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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended September 30, 1997
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or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to .
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Commission File Number: 001-13259
U S LIQUIDS INC.
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(Exact name of registrant as specified in its charter)
Delaware 76-0519797
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(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification Number)
411 N. Sam Houston Parkway East, Suite 400
Houston, TX 77060-3545
281-272-4500
(Address and telephone number of registrant's principal executive offices)
----------------------------------------------------
(Former name, former address and former fiscal year,
if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. [X] Yes [ ] No
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS:
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Sections 12, 13 or 15(d) of the Securities Exchange
Act of 1934 subsequent to the distribution of securities under a plan
confirmed by a court. [ ] Yes [ ] No
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date.
Common Stock, $.01 par value
7,205,285 shares as of November 14, 1997
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U S LIQUIDS INC.
FORM 10-Q FOR THE QUARTER ENDED SEPTEMBER 30, 1997
INDEX
PART I - FINANCIAL INFORMATION
Page
----
Item 1 - Financial Statements:
- Unaudited Condensed Consolidated Balance Sheets as
of December 31, 1996 and September 30, 1997.................. 4
- Unaudited Consolidated Statements of Income for the
three and nine month periods ended September 30,
1996 and 1997................................................ 5
- Unaudited Consolidated Statements of Cash Flows for
the nine month periods ended September 30, 1996
and 1997..................................................... 6
Item 2 - Management's Discussion and Analysis of Financial
Condition and Results of Operations.......................... 9
PART II - OTHER INFORMATION
Item 1 - Legal Proceedings................................................. 16
Item 2 - Changes in Securities and Use of Proceeds......................... 17
Item 6 - Exhibits and Reports on Form 8-K.................................. 18
Signature................................................................... 19
2
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PART I - FINANCIAL INFORMATION
ITEM 1 - FINANCIAL STATEMENTS
Introduction to Condensed Consolidated Financial Statements
The following condensed consolidated financial statements present the balance
sheet, income statement and cash flow data of U S Liquids Inc. ("U S
Liquids" or "The Company") which include financial statements of Mesa
Processing, Inc. and related companies ("Mesa") and American Waste Water Inc.
("AWW").
U S Liquids Inc. was founded November 18, 1996, and effective December 13,
1996 acquired certain assets and assumed certain liabilities of Campbell
Wells, L.P., and Campbell Wells NORM, L.P. (collectively, "Campbell Wells"),
which are wholly owned subsidiaries of Sanifill, Inc. ("Sanifill") (referred
to as the "Predecessor" to the extent of operations so acquired). On June
17, 1997, U S Liquids Inc. merged with Mesa and AWW through
pooling-of-interests transactions ("Pooled Companies").
The Company is engaged in two areas of the industrial and commercial
wastewater segment of the nonhazardous liquid waste industry: (i) the
treatment and disposal of nonhazardous commercial waste ("NCW"), including
the processing of NCW to recover finished products, and (ii) the treatment
and disposal of nonhazardous oilfield waste ("NOW").
The 1996 Pro Forma Income Statement includes certain adjustments to the
historical financial statements of the U S Liquids Inc. Predecessor,
including adjusting depreciation expense to reflect purchase price
allocations, recording interest expense to reflect the outstanding debt due
to Sanifill, adjusting insurance expense consistent with the expenses for U S
Liquids Inc. and the related income tax effects of these adjustments.
Operating results for the interim periods are not necessarily indicative of
the results for the full year. It is suggested that these consolidated
financial statements be read in conjunction with the consolidated financial
statements of the Company and the notes thereto included in the Company's
Registration statement on Form S-1 (File No. 333-34875), as filed with the
Securities and Exchange Commission ("SEC"), dated August 19, 1997.
3
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US LIQUIDS INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In Thousands, Except Share and Per Share Amounts)
<TABLE>
ASSETS
December 31, September 30,
1996 1997
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(Unaudited)
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 5,604 $14,589
Accounts receivable, less allowances of $265 and $237 4,843 4,336
Inventories 339 722
Prepaid expenses and other current assets 764 514
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Total current assets 11,550 20,161
PROPERTY, PLANT & EQUIPMENT, net 34,582 35,256
DEFERRED INCOME TAXES 186 -
OTHER ASSETS, net 533 629
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Total assets $46,851 $56,046
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------- -------
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Current maturities of long-term obligations $ 5,817 $ 4,574
Accounts payable 2,984 1,867
Accrued liabilities 2,147 1,951
Advances from stockholders 465 -
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Total current liabilities 11,413 8,392
LONG-TERM OBLIGATIONS, net of current maturities 23,668 18,591
CELL PROCESSING RESERVE 7,732 8,149
CLOSURE AND REMEDIATION RESERVES 2,500 2,500
DEFERRED INCOME TAXES - 67
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Total liabilities 45,313 37,699
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY:
Preferred stock, $.01 par value, 5,000,000 shares authorized,
none issued or outstanding
Series A 72 percent cumulative preferred stock, $1.00 par value,
10,000 shares authorized, 10,000 shares issued and outstanding 10 -
Common stock, $.01 par value, 30,000,000 shares authorized,
5,238,875 and 6,963,875 shares issued and outstanding 52 70
Additional paid-in capital 1,379 15,546
Retained earnings 97 2,731
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Total stockholders' equity 1,538 18,347
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Total liabilities and stockholders' equity $46,851 $56,046
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The accompanying notes are an integral part of these condensed consolidated financial statements.
</TABLE>
4
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US LIQUIDS INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In Thousands, Except Per Share Amounts)
(Unaudited)
<TABLE>
For the three months ended For the nine months ended
September 30, September 30,
--------------------------------- ---------------------------------
1996 1996 1997 1996 1996 1997
-------- ----------- -------- -------- ----------- --------
(Actual) (Pro Forma) (Actual) (Actual) (Pro Forma) (Actual)
(1) (1)
<S> <C> <C> <C> <C> <C> <C>
REVENUE $3,597 $8,649 $9,619 $10,406 $23,075 $27,313
COST OF OPERATIONS 3,070 5,450 6,088 8,931 15,583 17,411
------ ------ ------ ------- ------- -------
Gross Profit 527 3,199 3,531 1,475 7,492 9,902
SELLING, GENERAL, AND ADMINISTRATIVE
EXPENSES 231 747 1,138 721 2,734 3,454
MERGER & POOLING EXPENSES - - - - - 400
------ ------ ------ ------- ------- -------
INCOME FROM OPERATIONS 296 2,452 2,393 754 4,758 6,048
INTEREST EXPENSE 82 554 499 173 1,508 1,367
OTHER EXPENSE (INCOME) (5) (34) (138) (11) (64) 130
------ ------ ------ ------- ------- -------
INCOME BEFORE INCOME TAXES 219 1,932 2,032 592 3,314 4,551
------ ------ ------ ------- ------- -------
PROVISION FOR INCOME TAXES 90 792 713 243 1,359 1,746
------ ------ ------ ------- ------- -------
NET INCOME $ 129 $1,140 $1,319 $ 349 $ 1,955 $ 2,805
------ ------ ------ ------- ------- -------
------ ------ ------ ------- ------- -------
NET INCOME PER COMMON AND
COMMON EQUIVALENT SHARE .08 $ 0.14 $ 0.18 .21 $ 0.24 $ 0.42
------ ------ ------ ------- ------- -------
------ ------ ------ ------- ------- -------
WEIGHTED AVERAGE COMMON AND
COMMON EQUIVALENT SHARES OUTSTANDING 1,700 8,055 7,330 1,700 8,055 6,726
------ ------ ------ ------- ------- -------
------ ------ ------ ------- ------- -------
The accompanying notes are an integral part of these condensed consolidated financial statements.
</TABLE>
5
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US LIQUIDS INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In Thousands)
(Unaudited)
<TABLE>
Nine Months Ended September 30,
-------------------------------
1996 1997
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<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 349 $ 2,805
Adjustments to reconcile net income to net
cash provided by operating activities-
Depreciation and amortization 239 2,007
Gain on Sale of Assets - (27)
Deferred income tax provision (benefit) (42) 253
Changes in operating assets and liabilities-
Accounts receivable (48) 507
Inventories (14) (383)
Prepaid expenses and other current assets (6) 250
Other assets (54) (109)
Accounts payable and accrued liabilities 275 (1,334)
Closure, remediation and cell processing
reserves - 417
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Net cash provided by operating actvities 699 4,386
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CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to property, plant and equipment (1,459) (2,744)
Proceeds from sale of assets - 101
Net cash paid for acquisitions (16) -
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Net cash used in investing activities (1,475) (2,643)
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CASH FLOWS FROM FINANCING ACTIVITIES:
Payments on advances from stockholders (61) (465)
Proceeds from issuance of long-term obligations 1,018 198
Prinicipal payments on long-term obligations (189) (6,518)
Interest accrued on related-party notes payable 42 37
Preferred stock dividends paid - (16)
Payments to retire preferred stock - (10)
Initial Public Offering of common stock - 14,187
Distributions equal to the current income taxes of
the limited liability corporation - (171)
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Net cash provided by financing activities 810 7,242
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NET INCREASE IN CASH AND CASH EQUIVALENTS 34 8,985
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CASH AND CASH EQUIVALENTS AT
BEGINNING OF PERIOD 39 5,604
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CASH AND CASH EQUIVALENTS AT
END OF PERIOD $ 73 $14,589
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------- -------
SUPPLEMENTAL DISCLOSURES:
Cash paid for interest $ 161 $ 1,736
Cash paid for income taxes - 1,825
Assets acquired under capital leases - 46
The accompanying notes are an integral part of these condensed consolidated
financial statements.
</TABLE>
6
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U S LIQUIDS INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1. BASIS OF PRESENTATION
The unaudited condensed consolidated financial statements have been prepared
pursuant to the rules and regulations of the SEC. Certain information and
footnote disclosures, normally included in annual financial statements
prepared in accordance with generally accepted accounting principles, have
been condensed or omitted pursuant to those rules and regulations, although
the Company believes that the disclosures made are adequate to make the
information presented not misleading. In the opinion of management, all
adjustments, consisting only of normal recurring adjustments, necessary to
fairly present the financial position, results of operations and cash flows
with respect to the interim consolidated financial statements, have been
included. The results of operations for the interim periods are not
necessarily indicative of the results for the entire year.
2. PRO FORMA ADJUSTMENTS
The computation of net income per common and common equivalent share for the
three and nine months ended September 30, 1996 is based upon 1,700,000 shares
which represents the shares issued in connection with the acquisition of the
pooled companies.
The unaudited pro forma financial data present certain financial information
for the Company as adjusted for (i) the effects of the Campbell Wells
Acquisition as if it had occurred on January 1, 1996 and certain pro forma
adjustments to the historical financial statements of the Predecessor,
including adjusting depreciation expense to reflect purchase price
allocations, recording interest expense to reflect the outstanding debt due
to Sanifill, adjusting insurance expense consistent with the expenses for the
Company and the related income tax effects of these adjustments, and (ii) the
sale of 1,725,000 shares of Common Stock in the the Companies initial public
offering and the application of the net proceeds therefrom.
3. NET INCOME PER COMMON AND COMMON EQUIVALENT SHARE
The computation of pro-forma net income per common and common equivalent
share for the three and nine months ended September 30, 1996 is based upon
8,054,906 shares which include (i) 3,538,875 shares issued at the formation
of U S Liquids Inc., (ii) 1,700,000 shares issued to the stockholders of the
Mesa Companies and AWW in conjunction with their acquisitions, (iii)
1,725,000 shares issued in connection with the Companies initial public
offering and (iv) 1,091,031 shares representing the effect of outstanding
warrants and options to purchase common stock, using the treasury stock
method.
The computation of net income per common and common equivalent share for the
three months ended September 30, 1997 is based upon 7,330,423 shares which
include (i) 3,538,875 shares issued at the formation of U S Liquids Inc.,
(ii) 1,700,000 shares issued to stockholders of the Mesa Companies and AWW in
conjunction with their acquisitions, (iii) the weighted average portion of
1,725,000 shares issued in connection with the Companies initial public
offering, and (iv) 1,333,593 shares representing the effect of outstanding
warrants and options to purchase common stock, using the treasury stock
method.
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The computation of net income per common and common equivalent share for the
nine months ended September 30, 1997 is based upon 6,726,023 shares which
include (i) 3,538,875 shares issued at the formation of U S Liquids Inc.,
(ii) 1,700,000 shares issued to stockholders of the Mesa Companies and AWW in
conjunction with their acquisitions, (iii) the weighted average portion of
1,725,000 shares issued in connection with the Companies initial public
offering, and (iv) 1,229,287 shares representing the effect of outstanding
warrants and options to purchase common stock, using the treasury stock
method.
Fully diluted net income per common and common equivalent share is equal to
primary earnings per share for all periods presented.
NEW ACCOUNTING PRONOUNCEMENT
In February 1997, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards (SFAS) No.128, "Earnings Per Share." SFAS
No. 128 revises the methodology to be used in computing earnings per share
(EPS) such that the computations required for primary and fully diluted EPS
are to be replaced with "basic" and "diluted" EPS. Basic EPS is computed by
dividing net income by the weighted average number of shares of common stock
outstanding during the year. Diluted EPS is computed in the same manner as
fully diluted EPS, except that, among other changes, the average share price
for the period is used in all cases when applying the treasury stock method
to potentially dilutive outstanding options.
The Company will adopt SFAS No. 128 effective December 15, 1997, and will
restate EPS for all periods presented. The company anticipates that the
amounts reported for basic EPS for the unaudited pro forma nine months ended
September 30, 1996 and the unaudited nine months ended September 30, 1997
will be $.028 and $0.51. The Company anticipates that the amounts reported
for diluted EPS for the unaudited pro forma nine months ended September 30,
1996 and the unaudited nine months ended September 30, 1997 will be $0.24 and
$0.42.
4. INVENTORIES
Inventories are stated at the lower of cost or market and, at December 31,
1996 and September 30, 1997, consisted of finished grease products of
$265,000 and $610,105 respectively, and unprocessed grease of $74,000 and
$111,444 respectively. Cost is determined using the first-in, first-out
(FIFO) method.
8
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
THE FOLLOWING DISCUSSION SHOULD BE READ IN CONJUNCTION WITH THE
COMPANY'S UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS AND THE RELATED NOTES
THERETO INCLUDED ELSEWHERE IN THIS REPORT.
OVERVIEW
The Company is engaged in two areas of the industrial and commercial
wastewater segment of the nonhazardous liquid waste industry: the
treatment and disposal of nonhazardous commercial waste ("NCW"), including
the processing of NCW to recover finished products, and the treatment and
disposal of nonhazardous oilfield waste ("NOW"). On December 13, 1996, the
Company acquired its NOW treatment and disposal operations from Campbell
Wells, L.P. and Campbell Wells NORM, L.P. (referred to as the
"Predecessor" to the extent of the operations so acquired), which are
wholly-owned subsidiaries of Sanifill, Inc. ("Sanifill"). In June 1997,
the Company acquired Mesa Processing, Inc., T&T Grease Service, Inc. and
Phoenix Fats & Oils, Inc. (the "Mesa Companies") and American WasteWater,
Inc. ("AWW") in mergers which were accounted for under the
pooling-of-interests method of accounting. The following discussion
addresses the historical results of operations and financial condition of
the Company as shown in the unaudited consolidated financial statements
for the three-month and nine-month periods ended September 30, 1996 and
1997 and, to the extent necessary to better analyze the Company's
consolidated results of operations, the pro forma combined operating
results of the Company for the three-month and nine-month periods in 1996,
which include the historical results of operations of the Predecessor.
On October 1, 1997, the Company acquired Re-Claim Environmental, Inc.
("Re-Claim Texas"), Re-Claim Environmental Louisiana LLC ("Re-Claim LA")
and A&B Enterprises, Inc. ("A&B"). Re-Claim Texas was acquired in exchange
for 241,410 shares of common stock. The Company purchased Re-Claim LA for
approximately $2.5 million and agreed to pay additional amounts in 1998
through 2002 if Re-Claim LA's pre-tax earnings exceed predetermined
levels. The Company purchased A&B for $750,000. Re-Claim Texas treats NCW
in the Houston market while Re-Claim LA provides NCW treatment and
disposal services at a facility located at the Port of Shreveport-Bossier
on the Red River in Louisiana. A&B collects used cooking oil and other
food processing residuals in the Dallas-Fort Worth area. The acquisition
of Re-Claim Texas will be accounted for under the pooling-of-interests
method of accounting while the other two acquisitions will be treated as
9
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purchases. The results of operations of these three companies are not
included in the Company's operating results for the periods discussed.
Revenues from NCW operations are derived from two principal sources:
the sale of finished products (fats, oils and feed proteins processed and
recovered from NCW) and tipping and collection fees received for treating
and disposing of NCW. Prices of finished products fluctuate approximately
in proportion to the prices of such products as reported by commodity
pricing services. Finished products are sold primarily to customers in
Mexico. Because substantially all of the Company's NCW operations are
conducted in the United States and foreign sales are denominated and paid
in U.S. dollars, the Company is generally not subject to direct foreign
exchange gains and losses. Although such currency risk is borne by the
Company's customers, foreign exchange rate fluctuations could affect the
Company's business by making its products more expensive. The Company does
not believe that fluctuations in the Mexican peso and other foreign
currencies have materially impacted its business in the past. NCW tipping
and collection fees charged to customers vary per gallon by waste stream
according to constituents of the waste, expenses associated with treating
the waste and competitive factors.
NOW revenues are derived from fees charged to customers for treating
and disposing of NOW. These fees are based on the volume in barrels of
waste delivered by a customer and the composition of the waste. Currently,
such fees range from $.40 per barrel for salt water to $10.25 per barrel
for oil-based drilling fluids; however, as of July 31, 1997, the market
price for treatment and disposal of NOW consisting primarily of oil,
grease, chlorides and heavy metals found in water-based and oil-based
drilling fluids ranged from $6.75 to $10.25 per barrel, depending upon the
makeup of the NOW. Accordingly, the Company believes that total NOW
revenues are a better indicator of performance than is the average fee
charged. When waste is unloaded at a given site, the Company recognizes
the related revenue and records a reserve for the estimated amount of
expenses to be incurred with the treatment of the NOW in order to match
revenues with their related costs. As treatment occurs, generally over
nine to twelve months, the reserve is released as expenses are incurred.
Newpark Resources, Inc. ("Newpark") is the largest customer of the
Company's NOW operations, and accounted for approximately 43% of NOW
revenues for the nine months ending September 30, 1997. Under the terms of
a disposal agreement with Newpark (the "Disposal Agreement"), Newpark is
obligated to deliver to the Company annually the lesser of (i) one-third
of the barrels of NOW that Newpark receives for treatment and disposal in
a designated territory and (ii) 1,850,000 barrels of NOW, in each case
excluding saltwater. The contract price is $5.50 per barrel, adjustable
semi-annually beginning June 30, 1998, with a price floor of $5.50.
Although the contract price is lower than the price that the Company could
obtain in the open market, Newpark's delivery obligations allow the
Company to eliminate virtually all marketing and transfer expenses on NOW
delivered under the Disposal Agreement. Accordingly, the Company's gross
margin on this NOW volume generally is lower than the gross margin on NOW
volume from customers other than Newpark, but the Company believes that
operating margins on NOW volume from Newpark and other customers are
comparable. The Company expects a disparity between
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the contract price and market price to continue for the duration of the
Disposal Agreement. There is no absolute floor on the variable minimum
delivery requirements under the Disposal Agreement and, therefore, a
significant reduction in the volume of NOW generated in the territory or
in Newpark's market share could materially adversely affect the Company's
results of operations and its liquidity. Due to certain noncompete
restrictions with Newpark related to offshore-generated NOW, the Company
intends to focus its future marketing efforts toward inland generators of
NOW. The Company believes that fees charged for services to inland
generators will exceed those under the Disposal Agreement and, if its
marketing efforts are successful, could improve both gross and operating
margins.
The Company anticipates that the NCW operations will represent a
growing share of the Company's business and that the internal growth of
the NCW operations will continue at a faster rate than the internal growth
of NOW operations. Internal growth from NCW operations is expected to
continue because of enactment of state-wide "full pump" regulations in
Texas as well as recent and ongoing expansions of the Company's NCW
processing and treatment facilities. In addition, the Company expects to
focus its acquisition activity primarily in NCW-related businesses.
RESULTS OF OPERATIONS
THREE MONTHS ENDED SEPTEMBER 30, 1996 AND 1997
REVENUES. Revenues increased to $9.6 million in the third quarter of
1997 as compared to $3.6 million in the third quarter of 1996. NOW
operations are not included in results of operations for the third quarter
of 1996. On a pro forma basis to reflect NOW operations in both periods,
revenues for the third quarter of 1997 increased by 11.2% from pro forma
revenues of $8.6 million in the third quarter of 1996. Of total revenues
in the third quarter of 1997, NOW operations contributed 54.3%, NCW
finished product sales contributed 34.9% and NCW tipping and collection
fees contributed 10.8%. During the third quarter of 1996, pro forma
revenues were derived 58.4% from NOW operations, 35.2% from finished
product sales and 6.4% from NCW treatment and disposal (tipping and
collection fees).
Revenues for the third quarter of 1997 from NCW operations increased
by 22.2% from the third quarter of 1996. Revenues from the sale of
finished products increased by 10.2%, while revenues from NCW treatment
and disposal increased by 88.2%. The average price per pound for finished
product sales decreased by 16.0%, which was offset by a 31.3% increase in
volume. The lower average price per pound and the increased volume in the
third quarter of 1997 are due in part to the processing of lower-priced,
higher-margin products from the South Texas processing facility which was
purchased in September 1996. In addition, commodity prices were generally
lower in the third quarter of 1997 as compared to the third quarter of
1996. The increase in NCW treatment and disposal revenues was attributable
to a 190.4% increase in volume, most of which occurred at the Houston
facility, reflecting the expanded permitted volume and waste capabilities
of the facility and implementation of the "full pump" regulations in
Houston.
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Revenues for the third quarter of 1997 from NOW operations increased
by 3.4% from pro forma revenues during the third quarter of 1996. The
Company received 1,117,000 barrels of NOW for treatment in the third
quarter of 1997, a 3.1% decrease from the 1,153,000 barrels received on a
pro forma basis during the third quarter of 1996, reflecting reduced
deliveries by Newpark under the Disposal Agreement. Pro forma revenues in
the 1996 and 1997 periods are not comparable because 1996 revenues from
offshore-generated NOW reflect intercompany transfer prices established
by Sanifill between its transfer station operations and the Predecessor
while such revenues in 1997 reflect the price paid by Newpark under the
Disposal Agreement. For the year, the Company expects total NOW revenues
to be equal to or slightly higher than 1996 NOW revenue on a pro forma
basis.
GROSS MARGINS. The Company's gross margin increased to 36.7% in the
third quarter of 1997 from 14.7% in the third quarter of 1996, reflecting
the higher margin contribution of the NOW operations in the 1997 period.
On a pro forma basis, gross margin in the third quarter of 1996 was 37.0%.
NOW operations contributed 80.0% and 84.3% of the Company's actual and pro
forma gross profits during the third quarters of 1997 and 1996,
respectively.
Gross margin in the NCW operations increased from 14.7% in the third
quarter of 1996 to 16.1% in the third quarter of 1997. Improvement in the
gross margin in NCW operations reflects the increased share of
higher-margin NCW treatment and disposal operations. Gross margin on
finished products improved due to relatively lower product costs and
increased output of higher margin blends of finished products from the
South Texas facility. The increase in the gross margin on NCW treatment
and disposal was attributable to increased throughput at the Houston
facility. Pro forma gross margin in the NOW operations decreased from
56.0% in the third quarter of 1996 to 54.1% in the third quarter of 1997
due primarily to increased benefits costs and facility expenses.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and
administrative expenses increased to $1,138,000 in the third quarter of
1997 from $231,000 in the third quarter of 1996, as a result of the
addition of the NOW operations in December 1996. Pro forma selling,
general and administrative expenses increased by $391,000 from 8.6% of pro
forma revenues in the third quarter of 1996 to 11.8% of pro forma revenues
in the third quarter of 1997, primarily due to additional personnel and
office expense at the corporate headquarters.
INTEREST AND OTHER EXPENSES. Net interest and other expenses
increased to $361,000 in the third quarter of 1997 from $77,000 in the
third quarter of 1996, primarily as a result of interest expense on debt
incurred in acquiring the NOW division.
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NINE MONTHS ENDED SEPTEMBER 30, 1996 AND 1997
REVENUES. Revenues increased to $27.3 million in the first nine
months of 1997 as compared to $10.4 million in the first nine months of
1996. NOW operations are not included in results of operations in the 1996
period. On a pro forma basis to reflect NOW operations in both periods,
revenues for the first nine months of 1997 increased by 18.4% from pro
forma revenues of $23.1 million in the first nine months of 1996. Of total
revenues in the first three quarters of 1997, NOW operations contributed
55.5%, finished product sales contributed 33.7% and NCW tipping and
collection fees contributed 10.8%. During the first three quarters of
1996, pro forma revenues were derived 54.9% from NOW operations, 38.6%
from finished product sales and 6.5% from NCW treatment and disposal
(tipping and collection fees). Re-Claim Texas, Re-Claim LA and A&B
collectively generated revenues of approximately $5.0 million in 1996.
Accordingly, the Company expects that the relative revenue contribution
from NCW treatment and disposal will increase in future periods.
Revenues for the first nine months of 1997 from NCW operations
increased by 16.9% from the first nine months of 1996. Revenues from the
sale of finished products increased by 3.3%, while revenues from NCW
treatment and disposal increased by 97.4%. The average price per pound for
finished product sales decreased by 9.6%, which was offset by a 14.3%
increase in volume. The lower average price per pound is the result of
fluctuating commodity prices during the second and third quarters of 1997
which were below the market prices experienced in 1996. The lower average
price per pound and the increased volume in the first nine months of 1997
also are attributable to throughput from the South Texas processing
facility. The increase in NCW treatment and disposal revenues was
attributable to a 199.8% increase in volume, most of which occurred at the
Houston facility, reflecting the expanded permitted volume and waste
capabilities of the facility and implementation of the "full pump"
regulations in Houston. The 1997 period also includes a full nine months
of collection revenues from a NCW collection business acquired by the
Company in March 1996.
Revenues for the first nine months of 1997 from NOW operations
increased by 19.6% from pro forma revenues during the first nine months of
1996. The Company received 3,361,000 barrels of NOW for treatment in the
first nine months of 1997, a 24.4% increase over the 2,702,000 barrels
received on a pro forma basis during the first nine months of 1996,
primarily due to a large one-time delivery of NOW from a blown-out well in
the second quarter and increased deliveries of inland-generated NOW.
Off-shore generated NOW comprised 36% of volume during 1997 versus 52% of
volume during 1996, reflecting increased in-land drilling activity in 1997.
GROSS MARGINS. The Company's gross margin increased to 36.3% in the
first three quarters of 1997 from 14.2% in the first three quarters of
1996, reflecting the higher margin contribution of the NOW operations in
the 1997 period. On a pro forma basis, gross margin in the first nine
months of 1996 was 32.5%. NOW operations contributed 77.8% and 80.2% of
the Company's actual and pro forma gross profits during the first nine
months of 1997 and 1996, respectively.
13
<PAGE>
Gross margin in the NCW operations increased from 14.2% in the first
nine months of 1996 to 18.1% in the first nine months of 1997. Improvement
in the gross margin in NCW operations reflects the increased share of
higher-margin NCW treatment and disposal operations. Further improvements
in gross margin of the NCW operations are expected as a result of the
acquisitions of Re-Claim Texas and Re-Claim LA. Gross margin on finished
products improved due to relatively lower product costs. The increase in
the gross margin on NCW treatment and disposal was attributable to
increased throughput at the Houston facility. Pro forma gross margin in
the NOW operations increased from 47.3% in the first nine months of 1996
to 50.8% in the first nine months of 1997 due primarily to increased
volumes as well as reductions in personnel costs as a percentage of
revenue.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and
administrative expenses increased to $3,854,000 in the first nine months
of 1997 from $721,000 in the first nine months of 1996, as a result of the
addition of the NOW operations in December 1996. Pro forma selling,
general and administrative expenses increased by $1,120,000 from 11.8% of
pro forma revenues in the first nine months of 1996 to 14.1% of pro forma
revenues in the first nine months of 1997, primarily due to $400,000 of
nonrecurring expenses in the second quarter associated with the
acquisitions of the Mesa Companies and AWW and additional personnel and
office expense at the corporate headquarters. The Company expects selling,
general and administrative expenses to increase in relation to revenues
due to additional expenses associated with being a public company.
INTEREST AND OTHER EXPENSES. Net interest and other expenses
increased to $1,497,000 in the first nine months of 1997 from $162,000 in
the first nine months of 1996, primarily as a result of interest expense
on debt incurred in acquiring the NOW division.
LIQUIDITY AND CAPITAL RESOURCES
The Company had net working capital of $11,769,000 at September 30,
1997, compared to net working capital of $137,000 at December 31, 1996.
Improvement in liquidity during the nine months reflects $4.4 million of
net cash generated from operations during the period and completion of the
Company's initial public offering in August 1997. Of the $14.6 million
cash included in net working capital at the end of the third quarter, the
Company used approximately $3.7 million after the end of the quarter to
purchase and/or pay assumed indebtedness of Re-Claim Texas, Re-Claim LA
and A&B.
The Company's capital requirements for its continuing operations
consist of its general working capital needs, scheduled principal payments
on its debt obligations and capital leases, and planned capital
expenditures. The Company anticipates that its net working capital
requirements will increase by approximately $1 million during 1997 due to
internal growth of its business.
At the end of the third quarter, approximately $4.6 million of
principal payments on debt obligations and capital leases were payable
during the next twelve months. As a result
14
<PAGE>
of the acquisitions of Re-Claim Texas and Re-Claim LA, the Company
incurred additional short-term debt of approximately $75,000.
Capital expenditures for the next four quarters are budgeted at
approximately $4.5 million. Of this amount, approximately $2.5 million is
budgeted to be invested in equipment. The remaining amount is budgeted to
be invested in the Company's NCW operations to increase capacity and
comply with regulatory requirements.
At September 30, 1997, the Company had a $2.5 million reserve to
provide for the cost of future closures of landfarms. The amount of this
unfunded reserve is based on the estimated total cost to the Company of
closing the facilities as calculated in accordance with the applicable
regulations. As required by applicable regulatory agencies, the company
maintains financial assurance in the form of a letter of credit and/or
bonds to assure that all waste will be treated and the facilities closed
appropriately.
The Company expects that the remaining net proceeds from its initial
public offering, together with the cash flow which is expected to be
generated by operations, will be sufficient to provide the Company's
capital requirements for continuing operations for at least the next 12
months.
The Company plans to pursue acquisitions of businesses in the
nonhazardous liquid waste industry, and it is anticipated that additional
capital will be required to pursue the Company's acquisition strategy. The
Company anticipates using shares of its Common Stock for all or a
substantial part of the consideration to be paid for future acquisitions.
In addition, the Company may seek to raise additional capital through
public or private debt or equity financing. In particular, the Company
currently is negotiating a $50 million line of credit for general working
capital purposes and to finance, in whole or in part, future acquisitions.
The availability of these capital sources will depend upon prevailing
market conditions, interest rates and the then existing financial position
of the Company. Any such public or private debt must comply with the
Company's agreements with Sanifill. In the event that the Common Stock
does not maintain a sufficient market value or potential acquisition
candidates are unwilling to accept Common Stock as part of the
consideration for the sale of their businesses, the Company would be
required to utilize more of its cash resources in order to continue its
acquisition program. At the same time, the Company may be unable to raise
additional capital due to market conditions. As a result, the timing of
acquisitions over the longer term can be expected to be affected by
prevailing market conditions. In addition, if the Company were unable to
secure the capital necessary to carry out its acquisition program, the
implementation of the Company's growth strategy would be adversely
affected.
15
<PAGE>
FORWARD LOOKING STATEMENTS
Statements of the Company's or management's intentions, beliefs,
anticipations, expectations or similar statements concerning future events
contained in this report constitute "forward looking statements" as
defined in the Private Securities Litigation Reform Act of 1995. As with
any future event, there can be no assurance that the events described in
forward looking statements made in this report will occur or that the
results of future events will not vary materially from those described
herein. Important factors that could cause the Company's actual
performance and operating results to differ materially from the forward
looking statements include, among other factors, changes in the regulatory
environment in which the Company operates, changes in the level economic
activity in markets served by the Company, the availability of capital to
support the Company's growth strategy, the ability of the Company to
execute it business plan, changes in the level of exploration and
production of oil and gas, particularly in the Gulf Coast region, changes
in the level of competition faced by the Company in each of its markets,
the loss of business or inability to collect payment from one or more
significant customers and the adverse resolution of pending litigation
affecting the Company's landfarms.
PART II-OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
As previously reported, three lawsuits are pending against Campbell
Wells concerning the Company's Landfarms in Louisiana. In the first
lawsuit, the claims of 10 of the approximately 300 plaintiffs are
scheduled for trial on May 12, 1998. The second lawsuit, which seeks
unspecified monetary damages by one plaintiff, also is scheduled for trial
on May 12, 1998. Reference is made to the Company's registration statement
no. 333-30065 for a description of litigation pending against or
concerning the property of the Company.
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
SALES OF UNREGISTERED SECURITIES.
On August 19, 1997, the Company granted to Michael P. Lawlor an
option to purchase 300,000 shares of Common Stock at $9.50 per share under
the Company's 1996 Incentive Stock Option Plan. Such option was issued in
a private transaction exempt from the registration requirements of the
Securities Act pursuant to Section 4(2) thereof.
On August 25, 1997, the Company issued to each of Van Kasper &
Company and Sanders Morris Mundy Inc. a warrant to purchase 56,250 shares
of Common Stock at an exercise price of $11.40 per share as partial
consideration for their services as managing underwriters of the Company's
initial public offering. Such warrants were issued in a private
transaction exempt from the registration requirements of the Securities
Act pursuant to Section 4(2) thereof.
16
<PAGE>
On October 1, 1997, the Company acquired Re-Claim Environmental, Inc.
in exchange for 241,480 shares of Common Stock, of which an aggregate of
168,987 shares were issued to John E. Tuma, Duane F. Herbst, A. Travis
Campbell, Russell Reichert, Kenneth B. Holmes, R. L. Smothers and Rainbow
Investment Company in an unregistered transaction. Such shares were issued
in a private transaction exempt from the registration requirements of the
Securities Act pursuant to Section 4(2) thereof.
USE OF PROCEEDS. On August 19, 1997, registration statement no.
333-30065 was declared effective by the Securities and Exchange
Commission. The registration statement registered 1,725,000 shares of
Common Stock (including 225,000 shares to cover over-allotments) for sale
by the Company at an initial offering price of $9.50 per share. Van Kasper
& Company and Sanders Morris Mundy Inc. served as the managing
underwriters in the offering. Gross proceeds from the sale of 1,725,000
shares at $9.50 per share and certain expenses incurred by the Company in
the offering are as follows:
Description
-----------
Gross proceeds $16,387,500
Underwriting discount $1,188,094
Underwriters' expenses 162,750
Other expenses(1) 849,656
Total expenses(2) ---------- 2,200,500
-----------
Net proceeds $14,187,000
- -------------------------
(1) Other expenses includes some estimated amounts.
(2) All expenses were paid to or for the account of persons other than officers,
directors and stockholders of the Company.
As of November 1, 1997, the net proceeds from the offering have been
used by the Company as follows:
Description
Payment of AWW debt(1) $ 1,635,000
Payment of Mesa debt(2) 3,107,000
Acquisition of Re-Claim Texas 383,000
Acquisition of Re-Claim LA 2,766,000
Acquisition of A&B 600,000
Miscellaneous 35,000
Temporary investments(3) 5,661,000
-----------
Total $14,187,000
- -------------------------
(1) Includes approximately $650,000 paid to the former stockholders of AWW,
of which approximately $341,000 was paid to William H. Wilson, Jr., a key
employee of the Company. Also includes approximately $985,000 paid to an
unaffiliated lender on a debt guaranteed by Mr. Wilson.
(2) Includes approximately $241,000 paid to the brother-in-law of Thomas B.
Blanton, an officer and director of the Company. Also includes approximately
$114,000 of debt which
17
<PAGE>
was owed personally by Mr. Blanton and secured by real estate to be
transferred to the Company.
(3) Funds are invested in commercial paper and short term bonds.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
Exhibit
No. Description
- ------- -----------
2.1 Agreement and Plan of Reorganization, dated September 30, 1997,
among U S Liquids Inc., U S Liquids/Reclaim Acquisition Corporation,
Re-Claim Environmental, Inc., John E. Tuma, Duane F. Herbst,
A. Travis Campbell, Russell Reichert, Kenneth B. Holmes, R. L. Smothers
and Rainbow Investment Company in the acquisition of Re-Claim
Environmental, Inc.
2.2 Purchase of Membership Interest Agreement, dated September 30, 1997,
among US Liquids Inc., Re-Claim Environmental Louisiana LLC, John E.
Tuma and Reyncor Industrial Alcohol, Inc.
2.3 Purchase and Sale of Assets Agreement, dated September 30, 1997, among
T&T Grease Service, Inc., A&B Enterprises, Inc. and Ernest L. McCombs
3.1 (1) Second Amended and Restated Certificate of Incorporation of
US Liquids Inc.
3.2 (1) Amended and Restated Bylaws of US Liquids Inc.
