AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MAY 7, 1998
REGISTRATION NO. 333-
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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U S LIQUIDS INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN CHARTER)
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<S> <C> <C>
DELAWARE 8980 76-0519797
(STATE OR OTHER JURISDICTION OF (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER) IDENTIFICATION NUMBER)
</TABLE>
MICHAEL P. LAWLOR
CHIEF EXECUTIVE OFFICER
411 N. SAM HOUSTON PARKWAY EAST,
SUITE 400
HOUSTON, TEXAS 77060-3545
(281) 272-4500
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING
AREA CODE, OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
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COPIES TO:
JOHN D. ROBERTSON, ESQ. THOMAS J. MURPHY, ESQ.
HARTZOG CONGER & CASON MCDERMOTT, WILL & EMERY
201 ROBERT S. KERR, SUITE 1600 227 WEST MONROE STREET
OKLAHOMA CITY, OKLAHOMA 73102 CHICAGO, ILLINOIS 60606-5096
(405) 235-7000 (312) 372-2000
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APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon
as practicable after this Registration Statement becomes effective.
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If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. [ ]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
------------------
CALCULATION OF REGISTRATION FEE
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- ---------------------------------------------------------------------------------------------------------
PROPOSED PROPOSED
TITLE OF EACH CLASS OF MAXIMUM MAXIMUM
SECURITIES TO BE AMOUNT TO BE OFFERING PRICE OFFERING AMOUNT OF
REGISTERED REGISTERED(1) PER SHARE(2) PRICE(1)(2) REGISTRATION FEE
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock, $.01 par
value.................. 4,312,500 $23.5625 $101,613,282 $34,446
- ---------------------------------------------------------------------------------------------------------
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</TABLE>
(1) Includes 562,500 shares which may be purchased by the Underwriters pursuant
to an over-allotment option.
(2) Based on the average of the high and low reported sales prices of the Common
Stock on April 30, 1998 pursuant to Rule 457(c) for the purpose of
calculating the registration fee.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THIS REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
================================================================================
<PAGE>
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE A SALE OF ANY OF THESE
SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE
UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY
SUCH STATE.
SUBJECT TO COMPLETION, DATED MAY 7, 1998
PROSPECTUS
, 1998
3,750,000 SHARES
[U S LIQUIDS INC. LOGO]
U S LIQUIDS INC.
COMMON STOCK
All of the 3,750,000 shares of Common Stock offered hereby are being sold
by U S Liquids Inc., a Delaware corporation. The Common Stock is listed on the
American Stock Exchange under the symbol "USL." On May 5, 1998, the reported
last sale price of the Common Stock as reported on the American Stock Exchange
was $25 per share. See "Price Range of Common Stock and Dividend Policy."
SEE "RISK FACTORS" BEGINNING ON PAGE 7 FOR A DISCUSSION OF CERTAIN
FACTORS THAT SHOULD BE CONSIDERED BY PROSPECTIVE INVESTORS.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON
THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS.
ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
- ------------------------------------------------------------------------------
PRICE TO UNDERWRITING PROCEEDS
THE DISCOUNTS AND TO THE
PUBLIC COMMISSIONS(1) COMPANY(2)
- ------------------------------------------------------------------------------
Per Share........... $ $ $
Total(3)............ $ $ $
- ------------------------------------------------------------------------------
(1) THE COMPANY HAS AGREED TO INDEMNIFY THE UNDERWRITERS AGAINST CERTAIN
LIABILITIES, INCLUDING LIABILITIES UNDER THE SECURITIES ACT OF 1933, AS
AMENDED. SEE "UNDERWRITING."
(2) BEFORE DEDUCTING EXPENSES OF THE OFFERING PAYABLE BY THE COMPANY ESTIMATED
AT $1,000,000.
(3) THE COMPANY HAS GRANTED THE UNDERWRITERS AN OPTION EXERCISABLE WITHIN 30
DAYS AFTER THE DATE OF THIS PROSPECTUS TO PURCHASE UP TO AN AGGREGATE OF
562,500 ADDITIONAL SHARES OF COMMON STOCK, ON THE SAME TERMS AS SET FORTH
ABOVE, AT THE PRICE TO THE PUBLIC, LESS THE UNDERWRITING DISCOUNTS AND
COMMISSIONS, SOLELY FOR THE PURPOSE OF COVERING OVER-ALLOTMENTS, IF ANY. IF
SUCH OPTION IS EXERCISED IN FULL, THE TOTAL PRICE TO THE PUBLIC,
UNDERWRITING DISCOUNTS AND COMMISSIONS AND PROCEEDS TO THE COMPANY WILL BE
$ , $ AND $ , RESPECTIVELY. SEE
"UNDERWRITING."
The shares of Common Stock are offered by the several Underwriters subject
to prior sale, when, as and if delivered to and accepted by them, subject to
certain prior conditions. The Underwriters reserve the right to reject any order
in whole or in part. It is expected that delivery of the shares of Common Stock
will be made in New York, New York on or about , 1998.
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
DEUTSCHE MORGAN GRENFELL
VAN KASPER & COMPANY
SANDERS MORRIS MUNDY
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[PHOTO]
CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN TRANSACTIONS
THAT STABILIZE, MAINTAIN OR OTHERWISE AFFECT THE PRICE OF THE COMMON STOCK.
SPECIFICALLY, THE UNDERWRITERS MAY OVERALLOT IN CONNECTION WITH THE OFFERING AND
MAY BID FOR AND PURCHASE SHARES OF THE COMMON STOCK IN THE OPEN MARKET. FOR A
DESCRIPTION OF THESE ACTIVITIES, SEE "UNDERWRITING."
2
<PAGE>
PROSPECTUS SUMMARY
THE FOLLOWING SUMMARY IS QUALIFIED IN ITS ENTIRETY BY THE MORE DETAILED
INFORMATION AND THE FINANCIAL STATEMENTS AND NOTES THERETO APPEARING ELSEWHERE
IN THIS PROSPECTUS. SINCE THE COMPANY'S INITIAL PUBLIC OFFERING (THE "IPO") IN
AUGUST 1997, THE COMPANY HAS ACQUIRED OR CONTRACTED TO ACQUIRE 20 BUSINESSES
(THE "ACQUISITIONS"), WHICH COLLECTIVELY HAD 1997 PRO FORMA REVENUES OF
APPROXIMATELY $111.8 MILLION. ALL OF THESE ACQUISITIONS HAVE BEEN CONSUMMATED
EXCEPT THE ACQUISITION OF THREE SEPARATE BUSINESSES, UNIVERSAL WASTE AND
TRANSIT, CITY ENVIRONMENTAL, INC., AND NORTHERN A-1 SERVICES, INC. (THE
"PENDING ACQUISITIONS"), WHICH ARE UNDER DEFINITIVE AGREEMENTS. EXCEPT AS
OTHERWISE NOTED HEREIN, ALL INFORMATION IN THIS PROSPECTUS ASSUMES (I) THAT THE
PENDING ACQUISITIONS HAVE BEEN CONSUMMATED, (II) NO EXERCISE OF THE
UNDERWRITERS' OVER-ALLOTMENT OPTION, AND (III) AN OFFERING PRICE OF $25 PER
SHARE OF COMMON STOCK IN THIS OFFERING (THE "ASSUMED OFFERING PRICE"). SEE
"UNDERWRITING."
THE COMPANY
U S Liquids Inc. (the "Company") is a rapidly growing provider of
integrated liquid waste management services, including collection, processing,
recovery and disposal services. The Company's primary focus of operations is
industrial and commercial wastewater treatment, although the Company also
collects, processes and disposes of oilfield waste. The Company operates 34
processing facilities located in eight states and serves over 20,000 customers.
The services provided by the Company to any particular customer vary depending
on the type of liquid waste generated, local regulations and the treatment
capabilities of local publicly-operated treatment works ("POTWs").
The Company has adopted an acquisition-based growth strategy and intends to
continue its expansion, generally through (i) acquiring liquid waste processing
facilities; (ii) securing captive waste streams for its facilities by acquiring
collection companies and by entering into long-term contracts directly with
customers or collection companies; and (iii) integrating acquired companies into
the Company's operations to achieve operating efficiencies and economies of
scale. The Company believes that the liquid waste industry is highly fragmented
and that substantial acquisition opportunities exist throughout North America.
Since the Company's initial public offering in August 1997, the Company has
acquired 20 businesses, which collectively had 1997 pro forma revenues of
approximately $111.8 million.
The Company provides liquid waste management services through a number of
subsidiaries which are organized into two divisions. The Industrial Wastewater
Division collects, processes and disposes of liquid waste (such as industrial
wastewater, grease and grit trap waste, bulk liquids and unsaleable beverages,
and certain hazardous wastes) and recovers saleable by-products (such as fats,
oils, feed proteins, ethanol and solvents) from certain of the waste streams.
Typically, the Company uses a variety of physical, chemical, thermal and
biological techniques to break down the liquid waste into constituent
components. Water extracted from the liquid waste is pretreated and then
discharged into a POTW and solid materials are dried and disposed of in a solid
waste landfill. The Oilfield Waste Division collects, processes and disposes of
waste generated in oil and gas exploration and production. The Company's
Industrial Wastewater Division generated 82.0% of the Company's 1997 pro forma
revenues of $150.0 million and the Oilfield Waste Division generated the
remaining 18.0% of such pro forma revenues.
The Company believes that as it expands it is likely to gain numerous
competitive advantages relative to smaller operators, including: servicing
multiple customer locations, treating a wide variety of liquid waste streams,
achieving operating efficiencies (including collection route densification and
consolidation, and increased equipment and facility utilization), increased
economies of scale (including access to lower-cost capital, lower insurance
rates and decreased proportional selling, general and administrative expenses),
and adapting to changing regulations.
According to The McIlvaine Company, the industrial and commercial
wastewater treatment market is highly fragmented with thousands of businesses
generating an estimated $25 billion in revenues in 1995. This market is expected
to grow to over $29 billion in revenues in 2000. The Company believes that this
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growth reflects the following trends: (i) municipalities refusing to accept
certain industrial wastewaters due to limited treatment capabilities and a lack
of resources needed to expand or modernize their POTWs, (ii) industrial and
commercial businesses avoiding POTW surcharges by using third parties to process
and dispose of their wastewater, (iii) industrial and commercial businesses
outsourcing their wastewater treatment needs, (iv) continued industrial and
commercial expansion, and (v) increasingly strict regulations governing the
disposal of industrial wastewater and other liquid wastes, as well as more
stringent enforcement of such regulations.
STRATEGY
The Company's objective is to continue to grow throughout North America by
expanding its services in markets where it can be one of the largest and most
profitable integrated liquid waste management service companies. The Company has
assembled a management team with significant operating and consolidation
experience in the waste management industry. The key elements of the Company's
strategy are:
EXPAND THROUGH ACQUISITIONS. The Company intends to continue to
aggressively pursue acquisitions of liquid waste management companies in
new geographic areas, while increasing its facility and equipment
utilization and expanding its market penetration and range of services
offered in its existing markets through "tuck-in" acquisitions.
INTERNAL GROWTH. The Company intends to expand its customer base by
positioning itself as a multi-city, single source provider of liquid waste
management services for national and regional generators of liquid waste.
The Company also plans to expand the capacity and processing capabilities
of its existing liquid waste facilities, and is seeking to amend its
permits for certain facilities in order to receive additional liquid waste
streams.
OPERATIONAL ENHANCEMENTS. The Company will seek to enhance the
operations of its existing facilities and acquired businesses through
collection route densification and consolidation and increased facility and
equipment utilization. The Company also expects to realize economies of
scale, as well as cost savings by consolidating certain administrative
functions at its corporate offices.
OPERATE ON DECENTRALIZED BASIS. The Company intends to continue to
manage its various businesses on a decentralized basis, with local
management maintaining responsibility for the day-to-day operations,
profitability and growth of the business. The Company believes that such a
decentralized operating structure will allow the Company to capitalize on
the considerable local and regional market knowledge and customer
relationships possessed by local management.
THE OFFERING
Common Stock Offered................. 3,750,000 shares
Common Stock to be outstanding after
the Offering....................... 12,266,211 shares(1)
Use of Proceeds...................... Repayment of outstanding indebtedness
AMEX Symbol.......................... USL
- ------------------------------
(1) Excludes 2,135,375 shares of Common Stock subject to outstanding options and
warrants having a weighted average exercise price of $5.56 per share, which
options and warrants consist of (i) 1,000,000 shares issuable pursuant to a
warrant issued to Sanifill, Inc. ("Sanifill"), a wholly-owned subsidiary
of USA Waste Services, Inc. ("USA Waste"), the resale of which shares is
subject to certain contractual restrictions extending through 2001, (ii)
837,875 shares issuable pursuant to outstanding director and employee stock
options, (iii) 112,500 shares issuable pursuant to warrants granted to
certain underwriters in connection with the IPO, and (iv) 185,000 shares
issuable pursuant to other outstanding warrants and options. Also excludes
281,250 shares issuable pursuant to options, the vesting of which are
contingent upon the successful completion of certain corporate development
business activities.
4
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SUMMARY FINANCIAL DATA
The historical statement of operations data below sets forth the financial
data of the Company for the year ended December 31, 1997, derived from the
consolidated financial statements audited by Arthur Andersen LLP, which appear
elsewhere in this Prospectus. The historical statement of operations for the
three months ended March 31, 1997 and 1998 and the balance sheet data as of
March 31, 1998 have been derived from the unaudited consolidated financial
statements of the Company. The unaudited consolidated financial statements for
all periods have been prepared on the same basis as the audited consolidated
financial statements and in the opinion of the Company reflect all adjustments,
consisting of normal recurring adjustments, necessary for a fair presentation of
such data. The statement of operations data below present depreciation and
amortization expenses separately from operating expenses and selling, general
and administrative expenses. Depreciation and amortization expenses are included
in the operating and the selling, general and administrative expense captions
set forth in the audited financial statements.
The unaudited pro forma financial data set forth below present certain
financial information for the Company which gives effect to (i) the Acquisitions
and certain pro forma adjustments to the historical financial statements of the
businesses acquired, including adjusting depreciation and amortization expenses
to reflect purchase price allocations, recording interest expense to reflect
debt issued in connection with the Acquisitions, certain reductions in salaries
and benefits payable to the owners of the businesses acquired which were agreed
to in connection with the Acquisitions and the related income tax effects of
these adjustments, and (ii) the consummation of this offering at the Assumed
Offering Price and the application of the net proceeds therefrom. The pro forma
financial information is not necessarily indicative of results the Company would
have obtained had these events actually then occurred or the Company's future
results and should be read in conjunction with the other financial statements
and notes thereto included elsewhere in this Prospectus. See "Selected
Financial Data."
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HISTORICAL PRO FORMA AS ADJUSTED(1)
----------------------------------- -----------------------------------
THREE MONTHS THREE MONTHS
YEAR ENDED YEAR ENDED
ENDED MARCH 31, ENDED MARCH 31,
DECEMBER 31, -------------------- DECEMBER 31, --------------------
1997 1997 1998 1997 1997 1998
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenues............................ $ 38,159 $ 7,862 $ 12,343 $149,983 $ 34,499 $ 41,678
Operating expenses.................. 21,353 4,675 7,011 101,868 24,424 27,736
Depreciation and amortization....... 2,990 633 987 8,969 1,863 2,550
Selling, general and administrative
expenses.......................... 5,750 690 1,467 18,186 3,487 4,702
------------ --------- --------- ------------ --------- ---------
Income from operations.............. 8,066 1,864 2,878 20,960 4,725 6,690
Interest expense, net............... 1,734 509 346 1,524 447 195
Other (income) expense, net......... 41 (28) (5) 154 91 100
------------ --------- --------- ------------ --------- ---------
Income before provision for income
taxes............................. 6,291 1,383 2,537 19,282 4,187 6,395
Provision for income taxes.......... 2,416 504 1,002 7,905 1,716 2,622
------------ --------- --------- ------------ --------- ---------
Net income.......................... $ 3,875 $ 879 $ 1,535 $ 11,377 $ 2,471 $ 3,773
============ ========= ========= ============ ========= =========
Diluted earnings per common and
common equivalent share........... $ 0.55 $ 0.16 $ 0.18 $ 0.85 $ 0.19 $ 0.28
============ ========= ========= ============ ========= =========
Weighted average common and common
equivalent shares
outstanding(2).................... 7,078 5,418 8,737 13,395 13,233 13,560
EBITDA(3)........................... $ 11,056 $ 2,497 $ 3,865 $ 29,929 $ 6,588 $ 9,240
MARCH 31, 1998
-------------------------------------------
PRO PRO FORMA
HISTORICAL FORMA(4) AS ADJUSTED(5)
(IN THOUSANDS)
BALANCE SHEET DATA:
Cash and cash equivalents........... $ 5,733 $ 7,476 $ 7,476
Working capital..................... 5,478 10,277 10,277
Property, plant and equipment,
net............................... 40,501 76,736 76,736
Total assets........................ 70,240 168,412 168,412
Long-term obligations, net of
current maturities................ 25,346 90,816 3,457
Stockholders' equity................ 25,424 46,265 133,624
</TABLE>
(FOOTNOTES ON FOLLOWING PAGE)
5
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(1) Pro forma for the effect of the Acquisitions as if each had occurred on
January 1, 1997 and as adjusted to reflect the sale of 3,750,000 shares of
Common Stock offered by the Company hereby at the Assumed Offering Price and
the application of the net proceeds therefrom. See "Use of Proceeds" and
"Capitalization."
(2) The pro forma as adjusted weighted average common and common equivalent
shares outstanding includes: (i) 5,937,435 shares, 5,238,875 shares and
7,438,910 shares outstanding for the year ended December 31, 1997 and for
the three months ended March 31, 1997 and 1998, respectively, (ii) 3,750,000
shares issued in connection with this offering, (iii) 2,515,124 shares,
3,211,085 shares and 1,073,578 shares for the year ended December 31, 1997
and for the three months ended March 31, 1997 and 1998, respectively, issued
in connection with the Acquisitions and the Company's IPO as if each had
occurred on January 1, 1997, and (iv) 1,192,531 shares, 1,032,585 shares and
1,298,072 shares for the year ended December 31, 1997 and for the three
months ended March 31, 1997 and 1998, respectively, representing the effect
of outstanding warrants and options to purchase Common Stock, using the
treasury stock method. Excludes 281,250 shares issuable pursuant to options,
the vesting of which are contingent upon the successful completion of
certain corporate development activities.
(3) EBITDA represents earnings presented above before interest, other (income)
expense, income taxes, depreciation and amortization expense. EBITDA is not
a measure of cash flow, operating results or liquidity, as determined in
accordance with generally accepted accounting principles, and differs from
net cash provided by operating activities as determined under generally
accepted accounting principles in that EBITDA excludes interest expense and
does not reflect the effects of changes in working capital or deferred
income tax items. EBITDA should not be considered in isolation or as an
alternative to, or more meaningful than, net income or cash flows provided
by operations, as determined in accordance with generally accepted
accounting principles. The EBITDA amounts shown for the Company may not be
comparable to EBITDA as reported by or for other companies because the
Company's EBITDA may not be calculated on the same basis as EBITDA as
reported by or for other companies.
(4) Pro forma for the effect of the Acquisitions that were or will be
consummated subsequent to March 31, 1998 as if each had occurred on March
31, 1998.
(5) Pro forma for the effect of the Acquisitions that were or will be
consummated subsequent to March 31, 1998 as if each had occurred on March
31, 1998 and as adjusted to reflect the sale of 3,750,000 shares of Common
Stock offered by the Company hereby at the Assumed Offering Price and the
application of the net proceeds therefrom. See "Use of Proceeds" and
"Capitalization."
6
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RISK FACTORS
THE COMMON STOCK BEING OFFERED HEREBY INVOLVES A SIGNIFICANT DEGREE OF
RISK. IN ADDITION TO THE OTHER INFORMATION SET FORTH IN THIS PROSPECTUS,
PROSPECTIVE PURCHASERS OF THE COMMON STOCK SHOULD CONSIDER CAREFULLY THE
FOLLOWING RISK FACTORS IN EVALUATING AN INVESTMENT IN THE COMPANY. THIS
PROSPECTUS CONTAINS FORWARD-LOOKING STATEMENTS WITHIN THE MEANING OF SECTION 27A
OF THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND SECTION
21E OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED (THE "EXCHANGE ACT"),
THAT INVOLVE RISKS AND UNCERTAINTIES, SUCH AS STATEMENTS OF THE COMPANY'S
STRATEGIES, PLANS, OBJECTIVES, EXPECTATIONS AND INTENTIONS. THE COMPANY'S ACTUAL
RESULTS COULD DIFFER MATERIALLY FROM THOSE ANTICIPATED IN THESE FORWARD-LOOKING
STATEMENTS AS A RESULT OF ANY NUMBER OF FACTORS, INCLUDING THE RISK FACTORS SET
FORTH BELOW AND ELSEWHERE IN THIS PROSPECTUS. THE CAUTIONARY STATEMENTS MADE IN
THIS PROSPECTUS SHOULD BE READ AS BEING APPLICABLE TO ALL RELATED
FORWARD-LOOKING STATEMENTS WHEREVER THEY APPEAR IN THIS PROSPECTUS.
LIMITED OPERATING HISTORY; ABSENCE OF COMBINED OPERATING HISTORY
The Company was organized in November 1996 and began active operations in
December 1996. As a result, the Company has very little operating history as an
integrated liquid waste management business to which investors may look to
evaluate the Company's performance. In addition, since its IPO in August 1997,
the Company has completed 20 acquisitions, several of which were accounted for
under the pooling-of-interests method of accounting. There can be no assurance
that the Company will be able to successfully integrate the operations of the
acquired businesses or any subsequently acquired business or to institute the
necessary systems and procedures, including accounting and financial reporting
systems, to manage the entire combined enterprise on a profitable basis. In
addition, there can be no assurance that the Company's management group will be
able to effectively manage the combined entity or to effectively implement the
Company's acquisition program and internal growth strategy. The Pro Forma
Financial Statements of the Company cover periods when the businesses acquired
in the Acquisitions were not under common control or management and may not be
indicative of the Company's future financial or operating results. The inability
of the Company to integrate these acquired businesses successfully would have a
material adverse effect on the Company's business, results of operations and
financial condition, as well as its acquisition program. See
"Business -- Acquisition Program" and "Management."
RISKS RELATED TO THE COMPANY'S ACQUISITION STRATEGY
The Company intends to grow significantly through the acquisition of
additional liquid waste management businesses. The Company expects to face
competition for acquisition candidates, which may limit the number of
acquisition opportunities and may lead to higher acquisition prices. There can
be no assurance that the Company will be able to identify, acquire or manage
additional businesses profitably or to integrate successfully any acquired
businesses into the Company without substantial or material unanticipated costs,
delays or other operational or financial problems. Businesses acquired by the
Company may have liabilities that the Company does not discover or may be unable
to discover during its pre-acquisition investigations, including liabilities
arising from environmental contamination or non-compliance by prior owners with
environmental laws or regulatory requirements, and for which the Company, as a
successor owner or operator, may be responsible. Certain environmental
liabilities, even if not expressly assumed by the Company, may nonetheless be
imposed on the Company under certain legal principles of successor liability,
including those under the Comprehensive Environmental Response Compensation and
Liability Act, as amended ("CERCLA"). Three of the businesses acquired in the
Acquisitions process hazardous substances at their facilities. The Company may
be required under federal, state or local law to investigate and remediate any
contamination that may have resulted from the processing of any hazardous
substances by either of these businesses. Any indemnitees or warranties, due to
their limited scope, amount, duration, the financial limitations of the
indemnitor or warrantor, or other reasons, may not fully cover such liabilities.
Further, acquisitions involve a number of other special risks, including failure
of the acquired business to achieve expected results, diversion of management's
attention, failure to retain key personnel of the acquired business and risks
associated with unanticipated events, all of which could have a material
7
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adverse effect on the Company's business, results of operations and financial
condition. In addition, if the Company is not able to successfully integrate the
operations of one or more of its acquired businesses, the benefits expected to
be derived by the Company from consolidating certain overhead functions such as
cash management, human resources, finance and insurance will not be realized.
The Company currently has no binding agreements to make any acquisitions. See
"Business -- Acquisition Program" and "Management's Discussion and Analysis
of Financial Condition and Results of Operations -- Overview."
MANAGEMENT OF GROWTH
To manage its growth effectively, the Company will be required to continue
to implement and improve its operational, financial and management information
systems and controls, and to train, motivate and manage its employees. The
Company intends to continually review and upgrade its management information
systems, as well as hire additional management and other personnel in order to
maintain the adequacy of its operational, financial and management controls. The
Company's failure to manage its growth effectively could have a material adverse
effect on the Company's business, results of operations and financial condition.
See "Management."
RISKS RELATED TO ACQUISITION FINANCING
The timing, size and success of the Company's future acquisition efforts
and the associated capital requirements cannot be readily predicted at this
time. The Company currently intends to finance future acquisitions by using a
combination of Common Stock and cash. In the event shares of Common Stock are
issued in connection with future acquisitions or earn-out provisions of
completed acquisitions, purchasers of Common Stock in this offering may
experience dilution in the net tangible book value of their stock. If the Common
Stock does not maintain a sufficient market value, or potential acquisition
candidates are otherwise unwilling to accept Common Stock as part of the
consideration for the sale of their businesses, the Company may be required to
use more of its cash resources, if available, or incur indebtedness in order to
continue its acquisition program. The Company has a $100.0 million credit
facility (the "Credit Facility") with a group of banks under which the Company
may borrow to fund acquisitions and working capital requirements; however, under
the Credit Facility the banks' consent is required in order for the Company to
consummate certain acquisitions or incur indebtedness (including, without
limitation, debt assumed in connection with acquisitions). After the
consummation of this offering and the application of the net proceeds therefrom,
the Company anticipates that it will have no borrowings outstanding under the
Credit Facility. If the Company does not have sufficient cash resources, its
growth could be limited unless it is able to obtain additional capital through
debt or equity financings. There can be no assurance that the Company will be
able to obtain such financing when required or that such financing will be
available on terms and conditions reasonably acceptable to the Company. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations -- Liquidity and Capital Resources."
RISKS RELATED TO OPERATING AND INTERNAL GROWTH STRATEGY
Key elements of the Company's strategy are to improve the profitability and
increase the revenues of its existing operations and any subsequently acquired
businesses. The Company intends to improve the profitability of its existing
operations and any subsequently acquired businesses by various means, including
achieving operating efficiencies and economies of scale. The Company's ability
to increase the revenues of its existing operations and any subsequently
acquired businesses will be affected by various factors, including the demand
for liquid waste collection, processing and disposal services, as well as the
demand for by-products recovered by the Company from certain liquid waste
streams, and the Company's ability to expand the range of services offered to
customers, develop national and regional accounts for its liquid waste
management services and other marketing programs. Many of these factors are
beyond the Company's control, and there can be no assurance that the Company's
operating and internal growth strategies will be successful or that the Company
will be able to generate cash flow adequate for its operations and to support
internal growth. See "Business -- Strategy."
8
<PAGE>
COMPETITION
The liquid waste industry is highly fragmented and very competitive. The
Company competes with other liquid waste processing facilities and alternative
methods of disposal of certain waste streams provided by area landfills and
injection wells, as well as the alternative of illegal disposal. In addition,
competitive products and services have been and will continue to be successfully
developed and marketed by others. Furthermore, future technological change and
innovation may result in a reduction in the amount of liquid waste being
generated or alternative methods of processing and/or disposal being developed.
The Company's inability to procure sufficient quantities of liquid waste would
have a material adverse effect on the Company's business, results of operations
and financial condition. The market for the various by-products recovered by the
Company for sale to third parties is also very competitive and is served by
several large companies and a number of smaller, owner-operated companies. With
respect to its oilfield waste operations, the Company must compete with
alternative methods of off-site disposal of oilfield waste. The Company also
faces competition from customers who seek to enhance and develop their own
methods of disposal instead of using the services of third parties such as the
Company. Future technological change and innovation may increase the amount of
internal oilfield waste processing and disposal as well as the number of
competitors in this market. Increased use of internal processing and disposal
methods and other competitive factors could have a material adverse effect on
the Company's business, results of operations and financial condition. In
addition, until August 2001, the Company is prohibited from engaging in certain
activities relating to the collection, transportation or disposal of oilfield
waste generated in the Gulf of Mexico and certain surrounding states and other
related businesses. See " -- Dependence on Newpark for Offshore-Generated
Oilfield Waste; Covenant Not to Compete; and Obligation to Treat Oilfield Waste
Received from Newpark at Below-Market Prices," "Business -- Operations and
Services Provided" and "Certain Transactions -- Campbell Wells Acquisition."
Competitors of the Company may be better capitalized, have greater name
recognition or be able to provide services or products at a lower cost. In
addition, as the liquid waste market matures, competition can be expected to
increase. As a result of these competitive factors, there can be no assurance
that the Company's growth strategy will be successful or that the Company will
be able to generate cash flow adequate for its operations and to support future
acquisitions and internal growth. See "Business -- Competition."
FAILURE TO COMPLY WITH GOVERNMENTAL REGULATIONS
The Company's operations are subject to numerous and continually evolving
federal, state and local laws, regulations and policies that govern
environmental protection, zoning and other matters, including the Clean Water
Act, the Resource Conservation and Recovery Act of 1976, as amended ("RCRA")
and the Clean Air Act. If existing regulatory requirements change, the Company
may, among other things, be required to make significant unanticipated capital
and operating expenditures. Although the Company believes that it is presently
in material compliance with applicable laws and regulations, there can be no
assurance that it will be deemed to be in compliance in the future. Governmental
authorities may seek to impose fines and penalties on the Company or to revoke
or deny the issuance or renewal of operating permits for failure to comply with
applicable laws and regulations. Under such circumstances, the Company might be
required to curtail or cease operations or conduct site remediation until a
particular problem is remedied, which could have a material adverse effect on
the Company's business, results of operations and financial condition. In
addition, if the Company's operations resulted in the release of hazardous
substances, the Company could incur liability under CERCLA. See
"Business -- Regulatory Background."
IMPACT OF FAILURE TO OBTAIN OR MAINTAIN NECESSARY GOVERNMENTAL APPROVALS
The Company operates in a highly regulated environment and the facilities
at which the Company processes liquid waste are required to have permits and
approvals from federal, state and local governments. Any of such permits or
approvals or applications may be subject to denial, revocation or modification
under various circumstances. In addition, in the event new environmental
legislation or regulations are enacted or existing legislation or regulations
are amended or are enforced differently, the Company may be required to
9
<PAGE>
obtain additional operating permits or approvals. The process of obtaining a
required permit or approval may be lengthy and expensive and the issuance of
such permits or the obtaining of such approval may be subject to public
opposition. There can be no assurance that the Company will be successful in
obtaining or maintaining all required permits and approvals. Any such failure
could have a material adverse effect on the Company's business, results of
operations and financial condition.
POTENTIAL ENVIRONMENTAL LIABILITY; INSUFFICIENCY OF INSURANCE
The Company processes and disposes of various types of hazardous and
nonhazardous wastes at its facilities. There may be various adverse consequences
to the Company in the event that a facility owned or operated by the Company
(including any acquired business) causes environmental damage, in the event that
waste transported by the Company causes environmental damage at another site, in
the event the Company fails to comply with applicable environmental and land use
laws and regulations or the terms of a permit or outstanding consent order or in
the event a facility owned or operated by the Company or the soil or groundwater
thereunder is or becomes contaminated. These adverse consequences may include
the imposition of substantial monetary penalties on the Company, the issuance of
an order requiring the curtailment or termination of the operations involved or
affected, the revocation or denial of permits or other approvals necessary for
continued operation or expansion of a facility, the imposition of liability on
the Company with respect of any environmental damage (including groundwater or
soil contamination) at its facilities or that its facilities caused to adjacent
landowners or others or environmental damage at another site associated with
waste transported by the Company, the imposition of liability on the Company
under CERCLA or under comparable state laws, and criminal liability for the
Company or its officers. In addition, citizens' groups, adjacent landowners or
governmental entities could oppose the issuance of a permit or approval to the
Company or allege violations of the permits pursuant to which the Company
operates or laws or regulations to which the Company is subject. Any of the
foregoing could have a material adverse effect on the Company's business,
results of operations and financial condition. CERCLA and comparable state laws
impose retroactive strict joint and several liability on various parties that
are, or have been, associated with a site at which there has been, or is
threatened, a release of any hazardous substance (as defined by CERCLA) into the
environment. Liability under RCRA, CERCLA and comparable state laws may include
responsibility for costs of site investigations, site clean up, site monitoring,
natural resources damages and property damages. Liabilities under RCRA, CERCLA
and comparable state laws can be very substantial and, if imposed upon the
Company, could have a material adverse effect on the Company's business, results
of operations and financial condition. See "Business -- Regulatory
Background."
The National Emission Standards for Hazardous Air Pollutants ("NESHAPs")
regulate the collection, packaging, transportation and disposal of
asbestos-containing material. NESHAPs regulate visible emissions of asbestos
fibers to outside air and require emissions controls and appropriate work
practices. Asbestos is listed as a hazardous substance under CERCLA. Certain
states have classified asbestos as hazardous waste and require appropriate
handling and disposal practices. One of the businesses recently acquired by the
Company transports and disposes of asbestos-containing materials. There can be
no assurance that the Company will not face claims resulting from environmental
liabilities relating to these and other materials in its waste management
operations.
During the ordinary course of its operations, the Company has from time to
time received, and expects that it may in the future receive, citations or
notices from governmental authorities that its operations are not in compliance
with its permits or certain applicable environmental or land use laws and
regulations. The Company generally seeks to work with the authorities to resolve
the issues raised by such citations or notices. There can be no assurance,
however, that the Company will always be successful in this regard, and the
failure to resolve a significant issue could result in one or more of the
adverse consequences to the Company described above.
While the Company maintains liability insurance, the insurance is subject
to coverage limits and certain policies exclude coverage for damages resulting
from environmental contamination. Although there are currently numerous sources
from which such coverage may be obtained, there can be no assurance that
insurance will continue to be available to the Company on commercially
reasonable terms, that the possible
10
<PAGE>
types of liabilities that may be incurred by the Company will be covered by its
insurance, that the Company's insurance carriers will be able to meet their
obligations under the policies or that the dollar amount of such liabilities
will not exceed the Company's policy limits. Even a partially uninsured claim,
if successful and of significant magnitude, could have a material adverse effect
on the Company's business, results of operations and financial condition.
POTENTIAL IMPACT OF STATE OF LOUISIANA EXAMINATIONS OF THE OILFIELD WASTE
DISPOSAL INDUSTRY
In 1997, after an unsuccessful attempt was made in the Louisiana
legislature to require the Company's Bourg, Louisiana landfarm to relocate or
close, the Governor of Louisiana directed certain state agencies to examine the
operations at the Bourg landfarm and to review generally Louisiana's rules and
regulations regarding the processing and disposal of oilfield waste. As a result
of this mandate, the Louisiana Department of National Resources has adopted
emergency rules that will, among other things, require (i) generators of
oilfield waste to conduct additional tests on oilfield waste to be disposed of
off-site, and (ii) all oilfield waste disposal facilities located in Louisiana
to conduct additional tests on oilfield waste accepted for processing and/or
disposal. These emergency rules went into effect on May 1, 1998 and will
continue for 120 days. Results of the testing conducted by the disposal
facilities and the generators of the oilfield waste will be evaluated by the
Department of Natural Resources to determine if there are any constituents
present in the oilfield waste in high enough concentrations to pose a risk to
human health or the environment and, if so, whether any modifications to the
Department's rules governing the processing and/or disposal of oilfield waste
are warranted. New regulations or changes in applicable regulations resulting
from the implementation of these emergency rules could have a material adverse
effect on the Company's business, results of operations and financial condition.
DEPENDENCE UPON OILFIELD WASTE EXEMPTION UNDER RCRA AND OTHER ENVIRONMENTAL
REGULATIONS
Oilfield waste is currently exempt from the requirements of RCRA, which is
the principal federal statute governing the handling and disposal of waste. In
recent years, proposals have been made to rescind or modify this exemption. The
repeal or modification of the exemption covering oilfield waste or modification
of applicable regulations or interpretations regarding the processing and/or
disposal of oilfield waste would require the Company to alter its method of
processing and disposing of oilfield waste. Such repeal or modification could
have a material adverse effect on the Company's business, results of operations
and financial condition. Each of the Company's operations is also dependent to
varying degrees on the existence and enforcement of local, state and federal
environmental regulations. Any repeal or relaxation of such regulations, or a
failure of governmental authorities to enforce such regulations, could result in
decreased demand for the Company's services and, therefore, could have a
material adverse effect on the Company's business, results of operations and
financial condition. The Company's operations may also be adversely affected by
new regulations or changes in other applicable regulations. See "Business --
Regulatory Background."
DEPENDENCE ON OIL AND GAS INDUSTRY
Demand for the Company's oilfield waste processing and disposal services
depends in large part upon the level of exploration for and production of oil
and gas, particularly in the Gulf Coast region. This demand, in turn, depends
on, among other things, oil and gas prices, expectations about future prices,
the cost of exploring for, producing and delivering oil and gas, the discovery
rate of new oil and gas reserves and the ability of oil and gas companies to
raise capital. Prices for oil and gas historically have been extremely volatile
and have reacted to changes in the supply of and demand for oil and natural gas,
domestic and worldwide economic conditions and political instability in
oil-producing countries. No assurance can be given that current levels of oil
and gas activities will be maintained or that the demand for the Company's
oilfield waste services will reflect the level of such activities. Prices for
oil and natural gas are expected to continue to be volatile and affect demand
for the Company's oilfield waste services. A material decline in oil or natural
gas prices or exploration activities could have a material adverse effect on the
demand for the Company's oilfield waste services and, therefore, the Company's
business, results of operations and financial condition.
11
<PAGE>
DEPENDENCE ON NEWPARK FOR OFFSHORE-GENERATED OILFIELD WASTE; COVENANT NOT TO
COMPETE; AND OBLIGATION TO TREAT OILFIELD WASTE RECEIVED FROM NEWPARK AT
BELOW-MARKET PRICES
In December 1996, the Company acquired five oilfield waste landfarms and
landfills from Campbell Wells, L.P. and Campbell Wells Norm, L.P. (collectively
"Campbell Wells") and Sanifill, each of which is now a wholly-owned subsidiary
of USA Waste. In connection with this acquisition (the "Campbell Wells
Acquisition"), the Company acquired a disposal agreement (the "Disposal
Agreement") and certain related agreements with Newpark Resources, Inc., a
public company located in New Orleans ("Newpark"), that obligate Newpark to
deliver to the Company, in each of the next 23 years, oilfield waste for
treatment and disposal at certain of the Company's Louisiana landfarms.
Specifically, until June 30, 2021, Newpark is obligated to deliver to the
Company for processing and disposal the lesser of (i) one-third of the barrels
of oilfield waste that Newpark receives for processing and disposal in
Louisiana, Texas, Mississippi, Alabama and the Gulf of Mexico (the
"Territory") and (ii) 1,850,000 barrels of oilfield waste, in each case
excluding saltwater. In return, prior to August 2001, the Company is obligated
not to engage, directly or indirectly, in the collection, transfer,
transportation, treatment or disposal of oilfield waste generated in a marine
environment or transported in marine vessels or the site remediation and closure
business in the Territory. As a result of these contractual arrangements with
Newpark, the Company's Oilfield Waste Division is dependent upon Newpark's
ability to maintain its share of the oilfield waste disposal market in the
Territory. There can be no assurance that Newpark will be able to maintain its
share of the oilfield waste disposal market in the Territory, and a significant
decline in Newpark's market share could have a material adverse effect on the
Company's business, results of operations and financial condition. In addition,
these contractual arrangements limit the ability of the Company to expand its
offshore oilfield waste operations in the Territory through acquisitions or
otherwise.
The Disposal Agreement also governs the price to be paid by Newpark to the
Company for delivered oilfield waste. This contractual price is lower than the
price that the Company could obtain in the open market, and the Company expects
such price disparity to persist for the duration of the Disposal Agreement. For
the year ended December 31, 1997, pro forma revenues of approximately $27.0
million, or approximately 18.0% of the Company's total pro forma revenues, were
derived from the processing and disposal of oilfield waste, of which amount
approximately $7.9 million, or approximately 5.3% of the Company's total pro
forma revenues, was derived from the processing and disposal of oilfield waste
received from Newpark. See "Business -- Operations and Services Provided" and
"Certain Transactions -- Campbell Wells Acquisition."
RELIANCE ON KEY PERSONNEL
The Company is highly dependent on its executive officers and senior
management, and the Company likely will depend on the senior management of any
significant business it acquires in the future. The loss of any of its current
executive officers or key employees or any member of senior management of any
subsequently acquired business could have a material adverse effect on the
Company's business, results of operations and financial condition. In addition,
debt outstanding under the Credit Facility may be accelerated at the option of
the lenders in the event that, among other things, Michael P. Lawlor, W. Gregory
Orr or Earl J. Blackwell ceases to serve as an executive officer of the Company
and is not replaced within 60 days by an individual reasonably satisfactory to
the lenders. The Company does not maintain key man life insurance on any of its
executive officers or key employees.
LACK OF DIVIDENDS
The Company has not paid dividends on its Common Stock and does not
anticipate paying dividends in the foreseeable future. The Company intends to
retain future earnings, if any, to finance the expansion of its operations and
for general corporate purposes, including future acquisitions. In addition, the
Credit Facility prohibits the Company from paying dividends on its capital
stock. See "Dividend Policy."
12
<PAGE>
POTENTIAL ANTI-TAKEOVER EFFECT OF CERTAIN CHARTER PROVISIONS
The Company's Certificate of Incorporation, as amended (the "Certificate
of Incorporation"), provides for a Board of Directors with staggered terms,
which may discourage or prevent certain types of transactions involving an
actual or potential change in control of the Company, including transactions in
which selling stockholders may otherwise receive a premium for their shares over
then current market prices. In addition, pursuant to the Certificate of
Incorporation, the Board of Directors has been authorized to approve the
issuance of shares of currently undesignated preferred stock, to determine the
price, powers, preferences and rights and the qualifications, limitations or
restrictions granted to or imposed on any unissued series of such preferred
stock, and to fix the number of shares constituting any such series and the
designation of such series, without any vote or future action by the
stockholders. The preferred stock could be issued with voting, liquidation,
dividend and other rights superior to the rights of the Common Stock. See
"Description of Securities -- Preferred Stock."
13
<PAGE>
USE OF PROCEEDS
The net proceeds to the Company from the sale of the shares of Common Stock
offered hereby are estimated to be $87.4 million ($100.6 million if the
Underwriters' over-allotment option is exercised in full), after deducting
underwriting discounts and commissions and estimated offering expenses. The
Company intends to apply the net proceeds of the offering against the
outstanding balance of the Credit Facility, the vast majority of which
indebtedness was incurred in connection with acquisitions previously consummated
by the Company. See "Business -- Acquisitions." The Credit Facility expires on
April 10, 2001 and amounts currently outstanding thereunder bear interest at
approximately 7.9%, which rate is anticipated to decrease pursuant to the terms
of the Credit Facility to approximately 6.9% after the consummation of this
offering. Pending application of the net proceeds as described herein, the
Company intends to invest the net proceeds in short-term, interest bearing
investments.
PRICE RANGE OF COMMON STOCK AND DIVIDEND POLICY
The Common Stock has been listed on AMEX since August 20, 1997. The trading
symbol for the Common Stock is "USL." The reported last sale price of the
Common Stock as reported on AMEX on May 5, 1998 was $25. The following table
sets forth, for the periods indicated, the high and low sales prices for the
Common Stock as reported on AMEX.
PRICE RANGE
OF COMMON STOCK
----------------
HIGH LOW
1997
Third Quarter (beginning August
20)............................. $ 18 3/16 $13 1/8
Fourth Quarter..................... 19 3/8 12 5/8
1998
First Quarter...................... $ 20 3/4 $14 1/4
Second Quarter (through May 5)..... 25 1/4 19 5/16
The Company has not paid dividends on its Common Stock and does not
anticipate paying dividends in the foreseeable future. The Company intends to
retain future earnings, if any, to finance the expansion of its operations and
for general corporate purposes, including future acquisitions. Furthermore, the
Company is prohibited from declaring or paying cash dividends on its capital
stock under the terms of its Credit Facility.
14
<PAGE>
CAPITALIZATION
The following table sets forth the capitalization of the Company (i) as of
March 31, 1998, (ii) pro forma to reflect the effect of the Acquisitions that
were consummated subsequent to March 31, 1998 as if each had occurred on March
31, 1998, and (iii) pro forma as adjusted to reflect the consummation of this
offering at the Assumed Offering Price and the application of the net proceeds
therefrom as described in "Use of Proceeds." This table should be read in
conjunction with "Use of Proceeds," "Management's Discussion and Analysis of
Financial Condition and Results of Operations" and the financial statements
included elsewhere in this Prospectus.
<TABLE>
<CAPTION>
MARCH 31, 1998
---------------------------------------
PRO PRO FORMA
HISTORICAL FORMA AS ADJUSTED
(IN THOUSANDS)
<S> <C> <C> <C>
Current maturities of long-term
obligations............................. $ 1,258 $ 1,258 $ 1,258
========== ========== ===========
Long-term obligations, net of current
maturities............................ $ 25,346 $ 90,816 $ 3,457
Stockholders' equity:
Preferred Stock, $.01 par value,
5,000,000 shares authorized; no
shares issued and outstanding...... -- -- --
Common Stock, $.01 par value,
30,000,000 shares authorized;
7,499,022 shares issued and
outstanding, historical; 8,516,211
shares issued and outstanding, pro
forma; and 12,266,211 shares issued
and outstanding, pro forma as
adjusted(1)........................ 75 85 123
Additional paid-in capital............ 20,171 41,002 128,323
Retained earnings..................... 5,178 5,178 5,178
---------- ---------- -----------
Total stockholders' equity.... 25,424 46,265 133,624
---------- ---------- -----------
Total capitalization..... $ 50,770 $ 137,081 $ 137,081
========== ========== ===========
</TABLE>
- ------------------------------
(1) Excludes 2,110,375 shares issuable upon exercise of options and warrants
outstanding as of March 31, 1998.
15
<PAGE>
SELECTED FINANCIAL DATA
The historical statement of operations for the years ended December 31,
1995, 1996 and 1997 and the balance sheet data as of December 31, 1996 and 1997
have been derived from the consolidated financial statements audited by Arthur
Andersen LLP, which appear elsewhere in this Prospectus. The historical
statement of operations data for the year ended December 31, 1994 have been
derived from the consolidated financial statements audited by Arthur Andersen
LLP, which do not appear elsewhere in this Prospectus. The historical statement
of operations for the year ended December 31, 1993, and for the three month
periods ended March 31, 1997 and 1998 and the balance sheet data as of March 31,
1998 have been derived from the unaudited consolidated financial statements of
the Company. The unaudited consolidated financial statements for all periods
have been prepared on the same basis as the audited consolidated financial
statements and in the opinion of the Company reflect all adjustments, consisting
of normal recurring adjustments, necessary for a fair presentation of such data.
The statement of operations data below present depreciation and amortization
expenses separately from operating expenses and selling, general and
administrative expenses. Depreciation and amortization expenses are included in
the operating and the selling, general and administrative expense captions set
forth in the audited financial statements.
The unaudited pro forma financial data set forth below present certain
financial information for the Company which gives effect to (i) the Acquisitions
and certain pro forma adjustments to the historical financial statements of the
businesses acquired, including adjusting depreciation and amortization expenses
to reflect purchase price allocations, recording interest expense to reflect
debt issued in connection with the Acquisitions, certain reductions in salaries
and benefits payable to the owners of the businesses acquired which were agreed
to in connection with the Acquisitions and the related income tax effects of
these adjustments, and (ii) the consummation of this offering at the Assumed
Offering Price and the application of the net proceeds therefrom. The pro forma
financial information is not necessarily indicative of results the Company would
have obtained had these events actually then occurred or the Company's future
results and should be read in conjunction with the other financial statements
and notes thereto included elsewhere in this Prospectus. See the unaudited Pro
Forma Financial Statements and the notes thereto included elsewhere in this
Prospectus.
