect at the time of such dividend, subdivision, or
combination shall be proportionately adjusted so that the holder of
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the Series B Preferred Stock entitled to the dividend after such
time shall be entitled to receive the number and kind of shares
which he would have owned or have been entitled to receive had such
dividend been paid immediately prior to such time. Such adjustment
shall be made successively whenever any event listed above shall
occur.
(ii) In case of any consolidation of the Corporation into, or
merger of the Corporation with or into, any other corporation, or in
case of any sale or transfer of all or substantially all of the
assets of the Corporation, or in case of any reclassification of its
shares of Common Stock, the holder of each share of Series B
Preferred Stock then outstanding shall have the right thereafter to
receive as a dividend such share into the kind and amount of shares
of stock and other securities, cash and other property receivable
upon such consolidation, merger, sale, transfer or reclassification
by a holder of the number of shares of Common Stock of the
Corporation to which such share of Series B Preferred Stock might
have been entitled to receive as a dividend immediately prior to
such consolidation, merger, sale, transfer or reclassification. In
any such event, effective provision shall be made in the articles or
certificate of incorporation of the resulting or surviving
corporation or other corporation issuing or delivering such shares,
other securities cash or other property or otherwise so that the
provisions set forth herein for the protection of the dividend
rights of the Series B Preferred Stock shall thereafter be
applicable, as nearly as reasonably may be, to any such other shares
of stock and other securities, cash and other property deliverable
upon the payment of a dividend on the Series B Preferred Stock
outstanding; and any such resulting or surviving corporation or
other corporation issuing or delivering such shares, other
securities, cash or other property shall expressly assume the
obligation to deliver, upon the payment of the dividend, such
shares, securities, cash or other property as the holders of the
Series B Preferred Stock shall be entitled to receive pursuant to
the provisions hereof and to make provision for the protection of
the dividend right as above provided. In case shares, securities,
cash or other property other than Common Stock shall be issuable or
deliverable upon payment of the dividend as aforesaid, then all
references to Common Stock in this section 6(a)(2)(ii) shall be
deemed to apply, so far as provided and as nearly as is reasonable,
to any such shares, other securities, cash or other property.
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(b) All dividends paid with respect to shares of the Series B Preferred
Stock pursuant to this section 6 shall be paid pro rata to the holders entitled
thereto.
7. Redemption.
The Corporation shall have no right of redemption of the Series B Preferred
Stock.
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Exhibit 4.3
CERTIFICATE OF DESIGNATIONS OF RIGHTS AND PREFERENCES
OF
SERIES C REDEEMABLE CONVERTIBLE PREFERRED STOCK
(No Par Value Per Share)
OF
COMPOST AMERICA HOLDING COMPANY, INC.
New Jersey Business Corporation Act
Roger E. Tuttle hereby certifies that he is the Chairman of the Board,
President, Chief Executive Officer and Treasurer, of Compost America Holding
Company, Inc. (the "Company"), a corporation organized and existing under the
Corporation Law of the State of New Jersey, as amended, and further certify:
That pursuant to the authority conferred upon the Board of Directors by
the Certificate of Incorporation of the Company, as amended (the "Certificate of
Incorporation"), the Board of Directors of the Company (the "Board of
Directors") on October 30, 1997, adopted the following resolutions creating a
series of shares of Series C Convertible Preferred Stock, no par value per
share.
RESOLVED, that pursuant to the authority expressly granted to and vested
in the Board of Directors by the provisions of the Certificate of Incorporation
and the Corporation Law of the State of New Jersey, as amended, the Company is
authorized to issue an aggregate of 25,000,000 shares of the Company's preferred
stock, no par value per share (the "Preferred Stock"), in such series and with
such rights, designations, and privileges as the Board of Directors of the
Corporation may, from time to time determine; and
FURTHER, RESOLVED, that the Board of Directors be and the same hereby is
authorized, and the Board of Directors hereby fixes the voting powers,
designations, preferences, limitations, restrictions and relative rights, and
the qualifications limitations and restrictions of such rights, of the shares of
such series of Preferred Stock (in addition to the voting powers, designations,
preferences, limitations, restrictions and relative rights, and the
qualifications, limitations and restrictions of such rights, set forth in the
Certificate of Incorporation that may be applicable to the Preferred Stock) as
follows:
1. Designation and Rank. The designation of such series of the Preferred
Stock shall be the Series C Redeemable Convertible Preferred Stock, no par value
per share (the "Series C Preferred Stock"). The maximum number of shares of
Series C Preferred Stock (the "Shares") shall be
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Ninety-One Thousand. The Series C Preferred Stock shall rank (i) prior to the
common stock, no par value per share, of the Company (the "Common Stock"), (ii)
on a parity with all shares of the Company's Series A Exchangeable Redeemable
Preferred Stock (the "Series A Preferred Stock"); (iii) subordinate and junior
to all indebtedness of the Company now or hereafter existing, and (iv) prior to
the Series B Preferred Stock as to liquidation and other payment rights as
provided in Section 4(d) and to any other class or series of capital stock of
the Company hereafter created (unless it specifically, by its terms, ranks on a
parity with the Series C Preferred Stock) (each such junior class of series of
capital stock and the Common Stock being hereinafter referred to as the "Junior
Stock"), in each case as to dividends and distributions of assets upon
liquidation, dissolution or winding up of the Company, whether voluntary or
involuntary.
2. Cumulative Dividends; Priority.
(a) Payment of Dividends. The holders of record of shares of Series C
Preferred Stock are entitled to a non-cumulative noncompounded dividend as set
forth below, payable as, when and if declared by the Company's Board of
Directors, and upon any redemption of the Series C Preferred Stock.
(b) Special Dividends. Dividends on the Series C Preferred Stock shall be
at the rate of 20% per annum through May 3, 1999 (the "Early Redemption
Period"), payable on the earlier of (i) the last day of the Early Redemption
Period and (ii) the redemption of the shares of Series C Preferred Stock. The
dividend paid during the Early Redemption Period is hereinafter referred to as
the "Special Dividend." In the event of a redemption during the Early Redemption
Period, the Special Dividend shall nevertheless be paid for a period of not less
than six (6) months notwithstanding that the redemption occurs after less than
six (6) months from the date of initial issuance. The Special Dividend may be
paid in cash or, at the election of the Company, by delivery of additional
shares of Common Stock having an aggregate "Market Value" (as hereinafter
defined) equal to the amount of such dividend. For purposes of payment of the
Special Dividend, each share of Common Stock will be deemed to have a "Market
Value" equal to ninety percent (90%) of the "Average Share Price" as defined in
Section 5(c) for the ten (10) consecutive trading days preceding the dividend
payment date.
(c) After the Early Redemption Period, dividends on the Series C Preferred
Stock shall be at the rate of 8% per annum, payable (when and if declared by the
Company's Board of Directors), semi-annually by the Company, on June 30th and
December 31st of each year. All dividends paid after the Early Redemption Period
must be paid in cash.
3. Voting Rights.
(a) The Series C Preferred Stock shall have the following class voting
rights. So long as any shares of the Series C Preferred Stock remain
outstanding, the Company shall not, without the affirmative vote or consent of
the holders of at least a sixty-six and 2/3 (66-2/3%) percent of the shares of
the Series C Preferred Stock outstanding at the time, given in person or by
proxy, either in writing or at a meeting, in which the holders of the Series C
Preferred Stock vote
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separately as a class: (i) authorize, create or issue (other than the Series A
Preferred Stock outstanding on November 3, 1997), or increase the authorized or
issued amount of any class or series of stock ranking prior to or on a parity
with the Series C Preferred Stock, with respect to payment of dividends or the
distribution of assets on liquidation, dissolution or winding up; (ii) amend,
alter or repeal the provisions of the Series C Preferred Stock, whether by
merger, consolidation or otherwise, so as to affect materially and adversely any
right, preference, privilege or voting power of the Series C Preferred Stock;
provided, however, that any creation and issuance of other series of Junior
Stock shall not be deemed to materially and adversely affect such rights,
preferences, privileges or voting powers; (iii) repurchase, or pay cash
dividends on, shares of the Company's Junior Stock; provided, that dividends may
be paid on Junior Stock so long as at the time of such payment (A) all dividends
on the Series C Preferred Stock shall have been paid in full, and (B) if
dividends on Junior Stock are payable in cash, all dividends on the Series C
Preferred Stock thereafter paid shall similarly be paid in cash, or (iv) amend
the Certificate of Incorporation or By-Laws of the Company so as to affect
materially and adversely any right, preference, privilege or voting power of the
Series C Preferred Stock provided, however, that any creation and issuance of
other series of Junior Stock shall not be deemed to materially and adversely
affect such rights, preferences, privileges or voting powers.
(b) Except with respect to transactions upon which the Series C Preferred
Stock shall be entitled to vote separately as a class pursuant to Sections 3(a)
and (b) above and except as otherwise required by New Jersey law, the Series C
Preferred Stock shall not vote prior to the date on which the Series C Preferred
Stock shall become convertible; thereafter, the Series C Preferred Stock shall
vote as a class pursuant to Sections 3 (a) and (b) above and together with the
Common Stock and not as a separate class on all other issues transaction with
respect to which the Common Stock is entitled to vote pursuant to applicable New
Jersey law or the Certificate of Incorporation, each share of Series C Preferred
Stock being entitled to a number of votes per share equal to (i) one (1)
multiplied by (ii) the number of shares of Common Stock into which each share of
Series C Preferred Stock is convertible on the record date used to determine
shares eligible to vote on such transaction.
4. Liquidation Preference.
(a) In the event of the liquidation, dissolution or winding up of the
affairs of the Company, whether voluntary or involuntary, after payment or
provision for payment of the debts and other liabilities of the Company, the
holders of shares of the Series C Preferred Stock then outstanding, pari passu
with the holders of the shares of the Series A Preferred Stock, shall be
entitled to receive, out of the assets of the Company whether such assets are
capital or surplus of any nature, before any distribution shall be made to the
holders of the Common Stock or any other Junior Stock, an amount (the
"Liquidation Preference") per share equal to $100 per share of the Series C
Preferred Stock, plus declared, payable, and unpaid dividends at the then
applicable dividend rate per annum, through the date of liquidation, dissolution
or winding up, whether or not declared, and no more, before any payment shall be
made or any assets distributed to the holders of the Common Stock or any other
Junior Stock. If the assets of the Company are not sufficient to pay in full the
liquidation payment payable to the holders of outstanding shares of the
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Series C Preferred Stock and any series of preferred stock or any other class of
stock on a parity, as to rights on liquidation, dissolution or winding up, with
the Series C Preferred Stock (the "Parity Securities"), provided that the
holders of a majority of the shares of Series C Preferred Stock approve such
Parity Securities (other than the shares of Series A Preferred Stock outstanding
on November 3, 1997) in accordance with Section 3(a) hereof, then the holders of
outstanding shares of the Series C Preferred Stock are entitled to be paid on a
pro-rata basis together with the other Parity Securities, based on the relative
liquidation value of shares of Series C Preferred Stock and the Parity
Securities. The liquidation payment with respect to each outstanding fractional
share of Series C Preferred Stock shall be equal to a ratably proportionate
amount of the liquidation payment with respect to each outstanding share of
Series C Preferred Stock. All payments for which this Section 4(a) provides
shall be in cash, property (valued at its fair market value as determined by an
independent nationally recognized investment banking firm) or a combination
thereof; provided, however, that no cash shall be paid to holders of Junior
Stock unless each holder of the outstanding shares of Series C Preferred Stock
and each holder of Parity Securities has been paid in cash the full amount of
the Liquidation Preference to which such holder is entitled as provided herein.
After payment of the full amount of the Liquidation Preference to which each
holder is entitled, such holders of shares of Series C Preferred Stock will not
be entitled to any further participation as such in any distribution of the
assets of the Company.
(b) A consolidation or merger of the Company with or into any other
corporation or corporations, or a sale of all or substantially all of the assets
of the Company, shall not be deemed to be a liquidation, dissolution, or winding
up within the meaning of this Section 4.
(c) Written notice of any voluntary or involuntary liquidation,
dissolution or winding up of the affairs of the Company, stating a payment date
and the place where the distributable amounts shall be payable, shall be given
by mail, postage prepaid, no less than 30 days prior to the payment date stated
therein, to the holders of record of the Series C Preferred Stock at their
respective addresses as the same shall appear on the books of the Company.
(d) Together with the Series A Preferred Stock of the Company issued of
even date herewith, the liquidation preference set forth in this paragraph 4,
and all other payment rights hereunder, shall be senior and prior in all events
to any other preferred stock now or hereafter issued by the, Company, including
without limitation, the Series B Preferred Stock of the Company.
5. Conversion.
Subject at all times to the Company's right of voluntary redemption of the
Series C Preferred Stock provided in Section 6 of this Certificate of
Designations, the holders of shares of Series C Preferred Stock shall have the
right, at their option, to convert shares of Series C Preferred Stock into
shares of Common Stock at any time following the last day of the Early
Redemption Period, on and subject to the following terms and conditions:
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(a) The shares of Series C Preferred Stock shall be convertible at the
office of any transfer agent for the Series C Preferred Stock, and at such other
office or offices, if any, as the Board of Directors may designate, into fully
paid and nonassessable shares (calculated as to each conversion to the nearest
1/100th of a share) of Common Stock, at the conversion price, determined as
hereinafter provided, in effect at the time of conversion, each share of Series
C Preferred Stock being valued at $100 for the purpose of such conversion. The
price at which shares of Common Stock shall be delivered upon conversion (the
"conversion price") shall be 80% of the Average Share Price (as hereinafter
defined) for all the trading days during the last month of the Early Redemption
Period. The conversion price shall be adjusted as provided in paragraph (d)
below.
(b) In order to convert shares of the Series C Preferred Stock into Common
Stock, the holder thereof shall surrender to the Company, at any time during
normal business hours at the principal office of the Company, the certificate or
certificates evidencing the shares of Series C Preferred Stock to be converted,
accompanied by (i) written notice to the Company that such holder elects to
convert ("Conversion Notice"), (ii) if so required by the Company, by
instruments of transfer, in form satisfactory to the Company, duly executed by
the registered holder or by his duly authorized attorney and (iii) transfer tax
stamps or funds therefor. Shares of the Series C Preferred Stock shall be deemed
to have been converted immediately prior to the close of business on the day of
surrender of such shares for conversion in accordance with the foregoing
provisions (the "conversion date"), and the person or persons entitled to
receive the Common Stock issuable upon such conversion shall be treated for all
purposes as the record holder or holders of such Common Stock at such time. As
promptly as practicable on or after the conversion date, the Company shall issue
and shall deliver at said office against delivery of one or more certificates
evidencing Series C Preferred Stock a certificate or certificates for the number
of full shares of Common Stock issuable upon such conversion, together with a
cash payment in lieu of any fraction of a share, as hereinafter provided, to the
person or persons entitled to receive the same.
(c) No fractional shares of Common Stock shall be issued upon conversion
of shares of Series C Preferred Stock, but, in lieu of any fraction of a share
of Common Stock which would otherwise be issuable in respect of the aggregate
number of shares of Series C Preferred Stock surrendered for conversion at one
time by the same holder, the Company shall pay in cash as an adjustment of such
fraction an amount equal to the same fraction of the Closing Price (as defined
below) on the date on which such shares of Series C Preferred Stock were duly
surrendered for conversion, or, if such date is not a trading day, on the next
trading day.
(d) The conversion price shall be adjusted from time to time as follows:
(1) In case the Company shall (i) pay a dividend (or make a
distribution) on its outstanding shares of Common Stock in Common Stock,
(ii) subdivide or split its outstanding shares of Common Stock into a
larger number of shares by reclassification or otherwise, (iii) combine
its outstanding shares of Common Stock into a smaller number of shares by
reclassification or otherwise, or (iv) issue any shares of Common Stock by
reclassification, the conversion price in effect at the time of the record
date for such
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dividend or distribution or other effective date of such subdivision,
combination or reclassification shall be adjusted so that the holder of
any shares of Series C Preferred Stock surrendered for conversion after
such time shall be entitled to receive the number of shares of Common
Stock which he would have owned or been entitled to receive had such
shares of the Series C Preferred Stock been converted immediately prior to
such time.
(2) In case the Company shall issue rights or warrants to all
holders of its Common Stock entitling them to subscribe for or purchase
shares of Common Stock at a price per share less than the current market
price per share (determined as provided in clause (4) below) on the record
date for the distribution of such rights or warrants, the conversion price
in effect at the opening of business on such record date shall be adjusted
so that the same shall equal the price determined by multiplying the
conversion price then in effect by a fraction, of which the numerator
shall be the number of shares of Common Stock then outstanding plus the
number of shares of Common Stock which the aggregate exercise price of
such warrants or rights exercised would purchase at such current market
price and of which the denominator shall be the number of shares of Common
Stock then outstanding plus the number of additional shares of Common
Stock issued upon the exercise of such warrants or rights. Such adjustment
shall become effective at the opening of business on the business day next
following the computation thereof. If the conversion price shall be
adjusted at any time under or by reason of provisions in this clause (2),
then, in case of the delivery of Common Stock upon the exercise of any
such right or warrant the conversion price then in effect hereunder shall
forthwith be adjusted to such respective amount as would have been
obtained had such right or warrant never been issued as to such Common
Stock and had adjustments been made upon the issuance of the shares of
Common Stock delivered as aforesaid.
(3) In case the Company shall distribute to all holders of its
Common Stock evidences of its indebtedness or assets (excluding any cash
or stock dividends or distributions and dividends referred to in clause
(1) above or rights or warrants to subscribe for or purchase securities of
the Company or any of its subsidiaries (other than shares of Common Stock
referred to in clause (2) above), then in each such case the conversion
price shall be adjusted so that the same shall equal the price determined
by multiplying the conversion price in effect immediately prior to the
date of such distribution by a fraction of which the numerator shall be
the current market price per share (determined as provided in clause (4)
below) of the Common Stock on the record date mentioned below less the
then fair market value (as determined by the Board of Directors, whose
determination shall be conclusive) of the portion of the assets or
evidences of indebtedness or rights or warrants so distributed applicable
to one share of Common Stock, and the denominator shall be such current
market price per share of the Common Stock. Such adjustment shall become
effective on the opening of business on the business day next following
the record date for the determination of stockholders entitled to receive
such distribution.
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(4) For the purpose of any computation under clause (1), (2) or (3)
above, the current market price per share of Common Stock on any date
shall be deemed to be the Average Share Price for the 30 consecutive
trading days commencing not more than 45 trading days before the day in
question, such 30 consecutive trading day period to be specified by the
Board of Directors prior to the commencement of 45 trading days before the
day in question, or in the event the Board of Directors fails to specify
such 30 consecutive trading days, such 30 consecutive trading days shall
be deemed to have commenced on the 40th trading date before the day in
question.
(5) No adjustment in the conversion price pursuant to this paragraph
5 shall be required unless such adjustment would require an increase or
decrease of at least 1% in such price; provided that any adjustment which
by reason of this paragraph (d)(4) is not required to be made shall be
carried forward and taken into account in any subsequent adjustment and
will be made not more than three years after the time it would have been
made but for the provisions of this paragraph (d)(4); provided further
that, at the time of any adjustment, such adjustment shall include all
adjustments to the date thereof then being carried forward. All
calculations under this paragraph 4 shall be made to the nearest 1/100th
of a cent or to the nearest 1/100th of a share, as the case may be.
(e) In case of any consolidation or merger of the Company with or into
another corporation or in the case of any sale or conveyance to another
corporation (other than a wholly-owned subsidiary of the Company) of all or
substantially all of the property and assets of the Company, the holder of a
share of the Series C Preferred Stock shall have the right thereafter to convert
such share into the kind and amount of shares of stock and other securities and
properties receivable upon such consolidation, merger, sale or conveyance by a
holder of the number of shares of Common Stock into which such share of Series C
Preferred Stock might have been converted immediately prior to such
consolidation, merger, sale or conveyance and shall have no other conversion
right with regard to such share of Series C Preferred Stock. In the event of
such a consolidation, merger, sale or conveyance, effective provision shall be
made in the certificate of incorporation of the resulting or surviving
corporation or otherwise for the protection of the conversion rights of the
shares of the Series C Preferred Stock which shall be applicable, as nearly as
reasonably may be, to any such other shares of stock and other securities and
property deliverable upon conversion of shares of the Series C Preferred Stock.
In case securities or properties other than Common Stock shall be issuable or
deliverable upon conversion as aforesaid, then all references in this paragraph
5 shall be deemed to apply, so far as appropriate and as nearly as may be, to
such other securities or properties.
(f) Whenever the conversion price is adjusted as herein provided:
(1) the Company shall compute the adjusted conversion price in
accordance with this paragraph 5 and shall prepare a certificate signed by
the President or one of the Vice Presidents and the Treasurer or one of
the Assistant Treasurers of the Company setting forth the adjusted
conversion price, and such certificate shall forthwith be filed with the
transfer agent for the Series C Preferred Stock; and
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(2) a notice stating that the conversion price has been adjusted and
setting forth the adjusted conversion price shall, as soon as practicable,
be mailed to the holders of record of the outstanding shares of Series C
Preferred Stock.
(g) In case at any time:
(1) the Company shall declare a dividend (or any other distribution)
on its Common Stock payable otherwise than in cash out of profits or
surplus; or
(2) the Company shall authorize the granting to the holders of its
Common Stock of rights to subscribe for or purchase any shares of capital
stock of any class or series or of any other rights; or
(3) of any reclassification of the capital stock of the Company
(other than a subdivision or combination of its outstanding shares of
Common Stock), or of any consolidation or merger to which the Company is a
party and for which approval of any stockholders of the Company is
required, or of the sale or transfer of all or substantially all of the
property and assets of the Company, or of the voluntary or involuntary
dissolution, liquidation or winding up of the Company;
then the Company shall cause to be mailed to the transfer agent for the Series C
Preferred Stock and to the holders of record of the outstanding shares of Series
C Preferred Stock, at least 20 days (or 10 days in any case specified in clause
(1) or (2) above) prior to the applicable record date hereinafter specified, a
notice stating (x) the date on which a record is to be taken for the purpose of
such dividend, distribution or rights, or, if a record is not to be taken, the
date as of which the holders of Common Stock of record to be entitled to such
dividend, distribution or rights are to be determined, or (y) the date on which
such reclassification, consolidation, merger, sale, transfer, dissolution,
liquidation or winding up is expected to become effective, and the date as of
which it is expected that holders of Common Stock of record shall be entitled to
exchange their shares of Common Stock for securities or other property
deliverable upon such reclassification, consolidation, merger, sale, transfer,
dissolution, liquidation or winding up.
(h) The Company shall at all times reserve and keep available, free from
preemptive rights, out of its authorized but unissued Common Stock, for the
purpose of effecting the conversion of the shares of the Series C Preferred
Stock, the full number of shares of Common Stock then deliverable upon the
conversion of all shares of Series C Preferred Stock then outstanding.
(i) The Company will pay any and all transfer taxes that may be payable in
respect of the issuance or delivery of shares of Common Stock on conversion of
shares of Series C Preferred Stock pursuant hereto. The Company shall not,
however, be required to pay any tax which may be payable in respect of any
transfer involved in the issue and delivery of shares of Common Stock in a name
other than that in which the shares of Series C Preferred Stock so converted
were registered, and no such issue or delivery shall be made unless and until
the person requesting such
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issue has paid to the Company the amount of any such tax, or has established, to
the satisfaction of the Company, that such tax has been paid.
(j) For the purpose of this paragraph 5, the term "Common Stock" shall
include any stock of any class of the Company which has no preference in respect
of dividends or of amounts payable in the event of any voluntary or involuntary
liquidation, dissolution or winding up of the Company, and which is not subject
to redemption by the Company. However, shares issuable on conversion of shares
of the Series C Preferred Stock shall include only shares of Common Stock as
such Common Stock exists on the date of this Certificate or shares of any class
or classes resulting from any reclassification or reclassifications thereof and
which have no preference in respect of dividends or of amounts payable in the
event of any voluntary or involuntary liquidation, dissolution or winding up of
the Company and which are not subject to redemption by the Company, provided
that if at any time there shall be more than one such resulting class, the
shares of each such class then so issuable shall be substantially in the
proportion which the total number of shares of such class resulting from all
such reclassifications bears to the total number of shares of all such classes
resulting from all such reclassifications.
