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) April 27, 1998
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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)
Registrant's telephone number, including area code (201) 541-9393
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N/A
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(Former name or former address, if changed since last report.)
PLEASE ADDRESS ALL CORRESPONDENCE TO: Mark Gasarch, Esq.
40 West 57th Street
33rd Floor
New York, New York 10019
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Item 2. Acquisition or Disposition of Assets
On April 27, 1998 Compost America Holding Company, Inc. (the "Company") sold to
AW Compost Partners, LLC (Exhibit 2.1), a Delaware limited liability company
("AW") 1,627,980 shares of its common stock, no par value, and 17,500 shares of
its newly created Series D Preferred Stock (Exhibit 3.1 and Exhibit 4.1) for
$1,750,000, paid $554,413 in cash and $1,195,587 by the cancellation of the
Company's promissory notes in that amount. A Registration Rights Agreement
(Exhibit 4.2) grants to AW certain demand and piggyback registration rights with
regard to their holdings of the Company's common shares and Series D Preferred
Stock. G. Chris Andersen, a director of the Company, is the Manager and a voting
member of AW.
Item 7. Financial Statements and Exhibits
(a) and (b) - none
(c) Exhibits
2.1 - AW Compost Partners LLC Stock Purchase Agreement*
3.1 - Amendment to Certificate of Incorporation creating Series D
Preferred Stock
4.1 - Series D Preferred Stock Designation of Rights
4.2 - AW Compost Partners LLC Registration Rights 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: May 4, 1998
COMPOST AMERICA HOLDING COMPANY, INC.
(Registrant)
By /s/ Roger E. Tuttle
-----------------------------------
Roger E. Tuttle, President
(Principal Executive Officer)
Exhibit 2.1
AW Compost Partners LLC Stock Purchase Agreement
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================================================================================
STOCK PURCHASE AGREEMENT
between
COMPOST AMERICA HOLDING COMPANY, INC.
and
AW COMPOST PARTNERS, LLC
Dated as of April 27, 1998
================================================================================
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TABLE OF CONTENTS
ARTICLE I
SECTION 1.01. Definitions ................................................... 1
ARTICLE II
SECTION 2.01. Authorization, Purchase and Sale of Shares .................... 7
SECTION 2.02. Closing ....................................................... 7
ARTICLE III
SECTION 3.01. Organization and Qualification; Subsidiaries .................. 8
SECTION 3.02. Certificate of Incorporation and By-Laws ...................... 8
SECTION 3.03. Capitalization ................................................ 8
SECTION 3.04. Authority ..................................................... 10
SECTION 3.05. No Conflict; Required Filings and Consents .................... 10
SECTION 3.06. Common Stock; Series D Preferred Stock ........................ 11
SECTION 3.07. Compliance with Laws .......................................... 11
SECTION 3.08. SEC Filings; Financial Statements ............................. 11
SECTION 3.09. Financial Statements .......................................... 12
SECTION 3.10. Absence of Undisclosed Liabilities ............................ 12
SECTION 3.11. Absence of Certain Changes, Events and Conditions;
Conduct in the Ordinary Course ............................... 12
SECTION 3.12. Employee Benefit Matters ...................................... 15
SECTION 3.13. Real Property ................................................. 16
SECTION 3.14. Tangible Personal Property .................................... 17
SECTION 3.15. Intellectual Property ......................................... 17
SECTION 3.16. Environmental Matters ......................................... 20
SECTION 3.17. Litigation .................................................... 22
SECTION 3.18. Insurance ..................................................... 22
SECTION 3.19. Material Contracts ............................................ 23
SECTION 3.20. Licenses and Permits .......................................... 25
SECTION 3.21. Labor Matters ................................................. 25
SECTION 3.22. Taxes ......................................................... 25
SECTION 3.23. Miami Recycling and Composting Project ........................ 27
SECTION 3.24. Newark Recycling and Composting Project ....................... 28
SECTION 3.25. Private Offering .............................................. 28
SECTION 3.26. Brokers ....................................................... 28
SECTION 3.27. Disclosure Schedule and Disclosure Documents;
Accuracy of Information ...................................... 28
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ARTICLE IV
SECTION 4.01. Financial Information and Material Contracts of Longo ......... 29
SECTION 4.02. Railcars, Containers and Equipment ............................ 31
SECTION 4.03. The New York City Contract .................................... 31
SECTION 4.04. Licenses and Permits .......................................... 32
ARTICLE V
SECTION 5.01. Corporate Organization ........................................ 32
SECTION 5.02. Authority ..................................................... 32
SECTION 5.03. No Conflict; Required Filings and Consents .................... 32
SECTION 5.04. Funds ......................................................... 33
SECTION 5.05. Investment Purpose ............................................ 33
SECTION 5.06. Brokers ....................................................... 33
ARTICLE VI
SECTION 6.01 Use of Proceeds; Redemption; Issuance Restrictions ............ 35
SECTION 6.02. Bedminster Matters ............................................ 34
ARTICLE VII
SECTION 7.01. Indemnity ..................................................... 34
SECTION 7.02. Returns and Payments .......................................... 34
SECTION 7.03. Contests ...................................................... 35
SECTION 7.04. Time of Payment ............................................... 35
SECTION 7.05. Conveyance Taxes .............................................. 35
SECTION 7.06. Miscellaneous ................................................. 35
ARTICLE VIII
SECTION 8.01. Conditions to Obligations of the Purchaser .................... 36
SECTION 8.02. Conditions to Obligations of the Company ...................... 38
ARTICLE IX
SECTION 9.01. Survival of Representations and Warranties .................... 39
SECTION 9.02. Indemnification by the Company ................................ 39
SECTION 9.03. Indemnification by the Purchaser .............................. 42
SECTION 9.04. Materiality ................................................... 42
SECTION 9.05. Time Period; Dollar Threshold ................................. 42
SECTION 9.06. Notice and Defense ............................................ 43
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ARTICLE X
SECTION 10.01. Amendment .................................................... 43
SECTION 10.02. Waiver ....................................................... 43
ARTICLE XI
SECTION 11.01. Notices ...................................................... 44
SECTION 11.02. Entire Agreement; Assignment ................................. 45
SECTION 11.03. Parties in Interest .......................................... 45
SECTION 11.04. Governing Law ................................................ 45
SECTION 11.05. Jurisdiction, Etc. ........................................... 45
SECTION 11.06. Headings ..................................................... 46
SECTION 11.07. Counterparts ................................................. 46
SECTION 11.08. Specific Performance ......................................... 46
SECTION 11.09. Expenses ..................................................... 46
EXHIBIT A Disclosure Documents
EXHIBIT B Certificate of Designation of Series D Preferred Stock
EXHIBIT C Certificates of Designation of Preferred Stock, Series A, Series B and
Series C
EXHIBIT D Form of Opinion of Greenberg Traurig
EXHIBIT E Registration Rights Agreement
EXHIBIT F Officer's Certificate of the Company
EXHIBIT G Officer's Certificate of the Purchaser
DISCLOSURE SCHEDULE
iii
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STOCK PURCHASE AGREEMENT (this "Agreement"), dated as of April 27,
1998, between COMPOST AMERICA HOLDING COMPANY, INC., a New Jersey corporation
(the "Company"), and AW COMPOST PARTNERS, LLC, a limited liability company
organized under the laws of Delaware ("Purchaser").
WITNESSETH:
WHEREAS, the Company desires to authorize, issue, and sell to the
Purchaser, and the Purchaser desires to purchase from the Company, the Series D
Preferred Stock (as hereinafter defined) and 1,627,980 shares of the Company's
common stock (the "Common Stock") on the terms and subject to the conditions set
forth in this Agreement; and
WHEREAS, the Company intends to use the Purchase Price proceeds for
authorized corporate purposes;
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.
"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.
"AMR" means American Marine Rail, L.L.C., a New Jersey limited
liability company.
"AMR Opinion" means the option of the Purchaser to convert the
Series D Preferred Stock into ownership interests in AMR as provided in the
Certificate of Designation of the Series D Preferred Stock.
"Articles of Incorporation" means the Restated Articles of
Incorporation of the Company, as amended through the date hereof.
"Bankruptcy Proceeding" has the meaning specified in Section 8.01.
"Bedminster Miami" has the meaning specified in Section 6.03.
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"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 Series D Preferred Stock and the 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.
"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 Documents" mean the documents which are listed in
Exhibit A hereto and are incorporated by reference herein.
"Disclosure Schedule" means the Disclosure Schedule attached hereto
and forming a part of this Agreement.
"EBITDA" means earnings before interest, income taxes, depreciation
and amortization.
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"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.
"Equipment Debt Refinancing" means the refinancing of Longo's
equipment debt 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.
"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
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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
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.
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"Licensed Intellectual Property" means all Intellectual Property
licensed or sublicensed to the Company or any Subsidiary from a third party.
"Longo" or "EPIC" means R.J. Longo Construction Co., Inc., d/b/a
EPIC, a wholly-owned subsidiary of the Company.
"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.
"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.
"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, the shares of Preferred Stock Series C of the Company, no par value,
and the shares of Preferred Stock Series D of the Company, no par value, which
shall have the rights and terms set forth in Exhibit B hereto.
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"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.
"Preferred Stock Series D" means the Series D 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 April 27, 1998 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.
"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.
"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.
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"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.
ARTICLE II
PURCHASE AND SALE OF SHARES; CLOSING
SECTION 2.01. Authorization, Purchase and Sale of Shares. (a) 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) 17,500 shares of Preferred Stock Series D
(the "Series D Preferred Stock") representing 100% of the authorized shares of
Series D Preferred Stock and (ii) 1,627,980 shares of Common Stock for an
aggregate Purchase Price of $1,750,000 ("Purchase Price"). The Purchase Price
shall be paid in the form of cash of $554,413 and the cancellation of the
Company's promissory notes in the outstanding aggregate principal amount of
$1,195,587 (the "Company Notes").
The Series D Preferred Stock shall have the rights and terms set
forth in Exhibit B hereto.
SECTION 2.02. Closing. (a) The Closing of the purchase and sale of
the Series D Preferred Stock and the Common Stock shall take place upon the
satisfaction of the conditions set forth herein at the offices of Greenberg
Traurig, MetLife Building, 200 Park Avenue, New York NY 10166, 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 Series D
Preferred Stock and the Common Stock registered in the name of the Purchaser (or
its designee); (ii) the certificates referred to in Sections 8.01(a) and (d);
(iii) the legal opinions referred to in Sections 8.01(k); (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 cash portion of 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 Company Notes marked "cancelled"; (iii) the certificate
referred to in Section 8.02(a); and (iv) a receipt for the Series D Preferred
Stock and the Common Stock.
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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 and each of its 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. The
Disclosure Documents set forth a complete and correct list of each of the
Subsidiaries of the Company and each Affiliate of the Company. Each such
Subsidiary is directly or indirectly wholly owned by the Company, unless
otherwise indicated in the Disclosure Documents, which Disclosure Documents set
forth all other owners of each such Subsidiary not directly or indirectly wholly
owned by the Company, 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 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 is not a member of (nor is any part of its business
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 as to EPIC, Miami
Recycling & Composing Company ("Miami Recycling") and Newark Recycling &
Composing Co., Inc. ("Newark Recycling") 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. Neither
the Company, EPIC, Miami Recycling or Newark Recycling is in violation of any of
the provisions of the respective Certificates of Incorporation or By-Laws, and
to the Company's knowledge, 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
April 6, 1998, the authorized capital stock of the Company consisted of (x)
25,000,000 shares of preferred stock, of which (i) 169,000 shares of Preferred
Stock Series A are issued and outstanding, (ii) 401,000 shares of Preferred
Stock Series B are issued and outstanding (and 800,000 additional Preferred
Stock Series B shares are issuable upon conversion from the Convertible Note
referred to in Section 6.01(c)) and (iii) 91,000 shares of Preferred Stock
Series C are issued and outstanding, and (y) 50,000,000 shares of
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Common Stock, of which (i) 36,980,805 are issued and outstanding, (ii) 140,000
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 (the Preferred Stock Series C is
convertible to Common Stock, but not until May 4, 1999 at the earliest and
accordingly any Common Stock resulting from such a conversion is not included in
the calculations contained in this paragraph), and (iv) 7,498,258 shares of
Common Stock are reserved for options, warrants or other similar rights pursuant
to those agreements listed on Schedule 3.03(b)(l) attached hereto (for a total
of 46,621,063 Common Stock issued and reserved for issuance). As indicated in
Part II of Schedule 3.03(d), additional shares of Common Stock (including but
not limited to the 1,627,980 shares of Common Stock for the Purchaser) will be
issuable in conjunction with the issuance of the Series D Preferred Stock.
(b) Except as set forth in this Section 3.03 or in the Disclosure
Schedule or in Schedule 3.03(b)(l) of the Disclosure Schedule as to the Company,
Schedule 3.03(b)(2) as to EPIC and Schedule 3.03(b)(3) as to the 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 or any of its Subsidiaries or Affiliates is a party or obligating
the Company or any of its Subsidiaries or Affiliates to issue or sell any shares
of capital stock of, or other equity interests in, the Company or any of its
Subsidiaries or Affiliates. Except as set forth in Schedule 3.03(b)(l), (2) or
(3) of the Disclosure Documents, there are no outstanding contractual
obligations of the Company or any of its Subsidiaries or Affiliates to
repurchase, redeem or otherwise acquire any of the capital stock of the Company
or any 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. Except as set forth in Part II of Schedule
3.06(d), no antidilution adjustments are required to be made in connection with
the issuance of the Series D Preferred Stock and the Common Stock. Each of the
outstanding shares of capital stock of each of the Company's 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.
(c) Except as set forth herein and on Schedule 3.03(c) of the
Disclosure Schedule, neither the Company nor any of its Subsidiaries and
Affiliates 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 and each 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 March 31, 1998. Schedule 3.03(d) of the
Disclosure Schedule further contains a listing of all shares of stock (common
and preferred) to be owned by the Holders of the Series A, Series C and Series D
Holders immediately after the issuance of the Series D Preferred Stock.
(e) Except as otherwise disclosed in the Disclosure Documents, none
of the Persons listed on Schedule 3.03 (d) of the Disclosure Schedule, and no
officer or director of the Company, or
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any 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) Exhibit C hereof sets forth the terms and conditions (including,
without limitation, any rights and preferences) of the Preferred Stock, Series
A, Series B and Series C.
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 Series D Preferred Stock and the 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 Series D Preferred Stock and the 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 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 issuance, exchange or
redemption, if any, of the Series D 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 any of the Company's Subsidiaries, (iii) conflict
with or violate any law, rule, regulation, order, judgment or decree applicable
to the Company or any of its 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 or any of its
Subsidiaries pursuant to any note, bond, mortgage, indenture, contract,
agreement, lease, license, permit, insurance policy or other instrument or
obligation to which the Company or any of its Subsidiaries is a party, or by
which the Company or any of its Subsidiaries or its or any of their respective
properties are bound or affected, 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) 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
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the transactions contemplated hereunder) will not, require any consent,
approval, authorization or permit which has not been obtained.
SECTION 3.06. Common Stock; Series D 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 Series D Preferred
Stock subject to issuance pursuant to this Agreement, upon issuance against
payment therefor as contemplated by this Agreement and all ownership interests
in AMR to be received upon conversion of the Series D Preferred Stock and Common
Stock into ownership interests of AMR, 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 AMR
Option, shares of the Series D Preferred Stock and the Common Stock will be
convertible into ownership interests in AMR in accordance with the terms of the
Series D Preferred Stock.