10.28(1) Financial Advisory Agreement, dated May 15, 1997, between US Liquids
Inc. and Sanders Morris Mundy Inc. and supplemental letter dated
July 10, 1997
10.33(1) Warrant Agreement, dated August 25, 1997, among US Liquids Inc.,
Van Kasper & Company and Sanders Morris Mundy Inc.
10.40(1) Employment Agreement, dated July 2, 1997, between US Liquids Inc.
and Michael P. Lawlor
10.42(1) Amendment No. 1 to Financial Advisory Agreement, dated August 18,
1997, between US Liquids Inc. and Sanders Morris Mundy Inc.
27.1 Financial Data Schedule
- -------------------------
(1) Incorporated by reference from the same numbered exhibit to Registration
Statement No. 333-30065, as amended.
(b) The Company did not file any reports on Form 8-K during the quarter ended
September 30, 1997.
18
<PAGE>
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 thereunto duly authorized.
US LIQUIDS INC.
---------------
(Registrant)
Date: November 14, 1997 /s/ Michael P. Lawlor
---------------------
Michael P. Lawlor,
Chairman and CEO
Date: November 14, 1997 /s/ Earl J. Blackwell
---------------------
Earl J. Blackwell,
Chief Financial Officer
19
<PAGE>
Exhibit 2.1
AGREEMENT AND PLAN OF REORGANIZATION
AMONG
U.S. LIQUIDS/RECLAIM ACQUISITION CORPORATION
U S LIQUIDS INC.
AND
RE-CLAIM ENVIRONMENTAL, INC.
AND
JOHN E. TUMA, DUANE S. HERBST, A. TRAVIS CAMPBELL,
RUSSELL REICHERT, KENNETH B. HOLMES, JR.,
R.L. SMOTHERS, AND RAINBOW INVESTMENTS COMPANY
<PAGE>
TABLE OF CONTENTS
SECTION PAGE
- ------- ----
1. THE MERGER; DELIVERY OF SHARES; ENDORSEMENT OF COMPANY STOCK . . . . . . 2
1.1 ARTICLES OF MERGER. . . . . . . . . . . . . . . . . . . . . . . . . 2
1.2 ARTICLES OF INCORPORATION AND BYLAWS. . . . . . . . . . . . . . . . 2
1.3 CAPITALIZATION. . . . . . . . . . . . . . . . . . . . . . . . . . . 3
1.4 EFFECT OF MERGER. . . . . . . . . . . . . . . . . . . . . . . . . . 3
1.5 DELIVERY OF SHARES. . . . . . . . . . . . . . . . . . . . . . . . . 4
1.6 ENDORSEMENT OF COMPANY STOCK. . . . . . . . . . . . . . . . . . . . 4
2. CONVERSION AND EXCHANGE OF STOCK . . . . . . . . . . . . . . . . . . . . 4
2.1 CONVERSION OF STOCK . . . . . . . . . . . . . . . . . . . . . . . . 5
2.2 AGREED VALUE OF PARENT STOCK. . . . . . . . . . . . . . . . . . . . 5
2.3 ASSUMPTION OF DEBT. . . . . . . . . . . . . . . . . . . . . . . . . 5
2.4 ADJUSTMENT TO PURCHASE PRICE. . . . . . . . . . . . . . . . . . . . 6
3. TITLE ASSURANCE. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
3.1 OWNERS TITLE POLICY . . . . . . . . . . . . . . . . . . . . . . . . 7
3.2 PERMITTED ENCUMBRANCES. . . . . . . . . . . . . . . . . . . . . . . 8
3.3 SURVEY. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
4. CLOSING. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
5. REPRESENTATIONS AND WARRANTIES OF STOCKHOLDERS AND COMPANY.. . . . . . . 9
5.1 ORGANIZATION; AUTHORITY . . . . . . . . . . . . . . . . . . . . . . 10
5.2 STOCK OWNERSHIP; ABSENCE OF ADVERSE CLAIMS. . . . . . . . . . . . . 10
5.3 CAPITALIZATION. . . . . . . . . . . . . . . . . . . . . . . . . . . 10
5.4 PREDECESSOR ENTITIES; TRADE NAMES . . . . . . . . . . . . . . . . . 11
5.5 NO SUBSIDIARIES . . . . . . . . . . . . . . . . . . . . . . . . . . 12
5.6 FINANCIAL STATEMENTS. . . . . . . . . . . . . . . . . . . . . . . . 12
5.7 NON-BALANCE SHEET LIABILITIES . . . . . . . . . . . . . . . . . . . 13
5.8 ACCOUNTS RECEIVABLE . . . . . . . . . . . . . . . . . . . . . . . . 14
5.9 PROPRIETARY RIGHTS; ENVIRONMENTAL DOCUMENTS . . . . . . . . . . . . 14
5.10 REAL PROPERTY; REPORTING. . . . . . . . . . . . . . . . . . . . . . 15
5.11 PERSONAL PROPERTY; NEW PROJECTS . . . . . . . . . . . . . . . . . . 17
5.12 CONTRACTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
5.13 INSURANCE POLICIES. . . . . . . . . . . . . . . . . . . . . . . . . 19
5.14 DIRECTORS, OFFICERS AND EMPLOYEES; COMPENSATION . . . . . . . . . . 19
5.15 EMPLOYEE PLANS. . . . . . . . . . . . . . . . . . . . . . . . . . . 19
5.16 COMPLIANCE WITH ERISA . . . . . . . . . . . . . . . . . . . . . . . 20
5.17 COMPLIANCE WITH LAW; NO CONFLICTS . . . . . . . . . . . . . . . . . 21
5.18 TAXES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
5.19 LITIGATION. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
<PAGE>
SECTION PAGE
- ------- ----
5.20 ABSENCE OF PRICE RENEGOTIATION CONTRACTS. . . . . . . . . . . . . . 23
5.21 CONDUCT OF BUSINESS SINCE BALANCE SHEET DATE. . . . . . . . . . . . 23
5.22 BANK ACCOUNTS; DEPOSITORIES . . . . . . . . . . . . . . . . . . . . 24
5.23 HAZARDOUS MATERIALS . . . . . . . . . . . . . . . . . . . . . . . . 25
5.24 STORAGE TANKS . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
5.25 ABSENCE OF CERTAIN BUSINESS PRACTICES . . . . . . . . . . . . . . . 26
5.26 COMPLETE DISCLOSURE . . . . . . . . . . . . . . . . . . . . . . . . 26
6. REPRESENTATIONS AND WARRANTIES OF BUYER AND PARENT.. . . . . . . . . . . 27
6.1 CORPORATE ORGANIZATION. . . . . . . . . . . . . . . . . . . . . . . 27
6.2 CORPORATE AUTHORITY . . . . . . . . . . . . . . . . . . . . . . . . 27
6.3 NO CONFLICTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
6.4 BINDING AGREEMENT . . . . . . . . . . . . . . . . . . . . . . . . . 28
6.5 SEC FILINGS AND FINANCIAL INFORMATION . . . . . . . . . . . . . . . 28
6.6 FINANCIAL INFORMATION . . . . . . . . . . . . . . . . . . . . . . . 28
6.7 TAXATION. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
6.8 PARENT STOCK. . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
6.9 FINANCIAL AND BUSINESS. . . . . . . . . . . . . . . . . . . . . . . 29
7. COVENANTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
7.1 ACCESS TO LAND AND RECORDS. . . . . . . . . . . . . . . . . . . . . 29
7.2 COMPANY ACTIVITIES PRIOR TO CLOSING . . . . . . . . . . . . . . . . 30
7.3 PROHIBITED ACTIVITIES PRIOR TO CLOSING. . . . . . . . . . . . . . . 31
7.4 POOLING OF INTERESTS; REORGANIZATION. . . . . . . . . . . . . . . . 32
7.5 CONTACT WITH GOVERNMENT OFFICIALS . . . . . . . . . . . . . . . . . 32
8. CONDITIONS PRECEDENT TO OBLIGATIONS OF COMPANY AND STOCKHOLDERS. . . . . 33
8.1 REPRESENTATIONS AND WARRANTIES. . . . . . . . . . . . . . . . . . . 33
8.2 CONSENTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
8.3 NO ADVERSE PROCEEDING . . . . . . . . . . . . . . . . . . . . . . . 33
8.4 NONCOMPETITION AGREEMENT. . . . . . . . . . . . . . . . . . . . . . 33
8.5 TEXLINE NOTES . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
8.6 PARENT STOCK. . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
8.7 ANCILLARY DOCUMENTS . . . . . . . . . . . . . . . . . . . . . . . . 34
8.8 CERTAIN PERSONALTY. . . . . . . . . . . . . . . . . . . . . . . . . 34
8.9 RULE 144. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
9. CONDITIONS PRECEDENT TO OBLIGATIONS OF BUYER AND PARENT. . . . . . . . . 35
9.1 REPRESENTATIONS AND WARRANTIES. . . . . . . . . . . . . . . . . . . 35
9.2 COVENANTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
-2-
<PAGE>
SECTION PAGE
- ------- ----
9.3 NO ADVERSE PROCEEDING . . . . . . . . . . . . . . . . . . . . . . . 35
9.4 GENERAL RELEASE . . . . . . . . . . . . . . . . . . . . . . . . . . 36
9.5 CONSENTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
9.6 RESIGNATIONS. . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
9.7 GOOD STANDING CERTIFICATES. . . . . . . . . . . . . . . . . . . . . 36
9.8 UPDATED AGREEMENTS. . . . . . . . . . . . . . . . . . . . . . . . . 36
9.9 NONCOMPETITION AGREEMENT. . . . . . . . . . . . . . . . . . . . . . 36
9.10 DELIVERY OF COMPANY STOCK . . . . . . . . . . . . . . . . . . . . . 36
9.11 ENVIRONMENTAL REVIEW. . . . . . . . . . . . . . . . . . . . . . . . 37
9.12 TRANSFERABILITY OF PERMITS. . . . . . . . . . . . . . . . . . . . . 37
9.13 GENERAL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
10. POST CLOSING COVENANTS.. . . . . . . . . . . . . . . . . . . . . . . . . 37
10.1 TAXES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
10.2 POST CLOSING BALANCE SHEET . . . . . . . . . . . . . . . . . . . . 38
10.3 CLOSING DATE ACTIONS . . . . . . . . . . . . . . . . . . . . . . . 39
10.4 REGISTRATION OF PARENT STOCK . . . . . . . . . . . . . . . . . . . 39
10.5 TRADE PAYABLES . . . . . . . . . . . . . . . . . . . . . . . . . . 40
10.6 RELEASE OF PERSONAL GUARANTIES . . . . . . . . . . . . . . . . . . 40
10.7 FURTHER ASSURANCE. . . . . . . . . . . . . . . . . . . . . . . . . 40
10.8 ANNOUNCEMENT OF EARNINGS . . . . . . . . . . . . . . . . . . . . . 41
10.9 TRANSITION . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
10.10 SURVIVAL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
10.11 ENVIRONMENTAL REPORTS. . . . . . . . . . . . . . . . . . . . . . . 42
11. POOLING ACCOUNTING . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
11.1 RESTRICTIONS ON RESALE; LEGENDS. . . . . . . . . . . . . . . . . . 42
11.2 INDEMNIFICATION. . . . . . . . . . . . . . . . . . . . . . . . . . 43
12. INDEMNIFICATION. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
12.1 SURVIVAL OF REPRESENTATIONS, WARRANTIES AND COVENANTS;
LIMITATION OF LIABILITY. . . . . . . . . . . . . . . . . . . . . . 43
12.2 GENERAL INDEMNIFICATION BY STOCKHOLDERS. . . . . . . . . . . . . . 44
12.3 SPECIFIC INDEMNIFICATION BY STOCKHOLDERS . . . . . . . . . . . . . 45
12.4 INDEMNIFICATION BY PARENT AND THE SURVIVING CORPORATION. . . . . . 45
12.5 PROCEDURE FOR INDEMNIFICATION WITH RESPECT TO THIRD PARTY CLAIMS . 46
13. TERMINATION OF AGREEMENT.. . . . . . . . . . . . . . . . . . . . . . . . 48
13.1 TERMINATION BY BUYER . . . . . . . . . . . . . . . . . . . . . . . 48
13.2 TERMINATION BY STOCKHOLDERS. . . . . . . . . . . . . . . . . . . . 49
13.3 TERMINATION. . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
-3-
<PAGE>
SECTION PAGE
- ------- ----
14. NONDISCLOSURE OF CONFIDENTIAL INFORMATION. . . . . . . . . . . . . . . . 49
14.1 NONDISCLOSURE BY STOCKHOLDERS. . . . . . . . . . . . . . . . . . . 49
14.2 NONDISCLOSURE BY PARENT AND BUYER. . . . . . . . . . . . . . . . . 49
15. GENERAL. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
15.1 ASSIGNMENT; BINDING EFFECT; AMENDMENT. . . . . . . . . . . . . . . 50
15.2 ENTIRE AGREEMENT.. . . . . . . . . . . . . . . . . . . . . . . . . 50
15.3 COUNTERPARTS . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
15.4 NO BROKERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
15.5 EXPENSES OF TRANSACTION. . . . . . . . . . . . . . . . . . . . . . 51
15.6 NOTICES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
15.7 GOVERNING LAW. . . . . . . . . . . . . . . . . . . . . . . . . . . 53
15.8 APPOINTMENT OF AGENT . . . . . . . . . . . . . . . . . . . . . . . 53
15.9 NO WAIVER. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
15.10 TIME OF THE ESSENCE. . . . . . . . . . . . . . . . . . . . . . . . 54
15.11 CAPTIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
15.12 SEVERABILITY . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
15.13 CONSTRUCTION . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
15.14 STANDSTILL AGREEMENT . . . . . . . . . . . . . . . . . . . . . . . 55
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AGREEMENT AND PLAN OF REORGANIZATION
THIS AGREEMENT AND PLAN OF REORGANIZATION (the "Agreement") is
executed and delivered as of September 30, 1997, among U. S. LIQUIDS/RECLAIM
ACQUISITION CORPORATION, a Texas corporation ("Buyer"); U S LIQUIDS INC., a
Delaware corporation ("Parent"); RE-CLAIM ENVIRONMENTAL, INC., a Texas
corporation ("Company"); and JOHN E. TUMA, DUANE S. HERBST, A. TRAVIS
CAMPBELL, RUSSELL REICHERT, KENNETH B. HOLMES, JR., R.L. SMOTHERS, and
RAINBOW INVESTMENTS COMPANY, the sole shareholders of Company
("Stockholders");
W I T N E S S E T H:
WHEREAS, Company operates a non-hazardous commercial liquid waste
processing and treatment facility in the Houston, Texas area (the "Business");
WHEREAS, as part of the Business, Company owns certain real property
located in Houston, Texas and more fully described on Exhibit A, attached
hereto and made a part hereof (the "Land"), and operates thereon a fully
permitted facility for the treatment and processing of non-hazardous
commercial liquid waste (the "Facility");
WHEREAS, Buyer is a wholly owned subsidiary of Parent;
WHEREAS, Stockholders own all of the issued and outstanding shares
of the capital stock of Company;
WHEREAS, the respective Boards of Directors of Buyer, Parent and
Company deem it advisable and in the best interests of each corporation and
their respective stockholders that Buyer merge with and into Company (the
"Merger") pursuant to this Agreement and the applicable provisions of the
laws of the State of Texas;
WHEREAS, it is intended that the Merger shall be recorded for
accounting purposes as a "pooling-of-interests"; and
WHEREAS, the Boards of Directors of each of the corporate parties
hereto have approved and adopted this Agreement as a plan of reorganization
within the provisions of Section 368(a)(1)(A) and 368(a)(2)(E) of the
Internal Revenue Code of 1986, as amended (the "Code");
NOW, THEREFORE, in consideration of Ten Dollars ($10) in hand paid,
the premises and of the mutual agreements, representations, warranties and
obligations herein contained, the parties hereby agree as follows:
<PAGE>
1. THE MERGER; DELIVERY OF SHARES; ENDORSEMENT OF COMPANY STOCK.
1.1 ARTICLES OF MERGER. Buyer and Company will cause a Certificate of
Merger in substantially the form of Annex I attached hereto (the "Certificate of
Merger") to be signed, verified and delivered to the Texas Secretary of State on
the "Closing Date" as defined in Article 4. Such date shall be deemed the
"Effective Date of the Merger." At the Effective Date of the Merger, Buyer
shall be merged with and into Company, whereupon the separate existence of Buyer
shall cease and the corporate name of Company shall remain unchanged. Company,
the party surviving the Merger, is hereinafter sometimes referred to as the
"Surviving Corporation". The Merger will be effected in a single transaction.
1.2 ARTICLES OF INCORPORATION AND BYLAWS. At the Effective Date of the
Merger:
(i) the Articles of Incorporation of Buyer shall become the Articles
of Incorporation of the Surviving Corporation; and, subsequent to the
Effective Date of the Merger, such Articles of Incorporation shall be the
Articles of Incorporation of the Surviving Corporation until changed as
provided by law;
(ii) the Bylaws of Buyer shall become the Bylaws of the Surviving
Corporation; and, subsequent to the Effective Date of the Merger, such
Bylaws shall be the Bylaws of the Surviving Corporation until they shall
thereafter be duly amended;
(iii) the officers of Buyer immediately prior to the Effective Date of
the Merger shall become the officers of the Surviving Corporation, and shall
hold such offices subject to the provisions of the laws of the State of
Texas and the Articles of Incorporation and the Bylaws of the Surviving
Corporation; and
(iv) the name and address of the person who shall serve as the sole
member of the Board of Directors of the Surviving Corporation is as follows:
W. Gregory Orr
411 N. Sam Houston Parkway East
Houston, Texas 77060
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<PAGE>
The Director of the Surviving Corporation shall hold office subject to
the provisions of the laws of the State of Delaware and the Articles of
Incorporation and the Bylaws of the Surviving Corporation.
1.3 CAPITALIZATION. The respective designations and numbers of
outstanding shares and voting rights of each class of outstanding capital
stock of Buyer and Company as of the date of this Agreement are as follows:
(i) the authorized capital stock of Buyer consists of 1,000 shares of
common stock, $1.00 par value ("Buyer Stock"), of which 1,000 shares are
issued and outstanding; and
(ii) the authorized capital stock of Company consists of 1,000 shares
of common stock, $1.00 par value per share, of which 1,000 shares are
issued and outstanding (the "Company Stock").
1.4 EFFECT OF MERGER. Except as herein specifically set forth, the
identity, existence, purposes, powers, objects, franchises, privileges,
permits, licenses, approvals, rights and immunities of Company shall continue
unaffected and unimpaired by the Merger and the corporate franchises,
existence and rights of Buyer shall be merged into Company, and Company, as
the Surviving Corporation, shall be fully vested therewith. At the Effective
Date of the Merger, the separate existence of Buyer shall cease and, in
accordance with the terms of this Agreement, the Surviving Corporation shall
possess all the rights, privileges, permits, licenses, approvals, immunities
and franchises, of a public as well as of a private nature; and all property,
real, personal and mixed, and (except as otherwise expressly set forth
herein) debts on whatever account, including subscriptions to shares, and all
other choses in action, and all and every other interest of or belonging to
or due to each of Buyer and Company shall be taken and deemed to be
transferred to, and vested in, the Surviving Corporation without further act
or deed; and all property, rights and privileges, powers and franchises and
all and every other interest shall be thereafter as effectively the property
of the Surviving Corporation as they were of Buyer and Company; and the title
to any real estate, or interest therein, whether by deed or otherwise, vested
in Buyer and Company shall be deemed to be in the Surviving Corporation and
shall not revert or be in any way impaired by reason of the Merger.
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The Surviving Corporation shall thenceforth be responsible and liable for all
the liabilities and obligations of Buyer and Company and any claim existing,
or action or proceeding pending, by or against Buyer or Company may be
prosecuted as if the Merger had not taken place, or the Surviving Corporation
may be substituted in its place. Neither the rights of creditors nor any
liens upon the property of Buyer or Company shall be impaired by the Merger,
and all debts, liabilities and duties of each of Buyer and Company shall
attach to the Surviving Corporation, and may be enforced against it to the
same extent as if said debts, liabilities and duties had been incurred or
contracted by it.
1.5 DELIVERY OF SHARES. At the Closing, Stockholders, as the holders of
certificates representing all outstanding shares of Company Stock shall, upon
surrender of such certificates, receive the consideration set forth in
Article 2 below.
1.6 ENDORSEMENT OF COMPANY STOCK. Stockholders shall deliver at Closing
the certificates representing the Company Stock, duly endorsed in blank by
Stockholders and their respective spouses, if any, or accompanied by stock
powers duly endorsed in blank and with all necessary transfer tax and other
revenue stamps, acquired at the Stockholders' expense, affixed and cancelled.
Stockholders, at their sole expense, agree to cure (both before and after
Closing) any deficiencies with respect to the endorsement of the certificates
or other documents of conveyance with respect to the Company Stock or with
respect to the stock powers accompanying the Company Stock.
2. CONVERSION AND EXCHANGE OF STOCK.
2.1 CONVERSION OF STOCK. The manner of converting the shares of Company
Stock issued and outstanding immediately prior to the Effective Date of the
Merger into shares of stock of Parent shall be as follows:
At the Effective Date of the Merger all of the shares of Company
Stock issued and outstanding immediately prior to the Effective Date of the
Merger, by virtue of the Merger and without any action on the part of the
holder thereof, shall automatically be converted into that total number of
shares of Parent Stock ("Parent Stock") which shall have an aggregate
Agreed Value of $4,700,000, subject to adjustment in accordance with
Sections 2.3 and 2.4 below and certificates for such Parent Stock (with all
legends required by this
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<PAGE>
Agreement) shall be delivered to Stockholders at the Closing, free of all
liens, claims and encumbrances (except for such legends). The shares of
Parent Stock to be issued and distributed pursuant to this Section shall be
determined pursuant to Section 2.2, 30% of such Parent Stock shall be
registered with the Securities Exchange Commission (the "SEC") on the
Closing Date (the "Registered Stock") and 70% of such shares shall be
unregistered on the Closing Date (the "Unregistered Parent Stock"). The
consideration set forth in this Article 2 shall be allocated among the
Stockholders in accordance with Annex II attached hereto and made a part
hereof.
2.2 AGREED VALUE OF PARENT STOCK. For purposes of this Agreement, the
"Agreed Value" per share of Parent Stock shall be the average of the closing
prices of a share of the common stock of Parent, $.01 par value per share, on
the American Stock Exchange as reported in THE WALL STREET JOURNAL for the
five trading days immediately preceding the five trading days immediately
prior to the Closing Date.
2.3 ASSUMPTION OF DEBT. The consideration payable pursuant to Section
2.1 above shall be reduced by an amount equal to:
(a) the outstanding balance existing on the Closing Date of the
promissory notes from Company to Texline Gas Company dated March 16, 1995
and February 21, 1996, and in the original principal amounts of $250,000
and $150,000, respectively, which Buyer shall pay in full on the Closing
Date; and
(b) the actual debt of Company up to a maximum of $725,000,
consisting of all long-term debt (including the current portion of such
debt, including accrued interest) which Buyer shall (subject to the next
succeeding sentence) either assume or pay in full on the Closing Date, at
Buyer's option (the "Assumed Debt"). Attached hereto as Schedule 2.3 is a
listing of all Assumed Debt and evidence establishing the Assumed Debt.
Buyer and Parent agree to pay all Assumed Debt as promptly after the
Closing Date as possible, but in no event later than 10 days after the
Closing Date and to indemnify, defend and hold harmless Stockholders from
all Assumed Debt in accordance with Article 12 hereof during the time
period prior to payment. Buyer and Parent agree that all lease debt
(including lease end by-
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<PAGE>
out payments) are specifically excluded from the Assumed Debt, but will
become the obligation of the Surviving Corporation after Closing and Buyer
and Parent shall indemnify, defend and hold harmless Stockholders in
accordance with Article 12 from same.
2.4 ADJUSTMENT TO PURCHASE PRICE. The parties agree that the purchase
price was determined as if the net working capital of Company was going to be
$1.00 at the close of business on the Closing Date. Accordingly, the parties
agree that the purchase price set forth in this Article 2 shall be adjusted
(up or down) on the Adjustment Date (as defined in Section 10.2) to reflect
the actual net working capital of Company on the Closing Date (the "Actual
Net Working Capital"), as shown on the balance sheet to be prepared in
accordance with Section 10.2 hereof. If the Actual Net Working Capital of
Company so reflected is greater than $1.00 on the Closing Date, then the
purchase price paid pursuant to Section 2.1 shall be increased dollar for
dollar for each dollar the Actual Net Working Capital exceeds $1.00 on the
Closing Date. If the Actual Net Working Capital of Company so reflected is
less than $1.00 on the Closing Date, then the purchase price paid pursuant to
Section 2.1 shall be decreased dollar for dollar for each dollar the Actual
Net Working Capital falls below $1.00 on the Closing Date. For purposes of
this Agreement, Actual Net Working Capital shall mean the aggregate current
assets of Company on the Closing Date minus the aggregate of all current
liabilities (excluding leases but including an entry of $200,000 against the
indemnification obligations set forth in this Agreement) of Company on the
Closing Date (not including the Assumed Debt), calculated in accordance with
generally accepted accounting principles ("GAAP"). In computing the
adjustment amounts provided for in this Section, the party owing payment to
the other pursuant to this Section shall make such payment in shares of
Parent Stock having a value equal to the amount owed calculated in accordance
with Section 2.2.
In order to facilitate the contemplated adjustment to purchase price on
the Adjustment Date, between the date hereof and the Closing Date the parties
will prepare and agree upon an estimated net working capital balance for
Company as of August 31, 1997 (the "Estimated Working Capital") which shall
be an adjustment to the purchase price on the Closing Date to be attached
hereto as Exhibit B and will thereafter calculate the Actual Net Working
Capital consistent therewith.
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<PAGE>
In the event of a dispute between the parties as to the Actual Net
Working Capital, the parties will have 30 days to resolve the dispute among
themselves. If the parties have not resolved such dispute within such 30-day
period, then the parties shall select an arbitrator who shall decide the
dispute within 30 days after being selected. If the parties cannot agree on
an arbitrator, then Buyer and Stockholders (as a group) shall each select an
arbitrator and the two arbitrators so selected shall select a third
arbitrator. The parties hereto each agree to be bound by the decision of the
arbitrator(s). In the event that three arbitrators are chosen, a majority
decision will be required. Each arbitrator can be any natural person above
the age of 18 and need not have any specific qualification. All costs of the
arbitration shall be split equally between Buyer and Stockholders (as a
group).
3. TITLE ASSURANCE.
3.1 OWNERS TITLE POLICY. On the Closing Date, Stockholders shall
furnish to Buyer (at Buyer's sole cost) an extended coverage owners policy of
title insurance from Stewart Title Insurance Company (the "Title Company") in
the amount of $4,700,000 and satisfactory to Buyer, insuring title to the
Land to be in fee simple in the Surviving Corporation subject only to the
exceptions permitted by Section 3.2 hereof (the "Owners Policy"). Prior to
the Closing, Stockholders shall deliver to Buyer a preliminary title
commitment in respect of the Land, together with copies of all exception
instruments referenced therein, and any unrecorded leases, option agreements,
contracts and any other items affecting title which are in the possession of,
or known to, Stockholders.
3.2 PERMITTED ENCUMBRANCES. The Owners Policy shall insure the
Surviving Corporation's interest in the Land to be free and clear of all
encumbrances whatsoever except: (i) zoning ordinances and regulations which
do not, in Buyer's judgment, adversely affect the Surviving Corporation's use
of the Land for its current uses; (ii) real estate taxes and assessments,
both general and special, which are a lien but are not yet due and payable at
the Closing Date; and (iii) easements, encumbrances, covenants, conditions,
reservations and restrictions of record, if any, as have been approved in
writing by Buyer. Buyer shall pay all of the costs associated with the
delivery of the Owners Policy to the Surviving Corporation.
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<PAGE>
3.3 SURVEY. Stockholders shall obtain for Buyer's use and for the use
of the Title Company in connection with the issuance of the Owners Policy a
current and complete survey of the Land, made on the ground by a competent
registered surveyor, showing: (a) the exact boundary lines of the Land; (b)
the location thereon of all, if any, buildings, improvements, and easements
now existing; (c) the number of acres in the Land; (d) the location of any
buildings, fences or other improvements which encroach on the Land; (e) the
location of any improvements on the Land which encroach on any neighboring
property or on any property which is subject to any easement or right-of-way;
(f) all building lines established in respect of the Land; and (g) all public
access to the Land, and representing that the boundaries of the Land are
contiguous with the boundaries of all adjoining parcels (the "Survey").
Prior to the Closing, a copy of the Survey complying with the above
requirements shall be delivered to Buyer and the Title Company, together with
certification to each entity by the surveyor, which certification complies
with American Land Title Association guidelines, and also together with such
additional supporting reports and other certificates as the Title Company may
require to enable the Title Company to delete its standard survey exceptions
from the Owners Policy. Company shall pay all of the costs of the Survey,
which cost shall be considered as an additional current liability, subject to
Section 2.4 above.
4. CLOSING. Unless the parties agree otherwise, the closing of the within
contemplated transaction (the "Closing") shall take place on the date that is
within five business days after the completion, satisfaction or waiver of
each of the conditions to Closing set forth in Articles 8 and 9. The Closing
shall take place at a location mutually agreeable to Buyer and Stockholders.
The date on which the Closing occurs shall be referred to as the "Closing
Date."
5. REPRESENTATIONS AND WARRANTIES OF STOCKHOLDERS AND COMPANY. Company, as
to the time period before Closing only, and each Stockholder, severally,
represent and warrant to Buyer that the statements contained in this Section
5 except as set forth in the schedules to the subsections of this Section 5
delivered by Stockholders to Buyer on the date hereof (such schedules
hereinafter collectively referred to as the "Disclosure Schedules" and,
individually, as a "Disclosure Schedule"): (i) are correct and complete as
of the date of this Agreement; (ii) will be correct and complete as of the
Closing Date (as though made then and as
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<PAGE>
though the Closing Date were substituted for the date of this Agreement
throughout this Section 5); and (iii) shall survive the Closing in accordance
with Article 12 hereof. Nothing in the Disclosure Schedules shall be deemed
adequate to disclose an exception to a representation or warranty made
herein, however, unless the Disclosure Schedule identifies the exception with
reasonable particularity and describes the relevant facts in reasonable
detail. Wherever a representation or warranty herein is qualified as having
been made "to the best of Stockholders' knowledge", such phrase shall mean
the knowledge of John E. Tuma, after reasonable inquiry and the actual
knowledge of the other Stockholders without inquiry.
5.1 ORGANIZATION; AUTHORITY.
(i) Company is a Texas corporation duly organized, validly existing
and in good standing under the laws of the State of Texas and is now and
has been at all times since its creation, duly authorized, qualified and
licensed under all laws, regulations, ordinances and orders of public
authorities to carry on its businesses in the places and in the manner as
conducted at the time such activities were conducted except for where
failure to be so authorized, qualified or licensed would not have a
material adverse affect on the Business. Copies of Company's Articles of
Incorporation (certified by the Secretary of State of Texas and Bylaws
(certified by the Secretary of Company), each as amended, are attached
hereto as Schedule 5.1(i).
(ii) Company has full legal right, power and authority (corporate and
otherwise) to enter into this Agreement and to consummate the transactions
contemplated by this Agreement. All corporate action of Company necessary
to approve the sale of the Company Stock has been taken, including director
and shareholder approvals, if necessary.
(iii) Each Stockholder is competent and under no legal restraint or
duress and has the full legal right and capacity to enter into and perform
his obligations under this Agreement.
5.2 STOCK OWNERSHIP; ABSENCE OF ADVERSE CLAIMS. All of the issued and
outstanding shares of Company Stock are owned of record and beneficially by
Stockholders as set forth on Annex II and are free and clear of all liens,
security interests, encumbrances, adverse claims, pledges, charges, voting
trusts, equities and other restrictions on transfer whatsoever (collectively,
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<PAGE>
"Adverse Claims"). This Agreement is the valid and binding obligation of
Company and Stockholders, enforceable against each of them in accordance with
its terms.
5.3 CAPITALIZATION. The authorized capital stock of Company consists
solely of 1,000 shares of voting common stock, $1.00 par value, of which
1,000 shares are issued and outstanding. All of the issued and outstanding
shares of Company Stock have been duly authorized and validly issued, are
fully paid and nonassessable, were offered, issued, sold and delivered by
Company in compliance with all state and federal laws concerning the issuance
of securities and none of such shares were issued pursuant to awards, grants
or bonuses nor in violation of the preemptive rights of any past or present
stockholder. The stock transfer records provided by Stockholders and Company
to Buyer correctly set forth all issuances, acquisitions and retirements of
Company Stock since the inception of Company. Company has never acquired any
treasury stock, except for 175 shares acquired from Russell Reichert in
September 1996 which were subsequently reissued. No subscriptions, options,
warrants, puts, calls, conversion rights or other commitments of any kind
exist which obligate Company to issue any of its authorized but unissued
capital stock or otherwise relate to the sale or transfer by Company of any
securities of Company (whether debt or equity). In addition, Company has no
obligation (contingent or otherwise) to purchase, redeem or otherwise acquire
any of its equity securities or any interests therein or to pay any dividend
or make any distribution in respect thereof. Company has not agreed to
register any securities under the Securities Act of 1933, as amended (the
"Act"), or under any state securities law. There has been no transaction or
action taken with respect to the equity ownership of Company in contemplation
of the transaction described in this Agreement which would prevent Parent
from accounting for such transaction on a "pooling-of-interest" or on a
reorganization accounting basis. Neither the voting stock structure of
Company nor the ownership of shares of Company has been altered or changed in
contemplation of the Merger. Between June 30, 1995 and the Closing Date,
there has not been any sale or spin-off of significant assets of Company
other than in the ordinary course of business.
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<PAGE>
5.4 PREDECESSOR ENTITIES; TRADE NAMES. Except as set forth on Schedule
5.4, Company has never directly or indirectly participated in any manner in
any joint venture, partnership or other noncorporate entity. Company was
formed solely to operate the Business and has never conducted any other
business or activity. Also set forth on Schedule 5.4 is a list of the names
of all predecessors of Company, all prior corporate names of Company, and all
trade names and "doing business as" names of Company, including the names of
all entities substantially all of the assets of which were previously
acquired by Company.
5.5 NO SUBSIDIARIES. Company has never owned or controlled and does not
now own, of record or beneficially, or control, directly or indirectly, any
capital stock, securities convertible into capital stock or any other equity
interest in any partnership, corporation, association or other business
entity other than those of Company, except Re-Claim Environmental Louisiana,
L.L.C. and as disclosed on Schedule 5.4.
5.6 FINANCIAL STATEMENTS. Attached as Schedule 5.6 are copies of the
following financial statements of Company (together, the "Financial
Statements"):
(a) Company's balance sheet as of December 31, 1996, and a statement
of income, cash flow and retained earnings for the year then ended;
(b) Company's balance sheet as of June 30, 1997, and a statement of
income for the quarter then ended;
(c) Company's monthly interim balance sheets and statements of income
commencing for the month ended July 31, 1997, and continuing for each month
end until the end of the month immediately preceding the month in which the
Closing Date occurs; and
(d) Company's balance sheet and income statement as of August 31,
1997 (the "Balance Sheet Date"), prepared and audited by Arthur Andersen.
Except as set forth on Schedule 5.6, each of the Financial Statements
described in (d) above (including all footnotes thereto) has been prepared,
to the best of Stockholders' knowledge in accordance with GAAP, applied on a
consistent basis throughout the periods indicated. Each of the Financial
Statements (including all footnotes thereto) is true, complete and correct in
all material
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<PAGE>
respects. Each of the balance sheets presents fairly the financial condition
of Company as of the date indicated thereon and each of such statements of
income presents fairly on an accrual basis the results of the operations of
Company for the period indicated thereon. To the best of Stockholders'
knowledge, the Financial Statement described in (d) above includes all
footnotes required by GAAP, each such footnote is complete and accurate, and
contains all information required by GAAP to be contained therein. To the
best of Stockholders' knowledge, all reserves for contingent risks have been
estimated in accordance with GAAP and are appropriate and sufficient to cover
all costs reasonably expected to be incurred from such risks. Since its
inception Company has not (a) made any material change in its accounting
policies or (b) effected any prior period adjustment to, or other restatement
of, its financial statements for any period. The Financial Statements are
consistent with the books and records of Company (which books and records are
materially correct and complete). If required, the President or Chief
Financial Officer of Company will, on or before the Closing Date, execute any
reasonable documentation required by Parent's independent public accountants
or any stock exchange with respect to issues related to pooling accounting
treatment.
5.7 NON-BALANCE SHEET LIABILITIES. Attached hereto as Schedule 5.7 is a
complete and accurate list as of the date hereof of all liabilities and
obligations of Company, excluding obligations arising under this Agreement,
which are not individually reflected in the Financial Statements dated the
Balance Sheet Date, but which would have been so reflected in a full GAAP
accounting (whether or not incurred in the ordinary course of business) of
any kind, character and description, accrued or unaccrued, absolute or
contingent, secured or unsecured, liquidated or unliquidated, due or to
become due, together with, in the case of those liabilities and other
obligations the amounts of which are not fixed, a reasonable best estimate of
the maximum amount which may be payable. For each liability or obligation
for which the amount is not fixed or is contested, Stockholders shall provide
the following information:
(a) a summary description of the liability or other obligation
together with the following:
(1) copies of all relevant documentation relating thereto;
(2) amounts claimed and any other action or relief sought; and
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<PAGE>
(3) name of claimant and all other parties to the claim, suit or
proceeding, if any.