(k) Average Share Price. As used herein, the term "Average Share Price"
shall mean the average of the last sale price per share of the Company's shares
of Common Stock as reported by Bloomberg, L.P. ("Bloomberg"), on any one of the
following exchanges on which such Common Stock shall then be quoted; namely, (a)
the AMEX, (b) the NASDAQ National Market System ("NASDAQ NMS"), (c) the NASDAQ
System (other than the NASDAQ NMS), (d) the New York Stock Exchange, or (e) the
National Quotation Bureau, Inc. for quotes on the Electronic Bulletin or the
"Pink Sheets", as the case may be, for the applicable number of consecutive
trading days immediately preceding the dividend payment date or conversion date
specified in Section 2(b) or this Section 5, as the case may be. "Closing Price"
shall mean the last sale price per share on any particular date, determined as
aforesaid.
6. Redemptions.
(a) Voluntary Redemption. Subject to compliance with the provisions of
this Section 6(a), the Company shall have the right (i) during the Early
Redemption Period and (ii) otherwise exercisable at any time on or after
November 3, 2002, on not more than sixty (60) days and not less than fifteen
(15) days prior written notice to the holders of Series C Preferred Stock (the
"Voluntary Redemption Notice"), to redeem all or any portion of the Shares of
Series C Preferred at a redemption price for each Share of Series C Preferred
Stock to be redeemed (the "Voluntary Redemption Price") which shall equal to the
sum of (i) $100 per Share, and (ii) all declared, payable and unpaid dividends
on such Share to the date fixed for redemption (the "Voluntary Redemption
Date").
(b) Mandatory Redemption. On November 3, 2004 (the "Mandatory Redemption
Date"), the Company shall redeem all of the Shares of Series C Preferred Stock
then outstanding at a redemption price for each Share of Series C Preferred
Stock to be redeemed (the "Mandatory
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Redemption Price") equal to the sum of (i) $100 per Share, and (ii) all accrued
dividends on such Share to the Mandatory Redemption Date.
(c) Method of Payment. The Company shall pay an aggregate amount for all
Shares of Series C Preferred Stock to be redeemed hereunder (the "Redemption
Payment"), calculated by multiplying the number of Shares so redeemed by the
applicable Voluntary Redemption Price or Mandatory Redemption Price, as the case
may be, on the Voluntary Redemption Date or Mandatory Redemption Date, as
applicable, by payment of the Voluntary Redemption Price or Mandatory Redemption
Price, as the case may be, by bank cashiers' or certified check payable to the
applicable holders of the Series C Preferred Stock or wire transfer of
immediately available funds to accounts designated in writing by such holders
received by the Company at least five (5) business days prior thereto. In the
event that, for any reason, the full applicable Redemption Payment is not timely
made pursuant to this Section 6(c), such defaulted Redemption Payment shall
thereafter bear default interest at the rate of 15% per annum until paid in
full.
(d) Delivery of Series C Preferred Stock. The holders of Series C
Preferred Stock whose Shares are to be redeemed pursuant to this Section 6 shall
deliver to the Company, against receipt of the applicable Voluntary Redemption
Payment or Mandatory Redemption Payment, all of their Shares of Series C
Preferred Stock to be redeemed, duly endorsed in blank for transfer or
accompanied by a duly executed stock power with the signature of the record
owner guaranteed by a bank or member firm of the New York Stock Exchange.
7. No Preemptive Rights. Except as provided in Sections 5, 8, and 9 hereof, no
holder of the Series C Preferred Stock shall be entitled as of right to
subscribe for, purchase or receive any part of any new or additional shares of
any class, whether now or hereafter authorized, or any bonds or debentures, or
other evidences of indebtedness convertible into or exchangeable for shares of
any class, but all such new or additional shares of any class or bonds or
debentures, or other evidences of indebtedness convertible into or exchangeable
for shares may be issued and disposed of by the Board of Directors on such terms
and for such consideration (to the extent permitted by law), and to such person
or persons as the Board of Directors in its absolute discretion may deem
advisable.
8. Exchange for Senior Subordinated Notes. At any time after November 3, 2000,
the Series C Preferred Stock will be exchangeable for 9% Senior Subordinated
Notes of the Company due November 3, 2004, at the rate of $100 principal amount
of such notes for each share of Series C Preferred Stock. The exchanging holder
shall furnish to the Company irrevocable written notice of such exchange,
together with the certificates evidencing the shares of Series C Preferred Stock
to be exchanged, duly endorsed in blank for transfer or accompanied by a duly
executed stock power, with the signature of the record holder guaranteed by a
bank or a member of the firm of the New York Stock Exchange.
9. Exchange for Longo Common Stock. (a) Notwithstanding any other provision of
this Certificate of Designations, if at any time when shares of Series C
Preferred Stock remain issued and outstanding, the Company shall be in default
in the observance of any covenant or in the
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making of any payment when due, whether of principal, interest, premium, or
otherwise, with respect to any secured or unsecured debt (contingent or
otherwise) for an obligation in excess of $100,000, then, at their option, the
holders of Series C Preferred Stock shall have the right to exchange all of its
shares of Series C Preferred Stock for all shares of common stock ("Longo Common
Stock") of R.J. Longo Construction Co., Inc., a New Jersey corporation ("Longo")
outstanding at that time. In addition, and whether or not the Company shall be
in default as aforesaid at the time, at their option, the holders of Series C
Preferred Stock shall have the same right as aforesaid, on the same basis and at
the same exchange rate, to exchange shares of Series C Preferred Stock for Longo
Common Stock during each of the following time periods:
1. From November 1, 1999 through October 31, 2000;
2. From October 1, 1998 through September 30, 1999; provided, however, that the
option granted by this subparagraph shall be null and void if (i) prior to March
31, 1998, there is delivered by bond counsel satisfactory to the Company and
Holders an opinion to the effect that the Supply and Service Agreement between
The City of New York Department of Environmental Protection and R. J. Longo
Construction Company, Inc. d/b/a EPIC (the "New York Contract") is a valid and
binding obligation of the City of New York enforceable in accordance with its
terms, or (ii) the financial closing for the Company's recycling and composting
project in Newark, New Jersey (the "Newark Project") occurs prior to October 1,
1998 on terms no less favorable than financial results contained in the
PaineWebber report for the Newark Project as presented in the Compost America
Holding Company, Inc. Projected Consolidated Financial Statements, Seven Year
Forecast, 1997 to 2003, rev. 8/05/97, or (iii) prior to June 30, 1998, the
Company has entered into supply contracts that in the aggregate achieve the
financial results for the Newark Project contained in said PaineWebber report;
provided, however, that as conditions of the exercise of the foregoing exchange
rights, (i) all holders of the Company's Series A Preferred Stock shall tender
such Series A Preferred Stock to the Company and (ii) there shall be tendered to
the Company all shares of the Company's Common Stock held by Longo and by
Wasteco Ventures Limited on the date of issuance of the Series C Preferred
Stock, being 14,937,791 shares of the Company's Common Stock. The Longo Common
Stock is currently limited to 200 shares with no rights and no other Longo
Common Stock will be issued prior to the exercise of the foregoing option.
(b) No payment or adjustment shall be made on account of any dividends on
Longo Common Stock delivered upon such exchange.
(c) To exchange shares of Series C Preferred Stock, a holder must follow
the procedures described in Section 5 of the Certificate of Designation of
Rights and Preferences for the Series C Preferred Stock (the "Series C Preferred
Certificate") for conversions to the extent such procedures are equally
applicable, and the mechanical provisions in Section 5 for conversions shall
apply mutatis mutandis to exchanges to the extent they are apt and are not
superseded by provisions of this Section 9.
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<PAGE>
(d) So long as the possibility exists of exchanging Series C Preferred
Stock for Longo Common Stock (or reclassifications thereof), the Company shall
at all times keep available free for issue the full number of shares of Longo
Common Stock (or reclassifications thereof) then exchangeable for all shares of
Series C Preferred Stock then outstanding.
(e) In order to fully preserve the exchange rights of the Series C
Preferred Stock, other than ordinary periodic cash dividends, without the
affirmative vote or consent of at least 66 2/3% of the shares of Series C
Preferred Stock outstanding at the time, voting separately as a class, the
Company will not permit the payment of dividends on the Longo Common Stock, will
not permit the issuance of additional shares of Longo Common Stock or securities
convertible into or exchangeable for shares of Longo Common Stock or permit the
consolidation, merger or transfer of substantial assets of Longo.
10. Change in Control.
(a) Upon the occurrence of a "Change in Control", each holder of Series C
Preferred Stock shall have the right to require the redemption of its Series C
Preferred Stock by the Company in cash, pursuant to the offer described below
(the "Change in Control Offer") at a price equal to 101% of the par value per
share plus a sum equal to all dividends accrued and unpaid thereon (if any) to
the related Change in Control Redemption Date. A "Change in Control" shall mean
(i) a merger, consolidation or reorganization of the Company, if, after giving
effect thereto, the holders of the Common Stock prior to such transactions shall
fail to own at least 51% of the capital stock entitled to vote for the election
of directors in the successor entity, (ii) the sale of a majority or more of the
assets of the Company in any single transaction or in any series of related
transactions, or (iii) a change in the composition of the Board of Directors of
the Company such that during any period of two consecutive years the individuals
who at the beginning of such period were directors of the Company shall cease
for any reason to constitute a majority of the directors then in office (and not
designated to the Board by any holder of Preferred Stock) unless the individuals
replacing such directors were elected or nominated by the Board of Directors of
the Company.
(b) Within 30 days of any Change in Control the Company shall mail a
notice (the "Change in Control Notice") to each holder of record of the Series C
Preferred Stock stating:
(i) that a Change in Control has occurred, that the Change in
Control Offering is being made pursuant to the terms of the Series C
Preferred Stock and that all shares of Series A Preferred Stock validly
tendered will be accepted for redemption;
(ii) the redemption price and the date of redemption (which shall be
a business day no earlier than 30 days nor later than 60 days from the
date such notice is mailed) (the "Change in Control Redemption Date");
(iii) that any shares of Series C Preferred Stock not tendered will
continue to accumulate dividends;
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(iv) that, unless the Company defaults in the payment of the Change
in Control redemption price, any shares of Series C Preferred Stock
accepted for redemption pursuant to the Change in Control Offer shall
cease to accumulate dividends after the Change in Control Redemption Date;
(v) that holders of Series C Preferred Stock electing to have any
shares of Series A Preferred Stock redeemed pursuant to the Change in
Control Offer will be required to surrender the certificates representing
such shares of Series C Preferred Stock to the transfer agent for the
Series C Preferred Stock at the address specified in the notice prior to
1:00 P.M., New York City time, on the business day immediately preceding
the Change in Control Redemption Date; and
(vi) that holders whose shares of Series C Preferred Stock are being
redeemed only in part will be issued new certificates representing shares
of Series C Preferred Stock equal in number to the unredeemed portion of
the shares of Series C Preferred Stock surrendered; provided that each
certificate representing shares of Series C Preferred Stock redeemed and
each new certificate representing shares of Series C Preferred Stock
issued shall be in whole shares.
(c) On or about the Change in Control Redemption Date:
(i) the transfer agent for the Series C Preferred Stock shall
deliver to the Corporation a certificate specifying the aggregate number
of shares of Series C Preferred Stock delivered for purchase by the
holders of Series C Preferred Stock prior to the Change in Control
Redemption Date pursuant to the Change in Control Offer;
(ii) The Company shall accept for redemption shares of Series C
Preferred Stock or portions thereof so accepted; and
(iii) The Company shall deposit with the transfer agent for the
Series C Preferred Stock money sufficient to Pay the Change in Control
redemption price of all shares of Series C Preferred Stock or portions
thereof accepted for payment by the Company.
(iv) The Company shall deliver, or cause to be delivered, to the
transfer agent for the Series C Preferred Stock an officers' certificate
specifying the shares of Series C Preferred Stock or portions thereof
accepted for payment by the Company.
(d) The transfer agent for the Series C Preferred Stock shall promptly
mail to the holders of Series C Preferred Stock so accepted payment in an amount
equal to the Change in Control redemption price, and the transfer agent for the
Series C Preferred Stock shall promptly authenticate and mail to such holders of
Series C Preferred Stock a new certificate representing shares of Series C
Preferred Stock equal in number to any unredeemed shares of Series C Preferred
Stock surrendered; provided that each share of Series C Preferred stock redeemed
and
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each new certificate representing shares of Series C Preferred Stock issued
shall be in whole shares. The Company will notify the holders of Series C
Preferred Stock of the results of the Change in Control offer on or as soon as
practicable after the Change in Control Redemption Date.
11. Miscellaneous.
(a) No Impairment. The Company shall not, by amendment of its Certificate
of Incorporation or through any reorganization, transfer of assets,
consolidation, merger, dissolution, issue or sale of securities or any other
voluntary action, avoid or seek to avoid the observance or performance of any of
the terms to be observed or performed hereunder by the Company.
(b) Notices. All notices and other communications hereunder shall be in
writing and shall be deemed given (i) on the same date, if delivered personally
or by facsimile by not later than 5:00 p.m. New York time (provided, that a copy
of such facsimile shall be simultaneously sent to Compost America Holding
Company, Inc. at 320 Grand Avenue, Englewood, New Jersey 07631), or (ii) three
business days following being mailed by certified or registered mail, postage
prepaid, return-receipt requested, addressed to the holder of record at its
address appearing on the books of the Company.
IN WITNESS WHEREOF, the undersigned have executed this certificate as of
the 3rd day of November, 1997.
COMPOST AMERICA HOLDING COMPANY, INC.
By:
-------------------------------------
Name: Roger E. Tuttle
Chairman of the Board, President,
Chief Executive Officer and Treasurer
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Exhibit 4.4
EXHIBIT C
REGISTRATION RIGHTS AGREEMENT
dated as of
October __, 1997
between
COMPOST AMERICA HOLDING COMPANY, INC.
and
ROBERT J. LONGO
<PAGE>
TABLE OF CONTENTS
Page
----
ARTICLE 1 DEFINITIONS.........................................................2
1.1 Definitions.................................................2
ARTICLE 2 REGISTRATION RIGHTS.................................................4
2.1 Piggyback Registration......................................4
2.2 Registration Procedures.....................................5
2.3 Preparation: Reasonable Investigation.......................9
2.4 Certain Rights of Holders...................................9
2.5 Registration Expenses.......................................9
2.6 Indemnification; Contribution..............................10
2.7 Participation in Underwritten Registrations................12
2.8 Selection of Underwriters..................................12
ARTICLE 3 RULE 144...........................................................13
ARTICLE 4 MISCELLANEOUS......................................................13
4.1 Entire Agreement...........................................13
4.2 Successors and Assigns.....................................13
4.3 Notices....................................................13
4.4 Headings...................................................14
4.5 Counterparts...............................................15
4.6 Applicable Law.............................................15
4.7 Specific Enforcement.......................................15
4.8 Amendment and Waivers......................................15
<PAGE>
REGISTRATION RIGHTS AGREEMENT
REGISTRATION RIGHTS AGREEMENT, dated as of October __, 1997 (the
"Agreement"), between COMPOST AMERICA HOLDING COMPANY, INC., a New Jersey
corporation (the "Company"), and ROBERT J. LONGO, an individual residing at 71
Roxitichus Road, Mendham, New Jersey 07945 (the "Holder").
RECITALS
WHEREAS, the Company has agreed to sell to the Holder, and the Holder has
agreed to purchase from the Company, shares of Series A Preferred Stock (as
defined herein) and Series C Preferred Stock (as defined herein) of the Company,
upon the terms and subject to the conditions set forth in that certain Stock
Purchase Agreement, dated as of the date hereof (the "Stock Purchase
Agreement"), by and between the Company and the Holder;
WHEREAS, it is a condition precedent to the obligations of the Holder
under the Stock Purchase Agreement that the Company grant certain registration
rights in respect of the Restricted Securities (as defined herein); and
WHEREAS, the Company and the Holder desire to evidence such registration
rights by entering into this Agreement.
AGREEMENT
The parties hereto agree as follows:
ARTICLE 1
DEFINITIONS
1.1 Definitions. The following terms, as used herein, have the following
meanings.
"Business Day" means any day except a Saturday, Sunday or other day on
which banks in New York are authorized by law to close.
"Commission" means the Securities and Exchange Commission.
"Common Stock" means the common stock, no par value, of the Company.
"Effective Time" means the date of effectiveness of any Registration
Statement.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"NASD" means the National Association of Securities Dealers, Inc.
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"Person" means an individual, corporation, partnership, association, trust
or other entity or organization, including a government or political subdivision
or an agency or instrumentality thereof.
"Series A Preferred Stock" means the Series A Preferred Stock, no par
value, of the Company, issued pursuant to the Stock Purchase Agreement.
"Series C Preferred Stock" means the Series C Preferred Stock, no par
value, of the Company, issued pursuant to the Stock Purchase Agreement.
"Prospectus" means the prospectus included in any Registration Statement,
as amended or supplemented by any prospectus supplement and by all other
amendments thereto, including post-effective amendments, and all material
incorporated by reference into such Prospectus.
The term "register" means to register under the Securities Act and
applicable state securities laws for the purpose of effecting a public sale of
securities.
"Registration Statement" means the Registration Statement of the Company
relating to the registration for sale of shares of the Company's Common Stock
contemplated by Section 2.1, including the Prospectus included therein, all
amendments and supplements thereto (including post-effective amendments) and all
exhibits and material incorporated by reference therein.
"Restricted Securities" means any Securities until (i) a registration
statement covering such Securities has been declared effective by the Commission
and such Securities have been disposed of pursuant to such effective
registration statement, (ii) such Securities are sold under circumstances in
which all the applicable conditions of Rule 144 (or any similar provisions then
in force) under the Securities Act are met, or such Securities may be sold
pursuant to Rule 144(k) (or any similar provision then in force) under the
Securities Act, and are freely tradable after such sale by the transferee, (iii)
such Securities are otherwise transferred, the Company has delivered a new
certificate or other evidence of ownership for such Securities not bearing a
legend restricting further transfer and such Securities may be resold without
registration under the Securities Act, or (iv) such Securities shall have ceased
to be outstanding.
"Securities" means the shares of Common Stock issuable by the Company to
the Holder upon conversion of the Series A Preferred Stock and the Series C
Preferred Stock.
"Securities Act" means the Securities Act of 1933, as amended.
As used in this Agreement, words in the singular include the plural, and
in the plural include the singular.
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ARTICLE 2
REGISTRATION RIGHTS
2.1 Piggyback Registration.
(a) At any time that the Company proposes to file a Registration
Statement, either for its own account or for the account of a stockholder or
stockholders, the Company shall give the Holder written notice of its intention
to do so and of the intended method of sale (the "Registration Notice") within a
reasonable time prior to the anticipated filing date of the Registration
Statement effecting such registration. The Holder may request inclusion of any
Restricted Securities in such Registration Statement by delivering to the
Company, within ten (10) Business Days after receipt of the Registration Notice,
a written notice (the "Piggyback Notice") stating the number of Restricted
Securities proposed to be included and that such shares are to be included in
any underwriting only on the same terms and conditions as the shares of Common
Stock otherwise being sold through underwriters under such Registration
Statement. The Company shall use its best efforts to cause all Restricted
Securities specified in the Piggyback Notice to be included in the Registration
Statement and any related offering, all to the extent requisite to permit the
sale by the Holder of such Restricted Securities in accordance with the method
of sale applicable to the other shares of Common Stock included in such
Registration Statement; provided, however, that if, at any time after giving
Registration Notice and prior to the Effective Time of the Registration
Statement filed in connection with such registration, the Company shall
determine for any reason not to register or to delay registration of such
securities, the Company may, at its election, give written notice of such
determination to the Holder and, thereupon:
(i) in the case of a determination not to register, shall be
relieved of its obligation to register any Restricted Securities in
connection with such registration (but not from its obligation to pay the
Registration Expenses in connection therewith), and
(ii) in the case of a delay in registering, shall be permitted to
delay registering any Restricted Securities for the same period as the
delay in registering such other securities.
(b) The Company's obligation to include Restricted Securities in a
Registration Statement pursuant to Section 2.1(a) shall be subject to the
following limitations:
(i) The Company shall not be obligated to include any Restricted
Securities in a registration statement filed on Form S-4, Form S-8 or such
other similar successor forms then in effect under the Securities Act.
(ii) If a Registration Statement involves an underwritten offering
and the managing underwriter advises the Company in writing that, in its
opinion, the number of securities requested to be included in such
Registration Statement exceeds the number which can be sold in such
offering without adversely affecting the offering, the Company will
include in such Registration Statement the number of such Securities which
the Company is so advised can be sold in such offering without adversely
affecting the offering, determined as follows:
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(A) first, the securities proposed by the Company to be
sold for it own account, and
(B) second, any Restricted Securities requested to be
included in such registration and any other securities of the
Company in accordance with the priorities, if any, then
existing among the holders of such securities pro rata among
the holders thereof requesting such registration on the basis
of the number of shares of such securities requested to be
included by such holders.
(iii) The Company shall not be obligated to include Restricted
Securities in more than two (2) Registration Statement(s).
(c) The Holder may not include any of its Restricted Securities in the
Company Registration Statement pursuant to this Agreement unless and until such
Holder furnishes to the Company in writing, within 10 Business Days after
receipt of a written request therefor, such information specified in Item 507 of
Regulation S-K under the Securities Act and such other information as the
Company may reasonably request for use in connection with the Registration
Statement or Prospectus or preliminary Prospectus included therein and in any
application to the NASD. The Holder agrees to furnish promptly to the Company
all information required to be disclosed in order to make all information
previously furnished to the Company by such Holder not materially misleading.
2.2 Registration Procedures. In connection with any Registration Statement and
any Prospectus required by this Agreement to permit the sale or resale of
Restricted Securities, the Company shall:
(a) prepare and file with the Commission such amendments and
post-effective amendments to such Registration Statement as may be necessary to
keep such Registration Statement effective until such time as all of such
securities have been disposed of in accordance with the intended methods of
disposition by the seller or sellers thereof set forth in such Registration
Statement; cause the Prospectus to be supplemented by any required Prospectus
supplement, and as so supplemented to be filed pursuant to Rule 424 under the
Securities Act, and to comply fully with the applicable provisions of Rules 424
and 430A, as applicable, under the Securities Act in a timely manner; and comply
with the provisions of the Securities Act with respect to the disposition of all
securities covered by such Registration Statement during the applicable period
in accordance with the intended method or methods of distribution by the sellers
thereof set forth in such Registration Statement or supplement or the
Prospectus;
(b) promptly (and in respect of events covered by clause (i) hereof, on
the same day as the Company shall receive notice of effectiveness) advise the
Holder and, if requested by such Persons, to confirm such advice in writing, (i)
when the Prospectus or any Prospectus supplement or post-effective amendment has
been filed, and when the same has become effective, (ii) of any request by the
Commission for post-effective amendments to such Registration Statement or
post-effective amendments to such Registration Statement or post-effective
amendments or supplements to the
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Prospectus or for additional information relating thereto, (iii) of the issuance
by the Commission of any stop order suspending the effectiveness of any such
Registration Statement under the Securities Act or of the suspension by any
state securities commission of the qualification of the Restricted Securities
for offering or sale in any jurisdiction, or the initiation of any proceeding
for any of the preceding purposes, and (iv) of the existence of any fact or the
happening of any event that makes any statement of a material fact made in any
such Registration Statement, the related Prospectus, any amendment or supplement
thereto, or any document incorporated by reference therein untrue, or that
requires the making of any additions to or changes in any such Registration
Statement or the related Prospectus in order to make the statements therein not
misleading. If at any time the Commission shall issue any stop order suspending
the effectiveness of such Registration Statement, or any state securities
commission or other regulatory authority shall issue an order suspending the
qualification or exemption from qualification of the Restricted Securities under
state securities or Blue Sky laws, the Company shall use its reasonable efforts
to obtain the withdrawal or lifting of such order at the earliest possible time;
(c) promptly furnish to the Holder, and each underwriter, if any, without
charge, at least one conformed copy of any Registration Statement, as first
filed with the Commission, and of each amendment thereto, including all
documents incorporated by reference therein and all exhibits (including exhibits
incorporated therein by reference) and such other documents as such Holder may
reasonably request;
(d) deliver to the Holder, and each underwriter, if any, without charge,
as many copies of the Prospectus (including each preliminary prospectus) and any
amendment or supplement thereto as such person reasonably may request.