SECTION 3.07. Compliance with Laws. Neither the Company nor any of
its Subsidiaries is in conflict with, or in violation of, any law, rule,
regulation, order, judgment or decree applicable to the Company or any of its
Subsidiaries or by which the Company or any of its 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 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 the Company's 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 Disclosure Documents, (ii)
liabilities incurred in the ordinary course of business of the Company and its
Subsidiaries subsequent to April 30, 1997, and (iii) 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.
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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 January 31, 1998, 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 (xv) include all adjustments
that are necessary for a fair presentation of the consolidated financial
condition of the Company and the Subsidiaries, and the results of the operations
and cash flows of the Company and the Subsidiaries 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 (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 or Schedule 3.11 of the Disclosure Schedule or otherwise
disclosed in the Disclosure Documents or (c) incurred by the Company or any of
its Subsidiaries in the ordinary course of business subsequent to January 31,
1998.
SECTION 3.11. Absence of Certain Changes. Events and Conditions;
Conduct in the Ordinary Course. (a) Since January 31, 1998, 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 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 January 31, 1998, the Company and the Subsidiaries have
been operated, consistent with funds made available to them under their
financing facilities, if any, only in the
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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 any of its Subsidiaries has, since
January 31, 1998:
(i) made any change in any method of accounting or accounting
practice or policy used by the Company, other than such changes required
by GAAP that are separately identified by the Company to the Purchaser in
writing;
(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 or any Subsidiary, including practices and
policies relating to purchasing, inventory, marketing, selling or pricing;
(iii) failed to maintain the Company's or any Subsidiary's Tangible
Personal Property in good repair, ordinary wear and tear excepted;
(iv) redeemed any of the Company's or any 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;
(v) 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 or any Subsidiary;
(vi) amended or restated the Company's or any Subsidiary's
Certificate of Incorporation or By-Laws;
(vii) been merged with, 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 Equipment Debt Refinancing,
permitted or allowed any of the assets or properties (whether tangible or
intangible) of the Company or any Subsidiary to be subjected to any
Encumbrance;
(ix) other than with respect to the Equipment Debt Refinancing, made
any loan to, guaranteed any indebtedness of or otherwise incurred any
indebtedness on behalf of any Person;
(x) made any capital expenditure or commitment for any capital
expenditure in excess of $l00,000 individually or $250,000 in the
aggregate;
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(xi) 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;
(xiii) allowed any permit or Environmental Permit that was issued or
relates to the Company or any 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 Equipment Debt Refinancing,
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 or any Subsidiary's rights thereunder;
(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
or any Subsidiary has any right, title, interest or license;
(xvii) failed to pay any creditor any material amount owed to such
creditor when due;
(xviii) 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) (A) granted any increase, or announced any increase, in the
wages, salaries, compensation, bonuses, incentives, pension or other
benefits payable by the Company or any 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 or such 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 or any
Subsidiary other than in the ordinary course of business consistent with
past practice and in accordance with GAAP;
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(xxi) amended, terminated, cancelled or compromised any material
claims of the Company or any Subsidiary or waived any other rights of
substantial value to the Company or any 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, 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 or any Subsidiary is a party, with respect to which the
Company or any Subsidiary has any obligation or which are maintained,
contributed to or sponsored by the Company or any Subsidiary for the benefit of
any current or former employee, officer or director of the Company or any
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 or any
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 or any Subsidiary.
(b) Absence of Certain Types of Plans. 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 401(a)(15) of ERISA) or a plan intended to be qualified under Section
401(a) or 401(k) of the Code. None of the Plans provides for the payment of
separation, severance, termination or similar-type benefits to any Person or
obligates the Company or any 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. 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
or any 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 and any 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,
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including, without limitation, ERISA 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. 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 or any Subsidiary. The Company or any
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 or any 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 as of the date of
such Schedule. The Company or any 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 or such Subsidiary
free and clear of all Encumbrances except (i) as disclosed in writing to the
Purchaser and (ii) Encumbrances for current taxes not yet due and payable or
being contested in good faith by appropriate proceedings.
(b) Schedule 3.13(b) of the Disclosure Schedule contains a list of
all of the Leased Real Property as of the date of such Schedule and a list of
all leases and subleases pertaining to such Leased Property including all
agreements in which the Company or any 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 or any Subsidiary, as
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the case may be, or known to the Company or any Subsidiary, as the case may be,
relating to any of the Leased Real Property, (ii) the Company or any 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
or any 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 or any Subsidiary assigned its interest under any lease or sublease
to any third party.
(c) Each of the leases and subleases referred to in Section 3.13(b)
is in full force and effect and constitutes a legal, valid and binding
obligation of the respective parties thereto, and the Company or any 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 and its
Subsidiaries as of the date of the Disclosure Schedule. Except for changes made
in the ordinary course of business since November 3, 1997, the Company or any
such Subsidiary owns such Tangible Personal Property reflected on the Financial
Statements, free and clear of all Encumbrances.
(b) Schedule 3.14(b) of the Disclosure Schedule contains a list, as
of the date of such Schedule, of all leased Tangible Personal Property requiring
lease payments of $25,000 or more per year leased by the Company and its
Subsidiaries. Except for changes made in the ordinary course of business since
November 3, 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:
(i) such lease is in full force and effect and is a legal, valid and
binding obligation of the Company or the Subsidiary party thereto, and is
enforceable by the Company or such Subsidiary in accordance with its
terms;
(ii) the Company 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 or such Subsidiary that is still in effect; none of the
Company or any 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
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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.l5(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
3.1 5(a)(i) of the Disclosure Schedule, in each case where a trademark
registration or patent or application for trademark registration or patent
listed 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. To the best knowledge of the
Company after due inquiry, the rights of the Company or any 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 or any
Subsidiary has received any claim or written notice from any Person to such
effect.
(b) (i) All the Owned Intellectual Property is owned by the Company
or a Subsidiary, as the case may be, free and clear of any Encumbrance and the
Company 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 or any Subsidiary either (A)
based upon, or challenging or seeking to deny or restrict the use by the Company
or any Subsidiary of, any of the Owned Intellectual Property or (B) alleging
that any services provided, or products manufactured or sold by the Company or
any 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 or any Subsidiary
therein. None of the Company or any 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 none
of the Company or any Subsidiary nor any operation of the business of the
Company or any Subsidiary infringes any patent, trademark, service mark,
copyright or similar right of any Person, nor has the Company or any 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, no Person has made any
claim or allegation that any of the Company or any 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.
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(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 referred to in Section 3.15(a) hereof 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:
(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.l5(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.l5(a)(ii) of the
Disclosure Schedule, with respect to each such license or sublicense: (A)
none of the Company or any 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 or any such Subsidiary thereunder, (B) none of the Company or any
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 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, any 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 or any
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Subsidiary either (A) based upon or challenging or seeking to deny or
restrict the use by the Company 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
(vi) 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 or any 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 or any 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 or any 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 or any of its Subsidiaries are, and continue to be, owned and
operated by the Company and its 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 or any Subsidiary or the Business.
(b) None of the Company or any of its 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 the Company or any of its Subsidiaries during the
period in which any such property was owned or leased by the Company or
any Subsidiary.
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(d) Except as to Environmental Permits not yet obtained for
facilities under development or proposed for acquisition, the Company and
its 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 or any of its 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 or any of its 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 or any Subsidiary
or the Business.
(g) Except as is not likely to be material to the Company or any
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 any
Subsidiary during the period in which any such property was owned or
leased by the Company or by a Subsidiary.
(h) To the best of the Company's knowledge after due inquiry, none
of the Company or any of its Subsidiaries has received notice of pending
or threatened claims against the Company or any of its 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 respect to the Company and its 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 or any 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.
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SECTION 3.17. Litigation. Schedule 3.17 of the Disclosure Schedule,
together with the Disclosure Documents, 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 or any Subsidiary or Affiliate
before any Governmental Authority, or to which any of the respective properties
of the Company or any 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. Schedule 3.17 of the
Disclosure Schedule, together with the Disclosure Documents, 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 the Disclosure Schedule and Disclosure Documents, there are no
material citations, fines or penalties heretofore asserted against the Company
or its Subsidiaries under any federal, state or local law that remain unpaid or
that otherwise bind the assets of the Company or its 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 or any
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;
(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) 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 any 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
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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 or any Subsidiary is self-insured or that are covered
under any risk-retention program in which the Company or any Subsidiary
participates, together with details for the last five years (preceding the date
of the Disclosure Schedule) of the Company's and each 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 and each
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 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 or such Subsidiary, as the case may be.
(e) At no time subsequent to April 30, 1995 has the Company or any
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 or 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 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 or any 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
current insurance policy of the Company 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) to which the Company or any
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Subsidiary other than Longo is a party and all agreements relating to
Intellectual Property, 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 $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 or any
Subsidiary 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.
24
(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,
shall continue in full force 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 of the Disclosure Schedule,
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 or any 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 or any 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 or any 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 or any Subsidiary; or (d) material issues with respect to union
representation pending or threatened with respect to the employees of the
Company or any Subsidiary.
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
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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) (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 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
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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, Inc. ("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 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
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$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 & Composting Co., Inc.
("NRCC"), is duly negotiating with (i) Black & Veatch with respect to providing
the engineering, design, procurement, construction, startup 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.
SECTION 3.25. Private Offering. (a) Assuming the accuracy of the
representations and warranties of the Purchaser, the sale of the Series D
Preferred Stock and the Common Stock hereunder is exempt from the registration
and prospectus delivery requirements of the Securities Act.
(b) 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
Series D Preferred Stock and the Common Stock or in connection with the offer
and sale of the Series D Preferred Stock and the Common Stock.
SECTION 3.26. 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 Company except for a general advisory fee in the amount of $100,000 payable
to Andersen, Weinroth & Co., L.P.
SECTION 3.27. Disclosure Schedule and Disclosure Documents: 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 Series D Preferred Stock and
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the Common Stock and all information that the Company believes is reasonably
necessary to enable the Purchaser to make such decision. Each subsection made a
part of the Disclosure Schedule relates to the corresponding section of the
Agreement and each reference to a specific schedule within the Disclosure
Schedules shall be deemed to include reference to the corresponding amendment,
if any, to such schedule contained within the Disclosure Schedule Addendum. The
Company is not aware of any facts pertaining to the Company or any Subsidiary or
its business that could have a Material Adverse Effect and that have not been
disclosed in this Agreement, the Disclosure Schedule, the Disclosure Documents
or the Financial Statements. This Agreement, as modified by the Disclosure
Schedule and further modified by the Disclosure Documents, does not 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:
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 January 31, 1998, 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 January
31, 1998, 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
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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) Section 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 $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
Robert J. Longo or any Affiliate thereof or related party thereto;
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(ix) all contracts and agreements between or among Longo or Robert
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.
(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
or as otherwise disclosed in the Disclosure Documents, 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 and (iii) the Company has received
notice to proceed from the City of NeW York.
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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.
(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.
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 limited
liability company duly organized, validly existing and in good standing under
the laws of the State of Delaware, 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.
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 Series D Preferred Stock and the Common Stock as provided in Section 2.01
hereof by the Purchaser hereunder have been duly and validly authorized by all
necessary action of the Purchaser and no other proceedings on the part of the
Purchaser are necessary to authorize this Agreement or the purchase of the
Series D Preferred Stock and the 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 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,
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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 Common
Stock and the Series D Preferred Stock hereunder.
SECTION 5.05. Investment Purpose. The Series D Preferred Stock and
the Common Stock purchased by the Purchaser pursuant to this Agreement is being
acquired for investment only and not with a view to any sale or distribution
(within the meaning of the Securities Act) of the Series D Preferred Stock and
the Common Stock or any part thereof. The Purchaser agrees at all times to sell
or otherwise dispose of all or any part of the Series D Preferred Stock and the
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 except for the general advisory fee referred to in Section 3.26
hereof
ARTICLE VI
COVENANTS
SECTION 6.01. Use of Proceeds: Redemption: Issuance Restrictions.
(a) The Company covenants and agrees that the Purchase Price proceeds shall be
used exclusively for authorized corporate purposes including working capital of
the Company.
(b) The Company covenants and agrees that if and to the extent
that the Company calls any of the Series A Preferred Stock and the Series D
Preferred Stock for redemption, it will redeem such Preferred Stock pro rata
from each series in proportion to the number of such shares originally issued.
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(c) The Company covenants and agrees that so long as the
Series D Preferred Stock remains outstanding it will issue no additional shares
of Preferred Stock Series B, except to the extent it is required, in accordance
with the terms thereof, to convert a $2 million Convertible Term Loan Promissory
Note, dated November 3, 1997 and payable to Equity Investments of Delaware, Inc.
(the "Convertible Note"), for up to 800,000 shares of Preferred Stock Series B.
As of the date of this Agreement, 401,000 shares of Preferred Stock Series B are
outstanding. The Company further covenants and agrees that it will decrease the
authorized amount of Preferred Stock Series B to the lesser of (i) 1,201,000 (or
such lesser amount in excess of the 401,000 shares of Preferred Stock Series B
currently outstanding which is necessary to accommodate the conversion of the
Convertible Note from time to time) or (ii) the amount of Preferred Stock Series
B outstanding at any time.
SECTION 6.02. 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)(ix).
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.
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
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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).
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
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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.
(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 F 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 or any of its Subsidiaries or
Affiliates, 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: (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
Series D Preferred Stock and the Common Stock and the conversion or
redemption of the
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Series D Preferred Stock); (ii) prohibiting or materially limiting the
ownership of the Series D Preferred Stock and the Common Stock; (iii)
imposing material limitations on the ability of the Purchaser to exercise
full rights of ownership of any of the Series D Preferred Stock and the
Common Stock; (iv) requiring divestiture by the Purchaser of any Series D
Preferred 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 and of each 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 of Board members and the filing of the
Certificates of Designation with respect to the Series D Preferred Stock
and (ii) the By-laws (or similar organizational documents) of the Company
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 and for each
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 or any Subsidiary, or the operation of its business in such
jurisdiction, requires the Company or any 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.
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(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 Series D Preferred
Stock and the 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 any 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 or any
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
or any of its Subsidiaries having, individually or in the aggregate, a
Material Adverse Effect.
(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 D hereto.
(l) Registration Rights Agreement. The Registration Rights
Agreement, in the form of Exhibit E, shall have been executed and
delivered by the parties thereto.
(m) Filing of Corporate Certificates; Adoption of By-law. 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.
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:
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(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 G hereto, signed by a duly authorized officer thereon
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, the additional written information provided to the
Purchaser as set forth in Article III hereof, the Disclosure Documents and any
certificate, Financial Statement, Interim Financial Statement or schedule,
report or other document delivered pursuant to this Agreement or in connection
with the transactions contemplated by this Agreement (collectively, the
"Transaction Documents") shall survive the Closing until the second anniversary
of the Closing Date, except that the covenants contained in Section 6.02 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 Transaction Documents; or
(ii) the material breach of any covenant or agreement by the Company
contained in the Transaction 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 or any Subsidiary, whether
arising before or after the Closing Date, arising from or relating to any
of the Transaction Documents or listed in Articles III and IV herein; or
(v) any and all Losses suffered or incurred by the Purchaser, the
Company or any 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
occurring or existing prior to the Closing; or
(vi) any and all Losses suffered or incurred by the Purchaser, the
Company or any Subsidiary by reason of or in connection with any claim,
cause of action, cancellation, breach or invalidity of the New York City
Contract; or
(vii) (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 any
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 any Subsidiary prior to the Closing;
(viii) any diminution in value of any asset of the Company or any
subsidiary as a result of an expense incurred by the Company or any
subsidiary arising out or resulting from the causes enumerated in this
Section 9.02(a); or
(ix) 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 6.02.