<TABLE>
<CAPTION>
THREE MONTHS ENDED
YEARS ENDED DECEMBER 31, MARCH 31,
----------------------------------------------------- --------------------
1993 1994 1995 1996 1997 1997 1998
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS
DATA -- HISTORICAL:
Revenues............................. $ 3,799 $ 8,039 $ 11,127 $ 14,285 $ 38,159 $ 7,862 $ 12,343
Operating expenses................... 1,822 7,422 9,776 11,369 21,353 4,675 7,011
Depreciation and amortization........ 104 136 159 424 2,990 633 987
Selling, general and administrative
expenses........................... 1,813 643 863 1,437 5,750 690 1,467
--------- --------- --------- --------- --------- --------- ---------
Income (loss) from operations........ 60 (162) 329 1,055 8,066 1,864 2,878
Interest expense, net................ 112 110 159 397 1,734 509 346
Other (income) expense, net.......... 13 (1) 18 (88) 41 (28) (5)
--------- --------- --------- --------- --------- --------- ---------
Income (loss) before provision for
income taxes....................... (65) (271) 152 746 6,291 1,383 2,537
Provision for income taxes........... -- (89) 49 255 2,416 504 1,002
--------- --------- --------- --------- --------- --------- ---------
Net income (loss).................... $ (65) $ (182) $ 103 $ 491 $ 3,875 $ 879 $ 1,535
========= ========= ========= ========= ========= ========= =========
Basic earnings (loss) per common
share.............................. $ (0.04) $ (0.11) $ 0.06 $ 0.23 $ 0.65 $ 0.17 $ 0.21
========= ========= ========= ========= ========= ========= =========
Diluted earnings (loss) per common
and common equivalent share........ $ (0.04) $ (0.11) $ 0.06 $ 0.23 $ 0.55 $ 0.16 $ 0.18
========= ========= ========= ========= ========= ========= =========
Weighted average common shares
outstanding........................ 1,700 1,700 1,700 2,117 5,937 5,239 7,439
Weighted average common and common
equivalent shares outstanding...... 1,700 1,700 1,700 2,139 7,078 5,418 8,737
EBITDA(1)............................ $ 164 $ (26) $ 488 $ 1,479 $ 11,056 $ 2,497 $ 3,865
</TABLE>
(TABLE CONTINUED ON FOLLOWING PAGE)
16
<PAGE>
THREE MONTHS ENDED
YEAR ENDED MARCH 31,
DECEMBER 31, --------------------
1997 1997 1998
(IN THOUSANDS, EXCEPT PER SHARE
DATA)
STATEMENT OF OPERATIONS DATA -- PRO
FORMA AS ADJUSTED(2):
Revenues............................. $149,983 $ 34,499 $ 41,678
Operating expenses................... 101,868 24,424 27,736
Depreciation and amortization........ 8,969 1,863 2,550
Selling, general and administrative
expenses........................... 18,186 3,487 4,702
------------ --------- ---------
Income from operations............... 20,960 4,725 6,690
Interest expense, net................ 1,524 447 195
Other expense, net................... 154 91 100
------------ --------- ---------
Income before provision for income
taxes.............................. 19,282 4,187 6,395
Provision for income taxes........... 7,905 1,716 2,622
------------ --------- ---------
Net income........................... $ 11,377 $ 2,471 $ 3,773
============ ========= =========
Basic earnings per common share...... $ 0.93 $ 0.20 $ 0.31
============ ========= =========
Diluted earnings per common and
common equivalent share............ $ 0.85 $ 0.19 $ 0.28
============ ========= =========
Weighted average common shares
outstanding(3)..................... 12,203 12,200 12,262
Weighted average common and common
equivalent shares outstanding(4)... 13,395 13,233 13,560
EBITDA(1)............................ $ 29,929 $ 6,588 $ 9,240
<TABLE>
<CAPTION>
MARCH 31, 1998,
HISTORICAL DECEMBER 31, ----------------------
----------------------------------------------------- PRO
1993 1994 1995 1996 1997 HISTORICAL FORMA(5)
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents............ $ 51 $ 25 $ 39 $ 5,604 $ 2,203 $ 5,733 $ 7,476
Working capital (deficit)............ (108) (301) (576) 223 2,122 5,478 10,277
Property, plant and equipment, net... 867 911 1,680 34,582 39,110 40,501 76,736
Total assets......................... 1,277 1,410 3,007 46,851 55,016 70,240 168,412
Long-term obligations, net of current
maturities......................... 1,077 1,191 1,596 23,668 16,644 25,346 90,816
Stockholders' equity................. (266) (455) (358) 1,538 20,906 25,424 46,265
</TABLE>
PRO FORMA
AS ADJUSTED(6)
BALANCE SHEET DATA:
Cash and cash equivalents............ $ 7,476
Working capital (deficit)............ 10,277
Property, plant and equipment, net... 76,736
Total assets......................... 168,412
Long-term obligations, net of current
maturities......................... 3,457
Stockholders' equity................. 133,624
- ------------------------------
(1) EBITDA represents earnings presented above before interest, other (income)
expense, income taxes, depreciation and amortization expense. EBITDA is not
a measure of cash flow, operating results or liquidity, as determined in
accordance with generally accepted accounting principles, and differs from
net cash provided by operating activities as determined under generally
accepted accounting principles in that EBITDA excludes interest expense and
does not reflect the effects of changes in working capital or deferred tax
items. EBITDA should not be considered in isolation or as an alternative to,
or more meaningful than, net income or cash flows provided by operations, as
determined in accordance with generally accepted accounting principles. The
EBITDA amounts shown for the Company may not be comparable to EBITDA as
reported by or for other companies because the Company's EBITDA may not be
calculated on the same basis as EBITDA as reported by or for other
companies.
(2) Pro forma for the effect of the Acquisitions as if each had occurred on
January 1, 1997 and as adjusted for the sale of 3,750,000 shares of Common
Stock offered by the Company hereby at the Assumed Offering Price and the
application of the net proceeds therefrom. See "Use of Proceeds".
(3) The pro forma as adjusted weighted average common shares outstanding
includes: (i) 5,937,435 shares, 5,238,875 shares and 7,438,910 shares
outstanding for the year ended December 31, 1997 and for the three months
ended March 31, 1997 and 1998, respectively, (ii) 3,750,000 shares issued in
connection with this offering, and (iii) 2,515,124 shares, 3,211,085 shares
and 1,073,578 shares for the year ended December 31, 1997 and for the three
months ended March 31, 1997 and 1998, respectively, issued in connection
with the Acquisitions and the Company's IPO as if each had occurred on
January 1, 1997.
(4) The pro forma as adjusted weighted average common and common equivalent
shares outstanding includes the weighted average common shares outstanding
and 1,192,531 shares, 1,032,585 shares and 1,298,072 shares for the year
ended December 31, 1997 and for the three months ended March 31, 1997 and
1998, respectively, representing the effect of outstanding warrants and
options to purchase Common Stock, using the treasury stock method. Excludes
281,250 shares issuable pursuant to options, the vesting of which are
contingent upon the successful completion of certain corporate development
activities.
(5) Pro forma for the effect of the Acquisitions that were or will be
consummated subsequent to March 31, 1998 as if each had occurred on March
31, 1998.
(6) Pro forma for the effect of the Acquisitions that were or will be
consummated subsequent to March 31, 1998 as if each had occurred on March
31, 1998 and as adjusted to reflect the sale of 3,750,000 shares of Common
Stock offered by the Company hereby at the Assumed Offering Price and the
application of the net proceeds therefrom. See "Use of Proceeds" and
"Capitalization."
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
THE FOLLOWING DISCUSSION SHOULD BE READ IN CONJUNCTION WITH THE COMPANY'S
CONSOLIDATED FINANCIAL STATEMENTS AND THE RELATED NOTES THERETO, THE PRO FORMA
FINANCIAL STATEMENTS AND THE RELATED NOTES THERETO AND THE OTHER FINANCIAL
INFORMATION APPEARING ELSEWHERE IN THIS PROSPECTUS.
OVERVIEW
The Company collects, processes, recovers and disposes of liquid waste
through a number of subsidiaries that are organized into two divisions. The
Industrial Wastewater Division collects, processes and disposes of liquid waste
and whenever feasible recovers saleable by-products from these waste streams.
The Company formed its Industrial Wastewater Division when it acquired two
companies in June 1997 in transactions that were accounted for under the
pooling-of-interests method of accounting. The Oilfield Waste Division processes
and disposes of waste generated in oil and gas exploration and production. It
was formed in December 1996 when the Company purchased its Louisiana and Texas
landfarms from Sanifill, a wholly-owned subsidiary of USA Waste. Since the
Company's IPO in August 1997, the Industrial Wastewater Division has acquired 19
businesses and the Oilfield Waste Division has acquired one business.
Due to the number of acquisitions completed by the Company during the
fourth quarter of 1997 and the first five months of 1998, management's
discussion addresses both historical and pro forma results of operations and
financial condition. The pro forma discussion addresses the results of
operations of the Company for the quarters ended March 31, 1997 and 1998 and the
year ended December 31, 1997, with certain pro forma adjustments as described in
the notes to the Pro Forma Financial Statements. The Pro Forma Financial
Statements (i) assume that the Acquisitions were each completed on January 1,
1997, (ii) include certain adjustments to the historical financial statements of
the businesses acquired, including adjusting depreciation and amortization
expenses to reflect purchase price allocations, recording interest expense to
reflect debt issued in connection with the Acquisitions, certain reductions in
salaries and benefits payable to the owners of the businesses acquired which
were agreed to in connection with the Acquisitions and the related income tax
effects of these adjustments, and (iii) are adjusted for the consummation of
this offering at the Assumed Offering Price and the application of the net
proceeds therefrom as if these events occurred on January 1, 1997. The pro forma
results of operations are not necessarily indicative of the results the Company
would have obtained had the acquired businesses been acquired on that date or of
the Company's future results. The historical discussion addresses the actual
results of operations and financial condition of the Company as shown in its
Consolidated Financial Statements for the quarters ended March 31, 1997 and 1998
and the years ended December 31, 1995, 1996 and 1997. Such statements reflect,
for all periods presented, the historical results of operations of businesses
acquired by the Company in transactions that were accounted for under the
pooling-of-interests method of accounting and the results of operations of other
acquired businesses from their dates of acquisition.
The Industrial Wastewater Division generated $123.0 million, or 82.0%, of
the Company's 1997 pro forma revenues. This Division derives revenues from two
principal sources: tipping and collection fees received for processing and
disposing of waste and revenue obtained from the sale of by-products, including
fats, oils, feed proteins, industrial and fuel grade ethanol, solvents,
aluminum, glass, plastic and cardboard recovered from waste streams. Some of the
Company's by-product sales involve the brokering of industrial and fuel grade
ethanol produced by third parties in order to meet its customers' volume and
quality requirements. Tipping and collection fees charged to customers vary per
gallon by waste stream according to the constituents of the waste, expenses
associated with processing the waste and competitive factors. By-products are
commodities and their prices fluctuate based on market conditions. The Company
anticipates that revenues from tipping and collection fees, which have higher
margins than by-product sales, will increase at a faster rate than revenues from
sales of by-products and brokering of ethanol. The Company anticipates that the
Industrial Wastewater Division will represent a growing share of the Company's
business because of its projected internal growth and future acquisitions.
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The Oilfield Waste Division generated $27.0 million, or 18.0%, of the
Company's 1997 pro forma revenues. This Division derives revenues from fees
charged to customers for processing and disposing of oil and gas exploration and
production waste. These fees are based on the composition of the waste and
currently range from $0.40 per barrel for saltwater to $6.75 to $10.75 per
barrel for oil-based drilling fluids, depending upon the makeup of the waste.
Accordingly, the Company believes that total 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 to process the waste in order to
match revenues with their related costs. As processing occurs, generally over
nine to twelve months, the reserve is depleted as expenses are incurred. The
Company's operating margins in the Oilfield Waste Division are typically higher
than in the Industrial Wastewater Division.
In connection with the Campbell Wells Acquisition, the Company acquired a
long-term disposal agreement (the "Disposal Agreement") with Newpark for the
processing and disposal of oilfield waste generated offshore in the Gulf Coast
region. During the twelve month period ending December 31, 1997, Newpark
delivered approximately 1,430,000 barrels of oilfield waste, excluding
saltwater, to the Company's landfarms. These deliveries accounted for
approximately $7.9 million, or 5.3%, of the Company's 1997 pro forma revenues.
The price paid by Newpark under the Disposal Agreement is currently $5.50 per
barrel, adjusted semi-annually beginning June 30, 1998, with a price floor of
$5.50 per barrel. Although the contract price is lower than the current market
price for comparable waste, Newpark's delivery obligations under the Disposal
Agreement allow the Company to eliminate virtually all marketing and transfer
expenses on waste delivered under the Disposal Agreement and, consequently, the
Company believes that operating margins on waste volume from Newpark and other
customers are comparable. The Company expects a disparity between the contract
price and market price to continue for the duration of the Disposal Agreement.
While there is no absolute floor on the minimum delivery requirements under the
Disposal Agreement, Newpark is contractually obligated to deliver on an annual
basis to the Company one-third of the barrels of oilfield waste (excluding
saltwater) that Newpark receives for processing and disposal in Louisiana,
Texas, Mississippi, Alabama and the Gulf of Mexico; however, in no event is
Newpark obligated to deliver more than 1,850,000 barrels per contract year. See
"Certain Transactions -- Campbell Wells Acquisition."
Operating expenses include compensation and overhead related to operations
workers, supplies and other raw materials, transportation charges, disposal fees
paid to third parties, real estate lease payments and energy and insurance costs
applicable to waste processing and disposal operations.
Selling, general and administrative expenses include management, clerical
and administrative compensation and overhead relating to the Company's corporate
offices and each of its operating sites, as well as professional services and
costs.
Depreciation and amortization expenses relate to the Company's landfarms
and other depreciable or amortizable assets. Landfarms, which constitute
approximately 38% of the Company's pro forma net property, plant and equipment,
are amortized over 25 years. Other depreciable or amortizable assets are
expensed over periods ranging from three to 40 years. Amortization expenses
relating to acquisitions have not been significant in the past, but will
increase as a result of amortization of goodwill recorded in connection with the
Acquisitions and future acquisitions.
RESULTS OF OPERATIONS
PRO FORMA AS ADJUSTED RESULTS FOR THE QUARTERS ENDED MARCH 31, 1998 AND 1997
REVENUES. Pro forma revenues for the quarter ended March 31, 1998
increased $7.2 million, or 20.8%, from $34.5 million for the quarter ended March
31, 1997 to $41.7 million for the quarter ended March 31, 1998. The Industrial
Wastewater Division contributed $28.9 million, or 83.8%, of first quarter 1997
pro forma revenues and $33.8 million, or 81.1%, of first quarter 1998 pro forma
revenues. Tipping and collection fees generated $17.4 million, or 60.3%, and
$24.0 million, or 71.0%, of the Industrial Wastewater Division's pro forma
revenues for the first quarters of 1997 and 1998, respectively. By-product
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sales generated the remaining $11.5 million, or 39.7%, and $9.8 million, or
29.0%, of the Industrial Wastewater Division's pro forma revenues for the first
quarters of 1997 and 1998, respectively. Brokered sales of ethanol included in
by-product sales were $6.3 million and $4.3 million for the first quarters of
1997 and 1998, respectively. The Oilfield Waste Division contributed $5.6
million, or 16.2%, of first quarter 1997 pro forma revenues and $7.9 million, or
18.9%, of first quarter 1998 pro forma revenues.
Pro forma revenues of the Industrial Wastewater Division increased $4.9
million, or 17.0%, from $28.9 million for the quarter ended March 31, 1997 to
$33.8 million for the quarter ended March 31, 1998. This increase was
attributable to additional volumes of waste processed and an increase in the
average tipping fee, which was partially offset by a decrease in by-product
sales resulting primarily from lower market prices for ethanol. The Oilfield
Waste Division's pro forma revenues increased $2.3 million, or 41.1%, from $5.6
million for the quarter ended March 31, 1997 to $7.9 million for the quarter
ended March 31, 1998 due to additional revenues resulting from a nonrecurring
remediation project in Michigan, an increase in the volume of waste processed
resulting from increased drilling activity in the Gulf Coast region and an
increase in tipping fee rates which became effective in the third quarter of
1997.
OPERATING EXPENSES. Pro forma operating expenses increased $3.3 million,
or 13.6%, from $24.4 million for the quarter ended March 31, 1997 to $27.7
million for the quarter ended March 31, 1998. As a percentage of pro forma
revenues, pro forma operating expenses decreased from 70.8% for first quarter
1997 to 66.5% for first quarter 1998. This improvement was due primarily to an
increase in tipping and collection revenues, which have higher margins than
by-product sales, in the 1998 period, as well as increased efficiencies
resulting from higher volumes and operational enhancements.
DEPRECIATION AND AMORTIZATION. Pro forma depreciation and amortization
expenses increased $687,000, or 36.9%, from $1.9 million for the quarter ended
March 31, 1997 to $2.6 million for the quarter ended March 31, 1998, primarily
as a result of an increase in capital expenditures. As a percentage of pro forma
revenues, pro forma depreciation and amortization expenses increased from 5.4%
in first quarter 1997 to 6.1% in first quarter 1998.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Pro forma selling, general
and administrative expenses increased $1.2 million, or 34.8%, from $3.5 million
for the quarter ended March 31, 1997 to $4.7 million for the quarter ended March
31, 1998. As a percentage of pro forma revenues, pro forma selling, general and
administrative expenses increased from 10.1% for the first quarter of 1997 to
11.3% for the first quarter of 1998. The increase in such expenses was primarily
due to higher personnel costs and professional fees associated with being a
public company and the establishment of the Company's corporate offices in
Houston in May of 1997.
INTEREST AND OTHER EXPENSES. Pro forma net interest and other expenses
decreased by $243,000, or 45.2%, from $538,000 for the quarter ended March 31,
1997 to $295,000 for the quarter ended March 31, 1998. This decrease was
attributable to the use of free cash from operations to reduce debt.
INCOME TAXES. The pro forma provision for income taxes increased by
$906,000, or 52.8%, from $1.7 million for the quarter ended March 31, 1997 to
$2.6 million for the quarter ended March 31, 1998 as a result of increased
taxable income. The assumed effective tax rate for both periods was 41.0%.
PRO FORMA AS ADJUSTED RESULTS FOR THE YEAR ENDED DECEMBER 31, 1997
REVENUES. Pro forma revenues for 1997 were $150.0 million. The Industrial
Wastewater Division generated $123.0 million, or 82.0%, of such pro forma
revenues. Tipping and collection fees contributed $81.3 million, or 66.1%, of
the Industrial Wastewater Division's 1997 pro forma revenues and by-product
sales contributed the remaining $41.7 million, or 33.9%, of the Industrial
Wastewater Division's 1997 pro forma revenues. Brokered sales of ethanol
constituted $18.5 million of the by-product sales of the Industrial Wastewater
Division. The Oilfield Waste Division generated $27.0 million, or 18.0%, of 1997
pro forma revenues.
OPERATING EXPENSES. Pro forma operating expenses for 1997 were $101.9
million or 67.9% of pro forma revenues.
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DEPRECIATION AND AMORTIZATION. Pro forma depreciation and amortization
expenses for 1997 were $9.0 million, which represented 6.0% of pro forma
revenues.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Pro forma selling, general
and administrative expenses for 1997 were $18.2 million. As a percentage of pro
forma revenues, pro forma selling, general and administrative expenses were
12.1%. Included in the $18.2 million were $462,000 of pooling expenses.
Excluding this one-time charge, pro forma selling, general and administrative
expenses as a percentage of pro forma revenues would have been 11.8%.
INTEREST AND OTHER EXPENSES. Pro forma net interest and other expenses for
1997 were $1.7 million.
INCOME TAXES. The pro forma provision for income taxes for 1997 was $7.9
million. The assumed effective tax rate for the period was 41.0%.
HISTORICAL RESULTS FOR THE QUARTERS ENDED MARCH 31, 1998 AND 1997
REVENUES. Revenues for the quarter ended March 31, 1998 increased $4.5
million, or 57.0%, from $7.9 million for the quarter ended March 31, 1997 to
$12.3 million for the quarter ended March 31, 1998. The Industrial Wastewater
Division contributed $3.6 million, or 45.6%, of first quarter 1997 historical
revenues and $7.3 million, or 59.3%, of first quarter 1998 historical revenues.
Tipping and collection fees generated $824,000, or 22.2%, and $4.3 million, or
58.9%, of the Industrial Wastewater Division's historical revenues for the first
quarters of 1997 and 1998, respectively. By-product sales generated the
remaining $2.8 million, or 77.8%, and $3.0 million, or 41.1%, of the Industrial
Wastewater Division's historical revenues for the first quarters of 1997 and
1998, respectively. The Oilfield Waste Division contributed $4.3 million, or
54.4%, of first quarter 1997 historical revenues and $5.0 million, or 40.7%, of
first quarter 1998 historical revenues. Businesses acquired since the Company's
IPO in August 1997 accounted for $2.9 million, or 23.6%, of historical revenues
for the first quarter of 1998.
The revenues of the Industrial Wastewater Division increased $3.7 million,
or 102.8%, from $3.6 million for the quarter ended March 31, 1997 to $7.3
million for the quarter ended March 31, 1998 due to acquisitions completed
during the fourth quarter of 1997 and the first quarter of 1998 which were
accounted for using the purchase method of accounting and an increase in the
volume of waste processed resulting primarily from the enactment of state-wide
"full-pump" regulations in Texas. The Oilfield Waste Division's revenues
increased $759,000, or 17.7%, from $4.3 million for the quarter ended March 31,
1997 to $5.0 million for the quarter ended March 31, 1998 due to an increase in
the volume of waste processed resulting from increased drilling activity in the
Gulf Coast region and an increase in tipping fees which became effective in the
third quarter of 1997.
OPERATING EXPENSES. Operating expenses increased $2.3 million, or 50.0%,
from $4.7 million for the quarter ended March 31, 1997 to $7.0 million for the
quarter ended March 31, 1998. As a percentage of revenues, operating expenses
decreased from 59.5% in the first quarter of 1997 to 56.8% in the first quarter
of 1998. This improvement was due primarily to an increase in tipping and
collection revenues, which have higher margins than by-product sales, in the
1998 period, as well as increased efficiencies resulting from higher volumes and
operational enhancements.
DEPRECIATION AND AMORTIZATION. Depreciation and amortization expenses
increased $354,000, or 55.9%, from $633,000 for the quarter ended March 31, 1997
to $987,000 for the quarter ended March 31, 1998. As a percentage of revenues,
depreciation and amortization expenses remained relatively constant at a rate of
8.1% for the first quarter of 1997 and 8.0% for the first quarter of 1998.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and
administrative expenses increased $777,000, or 112.6%, from $690,000 for the
quarter ended March 31, 1997 to $1.5 million for the quarter ended March 31,
1998. As a percentage of revenues, selling, general and administrative expenses
increased from 8.8% for the first quarter of 1997 to 11.9% for the first quarter
of 1998. This increase was primarily due to higher personnel costs and
professional fees associated with being a public company and the establishment
of the Company's corporate offices in Houston in May of 1997.
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INTEREST AND OTHER EXPENSES. Net interest and other expenses decreased
$140,000, or 29.1%, from $481,000 for the quarter ended March 31, 1997 to
$341,000 for the quarter ended March 31, 1998. This decrease resulted primarily
from the use of a portion of the proceeds from the Company's IPO in August 1997
to reduce debt.
INCOME TAXES. The provision for income taxes increased $498,000, or 98.8%,
from $504,000 for the quarter ended March 31, 1997 to $1.0 million for the
quarter ended March 31, 1998 as a result of increased taxable income. The
effective tax rate for the period ended March 31, 1997 was 36.4% compared to a
39.5% rate for the period ended March 31, 1998.
HISTORICAL RESULTS FOR THE YEARS ENDED DECEMBER 31, 1997 AND 1996
REVENUES. Revenues increased $23.9 million, or 167.1%, from $14.3 million
in 1996 to $38.2 million in 1997. The Industrial Wastewater Division contributed
$13.5 million, or 94.4%, of 1996 revenues and $18.2 million, or 47.6%, of 1997
revenues. By-product sales generated $11.4 million, or 84.4%, of the Industrial
Wastewater Division's revenues in 1996 and $12.5 million, or 68.7%, in 1997.
Tipping and collection fees generated $2.1 million, or 15.6%, of the Industrial
Wastewater Division's revenues in 1996 and $5.7 million, or 31.3%, in 1997. The
Oilfield Waste Division contributed $826,000, or 5.6%, of revenues in 1996 and
$20.0 million, or 52.4%, of revenues in 1997. The Company purchased the Oilfield
Waste Division under the purchase method of accounting in December 1996.
Revenues of the Industrial Wastewater Division increased $4.7 million, or
34.8%, from $13.5 million in 1996 to $18.2 million in 1997. This increase was
attributable to an 180.1% increase in volume of waste processed and an 8.8%
increase in by-product sales. The Oilfield Waste Division's revenues increased
$19.2 million from $826,000 in 1996 to $20.0 million in 1997 as a result of the
inclusion of the Oilfield Waste Division for all of 1997 as compared to less
than one month in 1996.
OPERATING EXPENSES. Operating expenses increased $10.0 million, or 87.8%,
from $11.4 million in 1996 to $21.4 million in 1997, primarily due to the
inclusion of the Oilfield Waste Division for all of 1997 as compared to less
than one month in 1996. As a percentage of revenues, operating expenses
decreased from 79.6% for 1996 to 56.0% for 1997. This improvement reflects
higher operating margins derived by the Oilfield Waste Division as opposed to
the Industrial Wastewater Division.
DEPRECIATION AND AMORTIZATION. Depreciation and amortization expenses
increased $2.6 million, or 605.2%, from $424,000 in 1996 to $3.0 million in
1997. As a percentage of revenues, depreciation and amortization expenses
increased from 3.0% in 1996 to 7.8% in 1997. The increase in depreciation and
amortization expenses resulted primarily from the acquisition of the Oilfield
Waste Division.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and
administrative expenses increased $4.4 million, or 300.1%, from $1.4 million in
1996 to $5.8 million in 1997. The majority of this increase related to the
inclusion of the Oilfield Waste Division for all of 1997 as compared to less
than one month in 1996. Selling, general and administrative expenses increased
from 10.1% of 1996 revenues to 15.1% of 1997 revenues, primarily due to higher
personnel costs and professional fees associated with being a public company and
establishing the Company's corporate offices in Houston in May 1997.
INTEREST AND OTHER EXPENSES. Net interest and other expenses increased
$1.5 million, or 474.4%, from $309,000 in 1996 to $1.8 million in 1997. Net
interest and other expenses increased primarily as a result of interest expense
related to debt incurred in acquiring the Oilfield Waste Division in 1996 and
other businesses in 1997.
INCOME TAXES. The provision for income taxes increased $2.2 million, or
847.5%, from $255,000 in 1996 to $2.4 million in 1997. This increase resulted
primarily from additional taxable income. The effective tax rate for 1996 was
34.2% of income and the effective tax rate for 1997 was 38.4% of income.
HISTORICAL RESULTS FOR THE YEARS ENDED DECEMBER 31, 1996 AND 1995
REVENUES. All revenues in 1995 and 94.4% of revenues in 1996 were
generated by the Industrial Wastewater Division. Revenues increased $3.2
million, or 28.4%, from $11.1 million in 1995 to $14.3 million in 1996.
By-product sales contributed $9.8 million, or 88.3%, of the Company's revenues
in 1995
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and $11.4 million, or 79.7%, of the Company's revenues in 1996. Tipping and
collection fees received by the Industrial Wastewater Division contributed $1.3
million, or 11.7%, of the Company's revenues in 1995 and $2.1 million, or 14.7%,
of the Company's revenues in 1996. The Oilfield Waste Division contributed
$826,000, or 5.6%, of revenues in 1996.
By-product sales increased by $1.6 million, or 16.3%, from $9.8 million in
1995 to $11.4 million in 1996. Tipping and collection fees increased by
$750,000, or 56.3%, from $1.3 million in 1995 to $2.1 million in 1996. The
increase in revenues from the sale of by-products was due to an increase in
volumes and an increase in the average price per pound. The increase in the
volume of tipping and collection fees resulted primarily from growth of the
Houston market. The increase in the average price per pound was primarily
attributable to revenues obtained in the Company's acquisition of a collection
business in March 1996.
OPERATING EXPENSES. Operating expenses increased $1.6 million, or 16.3%,
from $9.8 million in 1995 to $11.4 million in 1996. As a percentage of revenues,
operating expenses decreased from 87.9% in 1995 to 79.6% in 1996. This
improvement was attributable to increased sales of by-products, lower per unit
processing costs, lower per unit costs of raw materials and increased revenues
from processing operations, offset in part by increased personnel expenses.
DEPRECIATION AND AMORTIZATION. Depreciation and amortization expenses
increased $265,000, or 166.7%, from $159,000 in 1995 to $424,000 in 1996. As a
percentage of revenues, depreciation and amortization expenses increased from
1.4% in 1995 to 3.0% in 1996. This increase was attributable to acquisitions of
additional depreciable assets during 1996.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and
administrative expenses increased $574,000, or 66.5%, from $863,000 in 1995 to
$1.4 million in 1996. As a percentage of revenues, selling, general and
administrative expenses increased from 7.8% in 1995 to 10.1% in 1996. The
majority of the increase relates to the addition of the Oilfield Waste Division
at the end of 1996.
INTEREST AND OTHER EXPENSES. Net interest and other expenses increased
$132,000, or 74.6%, from $177,000 in 1995 to $309,000 in 1996. Net interest and
other expenses increased primarily as a result of interest expense related to
the acquisition of the Oilfield Waste Division.
INCOME TAXES. The provision for income taxes increased by $206,000, or
420.4%, from $49,000 in 1995 to $255,000 in 1996. The effective tax rate for
1995 was 32.2% and the effective tax rate for 1996 was 34.2%.
LIQUIDITY AND CAPITAL RESOURCES
The Company's net working capital increased from $2.1 million at December
31, 1997 to $5.5 million at March 31, 1998. Improvement in the working capital
position was attributable primarily to an increase in current assets resulting
from borrowings at the end of the first quarter under the Company's Credit
Facility to fund acquisitions completed in the second quarter of 1998.
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. At March 31,
1998, approximately $1.3 million of principal payments on debt obligations were
payable during the next twelve months. Capital expenditures for the last three
quarters of 1998 are budgeted at approximately $11.0 million. Of this amount,
approximately $1.8 million is budgeted to be invested in the Oilfield Waste
Division on equipment replacements and landfarm expansions. The remaining amount
is budgeted to be invested in the Industrial Wastewater Division for plant
expansions, equipment and vehicle upgrades.
At March 31, 1998, the Company had established a $3.2 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.
Applicable regulatory agencies require the Company to post financial assurance
with the agencies to assure that all
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waste will be treated and the facilities closed appropriately. The Company has
in place a total of $4.0 million of financial assurance in the form of letters
of credit and bonds.
The Company has a $100.0 million Credit Facility with a group of banks
under which the Company may borrow to fund working capital requirements and
acquisitions. Amounts outstanding under the Credit Facility are secured by,
among other things, a lien on all or substantially all of the Company's assets.
The Credit Facility prohibits the payment of dividends and requires the Company
to comply with certain financial covenants. The Credit Facility also requires
the banks' consent for any acquisition by the Company of all or substantially
all of the assets or stock of any business. Upon completion of this offering,
the banks' consent will be required for acquisitions in which either (i) the
aggregate consideration to be paid by the Company (including any debt assumed or
issued) exceeds $15 million, or (ii) the aggregate consideration to be paid in
cash by the Company exceeds $10 million. The Company does not believe that these
restrictions will have a material adverse effect on the Company's ability to
fulfill its current acquisition program. The debt outstanding under the Credit
Facility may be accelerated at the option of the lenders in the event that,
among other things, a change in control of the Company occurs or Michael P.
Lawlor, W. Gregory Orr or Earl J. Blackwell ceases to serve as an executive
officer of the Company and is not replaced within sixty days by an individual
reasonably satisfactory to the lenders. After the consummation of this offering
and the application of the net proceeds therefrom, the Company anticipates that
it will have no borrowings outstanding under the Credit Facility. Amounts
currently outstanding under the Credit Facility bear interest at approximately
7.9%, which rate is anticipated to decrease pursuant to the terms of the Credit
Facility to approximately 6.9% after the consummation of this offering. See
"Use of Proceeds."
The Company's capital resources consist of cash reserves, cash generated
from operations and funds available under the Credit Facility. The Company
expects that these resources will be sufficient to fund continuing operations
for at least the next twelve months. In addition to capital required for its
ongoing operations, the Company will require additional capital to pursue its
acquisition program. The Company anticipates that future acquisitions will be
made using a combination of Common Stock and cash, much of which is expected to
be derived from borrowings under the Credit Facility. In addition, the Company
may seek to raise additional equity capital for all or a substantial part of the
consideration to be paid for future acquisitions or to reduce its debt. 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.
SEASONALITY
It is expected that the operations of the Oilfield Waste Division will
experience certain seasonal patterns consistent with the oil and gas exploration
and production activity in the Gulf Coast. Generally, the volume of oilfield
waste delivered to the Oilfield Waste Division has been lowest in the first
quarter of each calendar year. Prices for oil and natural gas are expected to
continue to be volatile and affect demand for the Company's oilfield waste
services. Certain of the Industrial Wastewater Division's processing facilities
in the Northeast and Midwest may be affected by adverse weather conditions.
YEAR 2000 COMPLIANCE
Many existing computer programs use only two digits to identify a year in
the date field. These programs were designed and developed without considering
the impact of the upcoming change in the century. If not corrected, such
computer applications could fail or create erroneous results by or at the Year
2000. The Company has determined that its computer programs are Year 2000
compliant. When the Company completes an acquisition, it replaces the acquired
company's systems with its own management reporting and control systems.
Accordingly, the Company does not believe that its acquisition program will be
adversely affected by Year 2000 compliance issues.
24
<PAGE>
BUSINESS
GENERAL
The Company is a rapidly growing provider of integrated liquid waste
management services, including collection, processing, recovery and disposal
services. The Company's primary focus of operations is industrial and commercial
wastewater treatment, although the Company also collects, processes and disposes
of oilfield waste. The Company operates 34 processing facilities located in
eight states and serves over 20,000 customers. The services provided by the
Company to any particular customer vary depending on the type of liquid waste
generated, local regulations and the treatment capabilities of local POTWs.
The Company has adopted an acquisition-based growth strategy and intends to
continue its expansion, generally through (i) acquiring liquid waste processing
facilities; (ii) securing captive waste streams for its facilities by acquiring
collection companies and by entering into long-term contracts directly with
customers or collection companies; and (iii) integrating acquired companies into
the Company's operations to achieve operating efficiencies and economies of
scale. The Company believes that the liquid waste industry is highly fragmented
and that substantial acquisition opportunities exist throughout North America.
Since the Company's IPO in August 1997, the Company has acquired 20 businesses,
which collectively had 1997 pro forma revenues of approximately $111.8 million.
The Company provides liquid waste management services through a number of
subsidiaries which are organized into two divisions. The Industrial Wastewater
Division collects, processes and disposes of liquid waste (such as industrial
wastewater, grease and grit trap waste, bulk liquids and unsaleable beverages,
and certain hazardous wastes) and recovers saleable by-products (such as fats,
oils, feed proteins, ethanol and solvents) from certain of the waste streams.
Typically, the Company uses a variety of physical, chemical, thermal and
biological techniques to break down the liquid waste into constituent
components. Water extracted from the liquid waste is pretreated and then
discharged into a POTW and solid materials are dried and disposed of in a solid
waste landfill. The Oilfield Waste Division collects, processes and disposes of
waste generated in oil and gas exploration and production. The Company's
Industrial Wastewater Division generated 82.0% of the Company's 1997 pro forma
revenues of $150.0 million and the Oilfield Waste Division generated the
remaining 18.0% of such pro forma revenues.
The Company's executive offices are located at 411 N. Sam Houston Parkway
East, Suite 400, Houston, Texas 77060-3545, and its telephone number is (281)
272-4500.
INDUSTRY BACKGROUND
The wastewater treatment market is generally divided into two segments:
industrial and commercial wastewater treatment, and municipal wastewater
treatment. Industrial and commercial companies produce various types of
wastewater (including hydrocarbon contaminated water, landfill leachate,
unsaleable beverages and grease and grit trap waste) that must be treated prior
to disposal in POTWs or for which municipalities charge higher rates to treat.
Similarly, oil and gas exploration and production companies produce liquid waste
that must be disposed of in accordance with federal and state regulations.
Municipalities utilize or contract with third parties for the utilization of
water treatment technology to treat municipal wastewater.
According to The McIlvaine Company, the global water and wastewater
treatment market was approximately $335 billion in 1995 and is expected to
increase to over $500 billion in 2000, reflecting a projected compound annual
growth rate of approximately 8.7%. The McIlvaine Company further estimated that,
in 1995, the worldwide costs of treating municipal wastewater were $90 billion
and the worldwide costs of treating industrial wastewater were $25 billion. The
Company believes that the liquid waste industry is comprised of thousands of
relatively small owner-operated businesses, presenting significant opportunities
for consolidation.
In the United States, the growth in demand for wastewater treatment
services has been driven by many factors, including (i) municipalities refusing
to accept certain industrial wastewaters due to limited treatment capabilities
and a lack of the resources needed to expand or modernize their POTWs,
25
<PAGE>
(ii) industrial and commercial businesses avoiding POTW surcharges by using
third parties to process and dispose of their wastewater, (iii) industrial and
commercial businesses outsourcing their wastewater treatment needs, (iv)
continued industrial and commercial expansion, and (v) increasingly strict
regulations governing the disposal of wastewater, as well as more stringent
enforcement of such regulations.
REJECTION OF CERTAIN WASTEWATERS BY POTW. In North America, governmental
regulation and enforcement have established strict standards for potable water
and the discharge of pollutants in wastewater. Municipalities have spent
billions of dollars building water purification and wastewater treatment
facilities. Historically, the municipalities have also managed these facilities.
However, many of these municipalities are facing increasing budgetary
constraints and damage to their wastewater treatment facilities caused by grease
and other liquid wastes and, thus, are seeking alternatives to maintaining and
upgrading their aging facilities. In addition to outsourcing the operation, or
transferring ownership, of their facilities, many municipalities have begun
refusing to accept certain liquid waste streams, thereby increasing the demand
for wastewater treatment services provided by the private sector. For example,
the Dallas, Houston and San Antonio POTWs do not accept grease or grit trap
waste. In addition, in late 1997, the Houston POTWs ceased accepting septage
generated outside the Houston city limits.
ECONOMIC BENEFIT OF PRETREATING CERTAIN WASTEWATERS. For years, generators
of industrial wastewater and other liquid waste have discharged the waste
directly into POTWs. However, the difficulties encountered by POTWs in
collecting and treating certain wastewaters have caused many municipalities to
increase the rates charged for accepting these wastewaters. With respect to
certain wastewaters, it is more economical for the generator to deliver the
waste to liquid waste service providers such as the Company than to discharge
the waste directly into the POTW. For example, it is currently more economical
for many soft drink manufacturers to deliver their unsaleable beverages to the
Company for processing and disposal than to discharge the beverages directly
into the POTW.
OUTSOURCING BY INDUSTRIAL AND COMMERCIAL BUSINESSES. Industrial and
commercial businesses have continued to focus on their primary business
activities and to downsize and outsource secondary business activities in which
they may not have much expertise. By outsourcing their wastewater treatment
needs, industrial and commercial businesses can free-up capital for investment
in their primary products and business activities, eliminate a significant
portion of their overhead and transfer risk to experts in the field.
ECONOMIC EXPANSION. Many industrial companies have significantly expanded
their manufacturing and processing facilities. This industrial expansion has
increased the amount of wastewater generated. In addition, continued commercial
expansion throughout North America has generated additional grease and grit trap
waste and other liquid waste that must be processed by the generators thereof,
POTWs or liquid waste service providers such as the Company.
INCREASINGLY STRICT REGULATIONS. Heightened public concern about water
quality has caused federal, state and local governments to adopt increasingly
strict regulations governing the processing and disposal of industrial
wastewater and other liquid wastes. For example, effective as of October 1993,
Subtitle D of RCRA banned the disposal of untreated bulk liquid waste in
landfills. In addition, effective in March 1997, the Texas Natural Resource
Conservation Commission (the "TNRCC") implemented state-wide "full pump"
regulations requiring 100% evacuation of all grease and grit traps and proper
disposal of the full volume of each trap. Louisiana, Michigan, Texas and certain
other oil and gas producing states have enacted comprehensive laws and
regulations governing the proper management of oilfield waste. Under Louisiana,
Michigan and Texas regulations, if oilfield waste cannot be processed for
discharge or disposed of at the well where it is generated, it must be
transported to a licensed oilfield waste processing or disposal facility. In
addition, federal regulations also restrict, and in some cases prohibit
entirely, the discharge of oilfield waste into U.S. waters.
STRATEGY
The Company's objective is to continue to grow throughout North America by
expanding its services in markets where it can be one of the largest and most
profitable integrated liquid waste management service companies. The Company
believes that as it expands it is likely to gain numerous competitive
26
<PAGE>
advantages relative to smaller operators, including servicing multiple customer
locations, treating a wide variety of liquid waste streams, achieving operating
efficiencies (including collection route densification and consolidation, and
increased equipment and facility utilization) and increased economies of scale
(including access to lower-cost capital, lower insurance rates, decreased
proportional selling, general and administrative costs and increased purchasing
power), and adapting to changing regulations. The Company's strategy for
achieving its objective is to (i) expand through acquisitions; (ii) generate
internal growth; (iii) enhance existing and acquired operations; and (iv)
operate its businesses on a decentralized basis. The Company intends to
implement this strategy as follows:
EXPAND THROUGH ACQUISITIONS. The Company intends to continue to expand by
acquiring liquid waste management businesses in new markets, while increasing
its facility and equipment utilization and expanding its market penetration and
range of services offered in its existing markets through "tuck-in"
acquisitions. In considering new markets, the Company will generally seek to
acquire a liquid waste processing facility that has the customer base, technical
skills and infrastructure necessary to be a core business into which other
liquid waste operations can be consolidated. After the Company has acquired a
processing facility, it will typically seek to increase the utilization of the
facility by securing captive waste streams, which includes acquiring collection
companies and entering into contracts to collect or accept all of the various
types of liquid waste generated by customers. The Company will also seek to
acquire other liquid waste businesses that can be integrated into its existing
operations or utilized to provide additional liquid waste services to the same
customer base.
INTERNAL GROWTH. In order to generate continued internal growth, the
Company has focused on increasing sales penetration in its current and adjacent
markets, soliciting new commercial and industrial customers, expanding its
collection infrastructure, marketing upgraded services to existing customers
and, where appropriate, raising prices. The Company believes that there are a
number of liquid waste generators that would prefer to have a single source
provider for the collection, processing and disposal of all of their liquid
waste streams, but are unable to do so because the liquid waste industry is
highly fragmented. The Company intends to expand its customer base by
positioning itself as a multi-city, single source provider for national and
regional generators of liquid waste. In addition, the Company intends to expand
the capacity and processing capabilities of its existing liquid waste
facilities, and is seeking to amend its permit for certain facilities in order
to receive additional liquid waste streams.
OPERATIONAL ENHANCEMENTS. The Company will seek to enhance the operations
of its existing facilities and acquired businesses through collection route
densification and consolidation and increased facility and equipment
utilization. The Company also expects to realize cost savings by consolidating
certain administrative functions at its corporate offices, such as cash
management, human resources, finance and insurance.
OPERATE ON DECENTRALIZED BASIS. The Company intends to continue to manage
its various businesses on a decentralized basis, with local management
maintaining responsibility for the day-to-day operations, profitability and
growth of the business, while the executive officers of the Company exercise
strong strategic and financial oversight. The Company believes that such a
decentralized operating structure will retain the entrepreneurial spirit present
in each of the acquired businesses and allow the Company to capitalize on the
considerable local and regional market knowledge and customer relationships
possessed by each acquired business.
ACQUISITION PROGRAM
Since its IPO in August 1997, the Company has pursued an aggressive
acquisition program, acquiring 20 liquid waste management businesses. The
Company believes that numerous acquisition candidates meeting the Company's
acquisition criteria, including "tuck-in" opportunities, exist within its
existing markets and in new geographic areas.
The Company has assembled an experienced acquisition team comprised of
operations, environmental, engineering, legal, financial and accounting
personnel to identify and evaluate acquisition opportunities. The Company has
established pre-acquisition review procedures for acquisition candidates,
including legal,
27
<PAGE>
financial, engineering, operational and environmental reviews. The environmental
reviews include, where appropriate, investigation of geologic, hydrogeologic and
other site conditions, past and current operations (including types of waste
processed and disposed of), design and construction records, permits, regulatory
compliance history, regulatory agency records and available soil sampling,
groundwater and air monitoring results. Senior management of the Company is
actively involved in identifying and evaluating acquisition candidates.
In considering whether to proceed with an acquisition, the Company
evaluates a number of factors, including (i) the acquisition candidate's
historical and projected financial results; (ii) any expected synergies with one
or more of the Company's existing operations; (iii) the proposed purchase price
and the expected impact on results of operations and on the Company's earnings
per share; (iv) whether the candidate will enhance the Company's ability to
effect other acquisitions in the vicinity; (v) the capabilities and experience
of senior management of the candidate; (vi) the candidate's customer service
reputation and relationships with the local communities; (vii) the composition
and size of the candidate's customer base; (viii) the types of services provided
by the candidate; and (ix) whether the candidate has definable and controllable
liabilities, including potential environmental liabilities.
The Company has also established a detailed process for integrating newly
acquired businesses. This process is designed to achieve operating compatibility
with maximum speed and efficiency, and with minimum disruption of ongoing
business. Once a liquid waste business is acquired, the Company implements
programs and policies for the business designed to reduce costs and improve
operating efficiencies and overall profitability. For example, the Company
replaces the acquired business' computer systems with its own management
reporting and control system. The Company typically seeks to retain the acquired
business' qualified managers and key employees, while consolidating certain
overhead functions such as cash management, human resources, finance and
insurance through the Company's corporate offices.
The Company believes it will be regarded by certain acquisition candidates
as an attractive acquiror because of: (i) the Company's strategy for creating an
integrated and professionally managed national liquid waste company; (ii) the
Company's visibility and access to financial resources as a public company;
(iii) the potential for owners of the businesses being acquired to participate
in the Company's planned internal growth and growth through acquisitions, while
realizing liquidity; (iv) the Company's management team, which includes
individuals with significant experience operating businesses in the waste
management industry and executing consolidation strategies; and (v) the
Company's general philosophy of maintaining an acquired business' culture and
retaining its management through appropriate incentives.
As consideration for future acquisitions, the Company intends to continue
to use various combinations of its Common Stock and cash. The consideration for
each future acquisition will vary on a case-by-case basis depending on the
financial interests of the Company and the owners of the business to be
acquired, and the historic operating results and future prospects of the
business. The Company intends to finance future acquisitions from cash generated
by operations, borrowings under the Credit Facility, and from the 1,682,901
shares of Common Stock remaining available for use under the Company's
acquisition shelf registration statement.
ACQUISITIONS
The Company has acquired 23 businesses since its formation in November
1996. The consideration for these acquisitions consisted of cash, notes and
shares of Common Stock. In addition, in some transactions, the Company has
agreed to issue additional shares of Common Stock if the future pre-tax earnings
of the acquired business exceed certain negotiated levels or other specified
events occur.
28
<PAGE>
The following table provides a summary description of acquisitions
completed by the Company since its formation in November 1996.
ACQUISITIONS BY INDUSTRIAL WASTEWATER DIVISION:
<TABLE>
<CAPTION>
PRINCIPAL DATE
SELLER TYPE OF BUSINESS LOCATION ACQUIRED
<S> <C>
The Mesa Companies................... Collection, Processing, Dallas, Texas 06/97
Recovery and Disposal
American WasteWater Inc.............. Collection, Processing, Houston, Texas 06/97
Recovery and Disposal
A&B Enterprises, Inc................. Collection Dallas, Texas 10/97
Re-Claim Environmental, Inc.......... Collection, Processing, Houston, Texas 10/97
Recovery and Disposal
Re-Claim Environmental Louisiana
LLC................................ Collection, Processing, Shreveport, Louisiana 10/97
Recovery and Disposal
E. Allison Enterprise, Inc........... Processing and Disposal Houston, Texas 10/97
Waste Technologies, Inc.............. Collection, Processing, San Antonio, Texas 12/97
Recovery and Disposal
Environment Management, Inc. (EMI)... Collection, Processing, Austin, Texas 01/98
Recovery and Disposal
Suburban Wastewater Services, Inc.... Collection Braintree, Massachusetts 01/98
Trapmaster, Inc...................... Collection San Antonio, Texas 03/98
Bug Master Exterminating Service,
Inc................................ Collection Austin, Texas 03/98
Betts Pump Service, Inc.............. Collection Kemp, Texas 04/98
Lindenborn Vacuum Services, Inc...... Collection McAllen, Texas 04/98
Parallel Products.................... Collection, Processing, Rancho Cucamonga, 04/98
Recovery and Disposal California
South Shore Pumping Corp............. Collection Plymouth, Massachusetts 04/98
Reclamation Technology Management,
Inc................................ Collection, Processing Haltom City, Texas 04/98
and Disposal
Amigo Diversified Services, Inc...... Collection, Processing, San Antonio, Texas 04/98
Recovery and Disposal
Waste Stream Environmental, Inc...... Collection, Processing, Weedsport, New York 04/98
Recovery and Disposal
The National Solvent Exchange
Corp............................... Processing, Recovery Atlanta, Georgia 04/98
and Disposal
Universal Waste and Transit.......... Collection, Processing Tampa, Florida 05/98
and Disposal
City Environmental, Inc.............. Collection, Processing Detroit, Michigan 05/98
and Disposal
ACQUISITIONS BY OILFIELD WASTE DIVISION:
PRINCIPAL DATE
SELLER TYPE OF BUSINESS LOCATION ACQUIRED
Campbell Wells....................... Processing and Disposal Lafayette, Louisiana 12/96
Northern A-1 Services, Inc........... Collection, Processing Kalkaska, Michigan 05/98
and Disposal
</TABLE>
OPERATIONS AND SERVICES PROVIDED
Industrial and commercial businesses produce various types of wastewater
(including hydrocarbon contaminated water, landfill leachate, unsaleable
beverages, and grease and grit trap wastes) that must be disposed of in
accordance with federal, state and local regulations. Similarly, oil and gas
exploration and production companies produce liquid waste that must be disposed
of in accordance with federal and state regulations. As demonstrated in the
diagram on the inside front cover page, the Company accepts liquid waste from
the generator thereof or an independent collection company, processes the liquid
waste to remove contaminants and then disposes of the liquid waste in accordance
with applicable regulations. In
29
<PAGE>
addition, in certain instances, the Company's processing operations generate
saleable by-products. The Company's services permit generators of liquid waste
to focus on their primary business activities and transfer the risks associated
with the processing and disposal of the waste to experts in the field.
The Company collects, processes, recovers and disposes of liquid waste
through a number of subsidiaries that are organized into two divisions -- the
Industrial Wastewater Division and the Oilfield Waste Division. The operations
of these two divisions are summarized below.