(e) enter into such customary agreements and take all such other
reasonable action in connection therewith (including those reasonably requested
by the Holder or the underwriter(s), if any) required in order to expedite or
facilitate the disposition of such Restricted Securities pursuant to such
Registration Statement, including, but not limited to, dispositions pursuant to
an underwritten registration, and in such connection:
(i) make such representations and warranties to the Holder and
underwriter(s), if any, in form, substance and scope as are customarily made by
issuers to underwriters in underwritten offerings (whether or not sales of
securities pursuant to such Registration Statement are to be to an
underwriter(s)) and confirm the same if and when requested;
(ii) obtain opinions of counsel to the Company addressed to the
Holder and underwriter(s), if any, covering the matters customarily covered in
opinions requested in underwritten offerings (whether or not sales of securities
pursuant to such Registration Statement are to be made to an underwriter(s)) and
dated the Effective Time of any Registration Statement (and, in the case of any
underwritten sale of securities pursuant to such Registration Statement, each
closing date of sales to the underwriter(s) pursuant thereto);
(iii) use reasonable efforts to obtain comfort letters dated the
Effective Time of any Registration Statement (and, in the case of any
underwritten sale of securities pursuant to such
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Registration Statement, each closing date of sales to the underwriter(s)
pursuant thereto) from the independent certified public accountants of the
Company addressed to the Holder and underwriter, if any, such letters to be in
customary form and covering matters of the type customarily covered in comfort
letters in connection with underwritten offerings (whether or not sales of
securities pursuant to such Registration Statement are to be made to an
underwriter(s));
(iv) provide for the indemnification provisions and procedures of
Section 2.4 hereof with respect to the Holder and the underwriter(s), if any,
and;
(v) deliver such documents and certificates as may be reasonably
requested by the Holder or the underwriter(s), if any, and which are customarily
delivered in underwritten offerings (whether or not sales of securities pursuant
to such Registration Statement are to be made to an underwriter(s), with such
documents and certificates to be dated the Effective Time of any Registration
Statement.
The actions required by clauses (i) through (v) above shall be done at
each closing under such underwriting or similar agreement, as and to the extent
required thereunder, and if at any time the representations and warranties of
the Company contemplated in clause (i) above cease to be true and correct, the
Company shall so advise the underwriter(s), if any, and the Holder promptly,
and, if requested by such Person, shall confirm such advice in writing;
(f) prior to any public offering of Restricted Securities, cooperate with
the Holder, the underwriter(s), if any, and their respective counsel in
connection with the registration and qualification of the Restricted Securities
under the securities or Blue Sky laws of such U.S. jurisdictions as the Holder
or underwriter(s), if any, may reasonably request in writing by the time any
Registration Statement is declared effective by the Commission, and do any and
all other acts or filings necessary or advisable to enable disposition in such
U.S. jurisdictions of the Restricted Securities covered by any Registration
Statement and to file such consents to service of process or other documents as
may be necessary in order to effect such registration or qualification;
provided, however, that the Company shall not be required to register or qualify
as a foreign corporation in any jurisdiction where it is not then so qualified
or as a dealer in securities in any jurisdiction where it would not otherwise be
required to register or qualify but for this Section 2.2, or to take any action
that would subject it to the service of process in suits or to taxation, in any
jurisdiction where it is not then so subject;
(g) in connection with any sale of Restricted Securities that will result
in such securities no longer being Restricted Securities, cooperate with the
Holder and the underwriter(s), if any, to facilitate the timely preparation and
delivery of certificates representing Restricted Securities to be sold and not
bearing any restrictive legends; and enable such Restricted Securities to be in
such denominations and registered in such names as the Holder or the
underwriter(s), if any, may request at least two (2) Business Days prior to any
sale of Restricted Securities made by such underwriters;
(h) use its reasonable efforts to cause the disposition of the Restricted
Securities covered by any Registration Statement to be registered with or
approved by such other U.S. governmental agencies or authorities as may be
necessary to enable the seller or sellers thereof or the underwriter(s),
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<PAGE>
if any, to consummate the disposition of such Restricted Securities, subject to
the proviso contained in Subsection (f) of this Section 2.2;
(i) if any fact or event contemplated by Section 2.2(b) shall exist or
have occurred, prepare a supplement or post-effective amendment to any
Registration Statement or related Prospectus or any document incorporated
therein by reference or file any other required document so that, as thereafter
delivered to the purchasers of Restricted Securities, the Prospectus will not
contain an untrue statement of a material fact or omit to state any material
fact necessary to make the statement therein not misleading;
(j) cooperate and assist in the performance of any due diligence
investigation by any underwriter (including any "qualified independent
underwriter") that is required to be retained in accordance with the rules and
regulations of the NASD, and use its reasonable efforts to cause any
Registration Statement to become effective and approved by such U.S.
governmental agencies or authorities as may be necessary to enable the Holder to
consummate the disposition of such Restricted Securities;
(k) otherwise use its reasonable efforts to comply with all applicable
rules and regulations of the Commission, and make generally available to its
security holders with regard to such Registration Statement, as soon as
practicable, a consolidated earnings statement meeting the requirements of Rule
158 (which need not be audited) for the twelve-month period (i) commencing at
the end of any fiscal quarter in which Restricted Securities are sold to the
underwriter in a firm or best efforts underwritten offering or (ii) if not sold
to an underwriter in such an offering, beginning with the first month of the
Company's first fiscal quarter commencing after the effective date of any
Registration Statement;
(l) provide a CUSIP number for all Restricted Securities not later than
the Effective Time of any Registration Statement;
(m) use its best efforts to qualify for inclusion, not later than the
Effective Time of such Registration Statement, all Restricted Securities covered
by such Registration Statement in the OTC Bulletin Board of the NASD, or any
other trading market on which the Common Stock of the Company is then admitted
for trading, and
(n) provide promptly to Holder upon request each document filed with the
Commission pursuant to the requirements of Section 12 and Section 14 of the
Exchange Act.
The Holder agrees by acquisition of a Restricted Security that, upon
receipt of any notice from the Company of the existence of any fact of the kind
described in Section 2.2(b)(iv), such Holder will forthwith discontinue
disposition of Restricted Securities pursuant to any Registration Statement
until such Holder's receipt of the copies of the supplemented or amended
Prospectus contemplated by Section 2.2(i), or until it is advised in writing, in
accordance with the notice provisions of Section 4.3 herein (the "Advice"), by
the Company that the use of the Prospectus may be resumed, and has received
copies of any additional or supplemental filings that are incorporated by
reference in the
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Prospectus. If so directed by the Company, the Holder will deliver to the
Company all copies, other than permanent file copies, then in such Holder's
possession, of the Prospectus covering such Restricted Securities that was
current at the time of receipt of such notice.
2.3 Preparation; Reasonable Investigation. In connection with preparation and
filing of each Registration Statement under the Securities Act, the Company will
give the Holder, its underwriter, if any, and their respective counsel and
accountants, the opportunity to participate in the preparation of such
Registration Statement, each prospectus included therein or filed with the
Commission, and each amendment thereof or supplement thereto, and will give each
to them access to its books and records and such opportunities to discuss the
business, finances and accounts of the Company and its subsidiaries with its
officers, directors and the independent public accountants who have certified
its financial statements as shall be necessary, in the reasonable opinion of the
Holder and such underwriters ' respective counsel, to conduct a reasonable
investigation within the meaning of the Securities Act.
2.4 Certain Rights of the Holder. The Company will not file any registration
statement under the Securities Act which refers to the Holder by name or
otherwise without the prior approval of such Holder, which consent shall not be
unreasonably withheld or delayed.
2.5 Registration Expenses.
(a) All expenses incident to the Company's performance of or compliance
with this Agreement will be borne by the Company, regardless of whether a
Registration Statement becomes effective, including without limitation: (i) all
registration and filing fees and expenses (including filings made with the NASD
and reasonable counsel fees in connection therewith); (ii) all reasonable fees
and expenses of compliance with federal securities and state Blue Sky or
securities laws (including all reasonable fees and expenses of one counsel to
the underwriter(s) in any underwriting) in connection with compliance with state
Blue Sky or securities laws for up to 10 states; (iii) all expenses of printing,
messenger and delivery services and telephone calls; (iv) all fees and
disbursements of counsel for the Company; and (v) all fees and disbursements of
independent certified public accountants of the Company (including the expenses
of any special audit and comfort letters required by or incident to such
performance), but excluding from this paragraph, fees and expenses of counsel to
the underwriter(s), if any, unless otherwise set forth herein.
(b) Notwithstanding the foregoing, the Company will not be responsible for
any underwriting discounts, commissions or fees attributable to the sale of
Restricted Securities or any legal fees or disbursements (other than any such
fees or disbursements relating to Blue Sky compliance or otherwise as set for
the under Section 2.5(a)) incurred by any underwriter(s) in any underwritten
offering if the underwriter(s) participates in such underwritten offering at the
request of the Holder, or any transfer taxes that may be imposed in connection
with a sale or transfer of Restricted Securities.
(c) The Company shall, in any event, bear its internal expenses
(including, without limitation, all salaries and expenses of its officers and
employees performing legal or accounting duties), the expenses of any annual
audit and the fees and expenses of any Person, including special experts,
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<PAGE>
retained by the Company.
2.6 Indemnification; Contribution.
(a) The Company agrees to indemnify and hold harmless (i) the Holder, (ii)
each other Person who participates as an underwriter in the offering or sale of
such securities, (iii) each person, if any, who controls (within the meaning of
Section 15 of the Securities Act or Section 20 of the Exchange Act) the Holder
or underwriter (any of the persons referred to in this clause (iii) being
hereinafter referred to as a "controlling person") and (iv) the respective
officers, directors, partners, employees, representatives and agents of the
Holder or underwriter or any controlling person (any person referred to in
clause (i), (ii), (iii) or (iv) may hereinafter be referred to as an
"indemnified Person"), to the fullest extent lawful, from and against any and
all losses, claims, damages, liabilities, judgments or expenses, joint or
several (or actions or proceedings, whether commenced or threatened, in respect
thereof) (collectively, "Claims"), to which such indemnified Person may become
subject under either Section 15 of the Securities Act or Section 20 of the
Exchange Act or otherwise, insofar as such Claims arise out of or are based
upon, or are caused by any untrue statement or alleged untrue statement of a
material fact contained in any Registration Statement or Prospectus (or any
amendment or supplement thereto), or any omission or alleged omission to state
therein a material fact required to be stated therein or necessary to make the
statements therein not misleading, or a violation by the Company of the
Securities Act or any state securities law, or any rule or regulation
promulgated under the Securities Act or any state securities law, or any other
law applicable to the Company relating to any such registration or
qualification, except insofar as such losses, claims, damages, liabilities,
judgments or expenses of any such indemnified Person; (x) are caused by any such
untrue statement or omission or alleged untrue statement or omission that is
based upon information relating to such indemnified Person furnished in writing
to the Company by or on behalf of any of such indemnified Person expressly for
use therein; (y) with respect to the preliminary Prospectus, result from the
fact that the Holder sold Securities to a person to whom there was not sent or
given, at or prior to the written confirmation of such sale, a copy of the
Prospectus, as amended or supplemented, if the Company shall have previously
furnished copies thereof to the Holder in accordance with this Agreement and
said Prospectus, as amended or supplemented, would have corrected such untrue
statement or omission; or (z) as a result of the use by an indemnified Person of
any Prospectus when, upon receipt of a notice from the Company of the existence
of any fact of the kind described in Section 2.2(b)(iv), the indemnified Person
or the Holder was not permitted to do so. Such indemnity shall remain in full
force and effect regardless of any investigation made by or on behalf of any
indemnified Person and shall survive the transfer of such securities by such
Holder.
In case any action shall be brought or asserted against any of the
indemnified Persons with respect to which indemnity may be sought against the
Company, such indemnified Person shall promptly notify the Company and the
Company shall assume the defense thereof. Such indemnified Person shall have the
right to employ separate counsel in any such action and to participate in the
defense thereof, but the fees and expenses of such counsel shall be at the
expense of the indemnified Person unless (i) the employment of such counsel
shall have been specifically authorized in writing by the Company, (ii) the
Company shall have failed to assume the defense and employ counsel or (iii) the
named parties to any such action (including any implied parties) include both
the indemnified Person
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and the Company and the indemnified Person shall have been advised in writing by
its counsel that there may be one or more legal defenses available to it which
are different from or additional to those available to the Company (in which
case the Company shall not have the right to assume the defense of such action
on behalf of the indemnified Person), it being understood, however, that the
Company shall not, in connection with such action or similar or related actions
or proceedings arising out of the same general allegations or circumstances, be
liable for the reasonable fees and expenses of more than one separate firm of
attorneys (in addition to any local counsel) at any time for all the indemnified
Persons, which firm shall be (x) designated by such indemnified Persons and (y)
reasonably satisfactory to the Company. The Company shall not be liable for any
settlement of any such action or proceeding effected without the Company's prior
written consent, which consent shall not be withheld unreasonably, and the
Company agrees to indemnify and hold harmless any indemnified Person from and
against any loss, claim, damage, liability, judgment or expense by reason of any
settlement of any action effected with the written consent of the Company. The
Company shall not, without the prior written consent of each indemnified Person,
settle or compromise or consent to the entry of judgment on or otherwise seek to
terminate any pending or threatened action, claim, litigation or proceeding in
respect of which indemnification or contribution may be sought hereunder
(whether or not any indemnified Person is a party thereto), unless such
settlement, compromise, consent or termination includes an unconditional release
of each indemnified Person from all liability arising out of such action, claim
litigation or proceeding.
(b) The Holder agrees to indemnify and hold harmless the Company and its
directors, officers and any person controlling (within the meaning of Section 15
of the Securities Act or Section 20 of the Exchange Act) the Company, and the
respective officers, directors, partners, employees, representatives and agents
of each person, to the same extent as the foregoing indemnity from the Company
to each of the indemnified Persons, but only (i) with respect to actions based
on information relating to the Holder furnished in writing by or on behalf of
such Holder expressly for use in any Registration Statement or Prospectus, and
(ii) to the extent of the gross proceeds, if any, received by such Holder from
the sale or other disposition of its Restricted Securities covered by such
Registration Statement. In case any action or proceeding shall be brought
against the Company or its directors or officers or any such controlling person
in respect of which indemnity may be sought against the Holder, such Holder
shall have the rights and duties given the Company in Section 2.6(a) (except
that the Holder may but shall not be required to assume the defense thereof),
and the Company or its directors or officers or such controlling person shall
have the rights and duties given to the Holder by Section 2.6(a).
(c) If the indemnification provided for in this Section 2.6 is unavailable
to an indemnified party under Section 2.5(a) or (b) (other than by reason of
exceptions provided in those Sections) in respect of any losses, claims,
damages, liabilities, judgments or expenses referred to therein, then each
applicable indemnifying party, in lieu of indemnifying such indemnified party,
shall contribute to the amount paid or payable by such indemnified party as a
result of such losses, claims damages, liabilities, judgments or expenses (i) in
such proportion as is appropriate to reflect the relative benefits received by
the Company on the one hand and the Holder on the other hand from sale of
Restricted Securities or (ii) if such allocation provided by clause (i) above is
not permitted by applicable law, in such proportion as is appropriate to reflect
not only the relative benefits referred to in clause (i) above but also the
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relative fault of the Company and the Holder in connection with the statements
or omissions which resulted in such losses, claims, damages, liabilities,
judgments or expenses, as well as any other relevant equitable considerations.
The relative fault of the Company on the one hand and of the Holder on the other
shall be determined by reference to, among other things, whether the untrue or
alleged untrue statement of a material fact or the omission or alleged omission
to state a material fact relates to information supplied by the Company or by
the Holder and the parties relative intent, knowledge, access to information and
opportunity to correct or prevent such statement or omission. The amount paid to
a party as a result of the losses, claims, damages, liabilities judgments and
expenses referred to above shall be deemed to include, subject to the
limitations set forth in the second paragraph of Section 2.6(a), any legal or
other fees or expenses reasonably incurred by such party in connection with
investigating or defending any action or claim.
The Company and the Holder agree that it would not be just and equitable
if contribution pursuant to this Section 2.6(c) were determined by pro rata
allocation or by any other method of allocation which does not take into account
the equitable considerations referred to in the immediately preceding paragraph.
Notwithstanding the provisions of this Section 2.6(c) the Holder (and its
related indemnified Persons) shall not be required to contribute, in the
aggregate, any amount in excess of the amount by which the dollar amount of
proceeds received by such Holder upon the sale of the Restricted Securities
exceeds the amount of any damages which such Holder has otherwise been required
to pay by reason of such untrue statement or omission or alleged omission. No
person guilty of fraudulent misrepresentations (within the meaning of Section
11(f) of the Securities Act) shall be entitled to contribution from any person
who was not guilty of such fraudulent misrepresentation.
The indemnity, and contribution provisions contained in this Section 2.6
are in addition to any liability which the indemnifying person may otherwise
have to the indemnified persons referred to above.
2.7 Participation in Underwritten Registrations. The Holder may not participate
in any underwritten registration hereunder unless such Holder (a) agrees to sell
such Holder's Restricted Securities on the basis provided in any underwriting
arrangements approved by the Persons entitled hereunder to approve such
arrangements and (b) completes and executes all reasonable questionnaires,
powers of attorney, indemnities, underwriting agreements, lock-up letters and
other documents required under the terms of such underwriting arrangements.
2.8 Selection of Underwriters. In any underwritten offering, the investment
banker or investment bankers and manager or managers that will administer the
offering will be selected by the Company. Such investment bankers and managers
are referred to herein as the "underwriters".
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ARTICLE 3
RULE 144
3.01 Rule 144 Reporting. With a view to making available the benefits of certain
rules and regulations of the Commission which may permit the sale of restricted
securities (as that term is used in Rule 144 under the Securities Act) to the
public without registration, the Company agrees to use its best efforts to:
(a) make and keep public information available as those terms are
understood and defined in Rule 144 under the Securities Act, at all times;
(b) file with the Commission in a timely manner all reports and
other documents required of the Company under the Securities Act and the
Exchange Act; and
(c) so long as the Holder owns any Restricted Securities, furnish to
the Holder forthwith upon request a written statement by the Company as to its
compliance with the reporting requirements of Rule 144 and of the Securities Act
and Exchange, a copy of the most recent annual or quarterly report of the
Company, and such other reports and documents so filed as the Holder may
reasonably request in availing itself of any rule or regulation of the
Commission allowing the Holder to sell any such Restricted Securities without
registration.
ARTICLE 4
MISCELLANEOUS
4.1 Entire Agreement. This Agreement, together with the Stock Purchase
Agreement, constitutes the entire agreement between the parties with respect to
the subject matter hereof and supersedes all prior agreement and understandings,
both oral and written, between the parties with respect to the subject matter
hereof.
4.2 Successors and Assigns. This Agreement shall inure to the benefit of and be
binding upon the successors and assigns of each of the parties, including
without limitation and without the need for an express assignment, subsequent
holders of Restricted Securities; provided, however, that this Agreement shall
not inure to the benefit of or be binding upon a successor or assign of the
Holder unless and to the extent such successor or assign acquired Restricted
Securities from the Holder at a time when the Holder could not transfer such
Restricted Securities pursuant to any Registration Statement or pursuant to Rule
144 under the Securities Act as contemplated by clause (ii) of the definition of
Restricted Securities.
4.3. Notices. All notices and other communications given or made pursuant hereto
or pursuant to any other agreement among the parties, unless otherwise
specified, shall be in writing and shall be deemed to have been duly given or
made if sent by telecopy (with confirmation in writing), delivered
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personally or by overnight courier or sent by registered or certified mail
(postage prepaid, return receipt requested) to the parties at the telecopy
number, if any, or address set forth below or at such other addresses as shall
be furnished by the parties by like notice. Notices sent by telecopier shall be
effective when receipt is acknowledged, notices delivered personally or by
overnight courier shall be effective upon receipt and notices sent by registered
or certified mail shall be effective three days after mailing:
if to the Holder: Mr. Robert J. Longo
R.J. Longo Construction Co., Inc.
305 Palmer Road
Denville, New Jersey 07834
Fax: (201) 328-8859
Telephone: (201) 361-3300
with a copy to: Okin, Hollander & DeLuca, L.L.P.
One Parker Plaza
Fort Lee, New Jersey 07024
Attention: Paul Hollander, Esquire
Fax: (201) 947-2665
Telephone: (201) 947-7500
if to the Company: Compost America Holding Company, Inc.
320 Grand Avenue
Englewood, New Jersey 07631
Fax: (201) 541-1303
Telephone: (201) 541-9393
with a copy to: Greenberg Traurig Hoffman
Lipoff Rosen & Quentel, P.A.
2005 Market Street, Suite 2050
Philadelphia, PA 19103
Attention: Theodore W. Mason, Esq.
Fax: (215) 988-7801
Telephone: (215) 988-7805
4.4 Headings The headings contained in this Agreement are for convenience only
and shall not affect the meaning or interpretation of this Agreement.
4.5 Counterparts. This Agreement may be executed in any number of counterparts,
each of which shall be deemed to be an original and all of which together shall
be deemed to be one and the same instrument.
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4.6 Applicable Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of New York, without giving effect to
choice law provisions.
4.7 Specific Enforcement. Each party hereto acknowledges that the remedies at
law of the other parties for a breach or threatened breach of this Agreement
would be inadequate, and, in recognition of this fact, any party to this
Agreement, without posting any bond, and in addition to all other remedies which
may be available, shall be entitled to obtain equitable relief in the form of
specific performance, a temporary restraining order, a temporary to permanent
injunction or any other equitable remedy which may then be available.
4.8 Amendment and Waivers. The provisions of this Agreement may not be amended,
modified or supplemented, and waivers or consents to or departures from the
provisions hereof may not be given unless the Company has obtained the written
consent of Holders of a majority of the Restricted Securities.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed by their respective authorized officers as of the day and year
first above written.
COMPOST AMERICA HOLDIING COMPANY, INC.
By:
--------------------------------------
Name:
Title
---------------------------
ROBERT J. LONGO
<PAGE>
Exhibit 9.1
Stockholders Agreement
<PAGE>
EXHIBIT H
STOCKHOLDERS AGREEMENT
STOCKHOLDERS AGREEMENT dated as of November 3, 1997 by and among
COMPOST AMERICA HOLDING COMPANY, INC., a New Jersey corporation (the "Company"),
WASTECO VENTURES LIMITED, a corporation organized under the laws of the British
Virgin Islands ("Wasteco"), ROBERT J. LONGO, an individual ("Longo"), ROGER E.
TUTTLE, an individual, ("Tuttle"), JOHN B. FETTER, an individual ("Fetter"),
ROBERT E. WORTMANN, an individual ("R. Wortmann"), VICTOR D. WORTMANN, SR., an
individual ("V. Wortmann"), VRH CONSTRUCTION COMPANY, a New York corporation
("VRH"), SELECT ACQUISITIONS, INC., a Colorado corporation ("Select"), and
ALFRED A. RATTIE, an individual ("Rattie").
WHEREAS, pursuant to separate stock purchase arrangements between
Wasteco and Longo (together the "New Common Stockholders") and the Company, the
New Common Stockholders have acquired common stock ("Common Stock") of the
Company as well as certain other securities and rights; and
WHEREAS, the Company and the others signing this agreement (each a
"Stockholder Party") desire to set forth their agreement concerning the
management of the Company and such other matters as are set forth herein;
NOW, THEREFORE, in consideration of the mutual and dependent
promises set forth in this Agreement, the Company and the Stockholder Parties
agree as follows:
ARTICLE I
BOARD OF DIRECTORS AND STOCKHOLDERS
SECTION 1.01. The Stockholder Parties, except as otherwise provided
herein, shall vote to cause the Board of Directors of the Company (the "Board")
to consist of seven (7) directors and the various provisions of this Agreement
shall be construed to relate to a Board of seven (7) directors. At least two of
the directors (other than the directors designated as provided below) shall be
"independent" directors. Except as provided in Section 1.02, Wasteco shall have
the right to designate two directors and Longo shall have the right to designate
one director. Should the Board be increased or decreased in size, the proportion
of directors then designated by Wasteco and Longo, as well as the proportion of
independent directors, shall be strictly maintained. Any right to designate
which shall result in a fraction of one shall be adjusted upward to provide an
additional director.
<PAGE>
2
SECTION 1.02. Should the total number of votes that Wasteco is
entitled to cast for the election of directors be less than 15% of the total
number of votes that could be cast in such election, the number of directors
designated by Wasteco shall be decreased to one. Should such total number of
votes that Wasteco is entitled to cast be more than 30% of such total number of
votes that could be cast, the number of directors designated by Wasteco shall be
increased to three. Should such total number of votes that Wasteco is entitled
to cast be more than 50% of such total number of votes that could be cast, the
number of directors designated by Wasteco shall be increased to four. Should the
total number of votes that either or both of Wasteco and Longo is entitled to
cast for the election of directors be less than 5% of the total number of votes
that could be cast in such election, no director may be designated by such
party, provided, however, that one director each shall be retained until
November 3, 2004 by each of Wasteco and Longo if they retain any securities of
the Company.
SECTION 1.03. Each Stockholder Party shall vote all shares of any
securities of the Company entitled to vote, owned by such Stockholder Party, to
cause the election to the Board of the individuals designated by the Stockholder
Parties in accordance with Sections 1.01 and 1.02.