(b) the name of each court or agency before which a claim, suit or
proceeding is pending;
(c) the date such claim, suit or proceeding was instituted;
(d) a reasonable best estimate by Stockholders of the maximum amount,
if any, which is likely to become payable with respect to each such
liability or the cost of performance with respect to each such other
obligation.
5.8 ACCOUNTS RECEIVABLE. Attached as Schedule 5.8 is a complete and
accurate list of all accounts and notes receivable of Company as of the date
hereof, including receivables from and advances to employees and Stockholders
and also including all such accounts and notes receivable which are not
reflected in the Financial Statements, if any. Also attached as Schedule 5.8
is an aging of all accounts and notes receivable showing amounts due in 30
day aging categories. Neither Company nor any Stockholder are guarantying
the collectibility of any account or note receivable and no reduction for
same shall be taken from any sums otherwise owed to Stockholders.
5.9 PROPRIETARY RIGHTS; ENVIRONMENTAL DOCUMENTS. (i) Attached as
Schedule 5.9(i) is a reasonably complete and accurate list and summary
description as of the date hereof of all permits, titles (including
motor vehicle titles and current registrations), fuel permits, licenses,
franchises, certificates, trademarks, trade names, patents, patent
applications and copyrights owned or held by Company, none of which
permits, titles, licenses, franchises and certificates, trademarks,
tradenames, patents, patent applications and copyrights, has been
claimed to or, to the best of Stockholders' knowledge, infringe on the
rights of others and all of which are now valid, in good standing and in
full force and effect. Except as set forth on Schedule 5.9(i), such
permits, titles, licenses, franchises, certificates, trademarks, trade
names, patents, patent applications and copyrights are adequate for the
operation of the Business as presently constituted;
(ii) Stockholders have, as of the date of this Agreement, made
available to Buyer for its
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inspection all presently held records, correspondence, reports,
notifications, permits, pending permit applications, licenses and
pending license applications, environmental impact studies, assessments
and audits and all notifications from governmental agencies and any
other person or entity and any other documents of Company relating to:
(a) each actual and threatened violation of Applicable Laws (hereinafter
defined) by Company or otherwise relating to the Land and all, if any,
claims thereof; (b) the present or past environmental compliance by
Company; (c) the present or past environmental condition of the Land;
(d) the discharge, leakage, spillage, transport, disposal or release of
any material into the environment by Company or otherwise relating to
the Land; and (e) land use and access approvals relative to any portion
of the Land (collectively, the "Environmental Documents").
5.10 REAL PROPERTY; REPORTING.
(i) Company has never owned, leased or otherwise occupied, had an
interest in or operated any real property other than the Land and
approximately two (2) acres in Dallas, Texas, previously leased by Company
that was used solely for a staging area. Company has good, fee simple
title to the Land except as permitted under Article 3 hereof. Except as
set forth on Schedule 5.10(i):
(a) The Land is, and at all times during operation of the
Facility has been, fully licensed, permitted and authorized for the
operation of the Facility under all Applicable Laws relating to the
protection of the environment, the Land and the conduct of the Facility
thereon (including, without limitation, all zoning restrictions and
land use requirements).
(b) The Land is usable for its current uses and can be used by
the Surviving Corporation after the Closing for such uses without
violating any Applicable Law or private restriction, and such uses are
legal conforming uses. There are no proceedings or amendments pending
and brought by or, to the best of Stockholders' knowledge, threatened
by, any third party which would result in a change in the allowable uses
of the Land or which would modify the right of the
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Surviving Corporation to use the Land for its current uses after the
Closing Date (subject to Schedule 5.19).
(c) Stockholders and Company have made available to Buyer all
engineering, geologic and other similar reports, documentation and maps
relating to the Land in the possession or control of Stockholders or
Company.
(d) To the best of Stockholders' knowledge, no third parties have
any rights to drill or explore for, collect, produce, mine, excavate,
deliver or transport oil, gas, coal, or other minerals in, on, beneath,
across, over, through, from or to any portion of the Land, other than as
set forth in the Owner's Policy.
(e) Neither Company, Stockholders nor the Land now is or ever
has been involved in any litigation or administrative proceeding
seeking to impose fines, penalties or other liabilities or seeking
injunctive relief for violation of any Applicable Laws relating to the
environment, other than as set forth on Schedule 5.19.
(f) No third party has a present or future right to possession
of all or any part of the Land, other than Force, Inc., Texline Gas
Company and Industrial Bank which hold deeds of trust to secure
Company's debt (which debt is part of the Assumed Debt).
(g) No portion of the Land contains any areas that could be
characterized as disturbed, undisturbed or man made wetlands or as
"waters of the United States" pursuant to any Applicable Laws or the
procedural manuals of the Environmental Protection Agency, U.S. Army
Corps of Engineers or the Department of Natural Resources of the
applicable state, whether such characterization reflects current
conditions or historic conditions which have been altered without the
necessary permits or approvals.
(h) There are no mechanic's liens affecting the Land and no work
has
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been performed on the Land within 120 days of the date hereof for which
a mechanic's lien could be filed.
(i) To the best of Stockholders' knowledge, there (subject to
Schedule 5.19) are no levied or pending special assessments affecting
all or any part of the Land and none is threatened.
(j) There are no pending or, to the best of Stockholders'
knowledge, threatened condemnation or eminent domain proceedings
affecting all or any part of the Land.
(ii) To the best of Stockholders' knowledge, subject to Schedule 5.19,
Company has provided to the government agencies requiring the same, all
material reports, notices, filings and other disclosures required by
Applicable Laws and all such reports, notices, filings and other documents
were complete and accurate in all material respects at the time provided to
said government agencies.
5.11 PERSONAL PROPERTY; NEW PROJECTS. (i) Attached as Schedule 5.11(i) is
a complete and accurate list and a complete description as of the date hereof
of all personal property of Company including true and correct copies of
leases for equipment and other personal property, if any, used in the
operation of the Business and including an indication as to which assets were
formerly owned by business or personal affiliates of Company. All of the
vehicles, machinery and other equipment of Company are in good working order
and repair;
(ii) Company has good title to, or a valid leasehold interest in, the
properties and assets used by it shown on its balance sheet dated the Balance
Sheet Date or acquired after the date thereof, whether or not located on the
Land, including, without limitation, the items of personal property listed on
Schedules 5.11(i), free and clear of all security interests, liens or other
Adverse Claims, except for the Assumed Debt (including security interests
related thereto) and the rights of owners of any leased assets;
(iii) all leases set forth on Schedule 5.11(i) are in full force and
effect and constitute valid and binding agreements of the parties thereto
(and their successors) in accordance with their respective terms. No default
by Company, or, to the best of Stockholders' knowledge, any other party to
any of such leases, exists or would exist except for the
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passage of time or delivery of a notice or both;
(iv) all fixed assets used by Company in the operation of the
Business are either owned by Company or leased by Company under an
agreement indicated on Schedule 5.11(i). Company's combined fixed
assets (together with the real property assets) constitute all of the
real and personal property necessary for the operation of the Business
both by Company and by the Surviving Corporation immediately following
the Closing and include all of the permits, licenses, franchises,
consents and other approvals necessary to operate the Business both
before and immediately after Closing; and
(v) at the Closing, Company shall have good and marketable title to
all personal property, subject to all listed debts and lease payments
(including lease end buy-out payments) and the Assumed Debt.
5.12 CONTRACTS. Attached as Schedule 5.12 is a complete and accurate
list as of the date hereof of all of the following types of contracts,
commitments and other agreements to which Company is a party or by which
Company or its properties are bound, which list shall include, at a minimum,
the full names of each party to each agreement and the date of execution
thereof: waste treatment and processing contracts, joint venture or
partnership agreements, contracts or collective bargaining arrangements with
any labor organizations, loan agreements, powers of attorney (each of which
shall be cancelled at the Closing), indemnity or guaranty agreements, bonds,
mortgages, options to purchase land, liens, pledges or other security
agreements, agreements for the employment of any individual, agreements under
which Company has advanced or loaned any amount to one another or to
Stockholders or any employee, officer or director of Company, any guaranties
by Company, any agreement concerning confidentiality or noncompetition and
any other agreement under which the consequences of a default or termination
could have an adverse effect on the business, financial condition, operations
or prospects of Company. None of the agreements listed on Schedule 5.12 have
been modified, altered, terminated or otherwise amended and there have been
no waivers, oral agreements, representations or other statements with
relation to any such agreements except as described in Schedule 5.12.
Company has complied with all obligations pertaining to it contained in such
contracts, commitments and other agreements, is not in default thereunder and
no notice of default has been received nor will the consummation of the
transactions contemplated by this Agreement result in such a default. To the
best of Stockholders' knowledge,
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there is no default by any other party to any contract, commitment or other
agreement attached as Schedule 5.12.
5.13 INSURANCE POLICIES. Attached as Schedule 5.13 are complete and
accurate copies as of the date hereof of all insurance policies carried by
Company and an accurate list of all insurance loss runs and workers'
compensation claims received for the past three policy years. All insurance
policies are in full force and effect and shall remain in full force and
effect through the Closing Date. Company's insurance has never been
cancelled and Company has never been denied coverage.
5.14 DIRECTORS, OFFICERS AND EMPLOYEES; COMPENSATION. Attached as
Schedule 5.14 is a complete and accurate list of all officers, directors and
employees of Company and the rate of compensation of each as of the date
hereof (including a breakdown of the portion thereof attributable to salary,
bonus and other compensation, respectively). Except as set forth on
Schedules 5.12 and 5.14 as to Laura Hathorn and Travis Campbell, each
employee of Company is an employee at will and there are no collective
bargaining agreements affecting any employee of Company. There is no pending
or, to the best of Stockholders' knowledge, threatened labor dispute
involving Company and any group of its employees nor has Company experienced
any labor interruptions over the past three years.
5.15 EMPLOYEE PLANS. Except as set forth on Schedule 5.15, Company has
no group health plans, employee benefit plans, employee welfare benefit
plans, employee pension benefit plans, multi-employer plans or
multiple-employer welfare arrangements (as defined in Sections 3(3), (1),
(2), (37) and (40), respectively, of the Employee Retirement Income Security
Act of 1974, as amended ("ERISA")) (collectively, "Plans"), which are
currently maintained and/or sponsored by Company, or to which Company
currently contributes, or has an obligation to contribute in the future
(including, without limitation, employment agreements and any other
agreements containing "golden parachute" provisions and deferred compensation
agreements). No such Plans have been terminated within the past three years.
5.16 COMPLIANCE WITH ERISA. Neither Company, any Controlled Group
Member (as defined in Code Section 414(n)(6)(B)), nor any business,
subsidiary, division or operation acquired
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by Company or a Controlled Group Member in the last five years, ever have
maintained or sponsored, or contributed to, an employee pension benefit plan
(as defined in ERISA Section 3(2)) which is subject to the provisions of
Title IV of ERISA. Except as set forth on Schedule 5.15, Company does not
maintain or sponsor, nor is a contributing employer to, a pension,
profit-sharing, deferred compensation, stock option, employee stock purchase
or other employee benefit plan, employee welfare benefit plan, or any other
arrangement with its employees. Further:
(i) With respect to Plans which qualify as "group health plans" under
Section 4980B of the Internal Revenue Code and Section 607(1) of ERISA and
related regulations (relating to the benefit continuation rights imposed by
"COBRA"), Company and Stockholders have complied (and on the Closing Date
will have complied), in all respects with all reporting, disclosure,
notice, election and other benefit continuation requirements imposed
thereunder as and when applicable to such plans, and Company has no (and
will incur no) direct or indirect liability and is not (and will not be)
subject to any loss, assessment, excise tax penalty, loss of federal income
tax deduction or other sanction, arising on account of or in respect of any
direct or indirect failure by Company and Stockholders or any of them, any
time prior to the Closing Date to comply with any such federal or state
benefit continuation requirement, which is capable of being assessed or
asserted before or after the Closing Date directly or indirectly against
Company or Stockholders, or any of them with respect to such group health
plans.
(ii) With respect to any Plan which qualifies as a group health plan,
such plan is insured by third parties and all premiums have been paid on a
timely basis and are paid in full as of the Closing Date or, to the extent
such plan is not fully insured, all self insured obligations have been met
as of the Closing Date and are fully reflected in the plan's financial
statements. To the extent that any of the Company's group health plans are
retrospectively rated, there are no liabilities capable of assertion against
the Company in respect of claims already incurred and present.
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5.17 COMPLIANCE WITH LAW; NO CONFLICTS.
(i) Except as disclosed in Schedule 5.19, Company has in the past
complied with, and is now in compliance with, all federal, state and local
statutes, laws, rules, regulations, orders, licenses, permits (including,
without limitation, zoning restrictions and land use requirements) and all
administrative and judicial judgments, rulings, decisions and orders of any
body having jurisdiction over Company, the Business or the Land (the
"Applicable Laws"), except to the extent that non-compliance would not have
a material adverse effect on Company and neither Company nor Stockholders
have received any notice that Company is under investigation or other form
of review with respect to any Applicable Law; and
(ii) the execution, delivery and performance of this Agreement, the
consummation of any transactions herein referred to or contemplated hereby
and the fulfillment of the terms hereof and thereof will not:
(a) conflict with, or result in a breach or violation of the
Articles of Incorporation or Bylaws of Company;
(b) conflict with, or result in a breach under any document,
agreement or other instrument to which Company, or Stockholders is a
party, or result in the creation or imposition of any lien, charge or
encumbrance on any properties of Company or Stockholders pursuant to:
(A) any law or regulation to which Company or Stockholders, or any of
their respective properties are subject, or (B) any judgment, order or
decree to which Company or Stockholders is bound or any of their
respective properties are subject;
(c) result in termination or any impairment of any permit,
license, franchise, contractual right or other authorization of
Company; or
(d) require the consent of, or the filing with any governmental
authority or agency or any other third party in order to remain in full
force and effect.
5.18 TAXES. Company has filed, or will file, in a timely manner all
requisite federal, state, local and other tax returns due for all fiscal
periods ended on or before the date hereof and, as of the
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Closing, shall have filed or will file in a timely manner all such returns
due for all periods ended on or before the Closing Date. There are no
agreements to extend the statutory period for the assessment of any taxes,
examinations in progress or claims against Company for federal, state, local
and other taxes (including penalties and interest) for any period or periods
prior to and including the date hereof and none shall exist as of the Closing
Date. No notice of any claim for taxes, whether pending or threatened, has
been received. Copies of: (i) all tax examinations; (ii) extensions of
statutory limitations; and (iii) the federal, state, local and other income
tax returns and franchise tax returns of Company for its last three fiscal
years are attached hereto as Schedule 5.18. Company is taxed under the
provisions of Subchapter C of the Code. Company has a taxable year ended
December 31. Company currently utilizes the accrual method of accounting for
income tax purposes and has not changed its method of accounting since its
initial creation.
5.19 LITIGATION. Except as set forth on Schedule 5.19, there is no
claim, litigation, action, suit or proceeding, investigation, formal
arbitration, informal arbitration or mediation, administrative, judicial or
other review, pending or, to the best of Stockholders' knowledge, threatened
against Company or Stockholders, or otherwise relating to the business or
affairs of Company, at law or in equity, before any federal, state or local
court or regulatory agency, or other governmental or private authority; no
notice of any of the above has been received by Company or Stockholders; and
no facts or circumstances exist which would give rise to any of the
foregoing. Also listed on Schedule 5.19 are all instances where Company is
the plaintiff, or complaining or moving party, under any of the above types
of proceedings or otherwise.
5.20 ABSENCE OF PRICE RENEGOTIATION CONTRACTS. Company is not now nor
has ever been a party to any governmental contracts subject to price
redetermination or renegotiation.
5.21 CONDUCT OF BUSINESS SINCE BALANCE SHEET DATE. Since the Balance
Sheet Date, there has not been any:
(i) material adverse change in the financial condition, assets,
liabilities (contingent or otherwise), income and business or prospects of
Company;
(ii) damage, destruction or loss (whether or not covered by insurance)
which, singly or in the aggregate, materially and adversely affects the
properties (whether owned or leased)
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or business of Company;
(iii) change in the authorized capital of Company or in its securities
outstanding, any change in its equity ownership or any grant by it of any
subscriptions, options, warrants, puts, calls, conversion rights or other
commitments related to its equity interests;
(iv) declaration or payment of any dividend or distribution in respect
of the capital stock of Company or any direct or indirect redemption,
purchase or other acquisition of any of the capital stock of Company;
(v) any increase in the compensation, bonus, sales commissions or fee
arrangements payable or to become payable by Company to any of its officers,
directors, employees, consultants or agents above those disclosed on
Schedule 5.14;
(vi) work interruption, labor grievance or claim filed;
(vii) sale or transfer of, or any agreement to sell or transfer, any
material assets, property or rights of Company to any person not in the
ordinary course of the business of Company, including, without limitation,
all agreements with Stockholders or with affiliates of Company;
(viii) cancellation or agreement to cancel any indebtedness or other
obligation owing to Company, including, without limitation, any
indebtedness or other obligation of Stockholders or with any affiliate of
Company;
(ix) plan, agreement or arrangement granting any preferential right to
purchase or acquire any interest in any of the assets, property or rights of
Company or requiring consent of any party to the transfer and assignment of
any such assets, property or rights;
(x) purchase or acquisition by any third party of, or any agreement,
plan or other arrangement by any third party to purchase or acquire, any
property, rights or assets of Company other than in the ordinary course of
business;
(xi) waiver of any rights or claims of Company;
(xii) breach, amendment or termination of any contract, license, permit
or other agreement to which Company is a party other than in the ordinary
course of business;
(xiii) transaction by Company outside the ordinary course of its
business;
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(xiv) amendment to the Articles of Incorporation or Bylaws of Company;
(xv) any other material occurrence, event, incident, action or failure
to act outside the ordinary course of business of Company; or
(xvi) any action by Company, Stockholders, or any employee, officer or
agent of Company or Stockholders committing to do any of the foregoing.
5.22 BANK ACCOUNTS; DEPOSITORIES. Attached as Schedule 5.22 is a
complete and accurate list as of the date of this Agreement, of:
(i) the name of each financial institution in which Company has any
account or safe deposit box;
(ii) the names in which each account or box is held;
(iii) the type of each account; and
(iv) the name of each person authorized to draw on or have access to
each account or box.
5.23 HAZARDOUS MATERIALS. Environmental Laws means any applicable
statute, code, enactment, or ordinance, rule, regulation, permit, consent,
approval, authorization, license, judgment, order, writ, decree, injunction,
or other requirement having the force and effect of law, whether local, state
or national relating to: (i) emissions, discharges, spills, releases or
threatened releases of Hazardous Substances into ambient air, surface water,
groundwater, watercourses, publicly or privately owned treatment works,
drains, sewer systems, wetlands septic systems or onto land; (ii) the use,
treatment, storage, disposal, handling, manufacturing, transportation, or
shipment of Hazardous Materials; (iii) the regulation of storage tanks; and
(iv) otherwise relating to pollution or protection of the environment.
Hazardous Materials means any hazardous or toxic material, substance or waste
designated as such under the Resource Conservation and Recovery Act of 1976;
the Comprehensive Environmental Response Compensation and Liability Act
("CERCLA"); the Clean Water Act; the Toxic Substances Control Act; and any
comparable or similar state statute affecting the Business; any other
applicable law or the rules and regulations promulgated under any of the
foregoing, as each of the foregoing may have been amended. The definition of
a Hazardous Materials as used herein, specifically excludes petroleum, as
that term is
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defined under the Resource Conservation and Recovery Act of 1976 and CERCLA.
Except as set forth on Schedules 5.19, 5.23 or 5.10, Company is not in
material violation of any Environmental Laws and Company has not received any
notice of alleged violation of Environmental Laws from any governmental
agency.
No Hazardous Materials have been used, stored, manufactured or processed
on the Land except as necessary to the conduct of Company's business and in
compliance with all applicable laws.
To the best of Company's knowledge, subject to Schedules 5.19 and 5.10,
there has been no disposal release or threatened release of Hazardous
Materials from or to the Land.
No liens, with respect to environmental liability, have been imposed
against Company or the Land under CERCLA, any comparable state statute
affecting the Business or other Applicable Law.
No portion of the Land is listed on the CERCLIS list or the National
Priorities List of Hazardous Waste Sites or any similar list maintained by
the State of Texas.
Neither Company nor any Stockholder has received a notice of potential
responsibility or letter of inquiry from any private party or government
agency for any off-site facility under CERCLA or state counterpart thereof.
5.24 STORAGE TANKS. Except as set forth on Schedule 5.24, the Land does
not contain any underground or above-ground storage tanks containing
Hazardous Materials, petroleum products or wastes or other hazardous
substances regulated by 40 CFR 280 or other Applicable Laws. All above and
below ground tanks currently in use on the Land are being used and maintained
in accordance with all Applicable Laws.
5.25 ABSENCE OF CERTAIN BUSINESS PRACTICES. To the best knowledge of
each Stockholder, neither Company nor Stockholders have ever made, offered or
agreed to offer anything of value to any employees of any customers of
Company for the purpose of attracting business to Company or any foreign or
domestic governmental official, political party or candidate for government
office or any of their respective employees or representatives, nor have they
otherwise taken any action which would cause it to be in violation of the
Foreign Corrupt Practices Act of 1977, as amended.
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5.26 COMPLETE DISCLOSURE. To the best knowledge of each Stockholder,
this Agreement and the schedules hereto and all other documents and
information furnished to Buyer and its representatives pursuant hereto or
pursuant to the negotiation of this transaction or the investigations of
Buyer or the employees or representatives of either of them, do not and will
not include any untrue statement of a material fact or omit to state a
material fact necessary to make the statements therein not misleading. If
Stockholders, or, prior to Closing, Company, becomes aware of any fact or
circumstance which would change a representation or warranty of Company or
Stockholders in this Agreement or any other statement made or document
provided to Buyer, the party with such knowledge shall promptly give written
notice of such fact or circumstance to Buyer. None of (i) such notification,
(ii) any pre-Closing investigation made by Buyer of Company, its properties,
businesses or assets, or (iii) the Closing contemplated by this Agreement,
shall relieve Stockholders or Company of their obligations under this
Agreement, including their representations and warranties made in this
Section 5.
6. REPRESENTATIONS AND WARRANTIES OF BUYER AND PARENT. Buyer and Parent,
jointly and severally, represent and warrant to each Stockholder that the
statements contained in this Section 6: (i) are correct and complete as of
the date of this Agreement; (ii) will be correct and complete as of the
Closing Date (as though made then and as though the Closing Date were
substituted for the date of this Agreement throughout this Section 6); and
(iii) shall survive the Closing in accordance with Article 12 hereof.
6.1 CORPORATE ORGANIZATION. Buyer is duly incorporated, validly
existing and in good standing under the laws of the State of Texas. Parent
is duly incorporated, validly existing and in good standing under the laws of
the State of Delaware. Buyer and Parent are each duly authorized, qualified
and licensed under all applicable laws, regulations and ordinances of public
authorities to carry on their businesses in the places and in the manner as
now conducted except for where the failure to be so authorized, qualified or
licensed would not have a material adverse affect on such businesses.
6.2 CORPORATE AUTHORITY. The officers of Buyer and Parent executing
this Agreement have the corporate authority to enter into and bind Buyer and
Parent to the terms of this Agreement and
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Buyer and Parent have taken all necessary corporate action (including,
without limitation, approval by their respective Boards of Directors) to
authorize the execution, delivery and performance of this Agreement. All
corporate action by Buyer and Parent necessary to approve the transaction,
including both director and (if required) shareholder approvals, has been
taken.
6.3 NO CONFLICTS. The execution, delivery and performance of this
Agreement, the consummation of any transactions herein referred to or
contemplated hereby and the fulfillment of the terms hereof and thereof,
including, without limitation, the provisions of Article 2 and Section 10.4,
will not:
(i) conflict with, or result in a breach or violation of the Articles
of Incorporation or Bylaws of Buyer or Parent;
(ii) conflict with, or result in a breach under any document,
agreement or other instrument to which Buyer or Parent is a party, or
result in the creation or imposition of any lien, charge or encumbrance on
any properties of Buyer or Parent pursuant to: (A) any law or regulation
to which Buyer or Parent, or their respective property is subject, or (B)
any judgment, order or decree to which Buyer or Parent is bound or their
respective property is subject; or
(iii) result in termination or any impairment of any material permit,
license, franchise, contractual right or other authorization of Buyer or
Parent.
6.4 BINDING AGREEMENT. This Agreement is the binding and valid
obligation of Buyer and Parent, enforceable against them in accordance with
its terms.
6.5 SEC FILINGS AND FINANCIAL INFORMATION. Buyer and Parent have timely
made all filings required to be made by them with the SEC. None of such
filings contains any untrue statement of material fact or omits to state a
material fact necessary to make the statements therein not misleading in
light of the circumstances in which they were made.
6.6 FINANCIAL INFORMATION. Parent has delivered to Company true copies
of the following: (i) its filings under the Act; (ii) all reports on Form
8-K's for the past twelve months, if any; (iii) all exhibits filed with such
forms or reports, if any. The foregoing filings and reports, as of their
respective dates, did not contain any untrue statement of a material fact or
omit to state a material fact required to be stated therein or necessary to
make the statements therein not misleading. Since
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the date of filing of Parent's Form S-1, there has not been any material
adverse change in the business, properties, financial condition or prospects
of Parent. Buyer has conducted no business prior to the Effective Date.
6.7 TAXATION. Parent has prepared and filed with the appropriate
governmental agencies all federal, state and local tax returns required to be
filed by it and has paid all taxes shown thereon to be payable or which have
become due pursuant to any assessment, deficiency notice or similar notice
received by it. Parent is not a party to any pending action or proceeding by
any governmental authority for assessment or collection of taxes and no claim
therefor has been asserted against it.
6.8 PARENT STOCK. The Parent Stock to be issued pursuant to Section 2.1
above, is validly issued and authorized and shall be issued and delivered free
and clear of all liens, claims and encumbrances except for the restrictions set
forth in this Agreement. Buyer and Parent are not a party to any agreement
creating rights in any person or entity with respect to such shares of stock
(other than this Agreement) or relating to the voting thereof. The registration
rights and obligations described in Sections 2.1 and 10.4 hereof are enforceable
according to their terms and are not affected by any other contract, agreement,
or commitment to which Parent, Buyer or any affiliate if either is a party.
6.9 FINANCIAL AND BUSINESS. Buyer has no material assets or liabilities
other than the stock it is acquiring in Company. All of the issued and
outstanding capital stock of Buyer is owned by Parent.
7. COVENANTS.
7.1 ACCESS TO LAND AND RECORDS. Between the date of this Agreement and
the Closing Date, Stockholders will cause Company to afford to or obtain for the
officers and authorized representatives of Buyer access to all of the Land
(including, without limitation, for the purpose of performing all testing,
inspections and other procedures considered desirable by Buyer), sites, books
and records, including, without limitation, the Environmental Documents, at all
reasonable times and upon reasonable notice and will furnish Buyer with such
additional financial and operating data and other information as to the business
and properties, both current and former, of
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Company as Buyer may from time to time reasonably request. Buyer agrees to
repair all damage, if any, caused by Buyer's entry onto the Land prior to
Closing. Stockholders will cooperate, and will cause Company to cooperate,
with Buyer, its representatives, engineers, auditors and counsel in the
preparation of any documents or other material which may be required in
connection with any documents or materials required by any governmental
agency. Buyer will cause all information obtained in connection with the
negotiation and performance of this Agreement to be treated as confidential
in accordance with the provisions of Article 14 hereof.
7.2 COMPANY ACTIVITIES PRIOR TO CLOSING. Between the date of this
Agreement and the Closing Date, Stockholders will cause Company:
(i) to carry on its business in substantially the same manner as it
has heretofore and not to introduce any material new method of management,
operation or accounting;
(ii) to maintain its properties and facilities, including those held
under leases, in as good working order and condition as at present, ordinary
wear and tear excepted;
(iii) to perform its obligations under agreements relating to or
affecting its assets, properties or rights, including payment of debts as
they become due;
(iv) to keep in full force and effect present insurance policies or
other comparable insurance coverage with reputable insurers;
(v) to use reasonable efforts to maintain and preserve its business
organization intact, retain employees and maintain relationships with
suppliers, customers, consultants, independent contractors and others
having business relations with Company;
(vi) to maintain compliance with all Applicable Laws;
(vii) to maintain and perform present debt and lease instruments in
accordance with their terms and not enter into new or amended debt or lease
instruments, without the prior written consent of Buyer;
(viii) to pay and provide salaries and commissions for all officers,
directors, employees and agents at levels no higher than those on Schedule
5.14;
(ix) to provide the interim financial statements required by Section
5.6; and
(x) to provide all reasonable assistance to Buyer to provide for an
orderly
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transfer of operating control of Company to Buyer.
7.3 PROHIBITED ACTIVITIES PRIOR TO CLOSING. Between the date of this
Agreement and the Closing Date, Stockholders will cause Company not, without the
prior written consent of Buyer:
(i) to amend the Articles of Incorporation or Bylaws of Company;
(ii) to change the authorized capital of Company or the equity
ownership of Company or grant any options, warrants, puts, calls, conversion
rights or commitments relating to the equity interests of Company;
(iii) to declare or pay any dividend of Company or directly or
indirectly purchase, redeem or otherwise acquire or retire for value or
issue any shares of stock of Company;
(iv) to enter into any contract or commitment or incur or agree to
incur any liability or make any capital expenditures in excess of an
aggregate of $5,000;
(v) to increase the compensation payable or to become payable to any
officer, director, stockholder, employee, consultant or agent, or make any
bonus or management fee payment to any such person;
(vi) to create or assume any mortgage, pledge or other lien or
encumbrance upon any assets or properties whether now owned or hereafter
acquired;
(vii) to sell, assign, lease or otherwise transfer or dispose of any
property or equipment;
(viii) to negotiate to acquire any business or begin any new business or
project;
(ix) to merge or consolidate or agree to merge or consolidate with or
into any other corporation;
(x) to waive any of its rights or claims;
(xi) to breach or permit a breach of, amend or terminate, any material
agreement, or any permit, license or other agreement or right to which
Company is a party;
(xii) to enter into any other transaction outside the ordinary course
of its business or otherwise prohibited hereunder;
(xiii) to make any oral or written public announcement concerning this
transaction except as may be required by law, all of which announcements, if
any, shall be forwarded to Buyer for review and comment at least seven days
prior to dissemination; or
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(xiv) to allow any other action or omission, or series of actions or
omissions, by Company or Stockholders that would cause a representation and
warranty of Company and Stockholders made in Section 5.21 of this Agreement
to be untrue on the Closing Date.
7.4 POOLING OF INTERESTS; REORGANIZATION. During the period from the date
of this Agreement through the Effective Date of the Merger, unless the other
parties shall otherwise agree in writing, neither Stockholders nor Company shall
intentionally (a) take or fail to take any action, which action or failure to
act would jeopardize the treatment of Company's combination with Buyer as a
"pooling-of-interest" for accounting purposes, or (b) take or fail to take any
action, which action or failure to act would jeopardize qualification of the
Merger as a reorganization within the meaning of Section 368(a) of the Code.
7.5 CONTACT WITH GOVERNMENT OFFICIALS. Company and Stockholders shall
each use their best efforts to cooperate with Buyer in making contact with the
appropriate governmental agencies and officials having information about or
jurisdiction over Company, the Stockholders or the Land, including, without
limitation, environmental and land use agencies and officials in order to assist
Buyer in completing its regulatory evaluation of Company and the Land.
8. CONDITIONS PRECEDENT TO OBLIGATIONS OF COMPANY AND STOCKHOLDERS. The
obligations of Stockholders and Company hereunder are subject to the completion,
satisfaction, or at their option, waiver, on or prior to the Closing Date, of
the following conditions.
8.1 REPRESENTATIONS AND WARRANTIES. The representations and warranties of
Buyer and Parent contained in this Agreement shall be accurate on and as of the
Closing Date with the same effect as though such representations and warranties
had been made on and as of such date; and each and all of the terms, covenants
and conditions of this Agreement to be complied with and performed by Buyer or
Parent on or before the Closing Date shall have been duly complied with and
performed.
8.2 CONSENTS. All necessary notices to, consents of and filings with any
governmental authority or agency or other third party relating to the
consummation of the Closing or the other transactions contemplated herein to be
made or obtained by Buyer shall have been obtained and
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made.
8.3 NO ADVERSE PROCEEDING. No action or proceeding before a court or any
other governmental agency or body shall have been instituted or, to the best of
Stockholders's knowledge, threatened to restrain or prohibit any of the
transactions contemplated by this Agreement.
8.4 NONCOMPETITION AGREEMENT. The Surviving Corporation shall have
executed and delivered at the Closing the Noncompetition Agreement with
Stockholders (the "Noncompetition Agreement"), in form and substance
satisfactory to Buyer and Stockholders.
8.5 TEXLINE NOTES. Buyer shall have paid the then outstanding principal
balance (and accrued but unpaid interest) of the Texline promissory notes on the
Closing Date.
8.6 PARENT STOCK. On the Closing Date, Buyer shall deliver to
Stockholders certificates for all of the Parent Stock, with all necessary and
appropriate legends thereon, not subject to any preemptive rights, free and
clear of all liens, claims and encumbrances, except for the restrictions set
forth in this Agreement.
8.7 ANCILLARY DOCUMENTS. On the Closing Date, Buyer shall have executed
and delivered that certain Executive Employment Agreement with John E. Tuma,
that certain Purchase of Membership Interests Agreement relating to Re-Claim
Environmental Louisiana, L.L.C. and that certain Lease Agreement referenced
therein.
8.8 CERTAIN PERSONALTY.
(a) TUMA EQUIPMENT. Notwithstanding other provisions hereof, the
parties acknowledge that the personalty described in Schedule 8.8 hereto is
owned by John E. Tuma, individually and used by the Company (some pursuant
to leases and rental paid by Company to John E. Tuma). Buyer and Parent
agree that all such personalty shall either be purchased by Company from
Tuma at Closing, continue to be leased by Company (with Company assuming
such lease and releasing Tuma from any liability or guaranty); all in
accordance with Schedule 8.8 hereto.
(b) INTER-COMPANY EQUIPMENT. Notwithstanding other provisions
hereof, three items of equipment are owned by Company and used by Re-Claim
Environmental Louisiana, L.L.C. ("RE-LA"), as described in Schedule 8.8.
Buyer agrees to either (i)
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continue to let RE-LA use such equipment so long as RE-LA pays (or
reimburses) Company for the applicable lease or note payments, or (ii)
transfer the applicable leases and/or purchase notes to RE-LA with RE-LA
assuming ownership (or lessee status).
8.9 RULE 144. Parent shall use its best efforts to cause all filings
required with the SEC to be made of Parent's current public information so that
Stockholders shall have available Rule 144 for the resale of the Parent Stock as
soon as practicable under Rule 144. As soon as resales are possible under Rule
144, at the written request of Stockholders proposing to sell securities in
compliance with Rule 144, Company shall (i) forthwith furnish to Stockholders a
written statement of compliance with the filing requirements of the SEC as set
forth in Rule 144, as such rule may be amended form time to time, and (ii)
timely file and make available to the public and Stockholders all such reports
and other information as will enable Stockholders to make sales, subject to the
express limitations of this Agreement, pursuant to Rule 144 beginning one year
after the date of the acquisition of the Parent Stock.
9. CONDITIONS PRECEDENT TO OBLIGATIONS OF BUYER AND PARENT. The obligations
of Buyer and Parent hereunder are subject to the completion, satisfaction or, at
their option, waiver, on or prior to the Closing Date, of the following
conditions.
9.1 REPRESENTATIONS AND WARRANTIES. The representations and warranties of
Stockholders and Company contained in this Agreement shall be accurate on and as
of the Closing Date with the same effect as though such representations and
warranties had been made on and as of such date, and Buyer shall have received a
certificate from Stockholders to that effect, or setting forth any discrepancies
in such representations and warranties which have arisen since the date of this
Agreement. The foregoing notwithstanding, Company and Stockholders agree that
no limitation of any representation or warranty concerning the knowledge of
Company or Stockholders or any qualification of such representations and
warranties set forth in the certificate contemplated in the first sentence of
this Section 9.1 shall restrict Buyer's right to terminate this Agreement if any
representation or warranty of Stockholders or Company is inaccurate as of the
Closing Date.
9.2 COVENANTS. Each and all of the terms, covenants and conditions of
this Agreement to be complied with and performed by Stockholders and Company on
or before the Closing Date
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shall have been duly complied with and performed.
9.3 NO ADVERSE PROCEEDING. No action or proceeding before a court or any
other governmental agency or body shall have been instituted or, to the best of
Buyer's knowledge, threatened to restrain or prohibit any of the transactions
contemplated by this Agreement, and no governmental agency or body shall have
taken any other action or made any request of Buyer as a result of which the
management of Buyer deems it inadvisable to proceed with the transactions
hereunder.
9.4 GENERAL RELEASE. Stockholders shall have delivered to Buyer an
instrument dated the Closing Date releasing Company, Parent, Buyer and the
Surviving Corporation from any and all claims of Stockholders against Company,
Parent, Buyer and the Surviving Corporation arising out of events which occurred
prior to the Closing (but not including any claims pursuant to this Agreement).
9.5 CONSENTS. All necessary notices to, consents of and filings with any
governmental authority or agency or other third party relating to the
consummation of the Closing or the other transactions contemplated herein to be
made or obtained by Company or Stockholders shall have been obtained and made.
9.6 RESIGNATIONS. Each officer and director of Company shall have
delivered to Buyer their written resignation.