INDUSTRIAL WASTEWATER DIVISION
Through its Industrial Wastewater Division, which contributed approximately
82% of the Company's 1997 pro forma revenues, the Company receives fees to
collect, process and dispose of liquid waste such as industrial wastewater,
grease trap and grit trap waste, bulk liquids and unsaleable beverages,
biosolids and oil-contaminated water. In addition, the Industrial Wastewater
Division generates revenues from the sale of by-products, including fats, oils,
feed proteins, industrial and fuel grade ethanol, solvents, aluminum, glass,
plastic and cardboard, recovered from waste streams. Some of the Company's
by-product sales involve brokering of industrial and fuel grade ethanol produced
by third parties in order to meet its customers' volume and quality
requirements. The Industrial Wastewater Division operates a fleet of
approximately 335 vehicles to collect waste directly from over 20,000 customers,
receives waste from independent transporters servicing thousands of additional
generators and also receives waste shipped directly by the generators thereof
via rail and truck. Brief descriptions of the types of liquid waste most
commonly managed by the Industrial Wastewater Division are set forth below:
INDUSTRIAL WASTEWATERS. Industrial wastewaters such as hydrocarbon
contaminated water, landfill leachate and printing solvents are transported to
the Company's facilities in vacuum trucks, trailers and other transportable
containers. Using a variety of physical, chemical, thermal and biological
techniques, the liquid waste is broken down into constituent components. Water
extracted from the liquid waste is pretreated and then discharged into the POTW
and solid materials are dried and disposed of in a solid waste landfill. In some
instances, such as printing solvents, the contaminated materials are processed
and returned to the generator for reuse.
GREASE AND GRIT TRAP WASTE. Grease trap waste from restaurants and other
food manufacturing and preparation facilities and grit trap waste from car
washes is collected by Company vehicles or independent third parties and
transported to the Company's facilities. Grease and grit trap waste is processed
using a variety of physical, chemical, thermal and biological techniques. Water
extracted from the liquid waste is pretreated and then discharged into the POTW
and solid materials are dried and disposed of in a solid waste landfill.
By-products recovered from grease trap waste are processed with used cooking oil
and other food processing residuals purchased by the Company to produce fats,
oils and feed proteins of various grades which are sold to producers of
livestock feed and chemicals.
BULK LIQUIDS AND UNSALEABLE BEVERAGES. The Company accepts both liquid
residuals and unsaleable packaged beverages from breweries, soft drink
manufacturers and food processors. Water extracted from the liquid waste is
pretreated and then discharged into the POTW. The remaining liquid waste is
fermented and distilled into both industrial and fuel grade ethanol, which is
sold primarily to major oil and chemical companies. Packaging of the unsaleable
beverages, whether aluminum, glass, plastic or cardboard, is removed, separated
and sold to recycling firms.
BIOSOLIDS. The Company accepts liquid and dry cake biosolids, or sludge,
from municipal wastewater treatment facilities and private businesses and
processes these biosolids into a product that is sold for use as a fertilizer
and landfill cover.
SEPTAGE. Septage is pumped from septic tanks by Company vehicles or
independent third parties and transported to the Company's facilities. The
septage is then processed using a variety of physical, chemical, thermal and
biological techniques. Water extracted from the liquid waste is pretreated and
then discharged into the POTW and solid materials are dried and disposed of in a
solid waste landfill.
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<PAGE>
HAZARDOUS WASTES. Hazardous wastes such as household hazardous wastes,
plating solutions, acids, caustic, oxidizers, and flammable and reactive wastes
are transported to certain of the Company's facilities in tankers, trucks and
other transportable containers and by rail. Wastes suitable for treatment under
the Clean Water Act are directed into a suitable process such as neutralization,
chemical precipitation, filtration, biological degradation, carbon adsorption,
alcohol recovery and/or oil recycling. Sludge and solid hazardous wastes are
directed to the Company's chemical fixation facility to be pre-treated using
chemical oxidation or reduction followed by fixation using silicates such as
lime or cement kiln dust. Treated residues are tested in accordance with federal
and state requirements to meet the land disposal restrictions prior to disposal.
Solid and semi-solid residues are shipped to a Subtitle D landfill. Treated
listed waste residues are sent to an audited and approved Subtitle C landfill.
PETROLEUM FUELS. Contaminated and/or off-specification petroleum fuels and
used oil are transported to the Company's facilities in vacuum trucks, trailers
and other transportable oil containers. Using mechanical and gravity separation
techniques, these materials are processed to produce a fuel sold primarily to
operators of industrial furnaces. Resulting wastewater is transported to another
of the Company's facilities for processing and disposal. Solid materials and
sludges are sent to one of the Company's oilfield waste processing facilities.
The Industrial Wastewater Division operates 21 liquid waste processing
facilities. The Company believes that the specialized equipment, licenses and
permits necessary to operate these liquid waste processing facilities create a
significant barrier to entry into this industry. The following table sets forth
certain information relating to each such facility, including the type of liquid
wastes most commonly managed:
<TABLE>
<CAPTION>
FACILITY LOCATION LIQUID WASTES MANAGED OWNED/LEASED
<S> <C> <C> <C>
Parallel CA............................. Rancho Cucamonga, Bulk Liquids and Unsaleable Beverages Owned
California
Universal Waste......................... Tampa, Florida Household Hazardous Wastes Owned
National Solvent........................ Atlanta, Georgia Industrial Wastewaters Leased(1)
Parallel KY............................. Louisville, Kentucky Bulk Liquids and Unsaleable Beverages Owned
Re-Claim LA............................. Shreveport, Industrial Wastewaters Leased(2)
Louisiana
City Environmental...................... Detroit, Michigan Hazardous Wastes; Industrial Owned
Wastewaters
Waste Stream............................ Weedsport, New York Biosolids Leased(3)
Environment Management.................. Austin, Texas Grease and Grit Trap Waste Owned
Mesa.................................... Dallas, Texas Grease and Grit Trap Waste Owned
Amigo North............................. Giddings, Texas Petroleum Fuels Owned
Reclamation Technology.................. Haltom City, Texas Industrial Wastewaters; Grease and Leased(4)
Grit Trap Waste
American WasteWater..................... Houston, Texas Industrial Wastewaters; Grease and Owned
Grit Trap Waste; Septage
E. Allison.............................. Houston, Texas Grease and Grit Trap Waste Leased(5)
Imperial East (Mesa).................... Houston, Texas Grease and Grit Trap Waste Owned
Re-Claim TX............................. Houston, Texas Industrial Wastewaters Owned
Laredo (Mesa)........................... Laredo, Texas Grease and Grit Trap Waste Owned
South Texas (Mesa)...................... Los Fresnos, Texas Grease and Grit Trap Waste Owned
Waste Technologies...................... San Antonio, Texas Grease and Grit Trap Waste Owned
Imperial (Mesa)......................... San Antonio, Texas Grease and Grit Trap Waste Owned
Amigo South............................. San Antonio, Texas Petroleum Fuels Owned
Enviro (EMI)............................ San Antonio, Texas Grease and Grit Trap Waste Owned
</TABLE>
- ------------------------------
(1) Lease expires in June 1999, with option to renew for one year.
(2) Lease expires in September 2007, with three ten-year renewal options.
(3) Lease expires in June 2004, with eight one-year renewal options.
(4) Lease expires in August 1999.
(5) Lease expires in October 1998, with option to renew for two years.
31
<PAGE>
OILFIELD WASTE DIVISION
The Oilfield Waste Division contributed approximately 18.0% of the
Company's 1997 pro forma revenues. At its six oilfield waste facilities located
in Louisiana, Michigan and Texas, the Oilfield Waste Division treats and
disposes of waste that is generated in the exploration for and production of oil
and natural gas. Oilfield waste consists primarily of oil-based and water-based
drilling fluids (which contain oil, grease, chlorides and heavy metals), as well
as cuttings, saltwater, workover and completion fluids, production pit sludges
and soil containing these materials.
Landfarming, the treatment process utilized at four of the Company's
oilfield waste facilities, involves several distinct stages. Oilfield waste is
brought to the Company's facilities in trucks and on barges and the delivered
waste materials are then tested. Materials which do not qualify as permitted
oilfield waste in accordance with applicable state regulations are rejected.
Accepted waste is then loaded into treatment cells, which are flooded with fresh
water and mixed to dissolve salts and soluble materials. Saltwater is then
pumped out through a collection system and typically disposed of at a saltwater
injection well on-site. This flooding process is typically repeated several
times. The remaining waste is then processed to remove organic contamination
through biological degradation. Total treatment of a cell takes approximately
nine to twelve months. In the final stage, the remaining material is tested to
ensure compliance with regulatory requirements. Thereafter, the material is
transported to on-site stockpile areas.
In connection with the Campbell Wells Acquisition, the Company acquired a
long-term Disposal Agreement with Newpark for the processing and disposal of
oilfield waste generated offshore in the Gulf Coast region. Under the terms of
the Disposal Agreement, until June 30, 2021, Newpark is obligated to deliver to
the Company the lesser of (i) one-third of the barrels of oilfield waste that
Newpark receives for processing and disposal in the Territory and (ii) 1,850,000
barrels of oilfield waste, in each case excluding saltwater. In return, until
August 2001, the Company is prohibited from accepting from any customer other
than Newpark oilfield waste generated in a marine environment or transported in
a marine vessel within the Territory. The price paid by Newpark under the
Disposal Agreement is currently $5.50 per barrel, adjusted semi-annually
beginning June 30, 1998, with a price floor of $5.50 per barrel. Although the
contract price is lower than the current market price for comparable waste,
Newpark's delivery obligations under the Disposal Agreement allow the Company to
eliminate virtually all marketing and transfer expenses on waste delivered under
the Disposal Agreement and, therefore, the Company believes that operating
margins on waste volume from Newpark and other customers are comparable. During
the twelve-month period ending December 31, 1997, Newpark delivered
approximately 1,430,000 barrels of oilfield waste, excluding saltwater, to the
Company's landfarms.
Due to its arrangements with Newpark, the Company is focusing its marketing
efforts toward inland waste generators and, by so doing, the Company believes
that it will be able to increase the total amount of oilfield waste that is
delivered to the Oilfield Waste Division for processing and disposal.
The Oilfield Waste Division operates six oilfield waste processing
facilities and seven commercial saltwater injection wells. The following table
sets forth certain information relating to each processing facility.
<TABLE>
<CAPTION>
AREA PERMITTED APPROXIMATE
FOR OILFIELD SQUARE FOOTAGE
WASTE PROCESSING OF OFFICE
LOCATION AND DISPOSAL FACILITIES OWNED/LEASED
<S> <C> <C> <C>
Bateman Island, Louisiana............ 115 acres 5,000 Leased(1)
Bourg, Louisiana..................... 140 acres 5,000 Leased(2)
Elm Grove, Louisiana................. 152 acres 500 Owned
Mermentau, Louisiana................. 277 acres 10,000 Owned
Kalkaska, Michigan................... Not Applicable 6,000 Owned
Bustamonte, Texas.................... 120 acres 1,000 Owned
</TABLE>
- ------------------------------
(1) Lease expires in October 1999, with seven three-year renewal options.
(2) Lease expires in January 2000, with seven three-year renewal options.
32
<PAGE>
COMPETITION
The liquid waste industry is highly fragmented and very competitive.
Competitors compete primarily on the basis of proximity to collection
operations, tipping fees charged and quality of service. With respect to certain
waste streams (such as oilfield waste, bulk liquids and unsaleable beverages)
the Company must compete with the generators of such waste streams, who
continually evaluate the decision whether to use internal disposal methods or
utilize a third party disposal company such as the Company. The Company must
also compete with area landfills for certain waste streams. The Company competes
with Newpark and a number of smaller companies for oilfield waste produced on
land in the Gulf Coast region. Pursuant to the Newpark Disposal Agreement, until
August 2001, the Company is contractually prohibited from (i) accepting from any
customer other than Newpark oilfield waste generated in a marine environment or
transported in a marine vessel within the Territory and (ii) engaging in the
site remediation and closure business in the Territory. Pursuant to the terms of
the Campbell Wells Acquisition, until December 2001, the Company is also
prohibited from engaging in the collection, treatment or disposal of municipal
solid wastes, construction debris or demolition debris.
The Company believes that there are certain barriers to entry in the liquid
waste industry. These barriers include formalized procedures for customer
acceptance, licenses, permits, and the need for specially equipped facilities
and trained personnel.
REGULATORY BACKGROUND
The Company's business operations are affected both directly and indirectly
by governmental regulations, including various federal, state and local
pollution control and health and safety programs that are administered and
enforced by regulatory agencies. These programs are applicable or potentially
applicable to one or more of the Company's existing operations. Although the
Company intends to make capital expenditures to expand its liquid waste
processing capabilities, the Company believes that it is not presently required
to make material capital expenditures to remain in compliance with federal,
state and local laws and regulations relating to the protection of the
environment. See "Risk Factors -- Dependence Upon Oilfield Waste Exemption
Under RCRA and Other Environmental Regulations" and "-- Failure To Comply with
Governmental Regulations."
THE CLEAN WATER ACT
The Company treats and discharges wastewaters at its liquid waste
facilities and at its oilfield waste landfarms. These activities are subject to
the requirements of the Clean Water Act and comparable state statutes and
federal and state enforcement of these regulations. The Clean Water Act
regulates the discharge of pollutants into waters of the United States. The
Clean Water Act establishes a system of standards, permits and enforcement
procedures for the discharge of pollutants from industrial and municipal
wastewater sources. The law sets treatment standards for industries and
wastewater treatment plants and provides federal grants to assist municipalities
in complying with the new standards. In addition to requiring permits for
industrial and municipal discharges directly into the waters of the United
States, the Clean Water Act also requires pretreatment of industrial wastewater
before discharge into municipal systems. The Clean Water Act gives the EPA the
authority to set pretreatment limits for direct and indirect industrial
discharges. In addition, the Clean Water Act prohibits certain discharges of oil
or hazardous substances and authorizes the federal government to remove or
arrange for removal of such oil or hazardous substances. The Clean Water Act
also requires the adoption of the National Contingency Plan to cover removal of
such materials. Under the Clean Water Act, the owner or operator of a vessel or
facility may be liable for penalties and costs incurred by the federal
government in responding to a discharge of oil or hazardous substances.
The Clean Water Act also has a significant impact on the operations of the
Company's customers for oilfield waste services. EPA Region 6, which includes
the Company's current market, continues to issue new and amended National
Pollution Discharge Elimination System ("NPDES") general permits further
limiting or restricting substantially all discharges of produced water from the
Oil and Gas Extraction Point Source Category into waters of the United States.
These permits include:
o Onshore subcategory permits for Texas, Louisiana, Oklahoma and New
Mexico (56 Fed. Reg. 7698). These permits completely prohibit the
discharge of drilling fluids, drill cuttings,
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<PAGE>
produced water or sand, and various other oilfield wastes generated by
onshore operations into waters of the United States. These permits
have the effect of requiring that most oilfield wastes follow
established state disposal programs. These general permits expired on
February 25, 1996, but pursuant to EPA policy, they are considered to
remain in effect until reissued by the EPA or superceded by other EPA
action.
o Permits for produced water and produced sand discharges into coastal
waters of Louisiana and Texas issued on January 9, 1995 (60 Fed. Reg.
2387). Coastal means "waters of the United States . . . located
landward of the territorial seas." Under these regulations all such
discharges were required to cease by January 1, 1997.
o The Outer Continental Shelf ("OCS") permit covering oil and gas
operations in federal waters in the Gulf of Mexico (seaward of the
Louisiana and Texas territorial seas) was reissued in November 1992
and modified in December 1993. The existing permit was combined with a
new source permit on August 9, 1996 (61 Fed. Reg. 41609). This permit
prohibits certain discharges of drilling fluids and drill cuttings and
includes stricter limits for oil and grease concentrations in produced
waters to be discharged. These limits are based on the Best Available
Treatment requirements contained in the Oil and Gas Offshore
Subcategory national guidelines which were published March 3, 1993.
Additional requirements include toxicity testing and bioaccumulation
monitoring studies of proposed discharges. The combined permit expired
on November 18, 1997; however, the expired permit will continue to be
effective for permittees that applied for a new permit prior to the
expiration date, until the EPA issues a new general permit for this
area or requires permittees to seek individual permits.
o A permit for the territorial seas of Louisiana was issued on November
4, 1997 (62 Fed. Reg. 59687). The permit became effective on December
4, 1997, except for the water quality based limits and certain
monitoring requirements that became effective May 4, 1998. The permit
prohibits the discharge of drilling fluids, drill cuttings and
produced sand. Produced water discharges are limited for oil and
grease, toxic metals, organics, and chronic toxicity. The territorial
seas part of the Offshore Subcategory begins at the line of ordinary
low water along the part of the coast which is in direct contact with
the open sea, and extends out three nautical miles. This permit covers
both existing sources and new sources. All discharges in state waters
must comply with any more stringent requirements contained in the
Louisiana Water Quality Regulations, LAC 33.IX.7.708. A similar permit
will be proposed for the Texas territorial seas in the future.
The combined effect of all of these permits closely approaches a "zero
discharge" standard affecting all waters except those of the OCS. The Company
and many industry participants believe that these permits and the requirements
of the Clean Water Act may ultimately lead to a total prohibition of overboard
discharge in the Gulf of Mexico.
RCRA
RCRA is the principal federal statute governing hazardous and solid waste
generation, treatment, storage and disposal. RCRA and state hazardous waste
management programs govern the handling and disposal of "hazardous waste." The
EPA has issued regulations pursuant to RCRA, and states have promulgated
regulations under comparable state statutes, that govern hazardous waste
generators, transporters and owners and operators of hazardous waste treatment,
storage or disposal facilities. These regulations impose detailed operating,
inspection, training and emergency preparedness and response standards and
requirements for closure, financial responsibility, manifesting of wastes,
record-keeping and reporting, as well as treatment standards for any hazardous
wastes intended for land disposal. The Company does not accept hazardous waste
at any of its facilities other than the Detroit, Michigan, Tampa, Florida and
Shreveport, Louisiana facilities. Consequently, the vast majority of the
Company's activities are not subject to the requirements adopted under Subtitle
C of RCRA.
The Company's Louisiana and Texas landfarms process and dispose of oilfield
waste, which is exempt from classification as a RCRA-regulated waste. At various
times in the past, proposals have been made to rescind the exemption that
excludes oilfield waste from regulation under RCRA. The repeal or modification
of this exemption by administrative, legislative or judicial process would
require the Company to change its
34
<PAGE>
method of doing business and could have a material adverse effect on the
Company's business, financial condition and results of operations. There is no
assurance that the Company would have the capital resources available to do so,
or that it would be able to adapt its operations. See "Risk Factors -- Failure
to Comply with Governmental Regulations."
RCRA also indirectly affects the Company's operations at its liquid waste
facilities by prohibiting, among other things, the disposal of certain liquid
wastes in landfills. This prohibition increases demand for the services provided
by the Company's Industrial Wastewater Division.
CERCLA
CERCLA provides for immediate response and removal actions coordinated by
the U.S. Environmental Protection Agency (the "EPA") for releases of hazardous
substances into the environment and authorizes the government, or private
parties, to respond to the release or threatened release of hazardous
substances. The government may also order persons responsible for the release to
perform any necessary cleanup. Liability extends to the present owners and
operators of waste disposal facilities from which a release occurs, persons who
owned or operated such facilities at the time the hazardous substances were
released, persons who arranged for disposal or treatment of hazardous substances
and waste transporters who selected such facilities for treatment or disposal of
hazardous substances. CERCLA has been interpreted to create strict, joint and
several liability for the cost of removal and remediation, other necessary
response costs and damages for injury to natural resources.
Despite the current exemption of oilfield waste under RCRA, if the
Company's operations resulted in the release of or improper disposal of
hazardous substances, the Company could incur CERCLA liability. Although the
Company is not aware of any such event, the Company or a business acquired by
the Company may have disposed or arranged for disposal of hazardous substances
that could result in the imposition of CERCLA liability on the Company in the
future. In addition, the Company would incur CERCLA liability if any hazardous
substances at the Company's facilities leached down into groundwater.
The Company is not aware of any claims against it or any of its
subsidiaries that are based on CERCLA. Nonetheless, the identification of one or
more sites at which cleanup action is required could subject the Company to
liabilities which could have a material adverse effect on the Company's
business, financial condition and results of operations.
THE CLEAN AIR ACT
The Clean Air Act provides for federal, state and local regulation of
emissions of air pollutants into the atmosphere. Any modification or
construction of a facility with regulated air emissions must be a permitted or
authorized activity. The Clean Air Act provides for administrative and judicial
enforcement against owners and operators of regulated facilities, including
substantial penalties. In 1990, the Clean Air Act was reauthorized and amended,
substantially increasing the scope and stringency of the Clean Air Act's
regulations. Compliance with the Clean Air Act is not expected to have a
material effect on the Company's business, results of operations or financial
condition.
STATE AND LOCAL REGULATIONS
Order 29-B of the Louisiana Department of Natural Resources contains
extensive rules regarding the generation, processing, storage, transportation
and disposal of oilfield waste. Under Order 29-B, on-site disposal of oilfield
waste is limited and subject to stringent guidelines. If these guidelines cannot
be met, oilfield waste must be transported and disposed of off-site in
accordance with the provisions of Order 29-B. Moreover, under Order 29-B, most,
if not all, active waste pits (a typical on-site disposal method used by inland
generators of oilfield waste) must be closed or modified to meet regulatory
standards; however, full enforcement of this portion of Order 29-B has been
deferred. The Texas Railroad Commission and the Michigan Department of
Environmental Quality have also promulgated detailed requirements for the
management and disposal of oilfield waste. Permits issued by state regulatory
agencies are required for each oilfield waste processing facility operating
within Louisiana, Michigan and Texas. The Company must perform tests before
acceptance of any oilfield waste, as well as during and after processing to
ensure compliance with all regulatory requirements. Short-term emergency rules
recently adopted by the Louisiana
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Department of Natural Resources have increased the pre-treatment testing to be
conducted by the Company on oilfield waste delivered to the Company's Louisiana
landfarms.
The closure of any of the Company's landfarms is also regulated by state
authorities. In general, closure of a landfarm involves a multi-phase process
whereby all injection wells at the landfarm are plugged and abandoned, all
surface equipment is removed from the site, the treatment cells and perimeter
containment levees are removed and the surface of the site is contoured and
vegetated. Additional regulatory requirements include monitoring the surface
runoff water, the soil pore water and the groundwater for a period of five
years. If, after five years, the water quality meets the requirements specified
in the state regulations, the site is certified as closed.
The Company's liquid waste processing facilities are subject to direct
regulation by a variety of state and local authorities. Typically, the Company
is required to obtain processing, wastewater discharge and air quality permits
from state and local authorities to operate these facilities and to comply with
applicable regulations concerning, among other things, the generation and
discharge of odors and wastewater.
States and localities into which the Company may expand, by acquisition or
otherwise, may now or in the future have regulations with positive or negative
effects on the Company. It is possible that state or local regulations could
adversely affect the Company's execution of its acquisition strategy. See "Risk
Factors -- Dependence Upon Oilfield Waste Exemption Under RCRA and Other
Environmental Regulations" and "Failure to Comply with Governmental
Regulations."
RISK MANAGEMENT
The Company's business exposes it to substantial risks. For example, the
Company's services routinely involve the handling, storage and disposal of
nonhazardous regulated materials and wastes and, in some cases, the handling of
hazardous materials and wastes for its customers which are the generators of
such wastes. The Company could be held liable for improper cleanup and disposal,
which liability could be based upon statute, negligence, strict liability,
contract or otherwise. In addition, the Company often is required to indemnify
its customers or other third parties against certain risks related to the
services performed by the Company, including damages stemming from environmental
contamination.
The Company has implemented various procedures designed to insure
compliance with applicable regulations and reduce the risk of damage or loss.
These include specified handling procedures and guidelines for regulated wastes,
ongoing training and monitoring of employees and maintenance of insurance
coverage. The Company carries a broad range of insurance coverages that
management considers adequate for the protection of its assets and operations.
This coverage includes general liability, comprehensive property damage,
workers' compensation and other coverage customary in its industries; however,
this insurance is subject to coverage limits and certain policies exclude
coverage from damages resulting from environmental contamination. A claim that
is not covered or only partially covered by insurance could have a material
adverse effect on the Company's business, results of operations and financial
condition. There is no assurance that insurance will continue to be available to
the Company, that the possible types of liabilities that may be incurred by the
Company will be covered by its insurance, that the Company's insurance carriers
will meet their obligations or that the dollar amount of such liabilities will
not exceed the Company's policy limits.
PROPERTIES
The Company's corporate offices are located in Houston, Texas. The
corporate offices consist of approximately 6,800 square feet of office space
occupied under a lease which expires on June 1, 2002.
In addition to the facilities described above in " -- Operations and
Services Provided," the Company also owns an administrative office in Fort
Worth consisting of approximately 2,000 square feet of office space and a
facility in Lacassine, Louisiana consisting of approximately 8,000 square feet
of office and equipment storage space and approximately 130 acres of undeveloped
land that was previously used for landfarming of oilfield waste and naturally
occurring radioactive material ("NORM"). In January 1997, the Company ceased
accepting NORM at the Lacassine facility and began taking the steps necessary to
close this facility in accordance with Louisiana law. The Company also owns a
facility in Kansas City, Missouri that was previously used for storage and
bulking of various hazardous wastes, a facility in Roseville,
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<PAGE>
Michigan that was previously used for fuel blending and solvent recycling and a
facility in Detroit, Michigan that was previously used in the solidification and
fixation of various types of waste. The Kansas City and Roseville facilities
have not been operational since 1992 and the Company has no plans to resume
operations at either of these facilities. The Detroit facility has ceased
accepting waste and will be closed in accordance with applicable law. The
Company also operates a transfer station in Portland, Oregon and two collection
and transportation facilities in Massachusetts.
All of the Company's facilities satisfy its present needs; however, as part
of its internal growth strategy, the Company intends to expand the capacity and
processing capabilities of certain of its liquid waste processing facilities and
increase the number and types of permitted waste streams of such facilities. The
Company believes that the unutilized capacity of each of the leased landfarms is
sufficient for at least 25 years; which, in each case, exceeds the remaining
term (including options) of the lease agreement for such facility. The Company
also believes that the remaining capacity at each of the landfarms owned by the
Company is sufficient for at least 25 years.
LEGAL PROCEEDINGS
Prior to the closing of the Campbell Wells Acquisition, four lawsuits were
brought against Campbell Wells based upon the operations of the Bourg, Louisiana
and Mermentau, Louisiana landfarms purchased by the Company as part of the
Campbell Wells Acquisition. As part of the Campbell Wells Acquisition, Sanifill
(a wholly-owned subsidiary of USA Waste) agreed to retain responsibility for the
contingent liabilities associated with each of these lawsuits. Sanifill also
agreed in the Campbell Wells Acquisition to indemnify the Company from and
against, among other things, the contingent liabilities associated with these
lawsuits. The obligation of Sanifill to indemnify the Company is limited to $10
million.
In one of the lawsuits filed against Campbell Wells, approximately 300
individuals residing in and around Grand Bois, Louisiana are seeking unspecified
monetary damages allegedly suffered as a result of (i) odors allegedly emitted
by oilfield waste received from Exxon Company U.S.A. ("Exxon") at the landfarm
in March 1994, and (ii) alleged air, water and soil contamination in connection
with ongoing operations at the landfarm. Trial in this matter on the claims of
ten plaintiffs is set to commence in the 17th Judicial District Court for the
Parish of Lafourche, Louisiana on July 13, 1998. A second lawsuit, brought by
one individual, seeks unspecified monetary damages allegedly suffered as a
result of odors allegedly emitted by oilfield waste received from Exxon at the
landfarm in March 1994. This lawsuit is also pending in the 17th Judicial
District Court for the Parish of Lafourche, Louisiana and trial is set to
commence on July 13, 1998. A third lawsuit, filed as a class action in the Civil
District Court for the Parish of Orleans, Louisiana, seeks unspecified monetary
damages allegedly suffered as a result of alleged air, water and soil
contamination in connection with ongoing operations at the Mermentau, Louisiana
landfarm. No trial date has been set for this matter. In a fourth lawsuit, six
individuals filed suit on March 7, 1996 against Campbell Wells in the 17th
Judicial District Court for the Parish of Lafourche, Louisiana seeking
preliminary and permanent injunctive relief against certain treatment operations
conducted at the Bourg, Louisiana landfarm which the plaintiffs contend have
resulted and will result in adverse health effects by way of emissions of
alleged air pollutants. The plaintiffs' request for a preliminary injunction was
heard during the summer of 1996. On December 30, 1996, the court entered an
order granting in part and denying in part the relief requested by the
plaintiffs. Specifically, the court found that there was no evidence that
emissions resulting from the treatment operations equalled or exceeded any
relevant safety standard, health standard or occupational standard and,
therefore, denied the plaintiffs' request for a temporary injunction prohibiting
such treatment operations. The court did, however, preliminarily enjoin Campbell
Wells (and, thus, indirectly the Company) from treating oilfield waste received
from Exxon in March 1994 in one particular treatment cell located within 500
feet of a building in which one of the plaintiffs resides. In connection
therewith, the court ordered that the Commissioner of the Louisiana Department
of Conservation be made a party to the litigation and substituted for the
plaintiffs on the limited issue of whether Campbell Wells has violated the
location criteria for the particular treatment cell involved. No trial date has
been set for the plaintiffs' request for permanent injunctive relief; however,
based upon the court's rulings from the preliminary injunction trial and initial
discussions with the Louisiana Department of Conservation, the
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Company believes that any permanent injunctive relief that might be entered will
not have a material adverse effect upon the Company's operations at the Bourg
landfarm.
In January 1998, the Company was named as a defendant in two of the
lawsuits arising out of the operations of the Bourg landfarm (i.e. the lawsuit
seeking injunctive relief and the lawsuit brought by the approximately 300
individuals residing in and around Grand Bois, Louisiana). The Company has not
yet been named as a defendant in the remaining lawsuit arising out of the
operations of the Bourg landfarm or the class action arising out of the
operations of the Mermentau landfarm; however, there can be no assurance that
the Company will not subsequently be named as a defendant in these lawsuits as
well.
The Company believes that the ultimate disposition of the above-referenced
lawsuits will not have a material adverse effect on the Company's business,
results of operations or financial condition. This belief is based upon, among
other things, the following reasons: (i) Sanifill has agreed to retain
responsibility for the contingent liabilities associated with these lawsuits,
(ii) Sanifill has agreed to indemnify the Company against such contingent
liabilities up to a maximum of $10 million, (iii) the Company has been operating
the Bourg and Mermentau landfarms only since December 1996, approximately four
months after the last of the three lawsuits seeking monetary damages was
originally filed, and (iv) the results of air, water and soil testing conducted
in and around the Bourg landfarm by the Louisiana Department of Health and
Hospitals, the Louisiana Department of Natural Resources and the Louisiana
Department of Environmental Quality indicate that the Company's operations at
the landfarms are in compliance with all applicable rules and regulations. There
can be no assurance, however, that a judgment will not ultimately be entered
against the Company in one or more of these lawsuits. In the event a monetary
judgment is entered against the Company, Sanifill is not required or is unable
to completely indemnify the Company against such judgment and the judgment is
not covered by insurance, such a judgment could have a material adverse effect
on the Company's business, results of operations and financial condition. In
addition, notwithstanding any indemnification to be provided by Sanifill, an
adverse ruling against the Company in the lawsuit seeking injunctive relief
could have a material adverse effect on the Company's operations at the Bourg
landfarm (which operations contributed 3.1% of the Company's pro forma revenues
for the year ended December 31, 1997 and 1.1% of the Company's pro forma
revenues for the first three months of 1998) and, therefore, the Company's
business, results of operations and financial condition.
In February 1997, an action entitled JUDY GARCIA, ET AL. V. RE-CLAIM
ENVIRONMENTAL was filed in the 51st Judicial District Court of Harris County,
Texas. This action was brought by the residents of an apartment complex located
adjacent to one of the Company's processing facilities and alleges that the
Company is guilty of nuisance, trespass, negligence and gross negligence by
reason of its pollution of the air, soil and ground and surface water and the
release of noxious odors. The plaintiffs have requested unspecified monetary
damages. The Company denies liability and intends to vigorously defend this
action.
The Company is, from time to time, a party to litigation arising in the
normal course of its business, most of which involves claims for personal injury
or property damage incurred in connection with its operations. Except as
described above, the Company is not currently involved in any litigation that it
believes will have a material adverse effect on its business, results of
operations or financial condition.
EMPLOYEES
At May 1, 1998, the Company employed approximately 690 persons full-time.
Neither the Company nor any of its subsidiaries is a party to any collective
bargaining agreement covering its employees. The Company believes that its
relationships with its employees are satisfactory.
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MANAGEMENT
DIRECTORS AND EXECUTIVE OFFICERS
The following table sets forth certain information concerning the directors
and executive officers of the Company.
<TABLE>
<CAPTION>
NAME AGE POSITION
<S> <C> <C>
Michael P. Lawlor(1)................. 58 Chairman of the Board and Chief Executive Officer
W. Gregory Orr(1).................... 42 Director, President and Chief Operating Officer
Earl J. Blackwell.................... 56 Chief Financial Officer, Senior Vice
President -- Finance and Secretary
Thomas B. Blanton(2)................. 51 Director and Divisional Vice President
James F. McEneaney, Jr.(3)(4)(5)..... 59 Director
William A. Rothrock IV(2)(4)(5)...... 45 Director
Alfred Tyler 2nd(3)(4)(5)............ 55 Director
</TABLE>
- ------------------------------
(1) Term on Board expires in 2000.
(2) Term on Board expires in 1999.
(3) Term on Board expires in 2001.
(4) Member of Audit Committee.
(5) Member of Compensation Committee.
MICHAEL P. LAWLOR has served as a director of the Company since June 1997.
On August 25, 1997, Mr. Lawlor assumed the positions of Chairman of the Board
and Chief Executive Officer of the Company. From March 1996 to August 1997, Mr.
Lawlor was a private investor. Mr. Lawlor has over 25 years of experience in the
environmental services industry. From December 1992 to March 1996, Mr. Lawlor
was Chief Executive Officer and a director of ITEQ, Inc. f/k/a Air-Cure
Technologies, Inc., a manufacturer of air treatment and air moving and process
systems, equipment and components. From 1970 to 1992, Mr. Lawlor held various
positions with Browning-Ferris Industries, Inc. ("BFI"), a national waste
services company. Mr. Lawlor started with BFI in 1970, became a corporate
officer in 1978, and from 1970 to 1988 was responsible for all of BFI's landfill
operations, during which time total landfill revenues grew from $1 million to
$500 million annually. Mr. Lawlor was the Chairman of the Wildlife Habitat
Enhancement Council, a nonprofit conservation organization, from 1992 to 1996.
W. GREGORY ORR is a co-founder of the Company and served as Chairman of the
Board, Chief Executive Officer and President of the Company from November 1996
to August 1997. Mr. Orr currently serves as a director and the Chief Operating
Officer and President of the Company. From 1995 until December 1996, Mr. Orr was
the President and Chief Operating Officer of Campbell Wells. From 1990 to 1991,
Mr. Orr was Regional Vice President of Sanifill's Atlantic Region, and from 1991
to 1995, Mr. Orr was a Vice President of Operations of Sanifill. From 1981 to
1989, Mr. Orr served in various capacities with BFI, including Divisional Vice
President.
EARL J. BLACKWELL is a co-founder of the Company and has served as Chief
Financial Officer, Senior Vice President -- Finance and Secretary of the Company
from November 1996 to the present. From 1991 to December 1996, Mr. Blackwell was
a Divisional Chief Financial Officer for Sanifill and controller for Campbell
Wells. During this time, Mr. Blackwell was responsible for organizing and
managing the financial and administrative functions of this division including
the design, installation and management of a financial reporting and management
system interfacing with Sanifill's general accounting system.
THOMAS B. BLANTON has been a director and Divisional Vice President of the
Company since June 1997. From 1991 to June 1997, Mr. Blanton served as the sole
director and President of each of the Mesa Companies. Mr. Blanton has owned and
operated fats and oils businesses for over 30 years.
JAMES F. MCENEANEY, JR. became a director of the Company in October 1997.
He is the retired President and Chief Operating Officer of The Ryland Building
Company, positions he held from 1980 to
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1992. Mr. McEneaney also served as Executive Vice President and a director of
The Ryland Group, Inc. from 1981 to 1993. Mr. McEneaney also was a founder of
The Fortress Group, Inc., which was organized to consolidate home builders in
North America. He served as the company's Chief Executive Officer from July 1995
through December 1995, and as a member of its Board of Directors from 1995 until
May 1997. Since August 1993, Mr. McEneaney has served as the President of MacCan
Associates, Inc., a management consulting firm. Currently, Mr. McEneaney serves
as Vice Chairman of the Board of Anne Arundel Health Systems, Inc.
WILLIAM A. ROTHROCK IV became a director of the Company in June 1997. Since
1990, he has been Vice President -- Business Development for Sanifill and,
subsequently, USA Waste Services, Inc. From 1984 to 1990, Mr. Rothrock was
Divisional Vice President -- Landfill Marketing for BFI.
ALFRED TYLER 2ND became a director of the Company in June 1997. Mr. Tyler
has over 20 years experience in the environmental services industry, most
recently as the President and Chief Executive Officer of Enviro-Gro
Technologies, a provider of sludge management services. In late 1992, Enviro-Gro
was sold to Wheelabrator Technologies and Mr. Tyler resigned his positions to
manage his other investments. From 1989 to the present, Mr. Tyler has been the
President and the sole stockholder of Weston Investments, Inc., a private
investment company. Mr. Tyler is also the President of Days Cove Reclamation
Company, a landfill operation and construction company, and a partner and
managing director of Bedford Capital Corporation, a New York consulting firm.
BOARD OF DIRECTORS
The Company's Certificate of Incorporation provides for the Board of
Directors to be divided into three classes, with staggered three-year terms. As
a result, only one class of directors is elected at each annual meeting of
stockholders of the Company, with the other classes continuing for the remainder
of their respective three-year terms, and directors may be removed from office
only for cause. This classification of the Board of Directors may make it more
difficult for the Company's existing stockholders to replace the Board of
Directors as well as for another party to obtain control of the Company by
replacing the Board of Directors. See "Risk Factors -- Potential Anti-Takeover
Effect of Certain Charter Provisions."
The Board of Directors has an Audit Committee and a Compensation Committee.
The members of both the Audit Committee and the Compensation Committee are
Messrs. McEneaney, Rothrock and Tyler. The principal duties of the Audit
Committee are to recommend to the Board of Directors the selection of the
Company's independent accountants, discuss and review with the Company's
independent accountants the audit plan, the auditor's report and management
letter and the Company's accounting policies, and review the accounting
procedures and internal control procedures recommended by the Company's
independent accountants. The principal duties of the Compensation Committee are
to establish and review the objectives, structure, cost and administration of
the Company's major compensation and benefit policies and programs, review
annually officers' and key employees' salaries, management incentives and stock
options, and administer the Company's stock option plan, management incentive
plans and other long-term incentive plans.
During 1997, each of the Company's directors attended at least 75% of the
aggregate of (i) the total number of meetings of the Board of Directors, and
(ii) the total number of meetings held by all committees of the Board on which
he served.
In connection with the acquisition of his three companies in June 1997, the
Company caused Mr. Blanton to be appointed to the Board of Directors of the
Company. In addition, for as long as Mr. Blanton is the beneficial owner of at
least 5% of the outstanding Common Stock, the Company is obligated to nominate
Mr. Blanton for election to the Company's Board of Directors and Messrs. Orr,
Blackwell and William M. DeArman are obligated to vote all of the shares of
Common Stock controlled by them in favor of Mr. Blanton's election to the Board
of Directors.
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COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
During 1997, Messrs. McEneaney, Rothrock and Tyler served on the Company's
Compensation Committee. Since 1990, Mr. Rothrock has served as the Vice
President -- Business Development for Sanifill and, subsequently, USA Waste. In
December 1997, the Company paid the outstanding balance (approximately $22.6
million) of the promissory note issued by the Company to Sanifill in the
Campbell Wells Acquisition. In May 1998, the Company acquired three additional
businesses from USA Waste. See "Certain Transactions -- Other." The Company
does not believe that Mr. Rothrock had a direct or indirect material interest in
any of these acquisitions.
EXECUTIVE COMPENSATION
The following table sets forth certain information with respect to the
compensation of the Company's executive officers during 1996 and 1997. The
Company was incorporated in November 1996. Messrs. Orr and Blackwell were the
only executive officers who received any compensation from the Company in 1996.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL LONG-TERM
COMPENSATION(1) COMPENSATION AWARDS
--------------------- ----------------------
NAME AND POSITION YEAR SALARY BONUS STOCK OPTIONS (SHARES)
<S> <C> <C> <C> <C>
Michael P. Lawlor,...................... 1997 $ 59,231 $ 87,500 300,00
Chairman of the Board and
Chief Executive Officer(2)
W. Gregory Orr,......................... 1997 125,000 125,000 --
President and Chief Operating 1996 2,403 -- --
Officer(3)
Earl J. Blackwell,...................... 1997 99,840 100,000 --
Chief Financial Officer, Senior 1996 1,923 -- --
Vice President and Secretary(4)
</TABLE>
- ------------------------------
(1) Excludes perquisites and other benefits, the aggregate amount of which does
not exceed the lesser of $50,000 or 10% of the total of such officer's
annual salary and bonus.
(2) Mr. Lawlor joined the Company in August 1997.
(3) Mr. Orr joined the Company in November 1996. Mr. Orr served as the Chief
Executive Officer of the Company from November 1996 to August 1997.
(4) Mr. Blackwell joined the Company in November 1996.
OPTIONS GRANTED; OPTION EXERCISES AND FISCAL YEAR-END VALUES
During 1997, Mr. Lawlor was granted an option to purchase 300,000 shares of
Common Stock at a price of $9.50 per share. These options, which vest at a rate
of 33 1/3% per year commencing on June 19, 1998 and expire on August 19, 2007,
constituted 57% of the total options granted to employees of the Company in
1997. The potential realized values of Mr. Lawlor's options at assumed annual
rates of stock price appreciation of 5% and 10% over the term of the options are
$2,248,917 and $3,598,818, respectively. The value of Mr. Lawlor's options as of
December 31, 1997 was approximately $1,387,500. Neither Mr. Orr nor Mr.
Blackwell has ever been granted a stock option by the Company.
EMPLOYMENT AGREEMENTS; CHANGES IN CONTROL
Each of Messrs. Lawlor, Orr and Blackwell has entered into an employment
agreement with the Company providing for an annual base salary of $175,000,
$150,000 and $120,000, respectively, with the right to receive incentive
compensation at the discretion of the Board of Directors. Each employment
agreement is for a term of five years with the term to be extended an additional
one year on each anniversary date of the employment agreement, unless either
party gives notice that the term of the employment agreement should not be so
extended. If the employee's employment is terminated by the Company without
cause, then the employee will continue to receive his base salary and employee
benefits for the remainder of the term of his employment agreement. If his
employment is terminated by the Company with cause, then the employee will not
be entitled to earn any further compensation or benefits under his employment
agreement. If the Company undergoes a "change in control", then, under certain
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<PAGE>
circumstances, the employee will have the right to require the Company to pay to
him a lump sum amount equal to approximately three times his "base amount", as
defined in Section 280G of the Internal Revenue Code. This base amount is
generally equal to the average annual gross income of the employee for the five
taxable years ending before the date on which the change in control occurs. This
payment will be in lieu of any further compensation or benefits payable to the
employee under the employment agreement. The employment agreement also contains
a covenant by the employee not to compete with the Company at any time during
his employment and for a period of two years after the termination of his
employment, except for a termination subsequent to a change in control.
STOCK OPTION PLANS
1996 INCENTIVE STOCK OPTION PLAN
On November 20, 1996, the Board of Directors adopted the U S Liquids Inc.
1996 Incentive Stock Option Plan. Thereafter, in June 1997, the Board of
Directors adopted various amendments to this plan, and the amended plan (the
"Stock Option Plan") was approved by the stockholders of the Company. The
purpose of the Stock Option Plan is to promote the long-term growth and
profitability of the Company and the value of the Common Stock by providing
selected employees and consultants of the Company (including directors who are
also employees) with incentives to contribute to the success of the Company. The
number of shares of Common Stock issuable under the Stock Option Plan is
automatically adjusted on the first day of each fiscal year to an amount equal
to 15% of the total number of shares of Common Stock which are outstanding on
such date, provided that the number of shares issuable under the Stock Option
Plan will not be less than 1,500,000 shares or exceed 3,000,000 shares.
The Stock Option Plan is required to be administered by a committee
designated by the Board of Directors. The committee must consist of at least two
Non-Employee Directors, as that term is defined in Rule 16b-3 under the Exchange
Act, or, at the discretion of the Board of Directors in order to comply with the
requirements of Rule 16b-3, the committee may consist of the entire Board of
Directors. Currently, the committee consists of Messrs. McEneaney, Rothrock and
Tyler. In awarding options under the Stock Option Plan, the committee considers
various factors, such as the past and expected future performance of an employee
and the extent to which an employee has been compensated for his or her
performance. The committee has not established any fixed formula for awarding
options under the Stock Option Plan. The exercise price for options issued under
the Stock Option Plan must, in the case of incentive stock options, be at least
equal to the fair market value of the Common Stock subject to the option at the
time the option is granted, and in the case of nonqualified stock options, be at
least equal to 75% of the fair market value of the shares subject to the option
at the time it is granted. In the case of an incentive stock option granted to
an employee who holds more than 10% of the Common Stock of the Company, the
exercise price must be at least 110% of the fair market value of the shares
subject to the option at the time it is granted. Options for a total of 802,875
shares of Common Stock are outstanding under the Stock Option Plan at exercise
prices ranging from $.02 per share to $20.25 per share.
DIRECTORS' STOCK OPTION PLAN
The Board of Directors adopted the U S Liquids Inc. Directors' Stock Option
Plan (the "Directors' Plan") and the stockholders approved the Directors' Plan
in June 1997. The Directors' Plan is intended to further the interests of the
Company by providing recognition and compensation to its outside directors for
their time, effort and participation in the growth and protection of the
Company's business. The Directors' Plan provides that, at the time of his or her
initial election or appointment to the Board, each director who is not an
employee of the Company and has not been an employee of the Company during the
preceding 12 months will automatically be granted an option to purchase 10,000
shares of Common Stock. In addition, each outside director will automatically be
granted an option to purchase 5,000 shares of Common Stock on January 1 of each
calendar year. The exercise price of all options granted under the Directors'
Plan must be equal to the fair market value of the Common Stock at the time the
option is granted. Options for a total of 35,000 shares of Common Stock at
exercise prices ranging from $9.50 per share to $16.00 per share have been
granted under the Directors' Plan.
The Directors' Plan is administered by the Compensation Committee. The
Compensation Committee is required to administer the Directors' Plan in strict
accordance with its terms and does not have the discretion to vary, add to or
take from the terms of the Directors' Plan.
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<PAGE>
CERTAIN TRANSACTIONS
CAMPBELL WELLS ACQUISITION
On December 13, 1996, the Campbell Wells Acquisition was consummated. The
assets acquired in the Campbell Wells Acquisition included four oilfield waste
processing facilities in Louisiana, one oilfield waste processing facility in
Texas, all equipment and capital improvements related to the processing
facilities, and approximately $8.1 million of working capital. In consideration
for these assets, the Company issued to Sanifill, a wholly-owned subsidiary of
USA Waste, a $27.8 million promissory note (the "Sanifill Note") and a
transferable 10-year warrant for the purchase of one million shares of Common
Stock at an exercise price of $2.00 per share (the "Sanifill Warrant"). In
December 1997, the Company paid the Sanifill Note in full.
In connection with the Campbell Wells Acquisition, Sanifill assigned to the
Company its rights and obligations under the Disposal Agreement. Pursuant to the
terms of the Disposal Agreement, through June 30, 2021, Newpark is obligated to
deliver to the Company on an annual basis for processing and disposal at certain
of its Louisiana landfarms the lesser of (i) one-third of the barrels of
oilfield waste that Newpark receives for processing and disposal in the
Territory and (ii) 1,850,000 barrels of oilfield waste, in each case excluding
saltwater. During the twelve-month period ending December 31, 1997, Newpark
delivered approximately 1,430,000 barrels of oilfield waste, excluding
saltwater, to the Company's landfarms.
The Disposal Agreement governs the price to be paid by Newpark to the
Company for delivered oilfield waste. Currently, Newpark is paying to the
Company $5.50 for each barrel of oilfield waste delivered to the Company under
the Disposal Agreement. This contractual price is lower than the $6.56 average
per barrel price (excluding saltwater) that the Company received from other
customers during the first quarter of 1998, and the Company expects such price
disparity to persist for the duration of the Disposal Agreement; however,
Newpark's delivery obligations under the Disposal Agreement allow the Company to
eliminate virtually all marketing and transfer expenses on waste delivered by
Newpark. On June 30, 1998 and on each subsequent December 31st and June 30th
occurring during the term of the Disposal Agreement, the per barrel price to be
paid by Newpark to the Company will be adjusted. Adjustments are made based upon
changes occurring in the average prices received by Newpark from customers for
oilfield waste processing and disposal and other related services performed by
Newpark during the six-month period ending on the applicable adjustment date
compared, on a percentage basis, to the average prices received by Newpark from
customers for such disposal and services during the six-month period commencing
12 months prior to such adjustment date and concluding six months prior to such
adjustment date. The adjusted price will be applied retroactively to all
invoices received by Newpark from the Company during the six-month period
preceding the applicable adjustment date. In no event, however, will the price
paid by Newpark to the Company be less than $5.50 per barrel. The Company does
not presently believe that this adjustment mechanism will in the near future
result in a material increase in the price per barrel paid by Newpark.
As part of the Campbell Wells Acquisition, Sanifill agreed that if, prior
to December 31, 1999, the Company is required by the Louisiana Department of
Natural Resources or the Louisiana Department of Environmental Quality to
construct or install additional water injection wells with respect to certain of
the Louisiana landfarms purchased by the Company from Sanifill, Sanifill will
reimburse the Company for up to $1.6 million of expenses incurred by the Company
in constructing or installing the additional water injection wells. Excepting
this reimbursement obligation and certain amounts previously paid by Sanifill to
reimburse the Company for closure and post-closure requirements associated with
the Lacassine, Louisiana NORM facility, the Company assumed all liabilities and
obligations of Campbell Wells for closure, post-closure, monitoring,
maintenance, environmental remediation and clean-up of all landfarms and
treatment sites owned, occupied, leased or operated by Campbell Wells as of the
date of the Campbell Wells Acquisition.