SECTION 1.04. (a) Any agreement by the Stockholder Parties herein to
vote their shares of Common Stock in a certain manner shall be deemed, in each
instance, to include an agreement by each Stockholder Party to use such
Stockholder Party's best efforts and to take all actions necessary to call, or
cause the Company and the appropriate officers and directors of the Company to
call, as promptly as practicable, a special or annual meeting of stockholders or
to act by written consent.
(b) When any action is required to be taken by a Stockholder Party
pursuant to this Agreement, such Stockholder Party shall take all steps
necessary to implement such action, including, without limitation, executing or
causing to be executed, as promptly as practicable, a consent in writing in lieu
of an annual or special meeting of the stockholders.
(c) Unless expressly stated to the contrary herein, any action
requiring the vote of the directors (or any committee thereof) may be effected
by consent in lieu of a meeting of the directors or committee members, as the
case may be.
SECTION 1.05. Each Stockholder Party shall vote all shares of Common
Stock owned by such Stockholder Party for the removal (with or without cause) of
any director designated and elected pursuant to Section 1.01 hereof if the
Stockholder Party entitled to designate such director pursuant to Section 1.01
requests such removal by written notice to the other Stockholder Parties.
<PAGE>
3
SECTION 1.06. If, as a result of death, disability, retirement,
resignation, removal (with or without cause) of any director, or otherwise there
shall exist or occur any vacancy on the Board, then:
(i) the Stockholder Parties entitled to designate (pursuant to
Section 1.01 hereof) the director whose death, disability, retirement,
resignation or removal resulted in such vacancy may designate another
individual to fill such capacity and to serve as a director of the
Company, and
(ii) each Stockholder Party shall vote its respective shares in
favor of the individual designated in accordance with clause (i) above to
fill such vacancy.
SECTION 1.07. Each Stockholder Party shall vote its shares of Common
Stock, and shall take all other actions necessary, to ensure that the Articles
of Incorporation and By-laws facilitate and do not at any time conflict with the
provisions of this Agreement.
SECTION 1.08. Except as specified herein or as authorized by the
entire Board in writing, the Stockholder Parties shall not cause or suffer the
existence of any empowerment of any committee or other group of directors to act
in the place and stead of the Board.
SECTION 1.09. The Board shall have a Compensation Committee which
shall consist of four directors, the two independent directors and two directors
designated by Wasteco. All issuances of securities of Compost or any subsidiary
to employees of the Company or other persons or entities in respect of services
to the Company or any subsidiary shall be approved by a majority vote of the
Compensation Committee as well as by the Board.
SECTION 1.10. Except as specified herein, neither the Company or any
Subsidiary shall take, and no Stockholder Party to this Agreement shall cause
the Company or any Subsidiary to take, any action, without the resolution of a
majority of the Board with respect to (i) any significant project, construction
or engagement commenced after November 3, 1997, (ii) any merger, consolidation,
or divestiture, (iii) any sale, lease, transfer, exchange or other disposition
of substantial assets, (iv) any material financial arrangement or indebtedness,
(v) any purchase, lease, exchange or other acquisition of substantial assets,
(vi) any increase or reduction of, or change in, the Company's authorized
capital stock, or the creation of any additional class of capital stock of the
Company, (vii) any amendment to the Certificate of Incorporation or Bylaws of
the Company, (viii) the dissolution, liquidation, reorganization or application
for receivership of the Company, (ix) any significant change in the conduct of
the business of the Company, (x) to increase or decrease the size of the Board
from seven (7) directors, and (xi) any such other substantial corporate change
as determined by the Board.
<PAGE>
4
ARTICLE II
SUBSIDIARIES AND AFFILIATES
SECTION 2.01. The Company agrees that it will cause its subsidiary,
EPIC INC, a New Jersey corporation ("EPIC"), to have a Board that is in all
respects similar to that of the Company in accordance with Section 1.01 of this
Agreement and to have By-Laws, a Certificate of Incorporation and other
governance rules substantially the same as those governing the conduct of the
business of the Company.
SECTION 2.02. Upon written demand of any Stockholder Party who
signed this Agreement on or about November 3, 1997, the Company agrees that it
will cause such other subsidiaries of the Company, directly and indirectly
owned, and any affiliates controlled by the Company as such demand shall include
to have a Board that is in all respects similar to that of the Company in
accordance with Section 1.01 of this Agreement and to have By-Laws, a
Certificate of Incorporation and other governance rules substantially the same
as those governing the conduct of the business of the Company.
ARTICLE III
LISTING
SECTION 3.01. The Company agrees that it will use its best efforts
to cause its Common Stock to obtain "Small Cap" status and NMS status as soon as
reasonably feasible.
ARTICLE IV
MISCELLANEOUS
SECTION 4.01. Each of the parties hereto represents that this
Agreement has been duly authorized, executed and delivered by such party and
constitutes a legal, valid and binding obligation of such party, enforceable
against it in accordance with the terms of this Agreement.
SECTION 4.02. The parties hereto agree that irreparable damage would
occur in the event any provision of this Agreement was not performed in
accordance with the terms hereof and that the parties shall be entitled to
specific performance of their terms hereof, in addition to any other remedy
available at law or in equity.
SECTION 4.03. Any term of this Agreement may be amended and the
observance of any such term may be waived (either generally or in a particular
instance and either retroactively or prospectively) only with the written
consent of the Company and all of
<PAGE>
5
the Stockholder Parties who signed this Agreement on or about November 3, 1997.
Each Stockholder Party shall be bound by any amendment or waiver authorized by
this Section 4.03, whether or not such Stockholder Party shall have consented
thereto.
SECTION 4.04. All notices and other communications provided for
herein shall be in writing and shall be delivered by hand, telecopied or sent by
certified or registered mail, return receipt requested, postage prepaid,
addressed in the manner set forth on the signature pages of this Agreement (or
in such other manner for a party as shall be specified in a notice given in
accordance with this Section). All such notices shall be conclusively deemed to
be received and shall be effective, if sent by hand delivery or telecopies, upon
receipt, or if sent by registered or certified mail, on the fifth day after the
day on which such notice is mailed.
SECTION 4.05. Except as otherwise provided herein, this Agreement
shall be binding upon and shall inure to the benefit of the parties hereto and
their respective successors and permitted assigns (including without limitation
the contemplated transfer of Wasteco's rights under this Agreement to a limited
partnership or another entity); provided, however, that this Agreement shall not
inure to the benefit of any prospective transferee unless such prospective
transferee shall have agreed in writing to be bound by the terms of this
Agreement. No Stockholder Party may assign any of its rights hereunder to any
person other than a transferee that has complied with the requirements of this
Section 4.05 in all respects, except that each party to this Agreement may sell
or otherwise transfer some or all shares of Common Stock owned by such party to
a non-affiliated institutional investor or investors or in an underwritten
public offering. Upon such transfer, this Agreement shall not be effective as to
such investor or investors. Nothing in this Agreement either express or implied
is intended to confer on any person other than the parties hereto and their
respective successors and permitted assigns, any rights, remedies or obligations
under or by reason of this Agreement.
SECTION 4.06. This Agreement shall terminate on the earlier to occur
of (i) November 3, 2004 or (ii) such earlier time as the Stockholder Parties
shall not collectively own at least 25% of the Common Stock of the Company.
SECTION 4.07. This Agreement sets forth the entire agreement and
understanding among the parties hereto, and supersedes all prior agreements and
understandings, relating to the subject matter hereof except for a certain
Wasteco Optional Participation Agreement between Tuttle and Wasteco and a
certain Longo Optional Participation Agreement between Tuttle and Longo, both
dated November 3, 1997. If any term or other provision of this Agreement is held
invalid, all other conditions and provisions of this Agreement shall
nevertheless remain in full force and effect, unless the term or provision held
invalid shall substantially impair the benefits of the remaining portions of
this Agreement and shall not limit or otherwise affect the meaning hereof. This
Agreement shall be governed by, and construed in accordance with, the laws of
the State of New Jersey,
<PAGE>
6
except that if the Company shall hereafter become a corporation governed by the
laws of another jurisdiction, the laws of that jurisdiction shall govern. This
Agreement may be executed in any number of counterparts, each of which shall be
deemed to be an original, but all of which together shall constitute one
instrument. Delivery of an executed counterpart of a signature page to this
Agreement by telecopier shall be effective as delivery of a manually executed
counterpart of this Agreement.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement in their individual capacity or caused it to be duly executed by their
respective signatories thereunto duly authorized as of the day and year first
above written.
COMPOST AMERICA HOLDING COMPANY, INC.
By:
------------------------------------
Title:
WASTECO VENTURES LIMITED
By:
------------------------------------
Title:
----------------------------------------
Robert J. Longo
----------------------------------------
Roger E. Tuttle
----------------------------------------
John B. Fetter
----------------------------------------
Robert E. Wortmann
----------------------------------------
Victor D. Wortmann, Sr.
<PAGE>
VRH CONSTRUCTION COMPANY
By:
------------------------------------
Title:
SELECT ACQUISITIONS, INC.
By:
------------------------------------
Title:
----------------------------------------
Alfred A. Rattie
<PAGE>
Exhibit 99.1
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT, made as of this 3rd day of November, 1997, by
and between ENVIRONMENTAL PROTECTION IMPROVEMENT COMPANY, INC. (EPIC), a New
Jersey corporation, with its principal offices located at 305 Palmer Road,
Denville, New Jersey 07834 (the "Company"), which is a wholly-owned
subsidiary of Compost America Holding Company, Inc. ("CAHC") and ROBERT J.
LONGO, an individual, residing at 305 Palmer Road, Denville, New Jersey 07834
(the "Executive").
W I T N E S S E T H:
WHEREAS, the Company desires the Executive to be employed by the Company,
and the Executive is desirous of such employment, upon the terms and
conditions set forth in this Agreement.
NOW, THEREFORE, in consideration of the foregoing and the mutual
covenants and agreements contained herein, the parties intending to be
legally bound hereby agree as follows:
1. Definitions. As used in this Agreement, the following terms shall
have the following meanings:
(a) "Agreement" means this Employment Agreement, as the same may,
from time to time, be amended in accordance with the provisions hereof.
(b) "Cause" means with respect to the Executive:
(i) Defrauding the Company in any way;
(ii) Being convicted of any crime that is punishable by
imprisonment for more than thirty (30) days and is not traffic or vehicular
related (whether or not the Executive is sentenced to imprisonment) or that
offends principles, generally
<PAGE>
accepted in the community, of general or business morals and ethics or
generally accepted principles of natural or moral law or that is such that
his conviction thereof would, by commonly accepted standards of the
professional community, justify his discharge;
(iii) An action taken in knowing contradiction to the best
interests of the Company;
(iv) Repeated refusal to perform job functions reasonably
required of him under this Agreement; or
(v) Any other act which has a direct, substantial and adverse
effect on the Company's reputation or business.
(c) "Company" means EPIC and its successors, whether now or
hereafter existing.
(d) "Competing Organization" means any person or legal entity
engaged in the rail transportation of sludge, municipal solid waste,
contaminated soils, dredge spoils and the like (collectively "Waste
Materials") in the United States of America.
(e) "Confidential Information" means any information in which the
Company has a legally protectable interest in preventing its unauthorized or
unintended disclosure to third parties and which is kept confidential by the
Company in the operation of its business or the conduct of its research and
which is not otherwise available to the public and is not available from any
source other than the Company, including, by way of illustration but not
limitation: source codes, object codes, engineering and other sketches,
drawings and tracings, specifications, engineering data,
2
<PAGE>
memoranda, designs, sources of supplies and materials, cost and financial
data, processes, production machines and equipment, procedures, customer
lists, marketing plans and business forecasts, together with all the
Company's Know-how and Technical Data relating thereto.
(f) "Customer" means any individual, firm, partnership,
corporation, company, joint venture or governmental or military unit or any
other entity which has a contract with the Company during the Term of this
Agreement for the transportation of Waste Materials.
(g) "Disability" means the Executive's inability to perform his
duties under this Agreement for a period of six (6) consecutive months, or
for eighty percent (80%) or more of the normal working days during the nine
(9) consecutive months then ending, because of his physical or mental illness
or infirmity. Should the Executive suffer a Disability as defined herein,
the Executive shall receive full Salary (as hereinafter defined) and
benefits, as set forth herein, for two (2) years from the date of the
Disability and, thereafter, one-half Salary for the balance of the Term of
this Agreement.
(h) "Future Inventions" means all inventions, discoveries, ideas,
concepts, designs and improvements of any sort, whether patentable,
copyrightable or not, relating in any way to the business of the Company with
respect to the rail transportation of Waste Materials, which the Executive
may, during the Term of
3
<PAGE>
this Agreement, conceive or invent, whether alone or jointly with others, and
whether during business hours or thereafter, and such term includes all
"know-how" and Technical Data relating to the foregoing, and all letters
patent and copyrights of the United States or any other country which may be
issued in connection with the foregoing.
(i) "Principal Office" means the principal office of the Company,
which currently is located in Denville, New Jersey. The Company represents
and warrants that during the Term of this Agreement, it will not require the
Executive to work at a location other than the Principal Office of the
Company, or if the Company elects to move the Principal Office, at a location
which is (a) more than thirty miles from the place where the Principal Office
of the Company is located on the effective date of this Agreement or (b)
which is more than five miles from the intersections of Routes 287, 202, 22
and 206 in New Jersey. If the Company requires the Executive to work at a
location which is (a) more than thirty miles from the place where the
Principal Office of the Company is located on the effective date of this
Agreement or (b) more than five miles from the intersections of Routes 287,
202, 22 and 206 in New Jersey, such requirement shall be deemed a termination
by the Company of this Agreement pursuant to Section 9(e) of this Agreement,
unless an alternative agreement regarding Principal Office is entered into
between the Company and the Executive.
(j) "Technical Data" means all written, printed and
4
<PAGE>
other tangible materials embodying or containing Know-how, and includes,
without limiting the generality of the foregoing, all correspondence,
designs, processes, source codes, object codes, engineering sketches,
drawings and tracings, specifications and engineering data, reporting
formats, memoranda, notebooks, and all copies thereof, together with all
models and prototypes of every description.
(k) "Term" means the period from the date of the execution of this
Employment Agreement to September 15, 2002 unless earlier terminated as
provided herein.
2. Employment. The Company hereby employs the Executive, and the
Executive hereby accepts such employment, upon the terms and subject to the
conditions set forth in this Agreement.
3. Duties. The Executive shall be employed by the Company as its
President and Chief Executive Officer and shall perform such duties and
render such services consistent therewith as may from time to time be
reasonably required of him by the Company's Chairman.
4. Extent of Service. During the Term of this Agreement, the Executive
agrees that he will:
(a) Serve the Company faithfully, diligently and to the best of his
ability under the reasonable direction of the Board;
(b) Devote his best efforts, attention and energy to the
performance of his duties hereunder and to promoting and furthering the
interests of the Company, taking, however, from time
5
<PAGE>
to time, reasonable vacations consistent with the performance of his
obligations hereunder and the vacation policies of the Company applicable to
all executives generally, not to exceed four (4) weeks in any calendar year.
The Executive shall be additionally compensated by the Company at his regular
weekly salary rate, for up to a maximum of two weeks unused vacation time per
year;
(c) Not without the prior written approval of the Chairman of the
Company, which approval shall not be unreasonably withheld, become associated
with or engaged with any business other than that of the Company, and will do
nothing inconsistent with his duties to the Company.
5. Term of Employment. The term of employment of the Executive under
this Agreement shall be guaranteed for the Term, unless terminated pursuant
to Paragraph 9 of this Agreement.
6. Basic Compensation; Bonus As basic compensation for the services to
be rendered hereunder by the Executive during the Term of this Agreement, the
Company agrees to pay to the Executive and the Executive agrees to accept, an
initial annual cash salary (the "Salary") of $325,000. On and after April
30, 1998, for each year during the Term, the Executive shall be entitled to
an annual bonus (the "Bonus") as specified on Schedule A attached hereto (the
"Bonus Formula"). The Salary payable to the Executive hereunder shall be paid
in equal installments during the Term, or in such other manner as shall be
consistent with the payroll policies of the Company applicable to all
executives. The Bonus shall be
6
<PAGE>
calculated in accordance with the Bonus Formula as of April 30th of each year
and shall be paid in a single installment each year within ninety (90) days
thereafter. At the sole option of the Executive, for any given year during
the Term of this Agreement, the Executive may choose to receive his Bonus in
either (a) cash or (b) unregistered common shares, no par value, of CAHC
("Shares") valued at the greater of (i) $2.00 per Share or (ii) eighty (80%)
percent of the last sale price of the Shares on the date payment is due.
7. Other Compensation. Upon the execution of this Agreement, the
Company shall issue to the Executive options to purchase 1,500,000
unregistered shares of the Company's common stock, no par value, at an option
price of $1.00 per share. 500,000 of these options will vest immediately
upon execution of this Agreement 200,000 on September 15, 1998, 200,000 on
September 15, 1999, 200,000 on September 15, 2000 and 200,000 on September
15, 2001 and 200,000 on September 15, 2002. All options not otherwise
exercised shall expire on September 16, 2002.
If, in the case of any offering of common shares by CAHC, within ten days
after Executive has been made aware by CAHC of its intention to effect a
registration of any of its common shares (otherwise than pursuant to a
registration statement on Form S-8 or similar form), the Executive may
request and CAHC shall honor the Executive's request that any common shares
of CAHC owned by the
7
<PAGE>
Executive be included in the registration statement.
Notwithstanding the foregoing, if the underwriter consents to the
inclusion in the registration statement of less than all shares proposed to
be offered by selling shareholders, including the Executive, then the amount
of shares to be sold for the account of each selling shareholder shall be
reduced proportionately in the ratio by which the amount each selling
shareholder proposes to sell bears to the total amount of shares which the
underwriter will permit to be sold for the account of all selling
shareholders.
In connection with any offering of shares registered pursuant to this
Agreement, CAHC (i) shall furnish to the Executive such number of copies of
any prospectus (including any preliminary prospectus, or supplement) as he
may reasonably request in order to effect the offering and sale of the shares
to be offered and sold, but only while CAHC shall be required under the
provisions hereof to cause the registration statement to remain current for
not more than six months, and (ii) take such action as shall be necessary to
qualify the shares covered by such registration statement under such blue sky
or other state securities laws for offer and sale as Employee shall request;
provided, however, that CAHC shall not be obligated to qualify as a foreign
corporation to do business under the laws of any jurisdiction in which it
shall not then be qualified or to file any general consent to service of
process in any jurisdiction in which such a consent has not been previously
filed. If requested by CAHC, in connection with a piggyback sale
8
<PAGE>
of the Shares covered hereunder, the Executive shall enter into an
underwriting agreement with a managing underwriting or underwriters selected
by CAHC and shall enter into an agreement with CAHC containing
representations, warranties, indemnities and agreements then customarily
included by an issuer or selling shareholder in underwriting agreements with
respect to secondary distributions. In connection with any offering of shares
registered pursuant to this Agreement, CAHC shall (x) furnish to the
underwriters, at CAHC's expense, unlegended certificates representing
ownership of the shares being sold in such denominations as requested and (y)
instruct any transfer agent and registrar of the shares to release any stop
transfer order with respect to shares included in any registration becoming
effective pursuant to this Agreement. CAHC shall use its best efforts to keep
such registration statement current for a period of six months. CAHC shall in
all events pay all expenses, fees, and disbursements of any counsel,
accountants and other consultants representing CAHC in connection therewith.
8. Other Benefits.
(a) General Executive Benefits. The Executive shall receive
medical insurance coverage provided by the Company to its executives
generally and/or participate in the best of any other similar plan or
arrangement, or other fringe benefit provided by Company to its executives
generally. The Executive shall also be entitled to participate in any stock
bonus, purchase or option plan and any bonus or profit sharing plan provided
for the Executive
9
<PAGE>
specifically or to any group of executives of the Company of which the
Executive is made a member by express provision of such plan.
(b) Expense Reimbursement. The Company shall reimburse the
Executive for reasonable out-of-pocket expenses incurred in connection with
the Company's business, including travel expenses, food, and lodging while
away from home, subject to such policies as the Company may from time to time
reasonably establish for its employees and subject to substantiation of
expenses as required under applicable federal and state tax laws and
regulations.
(c) Automobile Allowance. The Company will provide the Executive
with a car allowance of $600 per month to be paid to the Executive when
installments of Salary are paid.
(d) Officers and Directors Liability Insurance. The Company shall
purchase Officers and Directors Liability Insurance which shall cover the
Executive in an amount and with coverage to be determined by the Company.
9. Termination.
(a) The Term of this Agreement and the employment of the Executive
hereunder shall terminate in the event of the death of the Executive and, at
the option of the Company, upon thirty (30) days prior written notice to the
Executive, upon the Disability of the Executive. During the period of any
Disability, the Executive shall receive the compensation set forth in
Paragraph 1(g) herein.
10
<PAGE>
(b) In addition to the provisions of Paragraph 9 (a) above, the
Company may also, for Cause, elect to terminate the Term of this Agreement
and the employment of the Executive hereunder by ten (10) days' prior written
notice to the Executive. Upon any such termination for Cause, the Executive
shall no longer be entitled to receive his Salary or any other benefits under
this Agreement.
(c) The Executive shall have the right to terminate this Agreement
upon written notice given to the Company (i) at least three (3) months prior
to his intended date of resignation, in which case the Executive shall
receive no compensation or other benefits after the date of termination, but
shall receive his Base Salary and Bonus, pro-rata, through the date of
termination, or (ii) upon his Disability, in which case he shall receive
compensation in accordance with Paragraph 1 (g) herein.
(d) In the event of a merger or combination in which the Company is
not the surviving entity, or of a sale of all or substantially all of the
Company's assets, the Company may, at its sole option (1) upon thirty (30)
days' prior written notice to the Executive, assign this Agreement and all
rights and obligations under it to any business entity that succeeds to all
or substantially all of the Company's business through that merger or
combination or sale of
11
<PAGE>
assets, or (2) on at least thirty (30) days' prior written notice to the
Executive, terminate this Agreement effective on the date of the merger or
combination or sale of assets. Such termination shall constitute a
"Termination without Cause" under Paragraph 9(e) hereof.
(e) Termination without Cause. Should the Executive be terminated
for any reason other than for Cause, Disability or the expiration of this
Agreement (including a change of the Executive's place of employment as
provided in Paragraph 1(i) above), the Executive shall be entitled to receive
payments from the Company as follows:
(i) An amount equal to all the remaining installments of
Salary and Bonus, if any, that would otherwise be payable to the Executive
under this Agreement, payable in equal monthly installments, beginning seven
(7) days after the date of such termination;
(ii) The immediate vesting of all options, pension plans and
other benefit packages in which the Executive was a participant at the time
of his termination; and
(iii) Such additional payments and other compensation as may be
reasonable under the circumstances and approved by the Board of Directors of
the Company in the event that the termination is due to a merger of the
Company into another company, or, the Company is sold to third parties.
10. Representations and Warranties of the Executive as to Conflicts.
The Executive hereby represents and warrants to the Company that his
employment by the Company does not and will not violate any agreement or
instrument to which he is a party or by
12
<PAGE>
which he is bound, and the Executive agrees that he will indemnify and hold
harmless the Company, its directors, officers and employees against any
claims, damages, liabilities and expenses (including reasonable attorneys'
fees) which may be incurred, including amounts paid in settlement, by and of
them in connection with any claim based upon or related to a breach of the
Executive's representation and warranty set forth in this Paragraph 10. In
the event of any claim based upon or related to a breach of the Executive's
representation and warranty set forth in this Paragraph 10, the Company will
give prompt notice thereof, in writing, to the Executive and the Executive
shall have the right to defend such claim with counsel reasonably
satisfactory to the Company.
11. Future Inventions. The Executive shall assign and convey to the
Company, and hereby does assign and convey to the Company, and the Company
hereby accepts, all of the Executive's right, title and interest in and to
all Future Inventions made or conceived during the Term of this Agreement,
and the Executive hereby agrees that he shall, without the payment of royalty
or any other consideration to him therefor:
(a) Inform the Company promptly and fully of each such Future
Invention by a written report reasonably satisfactory to the Company;
(b) Apply, at the Company's request and expense, for United States
and foreign letters patent, copyright, trademark or service mark as the case
may be, either in the Executive's name or
13
<PAGE>
otherwise as the Company shall direct;
(c) Assign and convey to the Company, and he hereby does assign and
convey to the Company, all of his right, title and interest in and to
applications for United States and foreign letters patent, copyrights,
trademarks and service marks and to any letters patent, copyrights,
trademarks and service marks which may be issued upon any such Future
Invention;
(d) Deliver promptly to the Company, without charge to the Company
but at its expense, such written instruments, and do such other acts, as may
be reasonably necessary, in the opinion of the Company, to obtain and
maintain United States and foreign letters patent, copyrights, trademarks or
service marks on each such Future Invention and to vest the Executive's
entire right, title and interest thereto in the Company; and
(e) Grant to the Company, and he hereby does grant to the Company,
prior to any further assignment of the Executive's right, title and interest
to the Company in any Future Invention as required above, the royalty-free
right to use in its business, and to make, have made, use and sell products,
processes, services, writings and marks based upon or related to such Future
Invention made or conceived by the Executive.