9.7 GOOD STANDING CERTIFICATES. Stockholders shall have delivered to
Buyer certificates, dated as of a date no earlier than 10 days prior to the
Closing Date, duly issued by the appropriate governmental authority or
authorities showing that Company is in good standing in its state of
incorporation.
9.8 UPDATED AGREEMENTS. Stockholders shall have delivered to Buyer a
schedule (Schedule 9.8) dated the Closing Date, listing all material agreements
entered into by Company since the date of Schedule 5.12, which new agreements
must have been determined to be acceptable to Buyer in its sole discretion.
9.9 NONCOMPETITION AGREEMENT. The Noncompetition Agreement shall have
been executed and delivered by all parties thereto at the Closing.
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9.10 DELIVERY OF COMPANY STOCK. Stockholders shall have delivered to
Buyer certificates representing all Company Stock, duly endorsed in blank by
Stockholders or accompanied by stock powers duly executed in blank and with all
necessary transfer tax and other revenue stamps affixed and cancelled at
Stockholders's expense, none of which certificates shall bear any restrictive
legend other than those related to compliance with the Act.
9.11 ENVIRONMENTAL REVIEW. Buyer, through its authorized representatives,
must have completed a review (including, without limitation, all testing,
inspections and other procedures, review of existing files of, and discussions
with, governmental agencies and officials having jurisdiction over Company) of
the Land and the environmental and land use practices, procedures, operations
and activities of Company; the results of which review, without limiting the
generality of the foregoing, reflects compliance with all Applicable Laws
governing the Land and the operations of Company, discloses no actual or
probable violations, compliance problems, required capital expenditures or other
substantive environmental, land use or real estate related concerns and are
otherwise satisfactory in all respects to Buyer in its sole discretion.
9.12 TRANSFERABILITY OF PERMITS. Buyer shall have determined, in its sole
discretion, that prior to, or as a result of, this transaction, all of the
permits required for the operation of the Business and the Facility have been
transferred to the Surviving Corporation (as a matter of law or otherwise) or
can be transferred to the Surviving Corporation without a public hearing before
any governmental body and that all consents or other approvals necessary for the
Surviving Corporation's continued use of such permits after the Merger have been
obtained.
9.13 GENERAL. All actions taken by Stockholders and Company in connection
with the consummation of the transactions contemplated hereby and all
certificates, opinions and other documents required to effect the transactions
contemplated hereby will be reasonably satisfactory in form and substance to
Buyer.
10. POST CLOSING COVENANTS.
10.1 TAXES. (i) Stockholders irrevocably agree to indemnify the
Surviving Corporation against, and to hold the Surviving Corporation harmless
from:
(a) any and all federal, state, local, and other taxes of
Company arising
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from the audit, examination, review or other adjustment (all by
a governmental entity or court) of tax liabilities for periods ending
on or prior to the Closing Date;
(b) any and all taxes, interest, penalties, additions to tax (or
additional amounts imposed with respect to any such interest,
penalties, or additions to tax) imposed with respect to any federal,
state, local, or other taxes of Company for periods ending on or
before the Closing Date; and
(c) any and all federal, state, local, or other taxes of the
Surviving Corporation arising as the result of any payment by the
Stockholders to Buyer in fulfillment of his obligation pursuant to this
Section 10.1(i).
(ii) Parent and Buyer agree that they shall be responsible, at their
sole expense, for the preparation of Company's federal, state, local and
other income and franchise tax returns (and all taxes, penalties and
interest shown to be due thereon) for the tax periods beginning January 1,
1997 and ending on the Closing Date. The Surviving Corporation agrees to
cooperate with Stockholders in the preparation of such returns. Parent and
Buyer further agree that they shall pay all taxes (including all penalties
and interest, if any) due for such tax period; provided, however, that the
amount of such taxes, penalties and interest shall be considered a current
liability in calculating Actual Net Working Capital. Prior to filing the
returns provided for in this paragraph, the Surviving Corporation agrees to
allow Stockholders 20 business days to review such returns.
10.2 POST CLOSING BALANCE SHEET. On the date which is 60 days after the
Closing Date (the "Adjustment Date") the parties shall adjust the Purchase Price
in accordance with Section 2.4 based on a balance sheet of Company for the
period ending on the close of business on the Closing Date, prepared by the
Surviving Corporation's regular independent accountant in accordance with GAAP
and delivered to Parent and Stockholders, together with the supporting
documentation for all current assets and liabilities used to prepare such
balance sheet, at least seven days prior to the Adjustment Date. No accounts
receivable shall be written off in whole or in part in connection with preparing
such balance sheet. Any dispute between the parties as to this Section 10.2
shall be resolved in accordance with the procedure set forth in Section 2.4.
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10.3 CLOSING DATE ACTIONS. Buyer and Stockholders mutually agree that
they shall not, and shall cause Company not to, engage in an transaction outside
the normal course of business on the Closing Date.
10.4 REGISTRATION OF PARENT STOCK.
(a) Stockholder acknowledges that the Unregistered Parent Stock to be
delivered to Stockholders pursuant to this Agreement will not be registered with
the United States Securities and Exchange Commission (the "SEC") under the
Securities Act of 1933, as amended (the "Act"), prior to delivery to
Stockholders and as such will not be readily transferable.
(b) On or prior to a date one-month after the first anniversary of the
Closing Date (the "Registration Date"), Parent agrees to use its best efforts to
file a registration statement with the SEC to register for sale the aggregate
Parent Stock that remains unregistered on the Registration Date (the
"Registration Stock") received by Stockholders (the "Registration Statement").
(c) If the Registration Statement is not effective on or before the
Registration Date, then Parent agrees to employ all reasonable means, using its
best efforts, to make the Registration Statement effective as soon as
practicable thereafter.
(d) Parent agrees to use its best efforts to keep the Registration
Statement continually effective for a period of forty-five (45) days after the
date the Registration Statement is declared effective.
(e) In connection with Parent's obligation to file the Registration
Statement, Parent agrees to, as soon reasonably practicable, file any amendments
to the Registration Statement that may be required and complete all required
state securities or "blue sky" compliance procedures (the "State Securities
Laws").
(f) All expenses incident to Parent's performance of or compliance with
this Agreement, including without limitation, all registration and filing fees,
including fees with respect to filings required to be made with the National
Association of Securities Dealers, Inc., fees and expenses of compliance with
the State Securities Laws (including reasonable fees and disbursements of
Parent's counsel in such jurisdiction as the Stockholders reasonably request),
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printing expenses, reasonable fees and expenses of Parent's independent public
accountants will be borne by Parent. Parent will pay the expenses of any annual
audit, the fees and expenses incurred in connection with the listing of the
Parent Stock registered pursuant to the Registration Statement, and the fees and
expenses of any person, including special experts, retained by the Parent.
(g) In the event that Stockholders may sell an amount of Registration
Stock equal to or greater than the amount to be registered hereunder, pursuant
to Rule 144 under the Act on the Registration Date, then Parent shall be under
no obligation to file the Registration Statement or any other registration
statement and Stockholders' rights under this section shall terminate on the
Registration Date.
10.5 TRADE PAYABLES. The Surviving Corporation agrees to pay all of the
trade payables of Company existing on the Closing Date within 30 days after
Closing.
10.6 RELEASE OF PERSONAL GUARANTIES. The Surviving Corporation agrees to
use its reasonable efforts to have each of the Stockholders released from any
personal guaranties and lease obligations entered into by such Stockholder in
connection with a Company debt or lease that is not being paid off within 60
days after the Closing Date. Parent shall indemnify, defend and hold harmless
Stockholders for any loss or other matter suffered as a result of such personal
guaranties prior to release. If the Surviving Corporation cannot obtain a
release with 60 days, the Surviving Corporation will pay off the underlying
obligation in full.
10.7 FURTHER ASSURANCE. From time to time on and after the Closing and
without further consideration, the parties hereto shall each deliver or cause to
be delivered to any other party at such times and places as shall be reasonably
requested, such additional instruments as any of the others may reasonably
request for the purpose of carrying out this Agreement and the transaction
contemplated hereby. Stockholders, also without further consideration, agree to
cooperate with the Surviving Corporation and to use his reasonable efforts to
have the present officers and employees of Company cooperate on and after the
Closing Date in furnishing to the Surviving Corporation information, evidence,
testimony, and other assistance in connection with obtaining all necessary
permits and approvals and in connection with any actions, proceedings,
arrangements or disputes of any nature with respect to matters pertaining to all
periods prior to the Closing Date. Stockholders
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acknowledge and agree that, from and after the Closing, the Surviving
Corporation shall be entitled to possession of all documents, books, records
(including tax records), agreements and financial and operating data of any
sort of Company; provided that all such material shall be made available to
Stockholders for their preparation of tax returns, audits and other matters.
10.8 ANNOUNCEMENT OF EARNINGS. Parent agrees to announce and complete
publication and dissemination of consolidated financial results which include
results of the combined operations of Parent and Company for at least 30 days as
promptly as possible, but no later than they would be required to be law
(__________).
10.9 TRANSITION. Stockholders will not take any action that is designed
or intended to have the effect of discouraging any customer or business
associate of Company from maintaining the same business relationships with the
Surviving Corporation after the Closing that it maintained with Company before
the Closing. Stockholders will refer all customer inquiries relating to the
Business to the Surviving Corporation from and after the Closing. Further,
Stockholders agree that for a period of 90 days following the Closing Date,
Stockholders will assist the Surviving Corporation, at the Surviving
Corporation's request and expense, with the orderly transition of the operations
of Company from Stockholders to the Surviving Corporation (including, without
limitation, recommendations, advice and interaction with customers and potential
customers of Company, and governmental agencies).
10.10 SURVIVAL. The covenants in this Article 10 shall survive the
Closing in accordance with Article 12 hereof.
10.11 ENVIRONMENTAL REPORTS. Parent agrees to deliver full copies of the
two environmental studies/reports obtained by Parent during the prior two weeks;
one pertaining to the Land and one pertaining to the facility in Shreveport
owned by Reyncor Industrial Alcohol, Inc.
11. POOLING ACCOUNTING.
11.1 RESTRICTIONS ON RESALE; LEGENDS. Parent has informed Stockholders
that it is a material factor to Parent in entering into this Agreement that the
transactions contemplated by this
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Agreement be treated as a "pooling-of-interests" for accounting purposes.
Therefore, notwithstanding any other provision of this Agreement, prior to
the publication and dissemination by Parent of consolidated financial results
which include results of combined operations of Company and Parent for at
least 30 days on a consolidated basis following the Closing Date,
Stockholders shall not sell or otherwise transfer or dispose of, or in any
other way reduce their risk relative to any shares of the Registered Parent
Stock received by Stockholders (including, by way of example and not
limitation, engaging in put, call, short-sale, straddle or similar market
transactions). The SEC has issued Accounting Series Release Nos. 130 and
135, as amended (collectively, the "ASRs"), setting forth certain
restrictions applicable to the availability of "pooling-of-interest"
accounting treatment in transactions of the type contemplated by this
Agreement. Stockholders, therefore, covenant and agree with Parent to hold
their shares of Registered Parent Stock and to comply with the certificates
evidencing the Registered Parent Stock to be received by Stockholders which
will bear a legend substantially in the form set forth below and containing
such other information as Parent may deem necessary or appropriate:
THE SHARES REPRESENTED BY THIS CERTIFICATE MAY NOT BE SOLD,
TRANSFERRED OR ASSIGNED, AND THE ISSUER SHALL NOT BE REQUIRED
TO GIVE EFFECT TO ANY ATTEMPTED SALE, TRANSFER OR ASSIGNMENT
PRIOR TO THE PUBLICATION AND DISSEMINATION OF FINANCIAL
STATEMENTS BY THE ISSUER WHICH INCLUDE THE RESULTS OF AT LEAST
THIRTY (30) DAYS OF COMBINED OPERATIONS OF THE ISSUER AND THE
COMPANY ACQUIRED BY THE ISSUER FOR WHICH THESE SHARES ARE ISSUED.
UPON THE WRITTEN REQUEST OF THE HOLDER OF THIS CERTIFICATE, THE
ISSUER AGREES TO REMOVE THIS RESTRICTIVE LEGEND (AND ANY STOP
ORDER WITH THE TRANSFER AGENTS) WHEN THE REQUIREMENTS OF
ACCOUNTING SERIES RELEASE NOS. 130 AND 135, AS AMENDED, OF THE
SECURITIES AND EXCHANGE COMMISSION HAVE BEEN MET.
11.2 INDEMNIFICATION. Stockholders covenant and agree that they will
indemnify and hold harmless Parent from and after the Closing Date against any
and all losses, damages, liabilities, claims, deficiencies, costs, expenses or
expenditures (excluding any exemplary consequential and punitive damages)
resulting from a breach by Stockholders of the restrictions set forth in Section
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11.1, the ASRs or Stockholders' representations and warranties set forth in this
Agreement which directly results in Parent not being able to account for the
transactions contemplated herein as a "pooling-of-interest" reorganization or in
the transactions not qualifying as a tax free reorganization.
12. INDEMNIFICATION.
12.1 SURVIVAL OF REPRESENTATIONS, WARRANTIES AND COVENANTS; LIMITATION OF
LIABILITY.
(a) All of the representations, warranties and covenants of any party
hereto contained in this Agreement and the liabilities and obligations of the
parties with respect thereto shall survive the Closing for a period of one year
from the Closing Date; provided, however, the representations set forth in
Sections 5.6, 5.7 and 5.8 (concerning financial statements) shall survive until
the date of the first report of the independent auditors with respect to the
audited financial statements of Parent containing the combined operations of
Parent and Company; and provided further that the specific representations
contained in Section 5.2 (concerning stock ownership) shall survive until the
expiration of the statute of limitations applicable to persons claiming stock
ownership in Company and the specific representations contained in Section 6.2
shall survive until the expiration of the applicable statute of limitations (in
each case, the "Expiration Date").
(b) Notwithstanding any other provisions hereof, all obligations of
Stockholders hereunder including the indemnification obligations set forth in
this Agreement shall be several (and not joint and several) and shall apply only
after the aggregate amount of all such obligations exceed $25,000, at which time
the indemnification obligations shall be effective as to all amounts, including
the initial $25,000. In addition, notwithstanding any other provision hereof,
the aggregate liability of each Stockholder pursuant to this Agreement shall not
exceed the total aggregate purchase price received by each such Stockholder.
12.2 GENERAL INDEMNIFICATION BY STOCKHOLDERS. Stockholders agree that
they will, severally, indemnify, defend (as to third party claims only), protect
and hold harmless Buyer, the Surviving Corporation, Company and their respective
officers, shareholders, directors, divisions, subdivisions, affiliates,
subsidiaries, parent, agents, employees, successors and assigns at all times
from and after the date of this Agreement until the Expiration Date from and
against all liabilities
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claims, damages, actions, suits, proceedings, demands, assessments,
adjustments, penalties, losses, costs and expenses whatsoever (including
specifically, but without limitation, court costs, reasonable attorneys' fees
and reasonable expenses, and reasonable expenses of investigation) ("Claims")
whether equitable or legal, matured or contingent, known or unknown, foreseen
or unforeseen, ordinary or extraordinary, patent or latent, whether arising
out of occurrences prior to, at or after the date of this Agreement, incurred
as a result of or incident to: (a) any breach of, misrepresentation in,
untruth in or inaccuracy in the representations and warranties by Company or
Stockholders (including, without limitation, those relating to the
environmental condition of the Land and Company's environmental compliance),
set forth herein or in the Schedules, Exhibits or certificates attached
hereto or delivered pursuant hereto; (b) nonfulfillment or nonperformance of
any agreement, covenant or condition on the part of Stockholders made in this
Agreement; (c) nonfulfillment or nonperformance of any agreement, covenant or
condition on the part of Company made in this Agreement and to be performed
on or before the Closing Date; (d) the matters set forth in Section 11.1; (e)
the existence of liabilities of Company in excess of the liabilities
represented by Stockholders and Company consistent with Sections 2.4 and
10.2; and (f) any claim by a third party that, if true, would mean that a
condition for indemnification set forth in subsections (a) through (e) of
this Section 12.2 had been satisfied.
12.3 SPECIFIC INDEMNIFICATION BY STOCKHOLDERS. Notwithstanding the above,
Stockholders agree that they will, severally, indemnify, defend, protect and
hold harmless Buyer, the Surviving Corporation, Company and their respective
officers, shareholders, directors, divisions, subdivisions, affiliates,
subsidiaries, agents, parent, employees, successors and assigns at all times
from and after the date of this Agreement, against all Claims (including
specifically, but without limitation, reasonable attorneys' fees and expenses of
investigation) incident to any of the following:
(a) a claim by a person of stock ownership in Company, which shall
survive until the expiration of the status of limitations applicable to
persons claiming stock ownership in such Company; and
(b) The litigation specified on Schedule 5.19.
As to the matters set forth in (b) above, Company shall promptly pay the
first $200,000 of
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any Claims and the Stockholders shall pay any excess. If the matters set
forth in (b) above are finally resolved (either by settlement or judgment)
and the aggregate amount of the Claims (as to the items in [b] above) is less
than $200,000, then Company shall pay to Stockholders an amount equal to the
difference between $200,000 and the aggregate amount of such Claims. All
decisions as to handling of the matters described in (b) above (including
settlement) shall be made by Stockholders having held (on the Closing Date) a
majority of the Company stock.
12.4 INDEMNIFICATION BY PARENT AND THE SURVIVING CORPORATION. Parent and
the Surviving Corporation, jointly and severally, agree that they will
indemnify, defend, protect and hold harmless Stockholders, their respective
heirs, executors, assigns and personal representatives, at all times from and
after the date of this Agreement from and against all liabilities, claims,
damages, actions, suits, proceedings, demands, assessments, adjustments,
penalties, losses costs and expenses whatsoever (including specifically, but
without limitation, court costs, reasonable attorneys' fees and expenses and
reasonable expenses of investigation) whether equitable or legal, matured or
contingent, known or unknown, foreseen or unforeseen, ordinary or extraordinary,
patent or latent arising out of occurrences after the date hereof, incurred as a
result of or incident to: (i) any breach of, misrepresentation in, untruth in
or inaccuracy in the representations and warranties set forth herein, or in the
Schedules or certificates attached hereto or delivered pursuant hereto by Parent
or Buyer; (ii) nonfulfillment or nonperformance of any agreement, covenant or
condition on the part of Buyer or Parent made in this Agreement; (iii) the
operation of Company after the Closing Date (other than Stockholder
indemnification matters set forth herein); and (iv) any claim by a third party
that, if true, would mean that a condition for indemnification set forth in
subsections (i) or (ii) of this Section 12.4 had been satisfied.
12.5 PROCEDURE FOR INDEMNIFICATION WITH RESPECT TO THIRD PARTY CLAIMS.
(a) If any third party shall notify a party to this Agreement (the
"Indemnified Party") with respect to any matter (a "Third Party Claim") that may
give rise to a claim for indemnification against any other party to this
Agreement (the "Indemnifying Party") or if any party who may make a claim for
indemnification under this Agreement otherwise becomes aware of any matter that
may give rise to such a claim or wishes to make such a claim (whether or not
related to a Third Party
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Claim), then the Indemnified Party shall promptly notify each Indemnifying
party thereof in writing; provided, however, that no delay on the part of the
Indemnified Party in notifying any Indemnifying Party shall relieve the
Indemnifying Party from any obligation hereunder unless (and then solely to
the extent) the Indemnifying Party is thereby prejudiced.
(b) Any Indemnifying Party will have the right to defend the
Indemnified Party against a Third Party Claim with counsel of its choice
reasonably satisfactory to the Indemnified Party so long as (i) the
Indemnifying Party notifies the Indemnified Party in writing within a
reasonable time after the Indemnified Party has given notice of the Third
Party Claim that the Indemnifying Party will indemnify the Indemnified
Party from and against the entirety of any adverse consequences (which will
include, without limitation, all losses, claims, liens, and attorneys' fees
and related expenses) the Indemnified Party may suffer resulting from,
arising out of, relating to, in the nature of, or caused by the Third Party
Claim, to the extent covered by Sections 12.2, 12.3 or 12.4 hereof, as
applicable, (ii) the Indemnifying Party provides the Indemnified Party with
evidence acceptable to the Indemnified Party that the Indemnifying Party
will have the financial resources to defend against the Third Party Claim
and fulfill its indemnification obligations hereunder, (iii) the Third
Party Claim involves principally non-monetary damages and does not seek as
a primary focus an injunction or temporary or permanent restraining order
or involve the possibility of criminal penalties, (iv) settlement of, or
adverse judgment with respect to the Third Party Claim is not, in the good
faith judgment of the Indemnified Party, likely to establish a precedential
custom or practice adverse to the continuing business interests of the
Indemnified Party, and (v) the Indemnifying Party conducts the defense of
the Third Party Claim actively and diligently.
(c) So long as the Indemnifying Party is conducting the defense of
the Third Party Claim in accordance with Section 12.5(b) above, (i) the
Indemnified Party may retain separate co-counsel at its sole cost and
expense and participate in the defense of the Third Party Claim, (ii) the
Indemnified Party will not consent to the entry of any judgment or enter
into any settlement with respect to the Third Party Claim without the prior
written
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consent of the Indemnifying Party (which will not be unreasonably withheld)
and (iii) the Indemnifying Party will not consent to the entry of any
judgment or enter into any settlement with respect to the Third Party Claim
without the prior written consent of the Indemnified Party (which will not
be unreasonably withheld).
(d) In the event or to the extent that any of the conditions set
forth in Section 12.5(b) above is or becomes unsatisfied, however, (i) the
Indemnified Party may defend against, and consent to the entry of any
judgment or enter into any settlement with respect to, the Third Party
Claim and any matter it may deem appropriate in its sole discretion and the
Indemnified Party need not consult with, or obtain any consent from, any
Indemnifying Party in connection therewith (but will keep the Indemnifying
Party reasonably informed regarding the progress and anticipated cost
thereof), (ii) the Indemnifying Party will reimburse the Indemnified Party
promptly and periodically for the cost of defending against the Third Party
Claim (including reasonable attorneys' fees and reasonable expenses) and
(iii) the Indemnifying Party will remain responsible for any adverse
consequences the Indemnified Party may suffer resulting from, arising out
of, relating to, in the nature of, or caused by the Third Party Claim to
the fullest extent provided in this Article 12; and (iv) the Indemnifying
Party shall be deemed to have waived any claim that its indemnification
obligation should be reduced because of the manner in which the counsel for
the Indemnified Party handled the Third Party Claim. The Indemnifying
Party may retain separate co-counsel at its sole cost and participate in
the defense of the Third Party Claim, but shall not be entitled to direct
the course of such defense. In such instance, the Indemnified Party shall
not agree to a settlement of the defense without the consent of the
Indemnifying Party, which consent shall not be unreasonably withheld. If
the Indemnifying Party refuses to consent to a settlement and the resulting
judgment or later settlement exceeds the previously proposed settlement,
then the Indemnifying Party will be responsible for the entire excess
amount of the judgment or settlement without reference to any limitation on
indemnity set forth in this Agreement.
13. TERMINATION OF AGREEMENT.
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13.1 TERMINATION BY BUYER. Buyer, by notice in the manner hereinafter
provided on or before the Closing Date, may terminate this Agreement in the
event of a breach by Stockholders or Company in the observance or in the due and
timely performance of any of the agreements or conditions contained herein on
their part to be performed, and such breach shall not have been cured on or
before the Closing Date.
13.2 TERMINATION BY STOCKHOLDERS. Stockholders may, by notice in the
manner hereinafter provided on or before the Closing Date, terminate this
Agreement in the event of a breach by Buyer in the observance or in the due and
timely performance of any of the covenants, agreements or conditions contained
herein on their part to be performed, and such breach shall not have been cured
on or before the Closing Date.
13.3 TERMINATION. Either party may terminate this Agreement by written
notice to the other if the Closing has not occurred by October 31, 1997.
14. NONDISCLOSURE OF CONFIDENTIAL INFORMATION.
14.1 NONDISCLOSURE BY STOCKHOLDERS. Stockholders recognize and
acknowledge that they have in the past, currently has, and in the future may
possibly have, access to certain confidential information of Company, such as
lists of customers, operational policies, and pricing and cost policies that are
valuable, special and unique assets of Company and its businesses. Stockholders
agree that, except as may be required by Applicable Laws or other legal process,
they will not disclose such confidential information to any person, firm,
corporation, association or other entity for any purpose or reason whatsoever,
except to authorized representatives of Parent unless such information becomes
known to the public generally through no fault of Stockholders. In the case of
a disclosure required by Applicable Laws or other legal process, Stockholders
shall make no disclosure without prior written notice to Parent. In the event
of a breach or threatened breach by Stockholders of the provisions of this
Section, Parent shall be entitled to an injunction restraining Stockholders from
disclosing, in whole or in part, such confidential information. Nothing herein
shall be construed as prohibiting Parent from pursuing any other available
remedy for such breach or threatened breach, including, without limitation, the
recovery of damages. The provisions of this Section shall apply at all times
prior to the Closing Date and for a period of one year following the
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<PAGE>
Closing.
14.2 NONDISCLOSURE BY PARENT AND BUYER. Parent and Buyer recognize and
acknowledge that they have in the past, currently have, and prior to the Closing
Date, will have access to certain confidential information of Company and
Stockholders, such as lists of customers, operational policies, financial
information and pricing and cost policies that are valuable, special and unique
assets of Company and its businesses. Parent and Buyer agree that, except as
may be required by Applicable Laws or other legal process, they will not
disclose such confidential information to any person, firm, corporation,
association, or other entity for any purpose or reason whatsoever (prior to the
Closing Date as to Company information) without Stockholders's prior written
consent. In the case of a disclosure required by Applicable Laws or other legal
process, neither Parent nor Buyer shall make no disclosure without prior written
notice to Stockholders. In the event of a breach or threatened breach by Parent
or Buyer of the provisions of this Section, Stockholders shall be entitled to an
injunction restraining Parent and Buyer from disclosing, in whole or in part,
such confidential information. Nothing contained herein shall be construed as
prohibiting Stockholders from pursuing any other available remedy for such
breach or threatened breach, including, without limitation, the recovery of
damages. The provisions of this Section shall apply at all times prior to the
Closing Date and for a period of one year following the Closing or the
termination of this Agreement without a Closing having occurred.
15. GENERAL.
15.1 ASSIGNMENT; BINDING EFFECT; AMENDMENT. This Agreement and the rights
of the parties hereunder may not be assigned (except by operation of law, by
will, succession or probate) and shall be binding upon and shall inure to the
benefit of the parties hereto, the successors of the corporate parties hereto,
and the respective heirs and legal representatives of Stockholders. This
Agreement, upon execution and delivery, constitutes a valid and binding
agreement of the parties hereto enforceable in accordance with its terms and may
be modified or amended only by a written instrument executed by all parties
hereto. Parent hereby unconditionally guarantees all obligations of Buyer
hereunder.
15.2 ENTIRE AGREEMENT. This Agreement is the final, complete and
exclusive statement and
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expression of the agreement among the parties hereto with relation to the
subject matter of this Agreement, it being understood that there are no oral
representations, understandings or agreements covering the same subject
matter as this Agreement. This Agreement supersedes, and cannot be varied,
contradicted or supplemented by evidence of any prior or contemporaneous
discussions, correspondence, or oral or written agreements of any kind.
15.3 COUNTERPARTS. This Agreement may be executed simultaneously in two
or more counterparts, each of which shall be deemed an original and all of which
together shall constitute but one and the same instrument.
15.4 NO BROKERS. Company and Stockholders represent and warrant to Buyer
and Parent and Buyer and Parent represent to Stockholders and Company that the
warranting party has had no dealings with any broker or agent so as to entitle
such broker or agent to a commission or fee in connection with the within
transaction; provided that Stockholders have agreed to and shall pay a
commission to Russell Reichert. If for any reason a commission or fee shall
become due, the party dealing with such agent or broker shall pay such
commission or fee and agrees to indemnify and save harmless each of the other
parties from all claims for such commission or fee and from all attorneys' fees,
litigation costs and other expenses relating to such claim.
15.5 EXPENSES OF TRANSACTION. Whether or not the transactions herein
contemplated shall be consummated: (i) Buyer and Parent will pay the fees,
expenses and disbursements of Buyer and Parent and its agents, representatives,
accountants (including, without limitation, any cost of the audit of Company
currently being performed by Arthur Andersen above $30,000.00) and counsel
incurred in connection with the subject matter of this Agreement and any
amendments hereto and all other costs and expenses incurred in the performance
and compliance with all conditions to be performed by Buyer and Parent under
this Agreement; and (ii) Company will pay the fees, expenses and disbursements
of Stockholders and Company and their respective agents, representatives,
accountants and counsel incurred in connection with the subject matter of this
Agreement and any amendments hereto and all other costs and expenses incurred in
the performance and compliance with all conditions to be performed by
Stockholders and Company under this Agreement. All such fees, expenses and
disbursements of Stockholders and Company shall be paid
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<PAGE>
by Company prior to the Closing so as not to become an obligation of the
Surviving Corporation or shall be included as a current liability for
purposes of the calculation of Actual Net Working Capital set forth in
Section 2.4. Stockholders represents and warrants to Buyer that Stockholders
has relied on his own advisors for all legal, accounting, tax or other advice
whatsoever with respect to this Agreement and the transactions contemplated
hereby.
15.6 NOTICES. All notices or other communications required or permitted
hereunder shall be in writing and may be given by depositing the same in United
States mail, addressed to the party to be notified, postage prepaid and
registered or certified with return receipt requested, by overnight courier or
by delivering the same in person to such party.
(a) If to Buyer, addressed to it at:
U S Liquids Inc.
411 N. Sam Houston Parkway East
Houston, TX 77060
ATTN: W. Gregory Orr
with a copy to:
U S Liquids Inc.
411 N. Sam Houston Parkway East
Houston, TX 77060
ATTN: David Turkal
and a copy to:
Elaine A. Chotlos, Esq.
Baker & Hostetler LLP
3200 National City Center
1900 E. 9th Street
Cleveland, OH 44114-3485
(b) If to Stockholders, addressed to them at:
7026 Lawndale Avenue
Houston, TX 77023
with a copy to:
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<PAGE>
P.O. Box 1050
Corpus Christi, TX 78403
and a copy to:
Warren A. Hoffman, Esq.
Dow, Cogburn & Friedman, P.C.
9 Greenway Plaza
Suite 2300
Houston, TX 77046
Notice shall be deemed given and effective the day personally delivered, the day
after being sent by overnight courier, subject to signature verification, and
three business days after the deposit in the U.S. mail of a writing addressed as
above and sent first class mail, certified, return receipt requested, or when
actually received, if earlier. Any party may change the address for notice by
notifying the other parties of such change in accordance with this Section.
15.7 GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the internal laws of the State of Texas, without giving effect
to any choice or conflict of law provision or rule (whether of the State of
Texas or any other jurisdiction) that would cause the application of the laws of
any jurisdiction other than the State of Texas.
15.8 APPOINTMENT OF AGENT. Stockholders agree to maintain an agent in the
State of Texas to accept and acknowledge service of process. Each Stockholders
initially hereby appoints John E. Tuma, 13511 Lindsay, Cypress, Texas 77429, and
Kenneth B. Holmes, Jr., P.O. Box 1050, Corpus Christi, Texas 78403, jointly, as
such agent and agree to notify the Surviving Corporation in the manner set forth
in Section 15.6 of any change in agent. Each party agrees that service of
process or notice in any such action, suit or proceeding shall be effective if
in writing and delivered to the address provided in Section 15.6 for such party
or to any other address provided to the surviving corporation in accordance with
Section 15.6 and as set forth in this Section.
15.9 NO WAIVER. No delay of or omission in the exercise of any right,
power or remedy accruing to any party as a result of any breach or default by
any other party under this Agreement shall impair any such right, power or
remedy, nor shall it be construed as a waiver of or
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<PAGE>
acquiescence in any such breach or default, or of or in any similar breach or
default occurring later; nor shall any waiver of any single breach or default
be deemed a waiver of any other breach of default occurring before or after
that waiver.
15.10 TIME OF THE ESSENCE. Time is of the essence of this Agreement.
15.11 CAPTIONS. The headings of this Agreement are inserted for
convenience only, shall not constitute a part of this Agreement or be used to
construe or interpret any provision hereof.
15.12 SEVERABILITY. In case any provision of this Agreement shall be
invalid, illegal or unenforceable, it shall, to the extent possible, be modified
in such manner as to be valid, legal and enforceable but so as most nearly to
retain the intent of the parties. If such modification is not possible, such
provision shall be severed from this Agreement. In either case the validity,
legality and enforceability of the remaining provisions of this Agreement shall
not in any way be affected or impaired thereby.
15.13 CONSTRUCTION. The parties have participated jointly in the
negotiation and drafting of this Agreement. In the event an ambiguity or
question of intent or interpretation arises, this Agreement shall be construed
as if drafted jointly by the parties and no presumption or burden of proof shall
arise favoring or disfavoring any party by virtue of the authorship of any of
the provisions of this Agreement. Any reference to any federal, state, local or
foreign statute shall be deemed to refer to all rules and regulations
promulgated thereunder, unless the context requires otherwise. The word
"including" means including, without limitation. The parties intend that
representation, warranty and covenant contained herein shall have independent
significance. If any party has breached any representation, warranty or
covenant contained herein in any respect, the fact that there exists another
representation, warranty or covenant relating to the same subject matter
(regardless of the relative levels of specificity) that the party has not
breached shall not detract from or mitigate the fact the party is in breach of
the first representation, warranty or covenant.
15.14 STANDSTILL AGREEMENT. Unless and until this Agreement is terminated
pursuant to Article 13 hereof without the Closing having taken place,
Stockholders will not directly or indirectly solicit offers for Company Stock or
the assets of Company or a merger or consolidation
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<PAGE>
involving Company from, or respond to inquiries from, share information with,
negotiate with or in any way facilitate inquiries or offers from, third
parties who express or who have heretofore expressed an interest in acquiring
Company by merger, consolidation or other combination or acquiring any of
Company's assets; nor will they permit Company to do any of the foregoing.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the day and year first above written.
U.S. LIQUIDS/RECLAIM ACQUISITION
CORPORATION
By: /s/ W. Gregory Orr
-------------------------------
Its: President
------------------------------
U S LIQUIDS INC.
By: /s/ W. Gregory Orr
-------------------------------
Its: President
------------------------------
RE-CLAIM ENVIRONMENTAL, INC.
(EIN: _____________)
By:
-------------------------------
Its: President
/s/ John E. Tuma
----------------------------------
John E. Tuma
(SSN: ###-##-####)
/s/ Duane S. Herbst
----------------------------------
Duane S. Herbst
(SSN: ###-##-####)
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/s/ A. Travis Campbell
----------------------------------
A. Travis Campbell
(SSN: ###-##-####)
/s/ Russell Reichert
----------------------------------
Russell Reichert
(SSN: ###-##-####)
/s/ Kenneth B. Holmes, Jr.
----------------------------------
Kenneth B. Holmes, Jr.
(SSN: ###-##-####)
/s/ R.L. Smothers
----------------------------------
R.L. Smothers
(SSN: ###-##-####)
RAINBOW INVESTMENTS COMPANY
(EIN: 74-1935024)
By:
-------------------------------
Its:
------------------------------
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LIST OF SCHEDULES
Exhibit A -- Legal Description of the Land
Exhibit B -- Estimated Working Capital
Schedule 2.3 -- Assumed Debt
Schedule 5.1(i) -- Articles and Bylaws of Company
Schedule 5.4 -- Predecessor Entities; Trade Names
Schedule 5.6 -- Financial Statements
Schedule 5.7 -- Non-Balance Sheet Liabilities
Schedule 5.8 -- Accounts Receivable
Schedule 5.9(i) -- Proprietary Rights
Schedule 5.10(i) -- Real Property Disclosure
Schedule 5.11(i) -- Personal Property of Company
Schedule 5.12 -- Contracts
Schedule 5.13 -- Insurance Policies
Schedule 5.14 -- Employees
Schedule 5.15 -- Employee Plans
Schedule 5.18 -- Tax Returns of Company
Schedule 5.19 -- Litigation
Schedule 5.22 -- Bank Accounts
Schedule 5.23 -- Hazardous Materials; List of Disposal Sites
Schedule 5.24 -- Storage Tanks
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Schedule 8.8 -- Tuma Lease Property
Schedule 9.8 -- Updated Agreements
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ANNEX I
CERTIFICATE(S) OF MERGER
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<PAGE>
ANNEX II
TO THAT CERTAIN AGREEMENT AND PLAN OF REORGANIZATION
Among
U.S. LIQUIDS/RECLAIM ACQUISITION CORPORATION
U S LIQUIDS INC.
and
RE-CLAIM ENVIRONMENTAL, INC.
and
JOHN E. TUMA, DUANE S. HERBST, A. TRAVIS CAMPBELL,
RUSSELL REICHERT, KENNETH B. HOLMES, JR.,
R.L. SMOTHERS, and RAINBOW INVESTMENTS COMPANY
DATED AS OF ___________, 1997.
ALLOCATION
SHARES OF COMPANY OF
SHAREHOLDERS STOCK OWNED CONSIDERATION
- ------------ ----------------- -------------
John E. Tuma 325 32.5
Duane S. Herbst 15 1.5
A. Travis Campbell 25 2.5
Russell Reichert 200 20.0
Kenneth B. Holmes, Jr. 210 21.0
R.L. Smothers 15 1.5
Rainbow Investments Company 210 21.0
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Exhibit 2.2
PURCHASE OF MEMBERSHIP INTERESTS AGREEMENT
AMONG
U S LIQUIDS INC.