In connection with the Campbell Wells Acquisition, Sanifill also agreed to
indemnify the Company against all liabilities of Sanifill and Campbell Wells not
expressly assumed by the Company and, subject to certain limitations, against
any breach of any agreement or covenant made by Sanifill in the definitive
acquisition agreement. To be eligible for indemnification by Sanifill, an
individual claim or loss by the Company based on a Sanifill breach must exceed
$10,000, and all such claims and losses must have exceeded $200,000, in which
case the indemnification obligation of Sanifill is limited to the amount of such
43
<PAGE>
claims and losses in excess of $200,000. Further, the obligation of Sanifill to
indemnify the Company is limited to $10 million.
In connection with the Campbell Wells Acquisition, the Company and Sanifill
executed noncompetition agreements under which each party agreed not to compete
with the other in certain businesses for a period of five years. In its
noncompetition agreement, Sanifill agreed not to engage in the collection,
transfer, transportation, treatment or disposal of oilfield waste during the
restricted period. In return, the Company agreed not to engage in the
collection, treatment or disposal of municipal solid wastes, construction debris
or demolition debris during the restricted period, or own any interest in any
company engaged in any such business. In addition, as a result of the Campbell
Wells Acquisition, the Company is prohibited until August 2001 from (i)
accepting from any customer other than Newpark oilfield waste generated in a
marine environment or transported in a marine vessel within the Territory, and
(ii) engaging in the site remediation and closure business in the Territory.
On September 3, 1997, the Company filed a shelf registration statement
under Rule 415 of the Securities Act registering, among other things, the shares
of Common Stock issuable upon exercise of the Sanifill Warrant. The Company has
agreed to keep this shelf registration statement continuously effective until
the earlier of three years after the date of final exercise of the Sanifill
Warrant and such time as the holder of the Sanifill Warrant has sold all of the
shares issuable upon exercise thereof. However, without the Company's prior
consent, and, under certain circumstances, the prior consent of one of the lead
underwriters of the IPO, the number of shares offered by Sanifill pursuant to
this registration statement in any calendar year cannot exceed the following
limitations:
MAXIMUM NUMBER OF
SHARES TO BE
YEAR OFFERED
1998................................. 200,000
1999................................. 200,000
2000................................. 250,000
2001-2006............................ 300,000
The Sanifill Warrant also grants its holder the "piggyback" registration
right to include shares of Common Stock purchased upon exercise of the Sanifill
Warrant in the coverage of any registration statement under the Securities Act
filed by the Company with respect to an offering of Common Stock by the Company
for its own account or for the account of any of its securities holders.
Sanifill has waived its right to have any shares registered for resale in
connection with this offering.
OTHER
On June 17, 1997, the Company acquired all of the outstanding stock of
three companies owned by Thomas B. Blanton, a director and employee of the
Company. Mr. Blanton received 1,062,500 shares of Common Stock in exchange for
his capital stock of these companies. Pursuant to the terms of the acquisition
agreements, Mr. Blanton became a director and employee of the Company. In
addition, pursuant to the terms of the acquisition agreements, the Company used
approximately $1.2 million of the net proceeds of the IPO to repay various debts
of Mr. Blanton's former companies, all of which had been personally guaranteed
by Mr. Blanton and of which approximately $200,000 was owed to Tommy Yount, the
brother-in-law of Mr. Blanton.
The Company regularly purchases used cooking oil and other food processing
residuals that Mr. Yount collects from generators of such materials. During
1997, the Company purchased approximately $243,000 of such materials from Mr.
Yount.
In connection with the organization of the Company in November 1996,
Messrs. Orr, Blackwell and William M. DeArman, who may be deemed to be promoters
of the Company, purchased (together with members of their immediate family or
entities controlled by them) 976,000, 375,000 and 500,000 shares of Common Stock
for $19,520, $7,500 and $10,000, respectively. In December 1996, Mr. DeArman
purchased an additional 50,000 shares of Common Stock for $87,500.
On May 7, 1998, the Company entered into definitive agreements to acquire
from USA Waste all of the outstanding capital stock of Northern A-1 Services,
Inc. and substantially all of the assets of City Environmental, Inc. and
Universal Waste and Transit for $13.7 million, $30.8 million and $2.7 million in
cash and assumed debt, respectively. USA Waste is the parent corporation of
Sanifill, a principal stockholder of the Company.
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<PAGE>
PRINCIPAL STOCKHOLDERS
The following table sets forth information regarding beneficial ownership
of the Common Stock as of the date of this Prospectus by (i) each person who is
known to the Company to beneficially own more than 5% of the outstanding shares
of Common Stock, (ii) each director of the Company, (iii) Mr. Lawlor, as the
Chief Executive Officer, and each of the other executive officers of the Company
identified in the Summary Compensation Table, and (iv) all directors and
executive officers of the Company as a group. Unless otherwise indicated, all
persons listed have an address c/o the Company's principal executive offices and
have sole voting and investment power with respect to their shares of Common
Stock, except to the extent authority is shared by spouses under applicable law.
PERCENT
--------------------
NUMBER OF BEFORE AFTER
NAME SHARES OFFERING OFFERING
Michael P. Lawlor(1)................. 250,100 2.9% 2.0%
W. Gregory Orr(2).................... 623,500 7.3% 5.1%
Earl J. Blackwell(3)................. 355,000 4.2% 2.9%
Thomas B. Blanton.................... 700,780 8.2% 5.7%
William A. Rothrock IV(4)............ 67,500 * *
Alfred Tyler 2nd(5).................. 15,000 * *
James F. McEneaney, Jr.(6)........... 15,000 * *
Sanifill, Inc.(7).................... 1,000,000 10.5% 7.5%
William M. DeArman(8)................ 445,000 5.2% 3.6%
All executive officers and directors
as a group (7 persons)(9).......... 2,026,880 23.4% 16.3%
- ------------------------------
* Less than one percent.
(1) Includes 100,000 shares which may be acquired by Mr. Lawlor upon the
exercise of options which are exercisable within 60 days of the date of this
Prospectus.
(2) Includes 250,000 shares held by The Wiley Gregory & Genene M. Orr Family
LLC, a limited liability company, over which Mr. Orr, as the manager, has
sole voting and investment power, 15,000 shares held by Mr. Orr's wife,
Genene Orr, 15,000 shares held by Mr. Orr's wife as custodian for two of Mr.
Orr's children, and 10,000 shares held individually by one of Mr. Orr's
children. Mr. Orr disclaims beneficial ownership of all shares held
individually by his children.
(3) Includes 180,000 shares held by The Earl J. and Christine J. Blackwell
Family LLC, a limited liability company, over which Mr. Blackwell, as the
manager, has sole voting and investment power and 100,000 shares held in an
individual retirement account for the benefit of Mr. Blackwell.
(4) Includes 5,000 shares which Mr. Rothrock has the right to acquire pursuant
to the terms of a stock option granted by the Company to him. Excludes
125,000 shares issuable pursuant to a stock option granted to Mr. Rothrock,
the vesting of which are contingent upon the successful completion of
certain corporate development business activities.
(5) Includes 15,000 shares which Mr. Tyler has the right to acquire pursuant to
the terms of certain stock options granted by the Company to him.
(6) Includes 15,000 shares which Mr. McEneaney has the right to acquire pursuant
to the terms of certain stock options granted by the Company to him.
(7) Represents shares which Sanifill has the right to acquire pursuant to the
terms of a warrant issued by the Company to Sanifill on December 13, 1996.
Sanifill's address is 1001 Fannin Street, Suite 4000, Houston, Texas 77002.
(8) Includes 200,000 shares held by a trust of which Mr. DeArman is the sole
beneficiary, 12,500 shares held individually by one of Mr. DeArman's
children, and 47,500 shares held by trusts for the benefit of certain of Mr.
DeArman's children. Mr. DeArman disclaims beneficial ownership of all shares
held by or for the benefit of his children. Mr. DeArman's address is 5420
Huckleberry Lane, Houston, Texas 77056.
(9) Excludes 125,000 shares subject to the corporate development option granted
to Mr. Rothrock.
45
<PAGE>
DESCRIPTION OF SECURITIES
COMMON STOCK
The Company is authorized to issue 30,000,000 shares of Common Stock, of
which 8,516,211 shares are outstanding. Holders of Common Stock are entitled to
one vote for each share held on all matters submitted to a vote of stockholders.
There is no cumulative voting with respect to the election of directors. See
"Risk Factors -- Concentration of Voting Control." Holders of Common Stock are
entitled to receive ratably any dividends that may be declared by the Board of
Directors of the Company out of legally available funds. Upon the liquidation,
dissolution or winding up of the Company, the holders of Common Stock are
entitled to receive ratably the net assets of the Company after payment of all
debts and liabilities and liquidation preferences of any outstanding shares of
Preferred Stock. Holders of Common Stock have no preemptive, subscription,
redemption or conversion rights. As of May 6, 1998, the Company had 293 holders
of record of Common Stock.
PREFERRED STOCK
The Company's Certificate of Incorporation authorizes the issuance of
5,000,000 shares of Preferred Stock, of which no shares are outstanding. Shares
of unissued Preferred Stock may be issued in one or more series from time to
time with such designations, rights, preferences and limitations as the Board of
Directors may determine. The rights, preferences and limitations of separate
series of Preferred Stock may differ with respect to such matters as may be
determined by the Board of Directors including, without limitation, the rate of
dividends, method or nature of payment of dividends, terms of redemption,
amounts payable on liquidation, sinking fund provisions, conversion rights and
voting rights. Such undesignated shares could also be used as an anti-takeover
device by the Company. For example, they could be issued with "super-voting
rights" and placed in the control of parties friendly to the current
management.
OPTIONS AND WARRANTS
The Company has outstanding options to purchase an aggregate of 1,181,625
shares of Common Stock, of which 281,250 shares are issuable pursuant to options
the vesting of which are contingent upon the successful completion of certain
corporate business development activities. The Company has outstanding warrants
to purchase an additional 1,235,000 shares of Common Stock consisting of (i) the
Sanifill Warrant for 1,000,000 shares at $2.00 per share; (ii) warrants for
112,500 total shares at $11.40 per share issued to Sanders Morris Mundy Inc.
("SMM") and Van Kasper & Company in connection with the IPO (the "IPO
Warrants"); (iii) a warrant for 37,500 shares at $9.50 per share issued to SMM
for certain consulting services (the "SMM Warrant"); and (iv) other warrants
for 85,000 total shares at exercise prices ranging from $9.50 per share to
$14.125 per share.
SHARES ELIGIBLE FOR FUTURE SALE
As of the date of this Prospectus, the Company had issued and outstanding
8,516,211 shares of Common Stock. There are over 5,500,000 shares of Common
Stock which are freely tradeable or which are currently eligible for resale
under Rules 144 and 145 promulgated under the Securities Act. Further, the
Company has issued and outstanding options to purchase up to 1,181,625 shares of
Common Stock and warrants to purchase up to 1,235,000 shares of Common Stock.
Additional shares of Common Stock may become eligible for sale on the public
market from time to time upon exercise of warrants and stock options.
The Company has filed a registration statement on Form S-8 to register all
shares subject to the Stock Option Plan and the Directors' Plan. The Company has
also filed a shelf registration statement on Form S-1 registering for resale
388,397 total shares of Common Stock held by Messrs. Orr, Blackwell, DeArman and
certain owners of a business acquired by the Company in June 1997 and the
1,000,000 shares of Common Stock underlying the Sanifill Warrant, and 1,682,901
shares of Common Stock remaining available for use in acquisitions by the
Company. The Company has also agreed to register for resale all shares of Common
Stock issuable upon the exercise of the IPO Warrants and the SMM Warrant and
168,987 shares issued in connection with a 1997 acquisition.
No prediction can be made as to the effect, if any, the sale of shares or
the availability of shares for sale will have on the market price for the Common
Stock prevailing from time to time. Nevertheless, sales, or the availability for
sale of, substantial amounts of the Common Stock in the public market could
adversely
46
<PAGE>
affect prevailing market prices and the future ability of the Company to raise
equity capital and complete any additional acquisitions for Common Stock.
DELAWARE LAW AND CERTAIN CHARTER PROVISIONS
The Company's Certificate of Incorporation limits, to the fullest extent
permitted by Delaware law, the liability of a director to the Company or its
stockholders for monetary damages for a breach of such director's fiduciary duty
as a director. Delaware law presently permits such limitations of a director's
liability except where a director breaches his or her duty of loyalty to the
Company or its stockholders, fails to act in good faith or engages in
intentional misconduct or a knowing violation of law, authorizes payment of an
unlawful dividend or stock repurchase, or obtains an improper personal benefit.
This provision is intended to afford directors additional protection, and limit
their potential liability, from suits alleging a breach of the duty of care by a
director. The Company believes this provision will assist it in maintaining and
securing the services of directors who are not employees of the Company. As a
result of the inclusion of such a provision, stockholders may be unable to
recover, under Delaware law, monetary damages against directors for actions
taken by them that constitute negligence or gross negligence or that are in
violation of their fiduciary duties, although it may be possible to obtain
injunctive or other equitable relief with respect to such actions. If equitable
remedies are found not to be available to stockholders for any particular case,
stockholders may not have any effective remedy, under Delaware law, against the
challenged conduct.
The Company's Certificate of Incorporation also provides that directors and
officers shall be indemnified against liabilities arising from their service as
directors or officers to the fullest extent permitted by law, which generally
requires that the individual act in good faith and in a manner he or she
reasonably believes to be in or not opposed to the Company's best interests. The
Company has obtained directors and officers liability insurance to limit its
exposure under these provisions.
Under the Company's Certificate of Incorporation, the Board of Directors is
divided into three classes of directors with each class serving a staggered
three-year term. The classification system of electing directors may tend to
discourage a third party from making a tender offer or otherwise attempting to
obtain control of the Company and may maintain the incumbency of the Board of
Directors, as it generally makes it more difficult for stockholders to replace a
majority of the directors. See "Risk Factors -- Potential Anti-Takeover Effect
of Charter Provisions."
TRANSFER AGENT
The Company's transfer agent for the Common Stock is ChaseMellon
Shareholder Services, L.L.C.
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<PAGE>
UNDERWRITING
Subject to the terms and conditions of an Underwriting Agreement, dated
, 1998 (the "Underwriting Agreement"), the Underwriters named below, who
are represented by Donaldson, Lufkin & Jenrette Securities Corporation
("DLJ"), Deutsche Morgan Grenfell Inc., Van Kasper & Company and Sanders
Morris Mundy Inc. (the "Representatives"), have severally agreed to purchase
from the Company the respective number of shares of Common Stock set forth
opposite their names below.
NUMBER
UNDERWRITERS OF SHARES
Donaldson, Lufkin & Jenrette Securities
Corporation...........................
Deutsche Morgan Grenfell Inc............
Van Kasper & Company....................
Sanders Morris Mundy Inc................
---------
Total.............................. 3,750,000
=========
The Underwriting Agreement provides that the obligations of the several
Underwriters to purchase and accept delivery of the shares of Common Stock
offered hereby are subject to approval by their counsel of certain legal matters
and to certain other conditions. The Underwriters are obligated to purchase and
accept delivery of all the shares of Common Stock offered hereby (other than
those shares covered by the over-allotment option described below) if any are
purchased.
The Underwriters initially propose to offer the shares of Common Stock in
part directly to the public at the offering price set forth on the cover page of
this Prospectus and in part to certain dealers (including the Underwriters) at
such price less a concession not in excess of $ per share. The Underwriters
may allow, and such dealers may re-allow, to certain other dealers a concession
not in excess of $ per share. After the offering of the Common Stock, the
offering price and other selling terms may be changed by the Representatives at
any time without notice.
The Company has granted to the Underwriters an option, exercisable within
30 days after the date of this Prospectus, to purchase, from time to time, in
whole or in part, up to an aggregate of 562,500 additional shares of Common
Stock at the public offering price less underwriting discounts and commissions.
The Underwriters may exercise such option solely to cover overallotments, if
any, made in connection with the offering. To the extent that the Underwriters
exercise such option, each Underwriter will become obligated, subject to certain
conditions, to purchase its pro rata portion of such additional shares based on
such Underwriter's percentage underwriting commitment as indicated in the
preceding table.
The Company has agreed to indemnify the Underwriters against certain
liabilities, including liabilities under the Securities Act, or to contribute to
payments that the Underwriters may be required to make in respect thereof.
Each of the Company, its executive officers and directors and certain
stockholders of the Company has agreed, subject to certain exceptions, not to
(i) offer, pledge, sell, contract to sell, sell any option or contract to
purchase, purchase any option or contract to sell, grant any option, right or
warrant to purchase or otherwise transfer or dispose of, directly or indirectly,
any shares of Common Stock or any securities convertible into or exercisable or
exchangeable for Common Stock or (ii) enter into any swap or other arrangement
that transfers all or a portion of the economic consequences associated with the
ownership of any Common Stock (regardless of whether any of the transactions
described in clause (i) or (ii) is to be settled by the delivery of Common
Stock, or such other securities, in cash or otherwise) for a period of 120 days
after the date of this Prospectus without the prior written consent of DLJ. In
addition, during such period, the Company has also agreed not to file any
registration statement with respect to, and each of its executive officers,
directors and certain stockholders of the Company has agreed not to make any
demand for, or exercise any right with respect to, the registration of any
shares of Common Stock or any securities convertible into or exercisable or
exchangeable for Common Stock without DLJ's prior written consent.
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<PAGE>
The agreements described in the preceding sentence do not apply, however, with
respect to the shelf registration statement filed by the Company in September
1997.
In May 1997, the Company engaged SMM to assist it in, among other things,
developing and implementing its acquisition program. As consideration for its
services, the Company issued the SMM Warrant to SMM. In connection with the IPO,
the Company issued the IPO Warrant to Van Kasper & Company and SMM.
The Common Stock is listed on the American Stock Exchange ("AMEX") under
the symbol "USL." On May 5, 1998, the reported last sale price of the Common
stock as reported on the AMEX was $25 per share. See "Price Range of Common
Stock and Dividend Policy."
Other than in the United States, no action has been taken by the Company or
the Underwriters that would permit a public offering of the shares of Common
Stock offered hereby in any jurisdiction where action for that purpose is
required. The shares of Common Stock offered hereby may not be offered or sold,
directly or indirectly, nor may this Prospectus or any other offering material
or advertisements in connection with the offer and sale of any such shares of
Common Stock be distributed or published in any jurisdiction, except under
circumstances that will result in compliance with the applicable rules and
regulations of such jurisdiction. Persons into whose possession this Prospectus
comes are advised to inform themselves about and to observe any restrictions
relating to the offering of the Common Stock and the distribution of this
Prospectus. This Prospectus does not constitute an offer to sell or a
solicitation of an offer to buy any shares of Common Stock offered hereby in any
jurisdiction in which such an offer or a solicitation is unlawful.
In connection with the offering, the Underwriters may engage in
transactions that stabilize, maintain or otherwise affect the price of the
Common Stock. Specifically, the Underwriters may overallot the offering,
creating a syndicate short position. The Underwriters may bid for and purchase
shares of Common Stock in the open market to cover such syndicate short position
or to stabilize the price of the Common Stock. These activities may stabilize or
maintain the market price of the Common Stock above independent market levels.
The Underwriters are not required to engage in these activities, and may end any
of these activities at any time.
LEGAL MATTERS
The validity of the issuance of the shares of Common Stock offered hereby
by the Company will be passed upon for the Company by Hartzog Conger & Cason,
Oklahoma City, Oklahoma. Certain legal matters related to this offering will be
passed on for the Underwriters by McDermott, Will & Emery, Chicago, Illinois.
EXPERTS
The audited financial statements included elsewhere in this Prospectus and
elsewhere in the registration statement have been audited by Arthur Andersen
LLP, independent public accountants, as indicated in their reports with respect
thereto, and are included herein in reliance upon the authority of said firm as
experts in giving said reports.
ADDITIONAL INFORMATION
The Company has filed with the Securities and Exchange Commission (the
"Commission") a registration statement (which term shall encompass any and all
amendments thereto) on Form S-1 (the "Registration Statement") under the
Securities Act with respect to the shares of Common Stock offered by this
Prospectus. This Prospectus, which is part of the Registration Statement, does
not contain all of the information set forth in the Registration Statement and
the exhibits and schedules thereto, certain items of which are omitted in
accordance with the rules and regulations of the Commission. Statements made in
this Prospectus as to the contents of any contract, agreement or other document
referred to are not necessarily complete. With respect to each such contract,
agreement or other document filed as an exhibit to the Registration Statement,
reference is hereby made to the exhibit for a more complete description of the
matter involved, and each such statement shall be deemed qualified in its
entirety by such reference. Any person to whom this Prospectus is delivered may
obtain a copy of the Registration Statement, including the exhibits thereto,
without charge upon written or oral request to the Secretary of the Company at
411 N. Sam Houston Parkway East, Suite 400, Houston, Texas 77060, (281)
272-4500.
49
<PAGE>
The Company is subject to the information requirements of the Exchange Act,
and in accordance therewith files reports, proxy statements and other
information with the Commission. These reports, proxy statements and other
information may be inspected, without charge, at the Public Reference Section of
the Commission at Room 1024, Judiciary Plaza, 450 Fifth Street, N.W.,
Washington, D.C. 20549 and at the regional offices of the Commission located at
Seven World Trade Center, 13th Floor, New York, New York 10048 and at Citicorp
Center, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661. Copies of
such materials can be obtained from the Public Reference Section of the
Commission at Room 1024, Judiciary Plaza, 450 Fifth Street, N.W., Washington,
D.C. 20549, upon payment of the prescribed fees. The Commission maintains a web
site that contains reports, proxy and information statements regarding
registrants that file electronically with the Commission. The address of this
web site is (http://www.sec.gov).
The Common Stock is listed on AMEX. Reports, proxy statements and other
information concerning the Company can be inspected at the offices of AMEX
located at 86 Trinity Place, New York, New York 10006-1881.
50
<PAGE>
INDEX TO FINANCIAL STATEMENTS
PAGE
-----
U S LIQUIDS INC. PRO FORMA
Introduction to Unaudited Pro
Forma Financial Statements..... F-2
Pro Forma Balance Sheet
(Unaudited).................... F-3
Notes to Pro Forma Balance Sheet
(Unaudited).................... F-4
Pro Forma Statements of Income
(Unaudited).................... F-5
Notes to Pro Forma Statements of
Income (Unaudited)............. F-8
U S LIQUIDS INC. AND SUBSIDIARIES
Report of Independent Public
Accountants.................... F-9
Consolidated Balance Sheets..... F-10
Consolidated Statements of
Income......................... F-11
Consolidated Statements of
Stockholders' Equity........... F-12
Consolidated Statements of Cash
Flows.......................... F-13
Notes to Consolidated Financial
Statements..................... F-14
CITY ENVIRONMENTAL, INC.
Report of Independent Public
Accountants.................... F-29
Balance Sheets.................. F-30
Statements of Income............ F-31
Notes to Financial Statements... F-32
WASTE STREAM ENVIRONMENTAL INC. AND
AFFILIATE
Report of Independent Public
Accountants.................... F-38
Combined Balance Sheets......... F-39
Combined Statements of Income... F-40
Combined Statements of
Stockholders' Equity........... F-41
Combined Statements of Cash
Flows.......................... F-42
Notes to Combined Financial
Statements..................... F-43
PARALLEL PRODUCTS, INC.
Report of Independent Public
Accountants.................... F-48
Balance Sheets.................. F-49
Statements of Income............ F-50
Statements of Partners'
Capital........................ F-51
Statements of Cash Flows........ F-52
Notes to Financial Statements... F-53
U S LIQUIDS INC. PREDECESSOR
Report of Independent Public
Accountants.................... F-58
Balance Sheets.................. F-59
Statements of Income............ F-60
Notes to Financial Statements... F-61
F-1
<PAGE>
U S LIQUIDS INC.
INTRODUCTION TO UNAUDITED PRO FORMA FINANCIAL STATEMENTS
The following unaudited pro forma financial statements present the balance
sheet and income statement data from the consolidated financial statements of U
S Liquids Inc. (U S Liquids or the Company) combined with the historical
financial data of acquisitions by the Company since its initial public offering
(the Acquisitions) as follows: (i) the unaudited pro forma balance sheet
includes the historical consolidated balance sheet data of U S Liquids at March
31, 1998 combined with the Acquisitions consummated or to be consummated after
March 31, 1998 as if each had occurred on March 31, 1998 and (ii) the unaudited
pro forma income statements for the year ended December 31, 1997 and for the
three months ended March 31, 1997 and 1998 include the historical consolidated
income statements of U S Liquids for the respective periods combined with all
Acquisitions consummated or to be consummated since the Company's initial public
offering as if each had occurred January 1, 1997. Additionally, the effects of
the Company's initial public offering and the Company's current public equity
offering (the Offering) are included in the unaudited pro forma financial
statements as if they had occurred on January 1, 1997. The income statement data
present depreciation and amortization expenses separately from operating
expenses and selling, general and administrative expenses. Depreciation and
amortization expenses are included in the operating and the selling, general and
administrative expense captions set forth in the audited financial statements.
The Company has preliminarily analyzed the savings that it expects to be
realized by consolidating certain operational and general and administrative
functions. The Company cannot quantify these savings due to the short period of
time since the closing of the majority of the Acquisitions. It is anticipated
that these savings will be partially offset by the incremental increase in costs
related to the Company's corporate management. However, these costs, like the
savings that they offset, cannot be quantified accurately. Neither the
anticipated savings nor the anticipated costs have been included in the pro
forma financial statements.
The pro forma financial statements include certain adjustments to the
historical financial statements of the Acquisitions, including the adjustment of
depreciation and amortization expenses to reflect purchase price allocations,
recording of interest expense to reflect debt issued in connection with the
Acquisitions, and certain reductions of salaries and benefits payable to the
previous owners of the businesses acquired which were agreed to in connection
with the Acquisitions and the related income tax effects of these adjustments.
The pro forma adjustments are based on preliminary estimates, available
information and certain assumptions and may be revised as additional information
becomes available. The pro forma financial statements do not purport to
represent what the Company's financial position or results of operations would
actually have been if such transactions in fact had occurred on those dates or
project the Company's financial position or results of operations for any future
period. Since the Company and the Acquisitions were not under common control or
management for all periods, historical combined results may not be comparable
to, or indicative of, future performance. The unaudited pro forma financial
statements should be read in conjunction with the other financial statements and
notes thereto included elsewhere in this Prospectus, as well as information
included under the headings "Selected Financial Data," "Management's
Discussion and Analysis of Financial Condition and Results of Operations" and
"Risk Factors" included elsewhere herein.
F-2
<PAGE>
U S LIQUIDS INC.
PRO FORMA BALANCE SHEET (UNAUDITED)
(IN THOUSANDS)
<TABLE>
<CAPTION>
MARCH 31, 1998
------------------------------------------------------------------------------------------
HISTORICAL ACQUISITION OFFERING PRO FORMA
CONSOLIDATED ACQUISITIONS ADJUSTMENTS(a) PRO FORMA ADJUSTMENTS AS ADJUSTED
------------ ------------- --------------- --------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents.......... $ 5,733 $ 2,013 $ (270) $ 7,476 $ 87,359(b) $ 7,476
(87,359)(c)
Accounts receivable, net of
allowance....................... 7,155 13,872 (5,382) 15,645 15,645
Inventories........................ 447 655 1,102 1,102
Prepaid expenses and other current
assets.......................... 955 2,446 (46) 3,355 3,355
------------ ------------- --------------- --------- ------------ ------------
Total current assets....... 14,290 18,986 (5,698) 27,578 -- 27,578
PROPERTY, PLANT AND EQUIPMENT, net... 40,501 36,089 146 76,736 76,736
INTANGIBLE ASSETS, net............... 14,402 18,208 30,227 62,837 62,837
OTHER ASSETS, net.................... 1,047 249 (35) 1,261 1,261
------------ ------------- --------------- --------- ------------ ------------
Total assets............... $ 70,240 $73,532 $ 24,640 $ 168,412 $ -- $168,412
============ ============= =============== ========= ============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Current maturities of long-term
obligations..................... $ 1,258 $ 5,671 $ (5,671) $ 1,258 $ $ 1,258
Accounts payable................... 3,081 5,641 (685) 8,037 8,037
Accrued liabilities................ 4,473 2,764 769 8,006 8,006
------------ ------------- --------------- --------- ------------ ------------
Total current
liabilities................ 8,812 14,076 (5,587) 17,301 -- 17,301
LONG-TERM OBLIGATIONS, net of current
maturities......................... 25,346 5,838 59,632 90,816 (87,359)(c) 3,457
CELL PROCESSING RESERVE.............. 7,129 -- 7,129 7,129
CLOSURE AND REMEDIATION RESERVES..... 3,221 1,325 250 4,796 4,796
OTHER RESERVES....................... -- -- 1,360 1,360 1,360
DEFERRED INCOME TAXES................ 308 -- 437 745 745
------------ ------------- --------------- --------- ------------ ------------
Total liabilities.......... 44,816 21,239 56,092 122,147 (87,359) 34,788
------------ ------------- --------------- --------- ------------ ------------
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY:
Common stock....................... 75 33 (23) 85 38(b) 123
Additional paid-in capital......... 20,171 8,525 12,306 41,002 87,321(b) 128,323
Retained earnings.................. 5,178 8,259 (8,259) 5,178 5,178
Other owners' equity............... -- 35,476 (35,476) -- --
------------ ------------- --------------- --------- ------------ ------------
Total stockholders'
equity..................... 25,424 52,293 (31,452) 46,265 87,359 133,624
------------ ------------- --------------- --------- ------------ ------------
Total liabilities and
stockholders' equity.... $ 70,240 $73,532 $ 24,640 $ 168,412 $ -- $168,412
============ ============= =============== ========= ============ ============
</TABLE>
The accompanying notes are an integral part of this pro forma financial
statement.
F-3
<PAGE>
U S LIQUIDS INC.
NOTES TO PRO FORMA BALANCE SHEET (UNAUDITED)
(a) These adjustments reflect the purchase of the Acquisitions that were
consummated or will be consummated subsequent to March 31, 1998, including
approximately $61,363,000 of long-term obligations issued for the cash
portion of the purchase price and for certain debt obligations paid upon
acquisition and approximately 1,017,000 shares issued. These adjustments
also reflect purchase price allocations on the Acquisitions, including
allocating the deferred income tax liability attributable to the temporary
differences between the financial reporting and income tax bases on assets
and liabilities previously held as S Corporations and adjusting working
capital to zero for certain Acquisitions through the collection and
subsequent repayment of approximately $6,500,000 in accounts receivable.
(b) Reflects the proceeds from the issuance of 3,750,000 shares of Common
Stock, net of estimated offering costs. Offering costs primarily consist of
underwriting discounts and commissions, accounting fees, legal fees and
printing expenses.
(c) Reflects the repayment of certain debt obligations with proceeds from the
Offering.
F-4
<PAGE>
U S LIQUIDS INC.
PRO FORMA STATEMENT OF INCOME (UNAUDITED)
(IN THOUSANDS)
<TABLE>
<CAPTION>
FOR THE YEAR ENDED DECEMBER 31, 1997
-------------------------------------------------------------------------------------------
HISTORICAL ACQUISITION OFFERING PRO FORMA
CONSOLIDATED ACQUISITIONS ADJUSTMENTS PRO FORMA ADJUSTMENTS AS ADJUSTED
------------- ------------- ------------ ---------- ------------ ------------
<S> <C> <C> <C> <C>
REVENUES............................. $38,159 $ 111,824 $ $149,983 $ $149,983
OPERATING EXPENSES................... 21,353 79,621 894(a) 101,868 101,868
DEPRECIATION AND
AMORTIZATION....................... 2,990 4,611 1,368(b) 8,969 8,969
SELLING, GENERAL AND ADMINISTRATIVE
EXPENSES........................... 5,750 14,048 (1,612)(a) 18,186 18,186
------------- ------------- ------------ ---------- ------------ ------------
INCOME FROM OPERATIONS............... 8,066 13,544 (650) 20,960 -- 20,960
INTEREST EXPENSE, net................ 1,734 1,873 3,542(c) 7,149 (5,625)(e) 1,524
OTHER (INCOME) EXPENSE, net.......... 41 113 154 154
------------- ------------- ------------ ---------- ------------ ------------
INCOME (LOSS) BEFORE PROVISION FOR
INCOME TAXES....................... 6,291 11,558 (4,192) 13,657 5,625 19,282
PROVISION FOR INCOME TAXES........... 2,416 161 3,022(d) 5,599 2,306(d) 7,905
------------- ------------- ------------ ---------- ------------ ------------
NET INCOME (LOSS).................... $ 3,875 $ 11,397 $ (7,214) $ 8,058 $ 3,319 $ 11,377
============= ============= ============ ========== ============ ============
BASIC EARNINGS PER COMMON SHARE...... $ 0.93
============
DILUTED EARNINGS PER COMMON AND
COMMON EQUIVALENT SHARE............ $ 0.85
============
WEIGHTED AVERAGE COMMON SHARES
OUTSTANDING........................ 12,203(f)
============
WEIGHTED AVERAGE COMMON AND COMMON
EQUIVALENT SHARES OUTSTANDING...... 13,395(g)
============
</TABLE>
The accompanying notes are an integral part of this pro forma financial
statement.
F-5
<PAGE>
U S LIQUIDS INC.
PRO FORMA STATEMENT OF INCOME (UNAUDITED)
(IN THOUSANDS)
<TABLE>
<CAPTION>
FOR THE THREE MONTHS ENDED MARCH 31, 1997
-----------------------------------------------------------------------------------------
HISTORICAL ACQUISITION OFFERING PRO FORMA
CONSOLIDATED ACQUISITIONS ADJUSTMENTS PRO FORMA ADJUSTMENTS AS ADJUSTED
------------ ------------- ------------ --------- ------------ ------------
<S> <C> <C> <C> <C>
REVENUES................................ $7,862 $26,637 $ $34,499 $ $ 34,499
OPERATING EXPENSES...................... 4,675 19,611 138(a) 24,424 24,424
DEPRECIATION AND AMORTIZATION........... 633 923 307(b) 1,863 1,863
SELLING, GENERAL AND ADMINISTRATIVE
EXPENSES.............................. 690 3,087 (290)(a) 3,487 3,487
------------ ------------- ------------ --------- ------------ ------------
INCOME FROM OPERATIONS.................. 1,864 3,016 (155) 4,725 -- 4,725
INTEREST EXPENSE, net................... 509 525 819(c) 1,853 (1,406)(e) 447
OTHER (INCOME) EXPENSE, net............. (28) 119 91 91
------------ ------------- ------------ --------- ------------ ------------
INCOME (LOSS) BEFORE PROVISION FOR
INCOME TAXES.......................... 1,383 2,372 (974) 2,781 1,406 4,187
PROVISION FOR INCOME TAXES.............. 504 1 635(d) 1,140 576(d) 1,716
------------ ------------- ------------ --------- ------------ ------------
NET INCOME (LOSS)....................... $ 879 $ 2,371 $ (1,609) $ 1,641 $ 830 $ 2,471
============ ============= ============ ========= ============ ============
BASIC EARNINGS PER COMMON SHARE......... $ 0.20
============
DILUTED EARNINGS PER COMMON AND COMMON
EQUIVALENT SHARE...................... $ 0.19
============
WEIGHTED AVERAGE COMMON SHARES
OUTSTANDING........................... 12,200(f)
============
WEIGHTED AVERAGE COMMON AND COMMON
EQUIVALENT SHARES OUTSTANDING......... 13,233(g)
============
</TABLE>
The accompanying notes are an integral part of this pro forma financial
statement.
F-6
<PAGE>
U S LIQUIDS INC.
PRO FORMA STATEMENT OF INCOME (UNAUDITED)
(IN THOUSANDS)
<TABLE>
<CAPTION>
FOR THE THREE MONTHS ENDED MARCH 31, 1998
--------------------------------------------------------------------------------------
HISTORICAL ACQUISITION OFFERING PRO FORMA
CONSOLIDATED ACQUISITIONS ADJUSTMENTS PRO FORMA ADJUSTMENTS AS ADJUSTED
------------ ------------- ------------ --------- ----------- ------------
<S> <C> <C> <C> <C>
REVENUES............................. $ 12,343 $29,335 $ $ 41,678 $ $ 41,678
OPERATING EXPENSES................... 7,011 20,852 (127)(a) 27,736 27,736
DEPRECIATION AND
AMORTIZATION....................... 987 1,339 224(b) 2,550 2,550
SELLING, GENERAL AND ADMINISTRATIVE
EXPENSES........................... 1,467 3,235 4,702 4,702
------------ ------------- ------------ --------- ----------- ------------
INCOME FROM OPERATIONS............... 2,878 3,909 (97) 6,690 -- 6,690
INTEREST EXPENSE, net................ 346 512 743(c) 1,601 (1,406)(e) 195
OTHER (INCOME) EXPENSE, net.......... (5) 105 100 100
------------ ------------- ------------ --------- ----------- ------------
INCOME (LOSS) BEFORE PROVISION FOR
INCOME TAXES....................... 2,537 3,292 (840) 4,989 1,406 6,395
PROVISION FOR INCOME TAXES........... 1,002 69 974(d) 2,045 577(d) 2,622
------------ ------------- ------------ --------- ----------- ------------
NET INCOME (LOSS).................... $ 1,535 $ 3,223 $ (1,814) $ 2,944 $ 829 $ 3,773
============ ============= ============ ========= =========== ============
BASIC EARNINGS PER COMMON SHARE...... $ 0.31
============
DILUTED EARNINGS PER COMMON AND
COMMON EQUIVALENT SHARE............ $ 0.28
============
WEIGHTED AVERAGE COMMON SHARES
OUTSTANDING........................ 12,262(f)
============
WEIGHTED AVERAGE COMMON AND COMMON
EQUIVALENT SHARES OUTSTANDING...... 13,560(g)
============
</TABLE>
The accompanying notes are an integral part of this pro forma financial
statement.
F-7
<PAGE>
U S LIQUIDS INC.
NOTES TO PRO FORMA STATEMENTS OF INCOME (UNAUDITED)
(a) Adjusts compensation expense to the level the previous owners of the
Acquisitions have agreed to receive as employees of the Company subsequent
to their respective acquisitions. In addition, for certain of the
Acquisitions, salaries and related expenses previously recorded as
selling, general and administrative expenses have been reclassified as
operating expenses consistent with the Company's accounting policy.
(b) Adjusts depreciation and amortization expenses to reflect purchase price
allocations on the Acquisitions.
(c) Records interest expense on the debt incurred to effect the purchase of
the Acquisitions, net of a reduction in interest expense on debt repaid in
connection with the Acquisitions.
(d) Reflects the incremental provision for providing federal income taxes on
the Acquisitions previously taxed as S corporations or limited liability
companies as well as federal and state income taxes relating to the pro
forma income statement adjustments.
(e) Reflects the reduction in interest expense attributed to obligations
retired with proceeds from the Offering.
(f) Includes (i) 5,937,435 shares, 5,238,875 shares and 7,438,910 shares
outstanding for the year ended December 31, 1997, and for the three months
ended March 31, 1997 and 1998, respectively, (ii) 3,750,000 shares issued
in connection with the Offering and (iii) 2,515,124 shares, 3,211,085
shares and 1,073,578 shares for the year ended December 31, 1997, and for
the three months ended March 31, 1997 and 1998, respectively, issued in
connection with the Acquisitions and the Company's initial public offering
as if each had occurred on January 1, 1997.
(g) Includes the weighted average common shares outstanding and 1,192,531
shares, 1,032,585 shares and 1,298,072 shares for the year ended December
31, 1997, and for the three months ended March 31, 1997 and 1998,
respectively, representing the effect of outstanding warrants and options
to purchase Common Stock, using the treasury stock method. Excludes
281,250 shares issuable pursuant to options, the vesting of which is
contingent upon the successful completion or certain corporate development
activities.
F-8
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To U S Liquids Inc.:
We have audited the accompanying consolidated balance sheets of U S Liquids
Inc. (a Delaware corporation) and subsidiaries as of December 31, 1996 and 1997,
and the related consolidated statements of income, stockholders' equity and cash
flows for each of the three years in the period ended December 31, 1997. These
consolidated financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these consolidated
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the consolidated financial statements are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial position of
U S Liquids Inc. and subsidiaries as of December 31, 1996 and 1997, and the
consolidated results of their operations and their cash flows for each of the
three years in the period ended December 31, 1997, in conformity with generally
accepted accounting principles.
ARTHUR ANDERSEN LLP
Houston, Texas
March 3, 1998
F-9
<PAGE>
U S LIQUIDS INC.
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
DECEMBER 31, MARCH 31,
-------------------- -----------
ASSETS 1996 1997 1998
--------- --------- -----------
(UNAUDITED)
CURRENT ASSETS:
Cash and cash equivalents....... $ 5,604 $ 2,203 $ 5,733
Accounts receivable, less
allowances of $265, $342 and
$353 (unaudited).............. 4,843 5,436 7,155
Inventories..................... 339 567 447
Prepaid expenses and other
current assets................ 850 621 955
--------- --------- -----------
Total current assets....... $ 11,636 $ 8,827 $14,290
PROPERTY, PLANT AND EQUIPMENT, net... 34,582 39,110 40,501
DEFERRED INCOME TAXES................ 100 -- --
INTANGIBLE ASSETS, net............... 85 6,078 14,402
OTHER ASSETS, net.................... 448 1,001 1,047
--------- --------- -----------
Total assets............... $ 46,851 $ 55,016 $70,240
========= ========= ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Current maturities of long-term
obligations................... $ 5,817 $ 792 $ 1,258
Accounts payable................ 2,984 2,154 3,081
Accrued liabilities............. 2,147 3,759 4,473
Advances from stockholders and
related-party notes payable... 465 -- --
--------- --------- -----------
Total current
liabilities................ $ 11,413 $ 6,705 $ 8,812
LONG-TERM OBLIGATIONS, net of current
maturities......................... 23,668 16,644 25,346
CELL PROCESSING RESERVE.............. 7,732 7,330 7,129
CLOSURE AND REMEDIATION RESERVES..... 2,500 3,275 3,221
DEFERRED INCOME TAXES................ -- 156 308
--------- --------- -----------
Total liabilities.......... $ 45,313 $ 34,110 $44,816
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY:
Preferred stock, $.01 par value,
5,000,000 shares authorized,
none issued
Series A 72 percent cumulative
preferred stock, $1.00 par
value, 10,000 shares
authorized, issued and
outstanding as of December 31,
1996.......................... $ 10 $ -- $--
Common stock, $.01 par value,
30,000,000 shares authorized,
5,238,875, 7,303,164 and
7,499,022 (unaudited) shares
issued and outstanding........ 52 73 75
Additional paid-in capital...... 1,379 17,190 20,171
Retained earnings............... 97 3,643 5,178
--------- --------- -----------
Total stockholders'
equity..................... $ 1,538 $ 20,906 $25,424
--------- --------- -----------
Total liabilities and
stockholders' equity.... $ 46,851 $ 55,016 $70,240
========= ========= ===========
The accompanying notes are an integral part of these consolidated financial
statements.
F-10
<PAGE>
U S LIQUIDS INC.
CONSOLIDATED STATEMENTS OF INCOME
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
YEAR ENDED DECEMBER 31, MARCH 31,
------------------------------- --------------------
1995 1996 1997 1997 1998
--------- --------- --------- --------- ---------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
REVENUES............................. $ 11,127 $ 14,285 $ 38,159 $ 7,862 $ 12,343
COST OF OPERATIONS................... 9,935 11,790 24,173 5,283 7,935
--------- --------- --------- --------- ---------
Gross profit.................... $ 1,192 $ 2,495 $ 13,986 $ 2,579 $ 4,408
SELLING, GENERAL AND ADMINISTRATIVE
EXPENSES........................... 863 1,440 5,920 715 1,530
--------- --------- --------- --------- ---------
INCOME FROM OPERATIONS............... $ 329 $ 1,055 $ 8,066 $ 1,864 $ 2,878
INTEREST EXPENSE, net................ 159 397 1,734 509 346
OTHER (INCOME) EXPENSE, net.......... 18 (88) 41 (28) (5)
--------- --------- --------- --------- ---------
INCOME BEFORE PROVISION FOR INCOME
TAXES.............................. $ 152 $ 746 $ 6,291 $ 1,383 $ 2,537
PROVISION FOR INCOME TAXES........... 49 255 2,416 504 1,002
--------- --------- --------- --------- ---------
NET INCOME........................... $ 103 $ 491 $ 3,875 $ 879 $ 1,535
========= ========= ========= ========= =========
Basic Earnings per Common Share...... $ 0.06 $ 0.23 $ 0.65 $ 0.17 $ 0.21
========= ========= ========= ========= =========
Diluted Earnings per Common and
Common Equivalent Share............ $ 0.06 $ 0.23 $ 0.55 $ 0.16 $ 0.18
========= ========= ========= ========= =========
Weighted Average Common Shares
Outstanding........................ 1,700 2,117 5,937 5,239 7,439
========= ========= ========= ========= =========
Weighted Average Common and Common
Equivalent Shares Outstanding...... 1,700 2,139 7,078 5,418 8,737
========= ========= ========= ========= =========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-11
<PAGE>
U S LIQUIDS INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
PREFERRED STOCK COMMON STOCK ADDITIONAL RETAINED
----------------- ------------------- PAID-IN EARNINGS
SHARES AMOUNT SHARES AMOUNT CAPITAL (DEFICIT)
------- ------ --------- ------ ---------- ---------
<S> <C> <C> <C> <C> <C> <C>
BALANCE, December 31, 1994........... 10,000 $ 10 1,700,000 $ 17 $ 2 $ (483)
Net income...................... -- -- -- -- -- 103
Preferred stock dividends....... -- -- -- -- -- (7)
------- ------ --------- ------ ---------- ---------
BALANCE, December 31, 1995........... 10,000 $ 10 1,700,000 $ 17 $ 2 $ (387)
Net income...................... -- -- -- -- -- 491
Issuance of common stock........ -- -- 3,538,875 35 382 --
Preferred stock dividends....... -- -- -- -- -- (7)
Issuance of stock warrants...... -- -- -- -- 995 --
------- ------ --------- ------ ---------- ---------
BALANCE, December 31, 1996........... 10,000 $ 10 5,238,875 $ 52 $ 1,379 $ 97
Net income...................... -- -- -- -- -- 3,875
Distributions equal to the
current income taxes of
limited liability company..... -- -- -- -- -- (171)
Preferred stock dividends....... -- -- -- -- -- (16)
Warrants issued in connection
with initial public
offering...................... -- -- -- -- 551 --
Common stock issued in initial
public offering............... -- -- 1,725,000 17 13,497 --
Retirement of preferred stock... (10,000) (10 ) -- -- -- --
Common stock issued in
acquisitions.................. -- -- 283,039 3 1,579 (142)
Warrants issued in connection
with consulting agreement..... -- -- -- -- 184 --
Common stock options
exercised..................... -- -- 56,250 1 -- --
------- ------ --------- ------ ---------- ---------
BALANCE, December 31, 1997........... -- $-- 7,303,164 $ 73 $ 17,190 $ 3,643
======= ====== ========= ====== ========== =========
Net income (unaudited).......... -- -- -- -- -- 1,535
Common stock and warrants issued
in acquisitions (unaudited)... -- -- 185,858 2 2,981 --
Common stock options exercised
(unaudited)................... -- -- 10,000 -- -- --
------- ------ --------- ------ ---------- ---------
BALANCE, March 31, 1998 (unaudited).. -- $-- 7,499,022 $ 75 $ 20,171 $ 5,178
======= ====== ========= ====== ========== =========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-12
<PAGE>
U S LIQUIDS INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH
YEAR ENDED DECEMBER 31, 31,
------------------------------- --------------------
1995 1996 1997 1997 1998
--------- --------- --------- --------- ---------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income........................... $ 103 $ 491 $ 3,875 $ 879 $ 1,535
Adjustments to reconcile net income
to net cash provided by operating
activities:
Depreciation and amortization.... 159 424 2,990 633 987
Non-cash compensation recorded
through issuance of warrants... -- -- 184 -- --
Net gain on sale of property,
plant, and equipment........... -- -- (65) -- (1)
Deferred income tax provision
(benefit)...................... 31 (121) 64 (226) 152
Changes in operating assets and
liabilities, net of amounts
acquired:
Accounts receivable, net......... (539) (105) 68 1,107 (1,508)
Inventories...................... (288) 44 (228) (83) 120
Prepaid expenses and other
current assets................... (19) (635) 479 18 (326)
Intangible assets................ -- 96 (31) (36)
Other assets..................... (20) (209) (479) (41) (46)
Accounts payable and accrued
liabilities.................... 946 1,567 (784) (178) 1,350
Closure, remediation and cell
processing reserves............ -- (13) (503) (153) (255)
--------- --------- --------- --------- ---------
Net cash provided by
operating activities...... $ 373 $ 1,539 $ 5,570 $ 1,956 $ 1,972
--------- --------- --------- --------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to property, plant and
equipment.......................... $ (916) $ (1,795) $ (4,829) $ (544) $ (1,485)
Proceeds from sale of property,
plant, and equipment............... -- -- 206 -- 9
Net cash (paid for) acquired through
acquisitions....................... -- 5,985 (3,234) -- (5,101)
--------- --------- --------- --------- ---------
Net cash provided by (used
in) investing
activities................ $ (916) $ 4,190 $ (7,857) $ (544) $ (6,577)
--------- --------- --------- --------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Payments to stockholders and related
parties............................ $ (6) $ (139) $ (465) $ (27) $ --
Proceeds from issuance of long-term
obligations........................ 1,084 1,152 15,593 97 9,500
Principal payments on long-term
obligations........................ (564) (1,650) (30,111) (4,329) (1,365)
Interest accrued on related-party
notes payable...................... 50 56 -- 14 --
Preferred stock dividends paid....... (7) -- (16) -- --
Payments to retire preferred stock... -- -- (10) -- --
Issuance of common stock............. -- 417 -- -- --
Proceeds from initial public offering
of common stock.................... -- -- 14,065 -- --
Proceeds from exercise of stock
options............................ -- -- 1 -- --
Distributions equal to the current
income taxes of limited liability
corporation........................ -- -- (171) -- --
--------- --------- --------- --------- ---------
Net cash provided by (used
in) financing
activities................ $ 557 $ (164) $ (1,114) $ (4,245) $ 8,135
--------- --------- --------- --------- ---------
NET INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS................... $ 14 $ 5,565 $ (3,401) $ (2,833) $ 3,530
CASH AND CASH EQUIVALENTS AT
BEGINNING OF PERIOD................ 25 39 5,604 5,604 2,203
--------- --------- --------- --------- ---------
CASH AND CASH EQUIVALENTS AT END OF
PERIOD............................. $ 39 $ 5,604 $ 2,203 $ 2,771 $ 5,733
========= ========= ========= ========= =========
SUPPLEMENTAL DISCLOSURES:
Cash paid for interest........... $ 102 $ 339 $ 2,169 $ 599 $ 345
Cash paid for income taxes....... 2 7 2,745 23 670
Assets acquired under capital
leases........................... 88 -- -- -- --
Liabilities assumed related to
acquisitions..................... -- 28,725 1,340 -- 950
Common stock, warrants and
options issued for
acquisitions................... -- 995 1,440 -- 2,983
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-13
<PAGE>
U S LIQUIDS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. BUSINESS AND ORGANIZATION:
U S Liquids Inc. and subsidiaries (collectively "U S Liquids"or the
"Company") was founded November 18, 1996, and is a leading provider of
services for the collection, processing, disposal and recovery of liquid waste
in North America. On December 13, 1996, the Company acquired its Oilfield Waste
Division from Campbell Wells, L.P. and Campbell Wells NORM, L.P. (referred to as
"Campbell Wells" or "the Predecessor" to the extent of the operations so
acquired) which were wholly owned subsidiaries of Sanifill, Inc. ("Sanifill").