12. Confidentiality.
(a) During the Term of this Agreement and at all times thereafter,
the Executive will not use Confidential Information for his own benefit or
for the benefit of any person or legal entity
14
<PAGE>
other than the Company, nor will he discuss the same with any other person or
legal entity, except as reasonably required to conduct the business of the
Company in the ordinary course or by legal process, provided, however, that
any obligation which the Executive may have pursuant to this Agreement to
keep certain information confidential shall not prevent him from disclosing
any or all such information to the extent such disclosure is reasonably
required in connection with the preparation of closing adjustments or
financial statements as contemplated by that certain Stock Purchase Agreement
dated [ , 1997] by and among Robert J. Longo, Compost America Holding
Company, Inc. and R.J. Longo Construction Co., Inc. (the "Stock Purchase
Agreement") or the pursuit by any parties thereto of claims under the Stock
Purchase Agreement.
(b) Except with the prior written approval of the Company, or
except as required to conduct the business of the Company in the ordinary
course, the Executive will not, at any time, directly or indirectly, use,
disseminate, disclose, lecture upon, or publish articles concerning, any
Confidential Information.
(c) Upon the termination of his employment with the Company, all
documents, records, notebooks and similar repositories of, or containing,
Confidential Information, including any copies thereof, then in the
Executive's possession, or under his control, whether prepared by him or
others, will be left with or immediately returned to the Company by the
Executive.
13. Non-Compete. The Executive agrees that, during the Term
15
<PAGE>
of this Agreement and during any period following the termination of his
employment with the Company pursuant to Paragraph 9, subsections (a), (d)(2)
or (e) of this Agreement in which he is being compensated by the Company in
connection with his termination pursuant to those provisions, and in the case
of his termination pursuant to Paragraph 9 subsections (b) or (c), during the
period of two (2) years following the termination of his employment, and in
any state in which the Company or any of its affiliates does business, he
will not, without the written approval of the Company, directly or
indirectly, under any circumstances whatsoever, own, manage, operate, engage
in, control or participate in the ownership, management, operation or control
of, or be connected in any manner, whether as an individual partner,
stockholder, director, officer, principal, agent, employee or consultant, or
in any other relation or capacity whatsoever, with any Competing
Organization, and will not in any such manner, compete with or call on any
Customer of the Company, wherever located, who was a Customer of the Company
at any time during the one year period prior to the termination of the
Executive's employment with the Company, for the purpose of inducing such
Customer to do business with the Executive or any competing Organization.
Notwithstanding the foregoing, nothing contained in this Paragraph 13 shall
restrict the Executive from making any investment in any company, so long as
such investment consists of no more than five percent (5%) of any class of
equity securities of a company whose
16
<PAGE>
securities are traded on a national securities exchange or in the
over-the-counter market.
14. Non-Interference. The Executive will not, for a period of one (1)
year following the termination of the Executive's employment pursuant to
Paragraph 9, subsections (a), (c) or (e), directly or indirectly, employ,
hire, solicit or, in any manner, encourage any employee of the Company to
leave the employ of the Company to engage in business with the Executive or a
Competing Organization.
15. Injunctive Relief. In addition to any other rights or remedies
available to the Company as a result of any breach by the Executive of his
obligations under this Agreement, the Company shall be entitled to
enforcement of such obligations by an injunction or a decree of specific
performance from a court with appropriate jurisdiction, and in the event that
the Company is successful in any suit or proceeding brought or instituted by
the Company to enforce any of the provisions of this Agreement, or on account
of any damages sustained by the Company by reason of the violation by the
Executive of any of the terms of this Agreement to be performed by the
Executive, the Executive agrees to pay to the Company all attorneys' fees
reasonably incurred by the Company.
16. Withholding. The Executive hereby agrees that he will make such
arrangement as the Company may deem necessary to discharge any obligations of
the Company to withhold Federal, state or local taxes imposed upon the
Company in respect of this
17
<PAGE>
Agreement.
17. Severability. The provisions of this Agreement shall be severable
and if any part of any provision shall be held invalid or unenforceable, or
any separate covenant contained in any provision is held to be unduly
restrictive and void by a final decision of any court or other tribunal of
competent jurisdiction, such part, covenant or provision shall be construed
or limited in scope to give it maximum lawful validity, and the remaining
provisions of this Agreement shall nonetheless remain in full force and
effect.
18. Entire Agreement. This Agreement contains the entire agreement of
the parties relative to the subject matter hereof, superseding and
terminating all prior agreements or understandings, whether oral or written,
between the parties hereto relative to the subject matter hereof, and this
Agreement may not be extended, amended, modified or supplemented without the
prior written consent of the parties hereto.
19. Waiver. Any waiver of the performance of the terms or provisions
of this Agreement shall be effective only if in writing and signed by the
party against whom such waiver is to be enforced. The failure of either party
to exercise any of his or its rights under this Agreement or to require the
performance of any term or provision of this Agreement, or the waiver by
either party of any breach of this Agreement, shall not prevent a subsequent
exercise or enforcement of such rights or be deemed a waiver of any
subsequent breach of the same or any other term or provision of
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<PAGE>
this Agreement.
20. Notices. Any notice required or permitted to be given under this
Agreement shall be in writing and shall be deemed given when personally
delivered or sent by overnight courier or certified mail, postage prepaid,
return receipt requested, to the respective addresses of the parties hereto
as set forth above or to such other address as either party may designate by
notice to the other party given as herein provided.
21. Assignment. Except as provided in Paragraph 9(d), this Agreement
shall not be assignable by either party without the prior written consent of
the other party.
22. Governing Law. This Agreement shall be governed by and construed
and enforced in accordance with the laws of the State of New Jersey, without
giving effect to the conflict of laws rules of such state.
23. Survival of Terms. The terms of this Agreement and the respective
obligations of the parties hereto shall survive the termination of the
Executive's employment with the Company for as long as any obligation or duty
remains outstanding.
24. Arbitration. Any controversy or claim arising out of or relating
to this Agreement, or the breach thereof, shall be settled by arbitration in
accordance with the Commercial Arbitration Rules of the American Arbitration
Association, Bergen County, New Jersey, and judgment upon the award rendered
by the arbitrators may be entered in any court having jurisdiction over the
parties. The dispute will be resolved by a panel of three arbitrators if the
dollar amount that is being arbitrated exceeds $100,000.
19
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.
COMPANY
By:
---------------------------
Roger E. Tuttle, Chairman
EXECUTIVE
By:
---------------------------
Robert J. Longo
SCHEDULE A
BONUS FORMULA
Any Bonus to which the Executive may be entitled shall be calculated on
an annual basis as follows:
"Bonus Pool" shall mean to the extent that the Company's Earnings Before
Interest, Taxes, Depreciation and Amortization ("EBITDA") on Average Assets
in any fiscal year exceed 15.2% in
20
<PAGE>
such fiscal year, the amount by which EBITDA exceeds 15.2% shall be
maintained as a bonus pool of which the Executive shall be entitled to ten
(10%) percent.
"Average Assets" shall mean the stated value of all of the Company's
assets on its Audited Balance Sheet of the Company and its Subsidiaries, if
any, as at the end of any fiscal year divided by the beginning year assets,
as adjusted for the unamortized portion of the Purchase Price Premium.
"Purchase Price Premium" shall mean $33,000,000 minus the stated value of
all assets on the Adjusted Balance Sheet of the Company as of the Closing
Date. The Purchase Price Premium shall be amortized on a straight line basis
over a twenty (20) year period for purposes of the Bonus Formula.
"Adjusted Balance Sheet" shall mean the balance sheet of the Company as
finally agreed upon by the parties thereto in accordance with the Stock
Purchase Agreement.
The Purchase Price Premium shall be reduced by the excess of replacement
cost over the greater of net book value or sale value for any and all assets
on the Adjusted Balance Sheet which are the subject of a transaction with
Compost America Holding Company, Inc. or any of its Affiliates after the
Closing Date.
Adjustments will be made to EBITDA to give effect to market rates of
return on assets for all Affiliate transactions by and between the Company
and Compost America Holding Company, Inc. or any of its Affiliates.
The following is an example of the calculation of the Purchase Price
Premium:
Contract Purchase Price $33,000,000
Assets on Closing Balance Sheet:
Cash $ 750,000
Accounts Receivable 2,000,000
Prepaid Expenses 500,000
21
<PAGE>
Fixed Assets, Net 4,000,000
---------
Total Assets on Closing Balance Sheet 7,250,000
----------
Purchase Price Premium $25,750,000
----------
----------
Average Assets:
June 30,1997 April 30, 1998
------------ --------------
Total Assets on Balance Sheet $ 7,250,000 $10,000,000
Purchase Price Adjustment 25,750,000 24,677,083
----------- -----------
Total Adjusted Assets $33,000,000 $34,677,083
----------- -----------
----------- -----------
Beginning Adjusted Assets $33,000,000
Final Adjusted Assets 34,677,083
-----------
Subtotal 67,677,083
-----------
2
Average Assets $33,838,542
-----------
-----------
Bonus Pool:
EBITDA For Period July 1, 1997- April 30, 1998 $6,000,000
($5,000,000 for 10 months 12/10)
Base EBITDA Calculation
Average Assets For Period $33,838,542
Base Rate of EBITDA 15.2%
Base EBITDA 5,143,458
---------
Bonus Pool $ 856,542
---------
---------
Bonus Calculation:
Bonus Pool $856,542
--------
--------
Bonus Calculation:
R. Longo (10%) $ 85,654
22
<PAGE>
Document No. 44136.1/NYL3A
Form No. CF0411
Revised: 11/3/97
S&S Corporate Finance
STANDARD FORM
Questionnaire for Directors,
Officers, Significant Employees
and Principal Stockholders
Initial Public Offering of
Common Stock (Form S-1)
--------------------
Instructions to person drafting Questionnaire: All brackets and footnotes and
page ii should be omitted and all blanks completed.
Instructions to Operator: This standard form is stored as a "read-only"
document, which means that you will have to retrieve the form into a new
document before making revisions. First, you should create a new document and
fill out the SoftSolution profile. Once in the newly created document:
Select File, then select Retrieve - the "SoftSolution - Open Document"
screen will appear.
Select Document Number, type in the document number and the dataset
number appearing on the upper right hand corner of this standard form and
select OK.
The System will then ask whether you want to insert the standard form into
your document, select Yes.
Make the changes indicated on the attached master to the COPY you have just
created. Unless otherwise indicated on the master, this cover page and all
footnotes should be omitted. The type size should correspond as closely as
possible to that used herein.
<PAGE>
ii
Explanatory Note
Citations to the corresponding Item of Regulation S-K and/or rule under
the Securities Act of 1933, as amended, are in brackets following each
question. In preparing this Questionnaire, these citations should be omitted.
For commentary providing background information not self-evident from this
Form, see the explanatory memorandum in the S&S Public Offering Guidebook.
Following this Questionnaire is a Questionnaire Supplement relating to
executive compensation. The SEC adopted amendments to the executive
compensation disclosure requirements on October 21, 1992 and November 29,
1993, which limit the disclosure of executive compensation to "Named
Executive Officers," defined as:
(i) all individuals serving as the Company's Chief Executive Officer
("CEO") or acting in a similar capacity during the last completed
fiscal year, regardless of compensation level;
(ii) the Company's four most highly compensated executive officers other
than the CEO who were serving as executive officers at the end of
the last completed fiscal year; limited, however, to those
executives with salary and bonus of over $100,000 for the last
completed fiscal year; and
(iii) up to two additional individuals for whom disclosure would have
been provided pursuant to paragraph (ii) above but for the fact
that the individual was not serving as an executive officer of the
registrant at the end of the last completed fiscal year.
Generally, someone at the Company will be able to identify the five Named
Executive Officers in accordance with the Instructions to Item 402(a)(2) of
Regulation S-K. It may be necessary to send the Questionnaire Supplement to
more than five executive officers if the identity of the Named Executive
Officers has not been determined.
If the Company has employees who are not executive officers but make
significant contributions to the business (see Item 401(c) of Regulation
S-K), include "significant employees" in the list in the first sentence of
the Questionnaire and add them to the title of the Questionnaire. Also, add a
sentence to the effect that significant employees should answer questions 1,
3, 6, 9-11, 20-22 and 24. If there are people who have been chosen as
executive officers or nominated as directors, include "nominees" or
"appointees" also in the list and throughout the Questionnaire as appropriate
and delete the brackets around question 1(e).
<PAGE>
Exhibit 99.2
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT, made as of this 3rd day of November, 1997, by
and between ENVIRONMENTAL PROTECTION IMPROVEMENT COMPANY, INC. (EPIC), a New
Jersey corporation, with its principal offices located at 305 Palmer Road,
Denville, New Jersey 07834 (the "Company"), a wholly-owned subsidiary of Compost
America Holding Company, Inc. ("CAHC") and JAY WAXENBAUM, an individual,
residing at 4 Phoenix Drive, Mendham, Jersey 07945 (the "Executive").
W I T N E S S E T H:
WHEREAS, the Company desires the Executive to be employed by the Company,
and the Executive is desirous of such employment, upon the terms and conditions
set forth in this Agreement.
NOW, THEREFORE, in consideration of the foregoing and the mutual covenants
and agreements contained herein, the parties intending to be legally bound
hereby agree as follows:
1. Definitions. As used in this Agreement, the following terms shall
have the following meanings:
(a) "Agreement" means this Employment Agreement, as the same may,
from time to time, be amended in accordance with the provisions hereof.
(b) "Cause" means with respect to the Executive:
(i) Defrauding the Company in any way;
(ii) Being convicted of any crime that is punishable by
imprisonment for more than thirty (30) days and is not traffic or vehicular
related (whether or not the Executive is sentenced to imprisonment) or that
offends principles, generally
<PAGE>
accepted in the community, of general or business morals and ethics or
generally accepted principles of natural or moral law or that is such that
his conviction thereof would, by commonly accepted standards of the
professional community, justify his discharge;
(iii) An action taken in knowing contradiction to the best
interests of the Company;
(iv) Repeated refusal to perform job functions reasonably
required of him under this Agreement; or
(v) Any other act which has a direct, substantial and adverse
effect on the Company's reputation or business.
(c) "Company" means EPIC and its successors, whether now or hereafter
existing.
(d) "Competing Organization" means any person or legal entity engaged
in the rail transportation of sludge, municipal solid waste, contaminated soils,
dredge spoils and the like (collectively "Waste Materials") in the United States
of America.
(e) "Confidential Information" means any information in which the
Company has a legally protectable interest in preventing its unauthorized or
unintended disclosure to third parties and which is kept confidential by the
Company in the operation of its business or the conduct of its research and
which is not otherwise available to the public and is not available from any
source other than the Company, including, by way of illustration but not
limitation: source codes, object codes, engineering and other sketches, drawings
and tracings, specifications, engineering data,
2
<PAGE>
memoranda, designs, sources of supplies and materials, cost and financial
data, processes, production machines and equipment, procedures, customer
lists, marketing plans and business forecasts, together with all the
Company's Know-how and Technical Data relating thereto.
(f) "Customer" means any individual, firm, partnership, corporation,
company, joint venture or governmental or military unit or any other entity
which has a contract with the Company during the Term of this Agreement for the
transportation of Waste Materials.
(g) "Disability" means the Executive's inability to perform his
duties under this Agreement for a period of six (6) consecutive months, or for
eighty percent (80%) or more of the normal working days during the nine (9)
consecutive months then ending, because of his physical or mental illness or
infirmity. Should the Executive suffer a Disability as defined herein, the
Executive shall receive full Salary (as hereinafter defined) and benefits, as
set forth herein, for two (2) years from the date of the Disability and,
thereafter, one-half Salary for the balance of the Term of this Agreement.
(h) "Future Inventions" means all inventions, discoveries, ideas,
concepts, designs and improvements of any sort, whether patentable,
copyrightable or not, relating in any way to the business of the Company with
respect to the rail transportation of Waste Materials, which the Executive may,
during the Term of
3
<PAGE>
this Agreement, conceive or invent, whether alone or jointly with others, and
whether during business hours or thereafter, and such term includes all
"know-how" and Technical Data relating to the foregoing, and all letters
patent and copyrights of the United States or any other country which may be
issued in connection with the foregoing.
(i) "Principal Office" means the principal office of the Company,
which currently is located in Denville, New Jersey. The Company represents and
warrants that during the Term of this Agreement, it will not require the
Executive to work at a location other than the Principal Office of the Company,
or if the Company elects to move the Principal Office, at a location which is
(a) more than thirty miles from the place where the Principal Office of the
Company is located on the effective date of this Agreement or (b) which is more
than five miles from the intersections of Routes 287, 202, 22 and 206 in New
Jersey. If the Company requires the Executive to work at a location which is (a)
more than thirty miles from the place where the Principal Office of the Company
is located on the effective date of this Agreement or (b) more than five miles
from the intersections of Routes 287, 202, 22 and 206 in New Jersey, such
requirement shall be deemed a termination by the Company of this Agreement
pursuant to Section 9(e) of this Agreement, unless an alternative agreement
regarding Principal Office is entered into between the Company and the
Executive.
(j) "Technical Data" means all written, printed and
4
<PAGE>
other tangible materials embodying or containing Know-how, and includes,
without limiting the generality of the foregoing, all correspondence,
designs, processes, source codes, object codes, engineering sketches,
drawings and tracings, specifications and engineering data, reporting
formats, memoranda, notebooks, and all copies thereof, together with all
models and prototypes of every description.
(k) "Term" means the period from the date of the execution of this
Employment Agreement to September 15, 2002 unless earlier terminated as provided
herein.
2. Employment. The Company hereby employs the Executive, and the
Executive hereby accepts such employment, upon the terms and subject to the
conditions set forth in this Agreement.
3. Duties. The Executive shall be employed by the Company as its Vice
President of Operations and shall perform such duties and render such services
consistent therewith as may from time to time be reasonably required of him by
the Company's Chairman.
4. Extent of Service. During the Term of this Agreement, the Executive
agrees that he will:
(a) Serve the Company faithfully, diligently and to the best of his
ability under the reasonable direction of the Board;
(b) Devote his best efforts, attention and energy to the performance
of his duties hereunder and to promoting and furthering the interests of the
Company, taking, however, from time to time, reasonable vacations consistent
with the performance of
5
<PAGE>
his obligations hereunder and the vacation policies of the Company applicable
to all executives generally, not to exceed four (4) weeks in any calendar
year. The Executive shall be additionally compensated by the Company at his
regular weekly salary rate, for up to a maximum of two weeks unused vacation
time per year;
(c) Not without the prior written approval of the Chairman of the
Company, which approval shall not be unreasonably withheld, become associated
with or engaged with any business other than that of the Company, and will do
nothing inconsistent with his duties to the Company.
5. Term of Employment. The term of employment of the Executive under
this Agreement shall be guaranteed for the Term, unless terminated pursuant to
Paragraph 9 of this Agreement.
6. Basic Compensation; Bonus As basic compensation for the services to
be rendered hereunder by the Executive during the Term of this Agreement, the
Company agrees to pay to the Executive and the Executive agrees to accept, an
initial annual cash salary (the "Salary") of $125,000. On and after April 30,
1998, for each year during the Term, the Executive shall be entitled to an
annual bonus (the "Bonus") as specified on Schedule A attached hereto (the
"Bonus Formula"). The Salary payable to the Executive hereunder shall be paid in
equal installments during the Term, or in such other manner as shall be
consistent with the payroll policies of the Company applicable to all
executives. The Bonus shall be calculated in accordance with the Bonus Formula
as of April 30th of
6
<PAGE>
each year and shall be paid in a single installment each year within ninety
(90) days thereafter.
7. Other Compensation. Upon the execution of this Agreement, the Company
shall issue to the Executive options to purchase 300,000 unregistered shares of
the Company's common stock, no par value, at an option price of $1.00 per share.
50,000 of these options will vest upon the execution of this Agreement. The
balance of the options will vest 50,000 on September 15, 1998, 50,000 on
September 15, 1999, 50,000 on September 15, 2000, 50,000 on September 15, 2001,
and 50,000 on September 15, 2002. All options not otherwise exercised shall
expire on September 15, 2002.
8. Other Benefits.
(a) General Executive Benefits. The Executive shall receive medical
insurance coverage provided by the Company to its executives generally and/or
participate in the best of any other similar plan or arrangement, or other
fringe benefit provided by the Company to its executives generally. The
Executive shall also be entitled to participate in any stock bonus, purchase or
option plan and any bonus or profit sharing plan provided for the Executive
specifically or to any group of executives of the Company of which the Executive
is made a member by express provision of such plan.
(b) Expense Reimbursement. The Company shall reimburse the Executive
for reasonable out-of-pocket expenses incurred in connection with the Company's
business, including travel expenses,
7
<PAGE>
food, and lodging while away from home, subject to such policies as the
Company may from time to time reasonably establish for its employees and
subject to substantiation of expenses as required under applicable federal
and state tax laws and regulations.
(c) Automobile Allowance. The Company will provide the Executive
with a car allowance of $600 per month to be paid to the Executive when
installments of Salary are paid.
(d) Officers and Directors Liability Insurance. The Company shall
purchase Officers and Directors Liability Insurance which shall cover the
Executive in an amount and with coverage to be determined by the Company.
9. Termination.
(a) The Term of this Agreement and the employment of the Executive
hereunder shall terminate in the event of the death of the Executive and, at the
option of the Company, upon thirty (30) days prior written notice to the
Executive, upon the Disability of the Executive. During the period of any
Disability, the Executive shall receive the compensation set forth in Paragraph
1(g) herein.
(b) In addition to the provisions of Paragraph 9 (a) above, the
Company may also, for Cause, elect to terminate the Term of this Agreement and
the employment of the Executive hereunder by ten (10) days' prior written notice
to the Executive. Upon any such termination for Cause, the Executive shall no
longer be
8
<PAGE>
entitled to receive his Salary or any other benefits under this Agreement.
(c) The Executive shall have the right to terminate this Agreement
upon written notice given to the Company (i) at least three (3) months prior to
his intended date of resignation, in which case the Executive shall receive no
compensation or other benefits after the date of termination, or (ii) upon his
Disability, in which case he shall receive compensation in accordance with
Paragraph 1 (g) herein.
(d) In the event of a merger or combination in which the Company is
not the surviving entity, or of a sale of all or substantially all of the
Company's assets, the Company may, at its sole option (1) upon thirty (30) days'
prior written notice to the Executive, assign this Agreement and all rights and
obligations under it to any business entity that succeeds to all or
substantially all of the Company's business through that merger or combination
or sale of assets, or (2) on at least thirty (30) days' prior written notice to
the Executive, terminate this Agreement effective on the date of the merger or
combination or sale of assets. Such termination shall constitute a "Termination
without Cause" under Paragraph 9(e) hereof.
(e) Termination without Cause. Should the Executive be terminated
for any reason other than for Cause, Disability or the expiration of this
Agreement (including a change of the Executive's place of employment as provided
in Paragraph 1(i) above), the
9
<PAGE>
Executive shall be entitled to receive payments from the Company as follows:
(i) An amount equal to all the remaining installments of Salary
and Bonus, if any, that would otherwise be payable to the Executive under this
Agreement, payable in equal monthly installments, beginning seven (7) days after
the date of such termination;
(ii) The immediate vesting of all options, pension plans and
other benefit packages in which the Executive was a participant at the time of
his termination; and
(iii) Such additional payments and other compensation as may be
reasonable under the circumstances and approved by the Board of Directors of the
Company in the event that the termination is due to a merger of the Company into
another company, or, the Company is sold to third parties.
10. Representations and Warranties of the Executive as to Conflicts. The
Executive hereby represents and warrants to the Company that his employment by
the Company does not and will not violate any agreement or instrument to which
he is a party or by which he is bound, and the Executive agrees that he will
indemnify and hold harmless the Company, its directors, officers and employees
against any claims, damages, liabilities and expenses (including reasonable
attorneys' fees) which may be incurred, including amounts paid in settlement, by
and of them in connection with any claim based upon or related to a breach of
the Executive's representation and warranty set forth in this Paragraph 10. In
the event of any claim based upon or related to a breach of the Executive's
10
<PAGE>
representation and warranty set forth in this Paragraph 10. In the event of
any claim based upon or related to a breach of the Executive's representation
and warranty set forth in this Paragraph 10, the Company will give prompt
notice thereof, in writing, to the Executive and the Executive shall have the
right to defend such claim with counsel reasonably satisfactory to the
Company.