AND
RE-CLAIM ENVIRONMENTAL LOUISIANA LLC
AND
JOHN E. TUMA AND REYNCOR INDUSTRIAL ALCOHOL, INC.
<PAGE>
TABLE OF CONTENTS
SECTION PAGE
- ------- ----
1. DELIVERY OF MEMBERSHIP INTERESTS . . . . . . . . . . . . . . . . . . . . .1
1.1 DELIVERY OF MEMBERSHIP INTERESTS. . . . . . . . . . . . . . . . . . 1
1.2 DELIVERY OF MEMBERSHIP INTERESTS. . . . . . . . . . . . . . . . . . 2
2. PURCHASE PRICE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .2
2.1 PURCHASE PRICE. . . . . . . . . . . . . . . . . . . . . . . . . . . 2
2.2 AGREED VALUE OF PARENT STOCK. . . . . . . . . . . . . . . . . . . . 2
2.3 ASSUMPTION OF DEBT. . . . . . . . . . . . . . . . . . . . . . . . . 2
2.4 ADJUSTMENT TO PURCHASE PRICE. . . . . . . . . . . . . . . . . . . . 3
2.5 DEFERRED ADDITIONAL CONSIDERATION . . . . . . . . . . . . . . . . . 4
3. TITLE ASSURANCE. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .7
3.1 OWNERS TITLE POLICY. . . . . . . . . . . . . . . . . . . . . . . . .7
3.2 PERMITTED ENCUMBRANCES . . . . . . . . . . . . . . . . . . . . . . .7
3.3 SURVEY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .7
4. CLOSING. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .8
5. REPRESENTATIONS AND WARRANTIES OF MEMBERS AND COMPANY. . . . . . . . . . .8
5.1 ORGANIZATION; AUTHORITY. . . . . . . . . . . . . . . . . . . . . . .9
5.2 OWNERSHIP OF MEMBERSHIP INTERESTS; ABSENCE OF ADVERSE CLAIMS . . . .9
5.3 CAPITALIZATION . . . . . . . . . . . . . . . . . . . . . . . . . . 10
5.4 PREDECESSOR ENTITIES; TRADE NAMES. . . . . . . . . . . . . . . . . 10
5.5 NO SUBSIDIARIES. . . . . . . . . . . . . . . . . . . . . . . . . . 10
5.6 FINANCIAL STATEMENTS . . . . . . . . . . . . . . . . . . . . . . . 11
5.7 NON-BALANCE SHEET LIABILITIES. . . . . . . . . . . . . . . . . . . 12
5.8 ACCOUNTS RECEIVABLE. . . . . . . . . . . . . . . . . . . . . . . . 12
5.9 PROPRIETARY RIGHTS; ENVIRONMENTAL DOCUMENTS. . . . . . . . . . . . 13
5.10 REAL PROPERTY; REPORTING . . . . . . . . . . . . . . . . . . . . . 14
5.11 PERSONAL PROPERTY; NEW PROJECTS. . . . . . . . . . . . . . . . . . 16
5.12 CONTRACTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
5.13 INSURANCE POLICIES . . . . . . . . . . . . . . . . . . . . . . . . 18
5.14 OFFICERS AND EMPLOYEES; COMPENSATION . . . . . . . . . . . . . . . 18
5.15 EMPLOYEE PLANS . . . . . . . . . . . . . . . . . . . . . . . . . . 18
5.16 COMPLIANCE WITH ERISA. . . . . . . . . . . . . . . . . . . . . . . 18
5.17 COMPLIANCE WITH LAW; NO CONFLICTS. . . . . . . . . . . . . . . . . 20
5.18 TAXES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
5.19 LITIGATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
5.20 ABSENCE OF PRICE RENEGOTIATION CONTRACTS . . . . . . . . . . . . . 21
5.21 CONDUCT OF BUSINESS SINCE BALANCE SHEET DATE . . . . . . . . . . . 21
5.22 BANK ACCOUNTS; DEPOSITORIES. . . . . . . . . . . . . . . . . . . . 23
5.23 HAZARDOUS MATERIALS. . . . . . . . . . . . . . . . . . . . . . . . 23
5.24 STORAGE TANKS. . . . . . . . . . . . . . . . . . . . . . . . . . . 24
5.25 ABSENCE OF CERTAIN BUSINESS PRACTICES. . . . . . . . . . . . . . . 25
5.26 COMPLETE DISCLOSURE. . . . . . . . . . . . . . . . . . . . . . . . 25
6. REPRESENTATIONS AND WARRANTIES OF PARENT.. . . . . . . . . . . . . . . . 25
6.1 CORPORATE ORGANIZATION . . . . . . . . . . . . . . . . . . . . . . 26
6.2 PARENT STOCK . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
6.3 CORPORATE AUTHORITY. . . . . . . . . . . . . . . . . . . . . . . . 26
6.4 NO CONFLICTS . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
<PAGE>
6.5 BINDING AGREEMENT. . . . . . . . . . . . . . . . . . . . . . . . . 27
6.6 SEC FILINGS AND FINANCIAL INFORMATION. . . . . . . . . . . . . . . 27
6.7 FINANCIAL INFORMATION. . . . . . . . . . . . . . . . . . . . . . . 27
6.8 TAXATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
7. COVENANTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
7.1 ACCESS TO LAND AND RECORDS . . . . . . . . . . . . . . . . . . . . 28
7.2 COMPANY ACTIVITIES PRIOR TO CLOSING. . . . . . . . . . . . . . . . 28
7.3 PROHIBITED ACTIVITIES PRIOR TO CLOSING . . . . . . . . . . . . . . 29
7.4 CONTACT WITH GOVERNMENT OFFICIALS. . . . . . . . . . . . . . . . . 30
8. CONDITIONS PRECEDENT TO OBLIGATIONS OF COMPANY AND MEMBERS . . . . . . . 30
8.1 REPRESENTATIONS AND WARRANTIES . . . . . . . . . . . . . . . . . . 31
8.2 CONSENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
8.3 NO ADVERSE PROCEEDING. . . . . . . . . . . . . . . . . . . . . . . 31
8.4 NONCOMPETITION AGREEMENT . . . . . . . . . . . . . . . . . . . . . 31
8.5 TEXLINE NOTE . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
8.6 NEW REAL ESTATE LEASE. . . . . . . . . . . . . . . . . . . . . . . 31
8.7 ANCILLARY DOCUMENTS. . . . . . . . . . . . . . . . . . . . . . . . 31
8.8 CERTAIN PERSONALTY . . . . . . . . . . . . . . . . . . . . . . . . 32
8.9 RULE 144 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
9. CONDITIONS PRECEDENT TO OBLIGATIONS OF PARENT. . . . . . . . . . . . . . 32
9.1 REPRESENTATIONS AND WARRANTIES . . . . . . . . . . . . . . . . . . 32
9.2 COVENANTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
9.3 NO ADVERSE PROCEEDING. . . . . . . . . . . . . . . . . . . . . . . 33
9.4 GENERAL RELEASE. . . . . . . . . . . . . . . . . . . . . . . . . . 33
9.5 CONSENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
9.6 RESIGNATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
9.7 GOOD STANDING CERTIFICATES . . . . . . . . . . . . . . . . . . . . 33
9.8 UPDATED AGREEMENTS . . . . . . . . . . . . . . . . . . . . . . . . 33
9.9 NONCOMPETITION AGREEMENT . . . . . . . . . . . . . . . . . . . . . 34
9.10 TERMINATION OF EXISTING LEASE. . . . . . . . . . . . . . . . . . . 34
9.11 REAL ESTATE LEASE. . . . . . . . . . . . . . . . . . . . . . . . . 34
9.12 ASSIGNMENT OF MEMBERSHIP INTERESTS . . . . . . . . . . . . . . . . 34
9.13 ENVIRONMENTAL REVIEW . . . . . . . . . . . . . . . . . . . . . . . 34
9.14 TRANSFERABILITY OF PERMITS . . . . . . . . . . . . . . . . . . . . 34
9.15 GENERAL. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
10. ADDITIONAL COVENANTS.. . . . . . . . . . . . . . . . . . . . . . . . . . 35
10.1 TAXES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
10.2 POST CLOSING BALANCE SHEET . . . . . . . . . . . . . . . . . . . . 35
10.3 CLOSING DATE ACTIONS . . . . . . . . . . . . . . . . . . . . . . . 36
10.4 TRADE PAYABLES . . . . . . . . . . . . . . . . . . . . . . . . . . 36
10.5 RELEASE OF PERSONAL GUARANTIES . . . . . . . . . . . . . . . . . . 36
10.6 HAZARDOUS MATERIALS EXPANSION. . . . . . . . . . . . . . . . . . . 36
10.7 TUMA PERSONAL PROPERTY . . . . . . . . . . . . . . . . . . . . . . 37
10.8 FURTHER ASSURANCE. . . . . . . . . . . . . . . . . . . . . . . . . 37
10.9 TRANSITION . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
10.10 SURVIVAL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
11. FEDERAL SECURITIES ACT RESTRICTIONS ON STOCK. . . . . . . . . . . . . . 38
11.1 REGISTERED STOCK . . . . . . . . . . . . . . . . . . . . . . . . . 38
11.2 GENERAL LEGEND . . . . . . . . . . . . . . . . . . . . . . . . . . 38
11.3 COMPLIANCE WITH LAW. . . . . . . . . . . . . . . . . . . . . . . . 38
<PAGE>
12. INDEMNIFICATION. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
12.1 SURVIVAL OF REPRESENTATIONS, WARRANTIES AND COVENANTS. . . . . . . 38
12.2 LIMITATION ON LIABILITY. . . . . . . . . . . . . . . . . . . . . . 39
12.3 INDEMNIFICATION BY MEMBERS . . . . . . . . . . . . . . . . . . . . 39
12.4 INDEMNIFICATION BY PARENT. . . . . . . . . . . . . . . . . . . . . 40
12.5 PROCEDURE FOR INDEMNIFICATION WITH RESPECT TO THIRD PARTY CLAIMS . 40
13. TERMINATION OF AGREEMENT.. . . . . . . . . . . . . . . . . . . . . . . . 43
13.1 TERMINATION BY BUYER . . . . . . . . . . . . . . . . . . . . . . . 43
13.2 TERMINATION BY MEMBERS . . . . . . . . . . . . . . . . . . . . . . 43
13.3 TERMINATION. . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
14. NONDISCLOSURE OF CONFIDENTIAL INFORMATION. . . . . . . . . . . . . . . . 43
14.1 NONDISCLOSURE BY MEMBERS . . . . . . . . . . . . . . . . . . . . . 43
14.2 NONDISCLOSURE BY PARENT. . . . . . . . . . . . . . . . . . . . . . 44
15. GENERAL. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
15.1 ASSIGNMENT; BINDING EFFECT; AMENDMENT. . . . . . . . . . . . . . . 45
15.2 ENTIRE AGREEMENT.. . . . . . . . . . . . . . . . . . . . . . . . . 45
15.3 COUNTERPARTS . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
15.4 NO BROKERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
15.5 EXPENSES OF TRANSACTION. . . . . . . . . . . . . . . . . . . . . . 46
15.6 NOTICES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
15.7 GOVERNING LAW. . . . . . . . . . . . . . . . . . . . . . . . . . . 48
15.8 APPOINTMENT OF AGENT . . . . . . . . . . . . . . . . . . . . . . . 48
15.9 NO WAIVER. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
15.10 TIME OF THE ESSENCE. . . . . . . . . . . . . . . . . . . . . . . . 48
15.11 CAPTIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
15.12 SEVERABILITY . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
15.13 CONSTRUCTION . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
15.14 STANDSTILL AGREEMENT . . . . . . . . . . . . . . . . . . . . . . . 49
15.15 PERIODIC REPORTS . . . . . . . . . . . . . . . . . . . . . . . . . 49
<PAGE>
PURCHASE OF MEMBERSHIP INTERESTS AGREEMENT
THIS PURCHASE OF MEMBERSHIP INTERESTS AGREEMENT (the "Agreement") is
executed and delivered as of September 30, 1997, among U S LIQUIDS INC., a
Delaware corporation ("Buyer" or "Parent"); RE-CLAIM ENVIRONMENTAL LOUISIANA
LLC, a Louisiana limited liability company ("Company"); and JOHN E. TUMA and
REYNCOR INDUSTRIAL ALCOHOL, INC., a Louisiana corporation, the sole members
of Company ("Members");
W I T N E S S E T H:
WHEREAS, Company operates a non-hazardous commercial liquids waste
processing and treatment facility in the Shreveport, Louisiana area (the
"Business");
WHEREAS, as part of the Business, Company leases certain real property
located in Shreveport, Louisiana and more fully described on Exhibit A,
attached hereto and made a part hereof (the "Land"), and operates thereon a
fully permitted facility for the treatment and processing of non-hazardous
commercial liquid waste (the "Facility");
WHEREAS, Members own all of the membership interests of Company;
WHEREAS, Buyer desires to acquire all of the membership interests of Company
from Members and Members desire to sell such interests to Buyer as set forth
herein;
NOW, THEREFORE, in consideration of Ten Dollars ($10) in hand paid, the
premises and of the mutual agreements, representations, warranties and
obligations herein contained, the parties hereby agree as follows:
1. DELIVERY OF MEMBERSHIP INTERESTS.
1.1 DELIVERY OF MEMBERSHIP INTERESTS. Upon the terms and subject to the
conditions set forth in this Agreement, Members shall, at the Closing
(hereinafter defined), sell, assign, transfer and deliver to Buyer all of
such Members' membership interests in Company as set forth on Annex I
attached hereto and made a part hereof (the "Membership Interests"), which
Membership Interests represent 100% of the interests of all Members of
<PAGE>
Company. Members shall transfer the Membership Interests to Buyer free and
clear of all liens, security interests, encumbrances, adverse claims,
pledges, charges, voting trusts, equities and other restrictions on transfer
of any nature whatsoever (collectively, "Adverse Claims").
1.2 DELIVERY OF MEMBERSHIP INTERESTS. Members (and the spouse of John
E. Tuma) shall deliver at Closing an assignment of their Membership Interests
in form and substance satisfactory to Buyer (the "Assignment of Membership
Interests"). Further, Members, at their sole expense, agree to cure (both
before and after Closing) any deficiencies with respect to the assignment of
the Membership Interests or other documents of conveyance with respect to the
Membership Interests.
2. PURCHASE PRICE.
2.1 PURCHASE PRICE. Subject to Sections 2.3 and 2.4 below, in
consideration of the sale to Buyer in accordance with this Agreement of the
Membership Interests, Buyer shall pay to Members at Closing the aggregate sum
of $2,510,000 in immediately available funds. Buyer shall also pay the sums
set forth in Section 2.5 if, as and when they become due in accordance with
such Section. The shares of Parent Stock to be issued and distributed
pursuant to Section 2.5 below shall be determined pursuant to Section 2.2.
All of the consideration set forth in this Article 2 shall be allocated among
the Members in accordance with Annex I attached hereto and made a part hereof.
2.2 AGREED VALUE OF PARENT STOCK. For purposes of this Agreement, the
"Agreed Value" per share of Parent Stock shall be the average of the closing
prices of a share of the common stock of Parent, $.01 par value per share, on
the American Stock Exchange as reported in THE WALL STREET JOURNAL for the
five trading days immediately preceding the five trading days immediately
prior to the date the payment is due.
2.3 ASSUMPTION OF DEBT. In addition to the other consideration payable
pursuant to this Article 2, Parent shall pay:
(a) to Texline Gas Company a portion of the outstanding balance
existing on the Closing Date of the promissory notes from John E. Tuma to
Texline Gas Company
<PAGE>
dated October 21, 1996, and in the original principal
amount of $250,000, of which Buyer shall pay $156,131 on the Closing Date;
and
(b) the actual debt of Company consisting of(i) the outstanding balance
on the Wells Fargo debt in the amount of $65,770; and (ii)the Metro Bank
debt in the amount of $8,097 (collectively, the "Assumed Debt"). Attached
hereto as Schedule 2.3 is a listing of all Assumed Debt and evidence
establishing the Assumed Debt. Buyer agrees to pay all Assumed Debt as
promptly after the Closing Date as possible, but in no event later than 10
days after the Closing Date and to indemnify, defend and hold harmless
Members from all Assumed Debt in accordance with Article 12 hereof during
the time period prior to payment. Buyer agrees that all lease debt
(including lease end buy-out payments) are specifically excluded from the
Assumed Debt, but will remain the obligation of Company after Closing and
Parent shall indemnify, defend and hold harmless Members in accordance with
Article 12 from same.
2.4 ADJUSTMENT TO PURCHASE PRICE. The parties agree that the purchase
price was determined as if the net working capital of Company was going to be
- -$140,000 at the close of business on the Closing Date. Accordingly, the
parties agree that the purchase price set forth in this Article 2 shall be
adjusted (up or down) on the Adjustment Date (as defined in Section 10.2) to
reflect the actual net working capital of Company on the Closing Date (the
"Actual Net Working Capital"), as shown on the balance sheet to be prepared
in accordance with Section 10.2 hereof. If the Actual Net Working Capital of
Company so reflected is greater than -$140,000 on the Closing Date, then the
purchase price paid pursuant to Section 2.1 shall be increased dollar for
dollar for each dollar the Actual Net Working Capital exceeds -$140,000 on
the Closing Date. If the Actual Net Working Capital of Company so reflected
is less than -$140,000 on the Closing Date, then the purchase price paid
pursuant to Section 2.1 shall be decreased dollar for dollar for each
dollar the Actual Net Working Capital falls below -$140,000 on the
Closing Date. For purposes of this Agreement, Actual Net Working Capital
shall mean
<PAGE>
the aggregate current assets of Company on the Closing Date minus the
aggregate of all current liabilities (excluding leases and any lease buy out
penalties or fees) of Company on the Closing Date (not including the Assumed
Debt or any lease debt), calculated in accordance with generally accepted
accounting principles ("GAAP"). In computing the adjustment amounts provided
for in this Section, the party owing payment to the other pursuant to this
Section shall make such payment in shares of Parent Stock having a value
equal to the amount owed calculated in accordance with Section 2.2.
In order to facilitate the contemplated adjustment to purchase price on
the Adjustment Date, between the date hereof and the Closing Date the parties
will prepare and agree upon an estimated net working capital balance for
Company as of August 31, 1997 (the "Estimated Working Capital") which shall
be an adjustment to the Purchase Price on the Closing Date to be attached as
Exhibit B and will thereafter calculate the Actual Net Working Capital
consistent therewith.
In the event of a dispute between the parties as to the Actual Net
Working Capital, the parties will have 30 days to resolve the dispute among
themselves. If the parties have not resolved such dispute within such 30-day
period, then the parties shall select an arbitrator who shall decide the
dispute within 30 days after being selected. If the parties cannot agree on
an arbitrator, then Buyer and Members (as a group) shall each select an
arbitrator and the two arbitrators so selected shall select a third
arbitrator. The parties hereto each agree to be bound by the decision of the
arbitrator(s). In the event that three arbitrators are chosen, a majority
decision will be required. Each arbitrator can be any natural person above
the age of 18 and need not have any specific qualification. All costs of the
arbitration shall be split equally between Buyer and Members (as a group).
2.5 DEFERRED ADDITIONAL CONSIDERATION. (a) In addition to the
consideration payable pursuant to Section 2.1 above, Buyer shall pay to
Members additional consideration for the sale of the Membership Interests,
if, as and when the operations of Company after closing generate a certain
<PAGE>
amount of earnings before taxes (as defined below) ("Pre-Tax Earnings") as
set forth below. Buyer would pay to Members:
(i) (A) an aggregate of $500,000 (subject to clause [e] below) if
Pre-Tax Earnings exceeds $1,350,000 during any of calendar years
1998, 1999 or 2000; and
(B) an aggregate of $4,000,000 if Pre-Tax Earnings exceeds
$4,500,000 during any of calendar years 1998, 1999 or 2000;
(ii) (A) an aggregate of $6,000,000 if Pre-Tax Earnings exceeds
$7,300,000 during any of calendar years 1999, 2000 or 2001; and
(B) an aggregate of $4,800,000 if Pre-Tax Earnings exceeds
$11,000,000 during any of calendar years 1999, 2000 or 2001;
(iii) (A) an aggregate of $5,400,000 if Pre-Tax Earnings exceeds
$13,000,000 during any of calendar years 2000, 2001 or 2002; and
(B) an aggregate of $5,800,000 if Pre-Tax Earnings exceeds
$15,000,000 during any of calendar years 2000, 2001 or 2002.
(b) Pre-Tax Earnings will be calculated on an annual basis within 60 days
after the end of each applicable calendar year and any payments owed to
Members shall be paid on March 31st (or the next business day if March 31st
is not a business day) after the end of each applicable calendar year.
Payment shall be made in either (i) cash; (ii) shares of the common stock,
$.01 par value, of Parent (the "Parent Stock") having an Agreed Value
(calculated in accordance with Section 2.2) equal to the amount of the
required payment; or (iii) any combination of cash and Parent Stock, at the
option of Buyer. All Parent Stock will comply with the requirements of
Section 6.2 hereof.
(c) For purposes of this Agreement, "Pre-Tax Earnings" shall mean the
gross revenues of Company calculated in accordance with generally accepted
accounting principles ("GAAP") minus (i) all costs incurred in operating the
Business (including, without limitation, all payroll costs,
<PAGE>
equipment operating costs, insurance costs, maintenance costs, legal,
accounting and other professional fees, all depreciation, depletion and
amortization expenses, all selling, general and administrative costs,
interest and all other operating expenses); (ii) all taxes on operations such
as franchise taxes, real and personal property taxes, use taxes and sales
taxes (but specifically excluding all federal, state (if any) and local
income taxes); (iii) reasonable reserves for financial assurance, closure and
post closure costs and doubtful accounts; and (iv) 1% of such gross revenues
constituting a charge for corporate overhead. All of the foregoing shall be
determined by Company's regular independent accounting firm.
(d) Buyer and Members agree that the payments set forth in Section 2.5(a)
above must be earned in order (if at all) and that payment from only one
category (i.e., Section 2.5(a)(i), (ii) or (iii)) shall be owed for any one
calendar year. Consequently, no payments set forth in Section 2.5(a)(ii) or
(iii) shall be owed until payment under Section 2.5(a)(i) has been earned and
paid. Similarly, no payment set forth in Section 2.5(a) (iii) shall be owed
until payments under both Section 2.5(1) (i) and (ii) have been earned and
paid. For purposes of example only, if Pre-Tax Earnings is $7,400,000 in
1998, then Buyer will owe Members a total of $4,500,000. If Pre-Tax Earnings
is again $7,400,000 in 1999, then Buyer will owe Members a total of
$6,000,000 for that year. However, (continuing the original example) if
Pre-Tax Earnings is less than $7,300,000 in 1999, then Buyer will owe nothing
to Members for that year.
(e) If, as and when the amounts set forth in Section 2.5(a)(i)(A) become
payable to Members, Parent and Members agree that Parent shall pay directly
to Texline Gas Company the then remaining outstanding balance (together with
accrued but unpaid interest) of the promissory note to Texline in the
original principal amount of $147,101.05 of even date herewith out of the
proceeds otherwise payable to Members pursuant to (i)(A). Parent agrees that
if such amounts have not yet become payable by December 31, 2000,
<PAGE>
then Parent shall pay (and hereby unconditionally guarantees payment of) the
then remaining
<PAGE>
outstanding balance (together with accrued but unpaid interest) to Texline
Gas Company.
3. TITLE ASSURANCE.
3.1 OWNERS TITLE POLICY. On the Closing Date, Members shall furnish to
Buyer (at Buyer's sole cost) an extended coverage leasehold policy of title
insurance from Stewart Title Insurance Company (the "Title Company") in the
amount of $8,640,000 and satisfactory to Buyer, insuring leasehold title to
the Land to be in Buyer subject only to the exceptions permitted by Section
3.2 hereof (the "Title Policy"). Prior to the Closing, Members shall deliver
to Buyer a preliminary title commitment in respect of the Land, together with
copies of all exception instruments referenced therein, and any unrecorded
leases, option agreements, contracts and any other items affecting title
which are in the possession of, or known to, Members.
3.2 PERMITTED ENCUMBRANCES. The Title Policy shall insure Buyer's
interest in the Land to be free and clear of all encumbrances whatsoever
except: (i) zoning ordinances and regulations which do not, in Buyer's
judgment, adversely affect its use of the Land for its current uses after
Closing; (ii) real estate taxes and assessments, both general and special,
which are a lien but are not yet due and payable at the Closing Date; (iii)
easements, encumbrances, covenants, conditions, reservations and restrictions
of record, if any, as have been approved in writing by Buyer; and (iv) the
rights of the landlord under the Real Estate Lease (hereinafter defined).
Buyer shall pay all of the costs associated with the delivery of the Title
Policy to Buyer.
3.3 SURVEY. Members shall obtain for Buyer's use and for the use of the
Title Company in connection with the issuance of the Title Policy a current
and complete survey of the Land, made on the ground by a competent registered
surveyor, showing: (a) the exact boundary lines of the Land; (b) the
location thereon of all, if any, buildings, improvements, and easements now
existing;
-8-
<PAGE>
(c) the number of acres in the Land; (d) the location of any buildings,
fences or other improvements which encroach on the Land; (e) the location of
any improvements on the Land which encroach on any neighboring property or on
any property which is subject to any easement or right-of-way; (f) all
building lines established in respect of the Land; and (g) all public access
to the Land, and representing that the boundaries of the Land are contiguous
with the boundaries of all adjoining parcels (the "Survey"). Prior to the
Closing, a copy of the Survey complying with the above requirements shall be
delivered to Buyer and the Title Company, together with certification to each
entity by the surveyor, which certification complies with American Land Title
Association guidelines, and also together with such additional supporting
reports and other certificates as the Title Company may require to enable the
Title Company to delete its standard survey exceptions from the Title Policy.
Company shall pay all of the costs of the Survey, which cost shall be
considered as an additional current liability subject to Section 2.4 above.
4. CLOSING. Unless the parties agree otherwise, the closing of the within
contemplated transaction (the "Closing") shall take place on the date that is
within five business days after the completion, satisfaction or waiver of
each of the conditions to Closing set forth in Articles 8 and 9. The Closing
shall take place at a location mutually agreeable to Buyer and Members. The
date on which the Closing occurs shall be referred to as the "Closing Date."
5. REPRESENTATIONS AND WARRANTIES OF MEMBERS AND COMPANY. Company, as to
the time period before Closing only, and each Member, jointly and severally,
represent and warrant to Buyer that the statements contained in this Section
5 except as set forth in the schedules to the subsections of this Section 5
delivered by Members to Buyer on the date hereof (such schedules hereinafter
collectively referred to as the "Disclosure Schedules" and, individually, as
a "Disclosure Schedule"): (i) are correct and complete as of the date of
this Agreement; (ii)
-9-
<PAGE>
will be correct and complete as of the Closing Date (as though made then and
as though the Closing Date were substituted for the date of this Agreement
throughout this Section 5); and (iii) shall survive the Closing in accordance
with Article 12 hereof. Nothing in the Disclosure Schedules shall be deemed
adequate to disclose an exception to a representation or warranty made
herein, however, unless the Disclosure Schedule identifies the exception with
reasonable particularity and describes the relevant facts in reasonable
detail.
Wherever a representation or warranty herein is qualified as having been
made "to the best of Members' knowledge", such phrase shall mean the
knowledge of any Member, after reasonable inquiry.
5.1 ORGANIZATION; AUTHORITY.
(i) Company is a Louisiana limited liability company duly organized,
validly existing and in good standing under the laws of the State of
Louisiana and is now and has been at all times since its creation, duly
authorized, qualified and licensed under all laws, regulations, ordinances
and orders of public authorities to carry on its businesses in the places
and in the manner as conducted at the time such activities were conducted
except for where failure to be so authorized, qualified or licensed would
not have a material adverse affect on the Business. Copies of Company's
[Certificate of Formation] (certified by the Secretary of State of
Louisiana and Operating Agreement (certified by the Secretary of Company),
each as amended, are attached hereto as Schedule 5.1(i).
(ii) Company has full legal right, power and authority (corporate and
otherwise) to enter into this Agreement and to consummate the transactions
contemplated by this Agreement. All corporate action of Company necessary
to approve the sale of the Membership Interests has been taken, including
member approvals, if necessary.
(iii) Each Member is competent and under no legal
-10-
<PAGE>
restraint or duress and has the full legal right and capacity to enter into
and perform his obligations under this Agreement.
5.2 OWNERSHIP OF MEMBERSHIP INTERESTS; ABSENCE OF ADVERSE CLAIMS. All
of the interests of members in the Company are owned of record and
beneficially by Members as set forth on Annex I and are free and clear of all
liens, security interests, encumbrances, adverse claims, pledges, charges,
voting trusts, equities and other restrictions on transfer whatsoever
(collectively, "Adverse Claims"). This Agreement is the valid and binding
obligation of Company and Members, enforceable against each of them in
accordance with its terms.
5.3 CAPITALIZATION. Membership Interests have been duly authorized and
validly issued, are fully paid and nonassessable. The records of Company
provided by Members and Company to Buyer correctly set forth all issuances,
acquisitions and retirements of Membership Interests since the inception of
Company. Company has never acquired any treasury stock. No subscriptions,
options, warrants, puts, calls, conversion rights or other commitments of any
kind exist which obligate Company to issue any equity interests or otherwise
relate to the sale or transfer by Company of any equity interests of Company
(whether debt or equity). In addition, Company has no obligation (contingent
or otherwise) to purchase, redeem or otherwise acquire any of its equity
interests or any interests therein or to pay any dividend or make any
distribution in respect thereof. Company has not agreed to register any
securities under the Securities Act of 1933, as amended (the "Act"), or under
any state securities law.
5.4 PREDECESSOR ENTITIES; TRADE NAMES. Except as set forth on Schedule
5.4, Company has never directly or indirectly participated in any manner in
any joint venture, partnership or other noncorporate entity. Company was
formed solely to operate the Business and has never conducted any other
business or activity. Also set forth on Schedule 5.4 is a list of the names
of all predecessors of Company, all prior corporate names of
-11-
<PAGE>
Company, and all trade names and "doing business as" names of Company,
including the names of all entities substantially all of the assets of which
were previously acquired by Company.
5.5 NO SUBSIDIARIES. Company has never owned or controlled and does not
now own, of record or beneficially, or control, directly or indirectly, any
capital stock, securities convertible into capital stock or any other equity
interest in any partnership, corporation, association or other business entity
other than those of Company, except as may be disclosed on Schedule 5.4.
5.6 FINANCIAL STATEMENTS. Attached as Schedule 5.6 are copies of the
following financial statements of Company (together, the "Financial
Statements"):
(a) Company's balance sheet as of December 31, 1996, and a statement of
income, cash flow and retained earnings for the year then ended;
(b) Company's balance sheet as of June 30, 1997, and a statement of
income for the quarter then ended;
(c) Company's monthly interim balance sheets and statements of income
commencing for the month ended July 31, 1997, and continuing for each month
end until the end of the month immediately preceding the month in which the
Closing Date occurs; and
(d) Company's balance sheet and income statement as of August 31, 1997
(the "Balance Sheet Date"), prepared and audited by Arthur Andersen.
Except as set forth on Schedule 5.6, each of the Financial Statements
described in (d) above (including all footnotes thereto) has been prepared,
to the best of Stockholders' knowledge, in accordance with GAAP, applied on a
consistent basis throughout the periods indicated. Each of the Financial
Statements (including all footnotes thereto) is true, complete and correct in
all material respects. Each of the balance sheets presents fairly the
financial condition of Company as of the date indicated thereon and each of
such statements of income presents
-12-
<PAGE>
fairly on an accrual basis the results of the operations of Company for the
period indicated thereon. To the best of Stockholders' knowledge, the
Financial Statement described in (d) above includes all footnotes required by
GAAP, each such footnote is complete and accurate, and contains all
information required by GAAP to be contained therein. To the best of
Stockholders' knowledge, all reserves for contingent risks have been
estimated in accordance with GAAP and are appropriate and sufficient to cover
all costs reasonably expected to be incurred from such risks. Since its
inception Company has not (a) made any material change in its accounting
policies or (b) effected any prior period adjustment to, or other restatement
of, its financial statements for any period. The Financial Statements are
consistent with the books and records of Company (which books and records are
materially correct and complete).
5.7 NON-BALANCE SHEET LIABILITIES. Attached hereto as Schedule 5.7 is a
complete and accurate list as of the date hereof of all liabilities and
obligations of Company, excluding obligations arising under this Agreement,
which are not individually reflected in the Financial Statements dated the
Balance Sheet Date, but which would have been so reflected in a full GAAP
accounting (whether or not incurred in the ordinary course of business) of
any kind, character and description, accrued or unaccrued, absolute or
contingent, secured or unsecured, liquidated or unliquidated, due or to
become due, together with, in the case of those liabilities and other
obligations the amounts of which are not fixed, a reasonable best estimate of
the maximum amount which may be payable. For each liability or obligation
for which the amount is not fixed or is contested, Members shall provide the
following information:
(a) a summary description of the liability or other obligation together
with the following:
(1) copies of all relevant documentation relating thereto;
(2) amounts claimed and any other action or
-13-
<PAGE>
relief sought; and
(3) name of claimant and all other parties to the claim, suit or
proceeding, if any.
(b) the name of each court or agency before which a claim, suit or
proceeding is pending;
(c) the date such claim, suit or proceeding was instituted;
(d) a reasonable best estimate by Members of the maximum amount, if
any, which is likely to become payable with respect to each such liability
or the cost of performance with respect to each such other obligation.
5.8 ACCOUNTS RECEIVABLE. Attached as Schedule 5.8 is a complete and
accurate list of all accounts and notes receivable of Company as of the date
hereof, including receivables from and advances to employees and Members and
also including all such accounts and notes receivable which are not reflected
in the Financial Statements, if any. Also attached as Schedule 5.8 is an
aging of all accounts and notes receivable showing amounts due in 30 day
aging categories. Neither Company nor any Member are guarantying the
collectibility of any account or note receivable and no reduction for same
shall be taken from any sums otherwise owed to Members.
5.9 PROPRIETARY RIGHTS; ENVIRONMENTAL DOCUMENTS. (i) Attached as Schedule
5.9(i) is a reasonably complete and accurate list and summary description as
of the date hereof of all permits, titles (including motor vehicle titles and
current registrations), fuel permits, licenses, franchises, certificates,
trademarks, trade names, patents, patent applications and copyrights owned or
held by Company, none of which permits, titles, licenses, franchises and
certificates, trademarks, tradenames, patents, patent applications and
copyrights, has been claimed to or, to the best of Members' knowledge, infringe
on the rights of others and all of which are now valid, in good standing and
in full force and effect. Except as set forth on Schedule 5.9(i),
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such permits, titles, licenses, franchises, certificates, trademarks, trade
names, patents, patent applications and copyrights are adequate for the
operation of the Business as presently constituted;
(ii) Members have, as of the date of this Agreement, made available
to Buyer for its inspection all presently held records, correspondence,
reports, notifications, permits, pending permit applications, licenses
and pending license applications, environmental impact studies,
assessments and audits and all notifications from governmental agencies
and any other person or entity and any other documents of Company
relating to: (a) each actual and threatened violation of Applicable
Laws (hereinafter defined) by Company or otherwise relating to the Land
and all, if any, claims thereof; (b) the present or past environmental
compliance by Company; (c) the present or past environmental condition
of the Land; (d) the discharge, leakage, spillage, transport, disposal
or release of any material into the environment by Company or otherwise
relating to the Land; and (e) land use and access approvals relative to
any portion of the Land (collectively, the "Environmental Documents").
5.10 REAL PROPERTY; REPORTING. (i) Company has never owned, leased or
otherwise occupied, had an interest in or operated any real property other
than the Land and that certain property surrounding the Land as described in
Exhibit C (the "Additional Land"). Company currently leases the Land from
Reyncor Industrial Alcohol, Inc. pursuant to a valid written lease and by
virtue of such lease has good, leasehold title to the Land except as
permitted under Article 3 hereof. Except as set forth on Schedule 5.10(i):
(a) The Land is, and at all times during operation of the Facility
has been, fully licensed, permitted and authorized for the operation of
the
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Facility under all Applicable Laws relating to the protection of the
environment, the Land and the conduct of the Facility thereon
(including, without limitation, all zoning restrictions and land use
requirements).
(b) The Land is usable for its current uses and can be used by
Buyer after the Closing for such uses without violating any
Applicable Law or private restriction, and such uses are legal
conforming uses. There are no proceedings or amendments pending and
brought by or, to the best of Members' knowledge, threatened by, any
third party which would result in a change in the allowable uses of
the Land or which would modify the right of Buyer to use the Land
for its current uses after the Closing Date (subject to Schedule
5.19).
(c) Members and Company have made available to Buyer all
engineering, geologic and other similar reports, documentation and
maps relating to the Land in the possession or control of Members or
Company.
(d) To the best of Stockholders' knowledge, no third parties
have any rights to drill or explore for, collect, produce, mine,
excavate, deliver or transport oil, gas, coal, or other minerals in,
on, beneath, across, over, through, from or to any portion of the
Land, other than as set forth in the Title Policy.
(e) Neither Company, Members nor the Land now is or ever has
been involved in any litigation or administrative proceeding seeking
to impose fines, penalties or other liabilities or seeking
injunctive relief for violation of any Applicable Laws relating to
the environment, other than as set forth on Schedule 5.19.