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
40
<PAGE>
to the payment and satisfaction of all Losses incurred by the Purchaser, the
Company 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 thereon 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 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.
41
<PAGE>
(c) Purchaser Loss as to any matter arising under clauses (i)
through (ix) of Section 9.02(a) shall be conclusively measured by the Loss to
the Company or the Subsidiary incurring such Loss. 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.
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 $67,500. If the aggregate amount of
such claims against either party exceeds $101,250, then that party may claim
indemnification for the entire aggregate amount of such claims, subject to any
other applicable limitation contained in this Agreement. 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)(ix).
(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 $675,000. Notwithstanding the
42
<PAGE>
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)(ix).
(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 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.
43
<PAGE>
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):
(a) if to the Purchaser:
AW Compost Partners, LLC
1330 Avenue of the Americas
New York, NY 10019
Attention: G. Chris Andersen
Fax:(212) 399-1954
Telephone: (212) 399-2000
with copies to:
Shereff Friedman, Hoffman & Goodman, LLP
919 Third Avenue, 20th Floor
New York, NY 10022
Attention: Robert M. Friedman, Esquire
Fax:(212)758-9526
Telephone: (212) 758-9500
(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
44
<PAGE>
with a copy to:
Greenberg Traurig
2005 Market Street
Suite 2050
Philadelphia, PA 19103
Fax:(215) 988-7801
Telephone: (215) 988-7805
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. 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 thereon 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.
45
<PAGE>
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.
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.
46
<PAGE>
IN WITNESS WHEREOF, the Purchaser and the Company have each caused
this Agreement to be executed by its duly authorized officer as of the date
first written above.
COMPOST AMERICA HOLDING COMPANY, INC.
By: /s/ Roger E. Tuttle
-------------------------------
Name: Roger E. Tuttle
Title: President
AW COMPOST PARTNERS, LLC
By: /s/ G. Chris Andersen
-------------------------------
Name: G. Chris Andersen
Title: Manager
47
<PAGE>
EXHIBIT A
DISCLOSURE DOCUMENTS
1. The Company's Annual Report on Form 10-KSB for the fiscal year ended
April 30, 1997.
2. The Company's Quarterly Report on Form l0-QSB for the fiscal quarter
ended January 31, 1998.
3. The Company's report on Form 8-K dated November 3, 1997 and filed
November 17, 1997, as amended by the Company's report on Form 8-K/A dated
November 3, 1997 and filed January 15, 1998.
4. The Company's report on Form 8-K dated December 12, 1997 and filed
December 24, 1997.
5. The description of the Company's common shares contained in its
Registration Statement on Form 8-A, filed February 23,1996, file no. 0-27832.
6. The Company's Registration Statement on Form S-3 dated February 26,
1998 and filed February 27, 1998.
A-1
<PAGE>
EXHIBIT B
CERTIFICATE OF DESIGNATION OF SERIES D PREFERRED STOCK
B-1
<PAGE>
EXHIBIT C
CERTIFICATE OF DESIGNATION OF PREFERRED STOCK,
SERIES A, SERIES B AND SERIES C
C-1
<PAGE>
EXHIBIT D
FORM OF OPINION OF GREENBERG TRAURIG
D-1
<PAGE>
EXHIBIT E
REGISTRATION RIGHTS AGREEMENT
E-1
<PAGE>
EXHIBIT F
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 April 27, 1998 (the "Stock Purchase
Agreement"), between the Company and AW Compost Partners, LLC, a limited
liability company organized under the laws of Delaware, 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 27th
day of April, 1998.
------------------------------------
Name: Roger E. Tuttle
Title: President, Chief Executive
Officer and Treasurer
F-1
<PAGE>
EXHIBIT G
OFFICER'S CERTIFICATE OF THE PURCHASER
[PURCHASER]
Officer's Certificate
I, G. Chris Andersen, Manager of AW Compost Partners, LLC, a limited
liability company organized and duly existing in Delaware (the "Purchaser"),
hereby certify after due inquiry, that:
1. The representations and warranties of the Purchaser in the Stock
Purchase Agreement, dated as of April 27, 1998 (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 27th
day of April, 1998.
------------------------------------
Name: G. Chris Andersen
Title: Manager
G-1
<PAGE>
Schedule 3.01
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.
13. R.J. Longo Construction Co., Inc. d/b/a as EPIC
See chart attached showing cash flows to the Company and breakdown of ownership
structure.
<PAGE>
COMPANY ORGANIZATIONAL CHART
<TABLE>
<S> <C> <C> <C> <C>
---------------------
Compost America
Holding Company, Inc.
---------------------
|
|
- -------------------------------------------------------------------------------------------------------------
| | | | |
| | | | |
| | | | |
- ------------ ------------------ -------------------- ----------------- -------------------
Compost America
Company of
Compost America New Jersey d.b.a.
EPIC Technologies, Inc. CA Operating Company Garden Life Sales American Soil, Inc.
- ------------ ------------------ -------------------- ----------------- -------------------
| | | | |
| | | | |
| | | | |
- ------------ ------------------ -------------------- ----------------- -------------------
Chicago Miami Newark Monmouth Gloucester
Recycying Recycying Recycying Recycying Recycying
& Composting & Composting & Composting & Composting & Composting
Company Company Company Company Company
- ------------ ------------------ -------------------- ----------------- -------------------
| |
| |
| |
------------------ --------------------
Bedminster Seacor
Services Miami
Corporation American Bio-Ag
------------------ --------------------
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C> <C>
---------------------
Compost America
Holding Company, Inc.
---------------------
|
|
------------
Development
Companies
------------
|
|
---------------------------------------------------
| |
| |
----------------- ------------------
Miami Recycying & Newark Recycying &
Composting & Composting
Company, Inc. Company, Inc.
----------------- ------------------
| |
| |
| |
- ---------------------- | ---------------------- ------------------ | ------------------
| Prince George's |
| Contractors, Inc. |
<---> dba Potomac <--->
Tomas Mesire CAHC Technologies CAHC
19.9% Equity 80.1% Equity 25% Equity & 25% Equity &
10% Distributable Cash 10% Distributable Cash Distributable Cash Distributable Cash
- ---------------------- ---------------------- ------------------ ------------------
</TABLE>
<TABLE>
<S> <C> <C>
---------------------
Compost America
Holding Company, Inc.
---------------------
|
|
---------
Operating
Companies
---------
|
|
-------------------------------------------------------
| | |
| | |
- ------------------- ------------------ ------------------------
R.J. Longo Construction
Co., Inc. dba
Environmental Protection
American Soil, Inc. and Improvement Co.,
(ASI) Future Acquisition Inc. (EPIC)
- ------------------- ------------------ ------------------------
|
|
| ------------------
| Executive Committe
| R.J. Longo
| R.E. Tuttle
| John Shea
| -------------------
|
|
-----------------
R.J. Longo, Pres
Jay Waxenbaum, VP
Kevin Walsh, VP
-----------------
</TABLE>
<PAGE>
Schedule 3.03(b)(1)
Options, Warrants, Rights, Agreements
Seethe Company's Quarterly Report on Form 10-QSB for the fiscal quarter ended
January 31, 1998, showing total warrants and options outstanding of 5,892,294.
a. Deletions:
1. Edward Rodriguez 500,000
2. Berwyn Capital Corporation 33,334
--------
533,334
b. Additions:
1. Antonio Junior 5,000
2. MSA Engineering 50,000
3. Arsenio Milian 50,000
4. Jorge Luis Lopez 50,000
5. Herman Echevarria 50,000
6. Mestre Consultant 50,000
7. Roger E. Tuttle 209,875
8. Quirk, Carson, Peppet 75,000
9. Quirk, Carson, Peppet 240,000
10. Adam Gottbetter 150,083
11. Andersen, Weinroth 609,340
12. Chris Andersen 300,000
13. Charles Carson 300,000
---------
2,139,298
c. Total warrants and options outstanding as at April 6, 1998 - 7,498,258.
<PAGE>
Schedule 3.03(b)(2)
Options, Warrants, Rights, Agreements for EPIC
EPIC Option relating to Series A and Series C Preferred Stock
<PAGE>
Schedule 3.03(b)(3)
Options, Warrants, Rights, Agreements for Other Subsidiaries
Consulting Agreement between Miami Recycling & Composting Company, Inc. and Dade
County Bioconversion Corporation dated May 31, 1996.
Consulting Agreement with Antonio Zamura, Ereleo Pena and Pedro Roig dated May
31, 1996.
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.
Prince George Contractor's, Inc. d/b/a Potomac Technologies, Inc., ("PTI") is
retaining an interest in American Marine Rail, L.L.C., which also will be
partially owned by the Company. PTI holds a 25% interest in Newark Recycling &
Composting Co., Inc. ("Newark Recycling") and its Vice President, Robert W.
Jones, III, is a director of Newark Recycling.
Tomas Andres Mestre provides consulting services to the Company pursuant to a 10
year consulting agreement commencing February 21, 1997. Mr. Mestre also has a
19.9% equity ownership interest in Miami Recycling & Composing Company, Inc.
<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 $2.50 per share through July 11,
2004. 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 dated as of November 3, 1997 with Robert J. Longo
Registration Rights Agreement dated as of November 3, 1997 with Wasteco Ventures
Limited
Registration Rights Agreement dated as of April 21, 1998 with AW Compost
Partners, LLC
<PAGE>
Schedule 3.03(d)
Names and Addresses of Shareholders With Greater than 5% Interest and Number of
Shares Owned,
I. 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.
** As of April 6, 1998, there are no additional shareholders with greater than a
5% interest except as indicated in Part II of this Schedule. Since 9/30/97, the
ownership percentages of the other parties listed on this Schedule have changed
slightly but in most cases have not increased.
<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)
- ----------
(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>
II. Reconciliation of shares owned by Wasteco Ventures Limited and Robert J.
Longo:
A. Common shares of Compost America Holding Company, Inc. owned prior to
November 3, 1997:
By Wasteco By Longo
---------- --------
None 100,000
B. Common shares of Compost America Holding Company, Inc. issued on
November 3, 1997:
To Wasteco To Longo
---------- --------
11,490,609 3,447,182
C. Stock dividend shares issued:
To Wasteco To Longo
---------- --------
89,993 26,998
D. Total common shares held as at March 31, 1998:
By Wasteco By Longo
---------- --------
11,580,602 3,574,180
E. Shares issued as "gross-up" for AW Compost Partners, LLC ("AWCP"):
To Wasteo To Longo
--------- --------
602,955 180,887
F. Total common shares held after AWCP investment and "gross-up":
By Wasteco By Longo
---------- --------
12,183,557 3,755,067
CALCULATION OF AW SHARES AND EFFECT ON WASTECO AND LONGO HOLDINGS
BASED UPON AWCP INVESTMENT OF $1.75 MILLION
1. CAHC had 31,024,643 common shares outstanding on a fully-diluted
basis (assuming the exercise of all options, warrants and
convertible securities) as of calculation date (November 3, 1997),
including 11,490,609 issued to WASTECO and 3,447,182 issued to Longo
on November 3, 1997. (Longo previously had acquired 100,000).
2. AWCP will invest $1,750,000 to purchase 17,500 Series D $100
Preferred Shares and 1,627,980 common shares.
3. Adding these 1,627,980 common shares to the 31,024,643 fully-diluted
shares set forth above, the new CAHC fully diluted total as of
November 3, 1997 is 32,652,623.
<PAGE>
4. Doing a gross-up to maintain the WASTECO and LONGO positions, divide
32,652,623 by .675 = 48,374,256, of which:
CAHC (64.1346%) - 31,024,643
AWCP (3.3654%) - 1,627,980
WASTECO (25.0%) - 12,093,564
LONGO (7.5%) - 3,628,069
----------
Total 48,374,256
5. Summary of shares to be issued as per above:
AWCP - 1,627,980
WASTECO - 602,955 (12,093,564 less 11,490,609)
LONGO - 180,887 ( 3,628,069 less 3,447,182)
-------
Total 2,411,822
G. Preferred shares of Compost America Holding Company, Inc. owned by
Wasteco, Longo and AWCP:
Series A - Wasteco - 130,000
Longo - 39,000
Series C - Wasteco - 70,000
Longo - 21,000
Series D - AWCP - 17,500
<PAGE>
Schedule 3.03(e)
Andrea Longo is employed by EMAR Group, Inc. which provides insurance services
to EPIC. There also may exist from time to time, as will be disclosed in the
Disclosure Documents, business relationships and agreements among various
members of the Company's board of directors, their affiliates and the Company.
<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 3.08
Liabilities not Listed in SEC Reports that are
Material to the Company or Subsidiaries
See items shown on Schedule 3.11
Demand for back taxes in connection with the American Soil acquisition of up to
$150,000.
Failure to properly identify the number and names of Directors of the Company in
SEC filings, including John Fetter and Victor Wortmann
<PAGE>
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 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 (delinquent).
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
(unpaid - see Schedule 3.10).
Face Amt: $3,730,871
Accrued $ 444,736
Int.:
Total: $4,175,607
Maturity: 4/1/98
Rate Until
Maturity: 7%
Rate After
04/01/98: 18%
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. $100,000 revolving Line of Credit payable to Summit Bank, as extended by
Agreement dated October 15, 1997.
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
<PAGE>
11. Convertible Note payable to Brokerage Services Management, Inc. dated
October 15, 1996 in the original principal amount of $53,000 at 10%
maturity December 15, 1996, plus accrued interest; current balance is
$33,000, plus accrued interest (delinquent).
Face Amt: $33,000
Int.: $ 2,749
Total: $35,749
Maturity: 7/31/98
Rate: 10%
12. 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.
13. 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)
Mark Milask Dr. Smallheiser Philip Wanger
----------- --------------- -------------
Face Amt: $25,000 Face Amt: $25,000 Face Amt: $25,000
Int.: $ 1,166 Int.: $ 1,166 Int.: $ 1,458
Total: $26,166 Total: $26,166 Total: $26,458
Maturity: 9/30/98 Maturity: 9/30/98 Maturity: 9/30/98
Rate: 8% Rate: 8% Rate: 10%
14. 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. 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. 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.
17. $132,500 owed to Robert F. Young pursuant to Consulting Agreement dated
October 2, 1996 Maturity: 8/1/97 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
<PAGE>
Purchase Replacement Agreement; payable upon completion of all permitting
for an in vessel composting facility in Monmouth County, New Jersey
19 Subscription agreement w/Walter E. Piene dated May 14, 1997 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 agreement w/Helen S. Janklow dated May 15, 1997 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 agreement w/Richard J. Verge dated June 11, 1997 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%
22. Note payable to Ehmann, Van Denbergh & Trainor dated July 31, 1996.
$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
<PAGE>
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. Equipment Note payable to Concord Commercial dated April 9, 1997. $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. Equipment Note payable to General Electric Capital dated February 24,
1995. $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
28. $2,000,000 Note to Equity Investments of Delaware, Inc. or designee
convertible into 800,000 shares of Series B Preferred Stock.