The Oilfield Waste Division treats and disposes of oilfield waste generated in
oil and gas exploration and production. In June 1997, the Company formed the
basis of its Liquid Waste Division by acquiring Mesa Processing, Inc., T&T
Grease Services, Inc. and Phoenix Fats & Oils, Inc. ("Mesa") and American
WasteWater ("AWW"). Each of these acquisitions was accounted for under the
pooling-of-interests method of accounting. The Liquid Waste Division collects,
processes and disposes of liquid waste and recovers by-products from these waste
streams.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
BASIS OF PRESENTATION
The consolidated financial statements include the accounts of the Company,
after elimination of all significant intercompany accounts and transactions. The
consolidated financial statements for 1997 represent the operations of the
Company, including combined revenues and net income of Mesa and AWW for the
pre-acquisition period in 1997 of $7,291,000 and $539,000 respectively, as well
as all other acquired companies' operations from their respective dates of
acquisition.
INTERIM FINANCIAL INFORMATION
The interim consolidated financial statements as of March 31, 1998, and for
the three months ended March 31, 1997 and 1998, are unaudited, and certain
information and footnote disclosures, normally included in financial statements
prepared in accordance with generally accepted accounting principles, have been
omitted. 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 fiscal year.
USE OF ESTIMATES
The preparation of financial statements requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities, the disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those estimates.
CASH AND CASH EQUIVALENTS
All highly liquid investments with an original maturity of three months or
less are classified as cash equivalents.
CONCENTRATIONS OF CREDIT RISK
Accounts receivable potentially subject the Company to concentrations of
credit risk. At December 31, 1996, 41 percent and 16 percent, respectively, of
total accounts receivable were associated with two customers. At December 31,
1997, 13 percent of total accounts receivable was associated with one customer.
In addition, sales to one customer represented 62 percent and 43 percent of
total revenues for the years ended December 31, 1995, and 1996, respectively.
Sales to two customers represented 22 percent and 17 percent, respectively, of
total revenues for the year ended December 31, 1997.
F-14
<PAGE>
U S LIQUIDS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The Company's customers are concentrated in the oil and gas industry in
Louisiana and Texas, the liquid waste collection business in Louisiana and Texas
and the chemical processing and livestock feed industries in Mexico. Total sales
to customers in Mexico represented 82 percent, 70 percent and 31 percent of
total revenues for the years ended December 31, 1995, 1996 and 1997,
respectively. Accounts receivable from customers in Mexico represented
approximately 9 percent and 20 percent of total accounts receivable at December
31, 1996 and 1997, respectively. Management performs ongoing credit analyses of
the accounts of its customers and provides allowances as deemed necessary.
Additionally, sales are dollar-denominated and the majority of international
sales are secured by letters of credit.
INVENTORIES
Inventories are stated at the lower of cost or market and, at December 31,
1996 and 1997, consisted of finished grease products of $265,000 and $435,000,
respectively, and unprocessed grease of $74,000 and $132,000, respectively. Cost
is determined using the first-in, first-out (FIFO) method.
PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment are recorded at cost. Improvements or
betterments which significantly extend the life of an asset are capitalized.
Expenditures for maintenance and repair costs are charged to operations as
incurred. The cost of assets retired or otherwise disposed of and the related
accumulated depreciation are eliminated from the accounts in the year of
disposal. Gains and losses resulting from property disposals are included in
other income or expense. Depreciation is computed using the straight-line
method.
LONG-LIVED ASSETS
Long-lived assets consist primarily of the excess of cost over net assets
of acquired businesses (goodwill) and disposal sites. Management continually
evaluates whether events or circumstances have occurred that indicate the
remaining estimated useful life of intangible assets and other long lived assets
may warrant revision or that remaining balances may not be recoverable.
INCOME TAXES
The Company files a consolidated return for federal income tax purposes.
Income taxes for the Company are provided under the liability method considering
the income tax effects of transactions reported in the consolidated financial
statements which are different from the income tax return. The deferred income
tax assets and liabilities represent the future income tax consequences of those
differences, which will either be taxable or deductible when the underlying
assets or liabilities are realized or settled. Prior to May 1997, AWW was a
limited liability company (LLC), as defined by the Internal Revenue Code,
whereby it was not subject to taxation for federal income tax purposes. Under
LLC status, the equity owners reported their shares of AWW's federal taxable
earnings or losses on their personal income tax returns. In May 1997, AWW
converted to a C Corporation for federal income tax purposes and has recorded
current and deferred income tax assets and liabilities existing on the date of
conversion.
CLOSURE AND REMEDIATION RESERVES
As of December 31, 1997, the closure and remediation reserves represent
accruals for the total estimated costs associated with the ultimate closure of
the Company's landfarm facilities, including costs of decommissioning, statutory
monitoring costs and incremental direct administrative costs required during the
closure and subsequent postclosure periods. Management periodically reviews the
level of these reserves and will adjust such reserves if estimated costs change
over the remaining estimated life of the landfarm facilities. Landfarm facility
closure bonds and related letters of credit totaling $4 million are posted with
the states of Louisiana and Texas.
F-15
<PAGE>
U S LIQUIDS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
REVENUE RECOGNITION AND CELL PROCESSING RESERVE
When waste is unloaded at a given site, the Oilfield Waste Division
recognizes the related revenue and records a reserve for the estimated amount of
expenses to be incurred with the treatment of the oilfield waste in order to
match revenues with their related costs. The related treatment costs are charged
against the reserve as such costs are incurred.
The Liquid Waste Division recognizes revenue from processing services when
material is unloaded at the Company's facilities, if delivered by the customer,
or at the time the service is performed, if the Company collects the materials
from the customer's location. Sales revenue is recognized when the by-product is
shipped to the customer.
The Company's revenues consist of the following:
YEAR ENDED DECEMBER 31,
-------------------------------
1995 1996 1997
--------- --------- ---------
(IN THOUSANDS)
Processing revenues.................. $ 1,301 $ 2,875 $ 25,558
By-product sales..................... 9,796 11,378 12,383
Other revenues....................... 30 32 218
--------- --------- ---------
Total...................... $ 11,127 $ 14,285 $ 38,159
========= ========= =========
F-16
<PAGE>
U S LIQUIDS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
EARNINGS PER SHARE
Effective December 31, 1997, the Company adopted the provisions of
Statement of Financial Accounting Standards (SFAS) No. 128, "Earnings Per
Share". Under these provisions, earnings per share amounts are based on the
weighted average number of shares of common stock and common stock equivalents
outstanding during the period. The weighted average number of shares used to
compute basic and diluted earnings per share for 1995, 1996, and 1997 is
illustrated below:
<TABLE>
<CAPTION>
THREE MONTHS ENDED
YEAR ENDED DECEMBER 31, MARCH 31,
---------------------------------------- --------------------------
1995 1996 1997 1997 1998
------------ ------------ ------------ ------------ ------------
(IN THOUSANDS, EXCEPT SHARE DATA)
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Numerator:
For basic and diluted earnings
per share --
Income available to common
stockholders.................... $ 103 $ 491 $ 3,875 $ 879 $ 1,535
============ ============ ============ ============ ============
Denominator:
For basic earnings per share --
Weighted-average shares......... 1,700,000 2,116,909 5,937,435 5,238,875 7,438,910
Effect of dilutive securities:
Stock options and warrants...... -- 21,657 1,140,670 179,055 1,298,028
------------ ------------ ------------ ------------ ------------
Denominator:
For diluted earnings per
share --
Weighted-average shares and
assumed conversions............. 1,700,000 2,138,566 7,078,105 5,417,930 8,736,938
============ ============ ============ ============ ============
</TABLE>
At December 31, 1997, the Company had 10,000 employee stock options which
were not included in the computation of diluted earnings per share because to do
so would have been antidilutive for the period presented.
INSURANCE
The Company maintains various types of insurance coverage for its business,
including, without limitation, commercial general liability and commercial auto
liability, workers' compensation and employer liability, pollution legal
liability and a general umbrella policy. The Company has not incurred
significant claims or losses in excess of its insurance limits during the
periods presented in the accompanying consolidated financial statements.
RISK FACTORS
An investment in the Company's common stock involves a high degree of risk.
Those risks include, but are not limited to, government regulation, dependence
on the oil and gas industry and foreign customers, absence of a combined
operating history, reliance on key personnel and risks related to the Company's
acquisition strategy.
F-17
<PAGE>
U S LIQUIDS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
OTHER
Certain prior year amounts have been reclassified to conform with the
current year presentation.
3. ACQUISITIONS:
1996 ACQUISITIONS
Effective December 14, 1996, U S Liquids Inc. purchased certain assets and
assumed certain liabilities of Campbell Wells by issuing a long-term promissory
note for $27,800,000 and warrants to purchase 1,000,000 shares of U S Liquids
Inc. common stock at an exercise price of $2.00 per share (the "Campbell Wells
Acquisition") to Sanifill. The total purchase price includes a calculation of
the fair value of the warrants at their date of issuance using the Black-Scholes
pricing model with the following assumptions:
Expected stock price volatility...... 35.55%
Risk free interest rate.............. 6.35%
Expected life of warrants............ 10 years
The Campbell Wells Acquisition was accounted for under the purchase method
of accounting, and the net assets and results of operations since the date of
the Campbell Wells Acquisition are included in the consolidated financial
statements. Costs were allocated to the net assets acquired based on
management's estimate of the fair value of the acquired assets and liabilities
at the date of the Campbell Wells Acquisition. The purchase price has been
allocated as follows (in thousands):
Acquired assets --
Cash and cash equivalents....... $ 6,001
Accounts receivable............. 3,980
Prepaid expenses and other
current assets.................. 61
Property, plant and equipment... 30,693
Deferred income tax asset....... 1,628
Other assets.................... 271
Assumed liabilities --
Accounts payable and accrued
liabilities..................... (1,966)
Closure, remediation and cell
processing reserves............. (10,245)
Deferred income tax liability... (1,628)
---------
Total purchase price....... $ 28,795
=========
The following table sets forth unaudited pro forma income statement data to
present the effect of the Campbell Wells Acquisition on the Company's results of
operations for the years ended December 31, 1995 and 1996. The income statement
data for Campbell Wells may not necessarily be indicative of the results of
operations that would have been realized had Campbell Wells been operated as a
stand-alone entity.
As a wholly owned subsidiary of Sanifill, Campbell Wells maintained a
noninterest bearing intercompany account with Sanifill for recording
intercompany charges for costs and expenses, intercompany purchases of equipment
and additions under capital leases and intercompany transfers of cash, among
other transactions. It is not feasible to ascertain the amount of related
interest expense which would have been recorded in the statements of income had
Campbell Wells been operated as a stand-alone entity. The following unaudited
pro forma income statement data includes the revenues and net income of the
Company, plus the acquired operations of Campbell Wells, as if the Campbell
Wells Acquisition was effective on the first day of the year being reported:
F-18
<PAGE>
U S LIQUIDS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
YEAR ENDED DECEMBER
31,
--------------------
1995 1996
--------- ---------
(IN THOUSANDS)
(UNAUDITED)
Revenue................................. $ 26,246 $ 31,138
Net income, excluding intercompany
interest expense........................ 1,251 2,370
Pro forma adjustments for all periods included in the preceding table
primarily relate to (a) the recording of interest expense on the debt incurred
to effect the Campbell Wells Acquisition, (b) the adjustment to depreciation
expense to reflect the revaluation of property, plant and equipment in
conjunction with the Campbell Wells Acquisition purchase price allocation, (c)
the adjustment of insurance expense to reflect the differences in insurance
expenses recorded by U S Liquids compared to the intercompany insurance expenses
allocated to Campbell Wells from Sanifill, and (d) the related income tax
effects of these adjustments. Pro forma balances do not include the effects of
the Company's initial public offering.
The pro forma combined results presented above are not necessarily
indicative of actual results which might have occurred had the operations and
management teams of the Company and the acquired operations of Campbell Wells
been combined at the beginning of the periods presented.
In March 1996, Mesa acquired all of the assets of the trap and septic
division of a grease processing company through the purchase of assets. In
September 1996, Mesa acquired all of the assets and assumed all liabilities of a
feed and tallow processing company through the purchase of stock. Mesa paid
$16,000 in cash, net of cash acquired, and issued $925,000 of debt obligations
in conjunction with both of these acquisitions. Both acquisitions were accounted
for under the purchase method of accounting, and the net assets and results of
operations of these acquisitions since their respective dates of acquisition are
included in the consolidated financial statements.
1997 ACQUISITIONS
During the fourth quarter of 1997, the Company completed four acquisitions
that were accounted for under the purchase method of accounting. Results of
operations of companies that were acquired and subject to purchase accounting
are included in the consolidated financial statements from the dates of such
acquisitions. The total costs of acquisitions accounted for under the purchase
method were $6,819,000. The consolidated balance sheet as of December 31, 1997,
includes allocations of the respective purchase prices and is subject to final
adjustment. The excess of the aggregate purchase price over the fair value of
the net assets acquired was approximately $5,726,000.
In addition, the Company has agreed in connection with certain transactions
to pay additional amounts to the sellers upon the achievement by the acquired
businesses of certain negotiated goals, such as targeted earnings levels.
Although the amount and timing of any payments of additional contingent
consideration depend on whether and when these goals are met, the maximum
aggregate amount of contingent consideration potentially payable if all payment
goals are met is $27,880,000 with the achieved goals providing approximately
$31,125,000 of pre-tax income. The contingent consideration is payable in cash
or, in some instances, cash and stock, at the Company's option.
On October 1, 1997, the Company completed a merger accounted for as a
pooling-of-interests, pursuant to which the Company issued 241,410 shares of its
common stock in exchange for all outstanding shares of the acquired company.
Periods prior to consummation of this merger were not restated to include the
accounts and operations of the acquired company as combined results are not
materially different from the results as presented.
F-19
<PAGE>
U S LIQUIDS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The unaudited pro forma information set forth below presents the revenues,
net income and earnings per share of the Company, plus the acquired operations
of Campbell Wells and the 1997 acquisitions as if the acquisitions were
effective on the first day of the year being reported:
YEAR ENDED DECEMBER
31,
--------------------
1996 1997
--------- ---------
(IN THOUSANDS,
EXCEPT FOR PER SHARE
DATA)
(UNAUDITED)
Revenue................................. $ 34,766 $ 43,307
Net income.............................. 2,197 4,334
Basic earnings per common share......... 0.40 0.70
Diluted earnings per common share....... 0.38 0.59
The unaudited pro forma information is presented for informational purposes
only and is not necessarily indicative of the results of operations that
actually would have been achieved had the acquisitions been consummated at the
beginning of the periods presented.
4. PREPAID EXPENSES AND OTHER CURRENT ASSETS:
Prepaid expenses and other current assets at December 31, 1996 and 1997,
consist of the following:
1996 1997
--------- ---------
(IN THOUSANDS)
Prepaid insurance....................... $ 668 $ 152
Prepaid tax deposit..................... -- 51
Current deferred income tax asset....... 86 305
Other................................... 96 113
--------- ---------
Total.............................. $ 850 $ 621
========= =========
5. PROPERTY, PLANT AND EQUIPMENT:
Property, plant and equipment at December 31, 1996 and 1997, consist of the
following:
DEPRECIABLE
LIFE 1996 1997
----------- --------- ---------
(YEARS) (IN THOUSANDS)
Landfarm and processing sites........... 25 $ 14,781 $ 15,289
Land.................................... -- 508 739
Buildings and improvements.............. 5-39 14,496 17,021
Machinery and equipment................. 3-15 4,260 6,972
Vehicles................................ 3-5 1,176 2,602
Furniture and fixtures.................. 3-5 255 658
--------- ---------
Total.............................. $ 35,476 $ 43,281
Less -- Accumulated depreciation........ (894) (4,171)
--------- ---------
Net property, plant and
equipment........................ $ 34,582 $ 39,110
========= =========
F-20
<PAGE>
U S LIQUIDS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
6. INTANGIBLE ASSETS:
Intangible assets at December 31, 1996 and 1997, consist of the following:
1996 1997
--------- ---------
(IN THOUSANDS)
Goodwill............................. $ 29 $ 5,755
Noncompete agreements................ 67 327
Permits.............................. -- 81
--------- ---------
Total........................... $ 96 $ 6,163
Less -- Accumulated amortization..... (11) (85)
--------- ---------
Net intangible assets........... $ 85 $ 6,078
========= =========
Intangible assets are recorded at cost and are being amortized on a
straight-line basis over five to forty years.
7. ACCRUED LIABILITIES:
Accrued liabilities at December 31, 1996 and 1997, consist of the
following:
1996 1997
--------- ---------
(IN THOUSANDS)
Insurance premium promissory note,
interest rate at 6.0%, due July
1997................................. $ 589 $ --
Accrued interest on related-party
notes payable...................... 204 --
Accrued salaries..................... 161 873
Income and other taxes payable....... 460 709
Accrued professional fees............ 303 1,490
Other................................ 430 687
--------- ---------
Accrued liabilities............. $ 2,147 $ 3,759
========= =========
8. INCOME TAXES:
The Company has implemented SFAS No. 109, "Accounting for Income Taxes,"
which provides for a liability approach to accounting for income taxes. The
components of the provision (benefit) for income taxes are as follows:
1995 1996 1997
--- --------- ---------
(IN THOUSANDS)
Current --
Federal......................... $ 12 $ 327 $ 2,253
State........................... 6 49 99
--- --------- ---------
Total...................... $ 18 $ 376 $ 2,352
=== ========= =========
Deferred --
Federal......................... $ 30 $ (107) $ 62
State........................... 1 (14) 2
--- --------- ---------
Total...................... $ 31 $ (121) $ 64
--- --------- ---------
Provision for income
taxes................... $ 49 $ 255 $ 2,416
=== ========= =========
F-21
<PAGE>
U S LIQUIDS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The differences in income taxes provided and the amounts determined by
applying the federal statutory tax rate to income before provision (benefit) for
income taxes result from the following:
1995 1996 1997
--------- --------- ---------
(IN THOUSANDS)
Tax at statutory rate................... $ 52 $ 253 $ 2,202
Add --
State taxes, net of federal
benefit.......................... 6 24 66
Nondeductible expenses............. -- -- 157
Other.............................. (9) (22) (9)
--------- --------- ---------
Total......................... $ 49 $ 255 $ 2,416
========= ========= =========
For purposes of the consolidated federal tax return, the Company has net
operating loss carryforwards available to offset taxable income of the Company
in the future. The net operating loss carryforwards will begin to expire in
2011. In connection with certain acquisitions, ownership changes occurred
resulting in various limitations on certain tax attributes. However, the Company
expects full utilization of these tax attributes prior to their expiration.
Deferred income taxes are recognized for the tax consequences of temporary
differences by applying enacted statutory tax rates to differences between the
financial reporting and the tax bases of existing assets and liabilities. The
tax effects of significant temporary differences representing deferred income
tax assets and liabilities at December 31, 1996 and 1997 are as follows:
1996 1997
--------- ---------
(IN THOUSANDS)
Deferred income tax assets --
Closure and remediation reserves... $ 1,577 $ --
Accrued expenses................... 184 434
Net operating losses............... 135 41
Other.............................. 15 74
--------- ---------
Total......................... $ 1,911 $ 549
--------- ---------
Deferred income tax liabilities
Property, plant and equipment...... $ (1,622) $ (167)
Inventory.......................... (77) --
Investment in foreign
corporation...................... -- (59)
Other.............................. (26) (174)
--------- ---------
Total......................... $ (1,725) $ (400)
--------- ---------
Net deferred income tax
assets..................... $ 186 $ 149
========= =========
F-22
<PAGE>
U S LIQUIDS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Net deferred income tax assets and liabilities are comprised of the
following:
1996 1997
--------- ---------
(IN THOUSANDS)
Current deferred income tax assets
Gross assets....................... $ 86 $ 521
Gross liabilities.................. -- (216)
Total, net.................... $ 86 $ 305
Non-current deferred income tax assets
Gross assets....................... 100 152
Gross liabilities.................. -- (308)
--------- ---------
Total, net.................... $ 100 $ (156)
--------- ---------
Net deferred income tax
assets.................... $ 186 $ 149
========= =========
9. LONG-TERM OBLIGATIONS:
The Company's long-term obligations at December 31, 1996 and 1997, consist
of the following:
1996 1997
--------- ---------
(IN THOUSANDS)
Revolving Credit Facility............ $ -- $ 15,250
Note payable to Sanifill, interest at
7.5%, due in 19 quarterly
installments of $1,390,000,
maturing December 2001, secured by
substantially all of the assets of
U S Liquids........................ 26,410 --
Notes payable to banks and credit
institutions, interest ranging from
5.9% to 13.75%, maturing January
1997 to June 2014, secured by
vehicles and equipment............. 1,295 --
Notes payable to individuals,
interest ranging from
noninterest-bearing to 18.0%,
maturing January 1998 to June 2010,
secured by property, plant and
equipment.......................... 1,707 2,020
Notes payable to a corporation,
interest at prime rate plus 2.0%,
(10.5% at December 31, 1997)
maturing October 2000.............. -- 145
Other................................ 73 21
Less -- Current maturities of
long-term obligations.............. (5,817) (792)
--------- ---------
$ 23,668 $ 16,644
========= =========
On December 19, 1997, the Company entered into a revolving credit facility
with a bank group in the amount of $50,000,000. (See Note 14). The initial draw
of $15,250,000 was used to pay off the unpaid portion of the note payable to
Sanifill, which was not previously repaid with proceeds from the Company's
initial public offering. This facility is secured by substantially all of the
assets of the Company. Availability under this credit facility is tied to the
Company's cash flows and liquidity. The credit facility is available to fund
working capital requirements and acquisitions. The credit agreement requires the
Company to comply with certain financial covenants and requires the Company to
obtain the lenders' consent before making any acquisitions with a purchase price
exceeding $7 million, and prohibits the payment of cash dividends. The debt may
be accelerated upon a change in control of the Company or the departure of
senior management without a suitable replacement. Interest on the outstanding
balance is due quarterly and the facility matures on December 20, 2000. Advances
bear interest, at the Company's option, at the prime rate or London Interbank
Offered Rate ("LIBOR"), in each case, plus a margin which is calculated
quarterly based upon the Company's ratio of indebtedness to cash flow. The
Company has agreed to pay a commitment fee varying from 1/4 to 1/2 of 1 percent
per annum on the unused portion of the facility. As of December 31, 1997, the
Company had $34,750,000 available under this facility.
F-23
<PAGE>
U S LIQUIDS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Principal payments of long-term debt obligations in excess of one year as
of December 31, 1997, are as follows:
LONG-TERM DEBT
--------------
(IN THOUSANDS)
Year ending December 31 --
1998............................ $ 792
1999............................ 389
2000............................ 15,561
2001............................ 149
2002............................ 146
Thereafter...................... 399
--------------
Total...................... $ 17,436
==============
Management estimates that the fair value of its debt obligations
approximates the historical value at December 31, 1997.
10. STOCK OPTIONS AND WARRANTS:
On November 20, 1996, U S Liquids established a stock option plan which
provides, as amended, for a maximum authorized number of shares equal to 15% of
all outstanding common stock at the end of each year, not to exceed a total of
3,000,000 shares. Options vest equally in three annual installments, commencing
on the first anniversary of the date upon which the options were granted, and
expire after being outstanding for a period of 10 years. During June 1997, U S
Liquids established a directors' stock option plan which provides for granting
10,000 options to each director upon their initial election and 5,000 options
each year thereafter. The directors' stock options vest on the date of grant and
expire after 10 years. At December 31, 1997, there were 281,250 nonqualified
stock options granted for corporate development purposes which are contingent
upon the successful completion of certain corporate development activities and,
accordingly, no calculation of the fair value of the nonqualified stock options
will be determined or recorded until the realization of such contingencies. The
Company issued stock warrants in connection with its' Campbell Wells
Acquisition, initial public offering, and as compensation for corporate
consulting. Warrants issued in connection with acquisitions or common stock
offerings are capitalized based on the fair market value on the date of grant.
Stock warrants issued as compensation for consulting activities are expensed as
incurred.
The following table summarizes activity under the Company's stock option
plan and warrants granted:
<TABLE>
<CAPTION>
1996 1997
------------------- -------------------
OPTIONS WARRANTS OPTIONS WARRANTS
------- -------- ------- --------
<S> <C> <C>
Options and warrants outstanding,
beginning of year.................. -- -- 301,875 1,000,000
Granted (per share)
1996 ($.02-$2.00).......... 301,875 1,000,000 -- --
1997 ($.02-$16.00)......... 529,500 215,000
Exercised (per share)
1997 ($.02)................ (56,250) --
------- -------- ------- --------
Options and warrants outstanding, end
of year............................ 301,875 1,000,000 775,125 1,215,000
======= ======== ======= ========
</TABLE>
The Company accounts for its employee stock options under the Accounting
Principles Board Opinion No. 25, in which no compensation expense is recognized
for employee stock options if there is no intrinsic value at the date of grant.
Had compensation expense for these employee stock options been determined
consistent with SFAS No. 123, "Accounting for Stock-Based Compensation," the
Company's net income
F-24
<PAGE>
U S LIQUIDS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
and earnings per share would have been reduced to the following amounts (in
thousands, except per share data):
1996 1997
--------- ---------
Net income:
As reported..................... $ 491 $ 3,875
Pro forma....................... 488 1,726
Basic earnings per share:
As reported..................... $ 0.23 $ 0.65
Pro forma....................... 0.23 0.29
Diluted earnings per share:
As reported..................... $ 0.23 $ 0.55
Pro forma....................... 0.23 0.24
The effects of applying SFAS No. 123 in the disclosure may not be
indicative of future amounts.
The fair value of each employee stock option was estimated on the date of
grant using the Black-Scholes pricing model with the following assumptions:
1996 1997
---------- ---------------
Expected dividend yield.............. 0.00% 0.00%
Expected stock price volatility...... 35.55% 37.06%-38.78%
Risk-free interest rate.............. 6.17% 5.79%-6.47%
Expected life of options............. 10 years 10 years
During 1997, 529,500 options were granted which had a weighted average fair
value of $5.91 per option and a weighted average exercise price of $8.69 per
option.
The following table summarizes information about stock options outstanding
at December 31, 1997:
OPTIONS OUTSTANDING
------------------------------------------------------------------------
NUMBER WTD. AVG.
RANGE OF OUTSTANDING AT REMAINING WTD. AVG.
EXERCISE PRICES 12/31/97 CONTRACTUAL LIFE EXERCISE PRICE
--------------- --------------- ---------------- ---------------
$ .02 308,125 9.1 $ .02
9.50-13.38 457,000 9.6 9.71
16.00 10,000 9.8 16.00
--------------- --------------- --- ---------------
$ .02-16.00 775,125 9.4 $5.94
=============== =============== === ===============
OPTIONS EXERCISABLE
-----------------------------------
NUMBER
EXERCISABLE AT WTD. AVG.
12/31/97 EXERCISE PRICE
--------------- ---------------
44,375 $ .02
-- --
-- --
--------------- ---------------
44,375 $ .02
=============== ===============
11. COMMITMENTS AND CONTINGENCIES:
NONCOMPETE AND OILFIELD WASTE DISPOSAL AGREEMENTS
In conjunction with the Campbell Wells Acquisition, the Company assumed
certain rights and obligations pursuant to an earlier sales agreement entered
into during 1996 between Sanifill and Newpark Resources, Inc. ("Newpark"),
whereby Sanifill sold an unrelated portion of Campbell Wells to Newpark (the
"Newpark Transaction"). The Company has assumed Sanifill's position in a
noncompete agreement entered into between Sanifill and Newpark in conjunction
with the Newpark Transaction, in which Sanifill agreed not to compete with
Newpark in the collection of oilfield waste from offshore sources for a period
of five years.
US Liquids has also assumed a disposal agreement entered into between
Campbell Wells and Newpark in conjunction with the Newpark Transaction, in which
Newpark agreed to deliver, and Campbell Wells agreed to accept at its Louisiana
landfarms, certain quantities of oilfield waste each year for 25 years
F-25
<PAGE>
U S LIQUIDS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
beginning June 1996, for a specified price, subject to adjustment, and at
specified annual minimum volume levels.
LEASES
The Company leases office facilities and certain equipment under
noncancelable operating leases for periods ranging from one to 27 years. Rent
expense was approximately $98,000, $171,000 and $736,000 for the years ended
December 31, 1995, 1996 and 1997, respectively. The following table presents
future minimum rental payments under noncancelable operating leases:
OPERATING LEASES
-----------------
(IN THOUSANDS)
Year ending December 31 --
1998....................... $ 1,141
1999....................... 1,144
2000....................... 945
2001....................... 568
2002....................... 462
Thereafter................. 6,959
-----------------
Total............... $11,219
=================
LEGAL PROCEEDINGS
Prior to the closing of the Campbell Wells Acquisition, three lawsuits were
brought against Campbell Wells based upon the operation of its Bourg, Louisiana
landfarm. In one of the lawsuits filed against Campbell Wells, approximately 300
individuals residing in and around Grand Bois, Louisiana are seeking unspecified
monetary damages allegedly suffered as a result of (i) odors allegedly emitted
by waste received from Exxon Company U.S.A. ("Exxon") at the landfarm in March
1994, and (ii) alleged air, water and soil contamination in connection with
ongoing operations at the landfarm. The Company was named as a defendant in this
action in January 1998. Trial in this matter on the claims of ten plaintiffs is
set to commence in the 17th Judicial District Court for the Parrish of
Lafourche, Louisiana on July 13, 1998. A second lawsuit, brought by one
individual, seeks unspecified monetary damages allegedly suffered as a result of
odors allegedly emitted by waste received from Exxon at the landfarm in March
1994. This lawsuit is also pending in the 17th Judicial District Court for the
Parrish of Lafourche, Louisiana and trial is set to commence on July 13, 1998.
The Company has not yet been named as a defendant in this action. In the third
lawsuit, six individuals filed suit on March 7, 1996 against Campbell Wells in
the Civil District Court for the Parrish of Orleans, Louisiana, seeking
preliminary and permanent injunctive relief against certain treatment operations
conducted at the Bourg, Louisiana landfarm which the plaintiffs contend have
resulted and will result in adverse health effects by way of emissions of
alleged air pollutants. The plaintiffs' request for a preliminary injunction was
heard during the summer of 1996. On December 30, 1996, the court entered an
order granting in part and denying in part the relief requested by the
plaintiffs. Specifically, the court found that there was no evidence that
emissions resulting from the treatment operations complained of equaled or
exceeded any relevant safety standard, health standard or occupational standard
and, therefore, denied the plaintiffs' request for a temporary injunction
prohibiting such treatment operations. The court did, however, preliminarily
enjoin Campbell Wells (and, thus, indirectly the Company) from treating waste
received from Exxon in March 1994 in one particular treatment cell located
within 500 feet of a building in which one of the plaintiffs resides. In
connection therewith, the court ordered that the Commissioner of the Louisiana
Department of Conservation be made a party to the litigation and substituted for
the plaintiffs on the limited issue of whether Campbell Wells has violated the
location criteria for the particular treatment cell involved. The Company was
named as a defendant in this action in January 1998. No trial date has been
F-26
<PAGE>
U S LIQUIDS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
set for the plaintiffs' request for permanent injunctive relief; however, based
upon the court's rulings from the preliminary injunction trial and initial
discussions with the Louisiana Department of Conservation, the Company believes
that permanent injunctive relief that might be entered in the action will not
have a material adverse effect upon the Company's consolidated financial
position or results of operations.
Prior to the closing of the Campbell Wells Acquisition, a class action
lawsuit was filed in the Civil District Court for the Parrish of Orleans,
Louisiana against Campbell Wells seeking unspecified monetary damages allegedly
suffered as a result of alleged air, water and soil contamination in connection
with ongoing operations at its Mermentau, Louisiana landfarm. The Company has
not been named as a defendant in this lawsuit; however, there can be no
assurance that the Company will not subsequently be named as a defendant in this
lawsuit.
In connection with the Campbell Wells Acquisition, Sanifill agreed, with
certain enumerated exceptions, to retain responsibility for all liabilities of
Campbell Wells as of the closing date of the Campbell Wells Acquisition
including, without limitation, the contingent liabilities associated with such
lawsuits. The obligation of Sanifill to indemnify the Company is limited to $10
million.
In March 1998, the Company was dismissed as a defendant in a lawsuit
originally filed by Waste Facilities, Inc. in 1994 against Campbell Wells and
others in the District Court of Jim Wells County, Texas.
In February 1997, an action entitled JUDY GARCIA, ET AL V. RE-CLAIM
ENVIRONMENTAL was filed in the 51st Judicial District Court of Harris County,
Texas. This action was brought by the residents of an apartment complex located
adjacent to one of the Company's processing facilities and alleges that the
defendant is guilty of nuisance, trespass, negligence and gross negligence by
reason of its pollution of the air, soil and ground and surface water and the
release of noxious odors. The plaintiffs have requested unspecified monetary
damages. The Company denies liability and intends to vigorously defend the
action.
The Company is involved in various other legal actions arising in the
ordinary course of business. Management does not believe that the outcome of
such legal actions will have a material adverse effect on the Company's
consolidated financial position or results of operations.
F-27
<PAGE>
U S LIQUIDS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
12. SEGMENT INFORMATION:
The Company has two reporting business segments: Oilfield Waste and Liquid
Waste. The following is a summary of key business segment information:
1995 1996 1997
--------- --------- ---------
(IN THOUSANDS)
Revenue --
Oilfield Waste..................... $ -- $ 826 $ 19,948
Liquid Waste....................... 11,127 13,459 18,211
--------- --------- ---------
Total......................... $ 11,127 $ 14,285 $ 38,159
========= ========= =========
Income from operations --
Oilfield Waste..................... $ -- $ 126 $ 9,341
Liquid Waste....................... 329 929 1,929
Corporate.......................... -- -- (3,204)
--------- --------- ---------
Total......................... $ 329 $ 1,055 $ 8,066
========= ========= =========
Identifiable assets --
Oilfield Waste..................... $ -- $ 41,152 $ 34,071
Liquid Waste....................... 3,007 5,699 17,870
Corporate.......................... -- -- 3,075
--------- --------- ---------
Total......................... $ 3,007 $ 46,851 $ 55,016
========= ========= =========
Depreciation and amortization expense --
Oilfield Waste..................... $ -- $ 78 $ 2,266
Liquid Waste....................... 159 346 645
Corporate.......................... -- -- 79
--------- --------- ---------
Total......................... $ 159 $ 424 $ 2,990
========= ========= =========
Capital expenditures --
Oilfield Waste..................... $ -- $ -- $ 2,042
Liquid Waste....................... 916 1,795 2,278
Corporate.......................... -- -- 509
--------- --------- ---------
Total......................... $ 916 $ 1,795 $ 4,829
========= ========= =========
13. SUBSEQUENT EVENTS:
Subsequent to December 31, 1997, the Company acquired four businesses
engaged in the collection, treatment and disposal of liquid wastes for
approximately $4,420,000 in cash, $1,781,000 in assumed debt, 20,000 stock
warrants and 189,865 shares of the Company's common stock using the purchase
method of accounting.
14. EVENTS SUBSEQUENT TO DATE OF REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
(UNAUDITED):
On April 10, 1998 the Company revised its Revolving Credit Facility to
increase the maximum borrowings amount to $100,000,000.
Subsequent to March 31, 1998, the Company acquired 11 businesses engaged in
the processing and disposal of liquid waste for approximately $54,941,000 in
cash, $6,422,000 in assumed debt, and 1,017,188 shares of the Company's Common
Stock using the purchase method of accounting.
On May 7, 1998, U S Liquids filed a registration statement on Form S-1 for
the sale of 3,750,000 shares of its Common Stock.
F-28
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To City Environmental, Inc.:
We have audited the accompanying balance sheets of City Environmental, Inc.
(CEI or the Company), which represent certain assets acquired and liabilities
assumed by U S Liquids Inc. from USA Waste Services, Inc., as of June 30, 1996
and 1997, and the related statements of income for each of the three years in
the period ended June 30, 1997. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
As discussed in Note 1, the accompanying financial statements have been
prepared pursuant to the purchase agreement between USA Waste Services, Inc.,
and U S Liquids Inc. and were prepared for the purpose of complying with Rule
3-05 of Regulation S-X of the Securities and Exchange Commission and are not
intended to be a complete presentation of City Environmental, Inc.'s assets,
liabilities, operating results or cash flows on a stand-alone basis.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of City Environmental, Inc., as
of June 30, 1996 and 1997, and the results of its operations for each of the
three years in the period ended June 30, 1997, pursuant to the purchase
agreement referred to in Note 1 and in conformity with generally accepted
accounting principles.
ARTHUR ANDERSEN LLP
Houston, Texas
April 24, 1998
F-29
<PAGE>
CITY ENVIRONMENTAL, INC.
BALANCE SHEETS
(IN THOUSANDS)
JUNE 30,
-------------------- MARCH 31,
1996 1997 1998
--------- --------- -----------
(UNAUDITED)
ASSETS
CURRENT ASSETS:
Cash............................ $ 4 $ 4 $ 4
Accounts receivable, less
allowance of $53, $93 and $652
(unaudited)................... 2,803 4,258 3,103
Prepaid expenses and other
current assets................ 123 97 90
--------- --------- -----------
Total current
assets............. 2,930 4,359 3,197
PROPERTY, PLANT AND EQUIPMENT, net... 7,195 13,512 16,346
OTHER ASSETS......................... 249 318 5,971
--------- --------- -----------
Total assets.......... $ 10,374 $ 18,189 $25,514
========= ========= ===========
LIABILITIES AND NET INTERCOMPANY
BALANCE
CURRENT LIABILITIES:
Current maturities of long-term
debt.......................... $ 41 $ 57 $ 68
Accounts payable................ 412 480 791
Accrued liabilities............. 348 509 501
--------- --------- -----------
Total current
liabilities........ 801 1,046 1,360
LONG-TERM DEBT, net of current
maturities......................... 778 644 528
CLOSURE AND REMEDIATION RESERVES..... 1,373 1,516 1,289
--------- --------- -----------
Total liabilities..... 2,952 3,206 3,177
NET INTERCOMPANY BALANCE............. 7,422 14,983 22,337
--------- --------- -----------
Total liabilities and
net intercompany
balance............ $ 10,374 $ 18,189 $25,514
========= ========= ===========
The accompanying notes are an integral part of these financial statements.
F-30
<PAGE>
CITY ENVIRONMENTAL, INC.
STATEMENTS OF INCOME
(IN THOUSANDS)
<TABLE>
<CAPTION>
NINE SIX THREE
MONTHS MONTHS MONTHS
YEAR ENDED JUNE 30, ENDED ENDED ENDED
------------------------------- MARCH 31, DECEMBER 31, MARCH 31,
1995 1996 1997 1997 1997 1998
--------- --------- --------- ----------- ------------ -----------
(UNAUDITED) (UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C> <C>
REVENUES............................. $ 15,284 $ 14,461 $ 20,806 $14,643 $ 12,171 $ 5,211
COST OF OPERATIONS................... 8,854 7,451 9,969 7,290 6,303 2,376
--------- --------- --------- ----------- ------------ -----------
Gross profit.................... 6,430 7,010 10,837 7,353 5,868 2,835
SELLING, GENERAL AND ADMINISTRATIVE
EXPENSES........................... 2,262 2,662 3,533 2,431 2,685 1,022
--------- --------- --------- ----------- ------------ -----------
Income from operations.......... 4,168 4,348 7,304 4,922 3,183 1,813
INTEREST EXPENSE, net................ 313 201 104 39 102 15
OTHER INCOME, net.................... (804) (1,158) (1,386) (1,065) 123 41
--------- --------- --------- ----------- ------------ -----------
Income before taxes............. 3,051 2,989 5,814 3,818 3,204 1,839
PROVISION FOR INCOME TAXES........... 102 128 90 85 17 52
--------- --------- --------- ----------- ------------ -----------
NET INCOME........................... $ 2,949 $ 2,861 $ 5,724 $ 3,733 $ 3,187 $ 1,787
========= ========= ========= =========== ============ ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-31
<PAGE>
CITY ENVIRONMENTAL, INC.
NOTES TO FINANCIAL STATEMENTS
1. BUSINESS AND ORGANIZATION:
City Environmental, Inc. (CEI or the Company), is a division of City
Management Corporation (CMC), which in turn is a subsidiary of USA Waste
Services, Inc. (USA Waste). For periods up to and including December 31, 1997,
CMC was owned and operated as an independent private company. During January
1998, CMC was acquired by USA Waste. During March 1998, USA Waste entered into
negotiations with U S Liquids Inc. (USL) whereby USL would purchase certain
assets and assume certain liabilities of CEI through a transaction to be
accounted for as an asset purchase.
The Company treats and disposes hazardous and nonhazardous wastes generated
by commercial, industrial, residential and governmental generators. The Company
operates treatment facilities in Detroit, Michigan, which are accessible by
truck and rail. The Company also operates a truck/tanker fleet to transport
waste materials from customers to its treatment facilities and to deliver
treated waste to landfill sites.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
BASIS OF PRESENTATION
These financial statements have been prepared to present the financial
position and the results of operations of CEI related to the assets acquired and
liabilities assumed by USL in conformity with generally accepted accounting
principles. The unaudited balance sheet as of March 31, 1998, and the related
statement of income for the three months ended March 31, 1998, reflect purchase
price allocations associated with USA Waste's acquisition of CMC, effective as
of January 1, 1998.
CEI is a division of CMC and, as such, the balance sheets and statements of
income may not necessarily be indicative of the financial position or results of
operations that would have been realized had CEI been operated as a stand-alone
entity. The statements of income include amounts allocated by CMC to CEI for
corporate management fees, including insurance risk management, legal department
services, cash management, information systems support and executive management
salaries. Management believes the allocation is reasonable.
As a division of CMC, CEI maintains an interest-bearing intercompany
account with CMC for recording intercompany charges for costs and expenses,
intercompany transfers of equipment and intercompany transfers of cash, among
other transactions. CMC charges CEI interest expense at the rate of 9 percent
per annum of the average of the two prior months' intercompany balances when the
average exceeds $6,060,000 and credits interest income to CEI at a rate of 6
percent per annum when the average is less than $6,060,000. (The $6,060,000 was
established in prior years when CEI transferred the value of its common stock
and additional paid-in capital to the intercompany account with CMC as a result
of CMC becoming an S Corporation.) This method is not indicative of, nor is it
feasible to ascertain, the amount of related net interest expense that would
have been recorded in the accompanying statements of income had CEI operated as
a stand-alone entity. CMC does not maintain debt balances specifically related
to the operations of CEI. The net interest expense reflected in the accompanying
statements of income represents intercompany interest charges from CMC and
external interest expenses on long-term notes payable.
Due to the manner in which CMC intercompany transactions were recorded, it
is not feasible to present a detailed analysis of transactions reflected in the
intercompany balance with CMC. The change in the intercompany balance with CMC
was $991,000 and $7,561,000 for the years ended June 30, 1996 and 1997,
respectively. For the six months ended December 31, 1997, and for the three
months ended March 31, 1998, the change in intercompany balance with CMC was
$8,346,000 and $(1,013,000), respectively.
F-32
<PAGE>
CITY ENVIRONMENTAL, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
It is also not feasible to present complete statements of cash flows due to
the nature and manner of recording of intercompany transactions; however, the
following information presents certain cash flow data related to the operations
of CEI:
CASH FLOW INFORMATION
(IN THOUSANDS)
<TABLE>
<CAPTION>
NINE SIX THREE
MONTHS MONTHS MONTHS
YEAR ENDED JUNE 30 ENDED ENDED ENDED
------------------------------- MARCH 31, DECEMBER 31, MARCH 31,
1995 1996 1997 1997 1997 1998
--------- --------- --------- ----------- ------------ -----------
(UNAUDITED) (UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C> <C>
Cash flows from operating
activities --
Net income...................... $ 2,949 $ 2,861 $ 5,724 $ 3,733 $3,187 $ 1,787
Adjustments to reconcile net
income to net cash provided by
operating activities --
Depreciation and
amortization............ 1,050 845 849 637 650 242
Loss on disposal of
assets.................. 1,187 243 346 332 117 8
Changes in operating assets and
liabilities --
Accounts receivable........ (148) (305) (1,455) (660) 432 744
Prepaid expenses and other
current assets.......... (67) 27 26 (15) (17) 24
Other assets............... (75) (89) (201) (201) (160) (422)
Accounts payable and
accrued liabilities..... 102 90 229 159 107 196
Closure and remediation.... 280 80 143 22 (290) 63
--------- --------- --------- ----------- ------------ -----------
Net cash provided by
operating activities.... $ 5,278 $ 3,752 $ 5,661 $ 4,007 $4,026 $ 2,642
========= ========= ========= =========== ============ ===========
</TABLE>
INTERIM FINANCIAL INFORMATION
The interim financial statements for the nine months ended March 31, 1997,
the six months ended December 31, 1997, and the three months ended March 31,
1998, are unaudited, and certain information and footnote disclosures normally
included in financial statements prepared in accordance with generally accepted
accounting principles have been omitted. In the opinion of management, all
adjustments, consisting only of normal recurring adjustments, necessary to
fairly present the results of operations with respect to the interim financial
statements have been included. The results of operations for the interim period
are not necessarily indicative of the results for the entire fiscal year.
USE OF ESTIMATES
The preparation of financial statements requires management to make
estimates and assumptions that affect the reported amounts of assets acquired
and liabilities assumed, the disclosure of contingent assets acquired and
liabilities assumed at the date of the financial statements and the reported
amounts of revenues and expenses during the reporting period. Actual results
could differ from the estimates.
F-33
<PAGE>
CITY ENVIRONMENTAL, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
CASH
Cash represents an imprest account maintained by CEI. At month-end, all
excess cash balances, other than the balance in the imprest account, are
credited to CMC.
CONCENTRATIONS OF CREDIT RISK
Accounts receivable potentially subject the Company to concentrations of
credit risk. At June 30, 1996 and 1997, one customer accounted for 15 percent
and 12 percent, respectively, of the total accounts receivable balance. For the
year ended June 30, 1995, three customers accounted for 20 percent of total
revenues. For the years ended June 30, 1997 and 1996, four customers accounted
for 22 percent and 21 percent of total revenues, respectively.
PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment is recorded at cost. Improvements or
betterments which significantly extend the life of an asset are capitalized.
Expenditures for maintenance and repair costs are charged to operations as
incurred. The cost of assets retired or otherwise disposed of and the related
accumulated depreciation are eliminated from the accounts in the year of
disposal. Gains and losses resulting from property disposals are included in
other income or expense. Depreciation is computed using the straight-line
method.
LONG-LIVED ASSETS
Long-lived assets consist primarily of disposal sites, equipment and
permits. Management continually evaluates whether events or circumstances have
occurred that indicate the remaining estimated useful lives of intangible assets
and other long-lived assets may warrant revision or that remaining balances may
not be recoverable.
INSURANCE
The Company maintains various types of insurance coverage for its business
through CMC, including, without limitation, commercial general liability and
commercial auto liability, workers' compensation and employer liability,
pollution legal liability and a general umbrella policy. Premiums paid to CMC
may not have been indicative of market rates to obtain such coverage had the
Company operated on a stand-alone basis. The Company has not incurred
significant claims or losses in excess of its insurance limits during the
periods presented in the accompanying financial statements.
CLOSURE AND REMEDIATION RESERVES
The closure and remediation reserves represent accruals for the estimated
future costs associated with the ultimate closure of the Company's treatment and
disposal facilities, including costs of decommissioning, statutory monitoring
costs and incremental direct administrative costs required during the closure
and subsequent postclosure periods. The Company accrues for the estimated future
costs over the estimated useful life of the treatment facilities. Management
periodically reviews the estimated future costs and adjusts reserves over the
remaining useful life of the treatment facilities.
REVENUE RECOGNITION
CEI recognizes treatment and disposal revenue when waste material is
accepted and treated at the treatment and disposal site, and transportation
revenue at the point of collection, if the Company collects waste from the
customer's location.
INCOME TAXES
The operations of CEI are included in the consolidated U.S. federal and
state income tax returns of CMC. The stockholder of CMC elected to be taxed
individually on the Company's taxable income, pursuant
F-34
<PAGE>
CITY ENVIRONMENTAL, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
to S Corporation rules of the Internal Revenue Code for federal taxes. A
provision for state income taxes is reflected in the historical financial
statements as if CEI were a stand-alone entity.