11. Future Inventions. The Executive shall assign and convey to the
Company, and hereby does assign and convey to the Company, and the Company
hereby accepts, all of the Executive's right, title and interest in and to all
Future Inventions made or conceived during the Term of this Agreement, and the
Executive hereby agrees that he shall, without the payment of royalty or any
other consideration to him therefor:
(a) Inform the Company promptly and fully of each such Future
Invention by a written report reasonably satisfactory to the Company;
(b) Apply, at the Company's request and expense, for United States
and foreign letters patent, copyright, trademark or service mark as the case may
be, either in the Executive's name or otherwise as the Company shall direct;
(c) Assign and convey to the Company, and he hereby does assign and
convey to the Company, all of his right, title and interest in and to
applications for United States and foreign letters patent, copyrights,
trademarks and service marks and to any letters patent, copyrights, trademarks
and service marks which may
11
<PAGE>
be issued upon any such Future Invention;
(d) Deliver promptly to the Company, without charge to the Company
but at its expense, such written instruments, and do such other acts, as may be
reasonably necessary, in the opinion of the Company, to obtain and maintain
United States and foreign letters patent, copyrights, trademarks or service
marks on each such Future Invention and to vest the Executive's entire right,
title and interest thereto in the Company; and
(e) Grant to the Company, and he hereby does grant to the Company,
prior to any further assignment of the Executive's right, title and interest to
the Company in any Future Invention as required above, the royalty-free right to
use in its business, and to make, have made, use and sell products, processes,
services, writings and marks based upon or related to such Future Invention made
or conceived by the Executive.
12. Confidentiality.
(a) During the Term of this Agreement and at all times thereafter,
the Executive will not use Confidential Information for his own benefit or for
the benefit of any person or legal entity other than the Company, nor will he
discuss the same with any other person or legal entity, except as reasonably
required to conduct the business of the Company in the ordinary course or by
legal process, provided, however, that any obligation which the Executive may
have pursuant to this Agreement to keep certain information confidential shall
not prevent him from disclosing any or all such
12
<PAGE>
information to the extent such disclosure is reasonably required in
connection with the preparation of closing adjustments or financial
statements as contemplated by that certain Stock Purchase Agreement dated
[ , 1997] by and among Robert J. Longo, Compost America Holding
Company, Inc. and R.J. Longo Construction Co., Inc. (the "Stock Purchase
Agreement") or the pursuit by any parties thereto of claims under the Stock
Purchase Agreement.
(b) Except with the prior written approval of the Company, or except
as required to conduct the business of the Company in the ordinary course, the
Executive will not, at any time, directly or indirectly, use, disseminate,
disclose, lecture upon, or publish articles concerning, any Confidential
Information.
(c) Upon the termination of his employment with the Company, all
documents, records, notebooks and similar repositories of, or containing,
Confidential Information, including any copies thereof, then in the Executive's
possession, or under his control, whether prepared by him or others, will be
left with or immediately returned to the Company by the Executive.
13. Non-Compete. The Executive agrees that, during the Term of this
Agreement and during any period following the termination of his employment with
the Company pursuant to Paragraph 9, subsections (a), (d)(2) or (e) of this
Agreement in which he is being compensated by the Company in connection with his
termination pursuant to those provisions, and in the case of his termination
pursuant to Paragraph 9 subsections (b) or (c) during the period of
13
<PAGE>
two (2) years following the termination of his employment, and in any state
in which the Company or any of its affiliates does business, he will not,
without the written approval of the Company, directly or indirectly, under
any circumstances whatsoever, own, manage, operate, engage in, control or
participate in the ownership, management, operation or control of, or be
connected in any manner, whether as an individual partner, stockholder,
director, officer, principal, agent, employee or consultant, or in any other
relation or capacity whatsoever, with any Competing Organization, and will
not in any such manner, compete with or call on any Customer of the Company,
wherever located, who was a Customer of the Company at any time during the
one year period prior to the termination of the Executive's employment with
the Company, for the purpose of inducing such Customer to do business with
the Executive or any competing Organization. Notwithstanding the foregoing,
nothing contained in this Paragraph 13 shall restrict the Executive from
making any investment in any company, so long as such investment consists of
no more than five percent (5%) of any class of equity securities of a company
whose securities are traded on a national securities exchange or in the
over-the-counter market.
14. Non-Interference. The Executive will not, for a period of one (1)
year following the termination of the Executive's employment pursuant to
Paragraph 9, subsections (a), (c) or (e), directly or indirectly, employ, hire,
solicit or, in any manner,
14
<PAGE>
encourage any employee of the Company to leave the employ of the Company to
engage in business with the Executive or a Competing Organization.
15. Injunctive Relief. In addition to any other rights or remedies
available to the Company as a result of any breach by the Executive of his
obligations under this Agreement, the Company shall be entitled to enforcement
of such obligations by an injunction or a decree of specific performance from a
court with appropriate jurisdiction, and in the event that the Company is
successful in any suit or proceeding brought or instituted by the Company to
enforce any of the provisions of this Agreement, or on account of any damages
sustained by the Company by reason of the violation by the Executive of any of
the terms of this Agreement to be performed by the Executive, the Executive
agrees to pay to the Company all attorneys' fees reasonably incurred by the
Company.
16. Withholding. The Executive hereby agrees that he will make such
arrangement as the Company may deem necessary to discharge any obligations of
the Company to withhold Federal, state or local taxes imposed upon the Company
in respect of this Agreement.
17. Severability. The provisions of this Agreement shall be severable and
if any part of any provision shall be held invalid or unenforceable, or any
separate covenant contained in any provision is held to be unduly restrictive
and void by a final decision of any court or other tribunal of competent
jurisdiction, such part,
15
<PAGE>
covenant or provision shall be construed or limited in scope to give it
maximum lawful validity, and the remaining provisions of this Agreement shall
nonetheless remain in full force and effect.
18. Entire Agreement. This Agreement contains the entire agreement of
the parties relative to the subject matter hereof, superseding and terminating
all prior agreements or understandings, whether oral or written, between the
parties hereto relative to the subject matter hereof, and this Agreement may not
be extended, amended, modified or supplemented without the prior written consent
of the parties hereto.
19. Waiver. Any waiver of the performance of the terms or provisions of
this Agreement shall be effective only if in writing and signed by the party
against whom such waiver is to be enforced. The failure of either party to
exercise any of his or its rights under this Agreement or to require the
performance of any term or provision of this Agreement, or the waiver by either
party of any breach of this Agreement, shall not prevent a subsequent exercise
or enforcement of such rights or be deemed a waiver of any subsequent breach of
the same or any other term or provision of this Agreement.
20. Notices. Any notice required or permitted to be given under this
Agreement shall be in writing and shall be deemed given when personally
delivered or sent by overnight courier or certified mail, postage prepaid,
return receipt requested, to the respective addresses of the parties hereto as
set forth above or to such other
16
<PAGE>
address as either party may designate by notice to the other party given as
herein provided.
21. Assignment. Except as provided in Paragraph 9(d), this Agreement
shall not be assignable by either party without the prior written consent of the
other party.
22. Governing Law. This Agreement shall be governed by and construed and
enforced in accordance with the laws of the State of New Jersey, without giving
effect to the conflict of laws rules of such state.
23. Survival of Terms. The terms of this Agreement and the respective
obligations of the parties hereto shall survive the termination of the
Executive's employment with the Company for as long as any obligation or duty
remains outstanding.
24. Arbitration. Any controversy or claim arising out of or relating
to this Agreement, or the breach thereof, shall be settled by arbitration in
accordance with the Commercial Arbitration Rules of the American Arbitration
Association, Bergen County, New Jersey, and judgment upon the award rendered
by the arbitrators may be entered in any court having jurisdiction over the
parties. The dispute will be resolved by a panel of three arbitrators if the
dollar amount that is being arbitrated exceeds $100,000.
IN WITNESS WHEREOF, the parties have executed this Agreement
as of the date first above written.
COMPANY
By:_________________________________
Roger E. Tuttle, Chairman
17
<PAGE>
EXECUTIVE
By:_________________________________
Jay Waxenbaum
SCHEDULE A
BONUS FORMULA
Any Bonus to which the Executive may be entitled shall be calculated on an
annual basis as follows:
"Bonus Pool" shall mean to the extent that the Company's Earnings Before
Interest, Taxes, Depreciation and Amortization ("EBITDA") on Average Assets in
any fiscal year exceed 15.2% in such fiscal year, the amount by which EBITDA
exceeds 15.2% shall be maintained as a bonus pool of which the Executive shall
be entitled to five (5%) percent.
"Average Assets" shall mean the stated value of all of the Company's assets
on its Audited Balance Sheet of the Company and
18
<PAGE>
its Subsidiaries, if any, as at the end of any fiscal year divided by the
beginning year assets, as adjusted for the unamortized portion of the
Purchase Price Premium.
"Purchase Price Premium" shall mean $33,000,000 minus the stated value of
all assets on the Adjusted Balance Sheet of the Company as of the Closing Date.
The Purchase Price Premium shall be amortized on a straight line basis over a
twenty (20) year period for purposes of the Bonus Formula.
"Adjusted Balance Sheet" shall mean the balance sheet of the Company as
finally agreed upon by the parties thereto in accordance with the Stock Purchase
Agreement.
The Purchase Price Premium shall be reduced by the excess of replacement
cost over the greater of net book value or sale value for any and all assets on
the Adjusted Balance Sheet which are the subject of a transaction with Compost
America Holding Company, Inc. or any of its Affiliates after the Closing Date.
Adjustments will be made to EBITDA to give effect to market rates of return
on assets for all Affiliate transactions by and between the Company and Compost
America Holding Company, Inc. or any of its Affiliates.
The following is an example of the calculation of the Purchase Price
Premium:
Contract Purchase Price $33,000,000
Assets on Closing Balance Sheet:
--------------------------------
Cash $ 750,000
Accounts Receivable 2,000,000
Prepaid Expenses 500,000
Fixed Assets, Net 4,000,000
-----------
Total Assets on Closing Balance Sheet 7,250,000
-----------
Purchase Price Premium $25,750,000
-----------
-----------
19
<PAGE>
Average Assets:
- ----------------
June 30,1997 April 30, 1998
------------ --------------
Total Assets on Balance Sheet $ 7,250,000 $10,000,000
Purchase Price Adjustment 25,750,000 24,677,083
------------ --------------
Total Adjusted Assets $33,000,000 $34,677,083
------------ --------------
------------ --------------
Beginning Adjusted Assets $33,000,000
Final Adjusted Assets 34,677,083
------------
Subtotal 67,677,083
------------
2
Average Assets $33,838,542
------------
------------
Bonus Pool:
EBITDA For Period July 1, 1997- April 30, 1998 $6,000,000
($5,000,000 for 10 months 12/10)
Base EBITDA Calculation
Average Assets For Period $33,838,542
Base Rate of EBITDA 15.2%
Base EBITDA 5,143,458
--------------
Bonus Pool $ 856,542
--------------
--------------
Bonus Calculation:
Bonus Pool $856,542
--------
--------
Bonus Calculation:
------------------
J. Waxenbaum (5%) $ 42,827
20
<PAGE>
Exhibit 99.3
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT, made as of this 3rd day of November, 1997, by
and between ENVIRONMENTAL PROTECTION IMPROVEMENT COMPANY, INC. (EPIC), a New
Jersey corporation, with its principal offices located at 305 Palmer Road,
Denville, New Jersey 07834 (the "Company"), a wholly-owned subsidiary of Compost
America Holding Company, Inc. ("CAHC") and KEVIN WALSH, an individual, residing
at 6 Bonnell Road, Pittsdown, New Jersey 08867 (the "Executive").
W I T N E S S E T H:
WHEREAS, the Company desires the Executive to be employed by the Company,
and the Executive is desirous of such employment, upon the terms and conditions
set forth in this Agreement.
NOW, THEREFORE, in consideration of the foregoing and the mutual covenants
and agreements contained herein, the parties intending to be legally bound
hereby agree as follows:
1. Definitions. As used in this Agreement, the following terms shall
have the following meanings:
(a) "Agreement" means this Employment Agreement, as the same may,
from time to time, be amended in accordance with the provisions hereof.
(b) "Cause" means with respect to the Executive:
(i) Defrauding the Company in any way;
(ii) Being convicted of any crime that is punishable by
imprisonment for more than thirty (30) days and is not traffic or vehicular
related (whether or not the Executive is sentenced to imprisonment) or that
offends principles, generally
<PAGE>
accepted in the community, of general or business morals and ethics or
generally accepted principles of natural or moral law or that is such that
his conviction thereof would, by commonly accepted standards of the
professional community, justify his discharge;
(iii) An action taken in knowing contradiction to the best
interests of the Company;
(iv) Repeated refusal to perform job functions reasonably
required of him under this Agreement; or
(v) Any other act which has a direct, substantial and adverse
effect on the Company's reputation or business.
(c) "Company" means EPIC and its successors, whether now or hereafter
existing.
(d) "Competing Organization" means any person or legal entity engaged
in the rail transportation of sludge, municipal solid waste, contaminated soils,
dredge spoils and the like (collectively "Waste Materials") in the United States
of America.
(e) "Confidential Information" means any information in which the
Company has a legally protectable interest in preventing its unauthorized or
unintended disclosure to third parties and which is kept confidential by the
Company in the operation of its business or the conduct of its research and
which is not otherwise available to the public and is not available from any
source other than the Company, including, by way of illustration but not
limitation: source codes, object codes, engineering and other sketches, drawings
and tracings, specifications, engineering data,
2
<PAGE>
memoranda, designs, sources of supplies and materials, cost and financial
data, processes, production machines and equipment, procedures, customer
lists, marketing plans and business forecasts, together with all the
Company's Know-how and Technical Data relating thereto.
(f) "Customer" means any individual, firm, partnership, corporation,
company, joint venture or governmental or military unit or any other entity
which has a contract with the Company during the Term of this Agreement for the
transportation of Waste Materials.
(g) "Disability" means the Executive's inability to perform his
duties under this Agreement for a period of six (6) consecutive months, or for
eighty percent (80%) or more of the normal working days during the nine (9)
consecutive months then ending, because of his physical or mental illness or
infirmity. Should the Executive suffer a Disability as defined herein, the
Executive shall receive full Salary (as hereinafter defined) and benefits, as
set forth herein, for two (2) years from the date of the Disability and,
thereafter, one-half Salary for the balance of the Term of this Agreement.
(h) "Future Inventions" means all inventions, discoveries, ideas,
concepts, designs and improvements of any sort, whether patentable,
copyrightable or not, relating in any way to the business of the Company with
respect to the rail transportation of Waste Materials, which the Executive may,
during the Term of
3
<PAGE>
this Agreement, conceive or invent, whether alone or jointly with others, and
whether during business hours or thereafter, and such term includes all
"know-how" and Technical Data relating to the foregoing, and all letters
patent and copyrights of the United States or any other country which may be
issued in connection with the foregoing.
(i) "Principal Office" means the principal office of the Company,
which currently is located in Denville, New Jersey. The Company represents and
warrants that during the Term of this Agreement, it will not require the
Executive to work at a location other than the Principal Office of the Company,
or if the Company elects to move the Principal Office, at a location which is
(a) more than thirty miles from the place where the Principal Office of the
Company is located on the effective date of this Agreement or (b) which is more
than five miles from the intersections of Routes 287, 202, 22 and 206 in New
Jersey. If the Company requires the Executive to work at a location which is (a)
more than thirty miles from the place where the Principal Office of the Company
is located on the effective date of this Agreement or (b) more than five miles
from the intersections of Routes 287, 202, 22 and 206 in New Jersey, such
requirement shall be deemed a termination by the Company of this Agreement
pursuant to Section 9(e) of this Agreement, unless an alternative agreement
regarding Principal Office is entered into between the Company and the
Executive.
(j) "Technical Data" means all written, printed and
4
<PAGE>
other tangible materials embodying or containing Know-how, and includes,
without limiting the generality of the foregoing, all correspondence,
designs, processes, source codes, object codes, engineering sketches,
drawings and tracings, specifications and engineering data, reporting
formats, memoranda, notebooks, and all copies thereof, together with all
models and prototypes of every description.
(k) "Term" means the period from the date of the execution of this
Employment Agreement to September 15, 2002 unless earlier terminated as provided
herein.
2. Employment. The Company hereby employs the Executive, and the
Executive hereby accepts such employment, upon the terms and subject to the
conditions set forth in this Agreement.
3. Duties. The Executive shall be employed by the Company as its Vice
President of Operations and shall perform such duties and render such services
consistent therewith as may from time to time be reasonably required of him by
the Company's Chairman.
4. Extent of Service. During the Term of this Agreement, the Executive
agrees that he will:
(a) Serve the Company faithfully, diligently and to the best of his
ability under the reasonable direction of the Board;
(b) Devote his best efforts, attention and energy to the performance
of his duties hereunder and to promoting and furthering the interests of the
Company, taking, however, from time to time, reasonable vacations consistent
with the performance of
5
<PAGE>
his obligations hereunder and the vacation policies of the Company applicable
to all executives generally, not to exceed four (4) weeks in any calendar
year. The Executive shall be additionally compensated by the Company at his
regular weekly salary rate, for up to a maximum of two weeks unused vacation
time per year;
(c) Not without the prior written approval of the Chairman of the
Company, which approval shall not be unreasonably withheld, become associated
with or engaged with any business other than that of the Company, and will do
nothing inconsistent with his duties to the Company.
5. Term of Employment. The term of employment of the Executive under
this Agreement shall be guaranteed for the Term, unless terminated pursuant to
Paragraph 9 of this Agreement.
6. Basic Compensation; Bonus As basic compensation for the services to
be rendered hereunder by the Executive during the Term of this Agreement, the
Company agrees to pay to the Executive and the Executive agrees to accept, an
initial annual cash salary (the "Salary") of $150,000. On and after April 30,
1998, for each year during the Term, the Executive shall be entitled to an
annual bonus (the "Bonus") as specified on Schedule A attached hereto (the
"Bonus Formula"). The Salary payable to the Executive hereunder shall be paid in
equal installments during the Term, or in such other manner as shall be
consistent with the payroll policies of the Company applicable to all
executives. The Bonus shall be calculated in accordance with the Bonus Formula
as of April 30th of
6
<PAGE>
each year and shall be paid in a single installment each year within ninety
(90) days thereafter.
7. Other Compensation. Upon the execution of this Agreement, the Company
shall issue to the Executive options to purchase 300,000 unregistered shares of
the Company's common stock, no par value, at an option price of $1.00 per share.
All 300,000 of these options will vest upon the execution of this Agreement.
All options not otherwise exercised shall expire on September 15, 2002.
8. Other Benefits.
(a) General Executive Benefits. The Executive shall receive medical
insurance coverage provided by the Company to its executives generally and/or
participate in the best of any other similar plan or arrangement, or other
fringe benefit provided by the Company to its executives generally. The
Executive shall also be entitled to participate in any stock bonus, purchase or
option plan and any bonus or profit sharing plan provided for the Executive
specifically or to any group of executives of the Company of which the Executive
is made a member by express provision of such plan.
(b) Expense Reimbursement. The Company shall reimburse the Executive
for reasonable out-of-pocket expenses incurred in connection with the Company's
business, including travel expenses, food, and lodging while away from home,
subject to such policies as the Company may from time to time reasonably
establish for its employees and subject to substantiation of expenses as
required
7
<PAGE>
under applicable federal and state tax laws and regulations.
(c) Automobile Allowance. The Company will provide the Executive
with a car allowance of $600 per month to be paid to the Executive when
installments of Salary are paid.
(d) Officers and Directors Liability Insurance. The Company shall
purchase Officers and Directors Liability Insurance which shall cover the
Executive in an amount and with coverage to be determined by the Company.
9. Termination.
(a) The Term of this Agreement and the employment of the Executive
hereunder shall terminate in the event of the death of the Executive and, at the
option of the Company, upon thirty (30) days prior written notice to the
Executive, upon the Disability of the Executive. During the period of any
Disability, the Executive shall receive the compensation set forth in Paragraph
1(g) herein.
(b) In addition to the provisions of Paragraph 9 (a) above, the
Company may also, for Cause, elect to terminate the Term of this Agreement and
the employment of the Executive hereunder by ten (10) days' prior written notice
to the Executive. Upon any such termination for Cause, the Executive shall no
longer be entitled to receive his Salary or any other benefits under this
Agreement.
(c) The Executive shall have the right to terminate
8
<PAGE>
this Agreement upon written notice given to the Company (i) at least three
(3) months prior to his intended date of resignation, in which case the
Executive shall receive no compensation or other benefits after the date of
termination, or (ii) upon his Disability, in which case he shall receive
compensation in accordance with Paragraph 1 (g) herein.
(d) In the event of a merger or combination in which the Company is
not the surviving entity, or of a sale of all or substantially all of the
Company's assets, the Company may, at its sole option (1) upon thirty (30) days'
prior written notice to the Executive, assign this Agreement and all rights and
obligations under it to any business entity that succeeds to all or
substantially all of the Company's business through that merger or combination
or sale of assets, or (2) on at least thirty (30) days' prior written notice to
the Executive, terminate this Agreement effective on the date of the merger or
combination or sale of assets. Such termination shall constitute a "Termination
without Cause" under Paragraph 9(e) hereof.
(e) Termination without Cause. Should the Executive be terminated
for any reason other than for Cause, Disability or the expiration of this
Agreement (including a change of the Executive's place of employment as provided
in Paragraph 1(i) above), the Executive shall be entitled to receive payments
from the Company as follows:
(i) An amount equal to all the remaining
9
<PAGE>
installments of Salary and Bonus, if any, that would otherwise be payable to
the Executive under this Agreement, payable in equal monthly installments,
beginning seven (7) days after the date of such termination;
(ii) The immediate vesting of all options, pension plans and
other benefit packages in which the Executive was a participant at the time of
his termination; and
(iii) Such additional payments and other compensation as may be
reasonable under the circumstances and approved by the Board of Directors of the
Company in the event that the termination is due to a merger of the Company into
another company, or, the Company is sold to third parties.
10. Representations and Warranties of the Executive as to Conflicts. The
Executive hereby represents and warrants to the Company that his employment by
the Company does not and will not violate any agreement or instrument to which
he is a party or by which he is bound, and the Executive agrees that he will
indemnify and hold harmless the Company, its directors, officers and employees
against any claims, damages, liabilities and expenses (including reasonable
attorneys' fees) which may be incurred, including amounts paid in settlement, by
and of them in connection with any claim based upon or related to a breach of
the Executive's representation and warranty set forth in this Paragraph 10. In
the event of any claim based upon or related to a breach of the Executive's
representation and warranty set forth in this Paragraph
10
<PAGE>
10, the Company will give prompt notice thereof, in writing, to the Executive
and the Executive shall have the right to defend such claim with counsel
reasonably satisfactory to the Company.
11. Future Inventions. The Executive shall assign and convey to the
Company, and hereby does assign and convey to the Company, and the Company
hereby accepts, all of the Executive's right, title and interest in and to all
Future Inventions made or conceived during the Term of this Agreement, and the
Executive hereby agrees that he shall, without the payment of royalty or any
other consideration to him therefor:
(a) Inform the Company promptly and fully of each such Future
Invention by a written report reasonably satisfactory to the Company;
(b) Apply, at the Company's request and expense, for United States
and foreign letters patent, copyright, trademark or service mark as the case may
be, either in the Executive's name or otherwise as the Company shall direct;
(c) Assign and convey to the Company, and he hereby does assign and
convey to the Company, all of his right, title and interest in and to
applications for United States and foreign letters patent, copyrights,
trademarks and service marks and to any letters patent, copyrights, trademarks
and service marks which may be issued upon any such Future Invention;
(d) Deliver promptly to the Company, without charge to the Company
but at its expense, such written instruments, and do
11
<PAGE>
such other acts, as may be reasonably necessary, in the opinion of the
Company, to obtain and maintain United States and foreign letters patent,
copyrights, trademarks or service marks on each such Future Invention and to
vest the Executive's entire right, title and interest thereto in the Company;
and
(e) Grant to the Company, and he hereby does grant to the Company,
prior to any further assignment of the Executive's right, title and interest to
the Company in any Future Invention as required above, the royalty-free right to
use in its business, and to make, have made, use and sell products, processes,
services, writings and marks based upon or related to such Future Invention made
or conceived by the Executive.