29. Rights granted to LEN Co., All Jersey Express Company, Inc., Edward T.
Haefeli and Louis Aboyoun pursuant to letter agreement dated November 1,
1997. Total amount owed is $594,000, of which (subject to current
continuing negotiations) a portion will be payable at financial closing
for the Newark Project and the remainder over a period of time.
30. Select Acquisitions, Inc. is owed an undetermined fee to be determined
mutually by the Company and Select's President, who also serves as a
director of the Company.
<PAGE>
Schedule 3.10
Undisclosed Liabilities Since January 31, 1998
1. Promissory Note in the principal amount of $3,730,870.75, secured by first
mortgage, payable by Miami Recycling and Composting Company, Inc. to
Rinker Materials Corporation. Note was due on April 1, 1998 and remains
unpaid. Amount owed is approximately $4,300,000, including accrued
interest from March 29, 1996.
2. $100,000 due Black & Veatch for design and engineering work.
3. $100,000 due Chicago Recycling & Composting Co., Inc. for development
expenses.
4. $90,097 due Ehmann, Van Denbergh & Trainor as of March 2, 1998, which
remains unpaid.
5. $70,000 due David Egarian/D.J. Egarian.
6. $60,000 due Ronald Bryce/R.C. Land.
<PAGE>
Schedule 3.11(a)
Changes Having Material Adverse Effect
See Schedule 3.10 for description of overdue Promissory Note to Rinker Materials
Corporation
<PAGE>
Schedule 3.11(b)
Changes in Accounting Methods Since January 31, 1998
Failures to Maintain Property
Redemption of Company or Subsidiary Stock
Sales or Issuances of Stock
Insider Transactions
Capital Expenditures in Excess of $100,000
Additional Loans or Guarantees by Company or Subsidiaries
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
Delinquent obligations referenced on Schedule 3.10 hereto.
Various additional accounts payable to trade creditors in the amount of
approximately $1,030,000, including additional legal fees in excess of $350,000.
Item (iv) - except as provided in the Stock Purchase Agreement with respect to
the Excluded Assets.
Item (vi) Contemplated amendment to Certificate of Incorporation and By-laws to
increase the number of members of the Board of Directors of EPIC.
Options related to Chicago real estate interests are due.
Miami property may be subject to tax reassessment.
<PAGE>
Schedule 3.12 (a)
Employee Benefit Plans
Company
Compost America Corp.
The Guardian Health Insurance Plan with The Guardian.
Covers Renee Beites, Richard Kish, Alfred Rattie, Rutherford, Roger Tuttle and
William Tuttle.
EPIC
Employee Health & Life Insurance Plan Document with Great West Life & Annuity
Insurance Co.
This plan covers EPIC employees.
Standard Trust Agreement dated November 1, 1997 by and between EPIC and Kevin K.
Walsh, as Trustee.
Multiemployer Plans
Local 945
Local 542
Local 825
Potential withdrawal liability of $7,000 under multiemployer plan
<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
Brownfield Property located in Freehold Township, Monmouth County, New Jersey,
purchased by Monmouth Recycling & Composting Co., Inc. on January 26, 1998
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 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 3.11 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.
With respect to "peaceful; undisturbed possession" - except as provided in the
Conrail Lease.
<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.
The Company expects to refinance items 1 and 2 with a new equipment borrowing of
up to $500,000, such refinancing to close no later than May 15, 1998.
The Company also expects that the Equipment Debt Refinancing (as defined in the
Agreement) with respect to EPIC rail cars and equipment will occur by May 15,
1998.
<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)
Further descriptions of current permits and general status of the Miami and
Newark Projects are attached hereto and made a part of this Schedule.
<PAGE>
Miami Project Recap
1. Permitting
1.1. Air
DERM is satisfied that potential emissions of regulated pollutants from
the facility will be inconsequential so that ambient impact modeling of
regulated Clean Air Act compounds is not required. Remaining issues are limited
to odor impacts (i.e., nuisance conditions) beyond the facility property
boundary. CAHC strategy is to use engineering and meteorological modeling
methods to demonstrate that nuisance conditions will not be an issue beyond the
property boundary.
It is expected that the Air Permit will be issued in late April.
Solid Waste
General agreement achieved with DERM and FDEP on Minor Modification to
solid waste permit with conditions more favorable to CAHC. Permit modifications
are being approved concurrent with air permit application approvals.
FDEP permit is expected to be issued by late April provided MRCC has a
closure bond in place (see Financing). DERM conditions are expected to be
finalized by May. MRCC has been told that DERM conditions will mirror the FDEP
permit. The DERM permit itself is an operating permit and is expected to be
issued during the latter stages of construction.
It will be necessary to have a facility closure bond in place prior to the
issuance to the FDEP solid waste permit.
Water
Water supply issues are dealt with under "Utilities". Water permits
include Class IV and Class VI. Mitigation is also a quasi-permitting issue.
Water permits are also bundled under the heading of a Management and Storage of
Storm Water (MSSW) permit.
It is expected that issues regarding the required permits, including
wetlands, mitigation ratio, stormwater storage capacity and soil percolation
will be resolved and permits will be in hand by late April. The first pass
mitigation ratio from the U. S. Army Corps of Engineers is at 2.5:1. Because the
MRCC project is at the leading edge of other development in the Pennsuco area
and thus a precedent setter, it may prove difficult to move the Corps off of
this ratio. In such event, a structured payout can be arranged with the Corps.
The cost of mitigation at this ratio is slightly over $500,000.
FDOT
Design of the rail crossing is ready to submit to FDOT. This is the
longest lead-time permit item because a hearing is required. The design has been
settled with local regulators and the application has been filed with the state.
The project should be able to get an earlier determination of the acceptability
of the design and proceed toward closing while this permit is in the issuance
process and, if necessary, receive a letter from the Department that the
application meets technical requirements. Final issuance is expected in June.
Procurement
Bedminster Seacor Services Miami Corporation, a wholly owned subsidiary of
MRCC, has a 30-year put or pay contract with the city of Miami which provides a
minimum of 150,000 TPY of MSW. This represents nearly 80% of the project's
design capacity. Tip fees start at $52 per ton and escalates according to the
CPI. The contract has been modified to extend the initial start date by
twenty-four months, until November, 2000. Negotiations are under way to increase
volume to 175,000 tons per year.
The project also has a contract for a minimum 30,000 tons of sludge at
$23.50. The project is allowed to process 95,000 TPY of sludge.
The project can also process approximately 55,000 TPY of grit chamber
material. Discussions with treatment plants to
<PAGE>
secure this material have begun. Proforma revenue is $62 per ton.
Discussions with townships near the composting facility along with Dade
County officials to secure additional waste materials are underway.
Utilities
Electric
The facility can use Florida Power & Light as its electric supplier.
Discussion is also underway with Enron on a project basis or global basis
covering this or all projects. Enron electricity will be at a discount to
utility rates but must be analyzed against capital requirements. Enron has
stated that 5(cent) power is possible in Florida even without deregulation.
Water
Negotiations are ongoing with the Town of Medley for the supply of water
to the facility from the public system. The Town has offered to supply potable
water to the project. The public water main MRCC will link to under a proposed
agreement with the Town has experienced water pressure and volume problems that
impact on the Facility's ability to meet fire flows. Medley's attorney has
suggested annexation as a quid pro quo for providing water service to the
project. If he proves to be intransigent on this point we are pursuing a
parallel track with the Environmental Quality Control Board (EQCB) to allow
process and potable water to come from on-site wells. Water testing trials have
been completed at the site and the results should be acceptable to the EQCB. The
EQCB hearing is scheduled for April 9.
Sewer
The project has received a five-year exemption from sewer connection
requirements and will operate with a septic system and leach field during that
time. After five years, a further extension or variance may be sought provided
we have not experienced septic system problems. A bond to cover construction
cost should the sewer be required must be in place to receive final platting
approval. The bond amount must be roughly $500,000.
Contracts
EPC
The EPC price is currently at $47.5 million. Delivery is at 18 months from
notice to proceed plus 4 months of facility start-up.
The major EPC cost items include drums, electrical, mechanical and
pre-engineered building. Steps are being taken to refine and reduce the EPC
amount, particularly in these high cost areas.
Pricing is for a manned SCAT turning system. The project will switch to a
trough type automated system prior to closing. EPC cost should not change
appreciably, but cost of operation and maintenance should be lower.
Contract language and exhibits are 98% completed. Some performance testing
items and guarantee exhibit language are being finished.
Much of the sales tax on Facility equipment can be eliminated through the
Florida WAGES program. A sales tax collection certificate must be in hand prior
to MRCC being included in the program. Application for the tax collection
certificate was made by MRCC in February. It is expected to be issued at any
time.
O&M
The O&M contract requires some closure on technology prior to moving
forward. The O&M contract will pay PSG an annual fee and reimburse PSG's costs.
PSG will guarantee to meet permits and compost quality. PSG will also be able to
earn incentives by reducing operating cost of the project.
Efficacy Insurance
Hartford Steam Boiler Inspection and Insurance Company has agreed to
insure the technical performance of the facility. HSB's responsibility begins at
the limitation of liability in the EPC contract (100% of the EPC price until
mechanical completion and then reduced to 35% of the EPC price). HSB's liability
is the
<PAGE>
difference between the EPC limit and the value of the senior debt plus interest
for one year plus additional funds to make facility modifications. The policy
will be written so that the senior lender has no construction or technical
performance risk.
Residue Disposal
Discussions have begun with (a) landfills in Dade and Broward Counties,
(b) incinerators in Broward County, (3) plastic recyclers and (4) ferrous metal
recyclers for the disposal and/or recycling of project residue. It is likely
that an eddy current separator will be added to the project to allow the stream
of waste aluminum to also be pulled off and recycled.
Financing
Sixteen million dollars in tax exempt allocation was obtained from the
Dade County Industrial Development Authority, which allocation has been extended
through 1998. Additional allocation is being sought, however the project can
reach financial closing by borrowing additionally required amounts on a taxable
basis and refunding on a tax exempt basis as allocation becomes available.
Legal documentary pieces of closing will begin about 6 weeks prior to the
anticipated closing date. Agreements need to be modified for conversion to
reflect weekly floating rate mode bonds (if credit enhanced) or fixed term.
Credit enhancement provisions must be added as applicable. Talks with
prospective credit facility providers should begin at least 4 weeks prior to
initiation of document changes.
Discussions have begun with both HSB and Enron regarding project sub-debt.
R. W. Beck has been informed of generic progress. They will need
documentation to perform feasibility study roughly 8 weeks prior to conversion
of the bonds. Estimated cost for the Beck report is $80,000.
Bonding for facility closure (expected to be about $5,000,000 dependent on
residue disposal cost) is required for the State Solid Waste Facility permit. A
$500,000 bond to cover sewer construction cost if the facility cannot operate on
a zero discharge basis is required by the EQCB.
<PAGE>
Newark Project Recap
2. Permitting
A meeting was held with the New Jersey Department of Environmental
Protection on February 5. Discussion centered on change in scope for the
facility from 340 TPD of sludge to a combined 1,200 TPD of sludge plus solid
waste.
To keep the project on track the DEP strongly urged the project to permit
the facility as a Class C Recycling Facility without a solid waste front end.
Regulators said they can be flexible as to the interpretation of source
separated organic waste (SSOW) in general and as to the characteristics and
amount of residue in particular. They also indicated that our upgraded
application, when received would receive a fast track.
Following the suggested path will save considerable time in permitting.
Steps needed to receive the permits necessary to convert the existing bonds are:
o Notify City of Newark of Treatment Works Approval change in scope (as a
courtesy)
o File an application to modify the NJPDES permit
o File application to modify the Treatment Works Approval permit
o File a new application for a Class C Recycling Facility permit ($5,800 fee).
In other permitting developments, it was suggested that the ditch abutting
the site be reclassified to wetland with ordinary resource value from
intermediate resource value negating the need for a 50' setback. At the same
time, the Bureau of Land Use confirmed that a Waterfront Development permit
would not be required for the facility due to the existence of tidal gates in
the drainage ditches. The project had previously been given this assurance, but
the Bureau had neglected to advise the Division of Solid and Hazardous Waste of
this and, in fact, had advised Solid Waste that the permit would be required. A
formal request for reclassification of the wetland resource value has been
filed.
The project site was the former home of a tidally influenced creek. The
state therefor owns a tidelands easement across the site. Since the creek has
been gone for many years, state ownership of tidelands is no longer an issue,
but the project must enter a formal process for the state to convey its rights
back to NRCC. There will be a yet to be determined cost for the conveyance if it
is determined that the state does in fact still own a portion of the land.
Investigation of the Title Insurance policy for the property reveals that the
insurer excluded the creek from its coverage. There is no impediment to this
action. The state has been formally asked to issue a Notice of Determination.
Permit application/modification background work is in progress. Final
submittal of applications or modifications can only be made once the facility
back-end is defined and P. E. sealed drawings are available. It is anticipated
that decisions will be made by late April with formal applications filed within
two weeks thereafter. We are anticipating 120 days for the NJPDES process and 90
days for the Solid Waste process after the filing of applications.
Procurement
Biosolids
Biosolids will be obtained from the New York City EPIC contract and/or
other biosolids contracts. Negotiations have begun with Mascaro and
Hydropress/Tully to obtain additional biosolids.
SSOW
SSOW will be obtained from various commercial waste generators (food
processing centers, supermarkets, restaurants, cafeterias and
<PAGE>
others), waste haulers and directly from municipalities.
Utilities
The project still anticipates using public water, gas, sewer and
electricity. Enron has also been invited to provide a proposal for electric
service (both by project and globally for the company). Enron has come forward
with an estimate that 3.5(cent) power will be available in Newark. Each 1(cent)
savings in electric rates may correspond to $250,000 or more annually depending
on the final equipment configuration. Using Enron however may expose the project
to some additional capital cost to bring service to the site. Utilities
generally absorb this cost dependent on anticipated future revenues. It is
likely the project can make similar arrangements with Enron. Preliminary
meetings have been held with Enron. They have offered an exclusive arrangement
for providing power schemes for the projects. Enron has been told that progress
on the electric service side is tied to progress on the sub-debt side. They will
offer a modified service agreement to include this factor.
Contracts
EPC
The EPC process is coming to a close from a "language" standpoint. The
Miami contract will become the model by which the Newark contract is set. The
Newark EPC is as yet unpriced. Pricing will move forward as the back-end
technology is chosen. Koch Transporttechnik has been engaged to provide a
process design and equipment proposal package on a shared risk basis. Koch will
be paid up to $25,000 in current dollars for the proposal. Up to $25,000 will be
deferred until conversion of the bonds. If Koch's design is used for permitting,
the project will purchase the equipment from Koch at prices to be negotiated.
Koch will provide its process and equipment guarantees through Black & Veatch.
Longwood Manufacturing Corporation is working on a proposal which utilizes
its existing compost turner modified to provide a level bed (as Koch's system
does) throughout the composting tunnels. This is required for the anticipated
permitted volume to fit within the NRCC facility.