3. PREPAID EXPENSES AND OTHER CURRENT ASSETS:
Prepaid expenses and other current assets at June 30, 1996 and 1997,
consist of the following:
1996 1997
----- ----
(IN THOUSANDS)
Prepaid expenses..................... $ 80 $59
Prepaid licenses and permits......... 27 22
Inventory............................ 7 7
Other................................ 9 9
----- ----
Total........................... $ 123 $97
===== ====
4. PROPERTY, PLANT AND EQUIPMENT:
Property, plant and equipment at June 30, 1996 and 1997, consist of the
following:
JUNE 30
DEPRECIABLE --------------------
LIFE 1996 1997
----------- --------- ---------
(YEARS) (IN THOUSANDS)
Land............................ -- $ 630 $ 686
Buildings and improvements...... 15-39 4,477 4,686
Machinery and equipment......... 5-7 5,637 11,608
Vehicles........................ 5-7 171 190
Furniture and fixtures.......... 5 550 835
--------- ---------
Total...................... 11,465 18,005
Less -- Accumulated
depreciation.................. (4,270) (4,493)
--------- ---------
Total...................... $ 7,195 $ 13,512
========= =========
5. OTHER ASSETS:
Other assets at June 30, 1996 and 1997, consist of the following:
1996 1997
----- -----
(IN THOUSANDS)
Permits.............................. $ 148 $ 215
Deposits............................. 1 3
Assets held for resale............... 100 100
----- -----
Total........................... $ 249 $ 318
===== =====
F-35
<PAGE>
CITY ENVIRONMENTAL, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
6. ACCRUED LIABILITIES:
Accrued liabilities at June 30, 1996 and 1997, consist of the following:
1996 1997
--------- ---------
(IN THOUSANDS)
Accrued salaries and benefits........ $ 118 $ 134
Accrued interest..................... 20 18
Accrued insurance.................... 5 64
Accrued state taxes.................. 141 127
Other................................ 64 166
--------- ---------
Total........................... $ 348 $ 509
========= =========
7. LONG-TERM DEBT:
The Company's long-term debt at June 30, 1996 and 1997, consisted of the
following:
1996 1997
--------- ---------
(IN THOUSANDS)
Note payable to an individual,
imputed interest at 10%, due in
quarterly installments of $18,750,
maturing April 2004, secured by
assets of the Company.............. $ 528 $ 431
Note payable to a government
institution, imputed interest at
10%, due in quarterly installments
of $12,500, maturing July 2005,
secured by assets of the Company... 291 270
--------- ---------
Total................................ 819 701
Less: Current maturities of long term
obligations........................ (41) (57)
--------- ---------
$ 778 $ 644
========= =========
Principal payments of long-term debt as of June 30, 1997, are as follows:
(IN THOUSANDS)
--------------
Year ending June 30 --
1998............................ $ 57
1999............................ 70
2000............................ 77
2001............................ 85
2002............................ 94
Thereafter...................... 318
--------------
Total...................... $ 701
==============
8. COMMITMENTS AND CONTINGENCIES:
LEACHATE AND LANDFILL DISPOSAL AGREEMENT
In July 1995, CEI entered into an agreement with Carleton Farms, Inc., and
City Sand and Landfill (subsidiaries of CMC), whereby CEI agreed to transport
and treat leachate from these landfills and Carleton Farms, Inc., agreed to
accept CEI's treated waste. The pricing arrangements were not necessarily
indicative of market rates had this agreement been entered into between
unrelated parties. Revenues of $686,765 and $919,946 and cost of operations of
$1,324,612 and $1,600,476 are reflected in the accompanying statements of income
related to this agreement for the years ended June 30, 1996 and 1997,
respectively.
F-36
<PAGE>
CITY ENVIRONMENTAL, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
LEASES
The Company leases certain sales office facilities and certain equipment
under one-year cancelable operating leases. Rent expense was $7,000, $20,000 and
$23,000 for the years ended June 30, 1995, 1996 and 1997, respectively.
LEGAL
The Company is involved in various legal actions arising in the ordinary
course of business. Management does not believe that the outcome of such legal
actions will have a material adverse effect on the Company's financial position
or results of operations.
9. SUBSEQUENT EVENTS (UNAUDITED):
Effective January 1, 1998, USA Waste Services, Inc., acquired the
outstanding stock of CMC, including the operations of CEI, through a transaction
accounted for as a purchase.
In April 1998, USA Waste Services, Inc., signed a definitive agreement to
sell CEI to U S Liquids Inc. through an asset purchase agreement.
10. EVENTS SUBSEQUENT TO DATE OF REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
(UNAUDITED):
On May 7, 1997 U S Liquids Inc. entered into an agreement to acquire
certain assets and assume certain liabilities of CEI for cash and assume debt.
The transaction will be accounted for under the purchase method of accounting.
The acquisition agreement provides for contingent payments pursuant to a revised
leachate and landfill disposal agreement with USA Waste.
F-37
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Stockholders of
Waste Stream Environmental Inc.:
We have audited the accompanying combined balance sheet of Waste Stream
Environmental Inc. (a New York corporation) and affiliate as of December 31,
1997, and the related combined statements of income, stockholders' equity and
cash flows for the year then ended. These combined financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these combined financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the combined financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audit provides a reasonable basis for our
opinion.
In our opinion, the combined financial statements referred to above present
fairly, in all material respects, the combined financial position of Waste
Stream Environmental Inc. and Affiliate as of December 31, 1997, and the results
of their operations and their cash flows for the year then ended in conformity
with generally accepted accounting principles.
ARTHUR ANDERSEN LLP
Houston, Texas,
April 24, 1998
F-38
<PAGE>
WASTE STREAM ENVIRONMENTAL INC. AND AFFILIATE
COMBINED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE DATA)
DECEMBER 31, MARCH 31,
1997 1998
------------ ------------
(UNAUDITED)
ASSETS
CURRENT ASSETS:
Cash and cash equivalents....... $ 71 $ 619
Accounts receivable, less
allowance of $20 and $20
(unaudited).................... 2,996 2,711
Inventories..................... 92 120
Prepaid expenses and other
current assets................. 383 449
Due from related party.......... -- 222
------------ ------------
Total current assets....... 3,542 4,121
PROPERTY, PLANT AND EQUIPMENT, net... 5,823 5,992
OTHER ASSETS, net.................... 112 99
------------ ------------
Total assets............... $9,477 $ 10,212
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Current maturities of long-term
obligations.................... $3,164 $ 2,301
Accounts payable................ 1,788 1,969
Accrued liabilities............. 250 151
------------ ------------
Total current
liabilities............. 5,202 4,421
LONG-TERM OBLIGATIONS, net of current
maturities......................... 1,251 2,968
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY
Common stock, no par value, 200
shares authorized, 100 shares
issued and outstanding......... 7 7
Additional paid-in capital...... 368 368
Retained earnings............... 2,652 2,451
Less -- 50 shares of common,
held in treasury, at cost...... (3) (3)
------------ ------------
Total stockholders'
equity.................. 3,024 2,823
------------ ------------
Total liabilities and
stockholders' equity.... $9,477 $ 10,212
============ ============
The accompanying notes are an integral part of these combined financial
statements.
F-39
<PAGE>
WASTE STREAM ENVIRONMENTAL INC. AND AFFILIATE
COMBINED STATEMENTS OF INCOME
(IN THOUSANDS)
THREE MONTHS
YEAR ENDED ENDED MARCH 31
DECEMBER 31, --------------------
1997 1997 1998
------------ --------- ---------
(UNAUDITED)
REVENUES............................. $ 18,602 $ 3,899 $ 5,010
COST OF OPERATIONS................... 15,924 3,367 4,307
------------ --------- ---------
Gross profit.................... 2,678 532 703
SELLING, GENERAL AND ADMINISTRATIVE
EXPENSES........................... 1,669 331 536
------------ --------- ---------
Income from operations.......... 1,009 201 167
INTEREST EXPENSE, net................ 370 87 123
OTHER INCOME, net.................... (309) (15) (1)
------------ --------- ---------
Income before provision
(benefit) for income taxes.... 948 129 45
PROVISION (BENEFIT) FOR INCOME
TAXES.............................. 21 (2) 6
------------ --------- ---------
NET INCOME........................... $ 927 $ 131 $ 39
============ ========= =========
The accompanying notes are an integral part of these combined financial
statements.
F-40
<PAGE>
WASTE STREAM ENVIRONMENTAL INC. AND AFFILIATE
COMBINED STATEMENTS OF STOCKHOLDERS' EQUITY
(IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
COMMON STOCK ADDITIONAL TOTAL
------------------ PAID-IN RETAINED TREASURY STOCKHOLDERS'
SHARES AMOUNT CAPITAL EARNINGS STOCK EQUITY
------- ------- ----------- --------- --------- -------------
<S> <C> <C> <C> <C> <C> <C>
BALANCE, December 31, 1996........... 100 $ 7 $ 368 $ 1,969 $ (3) $ 2,341
Net income...................... -- -- -- 927 -- 927
Distributions to stockholders... -- -- -- (244) -- (244)
------- ------- ----------- --------- --- -------------
BALANCE, December 31, 1997........... 100 7 368 2,652 (3) 3,024
Net income (unaudited).......... -- -- -- 39 -- 39
Distributions to stockholders
(unaudited)................... -- -- -- (240) -- (240)
------- ------- ----------- --------- --- -------------
BALANCE, March 31, 1998
(unaudited)........................ 100 $ 7 $ 368 $ 2,451 $ (3) $ 2,823
======= ======= =========== ========= === =============
</TABLE>
The accompanying notes are an integral part of these combined financial
statements.
F-41
<PAGE>
WASTE STREAM ENVIRONMENTAL INC. AND AFFILIATE
COMBINED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
THREE MONTHS
YEAR ENDED ENDED MARCH 31
DECEMBER 31, --------------------
1997 1997 1998
------------ --------- ---------
(UNAUDITED)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income......................... $ 927 $ 131 $ 39
Adjustments to reconcile net income
to net cash provided by
operating activities --
Depreciation and
amortization............... 1,104 245 286
(Gain) loss from sale of
assets..................... (14) -- 4
Change in operating assets and
liabilities --
Accounts receivable, net...... (1,275) (162) 285
Inventories................... (8) 7 (28)
Prepaid expenses and other
current assets............. 89 21 (66)
Due from related party........ -- -- (222)
Accounts payable.............. 543 341 181
Accrued liabilities........... 80 (15) (99)
------------ --------- ---------
Net cash provided by operating
activities................. 1,446 568 380
------------ --------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and
equipment....................... (1,060) (240) (461)
Proceeds from sale of property and
equipment....................... 21 9 15
------------ --------- ---------
Net cash used in investing
activities................. (1,039) (231) (446)
------------ --------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Principal payments of long-term
debt............................ (1,188) (306) (1,815)
Proceeds from borrowings of
long-term debt.................. 819 231 2,402
Proceeds from line of credit,
net............................. 527 77 360
Payments of capital lease
obligations..................... (311) (58) (93)
Distributions to stockholders...... (244) (100) (240)
------------ --------- ---------
Net cash provided by (used in)
financing activities....... (397) (156) 614
------------ --------- ---------
NET INCREASE IN CASH AND CASH
EQUIVALENTS........................ 10 181 548
CASH AND CASH EQUIVALENTS AT
BEGINNING OF YEAR.................. 61 61 71
------------ --------- ---------
CASH AND CASH EQUIVALENTS AT END OF
YEAR............................... $ 71 $ 242 $ 619
============ ========= =========
SUPPLEMENTAL DISCLOSURES:
Cash paid for interest............. $ 408 $ 57 $ 126
Cash paid for income taxes......... $ 5 $ -- $ --
Assets acquired under capital
leases.......................... $ 905 $ 479 $ --
The accompanying notes are an integral part of these combined financial
statements.
F-42
<PAGE>
WASTE STREAM ENVIRONMENTAL INC. AND AFFILIATE
NOTES TO COMBINED FINANCIAL STATEMENTS
1. BUSINESS AND ORGANIZATION:
Waste Stream Environmental Inc. and its affiliate, Earth Blends, Inc.
(collectively, the Company), are primarily engaged in removing, transporting and
disposing of waste sludge and other waste related products. The Company's
customers, principally commercial industries and governmental units, are mainly
located in New York, Connecticut, New Jersey and Massachusetts. The Company
sells waste treatment plant supplies and provides processing services to its
customers.
The Company, through Earth Blends, Inc., also transports, markets and sells
N-VIRO soil.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
BASIS OF PRESENTATION
The individual companies that comprise the Company have been presented on a
combined basis due to their related operations, common ownership by three
individual stockholders and common management control. All significant
intercompany balances and transactions among the aforementioned entities have
been eliminated in combination.
INTERIM FINANCIAL INFORMATION
The interim financial statements for the three months ended March 31, 1997
and 1998, are unaudited, and certain information and footnote disclosures,
normally included in financial statements prepared in accordance with generally
accepted accounting principles, have been omitted. In the opinion of management,
all adjustments, consisting only of normal recurring adjustments, necessary to
fairly present the results of operations and cash flows with respect to the
combined interim financial statements have been included. The results of
operations for the interim periods ended March 31, 1997 and 1998, are not
necessarily indicative of the results for the entire fiscal year.
USE OF ESTIMATES
The preparation of financial statements requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities, the disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those estimates.
CASH AND CASH EQUIVALENTS
All highly liquid investments with an original maturity of three months or
less are classified as cash equivalents.
CONCENTRATIONS OF CREDIT RISK
Accounts receivable potentially subject the Company to concentrations of
credit risk. At December 31, 1997, 11 percent and 10 percent of total accounts
receivable were associated with two customers. In addition, sales to two
customers represented 21 percent and 8 percent, respectively, of total revenues
for the year ended December 31, 1997.
INVENTORIES
Inventories are stated at the lower of cost or market and, at December 31,
1997, consisted of raw materials. Cost is determined using the first-in,
first-out (FIFO) method.
PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment are recorded at cost. Improvements or
betterments which significantly extend the life of an asset are capitalized.
Expenditures for maintenance and repair costs are charged to operations as
incurred. The cost of assets retired or otherwise disposed of and the related
accumulated
F-43
<PAGE>
WASTE STREAM ENVIRONMENTAL INC. AND AFFILIATE
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
depreciation are eliminated from the accounts in the year of disposal. Gains and
losses resulting from property disposals are included in other income or
expense. Depreciation is computed using the straight-line method.
INCOME TAXES
For income tax purposes, the Company has elected S Corporation status under
the U.S. Internal Revenue Code. In accordance with the provisions of elections
to be treated as an S Corporation, the Company's income and losses are passed
through to its stockholders; accordingly, no provision for federal income taxes
has been recorded in the combined statement of income.
The Company, however, provides for state income taxes payable in accordance
with the tax laws of New York, New Jersey, Connecticut, Massachusetts and Rhode
Island as applicable to S Corporations.
REVENUE RECOGNITION
The Company recognizes revenue from processing services when material is
unloaded at the Company's facilities, if delivered by the customer, or at the
time the service is performed, if the Company collects the materials from the
customer's location. Sales revenue is recognized when the by-product is shipped
to the customer.
The Company's revenues consist of approximately the following (in
thousands):
Processing revenues.................. $ 3,832
Trucking and disposal revenues....... 13,050
Chemical and by-product sales........ 1,162
Other revenues....................... 558
---------
Total...................... $ 18,602
=========
INSURANCE
The Company maintains various types of insurance coverage for its business,
including, without limitation, commercial general liability and commercial auto
liability, workers' compensation and employer liability, and a general umbrella
policy. The Company has not incurred significant claims or losses in excess of
its insurance limits during the period presented in the accompanying combined
financial statements.
3. PREPAID EXPENSES AND OTHER CURRENT ASSETS:
Prepaid expenses and other current assets at December 31, 1997, consist of
the following (in thousands):
Prepaid insurance.................... $ 128
Prepaid performance bonds............ 168
Advances to stockholder.............. 26
Other................................ 61
---------
Total...................... $ 383
=========
F-44
<PAGE>
WASTE STREAM ENVIRONMENTAL INC. AND AFFILIATE
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
4. PROPERTY, PLANT AND EQUIPMENT:
Property, plant and equipment at December 31, 1997, consist of the
following (in thousands):
DEPRECIABLE
LIFE
-----------
(YEARS)
Land................................. -- $ 26
Buildings and improvements........... 5-40 2,433
Machinery and equipment.............. 5-10 3,771
Vehicles............................. 5 2,552
Other................................ 5 31
---------
Total........................... 8,813
Less -- Accumulated depreciation..... (2,990)
---------
Net property, plant and
equipment..................... $ 5,823
=========
5. ACCRUED LIABILITIES:
Accrued liabilities at December 31, 1997, consist of the following (in
thousands):
Accrued salaries..................... $ 137
Income and other taxes payable....... 11
Accrued professional fees............ 24
Other................................ 78
---------
Total........................... $ 250
=========
6. LONG-TERM OBLIGATIONS:
The Company's long-term obligations at December 31, 1997, consist of the
following:
(IN THOUSANDS)
--------------
Notes payable to Fleet Bank, monthly
payments ranging from $2,396 to
$23,256, interest ranging from
8.69% to 10.00%, maturing October
1997 to May 2002, secured by
business assets, including
machinery and equipment............ $1,697
Line of credit with Fleet Bank,
interest rate of 9.50%............. 940
Note payable to A.I. Credit Corp.,
monthly payments of $6,628,
interest of 6.81%, maturing
September 1998, unsecured.......... 57
Notes payable to two corporations,
monthly payments ranging from $419
to $719, interest ranging from
9.25% to 11.25%, maturing January
1999 to September 2002, secured by
vehicles........................... 86
Capital lease obligations, monthly
payments ranging from $1,570 to
$1,900, interest ranging from 9.22%
to 10.25%, expiring within the next
five years, secured by equipment... 1,635
Less -- Current maturities of
long-term obligations.............. (3,164)
--------------
$1,251
==============
The line of credit with Fleet Bank provides for a maximum borrowing amount
of $1,500,000 and is personally guaranteed by the Company's officers and
directors. The credit agreements with Fleet Bank require the Company to comply
with certain financial covenants, such as meeting minimum current ratio
requirements. At December 31, 1997, the Company was not in compliance with the
minimum current ratio financial covenant. Accordingly, all amounts due to Fleet
Bank have been included in current maturities of
F-45
<PAGE>
WASTE STREAM ENVIRONMENTAL INC. AND AFFILIATE
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
long-term obligations at December 31, 1997. During January 1998, the Company
retired its debt obligations to Fleet Bank.
Principal payments of long-term debt obligations in excess of one year as
of December 31, 1997, are as follows (in thousands):
CAPITAL
LEASES
--------
Year ending December 31 --
1998............................ $ 534
1999............................ 534
2000............................ 485
2001............................ 332
2002............................ 113
--------
Total...................... 1,998
Less -- Amount representing
executory costs and interest
expense........................ (363)
--------
Present value of minimum lease
payments....................... $ 1,635
========
Management estimates that the fair value of its debt obligations
approximates the historical value at December 31, 1997.
7. COMMITMENTS AND CONTINGENCIES:
LEASES
The Company leases certain equipment under noncancelable operating leases
expiring within the next two years. Rent expense was approximately $367,000 for
the year ended December 31, 1997. Future commitments under noncancelable leases
as of December 31, 1997, are as follows (in thousands):
1998................................. $ 70
1999................................. 46
---------
Total........................... $ 116
=========
LEGAL PROCEEDINGS
The Company is involved in legal actions arising in the ordinary course of
business. Management does not believe that the outcome of such legal actions
will have a material adverse effect on the Company's combined financial position
or results of operations.
ROYALTIES
In February 1990, the Company entered into a 15-year patent license
agreement allowing it to utilize a sludge pasteurization process. The Company
makes royalty payments of $8.20 per dry ton of sludge processed. The contract
requires the Company to make minimum annual payments based on the Company's
level of production. Total royalty expense for the year ended December 31, 1997,
was approximately $203,000.
8. RELATED-PARTY TRANSACTIONS:
The Company occupies its primary operational facilities and office space
under a month-to-month lease agreement with its stockholders. Rent expense was
approximately $70,000 for the year ended December 31, 1997.
F-46
<PAGE>
WASTE STREAM ENVIRONMENTAL INC. AND AFFILIATE
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
The Company purchases supplies from a company owned by a stockholder. Total
purchases for the year ended December 31, 1997, totaled approximately $67,000.
9. EMPLOYEE BENEFIT PLAN:
The Company has a 401(k) plan that covers substantially all of the
Company's full-time employees age 21 and over who elect to participate. The plan
provides for an elective employer's contribution based upon the employee's
contribution. Employer contributions were $13,436 for the year ended December
31, 1997.
10. SUBSEQUENT EVENTS:
INVESTMENT IN JOINT VENTURE
In March 1998, the Company signed a letter of intent to become a 50 percent
equity investor in a corporation. The Company has committed to obtain financing
to provide this corporation with $2.7 million for the construction of a waste
processing facility. As part of this agreement, the Company will operate this
facility.
DEBT REFINANCING
In January 1998, the Company entered into a revolving credit facility, a
project credit facility and two equipment loans with a domestic bank.
The purpose of the revolving credit facility is to provide working capital
to the Company. The borrowings are limited to the lesser of $2 million or 80
percent of eligible receivables, as defined. The facility is subject to
customary loan covenants and drawing conditions. Interest is set at the floating
LIBOR rate plus 2.25 percent.
The project credit facility is for a maximum of $1.25 million for the
development of a waste processing facility. Interest will be set at the
borrower's option.
The equipment loans require monthly payments of $29,664 plus interest at
7.73 percent per annum through January 2002. These obligations are secured by
substantially all of the Company's assets and the personal guarantees of the
Company's officers and stockholders.
DUE FROM RELATED PARTY
During March 1998, the Company repaid certain debt obligations of a related
party and recorded a corresponding receivable. This receivable was repaid by the
related party in April 1998.
U S LIQUIDS ACQUISITION
On April 21, 1998, U S Liquids Inc. acquired the Company for cash, assumed
debt and stock. The transaction was accounted for under the purchase method of
accounting.
The acquisition agreement provides for contingent payments up to $3.25
million, if certain financial and operational goals are met.
F-47
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Partners of Parallel Products:
We have audited the accompanying balance sheet of Parallel Products (a
California limited partnership) as of December 31, 1997, and the related
statements of income, partners' capital and cash flows for the year then ended.
These financial statements are the responsibility of the Company's management.
Our responsibility is to express an opinion on these financial statements based
on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Parallel Products as of
December 31, 1997, and the results of its operations and its cash flows for the
year then ended in conformity with generally accepted accounting principles.
ARTHUR ANDERSEN LLP
Houston, Texas
April 24, 1998
F-48
<PAGE>
PARALLEL PRODUCTS
BALANCE SHEETS
(IN THOUSANDS)
DECEMBER 31, MARCH 31,
1997 1998
------------ ------------
(UNAUDITED)
ASSETS
CURRENT ASSETS:
Cash and cash equivalents....... $ 220 $ 6
Restricted marketable
securities..................... 691 697
Accounts receivable, less
allowances of $17 and $20
(unaudited).................... 2,247 1,414
Inventories..................... 285 201
Prepaid expenses and other
current assets................. 29 56
------------ ------------
Total current
assets............ 3,472 2,374
PROPERTY, PLANT AND EQUIPMENT, net... 5,981 5,948
RELATED-PARTY NOTES RECEIVABLE....... 37 35
------------ ------------
Total assets.......... $9,490 $8,357
============ ============
LIABILITIES AND PARTNERS' CAPITAL
CURRENT LIABILITIES:
Lines of credit................. $1,262 $1,403
Current maturities of long-term
obligations.................... 1,236 1,236
Related-party notes payable,
current portion................ 310 310
Accounts payable................ 2,392 876
Accrued liabilities............. 498 460
------------ ------------
Total current
liabilities....... 5,698 4,285
LONG-TERM OBLIGATIONS, net of current
maturities......................... 1,215 1,116
RELATED-PARTY NOTES PAYABLE.......... 100 100
------------ ------------
Total liabilities..... 7,013 5,501
COMMITMENTS AND CONTINGENCIES
PARTNERS' CAPITAL.................... 2,477 2,856
------------ ------------
Total liabilities and
partners'
capital........... $9,490 $8,357
============ ============
The accompanying notes are an integral part of these financial statements.
F-49
<PAGE>
PARALLEL PRODUCTS
STATEMENTS OF INCOME
(IN THOUSANDS)
THREE MONTHS
YEAR ENDED ENDED MARCH 31
DECEMBER 31, --------------------
1997 1997 1998
------------ --------- ---------
(UNAUDITED)
SALES................................ $ 30,761 $ 9,289 $ 7,283
COST OF GOODS SOLD................... 27,556 8,344 6,453
------------ --------- ---------
Gross profit.................... 3,205 945 830
SELLING, GENERAL AND ADMINISTRATIVE
EXPENSES........................... 1,495 387 365
------------ --------- ---------
INCOME FROM OPERATIONS............... 1,710 558 465
INTEREST EXPENSE, net................ 531 157 102
OTHER INCOME, net.................... (126) (55) (16)
------------ --------- ---------
NET INCOME........................... $ 1,305 $ 456 $ 379
============ ========= =========
The accompanying notes are an integral part of these financial statements.
F-50
<PAGE>
PARALLEL PRODUCTS
STATEMENTS OF PARTNERS' CAPITAL
(IN THOUSANDS)
BALANCE, December 31, 1996........... $ 1,175
Net income...................... 1,305
Distributions to partners....... (3)
---------
BALANCE, December 31, 1997........... 2,477
Net income (unaudited).......... 379
---------
BALANCE, March 31, 1998
(unaudited)........................ $ 2,856
=========
The accompanying notes are an integral part of these financial statements.
F-51
<PAGE>
PARALLEL PRODUCTS
STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
THREE MONTHS
YEAR ENDED ENDED MARCH 31
DECEMBER 31, --------------------
1997 1997 1998
------------ --------- ---------
(UNAUDITED)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income...................... $1,305 $ 456 $ 379
Adjustments to reconcile net
income to net cash provided by
(used in) operating
activities --
Depreciation............... 504 126 148
Noncash interest income
received from marketable
securities.............. (26) (5) (6)
Net gain on sale of
property, plant and
equipment............... (83) (38) --
Changes in operating assets and
liabilities --
Accounts receivable, net... (85) 198 833
Inventories................ 64 25 84
Prepaid expenses and other
current assets.......... (9) (24) (25)
Other assets............... 40 40 --
Accounts payable and
accrued liabilities..... (767) (443) (1,554)
------------ --------- ---------
Net cash provided by
(used in) operating
activities............ 943 335 (141)
------------ --------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to property, plant and
equipment..................... (418) (93) (115)
Proceeds from sale of property,
plant and equipment........... 359 40 --
------------ --------- ---------
Net cash used in
investing
activities............ (59) (53) (115)
------------ --------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Distributions to partners....... (3) -- --
Principal payments on long-term
obligations................... (947) (322) (99)
Net borrowings on revolving
credit agreements............. 285 52 141
------------ --------- ---------
Net cash provided by
(used in) financing
activities............ (665) (270) 42
------------ --------- ---------
NET INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS................... 219 12 (214)
CASH AND CASH EQUIVALENTS AT
BEGINNING OF PERIOD................ 1 1 220
------------ --------- ---------
CASH AND CASH EQUIVALENTS AT END OF
PERIOD............................. $ 220 $ 13 $ 6
============ ========= =========
SUPPLEMENTAL DISCLOSURES:
Cash paid for interest.......... $ 560 $ 161 $ 138
The accompanying notes are an integral part of these financial statements.
F-52
<PAGE>
PARALLEL PRODUCTS
NOTES TO FINANCIAL STATEMENTS
1. BUSINESS AND ORGANIZATION:
Parallel Products (the Company) is a California limited partnership
organized in 1991. The Company recovers purified by-products, such as ethanol,
through the processing of its waste streams, acts as a broker and commodity
dealer in various nonpotable liquids and is a provider of services for the
processing, disposal and recovery of liquid waste. The Company's waste
processing operations are located in Rancho Cucamonga, California, and
Louisville, Kentucky. Brokerage operations are not concentrated in one specific
location of the country.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
BASIS OF PRESENTATION
The accounting records of the Company are maintained on the accrual basis
of accounting.
USE OF ESTIMATES
The preparation of financial statements requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities, the disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those estimates.
INTERIM FINANCIAL INFORMATION
The interim financial statements as of March 31, 1998, and for the three
months ended March 31, 1997 and 1998, are unaudited, and certain information and
footnote disclosures, normally included in financial statements prepared in
accordance with generally accepted accounting principles, have been omitted. 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 financial statements, have
been included. The results of operations for the interim periods are not
necessarily indicative of the results for the entire fiscal year.
CASH AND CASH EQUIVALENTS
All highly liquid investments with an original maturity of three months or
less are classified as cash equivalents.
RESTRICTED MARKETABLE SECURITIES
Restricted marketable securities consist of treasury bills and a treasury
note. The Company's investments are classified as held-to-maturity and are
scheduled to mature within 12 months. Held-to-maturity securities represent
those securities that the Company has both the positive intent and ability to
hold to maturity and are carried at amortized cost. Realized gains and losses
and declines in value of securities judged to be other than temporary are
included in interest income. Cost of held-to-maturity securities is determined
by specific identification in computing realized gains and losses.
At December 31, 1997, certain of the Company's restricted marketable
securities are being held for the benefit of the Company by Wells Fargo Bank
(the Bank), in order to provide additional collateral for the Company's debt
obligations to the Bank. A premature withdrawal of these funds could trigger an
event of default on the outstanding obligations of the Bank. At December 31,
1997, treasury bills in the amount of $492,000 and a treasury note in the amount
of $199,000 are held by the Bank as collateral for the outstanding debt.
CONCENTRATIONS OF CREDIT RISK
Accounts receivable potentially subject the Company to concentrations of
credit risk. At December 31, 1997, 21 percent and 13 percent of total accounts
receivable were associated with two customers. In
F-53
<PAGE>
PARALLEL PRODUCTS
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
addition, sales to three customers represented 13 percent, 11 percent and 10
percent of total revenues for the year ended December 31, 1997.
The Company's customers are concentrated in the beverage industry.
Management performs ongoing credit analyses of the accounts of its customers and
provides allowances as deemed necessary.
MAJOR SUPPLIERS
During 1997, two suppliers accounted for 31 percent and 13 percent of total
purchases. Management believes that alternate sources of supply are available on
comparable terms.
INVENTORIES
Inventories are stated at the lower of cost or market and, at December 31,
1997, consisted primarily of finished products such as brokered and manufactured
alcohol. Cost is determined using the first-in, first-out (FIFO) method.
PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment are recorded at cost. Improvements or
betterments which significantly extend the life of an asset are capitalized.
Expenditures for maintenance and repair costs are charged to operations as
incurred. The cost of assets retired or otherwise disposed of and the related
accumulated depreciation are eliminated from the accounts in the year of
disposal. Gains and losses resulting from property disposals are included in
other income or expense. Depreciation is computed using the straight-line
method.
INCOME TAXES
The accompanying financial statements do not include provisions for income
taxes that may be due on the reported net income of the Company, since any
related income taxes are obligations of the partners of the Company.
REVENUE RECOGNITION
Revenues are recognized when recycled products are shipped. Revenue from
brokered alcohol is recognized when shipped from the Company's locations or when
delivered if product is shipped from a location other than the Company's two
refineries.
The Company's revenues consisted of the following for the year ended
December 31, 1997 (in thousands):
By-product sales..................... $ 27,180
Processing revenues.................. 2,854
Other................................ 727
---------
Total...................... $ 30,761
=========
3. RELATED-PARTY NOTES RECEIVABLE:
At December 31, 1997, there was a note receivable from a limited partner of
the Company in the amount of $46,000. The borrowing bears interest at 8 percent
with scheduled payments of $750 per month to commence in 1998. The current
portion of the note receivable has been included in prepaid expenses and other
current assets at December 31, 1997.
F-54
<PAGE>
PARALLEL PRODUCTS
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
4. PROPERTY, PLANT AND EQUIPMENT:
Property, plant and equipment at December 31, 1997, consist of the
following (in thousands):
DEPRECIABLE LIFE
(YEARS)
-----------------
Land................................. -- $ 1,122
Machinery and equipment.............. 5-12 6,042
Buildings and leasehold
improvements....................... 5-20 1,443
Furniture and fixtures............... 3-15 144
Vehicles............................. 3-5 39
Construction in progress............. -- 90
---------
8,800
Less -- Accumulated depreciation..... (2,899)
---------
Net property, plant and
equipment............... $ 5,981
=========
5. ACCRUED LIABILITIES:
Accrued liabilities at December 31, 1997, consist of the following (in
thousands):
Accrued salaries..................... $ 187
Accrued insurance premiums........... 98
Accrued interest, including interest
payable to related party of $24.... 73
Other................................ 140
---------
Accrued liabilities........ $ 498
=========
6. LONG-TERM OBLIGATIONS:
The Company's long-term obligations at December 31, 1997, consist of the
following:
1997
--------------
(IN THOUSANDS)
Revolving credit facility............ $ 1,262
Note payable to the Bank, interest at
prime plus 3.0%, payable in monthly
principal installments of $11,675,
maturing June 1, 2000.............. 1,004
Term commitment, payable to the Bank,
interest-only installments at prime
plus 3.0%, through April 30, 1998,
at which time the remaining balance
is due and payable................. 600
Note payable to the Bank, interest at
prime plus 3.0%, payable in monthly
principal installments of $13,332,
maturing May 1, 2000............... 387
Note payable to the Bank,
interest-only installments at prime
plus 3.0%, through April 30, 2002,
at which time the remaining balance
is due and payable................. 239
Note payable to the Bank, interest at
prime plus 3.0%, payable in monthly
principal installments of $5,357,
maturing January 1, 2000........... 155
Note payable to the Bank, payable in
monthly principal installments of
$1,491 plus accrued interest at
prime plus 3.0%, maturing June 1,
2000............................... 45
Other................................ 21
Less -- Current maturities of
long-term obligations.............. (2,498)
--------------
$ 1,215
==============
Unless otherwise stated above, all notes payable are collateralized by
accounts receivable, inventory, equipment, treasury bills, a treasury note and a
first priority lien on real property at the Kentucky facility
F-55
<PAGE>
PARALLEL PRODUCTS
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
and the Rancho Cucamonga, California, facility, under the terms of the Company's
credit agreement with the Bank, amended on March 11, 1998.
On October 11, 1996, the Company entered into a revolving credit facility,
extended on March 11, 1998, with the Bank in the amount of $2,000,000 in two
lines of credit and $600,000 in a term commitment note. The Company also has
existing loans with the Bank which were used to purchase equipment and real
estate. The facility is secured by substantially all of the assets of the
Company. The borrowings under the credit facility, which are used to fund
working capital, are limited to a maximum of 90 percent of the market value of
the treasury notes plus 80 percent of eligible accounts receivable. The Company
is required to maintain a noninterest-bearing deposit account (restricted
marketable securities, see Note 2) over which the Company has no control and
from which deposits will be used as a principal reduction on the credit
facility. The credit agreement requires the Company to comply with certain
financial covenants, such as meeting minimum requirements for earnings before
interest, taxes, depreciation and amortization (EBITDA) coverage ratio, and
prohibits the Company from merging into or consolidating with any other entity.
The credit agreement allows distributions to partners to cover its partners'
federal income tax liability, and any other distributions are prohibited.
Interest on the outstanding balance is due monthly, and the facility matures on
April 30, 1998. Advances bear interest at prime plus 3 percent and prime plus 5
percent for each line of credit, respectively, and prime plus 3 percent for the
term note. Subsequent to year-end, interest rates were reduced to prime plus 2
percent for the entire facility. As of December 31, 1997, availability under the
credit facility was $738,000.
All of the indebtedness of the Company to the Bank, pursuant to the
parties' loan agreement as amended, stipulates that all bank debt with the Bank
shall be guaranteed by the general partner and two limited partners up to a
principal amount of $4,400,000 each. The Bank's prime rate of interest at
December 31, 1997, was 8.5 percent. Management estimates that the fair value of
its debt obligations approximates the historical value at December 31, 1997.
Principal payments of long-term debt obligations, including related-party
notes payable, in excess of one year as of December 31, 1997, are as follows (in
thousands):
Year ending December 31 --
1998............................ $ 2,808
1999............................ 394
2000............................ 821
2001............................ 100
2002............................ --
Thereafter...................... --
---------
$ 4,123
=========
7. RELATED-PARTY NOTES PAYABLE:
The Company has notes payable to David W. Allen, president of the Company,
in the amounts of $100,000 and $310,000, bearing interest at 8.0 percent and
5.31 percent, respectively, per annum. Annual installments, related to the
$100,000 note, of interest only are due beginning December 1, 1995, and continue
until January 1, 2000, at which time all remaining unpaid principal and interest
shall be due and payable. These notes are subordinated to the payment of all
obligations of the Company to the Bank, pursuant to the terms of a subordination
agreement amended on March 11, 1998.
8. EMPLOYEE BENEFITS:
The Company has a 401(k) defined contribution plan available to all
employees who have been with the Company for more than one year. Employees may
contribute up to 15 percent of their salary each year, and the Company may elect
to make a discretionary contribution to this plan once a year. All plan
F-56
<PAGE>
PARALLEL PRODUCTS
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
participants who are employed at the end of the plan year and have completed
1,000 hours of service in that plan year are eligible to receive a share of the
employer contribution. Participants' rights to the employer contribution vest 20
percent after the second covered year of service and 20 percent for each
additional covered year of service. No contribution was made by the employer to
the defined contribution plan for the year ended December 31, 1997.
9. COMMITMENTS AND CONTINGENCIES:
LEASES
The Company leases office facilities and certain equipment under
noncancelable operating leases for periods ranging from one to eight years. Rent
expense was approximately $236,000 for the year ended December 31, 1997. The
following table presents future minimum rental payments under noncancelable
operating leases (in thousands):
Year ending December 31 --
1998............................ $ 189
1999............................ 138
2000............................ 63
2001............................ 46
2002............................ 36
Thereafter...................... 104
---------
Total...................... $ 576
=========
SALES COMMITMENTS
Periodically, the Company enters into ethanol sales contracts with several
of its customers. These contracts are generally short-term in nature and are
used by the customer to ensure an adequate supply of ethanol for the
state-mandated oxygenated fuels requirements. Additionally, the Company enters
into short-term contracts for the purchase of ethanol to ensure an adequate
supply for the formal sales contracts. These purchase commitments did not result
in losses. The Company did not have any formal purchase or sales commitments
outstanding for the year ended December 31, 1997.
LEGAL PROCEEDINGS
The Company is subject to claims and legal actions that arise in the
ordinary course of business. Management believes that the ultimate liability
with respect to these claims and legal actions, if any, will not have a material
effect on the financial position of the Company.
The Company has been informed of possible violations of federal
environmental criminal laws resulting from possible improper handling of
asbestos-containing materials from a site now owned by the Company. The Company
does not expect that the ultimate disposition of these proceedings will have a
material adverse effect on the Company's financial condition or its results of
operations.
10. SUBSEQUENT EVENTS:
On April 21, 1998, U S Liquids Inc. acquired the Company for cash, assumed
debt and stock. The transaction was accounted for under the purchase method of
accounting. The acquisition agreement provides for contingent payments up to
$4.2 million, if certain financial and operational goals are met.
F-57
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To U S Liquids Inc.:
We have audited the accompanying balance sheets of the U S Liquids Inc.
Predecessor, which represents certain assets acquired and liabilities assumed by
U S Liquids Inc. from Campbell Wells, L.P. and Campbell Wells NORM, L.P.
(collectively "Campbell Wells") which were wholly-owned subsidiaries of
Sanifill, Inc., as of December 31, 1995 and December 13, 1996, and the related
statements of income for the years ended December 31, 1994 and 1995 and for the
period ended December 13, 1996. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
As discussed in Note 2, the accompanying financial statements have been
prepared pursuant to the purchase agreement effective December 14, 1996, between
Sanifill, Inc. and U S Liquids Inc. and were prepared for the purpose of
complying with Rule 3-05 of Regulation S-X of the Securities and Exchange
Commission and are not intended to be a complete presentation of Campbell Wells'
assets, liabilities, operating results or cash flows on a stand-alone basis.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the balance sheet of the U S Liquids Inc. Predecessor
as of December 31, 1995 and December 13, 1996, and the results of its operations
for the years ended December 31, 1994 and 1995 and for the period ended December
13, 1996, pursuant to the purchase agreement referred to in Note 2 and in
conformity with generally accepted accounting principles.
ARTHUR ANDERSEN LLP
Houston, Texas
June 26, 1997
(March 3, 1998
with respect to note 8)
F-58
<PAGE>
U S LIQUIDS INC. PREDECESSOR
BALANCE SHEETS
(IN THOUSANDS)
DECEMBER 31, DECEMBER 13,
1995 1996
------------ ------------
ASSETS
CURRENT ASSETS:
Cash and cash equivalents....... $ 286 $ 6,001
Accounts receivable, less
allowance of $200 and $172..... 6,393 4,053
Prepaid expenses and other
current assets.................. 324 61
------------ ------------
Total current assets....... $ 7,003 $ 10,115
PROPERTY, PLANT AND EQUIPMENT, net... 53,295 49,553
OTHER ASSETS......................... 243 232
------------ ------------
Total assets............... $ 60,541 $ 59,900
============ ============
LIABILITIES AND NET INTERCOMPANY
BALANCE
CURRENT LIABILITIES:
Accounts payable................ $ 2,875 $ 1,621
Accrued liabilities............. 115 336
------------ ------------
Total current
liabilities.................. $ 2,990 $ 1,957
CELL PROCESSING RESERVE.............. 7,803 7,745
CLOSURE AND REMEDIATION RESERVES..... 2,619 1,969
DEFERRED INCOME TAXES................ 12,571 14,554
------------ ------------
Total liabilities.......... $ 25,983 $ 26,225
COMMITMENTS AND CONTINGENCIES
NET INTERCOMPANY BALANCE............. 34,558 33,675
------------ ------------
Total liabilities and net
intercompany balance.... $ 60,541 $ 59,900
============ ============
The accompanying notes are an integral part of these financial statements.
F-59
<PAGE>
U S LIQUIDS INC. PREDECESSOR
STATEMENTS OF INCOME
(IN THOUSANDS)
YEAR ENDED
DECEMBER 31, PERIOD ENDED
-------------------- DECEMBER 13,
1994 1995 1996
--------- --------- -------------
REVENUES............................. $ 14,847 $ 15,119 $16,853
COST OF OPERATIONS................... 7,478 8,635 9,136
--------- --------- -------------
Gross profit.................... $ 7,369 $ 6,484 $ 7,717
SELLING, GENERAL AND ADMINISTRATIVE
EXPENSES........................... 2,626 2,989 2,524
--------- --------- -------------
Income from operations.......... $ 4,743 $ 3,495 $ 5,193
INTEREST EXPENSE, excluding
intercompany interest expense...... 105 246 353
OTHER INCOME, net.................... (176) (51) (97)
--------- --------- -------------
INCOME BEFORE PROVISION FOR INCOME
TAXES.............................. $ 4,814 $ 3,300 $ 4,937
PROVISION FOR INCOME TAXES........... 1,945 1,400 2,044
--------- --------- -------------
NET INCOME........................... $ 2,869 $ 1,900 $ 2,893
========= ========= =============
The accompanying notes are an integral part of these financial statements.
F-60
<PAGE>
U S LIQUIDS INC. PREDECESSOR
NOTES TO FINANCIAL STATEMENTS
1. THE ACQUISITION:
Effective December 13, 1996, U S Liquids Inc. ("U S Liquids") purchased
certain assets and assumed certain liabilities of Campbell Wells, L.P. and
Campbell Wells NORM L.P. ("Campbell Wells" the "U S Liquids Inc.
Predecessor," or the "Company"), which were wholly-owned subsidiaries of
Sanifill, Inc. ("Sanifill"), by issuing a long-term promissory note for $27.8
million and warrants to purchase 1,000,000 shares of U S Liquids common stock at
an exercise price of $2.00 per share (the "Campbell Wells Acquisition").
Assets not purchased and excluded from the accompanying predecessor financial
statements for all periods presented include transfer stations and other related
assets of Campbell Wells previously sold by Sanifill to Newpark Resources, Inc.
(the "Newpark Transaction").
The Company treats and disposes oilfield waste generated in the exploration
for and production of oil and natural gas. The Company has treatment facilities
located in Louisiana and Texas that service the Gulf Coast region of the United
States. The Company also treats oilfield naturally occurring radioactive
material at its treatment facility at Lacassine, Louisiana.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
BASIS OF PRESENTATION
These financial statements have been prepared to present the financial
position and results of operations of Campbell Wells related to the assets
acquired and liabilities assumed by U S Liquids Inc. under the terms of the
Campbell Wells Acquisition described in Note 1 and in conformity with generally
accepted accounting principles.
The balance sheets and statements of income may not necessarily be
indicative of the financial position or results of operations that would have
been realized had Campbell Wells been operated as a stand-alone entity. The
statements of income include the amounts allocated by Sanifill to Campbell Wells
for selling, general and administrative expenses based on a percentage of
revenues and direct payroll based costs. Management believes this allocation is
reasonable.
As a wholly-owned subsidiary of Sanifill, Campbell Wells maintained a
noninterest-bearing intercompany account with Sanifill for recording
intercompany charges for costs and expenses, intercompany purchases of equipment
and additions under capital leases, and intercompany transfers of cash, among
other transactions. It is not feasible to ascertain the amount of related
interest expense which would have been recorded in the accompanying statements
of income had Campbell Wells been operated as a stand-alone entity. Sanifill did
not maintain debt balances specifically related to the operations of Campbell
Wells nor did Sanifill allocate any interest charges to Campbell Wells relating
to Sanifill's corporate debt. The interest expense reflected in the accompanying
statements of income represents the interest portion of capital lease payments
which were paid by Sanifill and directly charged to Campbell Wells.
Due to the manner in which Sanifill intercompany transactions were recorded
and also due to carve out matters relating to intercompany transactions
associated with the portion of Campbell Wells which was sold by Sanifill to
Newpark, it is not feasible to present a detailed analysis of transactions
reflected in the intercompany balance with Sanifill. The change in the
intercompany balance with Sanifill (net of income) was ($409,000), $462,000, and
$3,776,000 for the years ended December 31, 1994, 1995 and for the period ended
December 13, 1996, respectively.
F-61
<PAGE>
U S LIQUIDS INC. PREDECESSOR
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
It is also not feasible to present complete statements of cash flows,
including unaudited interim cash flow data, due to the nature and manner of
recording of intercompany transactions; however, the following information
presents certain cash flow data related to the operations of Campbell Wells:
CASH FLOW INFORMATION
YEAR ENDED
DECEMBER 31, PERIOD ENDED
-------------------- DECEMBER 13,
1994 1995 1996
--------- --------- ------------
(IN THOUSANDS)
Cash flows from operating activities
Net income......................... $ 2,869 $ 1,900 $ 2,893
Adjustments to reconcile net income
to net cash provided by operating
activities
Depreciation.................. 2,860 3,025 2,594
Deferred income tax provision
(benefit).................. 1,234 (413) 1,983
Changes in operating assets
and liabilities
Accounts receivable...... (3,118) 706 2,340
Prepaid expenses and
other current
assets................ (8) (130) 263
Other assets............. (41) 58 11
Accounts payable and
accrued liabilities... (228) 1,812 (1,033)
Closure, remediation and
cell processing
reserves.............. 340 (148) (708)
--------- --------- ------------
Net cash provided by operating
activities............................ $ 3,908 $ 6,810 $ 8,343
========= ========= ============
USE OF ESTIMATES
The preparation of financial statements requires management to make
estimates and assumptions that affect the reported amounts of assets acquired
and liabilities assumed, the disclosure of contingent assets acquired and
liabilities assumed at the date of the financial statements and the reported
amounts of revenues and expenses during the reporting period. Actual results
could differ from those estimates.
CASH AND CASH EQUIVALENTS
All highly liquid investments with an original maturity of three months or
less are classified as cash equivalents.
CONCENTRATIONS OF CREDIT RISK
Accounts receivable potentially subject the Company to concentrations of
credit risk. At December 31, 1995, two customers accounted for 17 percent and 11
percent, respectively, of the total accounts receivable balance. At December 13,
1996, 19 percent and 50 percent of the total accounts receivable are associated
with two customers, respectively.
In 1994, one customer accounted for 19 percent of total revenues. During
1995, two customers accounted for 33 percent and 22 percent, respectively, of
total revenues. During 1996, two customers accounted for 41 percent and 31
percent, respectively, of total revenues.
The Company's customers are concentrated in the oil and gas industry in
Louisiana and Texas.
PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment is recorded at cost. Improvements or
betterments which significantly extend the life of an asset are capitalized.
Expenditures for maintenance and repair costs are charged to operations as
incurred. The cost of assets retired or otherwise disposed of and the related
accumulated
F-62
<PAGE>
U S LIQUIDS INC. PREDECESSOR
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
depreciation are eliminated from the accounts in the year of disposal. Gains and
losses resulting from property disposals are included in other income or
expense. Depreciation is computed using the straight-line method.
CLOSURE AND REMEDIATION RESERVES
The closure and remediation reserves represent accruals for the total
estimated future costs associated with the ultimate closure of the Company's
landfarm facilities, including costs of decommissioning and statutory monitoring
costs required during the closure and subsequent postclosure periods. Management
periodically reviews the level of these reserves and adjusts them to reflect its
current estimate of the total costs necessary to complete the closure and
remediation of its landfarm facilities. In conjunction with U S Liquids'
acquisition of certain assets and assumption of certain liabilities of Campbell
Wells, Sanifill has agreed to maintain landfarm facility closure bonds and
related letters of credit totalling $4 million posted with the states of
Louisiana and Texas through December 31, 1997, at which time U S Liquids will
replace these closure bonds and letters of credit with similar instruments.
REVENUE RECOGNITION AND CELL PROCESSING RESERVE
When waste is unloaded at a given site, Campbell Wells recognizes the
related revenue and records a reserve for the estimated amount of expenses to be
incurred with the treatment of the oil field waste in order to match revenues
with their related costs. The related treatment costs are charged against the
reserve as such costs are incurred.