12. Confidentiality.
(a) During the Term of this Agreement and at all times thereafter,
the Executive will not use Confidential Information for his own benefit or for
the benefit of any person or legal entity other than the Company, nor will he
discuss the same with any other person or legal entity, except as reasonably
required to conduct the business of the Company in the ordinary course or by
legal process, provided, however, that any obligation which the Executive may
have pursuant to this Agreement to keep certain information confidential shall
not prevent him from disclosing any or all such information to the extent such
disclosure is reasonably required in connection with the preparation of closing
adjustments or financial statements as contemplated by that certain Stock
Purchase
12
<PAGE>
Agreement dated [ , 1997] by and among Robert J. Longo, Compost America
Holding Company, Inc. and R.J. Longo Construction Co., Inc. (the "Stock
Purchase Agreement") or the pursuit by any parties thereto of claims under
the Stock Purchase Agreement.
(b) Except with the prior written approval of the Company, or except
as required to conduct the business of the Company in the ordinary course, the
Executive will not, at any time, directly or indirectly, use, disseminate,
disclose, lecture upon, or publish articles concerning, any Confidential
Information.
(c) Upon the termination of his employment with the Company, all
documents, records, notebooks and similar repositories of, or containing,
Confidential Information, including any copies thereof, then in the Executive's
possession, or under his control, whether prepared by him or others, will be
left with or immediately returned to the Company by the Executive.
13. Non-Compete. The Executive agrees that, during the Term of this
Agreement and during any period following the termination of his employment with
the Company pursuant to Paragraph 9, subsections (a), (d)(2) or (e) of this
Agreement in which he is being compensated by the Company in connection with his
termination pursuant to those provisions, and in the case of his termination
pursuant to Paragraph 9 subsections (b) or (c) during the period of two (2)
years following the termination of his employment, and in any state in which the
Company or any of its affiliates does business, he will not, without the written
approval of the Company,
13
<PAGE>
directly or indirectly, under any circumstances whatsoever, own, manage,
operate, engage in, control or participate in the ownership, management,
operation or control of, or be connected in any manner, whether as an
individual partner, stockholder, director, officer, principal, agent,
employee or consultant, or in any other relation or capacity whatsoever, with
any Competing Organization, and will not in any such manner, compete with or
call on any Customer of the Company, wherever located, who was a Customer of
the Company at any time during the one year period prior to the termination
of the Executive's employment with the Company, for the purpose of inducing
such Customer to do business with the Executive or any competing
Organization. Notwithstanding the foregoing, nothing contained in this
Paragraph 13 shall restrict the Executive from making any investment in any
company, so long as such investment consists of no more than five percent
(5%) of any class of equity securities of a company whose securities are
traded on a national securities exchange or in the over-the-counter market.
14. Non-Interference. The Executive will not, for a period of one (1)
year following the termination of the Executive's employment pursuant to
Paragraph 9, subsections (a), (c) or (e), directly or indirectly, employ, hire,
solicit or, in any manner, encourage any employee of the Company to leave the
employ of the Company to engage in business with the Executive or a Competing
Organization.
14
<PAGE>
15. Injunctive Relief. In addition to any other rights or remedies
available to the Company as a result of any breach by the Executive of his
obligations under this Agreement, the Company shall be entitled to enforcement
of such obligations by an injunction or a decree of specific performance from a
court with appropriate jurisdiction, and in the event that the Company is
successful in any suit or proceeding brought or instituted by the Company to
enforce any of the provisions of this Agreement, or on account of any damages
sustained by the Company by reason of the violation by the Executive of any of
the terms of this Agreement to be performed by the Executive, the Executive
agrees to pay to the Company all attorneys' fees reasonably incurred by the
Company.
16. Withholding. The Executive hereby agrees that he will make such
arrangement as the Company may deem necessary to discharge any obligations of
the Company to withhold Federal, state or local taxes imposed upon the Company
in respect of this Agreement.
17. Severability. The provisions of this Agreement shall be severable and
if any part of any provision shall be held invalid or unenforceable, or any
separate covenant contained in any provision is held to be unduly restrictive
and void by a final decision of any court or other tribunal of competent
jurisdiction, such part, covenant or provision shall be construed or limited in
scope to give it maximum lawful validity, and the remaining provisions of this
Agreement shall nonetheless remain in full force and effect.
15
<PAGE>
18. Entire Agreement. This Agreement contains the entire agreement of
the parties relative to the subject matter hereof, superseding and terminating
all prior agreements or understandings, whether oral or written, between the
parties hereto relative to the subject matter hereof, and this Agreement may not
be extended, amended, modified or supplemented without the prior written consent
of the parties hereto.
19. Waiver. Any waiver of the performance of the terms or provisions of
this Agreement shall be effective only if in writing and signed by the party
against whom such waiver is to be enforced. The failure of either party to
exercise any of his or its rights under this Agreement or to require the
performance of any term or provision of this Agreement, or the waiver by either
party of any breach of this Agreement, shall not prevent a subsequent exercise
or enforcement of such rights or be deemed a waiver of any subsequent breach of
the same or any other term or provision of this Agreement.
20. Notices. Any notice required or permitted to be given under this
Agreement shall be in writing and shall be deemed given when personally
delivered or sent by overnight courier or certified mail, postage prepaid,
return receipt requested, to the respective addresses of the parties hereto as
set forth above or to such other address as either party may designate by notice
to the other party given as herein provided.
21. Assignment. Except as provided in Paragraph 9(d), this
16
<PAGE>
Agreement shall not be assignable by either party without the prior written
consent of the other party.
22. Governing Law. This Agreement shall be governed by and construed and
enforced in accordance with the laws of the State of New Jersey, without giving
effect to the conflict of laws rules of such state.
23. Survival of Terms. The terms of this Agreement and the respective
obligations of the parties hereto shall survive the termination of the
Executive's employment with the Company for as long as any obligation or duty
remains outstanding.
24. Arbitration. Any controversy or claim arising out of or
relating to this Agreement, or the breach thereof, shall be settled
by arbitration in accordance with the Commercial Arbitration Rules
of the American Arbitration Association, Bergen County, New Jersey,
and judgment upon the award rendered by the arbitrators may be
entered in any court having jurisdiction over the parties. The
dispute will be resolved by a panel of three arbitrators if the
dollar amount that is being arbitrated exceeds $100,000.
IN WITNESS WHEREOF, the parties have executed this Agreement
as of the date first above written.
COMPANY
By:_________________________________
Roger E. Tuttle, Chairman
EXECUTIVE
By:_________________________________
Jay Waxenbaum
17
<PAGE>
SCHEDULE A
BONUS FORMULA
Any Bonus to which the Executive may be entitled shall be calculated on an
annual basis as follows:
"Bonus Pool" shall mean to the extent that the Company's Earnings Before
Interest, Taxes, Depreciation and Amortization ("EBITDA") on Average Assets in
any fiscal year exceed 15.2% in such fiscal year, the amount by which EBITDA
exceeds 15.2% shall be maintained as a bonus pool of which the Executive shall
be entitled to five (5%) percent.
"Average Assets" shall mean the stated value of all of the Company's assets
on its Audited Balance Sheet of the Company and its Subsidiaries, if any, as at
the end of any fiscal year divided by the beginning year assets, as adjusted for
the unamortized portion of the Purchase Price Premium.
"Purchase Price Premium" shall mean $33,000,000 minus the stated value of
all assets on the Adjusted Balance Sheet of the
18
<PAGE>
Company as of the Closing Date. The Purchase Price Premium shall be amortized
on a straight line basis over a twenty (20) year period for purposes of the
Bonus Formula.
"Adjusted Balance Sheet" shall mean the balance sheet of the Company as
finally agreed upon by the parties thereto in accordance with the Stock Purchase
Agreement.
The Purchase Price Premium shall be reduced by the excess of replacement
cost over the greater of net book value or sale value for any and all assets on
the Adjusted Balance Sheet which are the subject of a transaction with Compost
America Holding Company, Inc. or any of its Affiliates after the Closing Date.
Adjustments will be made to EBITDA to give effect to market rates of return
on assets for all Affiliate transactions by and between the Company and Compost
America Holding Company, Inc. or any of its Affiliates.
The following is an example of the calculation of the Purchase Price
Premium:
Contract Purchase Price $33,000,000
Assets on Closing Balance Sheet:
Cash $ 750,000
Accounts Receivable 2,000,000
Prepaid Expenses 500,000
Fixed Assets, Net 4,000,000
----------
Total Assets on Closing Balance Sheet 7,250,000
----------
Purchase Price Premium $25,750,000
----------
----------
Average Assets:
June 30,1997 April 30, 1998
------------ --------------
Total Assets on Balance Sheet $ 7,250,000 $10,000,000
Purchase Price Adjustment 25,750,000 24,677,083
------------ --------------
19
<PAGE>
Total Adjusted Assets $33,000,000 $34,677,083
------------ --------------
------------ --------------
Beginning Adjusted Assets $33,000,000
Final Adjusted Assets 34,677,083
------------
Subtotal 67,677,083
------------
2
Average Assets $33,838,542
------------
------------
Bonus Pool:
EBITDA For Period July 1, 1997- April 30, 1998 $6,000,000
($5,000,000 for 10 months 12/10)
Base EBITDA Calculation
Average Assets For Period $33,838,542
Base Rate of EBITDA 15.2%
Base EBITDA 5,143,458
-----------
Bonus Pool $ 856,542
-----------
-----------
Bonus Calculation:
Bonus Pool $856,542
-------
-------
Bonus Calculation:
-----------------
J. Waxenbaum (5%) $ 42,827
20
<PAGE>
Exhibit 99.4
FIRST AMENDMENT TO EMPLOYMENT AGREEMENT
THIS FIRST AMENDMENT TO EMPLOYMENT AGREEMENT (the "Amended Agreement")
effective the 1st day of May, 1997 between COMPOST AMERICA HOLDING COMPANY,
INC., a New Jersey corporation with offices at 320 Grand Avenue, Englewood, New
Jersey 07631 (the "Company") and ROGER E. TUTTLE, an individual residing at 3105
Gibson Lane, Doylestown, Pennsylvania 18901 (the "Executive").
R E C I T A L S
A. The Company presently is engaged in the business of developing
composting facilities throughout the United States (the "Business").
B. The Executive has certain unique skills and business experience which
he wishes to devote to the Company.
C. The Company desires to employ the Executive and the Executive desires
to be so employed by the Company.
D. The Company and the Executive previously entered into an Employment
Agreement dated May 10, 1996 ("First Agreement"), and the Company and the
Executive, by mutual agreement, wish to amend this First Agreement. This Amended
Agreement supersedes all previous agreements, whether written or oral.
E. This Amended Agreement, after careful review and consideration, has
been approved by the Company's board of directors (the "Board").
NOW THEREFORE, in consideration of the premises together with other good
and valuable consideration, the receipt of which is hereby acknowledged, it is
agreed as follows:
1. Amendment of First Agreement, Recitals and Effective Date: The
foregoing recitals are true and correct, and are incorporated herein by
reference. The effective date of this Amended Agreement shall be August 1, 1997
(the "Effective Date"). The First Agreement is hereby amended in its entirety by
this Amended Agreement.
2. Employment of the Executive: Subject to the terms and conditions
contained herein, and unless sooner terminated as hereinafter provided, the
Company agrees to employ Executive, and Executive agrees to serve as an employee
of the Company, for a term of employment commencing on the Effective Date and
ending seven (7) years from the Effective Date (the "Term").
3. Duties of the Executive: During the Term, the Executive shall have the
following powers and duties:
<PAGE>
3.1 Executive will have the powers and duties of the President and
Chief Executive Officer of the Company, as set forth in the Company's by-laws,
as amended (subject to the direction of the Board, which direction shall be
pursuant to reasonable policies adopted by the Board from time to time and
communicated by written notice to Executive).
3.2 During the Term, Executive shall devote his full business time,
attention, effort and skill to the business affairs and interests of the
Company. It is understood and agreed that Executive may serve or continue to
serve on the boards of directors of and hold any other offices or positions in
companies or organizations as Executive may desire, provided such position will
not present any significant conflict of interest with the Company or materially
affect the performance of Executive's duties pursuant to this Amended Agreement,
subject to Board approval. If any potential conflict of interest arises,
Executive shall present the position and circumstances to a meeting of the
Board, which shall determine if a conflict exists. Nothing contained herein
shall prohibit Executive from managing his personal, financial, and less active
business affairs to the extent such affairs do not contravene any of the
foregoing provisions.
Notwithstanding anything to the contrary contained herein, the
Executive shall have the right and the authority to delegate responsibility to
other personnel if he deems such delegation appropriate, and is hereby
authorized to hire, on behalf of Company, additional agents, employees and other
representatives who are in his opinion necessary to handle the Company's
affairs.
3.3 During the Term, the Company agrees to cause Executive to be
elected as a director on the Board of the Company, and to be selected as
Chairman of the Board and the Executive agrees to serve. Any additional
compensation paid to the Executive for serving as a director shall be determined
by the Board.
4. Compensation: During the Term, as compensation for the services to be
rendered by Executive, the Company shall pay Executive the following amounts:
4.1 Base Salary: Each twelve month fiscal period commencing May 1st
of one year, and ending April 30th of the next, is called herein a "Fiscal
Year". During the Fiscal Year already commenced, beginning on the Effective Date
and ending April 30, 1998, Executive shall be paid at the annual rate of
$350,000.00, payable in equal monthly installments (the "Base Salary"). Of this
Base Salary, the sum of $125,000 shall not be paid or accrued until the Company
has sufficient cash resources to make this payment. During the balance of the
Term, the Executive shall be entitled to and shall receive annual increases in
his Base Salary commensurate with the growth of the Company as shall be agreed
upon at an annual review of the Executive's performance and compensation by the
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Board, provided that such annual increases shall be no less than an amount equal
to the increase in the Consumer Price Index for all Urban Consumers and Urban
Wage Earners U.S. City Average issued by the United States Department of Labor
Bureau of Labor Statistics, or its successor index ("CPI") over the preceding
calendar year. Executive agrees to defer the commencement of actual receipt of
his Base Salary until the reasonable capitalization of the Company, during which
time this deferred Base Salary shall be accrued by the Company. At such time as
the Board determines that the Company is reasonably capitalized, then all
accrued Base Salary shall be paid to the Executive.
4.2 Bonus: During each Fiscal Year of the Term, commencing with the
fiscal year May 1, 1997 through April 30, 1998, Executive shall be paid a bonus
(the "Bonus"). The Bonus shall equal five (5%) percent of the Company's
"Consolidated Net Income After Taxes" ("CNIAT") on the first Twenty-Five Million
($25,000,000) Dollars of such CNIAT and two (2%) percent on all CNIAT above
Twenty-Five Million ($25,000,000) Dollars. "Consolidated Net Income After Taxes"
as used herein shall be defined as income after income taxes as reflected in the
Company's consolidated statement of operations, as adjusted to eliminate the
effect of an extraordinary items.
4.3 Computation of Bonus: The Bonus shall be determined by
calculations made by Company's independent certified public accountants, which
determination shall be final and conclusive upon all parties, subject to the
accuracy and consistency of the calculations in accordance with the provisions
of this Amended Agreement. Payment of the Bonus shall be made by the Company as
soon as reasonably practicable, but in no event later than 120 days after the
last day of Company's Fiscal Year for which the Bonus is due to Executive from
Company. At the sole option of the Executive, in any given year, the Executive
may choose to receive his Bonus in cash or restricted shares of the Company's
common stock valued, per share, at eighty (80%) percent of the average closing
trading price of the Company's common stock for the thirty (30) trading days
prior to the payment of the bonus ("Bonus Stock") or a combination of cash and
Bonus Stock.
4.4 Compensation of Other Officers and Directors: Should the
compensation or bonus benefits to any other officer or director of the Company
be greater than that of the Executive, then the Executive shall receive such
compensation or bonus benefits equal to that paid to said other officer or
director.
4.5 Conversion of Accruals Into Shares: Company acknowledges that
certain monies are owed to Executive, in the amount as set forth in the
Company's Form 10-QSB for the fiscal quarter ended July 31, 1997 ("Debt To
Executive"). For a period of sixty (60) days after the execution of this
Agreement, the Executive shall have the right, but not the obligation, to
convert
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some or all of this Debt To Executive into unregistered shares of the Company's
common stock at $2.00 per share, such conversion to be effected by written
instructions from the Executive to the Company.
5. Fringe Benefits: During the Term, Executive shall be entitled to:
5.1 Business Expenses: Executive is authorized to incur reasonable
expenses to execute and/or promote the Business of the Company, including but
not limited to expenses for entertainment, travel and similar items. Company
will reimburse Executive for all such expenses incurred on behalf of Company.
5.2 Automobile: Company shall furnish the Executive with an
appropriate automobile satisfactory to Executive for his use in discharging his
duties hereunder, and the Company shall pay all costs and expenses relating
thereto, including, but not limited, to gasoline, tolls, maintenance, insurance
and car phone.
5.3 Performance Bonuses: At such time as the Company's common shares
have been listed on "The NASDAQ Small Cap Market" or on "The NASDAQ National
Market System" during the Term of this Amended Agreement, the Executive shall be
entitled to a one-time cash performance bonus in the amount of $500,000. Payment
of this cash performance bonus shall be made within thirty (30) days after
satisfaction of this condition, except that, this Performance Bonus payment
shall be deferred and accrued until such time as, in the opinion of the
Company's Board, the Company has sufficient cash flow to make this payment.
5.4 Health, Medical, and Dental Insurance: Executive shall be
provided with hospital, major medical, and dental insurance reasonably
satisfactory to the Executive and his family dependents with full medical and
dental coverage. Said policy shall be chosen by the Executive.
5.5 Life Insurance: Executive shall be provided with a term life
insurance policy issued by a company chosen by Executive for the benefit of the
Executive's family as Executive may designate, in the amount of $1,500,000.00.
The Company shall pay the premium during the Term of this Amended Agreement.
Upon the termination of this Amended Agreement, the Company shall assign such
policy to the Executive.
5.6 Disability Insurance: Executive shall be entitled to disability
insurance issued by a company chosen by Executive which provides to Executive
not less than 80% of Executive's Base Salary hereunder after an elimination
period not to exceed 30 days and proof of disability. Furthermore, the
disability policy shall provide for coverage in the event of disability through
the age of 67. Executive may request that Company satisfy this paragraph 5.6
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by reimbursing Executive for payments made by Executive under an existing plan
which presently covers Executive.
5.7 Vacation: The Executive shall be entitled to four weeks paid
vacation annually.
5.8 Company Benefit Plans: Executive shall be entitled to
participate in any and all plans, arrangements or distributions maintained by
the Company pertaining to or in connection with any pension, profit sharing,
stock options and/or similar benefits for its regular employees and/or for its
executives, as determined by the Board or committees thereof pursuant to the
governing instruments which establish and/or determine eligibility and other
rights of the participants and beneficiaries under such plans or other benefit
programs.
5.9 Officers and Directors Liability Insurance: The Company shall
purchase Officers and Directors Liability Insurance which shall cover the
Executive, all Directors and designated Officers in an amount and with coverage
mutually agreeable to the Company and the Executive.
5.10 Fringe Benefits of Other Officers and Directors: Should the
fringe benefits to any other officer or director of the Company be greater than
that of the Executive, then the Executive shall receive such fringe benefits
equal to that paid to said other officer or director.
6. Rights of Indemnification:
(a) Subject to the provisions of the Company's Certificate of
Incorporation and Bylaws, each as amended from time to time, the Company shall
indemnify the Executive to the fullest extent permitted by the General
Corporation Law of the State of New Jersey, as amended from time to time, for
all amounts (including without limitation, judgments, fines, settlement
payments, expenses and attorney's fees) incurred or paid by the Executive in
connection with any action, suit, investigation or proceeding arising out of or
relating to the performance by the Executive of services for, or the acting by
the Executive as a director, officer or employee of the Company, or any other
person or enterprise at the Company's request. Upon request of the Executive,
all costs and expenses of indemnification required hereunder shall be paid in
advance.
(b) The Company shall use its best efforts to obtain and maintain in
full force and effect during the Term directors' and officers' liability
insurance policies providing full and adequate protection to the Executive for
his capacities.
7. Stock Options: The Company hereby grants to the Executive options (the
"Stock Options") to purchase 1,000,000
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shares of the common stock of the Company (the "Options Shares") exercisable
over a seven-year period from the Effective Date regardless of whether the
Executive is working for, or employed by the Company. Said Stock Options shall
be assignable and transferrable without any limitations whatsoever. The Company
and Executive hereby agree that as of the date of this Amended Agreement, all
1,000,000 shares shall be and are hereby declared to be vested and immediately
exercisable. The exercise price (the "Option Price") for the Option Shares shall
be $2.50 per share. The Stock Options shall be exercisable from time to time in
whole or in part without affecting the remainder of the Stock Options during the
term of the exercisability and any renewal or extension thereof.
7.1 Exercise of Stock Options: Stock Options may be exercised by
written notice directed to the Company or such other person as may be designated
by the Company accompanied by a check payable to the Company in payment of the
option price for the option shares or, at the sole option of the Executive,
payment may be made by "cashless exercise", as herein defined, or a combination
thereof. Cashless exercise shall mean payment for the option shares by the
surrender to the Company by the Executive that number of shares of the Company's
common stock which is calculated by multiplying (i) the total number of common
shares being acquired by the exercise of the Stock Option by (ii) the exercise
price and (iii) dividing the product by the closing bid price of the Company's
common stock on the date of exercise. The Company shall make immediate delivery
of the purchased option shares, fully paid and nonassessable, registered in the
name of the Executive subject to a restrictive legend set forth on the purchased
Option Shares certificate as follows:
The shares of stock represented by this Certificate have not been
registered under the Securities Act of 1933, as amended ("Act"), or
the securities laws of any other jurisdiction and may not be sold,
transferred, pledged, hypothecated or otherwise disposed of in any
manner unless they are registered under such Act and the securities
laws of any applicable jurisdictions or unless pursuant to an
exemption therefrom.
7.2 Reclassification, Consolidation or Merger: If and to the extent
that the number of issued and outstanding shares of common stock of the Company
shall be increased or reduced by a change of par value, split-up,
reclassification, distribution of a dividend payable in stock, issuance of
convertible debentures, warrants or similar transactions, the number of shares
subject to the Stock Options and the Option Price per share shall be
proportionately adjusted to protect the Executive from dilution. If the Company
is reorganized or consolidated or merged with
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<PAGE>
another corporation, the Executive shall be entitled to receive options covering
shares of such reorganized, consolidated, or merged company in the same
proportion, at an equivalent price, and subject to the same conditions. For
purposes of the preceding sentence, the excess of the aggregate fair market
value of the shares subject to the option immediately after the reorganization,
consolidation or merger over the aggregate option price of such shares shall not
be more than the excess of the aggregate fair market value of all shares subject
to the Stock Options immediately before such reorganization, consolidation or
merger over the aggregate option price of such shares, and the new option or
assumption of the old Stock Options shall not give Executive additional benefits
which he did not have under the old Stock Options, or deprive him of benefits
which he had under the old Stock Options. If there is a purchase of stock of the
Company by a party who is not an affiliate of the Company that causes a change
in control of the Company (as defined hereinafter), the Company or purchasing
entity shall purchase the Options Shares which have not been registered on the
same basis as all other shares.
7.3 Registration Rights:
a. Demand Registration. At anytime after October 1, 1997,
Executive shall have the right to make a request of the Company, in writing (any
such request hereinafter referred to as a "Registration Request"), to register
under the Securities Act of 1933 (the "Securities Act"), all or any part of the
Option Shares as to which the Stock Options were exercised and the Company shall
cause such shares to be registered for sale under the Securities Act as soon as
reasonably practicable so as to permit promptly the sale thereof, and, in
connection therewith, the Company shall prepare on such appropriate form as the
Company in its discretion shall determine, a registration statement under the
Securities Act to effect such registration and shall file such registration
statement with the Securities and Exchange Commission ("Commission") and
diligently pursue the declaration of such registration statement as effective.
Executive undertakes to provide all such information and materials and take all
such action as may be required in order to permit the Company to comply with all
applicable requirements of the Commission and to obtain any desired acceleration
of the effective date of such registration statement. Notwithstanding the
foregoing, the Company shall be entitled to postpone for a reasonable period of
time, but not in excess of 180 days, the filing of any registration statement
otherwise required to be prepared and filed by the Company pursuant to this
Amended Agreement if the Company is, at such time, conducting or about to
conduct an underwritten public offering of equity securities (or securities
convertible into equity securities) and is advised by its managing underwriter
or underwriters that such offering would in its or their reasonable opinion be
materially and adversely affected by the registration so requested.