SGE Environmental / Heil Company is also working through a proposal for
the project. We have investigated drums made by SGEE and were impressed with the
simplicity and effectiveness of the equipment from a material preparation
standpoint.
Time estimates to sort through the proposals/concepts is through late
April/early May.
O&M
The O&M contract requires some closure on technology prior to moving
forward. Concepts of the Miami O&M contract will apply to Newark. The O&M
contract will pay PSG an annual fee and reimburse PSG's costs. PSG will
guarantee to meet permits and compost quality. PSG will also be able to earn
incentives by reducing operating cost of the project.
Efficacy Insurance
Hartford Steam Boiler Inspection and Insurance Company has agreed to
insure the technical performance of the facility. HSB's responsibility begins at
the limitation of liability in the EPC contract (100% of the EPC price until
mechanical completion and then reduced to 35% of the EPC price). HSB's liability
is the difference between the EPC limit and the value of the senior debt plus
interest for one year plus additional funds to make facility modifications. The
policy will be written so that the senior lender has no construction or
technical performance risk.
Residue Disposal
Residue disposal, at worst case, can be accomplished through rail
transportation to USA Waste landfill sites in Virginia. Expected cost for such
disposal is roughly $37 per ton.
Financing
Legal documentary pieces of closing will begin about 6 weeks prior to the
anticipated closing date. Agreements need to be modified for conversion to
reflect weekly floating rate
<PAGE>
mode bonds (if credit enhanced) or fixed term. Credit enhancement provisions
must be added as applicable. Talks with prospective credit facility providers
should begin at least 4 weeks prior to initiation of document changes.
Discussions have begun with both HSB and Enron regarding project sub-debt.
R. W. Beck has been informed of generic progress. They will need
documentation to perform feasibility study roughly 8 weeks prior to conversion
of the bonds. Estimated cost for the Beck report is $80,000.
<PAGE>
Schedule 3.15(a)(ii)
Licensed Intellectual Property of Company, Longo, Subsidiaries
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.
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.
See additional information included as part of Schedule 3.15(a)(i).
<PAGE>
Schedule 3.17
Litigation
1. Demand for back taxes payable by American Soil, Inc. referenced in
Schedule 3.08.
2. Claim for $120,000 from Berwyn Capital Investments.
3. Claim for $70,000 from David Egarian.
4. Approximately $4,300,000 owed to Rinker Materials Corporation as described
in Schedule 3.10.
5. Ehmann, Van Denbregh & Trainer has filed suit for payment of the debt
described in Schedule 3.10.
6. Threat of lawsuit by Lionhart Global Appreciation Fund, Limited for
unspecified damages related to 10% Convertible Debenture due November 26,
1999.
7. Threat of lawsuit by Michael Marchese for consulting fees pursuant to
consulting agreement dated October 2, 1996.
<PAGE>
Schedule 3.18(a)
Insurance
COMPOST
LIMITS POLICY DEDUCTIBLE
- ------ ------ ----------
$2,000,000 Aggregate/ Reissuance Corp. of NY
$1,000,000 Per Occurrence No. GLR005398 n/a
Commercial 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
The Guardian Health Insurance
Plan (See Schedule 3.12(a))
$10,000,000 Directors, Officers and
Corporate $150,000
Liability Insurance -
National Union
Fire Ins. Co. of Pittsburgh,
Pa.
EPIC
LIMITS POLICY DEDUCTIBLE
$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)
<PAGE>
$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)
$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
Schedule) Texas Property (See Attached Attached
Schedules) Schedule)
$1,000 all vehicles except
tractors (Code 50499),
which is $3,000
<PAGE>
Schedule 3.18(c)
Self-Insured Risks for Past Five Years
Self-insured health insurance coverage with respect to EPIC.
<PAGE>
Schedule 3.18(d)
Uninsured Material Assets of Company,
EPIC or other Subsidiaries in Past Five Years.
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 EPIC Material Contracts
COMPOST
See reference to 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).
EPIC
See schedule 4.01 for EPIC Material Contracts.
<PAGE>
Schedule 3.19(d)
Agreements to Purchase Assets or Properties of Company or Subsidiary
Agreements with Andersen Weinroth re AMR assets, including AMR Option.
EPIC Option.
<PAGE>
Schedule 3.21
List of Collective Bargaining Agreements; Material Violations
COMPOST
None
EPIC LABOR-RELATED UNION AGREEMENTS:
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
EPIC's January 1998 settlement with the Teamsters Union Locals 945 and 825 has
been voted down by the union membership. EPIC, therefore, intends to operate the
Brill Yard Facility and all related trucking services independently, and
representatives from CAHC/EPIC will return to the negotiating table at some
future date.
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 referenced in Schedule 3.08)
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(c)
List of Tax Returns Filed for Company, Longo and all Subsidiaries since 4/30/95
See attached Schedule
<PAGE>
Compost America Holding Company
and Subsidiaries
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------
COMPOST COMPOST
AMERICA AMERICA NEWARK GLOUCESTER MONMOUTH MIAMI CHICAGO AMERICAN AMERICAN
HOLDING NEW JERSEY RECYCLING RECYCLING RECYCLING RECYCLING RECYCLING SOIL BIO-AG
-----------------------------------------------------------------------------------------------
Filed? Filed? Filed? Filed? Filed? Filed? Flied? Filed? Filed?
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
April 30, 1997
- ------------------------------------------------------------------------------------------------------------------------
Franchise Taxes N/A Yes Yes Yes Yes Yes Yes N/A Yes
- ------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------
Federal Income Taxes Ext Ext Ext Ext Ext Ext Ext Ext Ext
- ------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------
State Income Taxes Ext Ext Ext Ext Ext Ext Ext Ext Ext
- ------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------
Payroll Taxes Yes N/A N/A N/A N/A N/A N/A Yes N/A
- ------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------
April 30, 1996
- ------------------------------------------------------------------------------------------------------------------------
Franchise Taxes N/A Yes Yes Yes Yes Yes Yes N/A Yes
- ------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------
Federal Income Taxes Yes Yes Yes Yes Yes Yes Yes Yes Yes
- ------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------
State Income Taxes Yes Yes Yes Yes Yes Yes Yes Yes Yes
- ------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------
Payroll Taxes Yes N/A N/A N/A N/A N/A N/A Yes N/A
- ------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------
April 30, 1995
- ------------------------------------------------------------------------------------------------------------------------
Franchise Taxes N/A Yes Yes Yes Yes Yes Yes N/A Yes
- ------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------
Federal Income Taxes Yes Yes Yes Yes Yes Yes Yes Yes Yes
- ------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------
State Income Taxes Yes Yes Yes Yes Yes Yes Yes Yes Yes
- ------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------
Payroll Taxes N/A Yes N/A Yes N/A N/A N/A Yes N/A
- ------------------------------------------------------------------------------------------------------------------------
</TABLE>
Ext = Return on Extension
<PAGE>
Schedule 3.22(d)
Amounts and Expiration Dates of NOLs,
Net Capital Losses, Unused Business Credits, ETCs
See the Company's Quarterly Report on Form 10-QSB for the
fiscal quarter ended January 31, 1998
<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.
o Compost America Holding Company used its own stock to acquire land in
Arizona from RC Land Company, Inc. for land application. The possible
federal/state tax liability at the Newark Recycling and Composting Company
is $150,000 - $200,000.
<PAGE>
Schedule 4.01
Material Contracts of Longo
4.01(c)(i): Purchase Contracts and Agreements
1. Agreement between Local Union 542-C International Union of Operating
Engineers, A.F.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 T., AFL-CIO effective 4/1/91.
3. Agreement between EPIC R. J. Longo Construction, Inc., Virotech Systems,
Inc. and International Union of Operating Engineers, AFL-CIO Local Union
No. 825 effective April 1, 1994.
4. Shop Agreement between R. J. Longo Construction, Inc. t/a EPIC and
International Union of Operating Engineers, AFL-CIO Local Union No. 825
effective 4/1/97.
5. Agreement between I.B. of T. Local No. 42, AFL-CIO and EPIC R. J. Longo
Construction Co., Inc. dated 5/1/96.
6. 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.
7. 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).
8. 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.
9. 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.
10. Award of 10 year $23.5 million biosolid contract from Joint Meeting of
Union and Essex Counties.
<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 Massachusetts 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.
14. $11,000,000 surety bond for commencement of NYC contract.
15. $2,000,000 line of credit required for NYC contract.
<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.
4. Award of 10 year $23.5 million biosolid contract from Joint Meeting of
Union and Essex Counties.
<PAGE>
4.01(c)(vii): Agreements Not to Compete
None
<PAGE>
4.01(c)(viii): Agreements Between Company, EPIC and Robert Longo
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 regarding
Hempstead Contract.
3. Earn Out Agreement between Robert J. Longo and the Company regarding the
New York City Municipal Solid Waste Contract.
<PAGE>
4.01(c)(ix): Agreements between Company, Robert Longo and EPIC
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>
EQUIPMENT
3.10(b)
Cost Basis Accum Dep. NBV
---------- ---------- ---
EPIC
Vehicles - Schedule 3.10(b)(1) 1.043,985.45 785,464.56 .258,520.89
Office
Equipment - Schedule 3.10(b)(2) 45,709.24 44,247.20 1,462.04
Leasehold 1
Improvements - Schedule 3.10(b)(3) 340,586.23 336,961.08 3,625.15
Equipment - Schedule 3.10(b)(4) 15,847,680.72 12,051,340.87 3,796,339.85
Office
Equipment-- Schedule 3.10(b)(5) 200,042.49 194,223.68 5,808.8
--------------------------------------------
Sub-Totals 17,478.004.13 13,412,247.39 4,065,756.7
--------------------------------------------
<PAGE>
RJ LONGO CONSTRUCTION CO., INC.
D/B/A EPIC
FIXED ASSETS: OFFICE EQUIPMENT
YEAR ENDED: DECEMBER 31, 1996
<TABLE>
<CAPTION>
1995
COST RETIREMENT ACCUM. DEPR. 1996
DATE METHOD OR AND/OR ENDING BEGINNING DEPREC.
DESCRIPTION ACQUIRED RATE BASIS ADDITIONS ADJUSTMENT BALANCE BALANCE EXPENSE
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1286 DISPOSABLE TRUCK
BODIES 1991 S/L 7 5,558,896.36 5,558,896.36 4,382,679.28 168,031.01
TRANSPORTATION, DECALS,
SEALS, ETC 1991 S/L 7 44,021.18 44,021.18 34,706.67 1,330.64
SPREADER 2/01/91 S/L 7 15,330.03 15,330.03 12,086.32 463.39
LOCOMOTIVE 2/01/91 S/L 7 25,000.00 25,000.00 19,710.20 755.69
2(4) LEGGED BRIDLES 2/01/91 S/L 7 4,132.65 4,132.65 3,258.22 124.92
2-LEGGED BRIDLE 4/01/91 S/L 7 1,350.65 1,350.65 1,064.86 40.83
AIR COMPRESSOR/WELDER 3/08/91 S/L 7 3,050.00 3,050.00 2,404.65 92.19
GE SCALES 3/13/91 S/L 7 3,424.00 3,424.00 2,699.51 103.50
BARTLETT LIFT DEVICE 3/19/91 S/L 7 1,795.00 1,795.00 1,415.19 54.26
5TH WHEEL 4/25/91 S/L 7 1,182.77 1,182.77 932.50 35.75
TRAILOR & WATER TANK 4/23/91 S/L 7 2,135.00 2,135.00 1,683.25 64.54
8X32 MOBILE OFFICE 4/10/91 S/L 7 6,859.00 6,859.00 5,407.69 207.33
CONTAINER 20' SLIDER
#2860281 5/01/91 S/L 7 2,356.25 2,356.25 1,857.68 71.22
OFFICE TRLR #2074402 6/05/91 S/L 7 1,250.00 1,250.00 985.51 37.78
WELDER 5/12/91 S/L 7 1,500.00 1,500.00 1,182.61 45.34
SHOP COMPRESSOR 5/31/91 S/L 7 986.11 986.11 777.46 29.81
CAT 980C #063X08791 7/01/91 S/L 7 202,412.50 202,412.50 159,583.67 6,118.40
150 RAILROAD CARS 1991 S/L 7 8,952,900.00 8,952,900.00 6,076,497.67 410,914.62
TAYLOR LIFT TRK MODEL
TY620L #S-VO-21078 6/01/91 S/L 7 199,695.00 199,695.00 157,441.17 6,036.26
HITACHI UH083 BACKHOE
#144-26204 10/01/91 S/L 7 28,890.00 28,890.00 22,777.11 873.27
TAYLOR LIFT TRK MODEL
TY920L #21158 6/01/91 S/L 7 293,275.00 293,275.00 231,220.40 8,864.94
CAT V900CH TOP LOADER
#03WD00182 6/24/91 S/L 7 277,185.80 277,185.80 218,535.55 8,378.61
20' HANDLING ATTACHMENT 7/10/91 S/L 7 6,800.00 6,800.00 5,361.17 205.55
TITAN-HOBART #91W517161
WELDER 10/19/91 S/L 7 2,423.23 2,423.23 1,910.50 73.25
TRAILER UNIT 1226 #38906 10/31/91 S/L 7 6,725.00 6,725.00 5,302.05 203.28
2 20' STEEL CONTAINERS 10/06/91 S/L 7 3,500.00 3,500.00 2,759.43 105.80
1000 INTERBOX CONNECTORS 9/17/91 S/L 7 22,575.00 22,575.00 17,798.31 682.38
PRESSURE WASHER #PG1413 11/01/91 S/L 7 2,011.14 2,011.14 1,585.59 60.79
5500 WATT GENERATOR
#5501R 12/16/91 S/L 7 1,864.38 1,864.38 1,469.90 56.35
I R AIR COMPRESSOR
#160034 8/15/92 S/L 7 6,900.00 6,900.00 4,466.69 347.62
AIR COMPRESSOR #1252570 8/15/92 S/L 7 3,324.69 3,324.69 2,152.23 167.49
WELDER 11/06/92 S/L 7 2,722.13 2,722.13 1,762.16 137.14
PRESSURE WASHER
#59346766 1/27/94 S/L 7 8,090.46 8,090.46 2,146.45 849.14
CONVEYOR-MOORHEAD CO 5/16/94 S/L 7 4,198.20 4,198.20 1,113.81 440.63
V925 LIFT TRUCK
#8FB00124 6/27/94 S/L 7 118,355.94 118,355.94 31,400.55 12,422.20
SCREW EQUIP (MOOREHEAD) 7/06/94 S/L 7 10,537.00 10,537.00 2,150.41 1,198.08
20,026.25 20,026.25 1,430.45
TOTALS 15,847,680.72 0.00 0.00 15,847,680.72 11,420,286.42 631,054.45
</TABLE>
1996
RETIREMENT ACCUM. DEPR. 12/31/96 DEPR
AND/OR ENDING BOOK PER
DESCRIPTION ADJUSTMENT BALANCE VALUE MONTH
- ----------------------------------------------------------------------------
1286 DISPOSABLE TRUCK
BODIES 4,550,710.29 l,008,186.07 14,002.58
TRANSPORTATION, DECALS,
SEALS, ETC 36,037.31 7,983.87 110.89
SPREADER 12,549.11 2,780.32 38.62
LOCOMOTIVE 20,465.89 4,534.11 62.97 TX
2(4) LEGGED BRIDLES 3,383.14 749.51 10.41
2-LEGGED BRIDLE 1,105.69 244.96 3.40
AIR COMPRESSOR/WELDER 2,496.84 553.16 7.68 TX
GE SCALES 2,803.01 620.99 8.62 TX
BARTLETT LIFT DEVICE 1,469.45 325.55 4.52
5TH WHEEL 968.25 214.52 2.98
TRAILOR & WATER TANK 1,747.79 387.21 5.38
8X32 MOBILE OFFICE 5,615.02 1,243.98 17.28 IL
CONTAINER 20' SLIDER
#2860281 1,928.90 427.35 5.94 IL
OFFICE TRLR #2074402 1,023.29 226.71 3.15 IL
WELDER 1,227.95 272.05 3.78 TX
SHOP COMPRESSOR 807.27 176.84 2.48 TX
CAT 980C #063X08791 165,702.07 36,710.43 509.87
150 RAILROAD CARS 6,487,412.29 2,465,487.71 34,242.88
TAYLOR LIFT TRK MODEL
TY620L #S-VO-21078 163,477.43 36,217.57 503.02 NJ
HITACHI UH083 BACKHOE
#144-26204 23,650.38 5,239.62 72.77 NJ
TAYLOR LIFT TRK MODEL
TY920L #21158 240,085.34 53,189.60 738.75 NJ
CAT V900CH TOP LOADER
#03WD00182 226,914.16 50,271.64 698.22 NJ
20' HANDLING ATTACHMENT 5,566.72 1,233.28 17.13 NJ
TITAN-HOBART #91W517161
WELDER 1,983.75 439.48 6.10 TX
TRAILER UNIT 1226 #38906 5,505.33 1,219.67 16.94 NJ
2 20' STEEL CONTAINERS 2,865.23 634.77 8.82 NJ
1000 INTERBOX CONNECTORS 18,480.69 4,094.31 56.87 NJ
PRESSURE WASHER #PG1413 1,646.38 364.76 5.07 NJ
5500 WATT GENERATOR
#5501R 1,526.25 338.13 4.70 IL
I R AIR COMPRESSOR
#160034 4,814.31 2,085.69 28.97 TX
AIR COMPRESSOR #1252570 2,319.72 1,004.97 13.96 TX
WELDER 1,899.30 822.83 11.43
PRESSURE WASHER
#59346766 2,995.59 5,094.87 70.76 TX
CONVEYOR-MOORHEAD CO 1,554.44 2,643.76 36.72 MA
V925 LIFT TRUCK
#8FB00124 43,822.75 74,533.19 1,035.18 TX
SCREW EQUIP (MOOREHEAD) 3,348.49 7,188.51 99.84 MA
1,430.45
TOTALS 0.00 12,051,340.87 3,777,744.04 52,468.67
<PAGE>
RJ LONGO CONSTRUCTION CO., INC.