(f) Other than pursuant to the Real Estate Lease, no third party
has a present or future right to possession of all or any part of
the Land.
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(g) No portion of the Land contains any areas that could be
characterized as disturbed, undisturbed or man made wetlands or as
"waters of the United States" pursuant to any Applicable Laws or the
procedural manuals of the Environmental Protection Agency, U.S. Army
Corps of Engineers or the Department of Natural Resources of the
applicable state, whether such characterization reflects current
conditions or historic conditions which have been altered without
the necessary permits or approvals.
(h) There are no mechanic's liens affecting the Land and no work
has been performed on the Land within 120 days of the date hereof
for which a mechanic's lien could be filed.
(i) To the best of Members' knowledge, there are no levied or
pending special assessments affecting all or any part of the Land
and none is threatened.
(j) There are no pending or, to the best of Members' knowledge,
threatened condemnation or eminent domain proceedings affecting all
or any part of the Land.
(ii) To the best of Members' knowledge, Company has provided to the
government agencies requiring the same, all material reports, notices,
filings and other disclosures required by Applicable Laws and all such
reports, notices, filings and other documents were complete and accurate
in all material respects at the time provided to said government
agencies.
5.11 PERSONAL PROPERTY; NEW PROJECTS. (i) Attached as Schedule
5.11(i) is a complete and accurate list and a complete description as of
the date hereof of all personal property of Company including true and
correct copies of leases for equipment and other personal property, if
any, used in the operation of the Business and including an indication
as to which assets were formerly owned by
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business or personal affiliates of Company. All of the vehicles, machinery and
other equipment of Company are in good working order and repair;
(ii) Company has good title to, or a valid leasehold interest in, the
properties and assets used by it shown on its balance sheet dated the Balance
Sheet Date or acquired after the date thereof, whether or not located on the
Land, including, without limitation, the items of personal property listed on
Schedules 5.11(i), free and clear of all security interests, liens or other
Adverse Claims, except for the Assumed Debt (including security interests
related thereto), the personal property listed on Schedule 8.8 and the rights of
owners of any leased assets;
(iii) all leases set forth on Schedule 5.11(i) are in full force and effect
and constitute valid and binding agreements of the parties thereto (and their
successors) in accordance with their respective terms. No default by Company,
or, to the best of Members' knowledge, any other party to any of such leases,
exists or would exist except for the passage of time or delivery of a notice or
both;
(iv) all fixed assets used by Company in the operation of the Business are
either owned by Company or leased by Company under an agreement indicated on
Schedule 5.11(i). Company's combined fixed assets (together with the real
property assets) constitute all of the real and personal property necessary for
the operation of the Business both by Company and by Buyer immediately following
the Closing and include all of the permits, licenses, franchises, consents and
other approvals necessary to operate the Business both before and immediately
after Closing; and
(v) at the Closing, Company shall have good and marketable title to all
personal property, subject to all listed debts and lease payments (including
lease end buy-out payments) and the Assumed Debt.
5.12 CONTRACTS. Attached as Schedule 5.12 is a complete
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and accurate list as of the date hereof of all of the following types of
contracts, commitments and other agreements to which Company is a party or by
which Company or its properties are bound, which list shall include, at a
minimum, the full names of each party to each agreement and the date of
execution thereof: waste treatment and processing contracts, joint venture
or partnership agreements, contracts or collective bargaining arrangements
with any labor organizations, loan agreements, powers of attorney (each of
which shall be cancelled at the Closing), indemnity or guaranty agreements,
bonds, mortgages, options to purchase land, liens, pledges or other security
agreements, agreements for the employment of any individual, agreements under
which Company has advanced or loaned any amount to one another or to Members
or any employee, officer or director of Company, any guaranties by Company,
any agreement concerning confidentiality or noncompetition and any other
agreement under which the consequences of a default or termination could have
an adverse effect on the business, financial condition, operations or
prospects of Company. None of the agreements listed on Schedule 5.12 have
been modified, altered, terminated or otherwise amended and there have been
no waivers, oral agreements, representations or other statements with
relation to any such agreements except as described in Schedule 5.12.
Company has complied with all obligations pertaining to it contained in such
contracts, commitments and other agreements, is not in default thereunder and
no notice of default has been received nor will the consummation of the
transactions contemplated by this Agreement result in such a default. To the
best of Members' knowledge, there is no default by any other party to any
contract, commitment or other agreement attached as Schedule 5.12.
5.13 INSURANCE POLICIES. Attached as Schedule 5.13 are complete and
accurate copies as of the date hereof of all insurance policies carried by
Company and an accurate list of all insurance loss runs and workers'
compensation claims received for
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the past three policy years. All insurance policies are in full force and
effect and shall remain in full force and effect through the Closing Date.
Company's insurance has never been cancelled and Company has never been
denied coverage.
5.14 OFFICERS AND EMPLOYEES; COMPENSATION. Attached as Schedule 5.14 is a
complete and accurate list of all officers and employees of Company and the rate
of compensation of each as of the date hereof (including a breakdown of the
portion thereof attributable to salary, bonus and other compensation,
respectively). Except as set forth in Schedules 5.12 and 5.14 as to Linda Shaw,
each employee of Company is an employee at will and there are no collective
bargaining agreements affecting any employee of Company. There is no pending
or, to the best of Members' knowledge, threatened labor dispute involving
Company and any group of its employees nor has Company experienced any labor
interruptions over the past three years.
5.15 EMPLOYEE PLANS. Except as set forth on Schedule 5.15, Company has no
group health plans, employee benefit plans, employee welfare benefit plans,
employee pension benefit plans, multi-employer plans or multiple-employer
welfare arrangements (as defined in Sections 3(3), (1), (2), (37) and (40),
respectively, of the Employee Retirement Income Security Act of 1974, as amended
("ERISA")) (collectively, "Plans"), which are currently maintained and/or
sponsored by Company, or to which Company currently contributes, or has an
obligation to contribute in the future (including, without limitation,
employment agreements and any other agreements containing "golden parachute"
provisions and deferred compensation agreements). No such Plans have been
terminated within the past three years.
5.16 COMPLIANCE WITH ERISA. Neither Company, any Controlled Group Member
(as defined in Code Section 414(n)(6)(B)), nor any business, subsidiary,
division or operation acquired by Company or a Controlled Group Member in the
last five years, ever have maintained or sponsored, or contributed to, an
employee pension benefit plan (as defined in
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ERISA Section 3(2)) which is subject to the provisions of Title IV of ERISA.
Except as set forth on Schedule 5.15, Company does not maintain or sponsor,
nor is a contributing employer to, a pension, profit-sharing, deferred
compensation, stock option, employee stock purchase or other employee benefit
plan, employee welfare benefit plan, or any other arrangement with its
employees. Further:
(i) With respect to Plans which qualify as "group health plans" under
Section 4980B of the Internal Revenue Code and Section 607(1) of ERISA and
related regulations (relating to the benefit continuation rights imposed
by "COBRA"), Company and Members have complied (and on the Closing Date will
have complied), in all respects with all reporting, disclosure, notice,
election and other benefit continuation requirements imposed thereunder as
and when applicable to such plans, and Company has no (and will incur no)
direct or indirect liability and is not (and will not be) subject to any
loss, assessment, excise tax penalty, loss of federal income tax deduction
or other sanction, arising on account of or in respect of any direct or
indirect failure by Company and Members or any of them, any time prior to
the Closing Date to comply with any such federal or state benefit
continuation requirement, which is capable of being assessed or asserted
before or after the Closing Date directly or indirectly against Company or
Members, or any of them with respect to such group health plans.
(ii) With respect to any Plan which qualifies as a group health plan,
such plan is insured by third parties and all premiums have been paid on a
timely basis and are paid in full as of the Closing Date or, to the extent
such plan is not fully insured, all self insured obligations have been met
as of the Closing Date and are fully reflected in the plan's financial
statements. To the extent that any of the Company's group health plans
are retrospectively rated,
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there are no liabilities capable of assertion against the Company in respect
of claims already incurred and present.
5.17 COMPLIANCE WITH LAW; NO CONFLICTS.
(i) Except as disclosed in Schedule 5.19, Company has in the past
complied with, and is now in compliance with, all federal, state and local
statutes, laws, rules, regulations, orders, licenses, permits (including,
without limitation, zoning restrictions and land use requirements) and all
administrative and judicial judgments, rulings, decisions and orders of any
body having jurisdiction over Company, the Business or the Land (the
"Applicable Laws"), except to the extent that non-compliance would not have
a material adverse effect on Company and neither Company nor Members have
received any notice Company is under investigation or other form of review
with respect to any Applicable Law; and
(ii) the execution, delivery and performance of this Agreement, the
consummation of any transactions herein referred to or contemplated hereby
and the fulfillment of the terms hereof and thereof will not:
(a) conflict with, or result in a breach or violation of the
Articles of Incorporation or Bylaws of Company;
(b) conflict with, or result in a breach under any document,
agreement or other instrument to which Company, or Members is a
party, or result in the creation or imposition of any lien, charge or
encumbrance on any properties of Company or Members pursuant to: (A)
any law or regulation to which Company or Members, or any of their
respective properties are subject, or (B) any judgment, order or
decree to which Company or Members is bound or any of their respective
properties are subject;
(c) result in termination or any impairment of any permit,
license, franchise, contractual right or
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other authorization of Company; or
(d) require the consent of, or the filing with any governmental
authority or agency or any other third party in order to remain in full
force and effect.
5.18 TAXES. Company has filed, or will file, in a timely manner all
requisite federal, state, local and other tax returns due for all fiscal
periods ended on or before the date hereof and, as of the Closing, shall have
filed or will file in a timely manner all such returns due for all periods
ended on or before the Closing Date. There are no agreements to extend the
statutory period for the assessment of any taxes, examinations in progress or
claims against Company for federal, state, local and other taxes (including
penalties and interest) for any period or periods prior to and including the
date hereof and none shall exist as of the Closing Date. No notice of any
claim for taxes, whether pending or threatened, has been received. Copies
of: (i) all tax examinations; (ii) extensions of statutory limitations; and
(iii) the federal, state, local and other income tax returns and franchise
tax returns of Company for its last three fiscal years are attached hereto as
Schedule 5.18. Company has a taxable year ended December 31. Company
currently utilizes the cash method of accounting for income tax purposes and
has not changed its method of accounting since its initial creation.
5.19 LITIGATION. Except as set forth on Schedule 5.19, there is no claim,
litigation, action, suit or proceeding, investigation, formal arbitration,
informal arbitration or mediation, administrative, judicial or other review,
pending or, to the best of Members' knowledge, threatened against Company or
Members, or otherwise relating to the business or affairs of Company, at law or
in equity, before any federal, state or local court or regulatory agency, or
other governmental or private authority; no notice of any of the above has been
received by Company or Members; and no facts or circumstances exist which would
give rise to any of the foregoing. Also listed on Schedule 5.19 are all
instances where Company is the plaintiff, or
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complaining or moving party, under any of the above types of proceedings or
otherwise.
5.20 ABSENCE OF PRICE RENEGOTIATION CONTRACTS. Company is not now nor
has ever been a party to any governmental contracts subject to price
redetermination or renegotiation.
5.21 CONDUCT OF BUSINESS SINCE BALANCE SHEET DATE. Since the Balance Sheet
Date, there has not been any:
(i) material adverse change in the financial condition, assets,
liabilities (contingent or otherwise), income and business or prospects of
Company;
(ii) damage, destruction or loss (whether or not covered by insurance)
which, singly or in the aggregate, materially and adversely affects the
properties (whether owned or leased) or business of Company;
(iii) change in the membership interests of Company, any change in its
equity ownership or any grant by it of any subscriptions, options, warrants,
puts, calls, conversion rights or other commitments related to its equity
interests;
(iv) declaration or payment of any dividend or distribution in respect
of the membership interests of Company or any direct or indirect redemption,
purchase or other acquisition of any of the membership interests of Company;
(v) any increase in the compensation, bonus, sales commissions or
fee arrangements payable or to become payable by Company to any of its
officers, directors, employees, consultants or agents above those disclosed
on Schedule 5.14;
(vi) work interruption, labor grievance or claim filed;
(vii) sale or transfer of, or any agreement to sell or transfer, any
material assets, property or rights of Company to any person not in the
ordinary course of the business of Company, including, without limitation,
all agreements with Members or with affiliates of Company;
(viii) cancellation or agreement to cancel any
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indebtedness or other obligation owing to Company, including, without
limitation, any indebtedness or other obligation of Members or with any
affiliate of Company;
(ix) plan, agreement or arrangement granting any preferential right
to purchase or acquire any interest in any of the assets, property or rights
of Company or requiring consent of any party to the transfer and assignment
of any such assets, property or rights;
(x) purchase or acquisition by any third party of, or any agreement,
plan or other arrangement by any third party to purchase or acquire, any
property, rights or assets of Company other than in the ordinary course of
business;
(xi) waiver of any rights or claims of Company;
(xii) breach, amendment or termination of any contract, license, permit
or other agreement to which Company is a party other than in the ordinary
course of business;
(xiii) transaction by Company outside the ordinary course of its
business;
(xiv) amendment to the [Certificate of Formation] or Operating
Agreement of Company;
(xv) any other material occurrence, event, incident, action or failure
to act outside the ordinary course of business of Company; or
(xvi) any action by Company, Members, or any employee, officer or agent
of Company or Members committing to do any of the foregoing.
5.22 BANK ACCOUNTS; DEPOSITORIES. Attached as Schedule 5.22 is a complete
and accurate list as of the date of this Agreement, of:
(i) the name of each financial institution in which Company has any
account or safe deposit box;
(ii) the names in which each account or box is held;
(iii) the type of each account; and
(iv) the name of each person authorized to draw on or have access to each
account or box.
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5.23 HAZARDOUS MATERIALS. Environmental Laws means any applicable
statute, code, enactment, or ordinance, rule, regulation, permit, consent,
approval, authorization, license, judgment, order, writ, decree, injunction,
or other requirement having the force and effect of law, whether local, state
or national relating to: (i) emissions, discharges, spills, releases or
threatened releases of Hazardous Substances into ambient air, surface water,
groundwater, watercourses, publicly or privately owned treatment works,
drains, sewer systems, wetlands septic systems or onto land; (ii) the use,
treatment, storage, disposal, handling, manufacturing, transportation, or
shipment of Hazardous Materials; (iii) the regulation of storage tanks; and
(iv) otherwise relating to pollution or protection of the environment.
Hazardous Materials means any hazardous or toxic material, substance or waste
designated as such under the Resource Conservation and Recovery Act of 1976;
the Comprehensive Environmental Response Compensation and Liability Act
("CERCLA"); the Clean Water Act; the Toxic Substances Control Act; and any
comparable or similar state statute affecting the Business; any other
applicable law or the rules and regulations promulgated under any of the
foregoing, as each of the foregoing may have been amended. The definition of
a Hazardous Materials as used herein, specifically excludes petroleum, as
that term is defined under the Resource Conservation and Recovery Act of 1976
and CERCLA.
Except as set forth on Schedules 5.23 or 5.10, Company is not in material
violation of any Environmental Laws and Company has not received any notice
of alleged violation of Environmental Laws from any governmental agency.
No Hazardous Materials have been used, stored, manufactured or processed
on the Land except as necessary to the conduct of Company's business and in
compliance with all applicable laws.
To the best of Company's knowledge, subject to Schedule 5.10, there has
been no disposal release or threatened release of Hazardous Materials from or
to the Land.
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No liens, with respect to environmental liability, have been imposed against
Company or the Land under CERCLA, any comparable state statute affecting the
Business or other Applicable Law.
No portion of the Land is listed on the CERCLIS list or the National
Priorities List of Hazardous Waste Sites or any similar list maintained by
the State of Texas.
Neither Company nor any Member has received a notice of potential
responsibility or letter of inquiry from any private party or government
agency for any off-site facility under CERCLA or state counterpart thereof.
Set forth on Schedule 5.23 is a complete list of the names and addresses of
all disposal sites at any time now or in the past utilized by Company.
5.24 STORAGE TANKS. Except as set forth on Schedule 5.24, the Land does
not contain any underground or above-ground storage tanks containing Hazardous
Materials, petroleum products or wastes or other hazardous substances regulated
by 40 CFR 280 or other Applicable Laws. All above and below ground tanks
currently in use on the Land are being used and maintained in accordance with
all Applicable Laws.
5.25 ABSENCE OF CERTAIN BUSINESS PRACTICES. Neither Company nor Members
have ever made, offered or agreed to offer anything of value to any employees
of any customers of Company for the purpose of attracting business to Company
or any foreign or domestic governmental official, political party or candidate
for government office or any of their respective employees or representatives,
nor have they otherwise taken any action which would cause it to be in
violation of the Foreign Corrupt Practices Act of 1977, as amended.
5.26 COMPLETE DISCLOSURE. This Agreement and the schedules hereto and all
other documents and information furnished to Buyer and its representatives
pursuant hereto or pursuant to the negotiation of this transaction or the
investigations of Buyer or the employees or representatives of either of
them, do not and will not include any untrue statement of a material fact or
omit to state a material fact necessary to make the statements therein
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not misleading. If Members, or, prior to Closing, Company, becomes aware of
any fact or circumstance which would change a representation or warranty of
Company or Members in this Agreement or any other statement made or document
provided to Buyer, the party with such knowledge shall promptly give written
notice of such fact or circumstance to Buyer. None of (i) such notification,
(ii) any pre-Closing investigation made by Buyer of Company, its properties,
businesses or assets, or (iii) the Closing contemplated by this Agreement,
shall relieve Members or Company of their obligations under this Agreement,
including their representations and warranties made in this Section 5.
6. REPRESENTATIONS AND WARRANTIES OF PARENT. Parent represents and warrants
that the statements contained in this Section 6: (i) are correct and complete
as of the date of this Agreement; (ii) will be correct and complete as of the
Closing Date (as though made then and as though the Closing Date were
substituted for the date of this Agreement throughout this Section 6); and (iii)
shall survive the Closing in accordance with Article 12 hereof.
6.1 CORPORATE ORGANIZATION. Parent is duly incorporated, validly
existing and in good standing under the laws of the State of Delaware.
Parent is duly authorized, qualified and licensed under all applicable laws,
regulations and ordinances of public authorities to carry on its businesses
in the places and in the manner as now conducted except for where the failure
to be so authorized, qualified or licensed would not have a material adverse
affect on such businesses.
6.2 PARENT STOCK. The Parent Stock to be delivered to Members in
connection with this Agreement, when delivered in accordance with the terms
of this Agreement, will constitute valid and legally issued shares, fully
paid and nonassessable and will be registered and free from any lien, claim
encumbrance or restriction on transfer other than restrictions imposed by the
Act or the regulations promulgated thereunder. Buyer is not a party to any
agreement creating rights in any person or entity
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with respect to such Parent Stock (other than this Agreement) or relating to
the voting thereof.
6.3 CORPORATE AUTHORITY. The officers of Parent executing this
Agreement have the corporate authority to enter into and bind Parent to the
terms of this Agreement and Parent has taken all necessary corporate action
(including, without limitation, approval by its Board of Directors) to
authorize the execution, delivery and, subject to receipt of required
regulatory approvals, performance of this Agreement. All corporate action by
Parent necessary to approve the transaction, including both director and (if
required) shareholder approvals, has been taken.
6.4 NO CONFLICTS. The execution, delivery and performance of this
Agreement, the consummation of any transactions herein referred to or
contemplated hereby and the fulfillment of the terms hereof and thereof,
including, without limitation, the provisions of Article 2, will not:
(i) conflict with, or result in a breach or violation of the Articles of
Incorporation or Bylaws of Parent;
(ii) conflict with, or result in a breach under any document, agreement or
other instrument to which Parent is a party, or result in the creation or
imposition of any lien, charge or encumbrance on any properties of Parent
pursuant to: (A) any law or regulation to which Parent, or its property is
subject, or (B) any judgment, order or decree to which Parent is bound or
its property is subject; or
(iii) result in termination or any impairment of any material permit,
license, franchise, contractual right or other authorization of Parent.
6.5 BINDING AGREEMENT. This Agreement is the binding and valid
obligation of Parent, enforceable against it in accordance with its terms.
6.6 SEC FILINGS AND FINANCIAL INFORMATION. Parent has timely made all
filings required to be made by it with the SEC. None of such filings
contains any untrue statement of material fact or omits to state a material
fact necessary to make the
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statements therein not misleading in light of the circumstances in which they
were made.
6.7 FINANCIAL INFORMATION. Parent has delivered to Company true copies
of the following: (i) its filings under the Act; (ii) all reports on Form
8-K's for the past twelve months, if any; (iii) all exhibits filed with such
forms or reports, if any. The foregoing filings and reports, as of their
respective dates, did not contain any untrue statement of a material fact or
omit to state a material fact required to be stated therein or necessary to
make the statements therein not misleading. Since the date of filing of
Parent's Form S-1, there has not been any material adverse change in the
business, properties, financial condition or prospects of Parent.
6.8 TAXATION. Parent has prepared and filed with the appropriate
governmental agencies all federal, state and local tax returns required to be
filed by it and has paid all taxes shown thereon to be payable or which have
become due pursuant to any assessment, deficiency notice or similar notice
received by it. Parent is not a party to any pending action or proceeding by
any governmental authority for assessment or collection of taxes and no claim
therefor has been asserted against it.
7. COVENANTS.
7.1 ACCESS TO LAND AND RECORDS. Between the date of this Agreement and
the Closing Date, Members will cause Company to afford to or obtain for the
officers and authorized representatives of Buyer access to all of the Land
(including, without limitation, for the purpose of performing all testing,
inspections and other procedures considered desirable by Buyer), sites, books
and records, including, without limitation, the Environmental Documents, at
all reasonable times and upon reasonable notice and will furnish Buyer with
such additional financial and operating data and other information as to the
business and properties, both current and former, of Company as
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Buyer may from time to time reasonably request. Buyer agrees to repair all
damage, if any, caused by Buyer's entry onto the Land prior to Closing.
Members will cooperate, and will cause Company to cooperate, with Buyer, its
representatives, engineers, auditors and counsel in the preparation of any
documents or other material which may be required in connection with any
documents or materials required by any governmental agency. Buyer will cause
all information obtained in connection with the negotiation and performance
of this Agreement to be treated as confidential in accordance with the
provisions of Article 14 hereof.
7.2 COMPANY ACTIVITIES PRIOR TO CLOSING. Between the date of this
Agreement and the Closing Date, Members will cause Company:
(i) to carry on its business in substantially the same manner as it has
heretofore and not to introduce any material new method of management,
operation or accounting;
(ii) to maintain its properties and facilities, including those held under
leases, in as good working order and condition as at present, ordinary wear
and tear excepted;
(iii) to perform its obligations under agreements relating to or affecting
its assets, properties or rights, including payment of debts as they become
due;
(iv) to keep in full force and effect present insurance policies or other
comparable insurance coverage with reputable insurers;
(v) to use reasonable efforts to maintain and preserve its business
organization intact, retain employees and maintain relationships with
suppliers, customers, consultants, independent contractors and others
having business relations with Company;
(vi) to maintain compliance with all Applicable Laws;
(vii) to maintain and perform present debt and lease instruments in
accordance with their terms and not enter into new or amended debt or lease
instruments, without the
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prior written consent of Buyer;
(viii) to pay and provide salaries and commissions for all officers,
directors, employees and agents at levels no higher than those disclosed on
Schedule 5.14;
(ix) to provide the interim financial statements required by Section
5.6; and
(x) to provide all reasonable assistance to Buyer to provide for an
orderly transfer of operating control of Company to Buyer.
7.3 PROHIBITED ACTIVITIES PRIOR TO CLOSING. Between the date of this
Agreement and the Closing Date, Members will cause Company not, without the
prior written consent of Buyer:
(i) to amend the [Certificate of Formation] or Operating Agreement of
Company;
(ii) to change the membership interests of Company or the equity ownership
of Company or grant any options, warrants, puts, calls, conversion rights or
commitments relating to the equity interests of Company;
(iii) to declare or pay any dividend of Company or directly or indirectly
purchase, redeem or otherwise acquire or retire for value or issue any
membership interests of Company;
(iv) to enter into any contract or commitment or incur or agree to incur
any liability or make any capital expenditures in excess of an aggregate of
$5,000;
(v) to increase the compensation payable or to become payable to any
officer, director, stockholder, employee, consultant or agent, or make any
bonus or management fee payment to any such person;
(vi) to create or assume any mortgage, pledge or other lien or encumbrance
upon any assets or properties whether now owned or hereafter acquired;
(vii) to sell, assign, lease or otherwise transfer or dispose of any
property or equipment;
(viii) to negotiate to acquire any business or begin any
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new business or project;
(ix) to merge or consolidate or agree to merge or consolidate with or into
any other corporation;
(x) to waive any of its rights or claims;
(xi) to breach or permit a breach of, amend or terminate, any material
agreement, or any permit, license or other agreement or right to which
Company is a party;
(xii) to enter into any other transaction outside the ordinary course of
its business or otherwise prohibited hereunder;
(xiii) to make any oral or written public announcement concerning this
transaction except as may be required by law, all of which announcements,
if any, shall be forwarded to Buyer for review and comment at least seven
days prior to dissemination; or
(xiv) to allow any other action or omission, or series of actions or
omissions, by Company or Members that would cause a representation and
warranty of Company and Members made in Section 5.21 of this Agreement to
be untrue on the Closing Date.
7.4 CONTACT WITH GOVERNMENT OFFICIALS. Company and Members shall each use
their best efforts to cooperate with Buyer in making contact with the
appropriate governmental agencies and officials having information about or
jurisdiction over Company, the Members or the Land, including, without
limitation, environmental and land use agencies and officials in order to assist
Buyer in completing its regulatory evaluation of Company and the Land.
8. CONDITIONS PRECEDENT TO OBLIGATIONS OF COMPANY AND MEMBERS. The obligations
of Members and Company hereunder are subject to the completion, satisfaction,
or at their option, waiver, on or prior to the Closing Date, of the following
conditions.
8.1 REPRESENTATIONS AND WARRANTIES. The representations and warranties of
Buyer and Parent contained in this Agreement shall be accurate on and as of the
Closing Date with the same
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effect as though such representations and warranties had been made on and as
of such date; and each and all of the terms, covenants and conditions of this
Agreement to be complied with and performed by Buyer or Parent on or before
the Closing Date shall have been duly complied with and performed.
8.2 CONSENTS. All necessary notices to, consents of and filings with any
governmental authority or agency or other third party relating to the
consummation of the Closing or the other transactions contemplated herein to be
made or obtained by Buyer shall have been obtained and made.
8.3 NO ADVERSE PROCEEDING. No action or proceeding before a court or
any other governmental agency or body shall have been instituted or, to the
best of Members's knowledge, threatened to restrain or prohibit any of the
transactions contemplated by this Agreement.
8.4 NONCOMPETITION AGREEMENT. Buyer shall have executed and delivered at
the Closing the Noncompetition Agreement with John E. Tuma and Roger Reynolds
and their spouses (the "Noncompetition Agreement"), in form and substance
satisfactory to Buyer and Members.
8.5 TEXLINE NOTE. Buyer shall have paid the then outstanding principal
balance (and accrued but unpaid interest) of the Texline and Houston Grain
promissory notes on the Closing Date and agrees to pay the Assumed Debt as
set forth in Section 2.3.
8.6 NEW REAL ESTATE LEASE. Buyer and Reyncor Industrial Alcohol, Inc.
shall have entered into a lease for the Land for a ten-year initial term, at
a rental of $18,000 per month, with three separate 10-year renewals at the
option of Buyer and containing such other terms as are acceptable to Buyer
and Company (the "Real Estate Lease").
8.7 ANCILLARY DOCUMENTS. On the Closing Date, Buyer shall have executed
and delivered that certain Executive Employment Agreement with John E. Tuma,
that certain Plan of Reorganization relating to Re-Claim Environmental, Inc.
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8.8 CERTAIN PERSONALTY. Notwithstanding other provisions hereof, the
parties acknowledge that the personalty described in Schedule 8.8 hereto is
owned by John E. Tuma, individually and used by the Company (some pursuant to
leases and rental paid by Company to John E. Tuma). Parent agrees that all
such personalty shall either be purchased by Company from Tuma at Closing,
continue to be leased by Company (with Company assuming such lease and
releasing Tuma from any liability or guaranty); all in accordance with
Schedule 8.8 hereto.
8.9 RULE 144. Parent shall use its best efforts to cause all filings
required with the SEC to be made of Parent's current public information so
that Stockholders shall have available Rule 144 for the resale of the Parent
Stock as soon as practicable under Rule 144. As soon as resales are possible
under Rule 144, at the written request of Stockholders proposing to sell
securities in compliance with Rule 144, Company shall (i) forthwith furnish
to Stockholders a written statement of compliance with the filing
requirements of the SEC as set forth in Rule 144, as such rule may be amended
from time to time, and (ii) timely file and make available to the public and
Stockholders all such reports and other information as will enable
Stockholders to make sales, subject to the express limitations of this
Agreement, pursuant to Rule 144 beginning one year after the date of the
acquisition of the Parent Stock.
9. CONDITIONS PRECEDENT TO OBLIGATIONS OF PARENT. The obligations of Parent
hereunder are subject to the completion, satisfaction or, at their option,
waiver, on or prior to the Closing Date, of the following conditions.
9.1 REPRESENTATIONS AND WARRANTIES. The representations and warranties of
Members and Company contained in this Agreement shall be accurate on and as of
the Closing Date with the same effect as though such representations and
warranties had been made on and as of such date, and Buyer shall have received a
certificate from Members to that effect, or setting forth any discrepancies in
such representations and warranties which have
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arisen since the date of this Agreement. The foregoing notwithstanding,
Company and Members agree that no limitation of any representation or
warranty concerning the knowledge of Company or Members or any qualification
of such representations and warranties set forth in the certificate
contemplated in the first sentence of this Section 9.1 shall restrict Buyer's
right to terminate this Agreement if any representation or warranty of
Members or Company is inaccurate as of the Closing Date.
9.2 COVENANTS. Each and all of the terms, covenants and conditions of this
Agreement to be complied with and performed by Members and Company on or before
the Closing Date shall have been duly complied with and performed.
9.3 NO ADVERSE PROCEEDING. No action or proceeding before a court or
any other governmental agency or body shall have been instituted or, to the
best of Buyer's knowledge, threatened to restrain or prohibit any of the
transactions contemplated by this Agreement, and no governmental agency or
body shall have taken any other action or made any request of Buyer as a
result of which the management of Buyer deems it inadvisable to proceed with
the transactions hereunder.
9.4 GENERAL RELEASE. Members shall have delivered to Parent an instrument
dated the Closing Date releasing Company and Parent from any and all claims of
Members against Company and Parent arising out of events which occurred prior to
the Closing (but not including any claims pursuant to this Agreement).
9.5 CONSENTS. All necessary notices to, consents of and filings with
any governmental authority or agency or other third party relating to the
consummation of the Closing or the other transactions contemplated herein to
be made or obtained by Company or Members shall have been obtained and made.
9.6 RESIGNATIONS. Each officer and director of Company shall have
delivered to Buyer their written resignation.
9.7 GOOD STANDING CERTIFICATES. Members shall have delivered to Buyer
certificates, dated as of a date no earlier than 10 days prior to the Closing
Date, duly issued by the
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appropriate governmental authority or authorities showing that Company is in
good standing in its state of incorporation.
9.8 UPDATED AGREEMENTS. Members shall have delivered to Buyer a schedule
(Schedule 9.8) dated the Closing Date, listing all material agreements entered
into by Company since the date of Schedule 5.12, which new agreements must have
been determined to be acceptable to Buyer in its sole discretion.
9.9 NONCOMPETITION AGREEMENT. The Noncompetition Agreement shall have been
executed and delivered by all parties thereto at the Closing.
9.10 TERMINATION OF EXISTING LEASE. Company shall have terminated its
currently existing lease for the Land without liability to Buyer.
9.11 REAL ESTATE LEASE. Buyer and Company shall have entered into the Real
Estate Lease.
9.12 ASSIGNMENT OF MEMBERSHIP INTERESTS. Members shall have delivered to
Buyer the Assignment of Membership Interests.
9.13 ENVIRONMENTAL REVIEW. Buyer, through its authorized
representatives, must have completed a review (including, without limitation,
all testing, inspections and other procedures, review of existing files of,
and discussions with, governmental agencies and officials having jurisdiction
over Company) of the Land and the environmental and land use practices,
procedures, operations and activities of Company; the results of which
review, without limiting the generality of the foregoing, reflects compliance
with all Applicable Laws governing the Land and the operations of Company,
discloses no actual or probable violations, compliance problems, required
capital expenditures or other substantive environmental, land use or real
estate related concerns and are otherwise satisfactory in all respects to
Buyer in its sole discretion.
9.14 TRANSFERABILITY OF PERMITS. Buyer shall have determined, in its
sole discretion, that prior to, or as a result of, this transaction, all of
the permits required for the operation of the Business and the Facility have
been transferred
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to Buyer (as a matter of law or otherwise) or can be transferred to
Buyer without a public hearing before any governmental body and that all
consents or other approvals necessary for Buyer's continued use of such permits
after the Merger have been obtained.
9.15 GENERAL. All actions taken by Members and Company in connection
with the consummation of the transactions contemplated hereby and all
certificates, opinions and other documents required to effect the
transactions contemplated hereby will be reasonably satisfactory in form and
substance to Buyer.
10. ADDITIONAL COVENANTS.
10.1 TAXES. (i) Members irrevocably agree to indemnify Buyer against, and
to hold Buyer harmless from:
(a) any and all federal, state, local, and other taxes of Company
arising from the audit, examination, review or other adjustment of tax
liabilities for periods ending on or prior to the Closing Date;
(b) any and all taxes, interest, penalties, additions to tax (or
additional amounts imposed with respect to any such interest, penalties,
or additions to tax) imposed with respect to any federal, state, local, or
other taxes of Company for periods ending on or before the Closing Date; and
(c) any and all federal, state, local, or other taxes of Buyer arising
as the result of any payment by the Members to Buyer in fulfillment of his
obligation pursuant to this Section 10.1(i).
(ii) Members agree that they shall be responsible, at their sole expense,
for the preparation of Company's federal, state, local and other income and
franchise tax returns for the tax periods beginning January 1, 1997 and ending
on the Closing Date. Buyer agrees to cooperate with Members in the preparation
of such returns. Members further agree that they shall pay all taxes (including
all penalties and interest, if any) due for such tax period. Prior to
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filing the returns provided for in this paragraph, Members agree to allow
Buyer 20 business days to review and approve such returns, approval of
which will not unreasonably be withheld.
10.2 POST CLOSING BALANCE SHEET. On the date which is 60 days after the
Closing Date (the "Adjustment Date") the parties shall adjust the Purchase Price
in accordance with Section 2.4 based on a balance sheet of Company for the
period ending on the close of business on the Closing Date, prepared by Parent's
regular independent accountant in accordance with GAAP and delivered to Parent
and Members, together with the supporting documentation for all current assets
and liabilities used to prepare such balance sheet, at least seven days prior to
the Adjustment Date. No accounts receivable shall be written off in whole or in
part in connection with preparing such balance sheet. Any dispute between the
parties as to this Section 10.2 shall be resolved in accordance with the
procedure set forth in Section 2.4.
10.3 CLOSING DATE ACTIONS. Buyer and Members mutually agree that they
shall not, and shall cause Company not to, engage in an transaction outside
the normal course of business on the Closing Date.
10.4 TRADE PAYABLES. Parent agrees to pay all of the trade payables of
Company existing on the Closing Date within 30 days after Closing.
10.5 RELEASE OF PERSONAL GUARANTIES. Parent agrees to use its reasonable
efforts to have each of the Members released from any personal guaranties and
lease obligations entered into by such Member in connection with a Company debt
or lease that is not being paid off within 60 days after the Closing Date.
Parent shall indemnify, defend and hold harmless Members for any loss or other
matter suffered as a result of such personal guaranties prior to release. If
Parent cannot obtain a release with 60 days, Parent will pay off the underlying
obligation in full.
10.6 HAZARDOUS MATERIALS EXPANSION. All parties hereto
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acknowledge that Company intends to expand its business to implement a
hazardous waste recycling program and make necessary improvements to the
plant and equipment of Company to accommodate the handling and processing of
hazardous materials, including, without limitation, necessary improvements to
the tank farm, additional tanks, improvements to the containment area
foundation, driveways to be paved with concrete and guttered and implement
necessary safety programs and equipment upgrades, adding additional personnel
as necessary, additional monitoring equipment and upgrade laboratory
equipment (the "Hazardous Program"). Buyer agrees to do all things necessary
in its reasonable business judgment to implement the Hazardous Program and
Buyer shall contribute capital to Company necessary in its reasonable
business judgment to fully implement the Hazardous Program, the cost of which
shall be treated in the same manner as similar costs are treated by Parent as
to its other subsidiaries, in accordance with good accounting practices.
10.7 TUMA PERSONAL PROPERTY. On the Closing Date, Buyer shall purchase
from John E. Tuma, certain personal property personally owned by John E. Tuma
for the amounts, in cash, set forth on Schedule 8.8 attached hereto. The
parties acknowledge that such purchase price amounts are intended to
approximate the book cost or, in the case of the white trailer house, the
amount owing on the purchase debt. In the event any such equipment listed on
said Schedule 8.8 is being leased in the name of John E. Tuma, Company agrees
to either pay off such lease, or have such lease modified so that John E.
Tuma will no longer have any personal liability with regard to such leases or
equipment, whatsoever, in accordance with Section 10.5 hereof.