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<PAGE>
b. Piggyback Registrations. If, in the case of any offering of
equity securities (or securities convertible into equity securities), within ten
days after Executive has been made aware by the Company of its intention to
effect a registration of any of its securities (otherwise than pursuant to an
employee benefit plan or filing on Form S-8), the Executive may request and the
Company shall honor Executive's request that any equity securities in the
Company owned by Executive be included in the registration statement.
Notwithstanding the foregoing, if the underwriter consents to
the inclusion in the registration statement of less than all shares proposed to
be offered by selling shareholders, including the Executive, then the amount of
shares to be sold for the account of each selling shareholder shall be reduced
proportionately in the ratio by which the amount each selling shareholder
proposes to sell bears to the total amount of shares which the underwriter will
permit to be sold for the account of all selling shareholders.
c. Limitations: In connection with any offering of shares
registered pursuant to this Amended Agreement, the Company (i) shall furnish to
Executive such number of copies of any prospectus (including any preliminary
prospectus, or supplement) as he may reasonably request in order to effect the
offering and sale of the shares to be offered and sold, but only while the
Company shall be required under the provisions hereof to cause the registration
statement to remain current for not more than six months, and (ii) take such
action as shall be necessary to qualify the shares covered by such registration
statement under such blue sky or other state securities laws for offer and sale
as Executive shall request; provided, however, that the Company shall not be
obligated to qualify as a foreign corporation to do business under the laws of
any jurisdiction in which it shall not then be qualified or to file any general
consent to service of process in any jurisdiction in which such a consent has
not been previously filed. If requested by the Company, in connection with a
piggyback sale of the Option Shares covered hereunder, Executive shall enter
into an underwriting agreement with a managing underwriting or underwriters
selected by the Company and shall enter into an agreement with the Company
containing representations, warranties, indemnities and agreements then
customarily included by an issuer or selling shareholder in underwriting
agreements with respect to secondary distributions. In connection with any
offering of shares registered pursuant to this Amended Agreement, the Company
shall (y) furnish to the underwriters, at the Company's expense, unlegended
certificates representing ownership of the shares being sold in such
denominations as requested and (z) instruct any transfer agent and registrar of
the shares to release any stop transfer order with respect to shares included in
any registration becoming effective pursuant to this Amended Agreement. The
Company shall use its best efforts to keep such registration statement
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<PAGE>
current for a period of six months.
d. Costs. The Company shall in all events pay all expenses,
fees, and disbursements of any counsel, accountants and other consultants
representing the Company in connection therewith, as well as all underwriting
discounts and commissions in connection with the sale of the shares of
Executive.
8. Death During Employment: If Executive dies during the Term of this
Amended Agreement, the Executive's surviving spouse or the Executive's estate,
if otherwise provided, shall obtain all rights in vested stock options plus the
right to exercise the stock options on 100% of the non-vested stock options,
together with the sales rights of such stocks and/or stock options that have
been granted to the Executive hereunder.
9. Disability: If Executive suffers from a disability as hereinafter
defined, his employment hereunder may, after notice is hereinafter provided, at
the option of the Company, be deemed terminated. In such event, the Company will
pay the Executive the Base Salary, Bonus, and all fringe benefits otherwise
payable to him for a period of three (3) years after the date upon which the
Board deems the Executive to be disabled hereunder, and, thereafter, one-half of
his Base Salary for the balance of the seven (7) year Term of this Amended
Agreement (the "Disability Wage"). The Company shall have the right, however, to
set off against the amount of the Disability Wage payable to the Executive all
amounts which may be received by Executive during such period pursuant to the
disability insurance provided by the Company under the provisions of this
Amended Agreement. The Company shall have no further wage obligations to the
Executive or to his estate except as otherwise provided in this Amended
Agreement. For this purpose, the terms "disability" and "disabled" are defined
as Executive's inability for a period of 180 days in a 360 day period to perform
his duties under this Amended Agreement. If there is a dispute as to the
existence of the Executive's disability, then said dispute shall be submitted to
binding arbitration as provided hereafter.
10. Termination of Employment:
10.1 Termination by the Executive: Executive may voluntarily resign
at any time after seven (7) years of full employment as President and Chief
Executive Officer of the Company, upon 60 days prior written notice to the
Company. In such event, and not including circumstances described in Paragraph
12 below, Executive shall be entitled solely to the amounts specified in Section
11.1 of this Amended Agreement.
10.2 Termination by the Company: Executive's employment may be
terminated by the Company at any time, upon notice to Executive, for "Cause."
For this purpose, the term "Cause" is
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defined as:
a. Breach. A material violation by Executive of his duties as
an employee of the Company which are demonstrably willful and deliberate on his
part and which are not remedied in a reasonable period of time (not to exceed 30
days) after receipt of written notice from the Company;
b. Conviction. A conviction of Executive for a felony crime
involving baseness, vileness, depravity or moral turpitude that would negatively
impact on the Company and/or the Executive's performance hereunder;
c. Fraud. The commission or participation of Executive in an
act or acts of personal dishonesty intended to result in his material personal
enrichment at the expense of the Company which is not remedied in a reasonable
period of time after receipt of written notice from the Company; and
d. Chemical Dependency. Dependence by Executive upon an
illegal substance, including but not limited to, marijuana, cocaine, heroin, and
all other illegal substances and/or dependence by Executive upon the use of
alcohol, which, in any case, in the opinion of both Executive's family physician
and a physician chosen by the Company, materially impairs Executive's ability to
perform his duties hereunder, which dependence is not cured or rehabilitated
within six months of receipt of written notice from the Company to the
Executive.
Notwithstanding the foregoing, the Executive shall not be deemed to have been
terminated for Cause unless and until there shall have been delivered to him a
copy of a resolution duly adopted by the affirmative vote of not less than three
quarters (3/4) of the entire membership of the Board (which Board must consist
of at least four members at such time, including the Executive), at a meeting of
the Board held for the purpose (after at least seven days prior written notice
to the Executive and an opportunity for him, together with his counsel, to be
heard before said Board), finding that in the good faith opinion of said Board
the Executive was guilty of conduct set forth above in subsections (a), (b), (c)
or (d) above and specifying the particulars thereof in detail. In the event that
the Board shall consist of less than four members, the affirmative vote of at
least two-thirds of the entire membership of the Board will be required for
purposes of this Section.
10.3 Notice of Termination: Any termination by the Company pursuant
to Section 9 (Disability) or Section 10.2 (Cause), or by the Executive pursuant
to Section 12 (Good Reason), shall be communicated by written Notice of
Termination to the other party or parties hereto. For purposes of this Amended
Agreement, a "Notice of Termination" shall mean a notice which shall indicate
the specific termination provision in this Amended Agreement relied
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upon and shall set forth in reasonable detail the facts and circumstances
claimed to provide a basis for termination of the employment of the Executive
under the provision so indicated.
10.4 Date of Termination: For purposes of this Amended Agreement,
"Date of Termination" shall mean:
(i) if this Amended Agreement is terminated under Section 9
(Disability), thirty (30) days after Notice of Termination is
given (provided that the Executive shall not have returned to
the performance of his duties on a full-time basis during such
thirty (30) day period);
(ii) if the Executive's employment is terminated under Section
12 (Good Reason) below, the date specified in the Notice of
Termination; and
(iii) if the Executive's employment is terminated under
Section 10.2 (Cause), the date of which a Notice of
Termination is given; provided that if within thirty (30) days
after any Notice of Termination is given the party or parties
receiving such Notice of Termination notifies the other party
or parties that a dispute exists concerning the termination,
the Date of Termination shall be the date on which the dispute
is finally determined by a binding and final arbitration award
or by a final judgment, order or decree of a court of
competent juris- diction (the time for appeal therefrom having
expired and no appeal having been perfected); provided,
however, that the Executive's action is finally adjudicated or
arbitrated in his favor and against the Company or that the
Executive's action is settled by written agreement of the
parties in the Executive's favor.
11. Payments Upon Termination:
11.1. Termination by the Company for Cause, Resignation or by Mutual
Amended Agreement. If Executive and the Company mutually agree to the
termination of this Amended Agreement, if Executive voluntarily resigns, except
as provided in Paragraph 12 below, or if Executive is terminated by the Company
for Cause (as defined in Section 10.2), then Executive shall be entitled only to
a pro rata portion of the Base Salary, a Bonus which has accrued through the
date of termination together with accrued vacation to such date, all Stock
Options available under this Amended Agreement, and all reimbursements from the
Company due under Paragraph 5 hereof.
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11.2. Termination for Reasons other than Termination by the Company
for Cause, Resignation, Mutual Amended Agreement, Death or Disability. For any
form of termination other than that described in the preceding section or in
sections 8 or 9, including if the Executive shall terminate his employment for
Good Reason, as herein defined, or if the Company shall terminate the Executive
without Cause, then the Company shall pay the Executive the following amounts:
(i) The Executive's full Base Salary (and any annual increases
and Bonus) through the full seven (7) year term of this
Amended Agreement.
(ii) A lump sum payment of Three Million ($3,000,000) Dollars.
(iii) All Option Shares shall be exercisable for a period of
five years from the Date of Termination.
(iv) The Company shall also pay all indemnity payments and all
legal fees and expenses incurred by the Executive as a result
of such termination (including all such fees and expenses, if
any, incurred in contesting or disputing any such termination
or in seeking to obtain or enforce any right or benefit
provided by this Amended Agreement).
(v) The provisions of Section 16 (Confidentiality), Section 17
(Non-Compete) and Section 18 (Termination), as they may have
been applicable to the Executive, shall terminate at the time
of said Termination.
(vi) The Company shall continue to fund the Executive's term
life insurance and disability insurance until the Executive
reaches the age of sixty-seven (67) years.
The Executive shall not be required to mitigate the amount of any payment
provided for in this Section 11.2 by seeking other employment or otherwise.
12. Good Reason: The Executive may terminate his employment for Good
Reason. For purposes of this Amended Agreement "Good Reason" shall mean:
(i) without the express written consent of Executive, the
assignment to him of any duties grossly inconsistent with his
positions, duties, responsibilities and status with the
Company, or a change in his reporting responsibilities,
titles,
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or offices, or any removal of him from or any failure to
re-elect him to any of such positions, except because of the
termination of his employment for Cause, Disability or Death;
(ii) a reduction by the Company in his Base Salary as in
effect on the date hereof, or as the same may be increased
from time to time; or the failure by the Company to increase
such Base Salary each year as provided for in this Amended
Agreement;
(iii) the failure by the Company to continue in effect any
Company-sponsored benefit or compensation plan, pension plan,
life insurance plan, medical and dental plan, personal
accident plan or disability plan in which the Executive is
participating (or plans providing him with substantially
similar benefits), the taking of any action by the Company
which would adversely affect his participation in or
materially reduce his benefits under any of such plans or
deprive him of any material fringe benefit enjoyed by him, or
the failure by the Company to make any of the payments called
for in Section 5 hereof;
(iv) the failure of the Company to obtain the assumption of an
agreement to perform this Amended Agreement by any successor
as contemplated in Section 18 below;
(v) a "Change in Control" of the Company as defined in Section
13 below; or
(vi) the purported termination of the Executive's employment
which is not effected pursuant to a Notice of Termination
satisfying the requirements paragraph 10.3 above, and for
purposes of this Amended Agreement, no such purported
termination shall be effective.
13. Change in Control:
(a) For purposes of this Amended Agreement, a "change in control of
the Company" shall mean a change in control of the nature that would be required
to be reported in response to Item 6(e) of Schedule 14A of Regulation 14A
promulgated under the Securities Exchange Act of 1934, as amended ("Exchange
Act"); provided that, without limitation, such a change of control also shall be
deemed to have occurred:
(i) if, with the exception of the Executive, any "person" (as
such term is
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used in Sections 13(d) and 14(d)(2) of the Exchange Act) is or
becomes the beneficial owner, directly or indirectly by
acquisition, or otherwise, or securities of the Company
representing thirty (30%) percent or more of the combined
voting power of the Company's then outstanding securities; or
(ii) during any period of two consecutive years, individuals
who at the beginning of such period constitute the Board of
Directors of the Company cease for any reason to constitute at
least a majority thereof, unless the election or the
nomination for election by the Company's shareholders, of each
new director, was approved by a vote of at least three-fourths
(3/4) of the directors then still in office who were directors
at the beginning of the period.
(b) If any of the events described in this Section 13(a) hereof
constituting a change in control of the Company shall have occurred, the
Executive shall be entitled to the benefits provided in Section 11.2.
14. Reporting Obligation: The Company and the Executive hereby agree that
the Executive shall only be responsible to, and shall be required to report only
to, the Company's Board.
15. Future Inventions: The Executive shall assign and convey, to the
Company, and hereby does assign and convey to the Company, and the Company
hereby accepts, all of the Executive's right, title and interest in and to all
Future Inventions made or conceived during the Term of this Amended Agreement,
and the Executive hereby agrees that he shall, without the payment of royalty or
any other consideration to him therefor:
(a) Inform the Company promptly and fully of each such Future
Invention by a written report satisfactory to the Company;
(b) Apply, at the Company's request and expense, for United States
and foreign letters patent, copyright, trademark or service mark, as the case
may be, either in the Executive's name or otherwise as the Company shall direct;
(c) Assign and convey to the Company, and he hereby does assign and
convey to the Company, all of his right, title and interest in and to
applications for United States and foreign letters patent, copyrights,
trademarks and service marks and to any letters patent, copyrights, trademarks
and service marks which may
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be issued upon any such Future Invention;
(d) Deliver promptly to the Company, without charge to the Company
but at its expense, such written instruments, and do such other acts, as may be
reasonably necessary, in the opinion of the Company, to obtain and maintain
United States and foreign letters patent, copyrights, trademarks or service
marks on each such Future Invention and to vest the Executive's entire right,
title and interest thereto in the Company; and
(e) Grant to the Company, and he hereby does grant to the Company,
prior to any further assignment of the Executive's right, title and interest to
the Company in any Future Invention as required above, the royalty-free right to
use in its business, and to make, have made, use and sell products, processes,
services, writings and marks based upon or related to such Future Invention made
or conceived by the Executive.
As used herein, Future Invention shall mean all inventions, discoveries, ideas,
concepts, designs and improvements of any sort, whether patentable,
copyrightable or not, relating in any way to the business of the Company, which
the Executive may, during the term of this Amended Agreement, conceive or
invent, whether alone or jointly with others, and whether during business hours
or thereafter, and such term includes all "know-how" and Technical Data relating
to the foregoing, and all letters patent and copyrights of the United States or
any other country which may be issued in connection with the foregoing.
Technical Data shall mean all written, printed and other tangible materials
embodying or containing Know-how, and includes, without limiting the generality
of the foregoing, all correspondence, designs, processes, source codes, object
codes, engineering sketches, drawings and tracings, specifications and
engineering data, reporting formats, memoranda, notebooks, and all copies
thereof, together with all models and prototypes of every description.
16. Confidentiality:
(a) During the Term of this Amended Agreement and at all times
thereafter, the Executive will not use Secret or Confidential Information for
his own benefit or for the benefit of any person or legal entity other than the
Company, nor will he disclose the same to any other person or legal entity,
except as required to conduct the business of the Company in the ordinary
course.
(b) Except with the prior written approval of the Company, or except
as required to conduct the business of the Company in the ordinary course, the
Executive will not, at any time, directly or indirectly, use, disseminate,
disclose, lecture upon, or publish articles concerning, any Secret or
Confidential Information.
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(c) Upon the termination of his employment with the Company, all
documents, records, notebooks and similar repositories of, or containing, Secret
or Confidential Information, including any copies thereof, then in the
Executive's possession, or under his control, whether prepared by him or others,
will be left with or immediately returned to the Company by the Executive.
As sued herein, Secret or Confidential Information shall mean any ideas or any
compilations of information kept or which shall hereafter be kept confidential
by the Company in the operation of its business or the conduct of its research
and which are not in the public domain, and which give or can give to the
Company an advantage over its competitors, including, by way of illustration but
not limitation: source codes, object codes, engineering and other sketches,
drawings and tracings, specifications, engineering data, memoranda, designs,
sources of supplies and materials, cost and financial data, processes,
production machines and equipment, procedures, customer lists, marketing plans
and business forecasts, together with all Know-how and Technical Data relating
thereto.
17. Non-Compete: The Executive agrees that, during the Term of this
Amended Agreement and during the period of three (3) years following the
termination of his employment with the Company, he will not, without the written
approval of the Company, directly or indirectly, under any circumstances
whatsoever, own, manage, operate, engage in, control or participate in the
ownership, management, operation or control of, or be connected in any manner,
whether as in individual, partner, stockholder, director, officer, principal,
agent, employee or consultant, or in any other relation or capacity whatsoever,
with any Competing Organization, and will not in any such manner, compete with
or solicit or call on any Customer of the Company, wherever located, who was a
Customer of the Company at any time during the period one year prior to the
termination of the Executive's employment with the Company, for the purpose Of
inducing such Customer to purchase or lease a Competing Product. Notwithstanding
the foregoing, nothing contained in this paragraph shall restrict the Executive
from making any investment in any company, so long as such investment consists
of no more than five percent (5%) of any class of equity securities of a company
whose securities are traded on a national securities exchange or in the
over-the-counter market.
As used herein Competing Organization shall mean, to the best of the Executive's
knowledge, any person or legal entity engaged in, about to engage in, or
intending to engage in, research on, or development, use, production, marketing
or selling of, a Competing Product in or outside of the United States of
America; Competing Product shall mean any process, service or product of any
person or legal entity other than the Company, or a parent, subsidiary or
affiliate of the Company, in existence or under development, which during the
Term of this Amended Agreement, competes with or is an alternative to any
present or planned future process, service or
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product of the Company, whether or not actively marketed by the Company; and
Customer shall mean any individual, firm, partnership, corporation, company,
joint venture or governmental or military unit or any other entity or any
parent, subsidiary or affiliate of any of them which is negotiating or has a
contract with the Company for the purchase, sale or lease of the Company's
equipment, products or services or which has been solicited by the Company with
respect to such purchase or lease during the Executive's employment with the
Company.
18. Non-Interference: The Executive will not, for a period of two (2)
years following the termination of the Executive's employment, directly or
indirectly, employ, hire; solicit or, in any manner, encourage any employee of
the Company to leave the employ of the Company.
19. Injunctive Relief: In addition to any other rights or remedies
available to the Company as a result of any breach by the Executive of his
obligations under this Amended Agreement, the Company shall be entitled to
enforcement of such obligations by an injunction or a decree of specific
performance from a court with appropriate jurisdiction, and in the event that
the Company is successful in any suit or proceeding brought or instituted by the
Company to enforce any of the provisions of this Amended Agreement, or on
account of any damages sustained by the Company by reason of the violation by
the Executive of any of the terms of this Amended Agreement to be performed by
the Executive, the Executive agrees to pay to the Company all attorneys' fees
reasonably incurred by the Company.
20. Notices: Any notice, request, demand, offer, payment or communication
required or permitted to be given by any provision of this Amended Agreement
shall be deemed to have been delivered and given for all purposes if written,
and (1) if delivered personally or by courier or delivery service to the address
set forth below at the time of such delivery, (b) if sent by registered or
certified United States mail, postage and charges prepaid, addressed to the
intended recipient, at the address specified above, effective upon receipt or
refusal. Any party may change the address to which notices are to be mailed by
giving five (5) days prior notice as provided herein to all other parties.
Commencing on the day after the receipt or refusal of such notice, such newly
designated address shall be such person's address for purposes of all notices or
other communications required or permitted to be given pursuant to this Amended
Agreement.
21. Successors:
(a) The Company will require any successor (whether direct or
indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the business and/or assets of the Company, by agreement in
form and substance
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satisfactory to the Executive, to expressly assume and agree to perform this
Amended Agreement in the same manner and to the same extent that the Company
would be required to perform it if no such succession had taken place. Failure
to obtain such agreement prior to the effectiveness of any such succession shall
be a breach of this Amended Agreement and shall entitle the Executive to
compensation from the Company in the same amount and on the same terms as he
would be entitled hereunder if the Executive had terminated his employment for
Good Reason, except that for purposes of implementing the foregoing, the date on
which any such succession becomes effective shall be deemed the Date of
Termination. As used in this section, "Company" shall mean the Company as
hereinbefore defined, and any successor to its business and/or assets as
aforesaid which executes and delivers the agreement provided for in this Section
18 or which otherwise becomes bound by all the terms and provisions of the
Amended Agreement by operation of law.
22. Construction of Amended Agreement:
22.1. New Jersey Law. This Amended Agreement shall be governed by
and construed and enforced in accordance with the laws of the State of New
Jersey, and all of its provisions shall be administered according to and it
validity shall be determined under the laws of the State of New Jersey without
reference to Florida law provisions regarding conflicts of law.
22.2. Gender and Number. Whenever appropriate, references in this
Amended Agreement in any gender shall be construed to include all other genders,
references in the singular shall be construed to include the plural, and
references in the plural shall be construed to include the singular, unless the
context clearly indicates to the contrary.
22.3. Certain Words. The words "hereof", "herein", "hereunder", and
other similar compounds of the word "here" shall mean and refer to the entire
Amended Agreement and not to any particular article, provision or paragraph
unless so required by this Amended Agreement.
22.4. Captions. Section and paragraph headings, titles or captions
contained in this Amended Agreement are inserted only as a matter of convenience
and/or reference, and they shall in no way be construed as limiting, extending,
defining or describing either the scope or intent of this Amended Agreement or
any provision hereof.
22.5. Counterparts. This Amended Agreement may be executed in one or
more counterparts, and any such counterpart shall, for all purposes, be deemed
an original, but all such counterparts together shall constitute but one and the
same instrument.
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22.6. Severability. The invalidity or unenforceability of any
provision hereunder (or any portion of such a provision) shall not affect the
validity or enforceability of the remaining provisions (or remaining portions of
such provisions) of this Amended Agreement.
23. Miscellaneous:
23.1. Entire Amended Agreement. This Amended Agreement constitutes
the entire agreement among the parties pertaining to the subject matter hereof,
and supersedes and revokes any and all prior or existing agreements, written or
oral, relating to the subject matter hereof, and this Amended Agreement shall be
solely determinative of the matters addressed herein.
23.2. Waiver. Either the Company or Executive may, at any time or
times, waive (in whole or in part) any rights or privileges to which he or it
may be entitled hereunder. However, no waiver by any party of any condition or
of the breach of any term, covenant, representation or warranty contained in
this Amended Agreement, in any one or more instances, shall be deemed to be or
construed as a further or continuing waiver of any such condition or breach in
other instances, or as a waiver of any other condition or of any breach of any
other terms, covenants, representations of warranties contained in this Amended
Agreement, and no waiver shall be effective unless it is in writing and signed
by the waiving party.
23.3. Attorney's Fees. If either party shall be required to retain
the services of an attorney to enforce any of his or its rights hereunder, the
prevailing party shall be entitled to receive from the other party all costs and
expenses including (but not limited to) court costs and attorney's fees (whether
in a court of original jurisdiction or one or more courts of appellate
jurisdiction), incurred by him or it in connection therewith.
23.4. Venue. Any litigation arising hereunder shall be instituted
only in Bergen County, New Jersey, the place where this Amended Agreement was
executed, and all parties hereto agree that venue shall be proper in said county
for all such legal or equitable proceedings.
23.5. Assignment. The rights and obligations of the parties under
this Amended Agreement shall inure to the benefit of and shall be binding upon
their successors, assigns, and/or other legal representatives. This Amended
Agreement shall not be assignable by the Company, except as provided herein by
Executive. The services of Executive are personal and his obligations may not be
delegated by him except as otherwise provided herein.
23.6. Amendment. This Amended Agreement may not be amended,
modified, superseded or canceled, and any of the matters,
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covenants, representations, warranties or conditions hereof may not be waived,
except by a written instrument executed by the Company and the Executive or, in
the case of a waiver, by the party to be charged with such waiver.
23.7. Arbitration. Any controversy or claim arising out of or
relating to this Amended Agreement, or the breach thereof, shall be settled by
arbitration in accordance with the Commercial Arbitration Rules of the American
Arbitration Association with the American Arbitration Association, Bergen
County, New Jersey, and judgment upon the award rendered by the arbitrators may
be entered in any court having jurisdiction over the parties. The dispute will
be resolved by a panel of three arbitrators if the dollar amount in question
that is being arbitrated exceeds $100,000.
IN WITNESS WHEREOF, the Company and Executive have caused this Amended
Agreement to be effective on the day and year first above written.
WITNESSES: "Company"
COMPOST AMERICA HOLDING COMPANY
INC.,
a New Jersey corporation
By:
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Robert E. Wortmann, Secretary
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"Executive"
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ROGER E. TUTTLE
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