D/B/A EPIC
FIXED ASSETS VEHICLES
YEAR END DECEMBER 31, 1996
<TABLE>
<CAPTION>
COST RETIREMENT ACCUM. DEPR. 1996
DATE METHOD OR AND/OR ENDING BEGINNING DEPREC.
DESCRIPTION ACQUIRED RATE BASIS ADDITIONS ADJUSTMENT BALANCE BALANCE EXPENSE
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
91 FORD EXPLORER
#1FMDU34X1MUB44116 11/05/90 S/L7 21,388.58 21,388.58 16,988.66 879.99
91 MACK DM690S
#1M2B209CXMM008956 3/19/91 S/L7 74,286.41 74,286.41 53,698.50 4,117.59
91 YT-60T OTTAWA TRACTOR
#11VEC15P6MA000059 3/22/91 S/L7 62,571.00 62,571.00 45,229.89 3,468.22
91 YT-60T OTTAWA TRACTOR
#11VEC15P3MA000055 3/22/91 S/L7 62,571.00 62,571.00 45.229.89 3,468.22
91 YT-60T OTTAWA TRACTOR
#11VEC15P9MA000058 3/22/91 S/L7 62,571.00 62,571.00 45,229.89 3,468.22
91 F150
#1FTDF15NXMNA19335 2/07/91 S/L7 15,900.00 15,900.00 11,493.43 881.32
91 F150
#1FTDF15N8MLA26358 2/07/91 S/L7 15,900.00 15,900.00 11,493.43 881.32
91 F150
#2FTEFI5NXMCA25761 4/15/91 S/L7 15,500.25 15,500.25 11,204.48 859.16
85 FORD FLAT
#1FDKF37LXFKA31418 5/17/91 S/L7 5,000.00 5,000.00 3,614.28 277.14
PRATT MODEL CT-30/40
CHASSIS
#1P9CP4030MS109200 9/30/91 S/L7 28,440.00 28,440.00 22,195.38 1,248.92
OTTAWA YT-60T TRACTORS-
#11VEC15P2MA000113 7/30/91 S/L7 63,105.00 63,105.00 45,615.90 3,497.82
#11VEC15P0MA000112 7/30/91 S/L7 63,105.00 63,105.00 45,615.90 3,497.82
#11VEC15P9MA000111 7/30/91 S/L7 63,105.00 63,105.00 45,615.90 3,497.82
#11VEC15P6MA000110 7/30/91 S/L7 63,105.00 63,105.00 45,615.90 3,497.82
91 FORD F150
#1FTDF15Y2MNA75523 9/09/91 S/L7 12,812.85 12,812.85 9,261.87 710.20
DUNRIGHT TRLR
#DR91212R0DD3 7/22/91 S/L7 37,718.00 37,718.00 27,264.73 2,090.66
AJAX CHASSIS #601 8/22/91 S/L7 6,400.00 6,400.00 4,626.28 354.74
AJAX CHASSIS #602 8/22/91 S/L7 6,400.00 6,400.00 4,626.28 354.74
AJAX CHASSIS #604 8/22/91 S/L7 6,400.00 6,400.00 4,626.28 354.74
AJAX CHASSIS #605 8/22/91 S/L7 6,400.00 6,400.00 4,626.28 354.74
AJAX CHASSIS #606 8/22/91 S/L7 6,400.00 6,490.00 4,626.28 354.74
AJAX CHASSIS #607 8/22/91 S/L7 6,400.00 6,400.00 4,626.28 354.74
AJAX CHASSIS #608 8/22/91 S/L7 6,400.00 6,400.00 4,626.28 354.74
AJAX CHASSIS #609 8/22/91 S/L7 6,400.00 6,400.00 4,626.28 354.74
AJAX CHASSIS #603 8/22/91 S/L7 6,400.00 6,400.00 4,626.28 354.74
AJAX CHASSIS #610 8/22/91 S/L7 6,400.00 6,400.00 4,626.28 354.74
AJAX CHASSIS #613 8/22/91 S/L7 6,400.00 6,400.00 4,626.28 354.74
AJAX CHASSIS #611 8/22/91 S/L7 6,400.00 6,400.00 4,626.28 354.74
AJAX CHASSIS #612 8/22/91 S/L7 6,400.00 6,400.00 4,626.28 354.74
AJAX CHASSIS #614 8/22/91 S/L7 6,400.00 6,400.00 4,626.28 354.74
AJAX CHASSIS #615 8/22/91 S/L7 6,400.00 6,400.00 4,626.28 354.74
AJAX CHASSIS #616 8/22/91 S/L7 6,400.00 6,400.00 4,626.28 354.74
AJAX CHASSIS #617 8/22/91 S/L7 6,400.00 6,400.00 4,626.28 354.74
AJAX CHASSIS #618 8/22/91 S/L7 6,400.00 6,400.00 4,626.28 354.74
AJAX CHASSIS #619 8/22/91 S/L7 6,400.00 6,400.00 4,626.28 354.74
AJAX CHASSIS #620 8/22/91 S/L7 6,400.00 6,400.00 4,626.28 354.74
5 CT30/40-3FT TRI-AXLE
CHASSIS 11/06/91 S/L7 163,708.75 163,708.75 118,338.11 9,074.13
PRATT#1P9CP4032MS109229
PRATT#1P9CP4034MS109216
PRATT#1P9CP4032MS109215
PRATT#1P9CP4030MS109214
PRATT#1P9CP4039MS109213
92 EXPLORER
#1FMDU34X7NU827161 12/04/91 S/L7 26,967.57 26,967.57 16,608.11 2,071.89
92 EXPLORER
#1FMDU34X8NUB85151 4/15/92 S/L7 20,845.03 20,845.03 10,905.01 1,988.00
82 MACK
#1M2N179Y3CA077198 3/23/95 S/L7 18,800.00 0.00 18,800.00 1,410.03 1,880.00
96 FORD F-150 3/21/96 S/L5 18,584.95 18,584.95 0.00 1,858.50
TOTALS 1,025,400.50 18,584.95 0.00 1,043,965.45 725,154.95 60,309.61
<CAPTION>
RETIREMENT ACCUM. DEPR. 12/31/96 DEPR
AND/OR ENDING BOOK PER
DESCRIPTION ADJUSTMENT BALANCE VALUE MONTH
- ------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
91 FORD EXPLORER
#1FMDU34X1MUB44116 17,868.64 4,399.93 73.33 NJ
91 MACK DM690S
#1M2B209CXMM008956 57,816.10 20,587.97 343.13 MA
91 YT-60T OTTAWA TRACTOR
#11VEC15P6MA000059 48,698.11 17,341.11 289.02 IL
91 YT-60T OTTAWA TRACTOR
#11VEC15P3MA000055 48.698.11 17,341.11 289.02 NJ
91 YT-60T OTTAWA TRACTOR
#11VEC15P9MA000058 48,698.11 17,341.11 289.02 NJ
91 F150
#1FTDF15NXMNA19335 12,374.74 4,406.58 73.44 TX
91 F150
#1FTDF15N8MLA26358 12,374.74 4,406.58 73.44 TX
91 F150
#2FTEFI5NXMCA25761 12,063.63 4,295.78 71.60 MA
85 FORD FLAT
#1FDKF37LXFKA31418 3,891.43 1,385.72 23.10 TX
PRATT MODEL CT-30/40
CHASSIS
#1P9CP4030MS109200 23,444.31 6,244.62 104.08 TX
OTTAWA YT-60T TRACTORS-
#11VEC15P2MA000113 49,113.72 17,489.10 291.49 NJ
#11VEC15P0MA000112 49,113.72 17,489.10 291.49 NJ
#11VEC15P9MA000111 49,113.72 17,489.10 291.49 NJ
#11VEC15P6MA000110 49,113.72 17.489.10 291.49 NJ
91 FORD F150
#1FTDF15Y2MNA75523 9,972.06 3,550.98 59.18 NJ-PHIL
DUNRIGHT TRLR
#DR91212R0DD3 29,355.38 10,453.28 174.22 TX
AJAX CHASSIS #601 4,981.03 1,773.72 29.56 NJ
AJAX CHASSIS #602 4,981.03 1,773.72 29.56 NJ
AJAX CHASSIS #604 4,981.03 1,713.72 29.56 NJ
AJAX CHASSIS #605 4,981.03 1,773.72 29.56 NJ
AJAX CHASSIS #606 4,981.03 1,773.72 29.56 NJ
AJAX CHASSIS #607 4,981.03 1,773.72 29.56 NJ
AJAX CHASSIS #608 4,981.03 1,773.72 29.56 NJ
AJAX CHASSIS #609 4,981.03 1,773.72 29.56 NJ
AJAX CHASSIS #603 4,981.03 1,773.72 29.56 NJ
AJAX CHASSIS #610 4,981.03 1,773.72 29.56 NJ
AJAX CHASSIS #613 4,981.03 1,773.72 29.56 NJ
AJAX CHASSIS #611 4,981.03 1,773.72 29.56 NJ
AJAX CHASSIS #612 4,981.03 1,773.72 29.56 NJ
AJAX CHASSIS #614 4,981.03 1,773.72 29.56 NJ
AJAX CHASSIS #615 4,981.03 1,773.72 29.56 NJ
AJAX CHASSIS #616 4,981.03 1,773.72 29.56 NJ
AJAX CHASSIS #617 4,981.03 1,773.72 29.56 NJ
AJAX CHASSIS #618 4,981.03 1,773.72 29.56 NJ
AJAX CHASSIS #619 4,981.03 1,773.72 29.56 NJ
AJAX CHASSIS #620 4,981.03 1,773.72 29.56 NJ
5 CT30/40-3FT TRI-AXLE
CHASSIS 127,412.24 45,370.64 756.18
PRATT#1P9CP4032MS109229 NJ
PRATT#1P9CP4034MS109216 IL
PRATT#1P9CP4032MS109215 IL
PRATT#1P9CP4030MS109214 TX
PRATT#1P9CP4039MS109213 NJ
92 EXPLORER
#1FMDU34X7NU827161 18,680.00 10,359.46 172.66 NJ-BOB
92 EXPLORER
#1FMDU34X8NUB85151 12,893.02 9,940.02 165.67 NJ-AUGIE
82 MACK
#1M2N179Y3CA077198 3,290.03 17,389.97 156.67 TX
96 FORD F-150 1,858.50 18,584.95 154.87
TOTALS 0.00 785,464.56 318,830.50 5,025.80
</TABLE>
<PAGE>
COMPANY: RJ LONGO CONSTRUCTION
FIXED ASSETS: OFFICE EQUIPMENT
YEAR ENDED: DECEMBER 31, 1996
<TABLE>
<CAPTION>
COST RETIREMENT
DATE METHOD/ OR AND/OR ENDING
DESCRIPTION: ACQUIRED OR RATE BASIS ADDITIONS ADJUST BALANCE
- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
U SHAPED EXEC. DESK & CABINETS 2/81 ACRS-5 5,735.00 5,735.00
GOAT SKIN DESK 3/81 ACRS-5 3,156.00 3,156.00
OFFICE FURN. (RECEPT. AREA) 4/81 ACRS-5 9,481.30 9,481.30
EXECUTIVE DESK SET 4/81 ACRS-5 4,108.65 4,108.65
FILES 4/81 ACRS-5 3,209 85 3,209.85
OFFICE FURN.(BOB'S OFFICE) 4/81 ACRS-5 3,134.00 3,134.00
CABINETS (ENGINEERS OFFICE) 4/81 ACRS-5 620.00 620.00
OFFICE FURN. (BOB'S OFFICE) 4/81 ACRS-5 2,723.00 2,723.00
IBM SSP OPERATING SYSTEM 7/85 ACRS-5 89,944.00 89,944.00
ROOM DIVIDER PANELS (ENGINEER) 7/85 ACRS-3 3,948.66 3,948.66
2 S1104 L5-4 TIER LATERAL FILES 10/85 ACRS-5 1,333.48 1,333.48
6 FILE CABINETS-LATERAL FILE
STORAGE CABINET 3/86 ACRS-5 3,023.00 3,023.00
SHREDDER & STAND MODEL 31O 7/86 ACRS-5 1,472.34 1,472.34
XEROX 1038 ZOOM COPY MACH.-
S/N 26E-217288 7/86 ACRS-5 4,130.82 4,130.82
256K MEMORY UPGRADE 10/29/86 ACRS-5 1,250.00 1,250.00
512K MEMORY UPGRADE 10/29/86 ACRS-5 2,500.00 2,500.00
DECISON SUPPORT WRITER 11/25/86 ACRS-5 3,900.00 3,900.00
CANNON FAX 230 #3204597 04/23/87 ACRS-5 2,332.00 2,332 00
8500 SHARP COPIER #8621069 5/15/89 ACRS-5 10,536.40 10,536.40
CENTURY TELEPHONE SYSTEM 9/25/89 ACRS-5 11,834.90 11,834.90
FAX MACHINE (68)SHARP#9714850Y 5/03/90 ACRS-5 793.94 793.94
FAX MACHINE(69) 2/09/90 ACRS-5 1,580.46 1,580.46
RICOH COPIER #2149060623(69) 2/16/90 ACRS-5 2,114.70 2,114.70
SHARP FAX 4900 #10109831 5/24/91 ACRS-5 3,359.80 3,359.80
EVERCLEAR COPIER-CAMDEN 9/11/91 ACRS-5 1,683.00 1,683.00
SHREDDER 10/31/91 ACRS-5 1,603.93 1,603.93
RICOH COPIER FT2260#2141090196 8/24/92 ACRS-5 3,552.06 3,552.06
COPIER-CAMDEN 10/08/92 ACRS-5 2,459.20 2,459.20
RICOH COPIER #2732520190 1/31/94 ACRS-5 14,522.00 14,522.00
TOTAL 200,042.49 0.00 0.00 200,042.49
<CAPTION>
12/31/96 RETIREMENT 12/31/96 DEPREC.