10.8 FURTHER ASSURANCE. From time to time on and after the Closing and
without further consideration, the parties hereto shall each deliver or cause
to be delivered to any other party at such times and places as shall be
reasonably requested, such additional instruments as any of the others may
reasonably request for the purpose of carrying out this Agreement and the
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transaction contemplated hereby. Members, also without further
consideration, agree to cooperate with Buyer and to use his reasonable
efforts to have the present officers and employees of Company cooperate on
and after the Closing Date in furnishing to Buyer information, evidence,
testimony, and other assistance in connection with obtaining all necessary
permits and approvals and in connection with any actions, proceedings,
arrangements or disputes of any nature with respect to matters pertaining to
all periods prior to the Closing Date. Members acknowledge and agree that,
from and after the Closing, Buyer shall be entitled to possession of all
documents, books, records (including tax records), agreements and financial
and operating data of any sort of Company; provided that all such material
shall be made available to Members for their preparation of tax returns,
audits and other matters.
10.9 TRANSITION. Members will not take any action that is designed or
intended to have the effect of discouraging any customer or business
associate of Company from maintaining the same business relationships with
Buyer after the Closing that it maintained with Company before the Closing.
Members will refer all customer inquiries relating to the Business to Buyer
from and after the Closing. Further, Members agree that for a period of 90
days following the Closing Date, Members will assist Buyer, at Buyer's
request and expense, with the orderly transition of the operations of Company
from Members to Buyer (including, without limitation, recommendations, advice
and interaction with customers and potential customers of Company, and
governmental agencies).
10.10 SURVIVAL. The covenants in this Article 10 shall survive the
Closing in accordance with Article 12 hereof.
11. FEDERAL SECURITIES ACT RESTRICTIONS ON STOCK.
11.1 REGISTERED STOCK. Parent covenants, represents and warrants to
Members and Members acknowledge that all of the shares of Parent Stock to be
delivered to Members pursuant to this Agreement will be registered under the
Act prior to delivery
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to Members.
11.2 GENERAL LEGEND. All Parent Stock shall bear the following legend:
THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO THE PROVISIONS
OF RULE 145(D) PROMULGATED UNDER THE SECURITIES ACT OF 1933, AND MAY NOT BE
TRANSFERRED OR DISPOSED OF BY THE HOLDER WITHOUT COMPLIANCE WITH SAID RULE.
11.3 COMPLIANCE WITH LAW. Members covenant, warrant and represent that
none of the shares of Parent Stock will be offered, sold, assigned, pledged,
hypothecated, transferred or otherwise disposed of except in full compliance
with the Act and the rules and regulations promulgated thereunder.
12. INDEMNIFICATION.
12.1 SURVIVAL OF REPRESENTATIONS, WARRANTIES AND COVENANTS. All of the
representations, warranties and covenants of any party hereto contained in this
Agreement and the liabilities and obligations of the parties with respect
thereto shall survive the Closing for a period of five year from the Closing
Date; provided, however, the representations set forth in Sections 5.6, 5.7,
5.8, 5.18 and 6.2 (concerning ownership, financial statements and taxes) shall
survive until the expiration of the applicable statute of limitations (in each
case, the "Expiration Date").
12.2 LIMITATION ON LIABILITY. Any claims to be made under this Agreement,
including, without limitation, the indemnification obligations set forth in this
Agreement shall apply only after the aggregate amount of such obligations exceed
$25,000, at which time the indemnification obligations shall be effective as to
all amounts, including the initial $25,000. In addition, the aggregate
liability of Members shall not exceed the Purchase Price set forth in Article 2
hereof.
12.3 INDEMNIFICATION BY MEMBERS. Members agree that they will, jointly and
severally, indemnify, defend (as to third party claims only), protect and hold
harmless Buyer, Buyer, Company and
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their respective officers, shareholders, directors, divisions, subdivisions,
affiliates, subsidiaries, parent, agents, employees, successors and assigns
at all times from and after the date of this Agreement until the Expiration
Date from and against all liabilities claims, damages, actions, suits,
proceedings, demands, assessments, adjustments, penalties, losses, costs and
expenses whatsoever (including specifically, but without limitation, court
costs, reasonable attorneys' fees and reasonable expenses, and reasonable
expenses of investigation) ("Claims") whether equitable or legal, matured or
contingent, known or unknown, foreseen or unforeseen, ordinary or
extraordinary, patent or latent, whether arising out of occurrences prior to,
at or after the date of this Agreement, incurred as a result of or incident
to: (a) any breach of, misrepresentation in, untruth in or inaccuracy in the
representations and warranties by Company or Members (including, without
limitation, those relating to the environmental condition of the Land and
Company's environmental compliance), set forth herein or in the Schedules,
Exhibits or certificates attached hereto or delivered pursuant hereto; (b)
nonfulfillment or nonperformance of any agreement, covenant or condition on
the part of Members made in this Agreement; (c) nonfulfillment or
nonperformance of any agreement, covenant or condition on the part of Company
made in this Agreement and to be performed on or before the Closing Date; (d)
the existence of liabilities of Company in excess of the liabilities
represented by Members and Company consistent with Sections 2.4 and 10.2; (e)
all real estate taxes related to the Land for years prior; and (f) any claim
by a third party that, if true, would mean that a condition for
indemnification set forth in subsections (a) through (e) of this Section 12.3
had been satisfied.
12.4 INDEMNIFICATION BY PARENT. Parent agrees that it will indemnify,
defend, protect and hold harmless Members, their respective heirs, executors,
assigns and personal representatives, at all times from and after the date of
this
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Agreement from and against all liabilities, claims, damages, actions, suits,
proceedings, demands, assessments, adjustments, penalties, losses costs and
expenses whatsoever (including specifically, but without limitation, court
costs, reasonable attorneys' fees and expenses and reasonable expenses of
investigation) whether equitable or legal, matured or contingent, known or
unknown, foreseen or unforeseen, ordinary or extraordinary, patent or latent
arising out of occurrences after the date hereof, incurred as a result of or
incident to: (i) any breach of, misrepresentation in, untruth in or inaccuracy
in the representations and warranties set forth herein, or in the Schedules or
certificates attached hereto or delivered pursuant hereto by Buyer; (ii)
nonfulfillment or nonperformance of any agreement, covenant or condition on the
part of Buyer made in this Agreement; (iii) the operation of Company after the
Closing Date (other than stockholder indemnification matters set forth herein);
and (iv) any claim by a third party that, if true, would mean that a condition
for indemnification set forth in subsections (i) or (ii) of this Section 12.4
had been satisfied.
12.5 PROCEDURE FOR INDEMNIFICATION WITH RESPECT TO THIRD PARTY CLAIMS. (a)
If any third party shall notify a party to this Agreement (the "Indemnified
Party") with respect to any matter (a "Third Party Claim") that may give
rise to a claim for indemnification against any other party to this
Agreement (the "Indemnifying Party") or if any party who may make a claim
for indemnification under this Agreement otherwise becomes aware of any
matter that may give rise to such a claim or wishes to make such a claim
(whether or not related to a Third Party Claim), then the Indemnified
Party shall promptly notify each Indemnifying party thereof in writing;
provided, however, that no delay on the part of the Indemnified Party in
notifying any Indemnifying Party shall relieve the Indemnifying Party from
any obligation hereunder unless (and then solely to the extent) the
Indemnifying Party is thereby prejudiced.
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(b) Any Indemnifying Party will have the right to defend the
Indemnified Party against a Third Party Claim with counsel of its choice
reasonably satisfactory to the Indemnified Party so long as (i) the
Indemnifying Party notifies the Indemnified Party in writing within a
reasonable time after the Indemnified Party has given notice of the Third
Party Claim that the Indemnifying Party will indemnify the Indemnified
Party from and against the entirety of any adverse consequences (which
will include, without limitation, all losses, claims, liens, and attorneys'
fees and related expenses) the Indemnified Party may suffer resulting from,
arising out of, relating to, in the nature of, or caused by the Third Party
Claim, to the extent covered by Sections 12.3 and 12.4, (ii) the
Indemnifying Party provides the Indemnified Party with evidence reasonably
acceptable to the Indemnified Party that the Indemnifying Party will have
the financial resources to defend against the Third Party Claim and fulfill
its indemnification obligations hereunder, (iii) the Third Party Claim
involves principally non-monetary damages and does not seek as a primary
focus an injunction or temporary or permanent restraining order or involve
the possibility of criminal penalties, (iv) settlement of, or adverse
judgment with respect to the Third Party Claim is not, in the good faith
judgment of the Indemnified Party, likely to establish a precedential custom
or practice adverse to the continuing business interests of the Indemnified
Party, and (v) the Indemnifying Party conducts the defense of the Third
Party Claim actively and diligently.
(c) So long as the Indemnifying Party is conducting the defense of the
Third Party Claim in accordance with Section 12.5(b) above, (i) the
Indemnified Party may retain separate co-counsel at its sole cost and
expense and participate in the defense of the Third Party Claim, (ii) the
Indemnified Party will not consent to the entry of any
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judgment or enter into any settlement with respect to the Third Party
Claim without the prior written consent of the Indemnifying Party (which
will not be unreasonably withheld) and (iii) the Indemnifying Party will
not consent to the entry of any judgment or enter into any settlement with
respect to the Third Party Claim without the prior written consent of the
Indemnified Party (which will not be unreasonably withheld).
(d) In the event or to the extent that any of the conditions set forth
in Section 12.5(b) above is or becomes unsatisfied, however, (i) the
Indemnified Party may defend against, and consent to the entry of any
judgment or enter into any settlement with respect to, the Third Party Claim
and any matter it may deem appropriate in its sole discretion and the
Indemnified Party need not consult with, or obtain any consent from, any
Indemnifying Party in connection therewith (but will keep the Indemnifying
Party reasonably informed regarding the progress and anticipated cost
thereof), (ii) the Indemnifying Party will reimburse the Indemnified Party
promptly and periodically for the cost of defending against the Third Party
Claim (including reasonable attorneys' fees and reasonable expenses) and
(iii) the Indemnifying Party will remain responsible for any adverse
consequences the Indemnified Party may suffer resulting from, arising out
of, relating to, in the nature of, or caused by the Third Party Claim to the
fullest extent provided in this Article 12; and (iv) the Indemnifying Party
shall be deemed to have waived any claim that its indemnification obligation
should be reduced because of the manner in which the counsel for the
Indemnified Party handled the Third Party Claim. The Indemnifying Party
may retain separate co-counsel at its sole cost and participate in the
defense of the Third Party Claim, but shall not be entitled to direct the
course of such defense. In such instance, the Indemnified Party shall
not agree to a
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settlement of the defense without the consent of the Indemnifying Party,
which consent shall not be unreasonably withheld. If the Indemnifying
Party refuses to consent to a settlement and the resulting judgment or
later settlement exceeds the previously proposed settlement, then the
Indemnifying Party will be responsible for the entire excess amount of the
judgment or settlement without reference to any limitation on indemnity set
forth in this Agreement.
13. TERMINATION OF AGREEMENT.
13.1 TERMINATION BY BUYER. Buyer, by notice in the manner hereinafter
provided on or before the Closing Date, may terminate this Agreement in the
event of a breach by Members or Company in the observance or in the due and
timely performance of any of the agreements or conditions contained herein on
their part to be performed, and such breach shall not have been cured on or
before the Closing Date.
13.2 TERMINATION BY MEMBERS. Members may, by notice in the manner
hereinafter provided on or before the Closing Date, terminate this Agreement
in the event of a breach by Buyer in the observance or in the due and timely
performance of any of the covenants, agreements or conditions contained
herein on their part to be performed, and such breach shall not have been
cured on or before the Closing Date.
13.3 TERMINATION. Either party may terminate this Agreement by written
notice to the other if the Closing has not occurred by October 31, 1997.
14. NONDISCLOSURE OF CONFIDENTIAL INFORMATION.
14.1 NONDISCLOSURE BY MEMBERS. Members recognize and acknowledge that
they have in the past, currently has, and in the future may possibly have,
access to certain confidential information of Company, such as lists of
customers, operational policies, and pricing and cost policies that are
valuable, special and unique assets of Company and its businesses. Members
agree that, except as may be required by Applicable Laws or other legal
process, they will not disclose such confidential
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information to any person, firm, corporation, association or other entity for
any purpose or reason whatsoever, except to authorized representatives of
Parent unless such information becomes known to the public generally through
no fault of Members. In the case of a disclosure required by Applicable Laws
or other legal process, Members shall make no disclosure without prior
written notice to Parent. In the event of a breach or threatened breach by
Members of the provisions of this Section, Parent shall be entitled to an
injunction restraining Members from disclosing, in whole or in part, such
confidential information. Nothing herein shall be construed as prohibiting
Parent from pursuing any other available remedy for such breach or threatened
breach, including, without limitation, the recovery of damages. The
provisions of this Section shall apply at all times prior to the Closing Date
and for a period of one year following the Closing.
14.2 NONDISCLOSURE BY PARENT. Parent recognizes and acknowledges that
it has in the past, currently has, and prior to the Closing Date, will have
access to certain confidential information of Company and Members, such as
lists of customers, operational policies, financial information and pricing
and cost policies that are valuable, special and unique assets of Company and
Members and its businesses. Parent agrees that, except as may be required by
Applicable Laws or other legal process, it will not disclose such
confidential information to any person, firm, corporation, association, or
other entity for any purpose or reason whatsoever (prior to the Closing Date
as to Company information) without Members's prior written consent. In the
case of a disclosure required by Applicable Laws or other legal process,
Parent shall make no disclosure without prior written notice to Members. In
the event of a breach or threatened breach by Parent of the provisions of
this Section, Members shall be entitled to an injunction restraining Parent
from disclosing, in whole or in part, such confidential information. Nothing
contained herein shall be construed as prohibiting Members from
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pursuing any other available remedy for such breach or threatened breach,
including, without limitation, the recovery of damages. The provisions of
this Section shall apply at all times prior to the Closing Date and for a
period of one year following the Closing or the termination of this Agreement
without a Closing having occurred.
15. GENERAL.
15.1 ASSIGNMENT; BINDING EFFECT; AMENDMENT. This Agreement and the
rights and obligations of the parties hereunder may not be assigned (except
by operation of law, by will, succession or probate) and shall be binding
upon and shall inure to the benefit of the parties hereto, the successors of
the corporate parties hereto, and the respective heirs and legal
representatives of Members. This Agreement, upon execution and delivery,
constitutes a valid and binding agreement of the parties hereto enforceable
in accordance with its terms and may be modified or amended only by a written
instrument executed by all parties hereto. For the first five years after
the Closing Date, Parent agrees not to sell, assign or otherwise transfer any
of its interests in the Company or the Business without the prior written
consent of Members unless Parent remains fully obligated under its
obligations set forth in this Agreement, documented by an instrument
reasonably satisfactory to Members.
15.2 ENTIRE AGREEMENT. This Agreement is the final, complete and
exclusive statement and expression of the agreement among the parties hereto
with relation to the subject matter of this Agreement, it being understood
that there are no oral representations, understandings or agreements covering
the same subject matter as this Agreement. This Agreement supersedes, and
cannot be varied, contradicted or supplemented by evidence of any prior or
contemporaneous discussions, correspondence, or oral or written agreements of
any kind.
15.3 COUNTERPARTS. This Agreement may be executed simultaneously in two
or more counterparts, each of which shall be deemed an original and all of
which together shall constitute
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but one and the same instrument.
15.4 NO BROKERS. Company and Members represent and warrant to Buyer and
Buyer represents to Members and Company that the warranting party has had no
dealings with any broker or agent so as to entitle such broker or agent to a
commission or fee in connection with the within transaction; provided that
Shareholders have agreed to and shall pay a commission to Russell Reichert.
If for any reason a commission or fee shall become due, the party dealing
with such agent or broker shall pay such commission or fee and agrees to
indemnify and save harmless each of the other parties from all claims for
such commission or fee and from all attorneys' fees, litigation costs and
other expenses relating to such claim.
15.5 EXPENSES OF TRANSACTION. Whether or not the transactions herein
contemplated shall be consummated: (i) Buyer will pay the fees, expenses and
disbursements of Buyer and its agents, representatives, accountants
(including, without limitation, any cost of the audit of Company currently
being performed by Arthur Andersen above $10,000) and counsel incurred in
connection with the subject matter of this Agreement and any amendments
hereto and all other costs and expenses incurred in the performance and
compliance with all conditions to be performed by Buyer under this Agreement;
and (ii) Company will pay the fees, expenses and disbursements of Members and
Company and their respective agents, representatives, accountants and counsel
incurred in connection with the subject matter of this Agreement and any
amendments hereto and all other costs and expenses incurred in the
performance and compliance with all conditions to be performed by Members and
Company under this Agreement. All such fees, expenses and disbursements of
Members and Company shall be paid by Company prior to the Closing so as not
to become an obligation of Buyer or shall be included as a current liability
for purposes of the calculation of Actual Net Working Capital set forth in
Section 2.4. Members represents and warrants to Buyer that Members has
relied on his own advisors for
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all legal, accounting, tax or other advice whatsoever with respect to this
Agreement and the transactions contemplated hereby.
15.6 NOTICES. All notices or other communications required or permitted
hereunder shall be in writing and may be given by depositing the same in
United States mail, addressed to the party to be notified, postage prepaid
and registered or certified with return receipt requested, by overnight
courier or by delivering the same in person to such party.
(a) If to Buyer, addressed to it at:
411 N. Sam Houston Parkway East
Houston, TX 77060
ATTN: W. Gregory Orr
with a copy to:
U S Liquids Inc.
411 N. Sam Houston Parkway East
Houston, TX 77060
ATTN: David Turkal
and a copy to:
Elaine A. Chotlos, Esq.
Baker & Hostetler LLP
3200 National City Center
1900 E. 9th Street
Cleveland, OH 44114-3485
(b) If to Members, addressed to them at:
c/o John E. Tuma
13511 Lindsay Avenue
Cypress, TX 77429
with a copy to:
Reyncor Industrial Alcohol, Inc.
1300 Post Oak Blvd.
Suite 700
Houston, TX 77056
and a copy to:
Warren A. Hoffman, Esq.
Dow, Cogburn & Friedman, P.C.
9 Greenway Plaza
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Suite 2300
Houston, TX 77046
Notice shall be deemed given and effective the day personally delivered, the
day after being sent by overnight courier, subject to signature verification,
and three business days after the deposit in the U.S. mail of a writing
addressed as above and sent first class mail, certified, return receipt
requested, or when actually received, if earlier. Any party may change the
address for notice by notifying the other parties of such change in
accordance with this Section.
15.7 GOVERNING LAW. This Agreement shall be governed by and construed
in accordance with the internal laws of the State of Texas, without giving
effect to any choice or conflict of law provision or rule (whether of the
State of Texas or any other jurisdiction) that would cause the application of
the laws of any jurisdiction other than the State of Texas.
15.8 APPOINTMENT OF AGENT. Members agree to maintain an agent in the
State of Texas to accept and acknowledge service of process. Each Member
initially hereby appoints John E. Tuma, 13511 Lindsay, Cypress, Texas 77429,
and Roger Reynolds, 1300 Post Oak Blvd., Suite 770, Houston, Texas 77056,
jointly, as such agent and agrees to notify Buyer in the manner set forth in
Section 15.6 of any change in agent. Each party agrees that service of
process or notice in any such action, suit or proceeding shall be effective
if in writing and delivered to the address provided in Section 15.7 for such
party or to any other address provided to Parent in accordance with Section
15.6 and as set forth, in the manner prescribed in such Section.
15.9 NO WAIVER. No delay of or omission in the exercise of any right,
power or remedy accruing to any party as a result of any breach or default by
any other party under this Agreement shall impair any such right, power or
remedy, nor shall it be construed as a waiver of or acquiescence in any such
breach or default, or of or in any similar breach or default occurring later;
nor shall any waiver of any single breach or default be
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deemed a waiver of any other breach of default occurring before or after that
waiver.
15.10 TIME OF THE ESSENCE. Time is of the essence of this Agreement.
15.11 CAPTIONS. The headings of this Agreement are inserted for convenience
only, shall not constitute a part of this Agreement or be used to construe or
interpret any provision hereof.
15.12 SEVERABILITY. In case any provision of this Agreement shall be
invalid, illegal or unenforceable, it shall, to the extent possible, be
modified in such manner as to be valid, legal and enforceable but so as most
nearly to retain the intent of the parties. If such modification is not
possible, such provision shall be severed from this Agreement. In either
case the validity, legality and enforceability of the remaining provisions of
this Agreement shall not in any way be affected or impaired thereby.
15.13 CONSTRUCTION. The parties have participated jointly in the
negotiation and drafting of this Agreement. In the event an ambiguity or
question of intent or interpretation arises, this Agreement shall be
construed as if drafted jointly by the parties and no presumption or burden
of proof shall arise favoring or disfavoring any party by virtue of the
authorship of any of the provisions of this Agreement. Any reference to any
federal, state, local or foreign statute shall be deemed to refer to all
rules and regulations promulgated thereunder, unless the context requires
otherwise. The word "including" means including, without limitation. The
parties intend that representation, warranty and covenant contained herein
shall have independent significance. If any party has breached any
representation, warranty or covenant contained herein in any respect, the
fact that there exists another representation, warranty or covenant relating
to the same subject matter (regardless of the relative levels of specificity)
that the party has not breached shall not detract from or mitigate the fact
the party is in breach of the
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first representation, warranty or covenant.
15.14 STANDSTILL AGREEMENT. Unless and until this Agreement is
terminated pursuant to Article 13 hereof without the Closing having taken
place, Members will not directly or indirectly solicit offers for any equity
interests of Company or the assets of Company or a merger or consolidation
involving Company from, or respond to inquiries from, share information with,
negotiate with or in any way facilitate inquiries or offers from, third
parties who express or who have heretofore expressed an interest in acquiring
Company by merger, consolidation or other combination or acquiring any of
Company's assets; nor will they permit Company to do any of the foregoing.
15.15 PERIODIC REPORTS. Parent agrees to deliver to Members copies of
the periodic financial statements and reports that are produced by Company in
the normal course of its business.
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15.16 THIRD PARTY BENEFICIARY. Parent agrees that Texline Gas Company
shall be a third party beneficiary to this Agreement for purposes of Section
2.5
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the day and year first above written.
U S LIQUIDS INC.
By: /s/ W. Gregory Orr
-------------------------------------
Its: President
------------------------------------
RE-CLAIM ENVIRONMENTAL LOUISIANA LLC
(EIN: )
------------
By:
-------------------------------------
Its:
------------------------------------
/s/ John E. Tuma
----------------------------------------
John E. Tuma
(SSN: ###-##-####)
REYNCOR INDUSTRIAL ALCOHOL, INC.
(EIN: 72-1241895)
By:
-------------------------------------
Its:
------------------------------------
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LIST OF SCHEDULES
Exhibit A -- Legal Description of the Land
Exhibit B -- Legal Description of Additional Land
Exhibit C -- Estimated Net Working Capital
Schedule 2.3 -- Assumed Debt
Schedule 5.1(i) -- Certificate of Formation and
Operating Agreement of Company
Schedule 5.4 -- Predecessor Entities; Trade Names
Schedule 5.6 -- Financial Statements
Schedule 5.7 -- Non-Balance Sheet Liabilities
Schedule 5.8 -- Accounts Receivable
Schedule 5.9(i) -- Proprietary Rights
Schedule 5.10(i) -- Real Property Disclosure
Schedule 5.11(i) -- Personal Property of Company
Schedule 5.12 -- Contracts
Schedule 5.13 -- Insurance Policies
Schedule 5.14 -- Employees
Schedule 5.15 -- Employee Plans
Schedule 5.18 -- Tax Returns of Company
Schedule 5.19 -- Litigation
Schedule 5.22 -- Bank Accounts
Schedule 5.23 -- Hazardous Materials; List of Disposal
Sites
Schedule 5.24 -- Storage Tanks
Schedule 8.8 -- Tuma Property
Schedule 9.9 -- Updated Agreements
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ANNEX I
TO THAT CERTAIN PURCHASE OF MEMBERSHIP INTERESTS AGREEMENT
Among
U S LIQUIDS INC.
and
RE-CLAIM ENVIRONMENTAL, INC.
and
JOHN TUMA and REYNCOR INDUSTRIAL ALCOHOL, INC.
DATED AS OF September 30, 1997.
MEMBERSHIP ALLOCATION
SHAREHOLDERS INTERESTS OWNED OF CONSIDERATION
John E. Tuma 40% See Attached
Reyncor Industrial 60% See Attached
Alcohol, Inc.
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Exhibit 2.3
PURCHASE AND SALE OF ASSETS AGREEMENT
THIS PURCHASE AND SALE OF ASSETS AGREEMENT (the "Agreement") is
executed and delivered as of September 30, 1997, between T&T GREASE SERVICE,
INC., a Texas corporation ("Buyer"); A & B ENTERPRISES, INC., a Texas
corporation ("Seller"); and ERNEST L. MCCOMBS, its sole stockholder
("Stockholder").
P R E M I S E S:
WHEREAS, Seller operates a non-hazardous commercial waste,
transportation, storage, treatment, processing and disposal business in the
Dallas, Texas area known as A & B Environmental Services (the "Business");
WHEREAS, Buyer desires to purchase and acquire certain assets,
properties and contractual rights of Seller used in connection with the
Business and Seller desires to sell such assets, properties and contractual
rights to Buyer, all in accordance with the terms and conditions set forth in
this Agreement;
WHEREAS, Stockholder holds all of the outstanding capital stock of
Seller and Buyer is unwilling to enter into this Agreement without the
covenants and promises of Stockholder herein set forth; and
NOW, THEREFORE, in consideration of Ten Dollars ($10), the mutual
promises and covenants herein contained and other good and valuable
consideration, received to the full satisfaction of each of them, the parties
hereby agree as follows:
A G R E E M E N T:
ARTICLE 1. SALE OF ASSETS
SECTION 1.1 DESCRIPTION OF ASSETS. Upon the terms and subject to
the conditions set forth in this Agreement, Seller does hereby grant, convey,
sell, transfer and/or assign (as the case may be) to Buyer the following
assets, properties and contractual rights of Seller, wherever located,
subject to the exclusions hereinafter set forth:
(a) all equipment owned or leased by Seller and used or for use in
the operation of the Business, including, without limitation, the equipment
listed on Schedule 1.1(a) attached hereto and made a part hereof (the
"Equipment");
(b) all of the motor vehicles owned or leased by Seller and used or
for use in the Business, and all radios, attachments, accessories and
materials handling equipment
<PAGE>
owned or leased by Seller and now located in or on such motor vehicles
(the "Rolling Stock"), as the same are listed and more completely described
by manufacturer, model number and model year on Schedule 1.1(b), attached
hereto and made a part hereof;
(c) all manual and automated routing and billing information and
components thereof, including, without limitation, all routing and billing
computer hardware, software and programs containing any customer
information;
(d) all contractual rights of Seller with Seller's customers (whether
oral or in writing) relating to the conduct of the Business (the "Customer
Accounts"), and all commitments, lists, leases, permits, licenses,
approvals, franchises and other instruments relating to the Customer
Accounts, if any (the "Related Approvals"); a complete and accurate list of
the Customer Accounts and the Related Approvals is set forth on Schedule
1.1(d), attached hereto and made a part hereof, and true and complete
copies of all written Customer Accounts and Related Approvals shall be
delivered to Buyer simultaneously with the execution and delivery of this
Agreement;
(e) all of Seller's inventory of parts, tires and accessories of
every kind, nature and description used or for use in connection with the
Business (the "Inventory");
(f) all right, title and interest of Seller in and to all trade
secrets, proprietary rights, symbols, trademarks, service marks, logos and
trade names used in the Business;
(g) to the extent transferable, all permits, licenses, franchises,
consents and other approvals relating to the Business set forth on Schedule
1.1(g), attached hereto and made a part hereof (the "Permits") (true and
complete copies of which shall be delivered to Buyer simultaneously with
the execution and delivery of this Agreement);
(h) all right, title, and interest of Seller in and to the telephone
number (214) 698-9300 and the telecopier number (214) 698-0111 used by
Seller in the conduct of the Business;
(i) all of Seller's right, title and interest in and to the trade
name "A & B Environmental Services" and the right to use such name (the
"Business Name");
(j) all of Seller's shop tools, nuts and bolts relating to the
Business; and
(k) all of the goodwill of the Business.
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All of the foregoing assets, properties and contractual rights are
hereinafter sometimes collectively called the "Assets."
SECTION 1.2 EXCLUDED ASSETS. The parties agree that there shall be
excluded from the Assets the following which are not being sold to Buyer
pursuant to this Agreement (the "Excluded Assets"): (a) all cash on hand and
on deposit of Seller, except as set forth in Section 1.5 hereof; (b) all
accounts receivable of Seller ("Accounts Receivable") as of the close of
business on the date of Closing (hereinafter defined); (c) all real property
(whether owned or leased) and all buildings on and fixtures to all real
property of Seller (whether owned or leased), including, without limitation,
the Operations Property (hereinafter defined); (d) all contracts and contract
rights and obligations of Seller (whether oral or in writing) other than the
Customer Accounts and all commitments, lists, leases, permits, licenses,
consents, approvals, franchises and other instruments not relating to the
Customer Accounts or the Business; (e) all employment contracts to which
Seller is a party or by which Seller is bound; (f) the corporate name of
Seller; (g) all claims set forth on Schedule 5.1(h); (h) Seller's current
post office box (Box Number 224346); (i) a personal computer, typewriter,
laminator, fax machine and roll top desk; (j) a 1980 Mack truck which Seller
currently leases but will be returning to its owner on or about the Closing
Date; and (k) all motor vehicles of Seller that are not Rolling Stock.
SECTION 1.3 NON-ASSIGNMENT OF CERTAIN CUSTOMER ACCOUNTS.
Notwithstanding anything to the contrary in this Agreement, to the extent
that the assignment hereunder of any Customer Account shall require the
consent of any third party, neither this Agreement nor any action taken
pursuant to its provisions shall constitute an assignment or an agreement to
assign if such assignment or attempted assignment would constitute a breach
thereof or result in the loss or diminution thereof; provided, however, that
in each such case, Seller shall use its reasonable efforts to obtain the
consent of such other party to such assignment to Buyer. If such consent is
not obtained, Seller shall cooperate with Buyer in any reasonable arrangement
designed to provide for Buyer the benefits under any such Customer Account,
including, without limitation, an adjustment of the purchase price set forth
in Section 2.1 hereof and enforcement for the account and benefit of Buyer,
of any and all rights of Seller against any other person arising out of the
breach or cancellation of any such Customer Account by such other person, or
otherwise. Attached hereto as Schedule 1.3 is a list of all Customer
Accounts requiring consent to their assignment.
SECTION 1.4 SELLER ACCOUNTS RECEIVABLE. (a) Buyer shall have no
liability or obligation whatsoever to Seller in connection with the
Accounts Receivable and Buyer shall not be responsible for collecting the
Accounts Receivable. However, if Buyer receives any payments which are
designated
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by the customer as being toward such Accounts Receivable, then Buyer shall
forward such payments to Seller as set forth in Section 1.4(b). Attached
hereto as Schedule 1.4 is a true and complete list of all Accounts
Receivable of Seller as of September 28, 1997.
(b) All sums representing Accounts Receivable as set forth on
Schedule 1.4 collected by Buyer from the customers set forth on Schedule
1.1(d) shall be conclusively presumed to be receipts from the collection of
the oldest Accounts Receivable of such customer unless the customer
specifically indicates otherwise in writing. All such sums received by
Buyer shall be received in trust and shall be remitted to Seller on a
weekly basis, together with an itemized list of the sources thereof.
Seller shall be entitled to take such action as may be necessary in order
to collect its unpaid Accounts Receivable; provided, however, that Seller
agrees not to deliver any such Accounts Receivable to a collection agency
or institute any litigation related to an Accounts Receivable without the
prior written consent of Buyer, which consent shall not be unreasonably
withheld.
SECTION 1.5 PRORATION OF CASH ON HAND. The parties shall prorate,
as of the close of business on the date of Closing, all cash on hand or on
deposit with Seller consisting of sums paid to Seller pursuant to the advance
billing practice of Seller or otherwise representing a prepayment to Seller
of services to be rendered after the Closing. Seller shall be entitled to
all such sums allocable to services performed on or before the close of
business on the date of Closing and Buyer shall be entitled to all such sums
allocable to services to be performed thereafter. Buyer and Seller agree
that the amount of such prepaid services to be credited to Buyer is $-0-.
SECTION 1.6 TRADE NAME. Seller, A & B Enterprises, Inc., is a
Texas corporation doing business under the registered name "A & B
Environmental Services". On the date of Closing, Seller shall deliver to
Buyer such certificates, consents and other documents as are necessary to
effect the transfer and assignment of the registered trade name "A & B
Environmental Services" to Buyer. From and after the date of Closing, Seller
shall not use the trade name "A & B Environmental Services" or any variation
thereof, however, Seller may continue to and shall have the exclusive right
to use its true corporate name "A & B Enterprises, Inc.".
ARTICLE 2. PURCHASE PRICE
SECTION 2.1 AGGREGATE PURCHASE PRICE. Subject to Section 2.2
below, U S Liquids Inc., a Delaware corporation ("Parent") shall pay to
Seller for the Assets and the restrictive
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covenants set forth herein: (A) the sum of $350,000 in immediately available
funds on the date of Closing; (B) the sum of $75,000 in immediately available
funds on the first anniversary of the date of Closing; and (C) the sum of
$75,000 in immediately available funds on the second anniversary of the date
of Closing.
SECTION 2.2 PAYMENT OF DEBT. In addition to the purchase price
payable in Section 2.1 above, Buyer shall pay off at Closing, the actual debt
of Seller up to a maximum of $250,000, which amount constitutes all of the
debts of Seller (including lease payments) related to the Assets (the
"Assumed Debt"), excluding the lease obligation for the "Teletrac" system
which Buyer will assume without effecting the purchase price (the "Teletrac
Lease"). Attached hereto as Schedule 2.2 is a listing of all Assumed Debt
and evidence establishing the amount required to pay off the Assumed Debt in
full on the date of Closing. If the Assumed Debt is less than $250,000, the
purchase price payable in Section 2.1(A) shall be increased by an amount
equal to the difference between $250,000 and the Assumed Debt. If the
Assumed Debt is more than $250,000, the purchase price payable in Section
2.1(A) shall be reduced by an amount equal to the difference between $250,000
and the Assumed Debt.
SECTION 2.3 ALLOCATION OF PURCHASE PRICE. Of the purchase price
set forth in this Article 2, $250,000 shall be allocated to the fixed assets;
the $150,000 payable on the first and second anniversary of the Closing shall
be allocated to the restrictive covenants of Stockholder; and the remainder
shall be allocated to goodwill.
ARTICLE 3. CLOSING
SECTION 3.1 TIME AND PLACE OF CLOSING. Unless the parties
otherwise agree, this transaction shall be closed simultaneously with the
execution and delivery of this Agreement and the other documents and
instruments referred to in this Article 3 (the "Closing"). The Closing shall
take place at a location mutually acceptable to Buyer and Seller.
SECTION 3.2 DELIVERIES BY SELLER AND STOCKHOLDER. At the Closing,
Seller and Stockholder shall deliver to Buyer, all duly executed:
(a) a General Conveyance, Assignment and Bill of Sale, in form and
substance satisfactory to Buyer and Seller, conveying, selling,
transferring and assigning to Buyer all of the Assets (the "Bill of Sale");
(b) motor vehicle Certificates of Title and/or registrations to the
Rolling Stock, properly endorsed to Buyer;
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(c) a receipt acknowledging payment by Buyer of the purchase price;
(d) fully executed consents to the assignment of the Customer
Accounts set forth on Schedule 1.3, if any, in form and substance
reasonably satisfactory to Buyer;
(e) the documents assigning Seller's trade name as required by
Section 1.6;
(f) a certified copy of the written action of the shareholders and
directors of Seller authorizing the execution of this Agreement, the sale
of the Assets to Buyer, and the consummation of the transactions
contemplated herein; and
(g) such other separate instruments of sale, assignment or transfer
reasonably required by Buyer.
SECTION 3.3 DELIVERIES BY BUYER. At the Closing, Buyer shall
deliver to Seller the Purchase Price set forth in Section 2.1(A) and shall
make payment in full on the Assumed Debt.
ARTICLE 4. COVENANTS OF SELLER AND STOCKHOLDER
SECTION 4.1 USE OF BUSINESS NAME. Seller and Stockholder covenant
not to use the trade name A & B Environmental Services or any similar names
(other than Seller's corporate name) from and after the close of business on
the date of Closing.
SECTION 4.2 TRANSITION. Neither Seller nor Stockholder will take
any action that is designed or intended to have the effect of discouraging
any customer or business associate of Seller from maintaining the same
business relationships with Buyer after the Closing that it maintained with
Seller before the Closing. Seller and Stockholder will refer all customer
inquiries relating to the Business to Buyer from and after the Closing.
Further, Seller and Stockholder agree that for a period of 90 days following
the date of Closing, they will, without additional consideration, assist
Buyer with the orderly transition of the operations of the Business from
Seller to Buyer. Such assistance shall include, without limitation, Seller
and Stockholder assisting Buyer to obtain contracts with Seller's current
customers, routing transition activities and development of sufficient
information to allow Buyer to compile accurate customer billings.
SECTION 4.3 TEMPORARY USE OF OPERATIONS PROPERTY. Although Buyer
is not acquiring any rights or obligations in connection with the Operations
Property, Seller and Stockholder agree to allow Buyer to use the Operations
Property rent free for
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a period of 30 days after Closing in order to assist with the transfer of the
Assets and the Business to Buyer. Buyer shall be responsible for and shall
pay for all utilities and telephone charges during such 30-day period.