INCOME TAXES
The operations of Campbell Wells were included in the consolidated U.S.
federal income tax return of Sanifill, Inc., and no allocations of income taxes
were reflected in the historical statements of operations. For purposes of these
predecessor financial statements, current and deferred income taxes have been
provided on a separate return basis.
NEW ACCOUNTING STANDARD
Effective January 1, 1996, the Company adopted the provisions of Statement
of Financial Accounting Standards (SFAS) No. 121, "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of."
Under these provisions, the Company reviews certain long-lived assets for
impairment whenever events indicate that the carrying amount of an asset may not
be recoverable and recognizes an impairment loss under certain circumstances in
the amount by which the carrying value exceeds the fair value of the asset. In
making this assessment, the Company considered the estimated future undiscounted
cash flows of the Company's long-lived assets on the basis of continuing
operations, versus the current market value of such assets on a held for sale
basis. The adoption of SFAS No. 121 had no impact on the Company's financial
position or results of operations.
3. PREPAID EXPENSES AND OTHER CURRENT ASSETS:
Prepaid expenses and other current assets at December 31, 1995, and
December 13, 1996, consist of the following:
1995 1996
--------- ---------
(IN THOUSANDS)
Closure bond......................... $ 211 $ --
Prepaid expenses..................... 33 43
Notes receivable, current portion.... 33 16
Other................................ 47 2
--------- ---------
Total........................... $ 324 $ 61
========= =========
F-63
<PAGE>
U S LIQUIDS INC. PREDECESSOR
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
4. PROPERTY, PLANT AND EQUIPMENT:
Property, plant and equipment at December 31, 1995, and December 13, 1996,
consist of the following:
<TABLE>
<CAPTION>
DEPRECIABLE LIFE 1995 1996
----------------- ---------- ----------
(YEARS) (IN THOUSANDS)
<S> <C> <C> <C>
Landfarm and treatment facilities.... 25 $ 56,732 $ 56,573
Buildings and improvements........... 10-12 532 659
Machinery and equipment.............. 3-5 7,494 6,445
Vehicles............................. 3-5 826 755
Furniture and fixtures............... 3 355 359
---------- ----------
Total...................... $ 65,939 $ 64,791
Less accumulated depreciation........ (12,644) (15,238)
---------- ----------
Total...................... $ 53,295 $ 49,553
========== ==========
</TABLE>
Included in property, plant and equipment at December 31, 1995, and
December 13, 1996 are approximately $3,133,000 and $3,133,000, respectively, of
assets held under capital leases.
5. OTHER ASSETS:
Other assets at December 31, 1995, and December 13, 1996, consist of the
following:
1995 1996
--------- ---------
(IN THOUSANDS)
Note receivable...................... $ 196 $ 196
Other................................ 47 36
--------- ---------
Total...................... $ 243 $ 232
========= =========
6. ACCRUED LIABILITIES:
Accrued liabilities at December 31, 1995, and December 13, 1996, consist of
the following:
1995 1996
--------- ---------
(IN THOUSANDS)
Engineering and testing fees......... $ 13 $ 140
Repairs and maintenance.............. -- 96
Accrued salaries and benefits........ 21 55
Escrow deposits...................... 34 --
Accrued commissions.................. 33 --
Other................................ 14 45
--------- ---------
Total...................... $ 115 $ 336
========= =========
F-64
<PAGE>
U S LIQUIDS INC. PREDECESSOR
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
7. INCOME TAXES:
The components of the provision (benefit) for income taxes are as follows:
YEAR ENDED
DECEMBER 31, PERIOD ENDED
-------------------- DECEMBER 13,
1994 1995 1996
--------- --------- -------------
(IN THOUSANDS)
Current
Federal......................... $ 2,750 $ 1,622 $ 40
State........................... (2,039) 191 21
--------- --------- -------------
Total...................... $ 711 $ 1,813 $ 61
--------- --------- -------------
Deferred
Federal......................... $ (1,211) $ (511) $ 1,580
State........................... 2,445 98 403
--------- --------- -------------
Total...................... $ 1,234 $ (413) $ 1,983
--------- --------- -------------
$1,945 $1,400 $2,044
========= ========= =============
The difference in income taxes provided (benefited) and the amounts
determined by applying the federal statutory tax rate to income (loss) before
provision (benefit) for income taxes result from the following:
YEAR ENDED
DECEMBER 31, PERIOD ENDED
-------------------- DECEMBER 13,
1994 1995 1996
--------- --------- -------------
(IN THOUSANDS)
Tax at statutory rate................ $ 1,585 $ 1,104 $ 1,676
Add (deduct)
State income taxes, net of
federal benefit............... 269 191 280
Nondeductible expenses.......... 91 105 88
--------- --------- -------------
Total...................... $ 1,945 $ 1,400 $ 2,044
========= ========= =============
The tax effects of significant temporary differences representing deferred
income tax assets and liabilities are as follows:
DECEMBER 31, DECEMBER 31,
1995 1996
------------ ------------
(IN THOUSANDS)
Deferred income tax liabilities
Property and equipment.......... $ (4,511) $ (4,767)
Landfarm treatment facility..... (14,287) (14,286)
Other........................... (1,729) (2,924)
------------ ------------
Total...................... $(20,527) $(21,977)
============ ============
Deferred income tax assets
Closure accrual................. $ 2,015 $ 1,967
Depletion....................... 2,338 2,344
Processing reserve.............. 3,373 3,373
Other........................... 230 (261)
------------ ------------
Total...................... $ 7,956 $ 7,423
------------ ------------
Net deferred income tax
liabilities............. $ 12,571 $ 14,554
============ ============
F-65
<PAGE>
U S LIQUIDS INC. PREDECESSOR
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
8. COMMITMENTS AND CONTINGENCIES:
NONCOMPETE AGREEMENT
Under the terms of the Newpark Transaction, Campbell Wells and Sanifill
agreed not to compete with Newpark Resources, Inc., in the collection of
oilfield waste from offshore sources for a period of five years. This agreement
was assumed by U S Liquids pursuant to the Campbell Wells Acquisition.
OILFIELD WASTE DISPOSAL AGREEMENT
In connection with the Newpark Transaction, Campbell Wells signed a
disposal agreement dated June 4, 1996, in which Newpark Resources, Inc., agreed
to deliver, and Campbell Wells agreed to accept at its Louisiana landfarms,
certain quantities of oilfield waste each year for 25 years beginning June 1996,
for a specified price, subject to adjustment, and at specified annual minimum
volume levels. This agreement was assumed by U S Liquids pursuant to the
Campbell Wells Acquisition.
LEASES
The Company leases office facilities under noncancelable leases. Rent
expense was approximately $214,000, $202,000 and $214,000 for the years ended
December 31, 1994 and 1995, and for the period ended December 13, 1996,
respectively.
LEGAL PROCEEDINGS
Prior to the closing of the Campbell Wells Acquisition, three lawsuits were
brought against Campbell Wells based upon the operation of its Bourg, Louisiana
landfarm. In one of the lawsuits filed against Campbell Wells, approximately 300
individuals residing in and around Grand Bois, Louisiana are seeking unspecified
monetary damages allegedly suffered as a result of (i) odors allegedly emitted
by waste received from Exxon Company U.S.A. ("Exxon") at the landfarm in March
1994, and (ii) alleged air, water and soil contamination in connection with
ongoing operations at the landfarm. The Company was named as a defendant in this
action in January 1998. Trial in this matter on the claims of ten plaintiffs is
set to commence in the 17th Judicial District Court for the Parrish of
Lafourche, Louisiana on July 13, 1998. A second lawsuit, brought by one
individual, seeks unspecified monetary damages allegedly suffered as a result of
odors allegedly emitted by waste received from Exxon at the landfarm in March
1994. This lawsuit is also pending in the 17th Judicial District Court for the
Parrish of Lafourche, Louisiana and trial is set to commence on July 13, 1998.
The Company has not yet been named as a defendant in this action. In the third
lawsuit, six individuals filed suit on March 7, 1996 against Campbell Wells in
the Civil District Court for the Parrish of Orleans, Louisiana, seeking
preliminary and permanent injunctive relief against certain treatment operations
conducted at the Bourg, Louisiana landfarm which the plaintiffs contend have
resulted and will result in adverse health effects by way of emissions of
alleged air pollutants. The plaintiffs' request for a preliminary injunction was
heard during the summer of 1996. On December 30, 1996, the court entered an
order granting in part and denying in part the relief requested by the
plaintiffs. Specifically, the court found that there was no evidence that
emissions resulting from the treatment operations complained of equaled or
exceeded any relevant safety standard, health standard or occupational standard
and, therefore, denied the plaintiffs' request for a temporary injunction
prohibiting such treatment operations. The court did, however, preliminarily
enjoin Campbell Wells (and, thus, indirectly the Company) from treating waste
received from Exxon in March 1994 in one particular treatment cell located
within 500 feet of a building in which one of the plaintiffs resides. In
connection therewith, the court ordered that the Commissioner of the Louisiana
Department of Conservation be made a party to the litigation and substituted for
the plaintiffs on the limited issue of whether Campbell Wells has violated the
location criteria for the particular treatment cell involved. The Company was
named as a defendant in this action in January 1998. No trial date has been set
for the plaintiffs' request for permanent injunctive relief; however, based upon
the court's rulings from the preliminary injunction trial and initial
discussions with the Louisiana Department of Conservation, the
F-66
<PAGE>
U S LIQUIDS INC. PREDECESSOR
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
Company believes that permanent injunctive relief that might be entered in the
action will not have a material adverse effect upon the Company's consolidated
financial position or results of operations.
Prior to the closing of the Campbell Wells Acquisition, a class action
lawsuit was filed in the Civil District Court for the Parrish of Orleans,
Louisiana against Campbell Wells seeking unspecified monetary damages allegedly
suffered as a result of alleged air, water and soil contamination in connection
with ongoing operations at the Mermentau, Louisiana landfarm. The Company has
not been named as a defendant in this lawsuit; however, there can be no
assurance that the Company will not subsequently be named as a defendant in this
lawsuit.
In the Campbell Wells Acquisition Agreement, Sanifill agreed, with certain
enumerated exceptions, to retain responsibility for all liabilities of Campbell
Wells as of the closing date of the Campbell Wells Acquisition including,
without limitation, the contingent liabilities associated with such lawsuits.
The obligation of Sanifill to indemnify the Company is limited to $10 million.
In March 1998, the Company was dismissed as a defendant in a lawsuit
originally filed by Waste Facilities, Inc. in 1994 against Campbell Wells and
others in the District Court of Jim Wells County, Texas.
F-67
<PAGE>
[Inside Back Cover]
[PHOTO]
<PAGE>
- ------------------------------------------------------
- ------------------------------------------------------
NO DEALER, SALESPERSON OR ANY OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS NOT CONTAINED IN THIS PROSPECTUS,
AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED
UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY OR ANY OF THE UNDERWRITERS. THIS
PROSPECTUS DOES NOT CONSTITUTE AN OFFER OF ANY SECURITIES OTHER THAN THOSE TO
WHICH IT RELATES OR AN OFFER TO SELL, OR A SOLICITATION OF AN OFFER TO BUY, TO
ANY PERSON IN ANY JURISDICTION WHERE SUCH OFFER OR SOLICITATION WOULD BE
UNLAWFUL. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER
SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THE INFORMATION
CONTAINED HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO THE DATE HEREOF.
------------------------
TABLE OF CONTENTS
PAGE
Prospectus Summary................... 3
Risk Factors......................... 7
Use of Proceeds...................... 14
Price Range of Common Stock and
Dividend Policy.................... 14
Capitalization....................... 15
Selected Financial Data.............. 16
Management's Discussion and Analysis
of Financial Condition and Results
of Operations...................... 18
Business............................. 25
Management........................... 39
Certain Transactions................. 43
Principal Stockholders............... 45
Description of Securities............ 46
Underwriting......................... 48
Legal Matters........................ 49
Experts.............................. 49
Additional Information............... 49
Index to Financial Statements........ F-1
3,750,000 SHARES
[LOGO]
COMMON STOCK
_____________________
PROSPECTUS
_____________________
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
DEUTSCHE MORGAN GRENFELL
VAN KASPER & COMPANY
SANDERS MORRIS MUNDY
, 1998
- ------------------------------------------------------
- ------------------------------------------------------
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following table sets forth the costs and expenses payable by the
Company in connection with the sale of the securities being registered. All
amounts are estimates except for the fees payable to the SEC.
AMOUNT
------------
SEC registration fee................. $ 34,446
AMEX filing fee...................... 17,500
NASD filing fee...................... 10,662
Printing expenses.................... 180,000*
Accounting fees and expenses......... 420,000*
Legal fees and expenses.............. 200,000*
Transfer agent fees.................. 3,000*
Miscellaneous........................ 134,392*
------------
TOTAL........................... $ 1,000,000*
============
- ------------
* Estimated
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS
The Company's Certificate of Incorporation contains a provision which
limits, to the fullest extent permitted by Delaware law, the liability of a
director to the Company or its stockholders from monetary damages for a breach
of such director's fiduciary duty as a director. Delaware law presently permits
such limitation of a director's liability except where a director (i) breaches
his or her duty of loyalty to the Company or its stockholders, (ii) fails to act
in good faith or engages in intentional misconduct or a knowing violation of
law, (iii) authorizes payment of an unlawful dividend or stock repurchase, or
(iv) obtains an improper personal benefit.
The Company's Certificate of Incorporation also provides that directors and
officers shall be indemnified against liabilities arising from their service as
directors or officers to the fullest extent permitted by law, which generally
requires that the individual act in good faith and in a manner he or she
reasonably believes to be in or not opposed to the Company's best interests. The
Company has obtained directors and officers liability insurance to limit its
exposure under these provisions.
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES
In November 1996, the Company issued to members of management and other
founding stockholders a total of 3,338,875 shares of Common Stock at $.02 per
share. The sales were exempt from registration under Section 4(2) of the
Securities Act, no public offering being involved.
On December 13, 1996, in connection with its acquisition of various assets
of affiliates of Sanifill, Inc., the Company issued to Sanifill, Inc. a warrant
to purchase 1,000,000 shares of Common Stock at $2.00 per share. This sale was
exempt from registration under Section 4(2) of the Securities Act, no public
offering being involved.
On December 31, 1996, the Company sold shares of Common Stock to the
following parties in the amounts and for the consideration indicated. These
sales were exempt from registration under Section 4(2) of the Securities Act, no
public offering being involved: Eric Warden -- 87,500 shares for a consideration
of $153,125; William M. DeArman -- 50,000 shares for a consideration of $87,500;
Fred M. Ferreira -- 12,500 shares for a consideration of $21,875; Steven
Harter -- 6,250 shares for a consideration of $10,938; Ronald L. Stanfa -- 6,250
shares for a consideration of $10,938; and Lorne Bain 37,500 shares for a
consideration of $65,625.
II-1
<PAGE>
On May 15, 1997, the Company issued to Sanders Morris Mundy Inc. a warrant
to purchase 37,500 shares of Common Stock at an exercise price of $9.50 per
share in consideration of financial advisory services to be provided to the
Company. This sale was exempt from registration under Section 4(2) of the
Securities Act, no public offering being involved.
On June 17, 1997, the Company issued to Thomas B. Blanton 1,062,500 shares
of Common Stock in connection with the Company's acquisition of three companies
owned by Mr. Blanton. These sales were exempt from registration under Section
4(2) of the Securities Act, no public offering being involved.
On June 17, 1997, the Company issued a total of 637,500 shares of Common
Stock to the former stockholders of American WasteWater Inc. in connection with
the Company's acquisition of American WasteWater Inc. These sales were exempt
from registration under Section 4(2) of the Securities Act, no public offering
being involved.
On June 18, 1997, the Company issued to BellMeade Capital Partners and Mark
Liebovit warrants to purchase a total of 65,000 shares of Common Stock at an
exercise price of $9.50 per share in consideration of consulting services
provided and to be provided to the Company. These sales were exempt from
registration under Section 4(2) of the Securities Act, no public offering being
involved.
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.
These sales were exempt from registration under Section 4(2) of the Securities
Act, no public offering being involved.
On October 1, 1997, the Company acquired Re-Claim Environmental, Inc. in
exchange for 241,410 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
registered transaction. Such sales were exempt from registration under Section
4(2) of the Securities Act, no public offering being involved.
On January 1, 1998, the Company issued to Glenn Pratt and John Bailey
warrants to purchase a total of 20,000 shares of Common Stock in consideration
of consulting services to be provided to the Company. These sales were exempt
from registration under Section 4(2) of the Securities Act, no public offering
being involved.
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) Exhibits
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
- ------------------------ ------------------------------------------------------------------------------------------
<C> <S>
`1.1 -- Form of Underwriting Agreement among U S Liquids Inc. and Donaldson, Lufkin & Jenrette
Securities Corporation, Deutsche Morgan Grenfell, Van Kasper & Company and Sanders Morris
Mundy Inc., as representatives of the several underwriters.
3.1 -- Second Amended and Restated Certificate of Incoporation of U S Liquids Inc. Registration
Statement on Form S-1 (File No. 333-30065), effective August 19, 1997, is hereby
incorporated by reference).
3.2 -- Amended and Restated Bylaws of U S Liquids Inc. (Exhibit 3.2 of the U S Liquids Inc.
Registration Statement on Form S-1 (File No. 333-30065), effective August 19, 1997, is
hereby incorporated by reference).
4.1 -- Form of Certificate Evidencing Ownership of Common Stock of U S Liquids Inc. (Exhibit 4.1
of the U S Liquids Inc. Registration Statement on Form S-1 (File No. 333-30065), effective
August 19, 1997, is hereby incorporated by reference).
`4.2 -- Amended and Restated Credit Agreement, dated April 10, 1998, among U S Liquids Inc., Bank
of America National Trust and Savings Association, BankBoston, N.A. and Wells Fargo Bank,
N.A.
`4.3 -- Note dated April 10, 1998, of U S Liquids Inc. payable to Bank of America National Trust
and Savings Association.
</TABLE>
II-2
<PAGE>
<TABLE>
<CAPTION>
<C> <S>
`4.4 -- Note, dated April 10, 1998, of U S Liquids Inc. payable to BankBoston, N.A.
`4.5 -- Note, dated April 10, 1998, of U S Liquids Inc. payable to Wells Fargo Bank, N.A.
4.6 -- Security Agreement, dated December 17, 1997, executed by U S Liquids Inc. and its
subsidiaries in favor of Bank of America National Trust and Savings Association. (Exhibit
4.6 of the Form 10-K for the year ended December 31, 1997 is hereby incorporated by
reference).
4.7 -- Company Pledge Agreement, dated December 17, 1997, executed by U S Liquids Inc. in favor
of Bank of American National Trust and Savings Association. (Exhibit 4.7 of the Form 10-K
for the year ended December 31, 1997 is hereby incorporated by reference.)
`5.1 -- Opinion of Hartzog Conger & Cason.
10.1 -- Asset Purchase Agreement, dated December 2, 1996, among U S Liquids Inc., Sanifill, Inc.
and certain affiliates of Sanifill, Inc. (Exhibit 10.1 of the U S Liquids Inc.
Registration Statement on Form S-1 (File No. 333-30065), effective August 19, 1997, is
hereby incorporated by reference).
10.2 -- Seller Noncompetition Agreement, dated December 13, 1996, between U S Liquids Inc. and
Sanifill, Inc. (Exhibit 10.2 of the U S Liquids Inc. Registration Statement on Form S-1
(File No. 333-30065), effective August 19, 1997, is hereby incorporated by reference).
10.3 -- Buyer Noncompetition Agreement, dated December 13, 1996, between Sanifill, Inc. and U S
Liquids Inc. (Exhibit 10.3 of the U S Liquids Inc. Registration Statement on Form S-1
(File No. 333-30065), effective August 19, 1997, is hereby incorporated by reference).
10.4 -- NOW Disposal Agreement, dated June 4, 1996, among Sanifill, Inc., Oilfield Waste Disposal
Operating Co. and Campbell Wells, Ltd. (Exhibit 10.4 of the U S Liquids Inc. Registration
Statement on Form S-1 (File No. 333-30065), effective August 19, 1997, is hereby
incorporated by reference).
10.5 -- Noncompetition Agreement, dated August 12, 1996, between Sanifill, Inc. and Newpark
Resources, Inc. (Exhibit 10.5 of the U S Liquids Inc. Registration Statement on Form S-1
(File No. 333-30065), effective August 19, 1997, is hereby incorporated by reference).
10.6 -- Assumption and Guarantee Agreement dated August 12, 1996, among Newpark Resources, Inc.,
Sanifill, Inc., and Campbell Wells, Ltd. (Exhibit 10.6 of the U S Liquids Inc.
Registration Statement on Form S-1 (File No. 333-30065), effective August 19, 1997, is
hereby incorporated by reference).
10.7 -- Lease and Access Agreement between Campbell Wells, Ltd and Newpark Resources, Inc.
(Exhibit 10.7 of the U S Liquids Inc. Registration Statement on Form S-1 (File No.
333-30065), effective August 19, 1997, is hereby incorporated by reference).
10.8 -- Sublease and Access Agreement between Campbell Wells, Ltd. and Newpark Resources, Inc. and
underlying lease agreement (Exhibit 10.8 of the U S Liquids Inc. Registration Statement on
Form S-1 (File No. 333-30065), effective August 19, 1997, is hereby incorporated by
reference).
10.9 -- Sublease and Access Agreement between Campbell Wells, Ltd. and Newpark Resources, Inc. and
underlying lease agreement (Exhibit 10.9 of the U S Liquids Inc. Registration Statement on
Form S-1 (File No. 333-30065), effective August 19, 1997, is hereby incorporated by
reference).
10.10 -- Consent to Assignment and Assumption of Contracts, dated December 13, 1996, among
Sanifill, Inc., Campbell Wells, L.P. and U S Liquids Inc. (Exhibit 10.10 of the U S
Liquids Inc. Registration Statement on Form S-1 (File No. 333-30065), effective August 19,
1997, is hereby incorporated by reference).
10.11 -- Form of Nonqualified Stock Option Agreement between U S Liquids Inc. and certain
individuals (Exhibit 10.11 of the U S Liquids Inc. Registration Statement on Form S-1
(File No. 333-30065), effective August 19, 1997, is hereby incorporated by reference).
</TABLE>
II-3
<PAGE>
<TABLE>
<CAPTION>
<C> <S>
10.12 -- U S Liquids Inc. Amended and Restated Stock Option Plan (Exhibit 10.12 of the U S Liquids
Inc. Registration Statement on Form S-1 (File No. 333-30065), effective August 19, 1997,
is hereby incorporated by reference).
10.13 -- U S Liquids Inc. Directors' Stock Option Plan (Exhibit 10.12 of the U S Liquids Inc.
Registration Statement on Form S-1 (File No. 333-30065), effective August 19, 1997, is
hereby incorporated by reference).
10.14 -- Form of Grant of Incentive Stock Option Agreement (Exhibit 10.14 of the U S Liquids Inc.
Registration Statement on Form S-1 (File No. 333-30065), effective August 19, 1997, is
hereby incorporated by reference).
10.15 -- Employment Agreement, dated February 13, 1998, between U S Liquids Inc. and W. Gregory
Orr. (Exhibit 10.15 of the Form 10-K for the year ended December 31, 1997 is hereby
incorporated by reference).
10.16 -- Employment Agreement, dated February 13, 1998, between U S Liquids Inc. and Earl J.
Blackwell. (Exhibit 10.16 of the Form 10-K for the year ended December 31, 1997 is hereby
incorporated by reference).
10.17 -- Asset Purchase Agreement, dated December 15, 1997, among U S Liquids Inc., Mesa
Processing, Inc., Waste Technologies, Inc., Kirk Johnson, Norman Johnson, John Jetelina
and Ron McMahan (Exhibit 10.17 of the Form 10-K for the year ended December 31, 1997 is
hereby incorporated by reference).
10.18 -- 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 (Exhibit 2.1 to the Form 10-Q for the quarter ended
September 30, 1997 is hereby incorporated by reference).
10.19 -- Purchase of Membership Interest Agreement, dated; September 30, 1997, among U S Liquids
Inc. Re-Claim Environmental Louisiana LLC, John E. Tuma and Reyncor Industrial Alcohol,
Inc. (Exhibit 2.2 of the Form 10-Q for the quarter ended September 30, 1997 is hereby
incorporated by reference).
10.20 -- Purchase and Sale of Assets Agreement, dated September 30, 1997, among T&T Grease Service,
Inc., A&B Enterprises, Inc. and Earnest L. McCombs (Exhibit 2.3 to the Form 10-Q for the
quarter ended September 30, 1997 is hereby incorportated by reference).
10.21 -- Stock Distribution Agreement, dated June 16, 1997, between U S Liquids Inc. and Thomas B.
Blanton (Exhibit 10.21 of the U S Liquids Inc. Registration Statement on Form S-1 (File
No. 333-30065), effective August 19, 1997, is hereby incorporated by reference).
10.22 -- Form of Stock Distribution Agreement, dated June 16, 1997, between U S Liquids Inc., and
the former stockholders of Amercian WasteWater Inc. (Exhibit 10.22 of the U S Liquids Inc.
Registration Statement on Form S-1 (File No. 333-30065), effective August 19, 1997, is
hereby incorporated by reference).
10.23 -- Stock Distribution Agreement, dated June 16, 1997, between U S Liquids Inc. and W. Gregory
Orr (Exhibit 10.23 of the U S Liquids Inc. Registration Statement on Form S-1 (File No.
333-30065), effective August 19, 1997, is hereby incorporated by reference).
10.24 -- Noncompetition Agreement, dated June 17, 1997, between U S Liquids Inc. and Thomas B.
Blanton (Exhibit 10.24 of the U S Liquids Inc. Registration Statement on Form S-1 (File
No. 333-30065), effective August 19, 1997, is hereby incorporated by reference).
10.25 -- Noncompetition Agreement, dated June 17, 1997, between U S Liquids Inc. and William H.
Wilson, Jr. (Exhibit 10.25 of the U S Liquids Inc. Registration Statement on Form S-1
(File No. 333-30065), effective August 19, 1997, is hereby incorporated by reference).
</TABLE>
II-4
<PAGE>
<TABLE>
<CAPTION>
<C> <S>
10.26 -- Agreement to Vote Stock, dated June 16, 1997, among U S Liquids Inc., Thomas B. Blanton,
W. Gregory Orr, Earl J. Blackwell, William M. DeArman and certain other parties (Exhibit
10.26 of the U S Liquids Inc. Registration Statement on Form S-1 (File No. 333-30065),
effective August 19, 1997, is hereby incorporated by reference).
10.27 -- Estoppel, Waiver and Amendment Agreement, dated June 16, 1997, between sanifill, Inc. and
U S Liquids Inc. (Exhibit 10.27 of the U S Liquids Inc. Registration Statement on Form S-1
(File No. 333-30065), effective August 19, 1997, is hereby incorporated by reference).
10.28 -- Financial Advisory Agreement, dated May 15, 1997, between U S Liquids Inc. and Sanders
Morris Mundy Inc. and supplemental letter dated July 10, 1997 (Exhibit 10.28 of the U S
Liquids Inc. Registration Statement on Form S-1 (File No. 333-30065), effective August 19,
1997, is hereby incorporated by reference).
10.29 -- Service Agreement, dated June 23, 1997, between U S Liquids Inc. and Bellmeade Capital
Partners (Exhibit 10.29 of the U S Liquids Inc. Registration Statement on Form S-1 (File
No. 333-30065), effective August 19, 1997, is hereby incorporated by reference).
10.30 -- Service Agreement, dated June 23, 1997, between U S Liquids Inc. and Mark Liebovit
(Exhibit 10.30 of the U S Liquids Inc. Registration Statement on Form S-1 (File No.
333-30065), effective August 19, 1997, is hereby incorporated by reference).
10.31 -- Warrant, dated December 13, 1996, issued by U S Liquids Inc. to Sanifill, Inc. (Exhibit
10.31 of the U S Liquids Inc. Registration Statement on Form S-1 (File No. 333-30065),
effective August 19, 1997, is hereby incorporated by reference).
10.32 -- Warrant Agreement, dated May 15, 1997, between U S Liquids Inc. and Sanders Morris Mundy
Inc. (Exhibit 10.32 of the U S Liquids Inc. Registration Statement on Form S-1 (File No.
333-30065), effective August 19, 1997, is hereby incorporated by reference).
10.33 -- Warrant Agreement among U S Liquids Inc., Van Kasper & Company and Sanders Morris Mundy
Inc. (Exhibit 10.33 of the U S Liquids Inc. Registration Statement on Form S-1 (File No.
333-30065), effective September 18, 1997, is hereby incorporated by reference).
10.34 -- Warrant, dated June 23, 1997, issued by U S Liquids Inc. to Bellmeade Capital Partners
(Exhibit 10.34 of the U S Liquids Inc. Registration Statement on Form S-1 (File No.
333-30065), effective August 19, 1997, is hereby incorporated by reference).
10.35 -- Warrant, dated June 23, 1997, issued by U S Liquids Inc. to Mark Licbovit (Exhibit 10.35
of the U S Liquids Inc. Registration Statement on Form S-1 (File No. 333-30065), effective
August 19, 1997, is hereby incorporated by reference).
10.36 -- Stock Purchase Agreement, dated September 10, 1996, among Mesa Processing, Inc., Jack C.
Wolcott and South Texas By-Products Company, Inc. (Exhibit 10.36 of the U S Liquids Inc.
Registration Statement on Form S-1 (File No. 333-30065), effective August 19, 1997, is
hereby incorporated by reference).
10.37 -- Non-Competition Agreement, dated September 10, 1996, between Jack C. Wolcott and Mesa
Processing, Inc. (Exhibit 10.37 of the U S Liquids Inc. Registration Statement on Form S-1
(File No. 333-30065), effective August 19, 1997, is hereby incorporated by reference).
10.38 -- Stock Distribution Agreement, dated June 16, 1997, between U S Liquids Inc. and Earl J.
Blackwell (Exhibit 10.38 of the U S Liquids Inc. Registration Statement on Form S-1 (File
No. 333-30065), effective August 19, 1997, is hereby incorporated by reference).
10.39 -- Stock Distribution Agreement, dated June 16, 1997, between U S Liquids Inc. and William M.
DeArman (Exhibit 10.39 of the U S Liquids Inc. Registration Statement on Form S-1 (File
No. 333-30065), effective August 19, 1997, is hereby incorporated by reference).
</TABLE>
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10.40 -- Employment Agreement, dated July 2, 1997, between U S Liquids Inc. and Michael P. Lawlor
(Exhibit 10.40 of the U S Liquids Inc. Registration Statement on Form S-1 (File No.
333-30065), effective August 19, 1997, is hereby incorporated by reference).
10.41 -- Warrant, dated January 1, 1998, between U S Liquids Inc. to Glenn A. Pratt (Exhibit 10.41
of the Form 10-K for the year ended December 31, 1997 is hereby incorporated by
reference).
10.42 -- Amendment No. 1 to financial Advisory Agreement, dated August 18, 1997, between U S
Liquids Inc. and Sanders Morris Mundy Inc. (Exhibit 10.42 of the U S Liquids Inc.
Registration Statement on Form S-1 (File No. 333-30065), effective August 19, 1997, is
hereby incorporated by reference).
10.43 -- Agreement and Plan of Merger, dated June 16, 1997, among U S Liquids Inc., AWW Acquisition
Corp., American WasteWater Inc., William H. Wilson, Jr. and Michael W. Minick (Exhibit 2.1
of the U S Liquids Inc. Registration Statement on Form S-1 (File No. 333-30065), effective
August 19, 1997, is hereby incorporated by reference).
10.44 -- Agreement and Plan of Merger, dated June 16, 1997, among U S Liquids Inc., Mesa
Acquisition Corp., T&T GS Acquisition Corp., Phoenix F&O Acquisition Corp., Mesa
Processing, Inc., T&T Grease Service, Inc., Phoenix Fats & Oils, Inc. and Thomas B.
Blanton (Exhibit 2.2 of the U S Liquids Inc. Registration Statement on Form S-1 (File No.
333-30065), effective August 19, 1997, is hereby incorporated by reference).
10.45 -- Warrant, dated August 25, 1997, between U S Liquids Inc. to Van Kasper & Company (Exhibit
10.45 of U S Liquids Inc. Registration Statement on Form S-1 (File No. 333-34875),
effective September 18, 1997, is hereby incorporated by reference).
10.46 -- Warrant, dated August 25, 1997, issued by U S Liquids Inc. to Sanders Morris Mundy Inc.
(Exhibit 10.46 of U S Liquids Inc. Registration Statement on Form S-1 (File No.
333-34875), effective September 18, 1997, is hereby incorporated by reference).
10.47 -- Warrant issued by U S Liquids Inc. to Sanders Morris Mundy Inc. (Exhibit 10.47 of U S
Liquids Inc. Registration Statement on Form S-1 (File No. 333-34875), effective September
18, 1997, is hereby incorporated by reference).
10.48 -- Warrant, dated January 1, 1998, issued by U S Liquids Inc. to John Bailey (Exhibit 10.48
of the Form 10-K for the year ended December 31, 1997 is hereby incorporated by
reference).
`10.49 -- Purchase and Sale of Assets Agreement, dated January 1, 1998, among Environment
Management, Inc., Enviro-Plumbing, Inc., Michael L. Briggle and Mark A. Emmert.
`10.50 -- Agreement and Plan of Reorganization, dated January 1, 1998, among U S Liquids Inc., U S
Liquids/EMI Acquisition Corporation, Environment Management, Inc., Michael L. Briggle and
Mark A. Emmert.
`10.51 -- Stock Purchase Agreement, dated January 1, 1998, among U S Liquids Inc., Environment
Management, Inc., Enviro-Waste Type V of Texas, Inc., Michael L. Briggle and Mark A.
Emmert.
`10.52 -- Purchase and Sale of Assets Agreement, dated January 1, 1998, among U S Liquids Inc., U S
Liquids Northeast, Inc., Suburban Wastewater Services, Inc., Glenn A. Pratt, James D.
Baird, Peter J. Collins and John J. Bailey.
`10.53 -- First Amendment to Purchase and Sale of Assets Agreement, dated as of January 1, 1998,
among U S Liquids Inc., U S Liquids Northeast, Inc., Suburban Wastewater Services, Inc.,
Glenn A. Pratt, James D. Baird, Peter J. Collins and John J. Bailey.
`10.54 -- Purchase and Sale of Assets Agreement, dated March 15, 1998, among Environment Management,
Inc., Trapmaster, Inc., Joel Curtis, Sid Ankrom and Scott Ankrom.
`10.55 -- Purchase and Sale of Assets Agreement, dated March 15, 1998, among Environment Management,
Inc., Bug Master Exterminating Service, Inc. and Ned Ewart.
`10.56 -- Purchase and Sale of Assets Agreement, dated April 1, 1998, among Mesa Processing, Inc.,
Reclamation Technology Management, Inc. and Don E. Henley.
</TABLE>
II-6
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`10.57 -- Purchase and Sale of Assets Agreement, dated April 1, 1998, among Mesa Processing, Inc.,
Betts Pump Service, Inc. and Keith Betts.
10.58 -- Agreement for Purchase and Sale of Assets, dated April 2, 1998 among U S Liquids
Northeast, Inc., South Shore Pumping Corp. and Randy F. Bern.
10.59 -- Estoppel and Waiver Agreement, dated April 10, 1998, between U S Liquids Inc. and
Sanifill, Inc.
10.60 -- Agreement and Plan of Merger, dated April 15, 1998 among The National Solvent Exchange
Corp., U S Liquids Inc., NS Acquisition Corp., Ronald T. Calloway and Maxwell R. Calloway
(Exhibit 2.1 to the Form 8-K filed on April 30, 1998 is hereby incorporated by reference).
10.61 -- Amendment No. 1 to Warrant Agreement, dated April 20, 1998, among U S Liquids Inc., Van
Kasper & Company and Sanders Morris Mundy Inc.
10.62 -- Agreement for Purchase and Sale of Assets, dated April 21, 1998, among USL Parallel
Products of California, Parallel Products of Kentucky, Inc., Parallel Products of Florida,
Inc., Parallel Products, DWA of Belvedere Company, the Estate of David W. Allen, David W.
Allen Trust No. 1, Peter Allen, Neal Koehler and Richard Eastman (Exhibit 2.1 to the Form
8-K filed on May 6, 1998 is hereby incorporated by reference).
10.63 -- Stock Purchase Agreement, dated April 21, 1998, among U S Liquids Northeast, Inc., U S
Liquids Inc., Waste Stream Environmental, Inc., C. Wesley Gregory, Jr. and Donald E.
Gordon (Exhibit 2.2 to the Form 8-K filed on May 6, 1998 is hereby incorporated by
reference).
10.64 -- Stock Purchase Agreement, dated April 21, 1998, among U S Liquids NOrtheast, Inc., U S
Liquids Inc., Earth Blends, Inc., C. Wesley Gregory III, C. Wesley Gregory Jr. and Donald
E. Gordon (Exhibit 2.3 to the Form 8-K filed on May 6, 1998 is hereby incorporated by
reference).
10.65 -- Agreement and Plan of Reorganization, dated April 21, 1998, among U S Liquids Inc., Amigo
Acquisition, Inc., Amigo Diversified Services, Inc., Raoul Garza and Alex Salas (Exhibit
2.4 to the Form 8-K filed on May 6, 1998 is hereby incorporated by reference).
*10.66 -- Purchase and Sale of Assets Agreement, dated May 7, 1998, among USL City Environmental,
Inc., City Management Corporation and USA Waste Services, Inc.
*10.67 -- Purchase and Sale of Assets Agreement, dated May 7, 1998, among USL City Environmental
Services of Florida, Inc., City Management Corporation and USA Waste Services, Inc.
*10.68 -- Stock Purchase Agreement, dated May 7, 1998, among U S Liquids Inc., United Waste Systems
Inc. and USA Waste Services, Inc.
*10.69 -- Leachate Treatment Agreeement, dated May 7, 1998, between City Management Corporation and
USL City Environmental, Inc.
*10.70 -- Disposal Agreement, dated May 7, 1998, between City Management Corporation and USL City
Environmental, Inc.
21.1 -- List of subsidiaries of U S Liquids Inc.
23.1 -- Consent of Arthur Andersen LLP.
23.2 -- Consent of Hartzog Conger & Carson (contained in Exhibit 5.1)
24.1 -- Power of attorney (included on signature page).
27.1 -- Financial Data Schedule.
</TABLE>
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Filed herewith.
* To be filed by amendment.
(b) All schedules for which provision is made in the applicable accounting
regulations of the Commission are not required under the related instructions,
are inapplicable, or the information is included in the consolidated financial
statements, and therefore have been omitted.
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17. UNDERTAKINGS
(a) Insofar as indemnification for liabilities arising under the
Securities Act may be permitted to directors, officers and controlling persons
of the registrant pursuant to the foregoing provisions, or otherwise, the
registrant has been advised that in the opinion of the Securities Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the registrant of expenses incurred
or paid by a director, officer or controlling person of the registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Securities Act and will be governed by the final
adjudication of such issue.
(b) The undersigned registrant hereby undertakes that:
(1) for purposes of determining any liability under the Securities
Act of 1993, the information omitted from the form of prospectus
filed as part of this registration statement in reliance upon
Rule 430A and contained in a form of prospectus filed by the
registrant pursuant to Rule 424(b)(1) or 497(b) under the
Securities Act shall be deemed to be a part of this registration
statement as of the time it was declared effective.
(2) for the purpose of determining any liability under the
Securities Act of 1933, each post-effective amendment that
contains a form of prospectus shall be deemed to be a new
registration statement relating to the securities offered
therein, and the offering of such securities at that time
shall be deemed to be the initial bona fide offering
thereof.
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SIGNATURES
Pursuant to the requirements of the Securities Act of 1993, U S Liquids
Inc. has duly caused this Registration Statement or amendment thereto to be
signed on its behalf by the undersigned, thereunto duly authorized, in the City
of Houston, State of Texas, on May 7, 1998.
U S LIQUIDS INC.
By: __/s/__MICHAEL P.LAWLOR_____
MICHAEL P. LAWLOR
CHIEF EXECUTIVE OFFICER
POWER OF ATTORNEY
Each person whose signature appears below hereby consitutes and appoints
each of Michael P. Lawlor and Earl J. Blackwell with full power to act without
the other, his true and lawful attorney-in-fact and agent, with full power of
substitution and resubstitution, for him and in his name, place and stead, in
any and all capacities (until revoked in writing) to sign any and all amendments
(including post-effective amendments) to this Registration Statement, to file
the same, together with all exhibits thereto and other documents in connection
therewith, with the SEC, to sign any and all applications, registration
statements, notices and other documents necessary or advisable to comply with
the applicable state securities laws, and to file the same, together with all
other documents in connection therewith, with the appropriate state securities
authorities, granting unto said attorneys-in-fact and agents or any of them or
their or his substitutes or substitute, full power and authority to perform and
do each and every act and thing necessary and advisable as fully to all intents
and purposes as he might or could perform and do in person, thereby ratifying
and confirming all that said attorneys-in-fact and agents or any of them, or
their or his substitutes or substitute, may lawfully do or cause to be done by
virtue hereof.
PURSUANT TO THE REQIREMENTS OF THE SECURITIES ACT OF 1933, THIS
REGISTRATION STATEMENT OR AMENDMENT THERETO HAS BEEN SIGNED BELOW BY THE
FOLLOWING PERSON IN THE INDICATED CAPACITIES ON MAY 7, 1998.
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SIGNATURE TITLE DATE
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/s/MICHAEL P. LAWLOR Chief Executive Officer and
MICHAEL P. LAWLOR Director
/s/W. GREGORY ORR Chief Operating Officer,
W. GREGORY ORR President and Director
/s/EARL J. BLACKWELL Chief Financial Officer and
EARL J. BLACKWELL Senior Vice President --
Finance
/s/WILLIAM A. ROTHROCK IV Director
WILLIAM A. ROTHROCK IV
/s/THOMAS B. BLANTON Director
THOMAS B. BLANTON
/s/ALFRED TYLER 2ND Director
ALFRED TYLER 2ND
/s/JAMES F. MCENEANEY, JR. Director
JAMES F. MCENEANEY, JR.
</TABLE>
II-9
EXHIBIT 1.1
3,750,000 Shares
U S Liquids Inc.
Common Stock
FORM OF UNDERWRITING AGREEMENT
May ___, 1998
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
DEUTSCHE MORGAN GRENFELL
VAN KASPER & COMPANY
SANDERS MORRIS MUNDY
As representatives of the several Underwriters
named in Schedule I hereto c/o
Donaldson, Lufkin & Jenrette
Securities Corporation
277 Park Avenue
New York, New York 10172
Dear Sirs:
U S Liquids Inc., a Delaware corporation (the "COMPANY"), proposes to
issue and sell 3,750,000 shares of its Common Stock, $.01 par value (the "FIRM
SHARES") to the several underwriters named in Schedule I hereto (the
"UNDERWRITERS"). The Company also proposes to issue and sell to the several
Underwriters not more than an additional 562,500 shares of its Common Stock, par
value $.01 per share (the "ADDITIONAL SHARES") if requested by the Underwriters
as provided in Section 2 hereof. The Firm Shares and the Additional Shares are
hereinafter referred to
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collectively as the "SHARES". The shares of common stock of the Company to be
outstanding after giving effect to the sales contemplated hereby are hereinafter
referred to as the "COMMON STOCK".
SECTION 1. REGISTRATION STATEMENT AND PROSPECTUS. The Company has prepared
and filed with the Securities and Exchange Commission (the "COMMISSION") in
accordance with the provisions of the Securities Act of 1933, as amended, and
the rules and regulations of the Commission thereunder (collectively, the
"Act"), a registration statement on Form S-1, including a prospectus, relating
to the Shares. The registration statement, as amended at the time it became
effective, including the information (if any) deemed to be part of the
registration statement at the time of effectiveness pursuant to Rule 430A under
the Act, is hereinafter referred to as the "REGISTRATION STATEMENT"; and the
prospectus in the form first used to confirm sales of Shares is hereinafter
referred as the "PROSPECTUS". If the Company has filed or is required pursuant
to the terms hereof to file a registration statement pursuant to Rule 462(b)
under the Act registering additional shares of Common Stock (a "RULE 462(b)
REGISTRATION STATEMENT"), then, unless otherwise specified, any reference herein
to the term "Registration Statement" shall be deemed to include such Rule 462(b)
Registration Statement.
SECTION 2. AGREEMENTS TO SELL AND PURCHASE AND LOCK-UP AGREEMENTS. On the
basis of the representations and warranties contained in this Agreement, and
subject to its terms and conditions, the Company agrees to issue and sell, and
each Underwriter agrees, severally and not jointly, to purchase from the Company
at a price per Share of $______________ (the "PURCHASE PRICE") the number of
Firm Shares set forth opposite the name of such Underwriter in Schedule I
hereto.
On the basis of the representations and warranties contained in this
Agreement, and subject to its terms and conditions, the Company agrees to issue
and sell the Additional Shares and the Underwriters shall have the right to
purchase, severally and not jointly, up to _________ Additional Shares from the
Company at the Purchase Price. Additional Shares may be purchased solely for the
purpose of covering over-allotments made in connection with the offering of the
Firm Shares. The Underwriters may exercise their right to purchase Additional
Shares in whole or in part from time to time by giving written notice thereof to
the Company within 30 days after the date of this Agreement. You shall give any
such notice on behalf of the Underwriters and such notice shall specify the
aggregate number of Additional Shares to be purchased pursuant to such exercise
and the date for payment and delivery thereof, which date shall be a business
day (i) no earlier than two business days after such notice has been given (and,
in any event, no earlier than the Closing Date (as hereinafter defined)) and
(ii) no later than ten business days after such notice has been given. If any
Additional Shares are to be purchased, each Underwriter, severally and not
jointly, agrees to purchase from the Company the number of Additional Shares
(subject to such adjustments to eliminate fractional shares as you may
determine) which bears the same proportion to the total number of Additional
Shares to be purchased from the Company as the number of Firm Shares set forth
opposite the name of such Underwriter in Schedule I bears to the total number of
Firm Shares.
The Company hereby agrees not to (i) offer, pledge, sell, contract to
sell, sell any option or contract to purchase, purchase any option or contract
to sell, grant any option, right or warrant to
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purchase, or otherwise transfer or dispose of, directly or indirectly, any
shares of Common Stock or any securities convertible into or exercisable or
exchangeable for Common Stock or (ii) enter into any swap or other arrangement
that transfers all or a portion of the economic consequences associated with the
ownership of any Common Stock (regardless of whether any of the transactions
described in clause (i) or (ii) is to be settled by the delivery of Common
Stock, or such other securities, in cash or otherwise), except to the
Underwriters pursuant to this Agreement, for a period of 120 days after the date
of the Prospectus without the prior written consent of Donaldson, Lufkin &
Jenrette Securities Corporation. Notwithstanding the foregoing, during such
period (i) the Company may grant stock options pursuant to the Company's
existing stock option plan and (ii) the Company may issue shares of Common Stock
upon the exercise of an option or warrant or the conversion of a security
outstanding on the date hereof. The Company also agrees not to file any
registration statement with respect to any shares of Common Stock or any
securities convertible into or exercisable or exchangeable for Common Stock for
a period of 120 days after the date of the Prospectus without the prior written
consent of Donaldson, Lufkin & Jenrette Securities Corporation. The Company
shall, prior to or concurrently with the execution of this Agreement, deliver an
agreement executed by (i) each of the directors and officers of the Company and
(ii) each stockholder listed on Annex I hereto to the effect that such person
will not, during the period commencing on the date such person signs such
agreement and ending 120 days after the date of the Prospectus, without the
prior written consent of Donaldson, Lufkin & Jenrette Securities Corporation,
(A) engage in any of the transactions described in the first sentence of this
paragraph or (B) make any demand for, or exercise any right with respect to, the
registration of any shares of Common Stock or any securities convertible into or
exercisable or exchangeable for Common Stock.
SECTION 3. TERMS OF PUBLIC OFFERING. The Company is advised by you that
the Underwriters propose (i) to make a public offering of their respective
portions of the Shares as soon after the execution and delivery of this
Agreement as in your judgment is advisable and (ii) initially to offer the
Shares upon the terms set forth in the Prospectus.
SECTION 4. DELIVERY AND PAYMENT. The Shares shall be represented by
definitive certificates and shall be issued in such authorized denominations and
registered in such names as Donaldson, Lufkin & Jenrette Securities Corporation
shall request no later than two business days prior to the Closing Date or the
applicable Option Closing Date (as defined below), as the case may be. The
Company shall deliver the Shares, with any transfer taxes thereon duly paid by
the respective Sellers, to Donaldson, Lufkin & Jenrette Securities Corporation
through the facilities of The Depository Trust Company ("DTC"), for the
respective accounts of the several Underwriters, against payment to the Company
of the Purchase Price therefore by wire transfer of Federal or other funds
immediately available in New York City. The certificates representing the Shares
shall be made available for inspection not later than 9:30 A.M., New York City
time, on the business day prior to the Closing Date or the applicable Option
Closing Date (as defined below), as the case may be, at the office of DTC or its
designated custodian (the "DESIGNATED OFFICE"). The time and date of delivery
and payment for the Firm Shares shall be 9:00 A.M., New York City time, on
__________, 1998 or such other time on the same or such other date as Donaldson,
Lufkin & Jenrette Securities Corporation and the Company shall agree in writing.
The time and date of delivery for the Firm Shares are hereinafter referred to as
the "CLOSING DATE". The time and date of
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delivery and payment for any Additional Shares to be purchased by the
Underwriters shall be 9:00 A.M., New York City time, on the date specified in
the applicable exercise notice given by you pursuant to Section 2 or such other
time on the same or such other date as Donaldson, Lufkin & Jenrette Securities
Corporation and the Company shall agree in writing. The time and date of
delivery for the Additional Shares are hereinafter referred to as an "OPTION
CLOSING DATE".