GENERAL DEPREC. AND/OR GENERAL BOOK PER
DESCRIPTION: LEDGER EXPENSE ADJUST LEDGER VALUE MONTH
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
U SHAPED EXEC. DESK & CABINETS 5,735.00 5,735.00 0.00 0.00
GOAT SKIN DESK 3,156.00 3,156.00 0.00 0.00
OFFICE FURN. (RECEPT. AREA) 9,481.30 9,481.30 0.00 0.00
EXECUTIVE DESK SET 4,108.65 4,108.65 0.00 0.00
FILES 3,209.85 3,209.85 0.00 0.00
OFFICE FURN.(BOB'S OFFICE) 3,134.00 3,134.00 0.00 0.00
CABINETS (ENGINEERS OFFICE) 620.00 620.00 0.00 0.00
OFFICE FURN. (BOB'S OFFICE) 2,723.00 2,723.00 0.00 0.00
IBM SSP OPERATING SYSTEM 89,944.00 89,944 00 0.00 0.00
ROOM DIVIDER PANELS (ENGINEER) 3,948.66 3,948.66 0.00 0.00
2 S1104 L5-4 TIER LATERAL FILES 1,333.48 1,333.48 0.00 0.00
6 FILE CABINETS-LATERAL FILE 0.00
STORAGE CABINET 3,023.00 3,023.00 0.00 0.00
SHREDDER & STAND MODEL 31O 1,472.34 1,472.34 0.00 0.00
XEROX 1038 ZOOM COPY MACH.-
S/N 26E-217288 4,130.82 4,130.82 0.00 0.00
256K MEMORY UPGRADE 1,250.00 1,250.00 0.00 0.00
512K MEMORY UPGRADE 2,500.00 2,500.00 0.00 0.00
DECISON SUPPORT WRITER 3,900.00 3,900.00 0.00 0.00
CANNON FAX 230 #3204597 2,332.00 2,332.00 0.00 0.00
8500 SHARP COPIER #8621069 10,536.40 10,536.40 0.00 0.00
CENTURY TELEPHONE SYSTEM 11,834.90 11,834.90 0.00 0.00
FAX MACHINE (68)SHARP#9714850Y 793.94 0 00 793.94 0.00 0.00
FAX MACHINE(69) 1,580.46 0.00 1,580.46 0.00 0.00
RICOH COPIER #2149060623(69) 2,114.70 0.00 2,114.70 0.00 0.00
SHARP FAX 4900 #10109831 3,023.82 335.98 3,359.80 0.00 28.00
EVERCLEAR COPIER-CAMDEN 1,514.70 168.30 1,683.00 0.00 14.03
SHREDDER 1,443.55 160.38 1,603.93 0.00 13.37
RICOH COPIER FT2260#2141090196 2,841.64 710.42 3,552.06 0.00 59.20
COPIER-CAMDEN 1,967.36 491.84 2,459.20 0.00 40.99
RICOH COPIER #2732520190 5,808.79 2,904.40 8,713.19 5,808.81 242.03
TOTAL 189,462.36 4,771.32 0.00 194,233.68 5,808.81 397.61
</TABLE>
<PAGE>
Schedule 4.04
List of Longo Licenses and Permits
See list of permits in Schedule 4.01(c)(x)
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:7-2(2) and Section 14A:7-2(4),
Corporations, General, of the New Jersey Statutes, the undersigned corporation
executes the following Certificate of Amendment to Certificate of Incorporation:
1. The name of the corporation is: Compost America Holding Company, Inc.
2. The following resolution amending the Certificate of Incorporation was
duly adopted by the board of directors of the corporation on the 24th day of
April, 1998:
RESOLVED, that the corporation hereby designates a class of
preferred shares as Series D preferred stock as more particularly described on
the Certificates of Designations of Rights and Preferences of Series D
Exchangeable Redeemable Preferred Stock (no par value per share) of Compost
America Holding Company, Inc., attached hereto, and made a part hereof, as
Exhibit "A".
3. The Certificate of Incorporation is amended so that the designation and
number of shares of each class and series acted upon in the resolution and the
relative rights, preferences and limitations of each such class and series, are
as stated in the resolution.
Compost America Holding Company, Inc.
By: /s/ Roger E. Tuttle
-------------------------
Name: Roger E. Tuttle
Chairman of the Board, President,
Chief Executive Officer and Treasurer
Dated: April 27, 1998
Exhibit 4.1
Exhibit "A"
CERTIFICATE OF DESIGNATIONS OF RIGHTS AND PREFERENCES
OF
SERIES D 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 April 24, 1998 adopted the following resolutions creating a
series of shares of Series D 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 D Exchangeable Redeemable Preferred Stock, no par value per
share (the "Series D Preferred Stock"). The maximum number of shares of Series D
Preferred Stock (the "Shares") shall be Seventeen Thousand Five Hundred
(17,500). The Series D Preferred Stock shall rank (i)
<PAGE>
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") and the Company
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 Company's 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 D 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 D 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 D Preferred Stock. Dividends shall be payable
semi-annually by the Company, on June 30th and December 31st of each year;
provided, however, that for the period ending June 30, 1998 dividends shall be
payable at a rate which gives the holders of such stock a dividend equal to an
8% per annum return from April 27, 1998 to June 30, 1998. Through November 3,
1999, dividends on the Series D 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 D
Preferred Stock must be paid in cash. Dividends on shares of the Series D
Preferred Stock will be cumulative on a daily basis from the date of initial
issuance of such shares of Series D 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 D Preferred Stock, like dividends for all dividend payment periods of
the Series D 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
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the dividend payment period or periods of Series D 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 D 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 D 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 D Preferred Stock shall have the following class voting
rights. So long as any shares of the Series D 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 aggregate
shares of the Series A Preferred Stock and Series D 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 and Series D Preferred Stock
vote together as a single, separate class: (i) authorize, create or issue (other
than the 169,000 shares of Series A Preferred Stock and 91,000 shares of Series
C Preferred Stock outstanding on the date of the filing of this Certificate of
Designations of Rights and Preferences), or increase the authorized or issued
amount of any class or series of stock ranking prior to or on a parity with the
Series D Preferred Stock, with respect to payment of dividends or the
distribution of assets on liquidation, dissolution or winding up; or (ii)
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 D Preferred Stock shall have been
paid in full, and (B) if dividends on Junior Stock are payable in cash, all
dividends on the Series D Preferred Stock thereafter paid shall similarly be
paid in cash. In addition, so long as any shares of the Series D Preferred Stock
remain outstanding, the Company shall not, without the affirmative vote or
consent of the holders of at least sixty-six and 2/3%, (66 2/3%) percent of the
shares of the Series D 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 D Preferred Stock vote separately as a class; (x) amend, alter or repeal
the provisions of the Series D 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 D 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; or (y) 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 D 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.
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(b) Except as provided above and except as otherwise required by New
Jersey law, the Series D 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 D Preferred Stock then outstanding, pari passu
with the holders of shares of the Series A Preferred Stock and 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 D 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, 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 D
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 D Preferred Stock (the "Parity Securities"), provided that the holders of
a majority of the shares of Series D Preferred Stock approve such Parity
Securities (other than the 169,000 shares of Series A Preferred Stock and 91,000
shares of Series C Preferred Stock outstanding on the date of the filing of this
Certificate of Designations of Rights and Preferences) in accordance with
Section 3(a) hereof, then the holders of outstanding shares of the Series D
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 D Preferred Stock and the Parity Securities. The liquidation payment with
respect to each outstanding fractional share of Series D Preferred Stock shall
be equal to a ratably proportionate amount of the liquidation payment with
respect to each outstanding share of Series D 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 D 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 D
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
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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 D Preferred Stock at their respective addresses as the same shall
appear on the books of the Company.
(d) Together with the outstanding Series A Preferred Stock and
outstanding Series C Preferred Stock of the Company, 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 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
D Preferred Stock to effect an exchange of their shares of Series D 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 D Preferred Stock (the "Voluntary Redemption Notice"), to
redeem all or any portion of the Shares of Series D Preferred Stock at a
redemption price for each Share of Series
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D Preferred Stock to be redeemed (the "Voluntary Redemption Price") which shall
be 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 D
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 D Preferred Stock
then outstanding at a redemption price for each Share of Series D 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 D 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 D 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 D Preferred Stock. The holders of Series D
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 D
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 D 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 D Preferred Stock will be exchangeable for 9% Senior Subordinated
Notes of the
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Company due November 3, 2004, at the rate of $100 principal amount of such notes
for each share of Series D 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 D 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 AMR Ownership Interests. (a) Notwithstanding any other provision
of this Certificate of Designations, if at any time when shares of Series D
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 the option of the holders of Series D Preferred Stock but
if and only if the holders of the Series A Preferred Stock and Series C
Preferred Stock have exercised their option to exchange the Series A Preferred
Stock and Series C Preferred Stock for common stock of R.J. Longo Construction
Co., Inc. d/b/a EPIC and now a wholly-owned subsidiary of the Company (the "EPIC
Option"), then the holders of the Series D Preferred Stock shall have the right
to exchange all of their shares of Series D Preferred Stock for all or a portion
of the ownership interests of, and rights to, American Marine Rail, L.L.C. ("AMR
Ownership Interests"), a New Jersey limited liability company ("AMR"), owned or
beneficially held by the Company at such time. In addition, and whether or not
the Company shall be in default as aforesaid at the time, at their option, but
only if and to the extent shares of both Series D Preferred Stock and Series C
Preferred Stock remain outstanding and the holders of the Series A Preferred
Stock (if outstanding at the time) and Series C Preferred Stock have exercised
the EPIC Option, the holders of Series D Preferred Stock shall have the same
right as aforesaid, on the same basis and at the same exchange rate, to exchange
shares of Series D Preferred Stock for AMR Ownership Interests during the period
from November 1, 1999 through October 31, 2000; provided, however, that as a
condition of the exercise of any of the foregoing exchange rights, there shall
be tendered to the Company by the holder of record of the Series D Preferred
Stock (i) if the holder of record of the Series D Preferred Stock is acquiring
only the AMR Ownership Interests originally received by the Company from
Andersen, Weinroth & Co., L.P. simultaneously with the issuance of the Series D
Preferred Stock, all of the shares of the Company's Common Stock held by AW
Compost Partners, LLC as of the date of issuance of the Series D Preferred
Stock, being 1,627,980 shares of Common Stock, plus (ii) if the holder of record
of the Series D Preferred Stock desires to acquire any AMR Ownership Interests
which were not originally received by the Company from Andersen, Weinroth & Co.,
L.P. simultaneously with the issuance of the Series D Preferred Stock, then in
addition to the shares described in (i) above, an amount equal to the original
price paid by the Company for such additional AMR Ownership Interests.
(b) Notwithstanding any other provision of this Section 9, all exchange
rights for AMR Ownership Interests shall be extinguished, void and of no further
effect upon termination or expiration of the EPIC Option in accordance with its
terms.
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(c) No payment or adjustment shall be made on account of any distributions
on AMR Ownership Interests delivered upon such exchange.
(d) To exchange shares of Series D 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.
(e) So long as the possibility exists of exchanging Series D Preferred
Stock for AMR Ownership Interests, the Company shall at all times keep available
free for issue the full amount of AMR Ownership Interests owned or beneficially
held by it, then exchangeable for all shares of Series D Preferred Stock then
outstanding, free and clear of any liens.
(f) In order to fully preserve the exchange rights of the Series D
Preferred Stock, other than ordinary periodic cash distributions, without the
affirmative vote or consent of at least 66 2/3% of the shares of Series D
Preferred Stock outstanding at the time, voting separately as a class, the
Company will not permit the payment of distributions on the AMR Ownership
Interests, will not permit the issuance of additional AMR Ownership Interests or
securities convertible into or exchangeable for AMR Ownership Interests or
permit the consolidation, merger or transfer of substantial assets of AMR, if
and to the extent that any such transactions would adversely affect the ability
of holders of Series D Preferred Stock to exchange such Series D Preferred Stock
for AMR Ownership Interests as and to the extent contemplated by this Section 9.
10. Change in Control.
(a) Upon the occurrence of a "Change in Control", each holder of Series D
Preferred Stock shall have the right to require the redemption of its Series D
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.
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(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 D
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 D
Preferred Stock and that all shares of Series D 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 D 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 D 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 D Preferred Stock electing to have any
shares of Series D Preferred Stock redeemed pursuant to the Change in
Control Offer will be required to surrender the certificates representing
such shares of Series D Preferred Stock to the transfer agent for the
Series D 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 D Preferred Stock are being
redeemed only in part will be issued new certificates representing shares
of Series D Preferred Stock equal in number to the unredeemed portion of
the shares of Series D Preferred Stock surrendered; provided that each
certificate representing shares of Series D Preferred Stock redeemed and
each new certificate representing shares of Series D 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 D Preferred Stock shall
deliver to the Corporation a certificate specifying the aggregate number
of shares of Series D Preferred Stock delivered for purchase by the
holders of Series D 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 D
Preferred Stock or portions thereof so accepted; and
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(iii) The Company shall deposit with the transfer agent for the
Series D Preferred Stock money sufficient to pay the Change in Control
redemption price of all shares of Series D 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 D Preferred Stock an officers' certificate
specifying the shares of Series D Preferred Stock or portions thereof accepted
for payment by the Company.
(d) The transfer agent for the Series D Preferred Stock shall promptly
mail to the holders of Series D Preferred Stock so accepted payment in an amount
equal to the Change in Control redemption price, and the transfer agent for the
Series D Preferred Stock shall promptly authenticate and mail to such holders of
Series D Preferred Stock a new certificate representing shares of Series D
Preferred Stock equal in number to any unredeemed shares of Series D Preferred
Stock surrendered; provided that each share of Series D Preferred stock redeemed
and each new certificate representing shares of Series D Preferred Stock issued
shall be in whole shares. The Company will notify the holders of Series D
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 27th day of April, 1998.
COMPOST AMERICA HOLDING
COMPANY, INC.