SECTION 4.3 SURVIVAL. Each of the covenants set forth in this
Article 4 shall survive the Closing and the transfer of the Assets.
ARTICLE 5. REPRESENTATIONS AND WARRANTIES OF SELLER
AND STOCKHOLDER
SECTION 5.1 Seller and Stockholder, jointly and severally,
represent and warrant to Buyer that:
(a) AUTHORITY.
(i) Seller is a corporation duly formed, validly existing and in
good standing under the laws of the State of Texas. The execution and
delivery of this Agreement, the consummation of the transactions
contemplated hereby and the compliance by Seller and Stockholder with
the terms of this Agreement do not and will not conflict with or
result in a breach of any terms of, or constitute a default under, the
articles of incorporation or bylaws of Seller, or any instrument or
other agreement to which Seller or Stockholder is a party or by which
Seller or Stockholder is bound. This Agreement constitutes a valid
obligation of Seller and Stockholder enforceable against Seller and
Stockholder in accordance with its terms except as limited by
bankruptcy, insolvency, reorganization or other such laws concerning
the rights of creditors.
(ii) Stockholder is competent, under no duress or legal
restraint, and has all necessary authority to enter into this
Agreement, perform his obligations hereunder and consummate the
transactions contemplated hereby.
(iii) All of the issued and outstanding shares of Seller are owned
of record and beneficially by Stockholder, free and clear of all
liens, security interests and encumbrances whatsoever.
(b) COMPLIANCE WITH LAW. Except as set forth on Schedule 5.1(b),
neither Seller nor Stockholder is in default under any applicable federal,
state or local laws, statutes, ordinances, permits, licenses, orders,
approvals, variances, rules or regulations or judicial or administrative
decisions ("Applicable Laws") which would have an adverse effect upon
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the Assets or the Business and Seller has been granted all licenses,
permits, consents, authorizations and approvals from federal, state and
local government regulatory bodies necessary or desirable to carry on the
Business, all of which are currently in full force and effect. Each of the
Assets complies in all respects with all federal, state and local laws,
statutes, ordinances, permits, licenses, approvals, rules and regulations
applicable thereto.
(c) EQUIPMENT. Listed on Schedule 1.1(a) hereto is a complete and
accurate list of all Equipment. Each piece of Equipment is in operating
condition on the date hereof.
(d) ROLLING STOCK. Listed on Schedule 1.1(b) hereto is a complete
and accurate list of all Rolling Stock. Each motor vehicle, attachment,
accessory and piece of materials handling equipment comprising the Rolling
Stock is in operating condition on the date hereof.
(e) CUSTOMER ACCOUNTS. Listed on Schedule 1.1(d) hereto is a
complete and accurate list of the Customer Accounts as of the date hereof.
Except as set forth on Schedule 1.3, all Customer Accounts are (and will be
immediately following the Closing) in full force and effect and are valid,
binding and enforceable against the respective parties thereto in
accordance with their respective provisions, and Seller is not in default
in, nor has there occurred an event or condition (including Seller's
execution and delivery of or performance under this Agreement) which with
the passage of time or the giving of notice (or both) would constitute a
default, with regard to the payment or performance of any obligation under
any Customer Account; no claim of such a default has been asserted and
there is no reasonable basis upon which such a claim could validly be made.
Neither Seller nor Stockholder has received any notice that any person
intends or desires to modify, waive, amend, rescind, release, cancel or
terminate any written Customer Account. By virtue of the grant,
conveyance, sale, transfer and assignment of the written Customer Accounts
by Seller to Buyer hereunder, Buyer shall own and hold all right, title and
interest of Seller in and to the Customer Accounts, without the consent or
approval of any other person or entity.
(f) TITLE TO THE ASSETS. Seller has good and marketable title to
the Assets, free and clear of all liens, encumbrances, security interests,
equities or restrictions whatsoever except the Assumed Debt and, by virtue
of the grant, conveyance, sale, transfer, and assignment of the Assets
hereunder, Buyer shall receive good and marketable title to the Assets,
free and clear of all liens, lease payments (including lease-end buy-out
payments),
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encumbrances, security interests, equities or restrictions whatsoever except
for the Assumed Debt. Except as set forth on Schedule 5.1(b), the Assets
include all of the permits, licenses, franchises, consents and other
approvals necessary or desirable to conduct the Business.
(g) OPERATIONS PROPERTY. Seller currently operates on land owned by
Esta Turbyfill pursuant to a written lease agreement (the "Operations
Property"). There have been no spills, leaks, deposits or other releases
of Hazardous Materials (hereinafter defined) into or onto the Operations
Property by Seller. To the best of Seller's knowledge, no portion of the
Operations Property is listed on the CERCLIS list or the National
Priorities List of Hazardous Waste Sites or any similar list maintained by
the State of Texas. Except as set forth on Schedule 5.1(g), to the best of
Seller's knowledge, the Operations Property does not contain any
underground or above-ground storage tanks or transformers containing
Hazardous Materials, petroleum products or wastes or other hazardous
substances regulated by 40 CFR 280 or other Applicable Laws. All above and
below ground tanks currently in use by Seller on the Operations Property,
if any, are being used and maintained in accordance with all Applicable
Laws.
(h) LITIGATION. Except as set forth on Schedule 5.1(h) hereof, there
is no claim, litigation, action, suit or proceeding, administrative or
judicial, pending or threatened against Seller or Stockholder, or involving
the Assets or the Business, at law or in equity, before any federal, state
or local court or regulatory agency, or other governmental authority.
Neither Seller nor Stockholder has received any notice of any of the above
and no facts or circumstances exist which would, with the passage of time
or giving of notice (or both), give rise to any of the above.
(i) EMPLOYEES. Attached as Schedule 5.1(i) hereof is a complete list
of all employees of Seller and their respective rates of compensation
(including a breakdown of the portion thereof attributable to salary, bonus
and other compensation, respectively) as of the date of Closing. Each
employee is an employee at will and there are no collective bargaining
agreements affecting any employee of Seller. Buyer shall not be obligated
to hire any of Seller's employees.
(j) EMPLOYEE RELATIONS AND BENEFIT PLANS. Set forth on Schedule
5.1(j) is an accurate and complete list of all agreements of any kind
between Seller and its employees or group of employees, including, without
limitation, employment agreements, collective bargaining agreements and
benefit plans. Buyer shall not, by the execution and delivery of
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this Agreement or otherwise, become obligated to or assume any liabilities
or contractual obligations with respect to any employee of Seller or
otherwise become liable for or obligated in any manner (contractual or
otherwise) to any employee of Seller, including, without limiting the
generality of the foregoing, any liability or obligation pursuant to any
collective bargaining agreement, employment agreement, or pension, profit
sharing or other employee benefit plan (within the meaning of Section 3(3)
of the Employment Retirement Income Security Act of 1974, as amended) or any
other fringe benefit program maintained by Seller or to which Seller
contributes or any liability for the withdrawal or partial withdrawal from
or termination of any such plan or program by Seller.
(k) TAXES. No federal, state, local or other tax returns or reports
filed by Seller (whether filed prior to, on or after the date hereof) with
respect to the Business or the Assets will result in any taxes,
assessments, fees or other governmental charges upon the Assets or Buyer,
whether as a transferee of the Assets or otherwise. All federal, state and
local taxes due and payable with respect to the Business or the Assets have
been paid, including, without limiting the generality of the foregoing, all
federal, state and local income, sales, use, franchise, excise and property
taxes.
(l) HAZARDOUS MATERIALS. To the best of their knowledge, neither
Seller nor Stockholder has ever generated, transported, stored, handled,
recycled, reclaimed, disposed of, or contracted for the disposal of,
hazardous materials, hazardous wastes, hazardous substances, toxic wastes
or substances, infectious or medical waste, radioactive waste or sewage
sludges as those terms are defined by the Resource Conservation and
Recovery Act of 1976; the Comprehensive Environmental Response,
Compensation and Liability Act of 1980 ("CERCLA"); the Atomic Energy Act of
1954; the Toxic Substances Control Act; the Occupational Health and Safety
Act; any comparable or similar Texas statute; or the rules and regulations
promulgated under any of the foregoing, as each of the foregoing may have
been from time to time amended (collectively, "Hazardous Materials").
Seller has never owned, operated, had an interest in, engaged in and/or
leased a waste transfer, recycling, treatment, storage or disposal
facility, business or activity other than the Business. Seller has
obtained and maintained all necessary trip tickets, signed by the
applicable waste generators, and other records demonstrating the nature of
the waste transported in connection with the Business. To the best of
Stockholder's knowledge, no employee, contractor or agent of Seller has, in
the course and scope of employment with Seller, been harmed by exposure to
Hazardous Materials. To the best of
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Stockholder's knowledge, Seller has no direct or contingent liability or
obligation for or in connection with any claimed release, discharge or leak
of any substance into the environment. Attached hereto as Schedule 5.1(l)
is a complete list of the names and addresses of all disposal sites at any
time now or in the past utilized by Seller, none of which sites is listed
on the CERCLA list or the National Priorities List of Hazardous Waste Sites
or any comparable Texas list. Neither Seller nor Stockholder has received
any notice that it or he is listed as a potentially responsible party under
CERCLA or any comparable or similar Texas statute; and neither Seller nor
Stockholder knows of any facts or circumstances which could give rise to
such a listing.
(m) GOVERNMENT NOTICES. Seller has delivered to Buyer, a description
and copies, as of the date of this Agreement, of all notifications, filed
or submitted, or required to be filed or submitted, to governmental
agencies and of all material notifications from such governmental agencies
relating to Seller and the Assets or relating to the discharge or release
of materials into the environment or otherwise relating to the protection
of the public health or the environment.
(n) ABSENCE OF PRICE RENEGOTIATION CONTRACTS. Seller is not now nor
has ever been a party to any governmental contracts subject to price
redetermination or renegotiation.
(o) GROSS REVENUES. The gross revenues generated by the Business for
its 1996 fiscal year (March 1, 1996 through February 28, 1997) were
$545,396. The gross revenues generated by the Business for the period from
March 1, 1997 through August 31, 1997 were $280,950.
(p) UNDERGROUND STORAGE TANKS. Except for the Operations Property,
to the best of Seller's knowledge, Seller has never owned, leased or
operated any real estate having any underground storage tanks containing
petroleum products or wastes or other hazardous substances regulated by 40
CFR 280 and/or other applicable federal, state or local laws, rules and
regulations and requirements.
(q) COMPLETENESS OF DISCLOSURE. This Agreement and the Schedules
hereto and all other documents and information furnished to Buyer and its
representatives pursuant hereto do not and will not include any untrue
statement of a material fact or omit to state a material fact necessary to
make the statements therein not misleading. If Seller or Stockholder
become aware of any fact or circumstance which would change a representation
or warranty of Seller or Stockholder in this Agreement, the party with such
knowledge shall immediately
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give notice of such fact or circumstance to Buyer. However, such
notification shall not relieve Seller or Stockholder of their obligations
under this Agreement, and at the sole option of Buyer, the truth and
accuracy of any and all warranties and representations of Seller and
Stockholder at the date of this Agreement shall be a precondition to the
consummation of this transaction.
SECTION 5.2 SURVIVAL. Each of the representations and warranties
set forth in this Article 5 shall survive the Closing and the transfer of the
Assets for a period of two years.
ARTICLE 6. REPRESENTATIONS AND WARRANTIES OF BUYER AND PARENT
SECTION 6.1 Buyer and Parent represent and warrant to Seller and
Stockholder that:
(a) CORPORATE ORGANIZATION. Buyer is a corporation duly organized,
validly existing and in good standing under the laws of the State of Texas.
Parent is a corporation duly organized, validly existing and in good
standing under the laws of the State of Delaware.
(b) AUTHORIZATION. Buyer and Parent each have all requisite
corporate power and corporate authority to enter into this Agreement,
perform its respective obligations hereunder and consummate the
transactions contemplated hereby. The execution and delivery of this
Agreement, the consummation of the transactions contemplated hereby and the
compliance by Buyer and Parent with the terms of this Agreement do not and
will not conflict with or result in a breach of any terms of, or constitute
a default under, Buyer's Articles of Incorporation or Bylaws or any other
agreement or instrument to which Buyer or Parent is a party or by which
Buyer or Parent is bound. All necessary corporate action has been taken by
Buyer and Parent with respect to the execution and delivery of this
Agreement, and this Agreement constitutes a valid obligation of Buyer and
Parent enforceable in accordance with its terms except as limited by
bankruptcy, insolvency, reorganization or other such laws concerning the
rights of creditors.
SECTION 6.2 SURVIVAL. Each of the representations and warranties
set forth in this Article 6 shall survive the Closing and the transfer of the
Assets for a period of two years.
ARTICLE 7. NONCOMPETITION
SECTION 7.1 NONCOMPETITION COVENANTS. Seller and Stockholder,
jointly and severally, agree that for a period of
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five years following the date of Closing, neither of them shall directly or
indirectly, through a subsidiary or affiliate, without the prior express
written consent of Buyer:
(i) engage, whether as a corporation on its own account, or as an
officer, director, shareholder, owner, partner, joint venturer, investor,
agent, or in a managerial capacity, whether as an employee, independent
contractor, consultant or advisor, or as a sales representative, in the
business of: siting, developing, constructing, permitting or operating a
facility for the processing, treatment or disposal of non-hazardous liquid
waste (including, without limitation, waste oil, waste water, grease trap
waste, grit trap waste and oil contaminated water); siting, developing,
constructing, permitting or operating a facility for the processing,
treatment and disposal of non-hazardous oilfield waste (including, without
limitation, chlorides, heavy metals, cuttings, contaminated soils, drilling
fluids and pit sludges); and transportation or collection of any such
materials, in each case within a radius of 100 air miles of Dallas, Texas
(the "Territory");
(ii) call upon any person who is, at that time, within the Territory,
an employee of Buyer in a managerial capacity for the purpose or with the
intent of enticing such employee away from or out of the employ of Buyer;
(iii) call upon any person or entity which is, at that time, or which
has been, within one year prior to that time, a customer of Seller or
Buyer, as the case may be, within the Territory for the purpose of:
siting, developing, constructing, permitting or operating a facility for
the processing, treatment or disposal of non-hazardous liquid waste
(including, without limitation, waste oil, waste water, grease trap waste,
grit trap waste and oil contaminated water); siting, developing,
constructing, permitting or operating a facility for the processing,
treatment and disposal of non-hazardous oilfield waste (including, without
limitation, chlorides, heavy metals, cuttings, contaminated soils, drilling
fluids and pit sludges); and transportation or collection of any such
materials, in each case within the Territory;
(iv) call upon any prospective acquisition candidate, on their own
behalf or on behalf of any competitor, which candidate was either called
upon by Seller or Stockholder or for which Seller or Stockholder made an
acquisition analysis for Seller or Buyer;
(v) disclose the identity of Buyer's customers, whether in existence
or proposed, to any person, firm, partnership, corporation or business for
any reason or
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purpose whatsoever; or
(vi) promote or assist, financially or otherwise (including, without
limitation, lending, guaranteeing loans or otherwise providing financial
assurance in any way), any person, firm, partnership, corporation or other
entity whatsoever to do any of the above.
Notwithstanding the above, the foregoing covenant shall not be
deemed to prohibit Seller or Stockholder from acquiring as an investment not
more than one percent of the capital stock of a competing business, whose
stock is traded on a national securities exchange or over-the-counter.
SECTION 7.2 INJUNCTIVE RELIEF. Because of the difficulty of
measuring economic losses to Buyer as a result of the breach of the foregoing
covenant, and because of the immediate and irreparable damage that would be
caused to Buyer for which it would have no other adequate remedy, Seller and
Stockholder agree that, so long as Buyer is not in default hereunder, in the
event of breach by any of them of the foregoing covenant, the covenant may be
enforced by Buyer by, without limitation, injunctions and restraining orders.
SECTION 7.3 REASONABLENESS OF COVENANTS. It is agreed by the
parties that the foregoing covenants in this Section 7 impose a reasonable
restraint on Seller and Stockholder in light of the activities and business
of the Buyer on the date of the execution of this Agreement and the future
plans of the Buyer.
SECTION 7.4 SEVERABILITY OF COVENANTS. The covenants in this
Section 7 are severable and separate, and the unenforceability of any
specific covenant shall not affect the provisions of any other covenant.
Moreover, in the event any court of competent jurisdiction shall determine
that the scope, time or territorial restrictions set forth are unreasonable,
then it is the intention of the parties that such restrictions be enforced to
the fullest extent which the court deems reasonable, and the Agreement shall
thereby be reformed.
SECTION 7.5 DURATION OF COVENANTS. It is specifically agreed that
the duration of the noncompetition covenants stated above shall be computed
by excluding from such computation any time during which Seller or
Stockholder is in violation of any provision of this Section 7 and any time
during which there is pending in any court of competent jurisdiction any
action (including any appeal from any judgment) brought by any person,
whether or not a party to this Agreement, in which action Buyer seeks to
enforce the agreements and covenants of Seller or Stockholder or in which any
person contests the validity of such agreements and covenants or their
enforceability or seeks to avoid their performance or enforcement. In
addition, Seller and
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Stockholder agree that if either of them should violate the noncompetition
covenants set forth herein, then Buyer shall not be required to make any
further payments pursuant to Section 2.1(B) or (C). The foregoing
notwithstanding, in the event that Seller or Stockholder notifies Buyer in
writing of a failure of Buyer to make the payments required by Section 2.1(B)
and (C), which failure is not cured within five business days after Buyer's
receipt of such notice, then the noncompetition covenants set forth herein
shall cease to be effective unless and until such failure has been cured.
SECTION 7.6 MATERIALITY. Seller and Stockholder hereby agree that
the foregoing noncompetition covenants are a material and substantial part of
this transaction.
ARTICLE 8. NON-ASSUMPTION OF LIABILITIES; INDEMNIFICATION
SECTION 8.1 NON-ASSUMPTION OF LIABILITIES. Except as explicitly
set forth in Section 8.2 below, Buyer shall not, by the execution and
performance of this Agreement or otherwise, assume, become responsible for or
incur any liability or obligation of any nature of Seller or Stockholder
whether legal or equitable, matured or contingent, known or unknown, foreseen
or unforeseen, ordinary or extraordinary, patent or latent, whether arising
out of occurrences prior to, at or after the date of this Agreement,
including, without limiting the generality of the foregoing, any liability or
obligation arising out of or relating to: (a) any occurrence or circumstance
(whether known or unknown) which occurs or exists on or prior to the date of
this Agreement and which constitutes, or which by the lapse of time or giving
notice (or both) would constitute, a breach or default under any lease,
contract, or other instrument or agreement (whether written or oral); (b) any
injury to or death of any person or damage to or destruction of any property,
whether based on negligence, breach of warranty, or any other theory; (c) a
violation of the requirements of any governmental authority or of the rights
of any third person, including, without limitation, any requirements relating
to the reporting and payment of federal, state, local or other income, sales,
use, franchise, excise or property tax liabilities of Seller or Stockholder;
(d) the generation, collection, transportation, storage or disposal by Seller
or Stockholder of any materials, including, without limitation, Hazardous
Materials; (e) an agreement or arrangement between Seller and the employees
of Seller or Stockholder or any labor or collective bargaining unit
representing any such employees; (f) the severance pay obligation of Seller
or any employee benefit plan (within the meaning of Section 3(3) of the
Employee Retirement Income Security Act of 1974, as amended) or any other
fringe benefit program maintained or sponsored by Seller or Stockholder or to
which Seller or Stockholder contributes or any contributions, benefits or
liabilities therefor or any liability
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for the withdrawal or partial withdrawal from or termination of any such plan
or program by Seller or Stockholder; (g) the debts of Seller or Stockholder
other than the Assumed Debt; (h) any litigation against Seller or
Stockholder, whether or not listed on Schedule 5.1(h); (i) any liability,
obligation, cost or expense related to the Excluded Assets; (j) any
liability, obligation cost or expense related to the Operations Property,
including, without limitation, the environmental condition thereof and any
dispute between Seller and the owner of the Operations Property; and (k) the
liabilities or obligations of Seller or Stockholder for brokerage or other
commissions relative to this Agreement or the transactions contemplated
hereunder. Seller and Stockholder each agree to indemnify Buyer, its
successors and assigns from and against all of the above liabilities and
obligations in accordance with Section 8.3 below.
SECTION 8.2 ASSUMPTION OF SPECIFIC LIABILITIES. In addition to the
payment of the Assumed Debt, Buyer agrees to perform all of Seller's
contractual obligations related to the Customer Accounts and the Teletrac
Lease to the extent, and only to the extent, such obligations first mature or
are required to be performed after the close of business on the Closing Date.
SECTION 8.3 INDEMNIFICATION BY SELLER AND STOCKHOLDER. Seller and
Stockholder, jointly and severally, agree to defend, indemnify and hold
harmless Buyer, its officers, shareholders, directors, divisions,
subdivisions, affiliates, parent, employees, agents, successors, assigns and
the Assets from and against all losses, claims, actions, causes of action,
damages, liabilities, expenses and other costs of any kind or amount
whatsoever (including, without limitation, reasonable attorneys' fees),
whether equitable or legal, matured or contingent, known or unknown, foreseen
or unforeseen, ordinary or extraordinary, patent or latent, which result from:
(a) inaccuracy in any representation or warranty made by Seller or
Stockholder in this Agreement;
(b) breach of any representation or warranty under this Agreement by
Seller or Stockholder;
(c) failure of Seller or Stockholder duly to perform and observe any
term, provision, covenant, agreement or condition under this Agreement;
(d) liability of Seller or Stockholder imposed upon Buyer (including,
without limitation, all liability for the generation, collection,
transportation, storage or disposal of any materials, including, without
limitation, Hazardous Materials, whether or not disclosed on Schedule
5.1(l) hereof);
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(e) misrepresentation in or omission from any Schedule to this
Agreement;
(f) failure of Seller or Stockholder to obtain consent to a Customer
Account requiring such consent (including, without limitation,
reimbursement to Buyer of the value of such nonassigned Customer Account);
(g) liability of Seller or Stockholder resulting from one or more
pending or threatened lawsuits whether or not listed on Schedule 5.1(h);
(h) liability of Seller or Stockholder to creditors of Seller or
Stockholder which is imposed on Buyer whether as a result of bankruptcy
proceedings or otherwise and whether as an account payable by Seller or
Stockholder or as a claim of alleged fraudulent conveyance or preferential
payments within the meaning of the United States Bankruptcy Code or
otherwise; and
(i) the existence of creditors of Seller which are not disclosed to
Buyer;
(j) any of the matters described in Section 8.1(a)-(k) hereof; and
(k) any claim by a third party that, if true, would mean that a
condition for indemnification set forth in this Section 8.3 had been
satisfied.
Buyer shall be deemed to have suffered such loss, claim, action, cause of
action, damage, liability, expense or other cost, or to have paid or to have
become obligated to pay any sum on account, of, the matters referred to in
subparagraphs (a) - (k) of this Section 8.3 if the same shall be suffered,
paid or incurred by Buyer or any parent, subsidiary, affiliate, or successor
of Buyer. The amount of the loss, claim, action, cause of action, damage,
liability, expense or other cost deemed to be suffered, paid or incurred by
Buyer shall be an amount equal to the loss, claim, action, cause of action,
damage, liability, expense or other cost suffered, paid or incurred by such
parent, subsidiary, affiliate, or successor.
SECTION 8.4 INDEMNIFICATION BY BUYER AND PARENT. Buyer and Parent,
jointly and severally, agree to defend, indemnify and hold harmless Seller,
its officers, shareholders, directors, divisions, subdivisions, affiliates,
employees, agents, successors, assigns from and against all losses, claims,
actions, causes of action, damages, liabilities, expenses and other costs of
any kind or amount whatsoever (including, without limitation, reasonable
attorneys' fees), whether equitable or legal, matured or contingent, known or
unknown, foreseen or unforeseen, ordinary
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or extraordinary, patent or latent, which result from:
(a) inaccuracy in any representation or warranty made by Buyer or
Parent in this Agreement;
(b) breach of any representation or warranty under this Agreement by
Buyer or Parent;
(c) failure of Buyer or Parent duly to perform and observe any term,
provision, covenant, agreement or condition under this Agreement; and
(d) any claim by a third party that, if true, would mean that a
condition for indemnification set forth in this Section 8.4 had been
satisfied.
Seller shall be deemed to have suffered such loss, claim, action, cause of
action, damage, liability, expense or other cost, or to have paid or to have
become obligated to pay any sum on account, of, the matters referred to in
subparagraphs (a) - (d) of this Section 8.4 if the same shall be suffered,
paid or incurred by Seller or any subsidiary, affiliate, or successor of
Seller. The amount of the loss, claim, action, cause of action, damage,
liability, expense or other cost deemed to be suffered, paid or incurred by
Seller shall be an amount equal to the loss, claim, action, cause of action,
damage, liability, expense or other cost suffered, paid or incurred by such
subsidiary, affiliate, or successor.
SECTION 8.5 LIMITATION ON LIABILITY. The indemnification
obligations set forth in this Agreement shall apply only after the aggregate
amount of such obligations exceed $25,000, at which time the indemnification
obligations shall be effective as to all amounts, including the initial
$25,000 and shall in no event exceed a maximum of the purchase price set
forth in Article 2 hereof.
SECTION 8.6 PROCEDURE FOR INDEMNIFICATION. Promptly after a party
hereto (hereinafter the "Indemnified Party") has received notice of or has
knowledge of any claim by a person not a party to this Agreement ("Third
Person") or the commencement of any action or proceeding by a Third Person,
the Indemnified Party shall, as a condition precedent to a claim with respect
thereto being made against any party obligated to provide indemnification
pursuant to this Agreement (hereinafter the "Indemnifying Party"), give the
Indemnifying Party written notice of such claim or the commencement of such
action or proceeding (the "Notice"). The Notice shall state the nature and
the basis of such claim and a reasonable estimate of the amount thereof. The
Indemnifying Party, after receipt of the Notice, shall defend and settle, at
its own expense and by its own counsel, each such matter so long as the
Indemnifying Party pursues the same diligently and in good
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faith and the claim does not involve injunctive or equitable relief or
involve the possibility of criminal penalties. The Indemnified Party shall
cooperate with the Indemnifying Party and its counsel in the defense thereof
and in any settlement thereof. Such cooperation shall include, but shall not
be limited to, furnishing the Indemnifying Party with any books, records or
information reasonably requested by the Indemnifying Party that are in the
Indemnified Party's possession or control. Notwithstanding the foregoing,
the Indemnified Party shall have the right to participate in any matter
through counsel of its own choosing at its own expense, provided that the
Indemnifying Party's counsel shall always be lead counsel and shall determine
all litigation and settlement steps, strategy and the like. After the
Indemnifying Party has received the Notice, the Indemnifying Party shall not
be liable for any additional legal expenses incurred by the Indemnified Party
in connection with any defense or settlement of such asserted liability,
except to the extent such participation is requested by the Indemnifying
Party, in which event the Indemnified Party shall be reimbursed by the
Indemnifying Party for reasonable additional legal expenses, out-of-pocket
and allocable share of employee compensation incurred in connection with such
participation for any employee whose participation is so requested. The
foregoing notwithstanding, if the Indemnifying Party fails diligently to
defend any such matter to which the Indemnified Party is entitled to
indemnification hereunder or if the claim involves injunctive or equitable
relief or involves the possibility of criminal penalties, the Indemnified
Party may undertake such defense through counsel of its choice and at the
Indemnifying Party's expense. In each case where the Indemnifying Party is
obligated to pay the costs and expenses of the Indemnified Party, the
Indemnifying Party shall pay the costs and expenses of the Indemnified Party
as such costs and expenses are incurred. If the Indemnifying Party desires
to accept a final and complete settlement of any such Third Person claim and
the Indemnified Party refuses to consent to such settlement, then the
Indemnifying Party's liability under this Section with respect to such Third
Person claim shall be limited to the amount so offered in settlement by said
Third Person and the Indemnified Party shall reimburse the Indemnifying Party
for any additional costs of defense which it subsequently incurs with respect
to such claim.
ARTICLE 9. GENERAL
SECTION 9.1 FURTHER ASSURANCE. From time to time after the
Closing, Seller and Stockholder will, without further consideration, execute
and deliver such other instruments of conveyance and transfer, and take such
other action as Buyer reasonably may request to more effectively convey and
transfer to and vest in Buyer and to put Buyer in possession of the Assets to
be transferred hereunder, and in the case of contracts and rights, if any,
which cannot be transferred effectively without the
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consents of third parties, to endeavor to obtain such consents promptly, and
if any be unobtainable, to use their reasonable efforts to provide Buyer with
the benefits thereof in some other manner. Seller and Stockholder will
cooperate and use its reasonable efforts to have the present officers,
directors and employees of Seller cooperate with Buyer on and after the
Closing in furnishing information, evidence, testimony and other assistance
in connection with any actions, proceedings, arrangements or disputes of any
nature with respect to matters pertaining to all periods prior to the Closing.
SECTION 9.2 INSPECTION BY BUYER. Buyer acknowledges that Seller
has provided Buyer with the opportunity to inspect all of the Equipment and
Rolling Stock.
SECTION 9.3 COSTS OF LITIGATION. (a) If Parent fails to make a
required payment when due under the terms of this Agreement (after
expiration of the notice and cure period set forth in Section 7.5), then
Parent or Buyer shall pay to Seller interest on the amount due at the rate
of 15% per annum from the date the payment was due until the date paid.
(b) In any litigation brought by a party over the terms of this
Agreement, including, without limitation, failure to make required
payments, the prevailing party shall be entitled to receive, as part of its
damages, all of its costs and expenses of such litigation, including,
without limitation, attorneys' fees and expenses, investigation costs and
court costs.
SECTION 9.4 JOINT AND SEVERAL OBLIGATIONS. All representations,
warranties and agreements of Seller or Stockholder under this Agreement, the
Schedules and the transactions contemplated hereby shall be joint and
several. All representations, warranties and agreements of Parent and Buyer
under this Agreement shall be joint and several.
SECTION 9.5 WAIVER. Except as otherwise provided herein, no delay
of or omission in the exercise of any right, power or remedy accruing to any
party as a result of any breach or default by any other party under this
Agreement shall impair any such right, power or remedy, nor shall it be
construed as a waiver of or acquiescence in any such breach or default, or of
or in any similar breach or default occurring later; not shall any waiver of
any single breach or default be deemed a waiver of any other breach of
default occurring before or after that waiver.
SECTION 9.6 TIME OF THE ESSENCE. Time is of the essence of this
Agreement.
SECTION 9.7 NOTICE. All notices or communications required or
permitted under this Agreement shall be given in
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writing and served either by personal delivery, overnight courier or by
deposit in the United States mail and sent by first class registered or
certified mail, return receipt requested, postage prepaid:
If to Seller or Stockholder:
c/o Ernest L. McCombs
4545 Cathedral Dr.
Dallas, TX 75214
with a copy to:
Richard Cox, Esq.
300 Crescent Court, Suite 1400
Dallas, TX 75201
If to Buyer:
U S Liquids Inc.
411 N. Sam Houston Parkway East
Houston, TX 77060
ATTN: W. Gregory Orr
with a copy to:
U S Liquids Inc.
411 N. Sam Houston Parkway East
Houston, TX 77069
ATTN: David Turkal
with a copy to:
Elaine A. Chotlos, Esq.
Baker & Hostetler
3200 National City Center
1900 E. 9th Street
Cleveland, OH 44114-3485
Notice shall be deemed given and effective the day personally delivered, the
day after being sent by overnight courier, subject to signature verification,
and three days after deposit in the U.S. mail as provided above, or when
actually received, if earlier. Either party may change the address for
notices or communications to be given to it by written notice to the other
party given as provided in this Section.
SECTION 9.8 ENTIRE AGREEMENT. This Agreement, the Schedules hereto
and the other agreements referred to herein constitute the entire agreement
and understanding of the parties with respect to the subject matter hereof,
and supersede all prior and contemporaneous agreements and understandings,
oral or
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<PAGE>
written, relative to said subject matter.
SECTION 9.9 BINDING EFFECT; ASSIGNMENT. This Agreement and the
various rights and obligations arising hereunder shall inure to the benefit
of and be binding upon the parties hereto and their respective executors,
administrators, heirs, legal representatives, successors and permitted
assigns. Seller shall have no right to assign this Agreement or any of their
respective rights hereunder. Buyer may assign this Agreement without consent
by Seller; provided, however, that the assignee under such assignment shall
agree to assume the obligations of the assignor under this Agreement. It is
further understood and agreed that Buyer may be merged or consolidated with
another entity and that any such entity shall automatically succeed to the
rights, powers and duties of Buyer hereunder.
SECTION 9.10 EXPENSES OF TRANSACTION. Seller shall pay all costs
and expenses incurred by Seller or Stockholder in connection with this
Agreement and the transactions contemplated hereby and thereby, including,
without limitation, the fees and expenses of Seller's attorneys and
accountants and will make all necessary arrangements so that the Assets will
not be charged with or diminished by any such cost or expense. Buyer shall
pay all costs and expenses incurred by it in connection with this Agreement
and the transactions contemplated hereby and thereby, including without
limitation, the fees and expenses of its attorneys and accountants.
SECTION 9.11 BROKER'S COMMISSION. Seller and Stockholder represent
and warrant to Buyer and Buyer represents and warrants to Seller and
Stockholder that the warranting party has had no dealing with any dealer,
broker or agent so as to entitle such dealer, broker or agent to a commission
or fee in connection with the sale of the Assets to Buyer. If for any reason
any commission or fee shall become due, the party dealing with such dealer,
broker or agent shall pay such commission or fee and agrees to indemnify and
save the other party harmless from all claims for such commission or fee and
from all attorneys' fees, litigation costs and other expense relating to such
claim.
SECTION 9.12 MODIFICATION; REMEDIES CUMULATIVE. This Agreement may
not be changed, amended, terminated, augmented, rescinded or otherwise
altered, in whole or in part, except by a writing executed by all of the
parties hereto. No right, remedy or election given by any term of this
Agreement shall be deemed exclusive but each shall be cumulative with all
other rights, remedies and elections available at law or in equity.
SECTION 9.13 SEVERABILITY. In case any provision of this Agreement
shall be invalid, illegal or unenforceable, it shall, to the extent possible,
be modified in such manner as to be valid, legal and enforceable but so as to
most nearly retain the
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<PAGE>
intent of the parties. If such modification is not possible, such provision
shall be severed from this Agreement. In either case the validity, legality
and enforceability of the remaining provisions of this Agreement shall not in
any way be affected or impaired thereby.
SECTION 9.14 GOVERNING LAW. This Agreement shall in all respects
be governed by and construed in accordance with the internal laws of the
State of Texas, without giving effect to any choice or conflict of law
provision or rule (whether of the State of Texas or any other jurisdiction)
that would cause the application of the laws of any jurisdiction other than
the State of Texas.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed as of the day and year first above written.
BUYER:
T&T GREASE SERVICES, INC.
By: /s/ W. Gregory Orr
-----------------------------------------
Its: President
----------------------------------------
SELLER:
A & B ENTERPRISES, INC.
(EIN: 75-1440889)
By:
-----------------------------------------
Its:
----------------------------------------
STOCKHOLDER:
/s/ Ernest L. McCombs
--------------------------------------------
Ernest L. McCombs
(SSN: ###-##-####)
The undersigned, U S Liquids Inc., has read the foregoing document and
agrees to be bound by the provisions related to it.
U S LIQUIDS INC.
By: /s/ W. Gregory Orr
-----------------------------------------
Its: President
----------------------------------------
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<PAGE>
LIST OF SCHEDULES
Schedule 1.1(a) -- Equipment
Schedule 1.1(b) -- Rolling Stock
Schedule 1.1(d) -- Customer Accounts and Related Approvals
Schedule 1.1(g) -- Permits
Schedule 1.3 -- Customer Accounts Requiring Consent to Assignment
Schedule 1.4 -- Accounts Receivable
Schedule 2.2 -- Assumed Debt
Schedule 5.1(b) -- Compliance with Law
Schedule 5.1(g) -- Real Property Disclosure
Schedule 5.1(h) -- Litigation
Schedule 5.1(i) -- Employees
Schedule 5.1(j) -- Employee Agreements
Schedule 5.1(l) -- List of Disposal Sites
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<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
UNAUDITED FINANCIAL STATEMENTS OF US LIQUIDS INC. AT AND FOR THE NINE MONTHS
ENDED SEPTEMBER 30, 1997 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> SEP-30-1997
<CASH> 14,589
<SECURITIES> 0
<RECEIVABLES> 4,573
<ALLOWANCES> 237
<INVENTORY> 722
<CURRENT-ASSETS> 20,161
<PP&E> 38,079
<DEPRECIATION> 2,822
<TOTAL-ASSETS> 56,046
<CURRENT-LIABILITIES> 8,392
<BONDS> 18,591
0
0
<COMMON> 70
<OTHER-SE> 18,277
<TOTAL-LIABILITY-AND-EQUITY> 56,046
<SALES> 0
<TOTAL-REVENUES> 27,313
<CGS> 0
<TOTAL-COSTS> 17,411
<OTHER-EXPENSES> 3,984
<LOSS-PROVISION> 237
<INTEREST-EXPENSE> 1,367
<INCOME-PRETAX> 4,551
<INCOME-TAX> 1,746
<INCOME-CONTINUING> 2,805
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,805
<EPS-PRIMARY> .42
<EPS-DILUTED> 0
</TABLE>