By: /s/ Roger E. Tuttle
-----------------------------------------
Name: Roger E. Tuttle
Title: Chairman of the Board, President,
Chief Executive Officer and
Treasurer
By: /s/ Pasquale Dileo
-----------------------------------------
Name: Pasquale Dileo
Title: Assistant Secretary
REGISTRATION RIGHTS AGREEMENT
dated as of
April 27, 1998
between
COMPOST AMERICA HOLDING COMPANY, INC.
and
AW COMPOST PARTNERS, LLC
<PAGE>
TABLE OF CONTENTS
ARTICLE 1....................................................................1
DEFINITIONS............................................................1
1.1 Definitions..................................................1
ARTICLE 2....................................................................2
REGISTRATION RIGHTS....................................................2
2.1 Securities Subject to this Agreement.........................2
2.2 Demand Registration..........................................3
2.3 Piggyback Registration.......................................4
2.4 Registration Procedures......................................6
2.5 Preparation; Reasonable Investigation.......................10
2.6 Certain Rights of the Holder................................10
2.7 Registration Expenses.......................................10
2.8 Indemnification; Contribution...............................10
2.9 Participation in Underwritten Registrations.................12
2.10 Selection of Underwriters..................................13
ARTICLE 3...................................................................13
RULE 144..............................................................13
3.1 Rule 144 Reporting..........................................13
ARTICLE 4...................................................................13
MISCELLANEOUS.........................................................13
4.1 Entire Agreement............................................13
4.2 Successors and Assigns......................................13
4.3. Notices....................................................13
4.4 Headings....................................................14
4.5 Counterparts................................................14
4.6 Applicable Law..............................................14
4.7 Specific Enforcement........................................14
4.8 Amendment and Waivers.......................................14
<PAGE>
REGISTRATION RIGHTS AGREEMENT
REGISTRATION RIGHTS AGREEMENT, dated as of April 27, 1998 (the
"Agreement"), between COMPOST AMERICA HOLDING COMPANY, INC., a New Jersey
corporation (the "Company"), and AW COMPOST PARTNERS, LLC, a limited liability
company organized under the laws of Delaware (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 D Preferred Stock (as
defined herein) and shares of Common 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.
"Board" means the Board of Directors of the Company.
"Business Day" means any day except a Saturday, Sunday or other day on
which banks in New York are authorized by law to close.
"Closing Date" means the date on which the completion of the transactions
specified in the Stock Purchase Agreement relating to the purchase and sale of
Series D Preferred Stock as contemplated by Section 2.01 thereof shall occur.
"Commission" means the Securities and Exchange Commission.
"Common Stock" means the common stock, no par value, of the Company.
"Company 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 2.3, including the Prospectus included therein,
all amendments and supplements thereto (including post-effective amendments) and
all exhibits and material incorporated by reference therein.
"Effective Time" means the date of effectiveness of any Registration
Statement.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
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"NASD" means the National Association of Securities Dealers, Inc.
"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 D Preferred Stock" means the Series D Preferred Stock, no par
value, of the Company.
"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 Company Registration Statement and/or
the Shelf Registration Statement.
"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 at the Closing Date and, to the extent applicable pursuant to Section
2.3(e) hereof, the shares of Preferred Stock granted piggyback registration
rights.
"Securities Act" means the Securities Act of 1933, as amended.
"Shelf Registration Statement" means the Registration Statement of the
Company relating to the shelf registration for resale of Restricted Securities
contemplated by Section 2.2 herein, including the Prospectus included therein,
all amendments and supplements thereto (including post-effective amendments) and
all exhibits and material incorporated by reference therein.
"Stock Purchase Agreement" has the meaning given to it in the recitals to
this Agreement.
As used in this Agreement, words in the singular include the plural, and
in the plural include the singular.
ARTICLE 2
REGISTRATION RIGHTS
2.1 Securities Subject to this Agreement.
(a) The Securities entitled to the benefits of this Agreement are the
Restricted Securities, but only for so long as they remain Restricted
Securities.
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(b) A Person is deemed to be a holder of Restricted Securities (each, a
"Holder") whenever such Person is the registered holder of such Restricted
Securities on the books and records of the Company or its transfer agent.
2.2 Demand Registration.
(a) Subject to the limitations set forth in this Agreement, at any time
after the date which is 90 days after the Closing Date, the Holder may request
the Company to register under the Securities Act, all or any portion (but not
less than $270,000 (based upon the offering price) of the Holder's Restricted
Securities) of its Restricted Securities for sale on terms and conditions
comparable to those normally applicable to offerings of equity securities in
similar circumstances as determined by the Company on Form S-3 or such other
form as the Company deems appropriate; provided, however, that the request for
registration must be for a Shelf Registration Statement pursuant to Rule 415
under the Securities Act. The Company shall be obligated to register Restricted
Securities pursuant to this Section 2.2(a) on two occasions only, provided,
however, that such registrations shall be counted only if (A) the corresponding
Registration Statements have become effective under the Securities Act, and (B)
the public offerings have been consummated on the terms and conditions specified
therein or if not consummated, such failure was not attributable to an action
taken by the Company. The Company shall be entitled to include in any Shelf
Registration Statement filed pursuant to this Section 2.2(a) securities of the
Company held by any other shareholder of the Company and, in an underwritten
public offering, Common Stock of the Company to be sold by the Company for its
own account so long as the inclusion of such additional securities will not
result in a decrease of the amount of Restricted Securities to be registered
pursuant to this Section 2.2(a).
(b) In connection with the Shelf Registration Statement, the Company shall
comply with all the provisions of Section 2.4 below and shall use its reasonable
efforts to effect such registration to permit the sale of the Restricted
Securities being sold in accordance with the intended method or methods of
distribution thereof (as indicated in the information furnished to the Company
pursuant to Section 2.2(c)). Subject to Section 2.2(d), the Company shall use
its best efforts to keep each such Shelf Registration Statement continuously
effective, supplemented and amended as required by the provisions of Section
2.2(d) to the extent necessary to ensure that it is available for resales of
Restricted Securities by the Holder, and to ensure that it conforms with the
requirements of this Agreement, the Securities Act and the policies, rules and
regulations of the Commission as announced from time to time, for a period of 18
months from the Effective Time or such longer period as required by Section
2.2(d) or such shorter period that will terminate when all the securities
covered by the Shelf Registration Statement have been sold pursuant to the Shelf
Registration Statement or otherwise cease to be Restricted Securities (the
"Effective Period"). Upon the occurrence of any event that would cause any Shelf
Registration Statement or the Prospectus contained therein (i) to contain a
material misstatement or omission or (ii) not to be effective and usable for
sale or resale of Restricted Securities during the period required by this
Agreement, the Company shall file promptly an appropriate amendment to such
Shelf Registration Statement or the related Prospectus or any document
incorporated therein by reference, in the case of clause (i), correcting any
such misstatement or omission, and, in the case of either clause (i) or (ii),
use its reasonable efforts to cause such amendment to be declared effective and
such Registration Statement and the related Prospectus to become usable for its
intended purpose(s) as soon as practicable thereafter.
(c) The Holder may not include any of its Restricted Securities in a Shelf
Registration Statement pursuant to this Agreement unless and until such Holder
furnishes to the Company in writing, within 30 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 a Shelf 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
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to make the information previously furnished to the Company by such Holder not
materially misleading.
(d) Notwithstanding anything to the contrary contained herein, if (x) the
Board determines in good faith that the registration and distribution of
Restricted Securities (or the use of any such Shelf Registration Statement or
the Prospectus contained therein) would interfere with any proposed or pending
material corporate transaction involving the Company or any of its subsidiaries
or would require premature disclosure thereof or would require the Company to
disclose information that the Company has not otherwise made public and that the
Company reasonably determines is in the best interests of the Company not to
disclose at such time, and (y) the Company notifies the Holder in writing not
later than three days following such determination (such notice a "Blackout
Notice"), the Company may (A) postpone the filing of such Shelf Registration
Statement or (B) allow such Shelf Registration Statement to fail to be effective
and usable or elect that such Shelf Registration Statement not be usable for a
reasonable period of time, but not in excess of 30 days (a "Blackout Period");
provided, however, that the aggregate number of days included in all Blackout
Periods shall not exceed 90 during any consecutive 12 months and shall not
exceed 150 during the period specified in Section 2.2(b) of this Agreement; and
provided, further, that the Effective Period referred to in Section 2.2(b)
during which a Shelf Registration Statement is required to be effective and
usable shall be extended by the aggregate number of days during which such Shelf
Registration Statement was not effective or usable pursuant to the foregoing
provisions.
(e) Notwithstanding anything to the contrary contained herein, the Company
shall not be obligated to file a Shelf Registration Statement in respect of
Restricted Securities pursuant to this Section 2.2 if: (i) the Company has
previously filed a Shelf Registration Statement with respect to Restricted
Securities, and a period of at least 180 days has not elapsed from the date on
which the Effective Period of such Shelf Registration Statement has expired; and
(ii) the Company has previously filed a Company Registration Statement pursuant
to which Restricted Securities have been registered under Section 2.3 hereof,
and a period of at least 120 days has not elapsed from the Effective Time of
such Company Registration Statement.
2.3 Piggyback Registration.
(a) At any time that the Company proposes to file a Company 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 Company Registration
Statement effecting such registration (but in no event less than 30 days before
the anticipated filing date). The Holder may request inclusion of any Restricted
Securities in such Company Registration Statement by delivering to the Company,
within 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 Company Registration
Statement. The Company shall use its best efforts to cause all Restricted
Securities specified in the Piggyback Notice to be included in the Company
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 Company Registration Statement; provided, however, that if, at any time
after giving Registration Notice and prior to the Effective Time of the Company
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:
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(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 Company
Registration Statement pursuant to Section 2.3(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 Company 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:
(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 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 effect any registration
for the account of the Holder on a Company Registration Statement with
respect to less than $270,000 of the Holder's Restricted Securities,
subject to the provisions of Subsection (ii) of this Section 2.3(b).
(iv) The Company shall not be obligated to effect any registration
for the account of the Holder on a Company Registration Statement if,
prior to the filing date of such Company Registration Statement, (A) the
Holder has requested registration of its Restricted Securities on a Shelf
Registration Statement pursuant to Section 2.2 hereof, (B) the
corresponding Shelf Registration Statement has become effective under the
Securities Act, and (C) the public offering has been consummated on the
terms and conditions specified therein or if not consummated, such failure
was not attributable to an action taken by the Company.
(c) The Holder may not include any of its Restricted Securities in a
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.
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(d) The Company covenants not to grant any piggyback registration rights
which would permit any holder of Common Stock to have piggyback registration
rights prior to those of the Holder.
(e) This subsection (e) shall apply solely to piggyback rights for holders
of the Series D Preferred Stock. Except as specified in this subjection, holders
of the Series D Preferred Stock shall have no registration rights pursuant to
this Agreement.
If, in the case, of any offering of Series D Preferred Stock or any
offering of the Company's outstanding Preferred Stock Series A, Preferred Stock
Series B or Preferred Stock Series C (together, as defined in the Stock Purchase
Agreement, with the Series D Preferred Stock, referred to hereinafter as the
"Preferred Stock"), or securities convertible into Preferred Stock, within ten
days after the Holder has been made aware by the Company of its intention to
effect a registration of any of the Preferred Stock (otherwise than pursuant to
an employee benefit plan or filing on Form S-8), the Holder may request and the
Company shall honor the Holder's request that any Preferred Stock in the Company
owned by the Holder be included in the registration statement.
Notwithstanding the foregoing, if an underwriter consents to the inclusion
in the registration statement of less than all Preferred Stock proposed to be
offered by selling shareholders, including the Holder, 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 Preferred Stock registered pursuant to
this subsection, the Company (i) shall furnish to the Holder such number of
copies of any prospectus (including any preliminary prospectus, or supplement)
as it may reasonably request in order to effect the offering and sale of the
Preferred Stock 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, which shall be for not more than six months, and (ii) shall 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 the Holder shall reasonably 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 be then
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 Preferred Stock
covered hereunder, the Holder 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 Preferred Stock registered pursuant to this
subsection, 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 hereto. The
Company shall use its best efforts to keep such registration statement current
for a period of six months. 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 sales of the Preferred Stock of
the Holder. The Holder shall pay all expenses, fees and disbursements of any
counsel, accountants and other consultants representing the Holder in connection
with said sale.
2.4 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:
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(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 (i) if such Registration Statement is
a Company Registration Statement, until the earlier of 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 Company
Registration Statement or (ii) if such Registration Statement is a Shelf
Registration Statement, for the applicable period set forth in Section 2.2(b)
herein; 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 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;
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(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 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 2.6 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 2.4, 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.
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governmental agencies or authorities as may be necessary to enable the seller or
sellers thereof or the underwriter(s), if any, to consummate the disposition of
such Restricted Securities, subject to the proviso contained in Section 2.4(f);
(i) if any fact or event contemplated by Section 2.4(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 on 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 2.4(b)(iv) or the commencement of a Blackout Period, 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 2.4(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 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. In
the event the Company shall give any such notice, the time period regarding the
effectiveness of the Shelf Registration Statement set forth in Section 2.2(b)
shall be extended by the number of days during the period from and including the
date of the giving of such notice pursuant to Section 2.4(b)(iv) or the
commencement of a Blackout Period to and including the date when the Holder
shall have received the copies of the supplemented or amended Prospectus
contemplated by Section 2.4(i) or shall have received (in accordance with the
notice provisions of Section 4.3) the Advice.
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2.5 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.
2.6 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.
2.7 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 forth
under Section 2.7(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,
retained by the Company.
2.8 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
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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 Blackout Notice or a notice from the
Company of the existence of any fact of the kind described in Section
2.4(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 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
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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 2.8(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 2.8(a).
(c) If the indemnification provided for in this Section 2.8 is unavailable
to an indemnified party under Section 2.7(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
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 2.8(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 2.8(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 2.8(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
2.8 are in addition to any liability which the indemnifying person may otherwise
have to the indemnified persons referred to above.
2.9 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.
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2.10 Selection of Underwriters. The Holder may sell its Restricted Securities in
an underwritten offering. In any such underwritten offering, the investment
banker or investment bankers and manager or managers that will administer the
offering will be selected by the Holder if such registration is pursuant to the
Shelf Registration Statement, and by the Company if such registration is
pursuant to a Company Registration Statement; provided, however, that such
investment bankers and managers must be reasonably satisfactory to the Company
or the Holder, respectively. Such investment bankers and managers are referred
to herein as the "underwriters".
ARTICLE 3
RULE 144
3.1 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 Act, 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 personally or
by overnight
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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: AW Compost Partners, LLC
1330 Avenue of the Americas
New York, NY 10019
Attention: G. Chris Andersen
Fax: (212) 399-1954
Telephone: (212) 399-2000
with copies to: Shereff, Friedman, Hoffman & Goodman, LLP
919 Third Avenue, 20th Floor
New York, NY 10022
Attention: Robert M. Friedman, Esquire
Fax: (212) 758-9526
Telephone: (212) 758-9500
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 copies 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.
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 unanimous
written consent of the Holders 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: /s/ Roger E. Tuttle
------------------------------------
Name: Roger E. Tuttle
Title: President
AW COMPOST PARTNERS, LLC
By: /s/ G. Chris Andersen
------------------------------------
Name: G. Chris Andersen
Title: Manager
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