The documents to be delivered on the Closing Date or any Option Closing
Date on behalf of the parties hereto pursuant to Section 8 of this Agreement
shall be delivered at the offices of McDermott, Will & Emery, 227 West Monroe
Street, Suite 4400, Chicago, Illinois 60606 and the Shares shall be delivered at
the Designated Office, all on the Closing Date or such Option Closing Date, as
the case may be.
SECTION 5. AGREEMENTS OF THE COMPANY. The Company agrees with you:
(a) To advise you promptly and, if requested by you, to confirm such
advice in writing, (i) of any request by the Commission for amendments to
the Registration Statement or amendments or supplements to the Prospectus
or for additional information, (ii) of the issuance by the Commission of
any stop order suspending the effectiveness of the Registration Statement
or of the suspension of qualification of the Shares for offering or sale
in any jurisdiction, or the initiation of any proceeding for such
purposes, (iii) when any amendment to the Registration Statement becomes
effective, (iv) if the Company is required to file a Rule 462(b)
Registration Statement after the effectiveness of this Agreement, when the
Rule 462(b) Registration Statement has become effective and (v) of the
happening of any event during the period referred to in Section 5(d) below
which makes any statement of a material fact made in the Registration
Statement or the Prospectus untrue or which requires any additions to or
changes in the Registration Statement or the Prospectus in order to make
the statements therein not misleading. If at any time the Commission shall
issue any stop order suspending the effectiveness of the Registration
Statement, the Company will use its best efforts to obtain the withdrawal
or lifting of such order at the earliest possible time.
(b) To furnish to you five signed copies of the Registration
Statement as first filed with the Commission and of each amendment to it,
including all exhibits, and to furnish to you and each Underwriter
designated by you such number of conformed copies of the Registration
Statement as so filed and of each amendment to it, without exhibits, as
you may reasonably request.
(c) To prepare the Prospectus, the form and substance of which shall
be satisfactory to you, and to file the Prospectus in such form with the
Commission within the applicable period specified in Rule 424(b) under the
Act; during the period specified in Section 5(d) below, not to file any
further amendment to the Registration Statement and not to make any
amendment or supplement to the Prospectus of which you shall not
previously
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<PAGE>
have been advised or to which you shall reasonably object after being so
advised; and, during such period, to prepare and file with the Commission,
promptly upon your reasonable request, any amendment to the Registration
Statement or amendment or supplement to the Prospectus which may be
necessary or advisable in connection with the distribution of the Shares
by you, and to use its best efforts to cause any such amendment to the
Registration Statement to become promptly effective.
(d) Prior to 10:00 A.M., New York City time, on the first business
day after the date of this Agreement and from time to time thereafter for
such period as in the opinion of counsel for the Underwriters a prospectus
is required by law to be delivered in connection with sales by an
Underwriter or a dealer, to furnish in New York City to each Underwriter
and any dealer as many copies of the Prospectus (and of any amendment or
supplement to the Prospectus) as such Underwriter or dealer may reasonably
request.
(e) If during the period specified in Section 5(d), any event shall
occur or condition shall exist as a result of which, in the opinion of
counsel for the Underwriters, it becomes necessary to amend or supplement
the Prospectus in order to make the statements therein, in the light of
the circumstances when the Prospectus is delivered to a purchaser, not
misleading, or if, in the opinion of counsel for the Underwriters, it is
necessary to amend or supplement the Prospectus to comply with applicable
law, forthwith to prepare and file with the Commission an appropriate
amendment or supplement to the Prospectus so that the statements in the
Prospectus, as so amended or supplemented, will not in the light of the
circumstances when it is so delivered, be misleading, or so that the
Prospectus will comply with applicable law, and to furnish to each
Underwriter and to any dealer as many copies thereof as such Underwriter
or dealer may reasonably request.
(f) Prior to any public offering of the Shares, to cooperate with
you and counsel for the Underwriters in connection with the registration
or qualification of the Shares for offer and sale by the several
Underwriters and by dealers under the state securities or Blue Sky laws of
such jurisdictions as you may request, to continue such registration or
qualification in effect so long as required for distribution of the Shares
and to file such consents to service of process or other documents as may
be necessary in order to effect such registration or qualification;
PROVIDED, HOWEVER, that the Company shall not be required in connection
therewith to qualify as a foreign corporation in any jurisdiction in which
it is not now so qualified or to take any action that would subject it to
general consent to service of process or taxation other than as to matters
and transactions relating to the Prospectus, the Registration Statement,
any preliminary prospectus or the offering or sale of the Shares, in any
jurisdiction in which it is not now so subject.
(g) To mail and make generally available to its stockholders as soon
as practicable an earnings statement covering the twelve-month period
ending June 30, 1998 that shall satisfy the provisions of Section 11(a) of
the Act, and to advise you in writing when such statement has been so made
available.
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<PAGE>
(h) During the period of three years after the date of this
Agreement, to furnish to you as soon as available copies of all reports or
other communications furnished to the record holders of Common Stock or
furnished to or filed with the Commission or any national securities
exchange on which any class of securities of the Company is listed and
such other publicly available information concerning the Company and its
subsidiaries as you may reasonably request.
(i) Whether or not the transactions contemplated in this Agreement
are consummated or this Agreement is terminated, to pay or cause to be
paid all expenses incident to the performance of its obligations under
this Agreement, including: (i) the fees, disbursements and expenses of the
Company's counsel and the Company's accountants in connection with the
registration and delivery of the Shares under the Act and all other fees
and expenses in connection with the preparation, printing, filing and
distribution of the Registration Statement (including financial statements
and exhibits), any preliminary prospectus, the Prospectus and all
amendments and supplements to any of the foregoing, including the mailing
and delivering of copies thereof to the Underwriters and dealers in the
quantities specified herein, (ii) all costs and expenses related to the
transfer and delivery of the Shares to the Underwriters, including any
transfer or other taxes payable thereon, (iii) all costs of printing or
producing this Agreement and any other agreements or documents in
connection with the offering, purchase, sale or delivery of the Shares,
(iv) all expenses in connection with the registration or qualification of
the Shares for offer and sale under the securities or Blue Sky laws of the
several states and all costs of printing or producing any Preliminary and
Supplemental Blue Sky Memoranda in connection therewith (including the
filing fees and fees and disbursements of counsel for the Underwriters in
connection with such registration or qualification and memoranda relating
thereto), (v) the filing fees and disbursements of counsel for the
Underwriters in connection with the review and clearance of the offering
of the Shares by the National Association of Securities Dealers, Inc.,
(vi) all fees and expenses in connection with the preparation and filing
of the registration statement on Form 8-A relating to the Common Stock and
all costs and expenses incident to the listing of the Shares on AMEX,
(vii) the cost of printing certificates representing the Shares, (viii)
the costs and charges of any transfer agent, registrar and/or depositary,
and (ix) all other costs and expenses incident to the performance of the
obligations of the Company hereunder for which provision is not otherwise
made in this Section.
(j) To use its best efforts to list, subject to notice of issuance,
the Shares on the AMEX and to maintain the listing of the Shares on the
AMEX for a period of three years after the date of this Agreement.
(k) To use its best efforts to do and perform all things required or
necessary to be done and performed under this Agreement by the Company
prior to the Closing Date or any Option Closing Date, as the case may be,
and to satisfy all conditions precedent to the delivery of the Shares.
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(l) If the Registration Statement at the time of the effectiveness
of this Agreement does not cover all of the Shares, to file a Rule 462(b)
Registration Statement with the Commission registering the Shares not so
covered, in compliance with Rule 462(b) by 10:00 P.M., New York City time,
on the date of this Agreement and to pay to the Commission the filing fee
for such Rule 462(b) Registration Statement at the time of the filing
thereof or to give irrevocable instructions for the payment of such fee
pursuant to Rule 111(b) under the Act.
SECTION 6. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company
represents and warrants to each Underwriter that:
(a) The Registration Statement has become effective (other than any
Rule 462(b) Registration Statement to be filed by the Company after the
effectiveness of this Agreement); any Rule 462(b) Registration Statement
filed after the effectiveness of this Agreement will become effective no
later than 10:00 P.M., New York City time, on the date of this Agreement;
and no stop order suspending the effectiveness of the Registration
Statement is in effect, and no proceedings for such purpose are pending
before or threatened by the Commission.
(b) (i) The Registration Statement (other than any Rule 462(b)
Registration Statement to be filed by the Company after the effectiveness
of this Agreement), when it became effective, did not contain and, as
amended, if applicable, will 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, (ii)
the Registration Statement (other than any Rule 462(b) Registration
Statement to be filed by the Company after the effectiveness of this
Agreement) and the Prospectus comply and, as amended or supplemented, if
applicable, will comply in all material respects with the Act, (iii) if
the Company is required to file a Rule 462(b) Registration Statement after
the effectiveness of this Agreement, such Rule 462(b) Registration
Statement and any amendments thereto, when they become effective (A) will
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 and (B) will comply in all material
respects with the Act and (iv) the Prospectus does not contain and, as
amended or supplemented, if applicable, will not contain any untrue
statement of a material fact or omit to state a material fact necessary to
make the statements therein, in the light of the circumstances under which
they were made, not misleading, except that the representations and
warranties set forth in this paragraph do not apply to statements or
omissions in the Registration Statement or the Prospectus based upon
information relating to any Underwriter furnished to the Company in
writing by such Underwriter through you expressly for use therein.
(c) Each preliminary prospectus filed as part of the Registration
Statement as originally filed or as part of any amendment thereto, or
filed pursuant to Rule 424 under the Act, complied when so filed in all
material respects with the Act, and did not contain an 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, in the light of the
circumstances under
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which they were made, not misleading, except that the representations and
warranties set forth in this paragraph do not apply to statements or
omissions in any preliminary prospectus based upon information relating to
any Underwriter furnished to the Company in writing by such Underwriter
through you expressly for use therein.
(d) Each of the Company and its subsidiaries has been duly
incorporated, is validly existing as a corporation in good standing under
the laws of its jurisdiction of incorporation and has the corporate power
and authority to carry on its business as described in the Prospectus and
to own, lease and operate its properties, and each is duly qualified and
is in good standing as a foreign corporation authorized to do business in
each jurisdiction in which the nature of its business or its ownership or
leasing of property requires such qualification, except where the failure
to be so qualified would not have a material adverse effect on the
business, prospects, financial condition or results of operations of the
Company and its subsidiaries, taken as a whole.
(e) There are no outstanding subscriptions, rights, warrants,
options, calls, convertible securities, commitments of sale or liens
granted or issued by the Company or any of its subsidiaries relating to or
entitling any person to purchase or otherwise to acquire any shares of the
capital stock of the Company or any of its subsidiaries, except as
otherwise disclosed in the Registration Statement.
(f) All the outstanding shares of capital stock of the Company have
been duly authorized and validly issued and are fully paid, non-assessable
and not subject to any preemptive or similar rights; and the Shares have
been duly authorized and, when issued and delivered to the Underwriters
against payment therefor as provided by this Agreement, will be validly
issued, fully paid and non-assessable, and the issuance of such Shares
will not be subject to any preemptive or similar rights.
(g) All of the outstanding shares of capital stock of each of the
Company's subsidiaries have been duly authorized and validly issued and
are fully paid and non-assessable, and are owned by the Company, directly
or indirectly through one or more subsidiaries, free and clear of any
security interest, claim, lien, encumbrance or adverse interest of any
nature.
(h) The authorized capital stock of the Company conforms as to legal
matters to the description thereof contained in the Prospectus.
(i) Neither the Company nor any of its subsidiaries is in violation
of its respective charter or by-laws or in default in the performance of
any obligation, agreement, covenant or condition contained in any
indenture, loan agreement, mortgage, lease or other agreement or
instrument that is material to the Company and its subsidiaries, taken as
a whole, to which the Company or any of its subsidiaries is a party or by
which the Company or any of its subsidiaries or their respective property
is bound.
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(j) The execution, delivery and performance of this Agreement by the
Company, the compliance by the Company with all the provisions hereof and
the consummation of the transactions contemplated hereby will not (i)
require any consent, approval, authorization or other order of, or
qualification with, any court or governmental body or agency (except such
as may be required under the securities or Blue Sky laws of the various
states), (ii) conflict with or constitute a breach of any of the terms or
provisions of, or a default under, the charter or by-laws of the Company
or any of its subsidiaries or any indenture, loan agreement, mortgage,
lease or other agreement or instrument that is material to the Company and
its subsidiaries, taken as a whole, to which the Company or any of its
subsidiaries is a party or by which the Company or any of its subsidiaries
or their respective property is bound, (iii) violate or conflict with any
applicable law or any rule, regulation, judgment, order or decree of any
court or any governmental body or agency having jurisdiction over the
Company, any of its subsidiaries or their respective property or (iv)
result in the suspension, termination or revocation of any Authorization
(as defined below) of the Company or any of its subsidiaries or any other
impairment of the rights of the holder of any such Authorization.
(k) There are no legal or governmental proceedings pending or
threatened to which the Company or any of its subsidiaries is or could be
a party or to which any of their respective property is or could be
subject that are required to be described in the Registration Statement or
the Prospectus and are not so described; nor are there any statutes,
regulations, contracts or other documents that are required to be
described in the Registration Statement or the Prospectus or to be filed
as exhibits to the Registration Statement that are not so described or
filed as required.
(l) Neither the Company nor any of its subsidiaries has violated any
foreign, federal, state or local law or regulation relating to the
protection of human health and safety, the environment or hazardous or
toxic substances or wastes, pollutants or contaminants ("ENVIRONMENTAL
LAWS"), any provisions of the Employee Retirement Income Security Act of
1974, as amended, or any provisions of the Foreign Corrupt Practices Act,
or the rules and regulations promulgated thereunder, except for such
violations which, singly or in the aggregate, would not have a material
adverse effect on the business, prospects, financial condition or results
of operation of the Company and its subsidiaries, taken as a whole.
(m) Each of the Company and its subsidiaries has such permits,
licenses, consents, exemptions, franchises, authorizations and other
approvals (each, an "AUTHORIZATION") of, and has made all filings with and
notices to, all governmental or regulatory authorities and self-regulatory
organizations and all courts and other tribunals, including, without
limitation, under any applicable Environmental Laws, as are necessary to
own, lease, license and operate its respective properties and to conduct
its business, except where the failure to have any such Authorization or
to make any such filing or notice would not, singly or in the aggregate,
have a material adverse effect on the business, prospects, financial
condition or results of operations of the Company and its subsidiaries,
taken as a whole. Each such Authorization is valid and in full force and
effect and each of the
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Company and its subsidiaries is in compliance with all the terms and
conditions thereof and with the rules and regulations of the authorities
and governing bodies having jurisdiction with respect thereto; and no
event has occurred (including, without limitation, the receipt of any
notice from any authority or governing body) which allows or, after notice
or lapse of time or both, would allow, revocation, suspension or
termination of any such Authorization or results or, after notice or lapse
of time or both, would result in any other impairment of the rights of the
holder of any such Authorization; and such Authorizations contain no
restrictions that are burdensome to the Company or any of its
subsidiaries; except where such failure to be valid and in full force and
effect or to be in compliance, the occurrence of any such event or the
presence of any such restriction would not, singly or in the aggregate,
have a material adverse effect on the business, prospects, financial
condition or results of operations of the Company and its subsidiaries,
taken as a whole.
(n) There are no costs or liabilities associated with Environmental
Laws (including, without limitation, any capital or operating expenditures
required for clean-up, closure of properties or compliance with
Environmental Laws or any Authorization, any related constraints on
operating activities and any potential liabilities to third parties) which
would, singly or in the aggregate, have a material adverse effect on the
business, prospects, financial condition or results of operations of the
Company and its subsidiaries, taken as a whole.
(o) This Agreement has been duly authorized, executed and delivered
by the Company.
(p) Arthur Andersen LLP are independent public accountants with
respect to the Company and its subsidiaries as required by the Act.
(q) The consolidated financial statements included in the
Registration Statement and the Prospectus (and any amendment or supplement
thereto), together with related schedules and notes, present fairly the
consolidated financial position, results of operations and changes in
financial position of the Company and its subsidiaries on the basis stated
therein at the respective dates or for the respective periods to which
they apply; such statements and related schedules and notes have been
prepared in accordance with generally accepted accounting principles
consistently applied throughout the periods involved, except as disclosed
therein; the supporting schedules, if any, included in the Registration
Statement present fairly in accordance with generally accepted accounting
principles the information required to be stated therein; and the other
financial and statistical information and data set forth in the
Registration Statement and the Prospectus (and any amendment or supplement
thereto) are, in all material respects, accurately presented and prepared
on a basis consistent with such financial statements and the books and
records of the Company.
(r) The Company is not and, after giving effect to the offering and
sale of the Shares and the application of the proceeds thereof as
described in the Prospectus, will not
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be, an "investment company" as such term is defined in the Investment
Company Act of 1940, as amended.
(s) There are no contracts, agreements or understandings between the
Company and any person granting such person the right to require the
Company to file a registration statement under the Act with respect to any
securities of the Company or to require the Company to include such
securities with the Shares registered pursuant to the Registration
Statement.
(t) Since the respective dates as of which information is given in
the Prospectus other than as set forth in the Prospectus (exclusive of any
amendments or supplements thereto subsequent to the date of this
Agreement), (i) there has not occurred any material adverse change or any
development involving a prospective material adverse change in the
condition, financial or otherwise, or the earnings, business, management
or operations of the Company and its subsidiaries, taken as a whole, (ii)
there has not been any material adverse change or any development
involving a prospective material adverse change in the capital stock or in
the long-term debt of the Company or any of its subsidiaries and (iii)
neither the Company nor any of its subsidiaries has incurred any material
liability or obligation, direct or contingent.
(u) Each certificate signed by any officer of the Company and
delivered to the Underwriters or counsel for the Underwriters shall be
deemed to be a representation and warranty by the Company to the
Underwriters as to the matters covered thereby.
SECTION 7. INDEMNIFICATION.
(a) The Company agrees to indemnify and hold harmless each
Underwriter, its directors, its officers and each person, if any, who
controls any Underwriter within the meaning of Section 15 of the Act or
Section 20 of the Securities Exchange Act of 1934, as amended (the
"EXCHANGE ACT"), from and against any and all losses, claims, damages,
liabilities and judgments (including, without limitation, any legal or
other expenses incurred in connection with investigating or defending any
matter, including any action, that could give rise to any such losses,
claims, damages, liabilities or judgments) caused by any untrue statement
or alleged untrue statement of a material fact contained in the
Registration Statement (or any amendment thereto), the Prospectus (or any
amendment or supplement thereto) or any preliminary prospectus, or caused
by any omission or alleged omission to state therein a material fact
required to be stated therein or necessary to make the statements therein
not misleading, except insofar as such losses, claims, damages,
liabilities or judgments are caused by any such untrue statement or
omission or alleged untrue statement or omission based upon information
relating to any Underwriter furnished in writing to the Company by such
Underwriter through you expressly for use therein; PROVIDED, HOWEVER, that
the foregoing indemnity agreement with respect to any preliminary
prospectus shall not inure to the benefit of any Underwriter who failed to
deliver a Prospectus (as then amended or supplemented, provided by the
Company to the several Underwriters in the requisite
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<PAGE>
quantity and on a timely basis to permit proper delivery on or prior to
the Closing Date) to the person asserting any losses, claims, damages and
liabilities and judgments caused by any untrue statement or alleged untrue
statement of a material fact contained in any preliminary prospectus, or
caused by any omission or alleged omission to state therein a material
fact required to be stated therein or necessary to make the statements
therein not misleading, if such material misstatement or omission or
alleged material misstatement or omission was cured in such Prospectus and
such Prospectus was required by law to be delivered at or prior to the
written confirmation of sale to such person.
(b) Each Underwriter agrees, severally and not jointly, to indemnify
and hold harmless the Company, its directors, its officers who sign the
Registration Statement and each person, if any, who controls the Company
within the meaning of Section 15 of the Act or Section 20 of the Exchange
Act, to the same extent as the foregoing indemnity from the Company to
such Underwriter but only with reference to information relating to such
Underwriter furnished in writing to the Company by such Underwriter
through you expressly for use in the Registration Statement (or any
amendment thereto), the Prospectus (or any amendment or supplement
thereto) or any preliminary prospectus.
(c) In case any action shall be commenced involving any person in
respect of which indemnity may be sought pursuant to Section 7(a) or 7(b)
(the "indemnified party"), the indemnified party shall promptly notify the
person against whom such indemnity may be sought (the "indemnifying
party") in writing and the indemnifying party shall assume the defense of
such action, including the employment of counsel reasonably satisfactory
to the indemnified party and the payment of all fees and expenses of such
counsel, as incurred (except that in the case of any action in respect of
which indemnity may be sought pursuant to both Sections 7(a) and 7(b), the
Underwriter shall not be required to assume the defense of such action
pursuant to this Section 7(c), but may employ separate counsel and
participate in the defense thereof, but the fees and expenses of such
counsel, except as provided below, shall be at the expense of such
Underwriter). Any indemnified party shall have the right to employ
separate counsel in any such action and participate in the defense
thereof, but the fees and expenses of such counsel shall be at the expense
of the indemnified party unless (i) the employment of such counsel shall
have been specifically authorized in writing by the indemnifying party,
(ii) the indemnifying party shall have failed to assume the defense of
such action or employ counsel reasonably satisfactory to the indemnified
party or (iii) the named parties to any such action (including any
impleaded parties) include both the indemnified party and the indemnifying
party, and the indemnified party shall have been advised by such counsel
that there may be one or more legal defenses available to it which are
different from or additional to those available to the indemnifying party
(in which case the indemnifying party shall not have the right to assume
the defense of such action on behalf of the indemnified party). In any
such case, the indemnifying party shall not, in connection with any one
action or separate but substantially similar or related actions in the
same jurisdiction arising out of the same general allegations or
circumstances, be liable for the fees and expenses of more than one
separate firm of attorneys (in addition to any local counsel) for all
indemnified parties and all such fees and expenses shall be reimbursed as
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they are incurred. Such firm shall be designated in writing by Donaldson,
Lufkin & Jenrette Securities Corporation, in the case of parties
indemnified pursuant to Section 7(a), and by the Company, in the case of
parties indemnified pursuant to Section 7(b). The indemnifying party shall
indemnify and hold harmless the indemnified party from and against any and
all losses, claims, damages, liabilities and judgments by reason of any
settlement of any action (i) effected with its written consent or (ii)
effected without its written consent if the settlement is entered into
more than twenty business days after the indemnifying party shall have
received a request from the indemnified party for reimbursement for the
fees and expenses of counsel (in any case where such fees and expenses are
at the expense of the indemnifying party) and, prior to the date of such
settlement, the indemnifying party shall have failed to comply with such
reimbursement request. No indemnifying party shall, without the prior
written consent of the indemnified party, effect any settlement or
compromise of, or consent to the entry of judgment with respect to, any
pending or threatened action in respect of which the indemnified party is
or could have been a party and indemnity or contribution may be or could
have been sought hereunder by the indemnified party, unless such
settlement, compromise or judgment (i) includes an unconditional release
of the indemnified party from all liability on claims that are or could
have been the subject matter of such action and (ii) does not include a
statement as to or an admission of fault, culpability or a failure to act,
by or on behalf of the indemnified party.
(d) To the extent the indemnification provided for in this Section 7
is unavailable to an indemnified party or insufficient in respect of any
losses, claims, damages, liabilities or judgments referred to therein,
then each indemnifying party, in lieu of indemnifying such indemnified
party, shall contribute to the amount paid or payable by such indemnified
party as a result of such losses, claims, damages, liabilities and
judgments (i) in such proportion as is appropriate to reflect the relative
benefits received by the Company on the one hand and the Underwriters on
the other hand from the offering of the Shares or (ii) if the allocation
provided by clause 7(d)(i) above is not permitted by applicable law, in
such proportion as is appropriate to reflect not only the relative
benefits referred to in clause 7(d)(i) above but also the relative fault
of the Company on the one hand and the Underwriters on the other hand in
connection with the statements or omissions which resulted in such losses,
claims, damages, liabilities or judgments, as well as any other relevant
equitable considerations. The relative benefits received by the Company on
the one hand and the Underwriters on the other hand shall be deemed to be
in the same proportion as the total net proceeds from the offering (after
deducting underwriting discounts and commissions, but before deducting
expenses) received by the Company, and the total underwriting discounts
and commissions received by the Underwriters, bear to the total price to
the public of the Shares, in each case as set forth in the table on the
cover page of the Prospectus. The relative fault of the Company on the one
hand and the Underwriters on the other hand shall be determined by
reference to, among other things, whether the untrue or alleged untrue
statement of a material fact or the omission or alleged omission to state
a material fact relates to information supplied by the Company or the
Underwriters and the parties relative intent, knowledge, access to
information and opportunity to correct or prevent such statement or
omission.
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The Company and the Underwriters agree that it would not be just and
equitable if contribution pursuant to this Section 7(d) were determined by
pro rata allocation (even if the Underwriters were treated as one entity
for such purpose) or by any other method of allocation which does not take
account of the equitable considerations referred to in the immediately
preceding paragraph. The amount paid or payable by an indemnified party as
a result of the losses, claims, damages, liabilities or judgments referred
to in the immediately preceding paragraph shall be deemed to include,
subject to the limitations set forth above, any legal or other expenses
incurred by such indemnified party in connection with investigating or
defending any matter, including any action, that could have given rise to
such losses, claims, damages, liabilities or judgments. Notwithstanding
the provisions of this Section 7, no Underwriter shall be required to
contribute any amount in excess of the amount by which the total price at
which the Shares underwritten by it and distributed to the public were
offered to the public exceeds the amount of any damages which such
Underwriter has otherwise been required to pay by reason of such untrue or
alleged untrue statement or omission or alleged omission. No person guilty
of fraudulent misrepresentation (within the meaning of Section 11(f) of
the Act) shall be entitled to contribution from any person who was not
guilty of such fraudulent misrepresentation. The Underwriters' obligations
to contribute pursuant to this Section 7(d) are several in proportion to
the respective number of Shares purchased by each of the Underwriters
hereunder and not joint.
(e) The remedies provided for in this Section 7 are not exclusive
and shall not limit any rights or remedies which may otherwise be
available to any indemnified party at law or in equity.
SECTION 8. CONDITIONS OF UNDERWRITERS' OBLIGATIONS. The several
obligations of the Underwriters to purchase the Firm Shares under this Agreement
are subject to the satisfaction of each of the following conditions:
(a) All the representations and warranties of the Company contained
in this Agreement shall be true and correct on the Closing Date with the
same force and effect as if made on and as of the Closing Date.
(b) If the Company is required to file a Rule 462(b) Registration
Statement after the effectiveness of this Agreement, such Rule 462(b)
Registration Statement shall have become effective by 10:00 P.M., New York
City time, on the date of this Agreement; and no stop order suspending the
effectiveness of the Registration Statement shall have been issued and no
proceedings for that purpose shall have been commenced or shall be pending
before or contemplated by the Commission.
(c) You shall have received on the Closing Date a certificate dated
the Closing Date, signed by Michael P. Lawlor and W. Gregory Orr, in their
capacities as the Chief Executive Officer and President of the Company,
confirming the matters set forth in Sections 6(t), 8(a) and 8(b) and that
the Company has complied with all of the agreements
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and satisfied all of the conditions herein contained and required to be
complied with or satisfied by the Company on or prior to the Closing Date.
(d) Since the respective dates as of which information is given in
the Prospectus other than as set forth in the Prospectus (exclusive of any
amendments or supplements thereto subsequent to the date of this
Agreement), (i) there shall not have occurred any change or any
development involving a prospective change in the condition, financial or
otherwise, or the earnings, business, management or operations of the
Company and its subsidiaries, taken as a whole, (ii) there shall not have
been any change or any development involving a prospective change in the
capital stock or in the long-term debt of the Company or any of its
subsidiaries and (iii) neither the Company nor any of its subsidiaries
shall have incurred any liability or obligation, direct or contingent, the
effect of which, in any such case described in clause 8(d)(i), 8(d)(ii) or
8(d)(iii), in your judgment, is material and adverse and, in your
judgment, makes it impracticable to market the Shares on the terms and in
the manner contemplated in the Prospectus.
(e) You shall have received on the Closing Date an opinion
(satisfactory to you and counsel for the Underwriters), dated the Closing
Date, of Hartzog Conger & Cason, counsel for the Company, to the effect
that:
(i) each of the Company and its subsidiaries has been duly
incorporated, is validly existing as a corporation in good standing
under the laws of its jurisdiction of incorporation and has the
corporate power and authority to carry on its business as described
in the Prospectus and to own, lease and operate its properties;
(ii) each of the Company and its subsidiaries is duly
qualified and is in good standing as a foreign corporation
authorized to do business in each jurisdiction in which the nature
of its business or its ownership or leasing of property requires
such qualification, except where the failure to be so qualified
would not have a material adverse effect on the business, prospects,
financial condition or results of operations of the Company and its
subsidiaries, taken as a whole;
(iii) all the outstanding shares of capital stock of the
Company have been duly authorized and validly issued and are fully
paid, non-assessable and not subject to any preemptive or similar
rights;
(iv) the Shares have been duly authorized and, when issued and
delivered to the Underwriters against payment therefor as provided
by this Agreement, will be validly issued, fully paid and
non-assessable, and the issuance of such Shares will not be subject
to any preemptive or similar rights;
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(v) all of the outstanding shares of capital stock of each of
the Company's subsidiaries have been duly authorized and validly
issued and are fully paid and non-assessable, and are owned by the
Company, directly or indirectly through one or more subsidiaries,
free and clear of any security interest, claim, lien, encumbrance or
adverse interest of any nature;
(vi) this Agreement has been duly authorized, executed and
delivered by the Company;
(vii) the authorized capital stock of the Company conforms as
to legal matters to the description thereof contained in the
Prospectus;
(viii) the Registration Statement has become effective under
the Act, no stop order suspending its effectiveness has been issued
and no proceedings for that purpose are, to the best of such
counsel's knowledge after due inquiry, pending before or
contemplated by the Commission;
(ix) the statements under the captions "____________________",
"____________________","_________________",."_____________________",
"______________________", and "Description of Capital Stock" and
"Underwriting" in the Prospectus and Items 14 and 15 of Part II of
the Registration Statement, insofar as such statements constitute a
summary of the legal matters, documents or proceedings referred to
therein, fairly present the information called for with respect to
such legal matters, documents and proceedings;
(x) neither the Company nor any of its subsidiaries is in
violation of its respective charter or by-laws and, to the best of
such counsel's knowledge after due inquiry, neither the Company nor
any of its subsidiaries is in default in the performance of any
obligation, agreement, covenant or condition contained in any
indenture, loan agreement, mortgage, lease or other agreement or
instrument that is material to the Company and its subsidiaries,
taken as a whole, to which the Company or any of its subsidiaries is
a party or by which the Company or any of its subsidiaries or their
respective property is bound;
(xi) the execution, delivery and performance of this Agreement
by the Company, the compliance by the Company with all the
provisions hereof and the consummation of the transactions
contemplated hereby will not (A) require any consent, approval,
authorization or other order of, or qualification with, any court or
governmental body or agency (except such as may be required under
the securities or Blue Sky laws of the various states), (B) conflict
with or constitute a breach of any of the terms or provisions of, or
a default under, the charter or by-laws of the Company or any of its
subsidiaries or any indenture, loan agreement, mortgage, lease or
other agreement or instrument that is material to the Company and
its
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subsidiaries, taken as a whole, to which the Company or any of its
subsidiaries is a party or by which the Company or any of its
subsidiaries or their respective property is bound, (C) violate or
conflict with any applicable law or any rule, regulation, judgment,
order or decree of any court or any governmental body or agency
having jurisdiction over the Company, any of its subsidiaries or
their respective property or (D) result in the suspension,
termination or revocation of any Authorization of the Company or any
of its subsidiaries or any other impairment of the rights of the
holder of any such Authorization;
(xii) after due inquiry, such counsel does not know of any
legal or governmental proceedings pending or threatened to which the
Company or any of its subsidiaries is or could be a party or to
which any of their respective property is or could be subject that
are required to be described in the Registration Statement or the
Prospectus and are not so described, or of any statutes,
regulations, contracts or other documents that are required to be
described in the Registration Statement or the Prospectus or to be
filed as exhibits to the Registration Statement that are not so
described or filed as required;
(xiii) neither the Company nor any of its subsidiaries has
violated any Environmental Law, any provisions of the Employee
Retirement Income Security Act of 1974, as amended, or any
provisions of the Foreign Corrupt Practices Act, or the rules and
regulations promulgated thereunder, except for such violations
which, singly or in the aggregate, would not have a material adverse
effect on the business, prospects, financial condition or results of
operation of the Company and its subsidiaries, taken as a whole;
(xiv) each of the Company and its subsidiaries has such
Authorizations of, and has made all filings with and notices to, all
governmental or regulatory authorities and self-regulatory
organizations and all courts and other tribunals, including, without
limitation, under any applicable Environmental Laws, as are
necessary to own, lease, license and operate its respective
properties and to conduct its business, except where the failure to
have any such Authorization or to make any such filing or notice
would not, singly or in the aggregate, have a material adverse
effect on the business, prospects, financial condition or results of
operations of the Company and its subsidiaries, taken as a whole;
each such Authorization is valid and in full force and effect and
each of the Company and its subsidiaries is in compliance with all
the terms and conditions thereof and with the rules and regulations
of the authorities and governing bodies having jurisdiction with
respect thereto; and no event has occurred (including, without
limitation, the receipt of any notice from any authority or
governing body) which allows or, after notice or lapse of time or
both, would allow, revocation, suspension or termination of any such
Authorization or results or, after notice or lapse of time or both,
would result in any other impairment of the rights of the holder of
any such Authorization; and such Authorizations contain no
restrictions that are burdensome to the Company or any of
-17-
<PAGE>
its subsidiaries; except where such failure to be valid and in full
force and effect or to be in compliance, the occurrence of any such
event or the presence of any such restriction would not, singly or
in the aggregate, have a material adverse effect on the business,
prospects, financial condition or results of operations of the
Company and its subsidiaries, taken as a whole;
(xv) the Company is not and, after giving effect to the
offering and sale of the Shares and the application of the proceeds
thereof as described in the Prospectus, will not be, an "investment
company" as such term is defined in the Investment Company Act of
1940, as amended;
(xvi) to the best of such counsel's knowledge after due
inquiry, there are no contracts, agreements or understandings
between the Company and any person granting such person the right to
require the Company to file a registration statement under the Act
with respect to any securities of the Company or to require the
Company to include such securities with the Shares registered
pursuant to the Registration Statement; and
(xvii) (A) the Registration Statement and the Prospectus and
any supplement or amendment thereto (except for the financial
statements and other financial data included therein as to which no
opinion need be expressed) comply as to form with the Act, (B) such
counsel has no reason to believe that at the time the Registration
Statement became effective or on the date of this Agreement, the
Registration Statement and the prospectus included therein (except
for the financial statements and other financial data as to which
such counsel need not express any belief) contained any untrue
statement of a material fact or omitted to state a material fact
required to be stated therein or necessary to make the statements
therein not misleading and (C) such counsel has no reason to believe
that the Prospectus, as amended or supplemented, if applicable
(except for the financial statements and other financial data, as
aforesaid) contains any untrue statement of a material fact or omits
to state a material fact necessary in order to make the statements
therein, in the light of the circumstances under which they were
made, not misleading.
The opinion of Hartzog Conger & Cason described in Section 8(e) above
shall be rendered to you at the request of the Company and shall so state
therein.
(f) You shall have received on the Closing Date an opinion, dated
the Closing Date, of McDermott, Will & Emery, counsel for the
Underwriters, as to the matters referred to in Sections 8(e)(iv),
8(e)(vi), 8(e)(ix) (but only with respect to the statements under the
caption "Description of Capital Stock" and "Underwriting") and 8(e)(xvii).
In giving such opinions with respect to the matters covered by
Section 8(e)(xvii), Hartzog Conger & Cason and McDermott, Will & Emery may
state that their opinion and
-18-
<PAGE>
belief are based upon their participation in the preparation of the
Registration Statement and Prospectus and any amendments or supplements
thereto and review and discussion of the contents thereof, but are without
independent check or verification except as specified.
(g) You shall have received, on each of the date hereof and the
Closing Date, a letter dated the date hereof or the Closing Date, as the
case may be, in form and substance satisfactory to you, from Arthur
Andersen LLP, independent public accountants, containing information and
statements of the type ordinarily included in accountants' "comfort
letters" to Underwriters with respect to the financial statements and
certain financial information contained in the Registration Statement and
the Prospectus.
(h) The Company shall have delivered to you the agreements specified
in Section 2 hereof which agreements shall be in full force and effect on
the Closing Date.
(i) The Shares shall have been duly listed, subject to notice of
issuance, on the AMEX.
(j) The Company shall not have failed on or prior to the Closing
Date to perform or comply with any of the agreements herein contained and
required to be performed or complied with by the Company on or prior to
the Closing Date.
The several obligations of the Underwriters to purchase any
Additional Shares hereunder are subject to the delivery to you on the
applicable Option Closing Date of such documents as you may reasonably
request with respect to the good standing of the Company, the due
authorization and issuance of such Additional Shares and other matters
related to the issuance of such Additional Shares.
SECTION 9. EFFECTIVENESS OF AGREEMENT AND TERMINATION. This Agreement
shall become effective upon the execution and delivery of this Agreement by the
parties hereto.
This Agreement may be terminated at any time on or prior to the
Closing Date by you by written notice to the Company if any of the
following has occurred: (i) any outbreak or escalation of hostilities or
other national or international calamity or crisis or change in economic
conditions or in the financial markets of the United States or elsewhere
that, in your judgment, is material and adverse and, in your judgment,
makes it impracticable to market the Shares on the terms and in the manner
contemplated in the Prospectus, (ii) the suspension or material limitation
of trading in securities or other instruments on the New York Stock
Exchange, the American Stock Exchange, the Chicago Board of Options
Exchange, the Chicago Mercantile Exchange, the Chicago Board of Trade or
the Nasdaq National Market or limitation on prices for securities or other
instruments on any such exchange or the Nasdaq National Market, (iii) the
suspension of trading of any securities of the Company on any exchange or
in the over-the-counter market, (iv) the enactment, publication, decree or
other promulgation of any federal or state statute, regulation, rule or
order of any court or other governmental authority which in your opinion
materially and
-19-
<PAGE>
adversely affects, or will materially and adversely affect, the business,
prospects, financial condition or results of operations of the Company and
its subsidiaries, taken as a whole, (v) the declaration of a banking
moratorium by either federal or New York State authorities or (vi) the
taking of any action by any federal, state or local government or agency
in respect of its monetary or fiscal affairs which in your opinion has a
material adverse effect on the financial markets in the United States.
If on the Closing Date or on an Option Closing Date, as the case may be,
any one or more of the Underwriters shall fail or refuse to purchase the Firm
Shares or Additional Shares, as the case may be, which it has or they have
agreed to purchase hereunder on such date and the aggregate number of Firm
Shares or Additional Shares, as the case may be, which such defaulting
Underwriter or Underwriters agreed but failed or refused to purchase is not more
than one-tenth of the total number of Firm Shares or Additional Shares, as the
case may be, to be purchased on such date by all Underwriters, each
non-defaulting Underwriter shall be obligated severally, in the proportion which
the number of Firm Shares set forth opposite its name in Schedule I bears to the
total number of Firm Shares which all the non-defaulting Underwriters have
agreed to purchase, or in such other proportion as you may specify, to purchase
the Firm Shares or Additional Shares, as the case may be, which such defaulting
Underwriter or Underwriters agreed but failed or refused to purchase on such
date; PROVIDED that in no event shall the number of Firm Shares or Additional
Shares, as the case may be, which any Underwriter has agreed to purchase
pursuant to Section 2 hereof be increased pursuant to this Section 9 by an
amount in excess of one-ninth of such number of Firm Shares or Additional
Shares, as the case may be, without the written consent of such Underwriter. If
on the Closing Date any Underwriter or Underwriters shall fail or refuse to
purchase Firm Shares and the aggregate number of Firm Shares with respect to
which such default occurs is more than one-tenth of the aggregate number of Firm
Shares to be purchased by all Underwriters and arrangements satisfactory to you
and the Company for purchase of such Firm Shares are not made within 48 hours
after such default, this Agreement will terminate without liability on the part
of any non-defaulting Underwriter and the Company. In any such case which does
not result in termination of this Agreement, either you or the Company shall
have the right to postpone the Closing Date, but in no event for longer than
seven days, in order that the required changes, if any, in the Registration
Statement and the Prospectus or any other documents or arrangements may be
effected. If, on an Option Closing Date, any Underwriter or Underwriters shall
fail or refuse to purchase Additional Shares and the aggregate number of
Additional Shares with respect to which such default occurs is more than
one-tenth of the aggregate number of Additional Shares to be purchased on such
date, the non-defaulting Underwriters shall have the option to (i) terminate
their obligation hereunder to purchase such Additional Shares or (ii) purchase
not less than the number of Additional Shares that such non-defaulting
Underwriters would have been obligated to purchase on such date in the absence
of such default. Any action taken under this paragraph shall not relieve any
defaulting Underwriter from liability in respect of any default of any such
Underwriter under this Agreement.
SECTION 10. MISCELLANEOUS. Notices given pursuant to any provision of this
Agreement shall be addressed as follows: (i) if to the Company, to U S Liquids
Inc., 411 N. Sam Houston Parkway East, Suite 400, Houston, Texas 77060-3545 and
(ii) if to any Underwriter or to you, to you c/o Donaldson, Lufkin & Jenrette
Securities Corporation, 277 Park Avenue, New York, New
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<PAGE>
York 10172, Attention: Syndicate Department, or in any case to such other
address as the person to be notified may have requested in writing.
The respective indemnities, contribution agreements, representations,
warranties and other statements of the Company and the several Underwriters set
forth in or made pursuant to this Agreement shall remain operative and in full
force and effect, and will survive delivery of and payment for the Shares,
regardless of (i) any investigation, or statement as to the results thereof,
made by or on behalf of any Underwriter, the officers or directors of any
Underwriter, any person controlling any Underwriter, the Company, the officers
or directors of the Company or any person controlling the Company, (ii)
acceptance of the Shares and payment for them hereunder and (iii) termination of
this Agreement.
If for any reason the Shares are not delivered by or on behalf of the
Company as provided herein (other than as a result of any termination of this
Agreement pursuant to Section 9), the Company agrees to reimburse the several
Underwriters for all out-of-pocket expenses (including the fees and
disbursements of counsel) incurred by them. Notwithstanding any termination of
this Agreement, the Company shall be liable for all expenses which it has agreed
to pay pursuant to Section 5(i) hereof. The Company also agrees to reimburse the
several Underwriters, their directors and officers and any persons controlling
any of the Underwriters for any and all fees and expenses (including, without
limitation, the fees disbursements of counsel) incurred by them in connection
with enforcing their rights hereunder (including, without limitation, pursuant
to Section 7 hereof).
Except as otherwise provided, this Agreement has been and is made solely
for the benefit of and shall be binding upon the Company, the Underwriters, the
Underwriters' directors and officers, any controlling persons referred to
herein, the Company's directors and the Company's officers who sign the
Registration Statement and their respective successors and assigns, all as and
to the extent provided in this Agreement, and no other person shall acquire or
have any right under or by virtue of this Agreement. The term "successors and
assigns" shall not include a purchaser of any of the Shares from any of the
several Underwriters merely because of such purchase.
This Agreement shall be governed and construed in accordance with the laws
of the State of New York.
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<PAGE>
This Agreement may be signed in various counterparts which together shall
constitute one and the same instrument. Please confirm that the foregoing
correctly sets forth the agreement between the Company and the several
Underwriters.
Very truly yours,
U S LIQUIDS INC.
By: ________________________________
Title:
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
DEUTSCHE MORGAN GRENFELL
VAN KASPER & COMPANY
SANDERS MORRIS MUNDY
Acting severally on behalf of
themselves and the several
Underwriters named in
Schedule I hereto
By: DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
By: ________________________
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<PAGE>
SCHEDULE I
___________________________ ___________________________
Underwriters Number of Firm Shares to be
Purchased
Donaldson, Lufkin & Jenrette Securities
Corporation
Deutsche Morgan Grenfell
Van Kasper & Company
Sanders Morris Mundy
___________________
Total
<PAGE>
Annex I
[Michael P. Lawlor
W. Gregory Orr
Earl J. Blackwell
Thomas B. Blanton
James F. McEneaney, Jr.
William A. Rothrock, IV
Alfred Taylor, II
Sanifill, Inc.
William M. DeArman]
AMENDED AND RESTATED
CREDIT AGREEMENT
dated as of April 10, 1998
among
U S LIQUIDS INC.,
VARIOUS FINANCIAL INSTITUTIONS
BANKBOSTON,N.A.
and
WELLS FARGO BANK, N.A.,
as Co-Agents,
and
BANK OF AMERICA NATIONAL TRUST
AND SAVINGS ASSOCIATION,
as Agent
Arranged by BANCAMERICA ROBERTSON STEPHENS
<PAGE>
|| TABLE OF CONTENTS
Page
SECTION 1 DEFINITIONS.....................................................1
1.1 Definitions.....................................................1
1.2 Other Interpretive Provisions..................................13
1.3 Reallocation of Percentages and Revolving Loans................13
SECTION 2 COMMITMENTS OF THE BANKS; BORROWING, CONVERSION AND
LETTER OF CREDIT PROCEDURES; SWING LINE LOANS..................14
2.1 Commitments....................................................14
2.1.1 Revolving Loan Commitment.............................14
2.1.2 L/C Commitment........................................15
2.2 Revolving Loan Procedures......................................15
2.2.1 Various Types of Revolving Loans......................15
2.2.2 Borrowing Procedures..................................15
2.2.3 Procedures for Conversion of Type of
Revolving Loan......................................16
2.3 Letter of Credit Procedures..................................16
2.3.1 L/C Applications......................................16
2.3.2 Participation in Letters of Credit....................17
2.3.3 Reimbursement Obligations.............................17
2.3.4 Limitation on Obligations of Issuing Banks............18
2.3.5 Funding by Banks to Issuing Banks.....................18
2.4 Swing Line Loans...............................................19
2.4.1 Swing Line Loans......................................19
2.4.2 Swing Line Loan Procedures............................19
2.4.3 Refunding of, or Funding of Participations
in, Swing Line Loans................................19
2.4.4 Repayment of Participations...........................20
2.4.5 Participation Obligations Unconditional...............20
2.5 Commitments Several............................................21
2.6 Certain Conditions.............................................21
SECTION 3 NOTES EVIDENCING LOANS...........................................21
3.1 Notes..........................................................21
3.2 Recordkeeping..................................................21
SECTION 4 INTEREST..........................................................22
4.1 Interest Rates.................................................22
4.2 Interest Payment Dates.........................................22
4.3 Interest Periods...............................................22
4.4 Setting and Notice of Eurodollar Rates.........................23
4.5 Computation of Interest........................................23
SECTION 5 FEES..............................................................24
5.1 Non-Use Fee..................................................24
5.2 Letter of Credit Fees........................................24
5.3 Arrangement and Agent's Fees.................................24
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SECTION 6 REDUCTION AND TERMINATION OF THE COMMITMENTS;
PREPAYMENTS..................................................25
6.1 Reduction or Termination of the Commitments..................25
6.1.1 Voluntary Reduction or Termination of the
Commitments.........................................25
6.1.2 Mandatory Reductions of Commitments...................25
6.1.3 All Reductions of the Commitments.....................25
6.2 Prepayments..................................................25
6.2.1 Voluntary Prepayments.................................25
6.2.2 Mandatory Payments....................................25
6.2.3 All Prepayments.......................................26
SECTION 7 MAKING AND PRORATION OF PAYMENTS; SETOFF; TAXES...................26
7.1 Making of Payments...........................................26
7.2 Application of Certain Payments..............................26
7.3 Due Date Extension...........................................26
7.4 Setoff.......................................................26
7.5 Proration of Payments........................................27
7.6 Taxes........................................................27
SECTION 8 INCREASED COSTS; SPECIAL PROVISIONS FOR EURODOLLAR
LOANS.............................................................28
8.1 Increased Costs................................................28
8.2 Basis for Determining Interest Rate Inadequate or
Unfair.......................................................30
8.3 Changes in Law Rendering Eurodollar Loans Unlawful.............30
8.4 Funding Losses.................................................31
8.5 Right of Banks to Fund through Other Offices...................31
8.6 Discretion of Banks as to Manner of Funding....................31
8.7 Mitigation of Circumstances; Replacement of Affected
Bank.........................................................32
8.8 Conclusiveness of Statements; Survival of
Provisions...................................................32
SECTION 9 WARRANTIES........................................................33
9.1 Organization, etc..............................................33
9.2 Authorization; No Conflict.....................................33
9.3 Validity and Binding Nature....................................33
9.4 Financial Condition............................................34
9.5 No Material Adverse Change.....................................34
9.6 Litigation and Contingent Liabilities..........................34
9.7 Ownership of Properties; Liens.................................34
9.8 Subsidiaries...................................................35
9.9 Pension and Welfare Plans......................................35
9.10 Investment Company Act.........................................35
9.11 Public Utility Holding Company Act.............................35
9.12 Regulation U...................................................35
9.13 Taxes..........................................................36
9.14 Solvency, etc..................................................36
9.15 Environmental Matters..........................................36
9.16 Year 2000 Problem..............................................38
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9.17 Information....................................................38
SECTION 10 COVENANTS........................................................38
10.1 Reports, Certificates and Other Information...................38
10.1.1 Audit Report.........................................38
10.1.2 Quarterly Reports....................................39
10.1.3 Compliance Certificates..............................39
10.1.4 Reports to SEC and to Shareholders...................39
10.1.5 Notice of Default, Litigation and
ERISA Matters......................................40
10.1.6 Subsidiaries.........................................41
10.1.7 Management Reports...................................41
10.1.8 Projections..........................................41
10.1.9 Other Information....................................41
10.2 Books, Records and Inspections................................41
10.3 Insurance.....................................................42
10.4 Compliance with Laws; Payment of Taxes and
Liabilities.................................................42
10.5 Maintenance of Existence, etc.................................42
10.6 Financial Covenants...........................................42
10.6.1 Minimum Net Worth....................................42
10.6.2 Minimum Interest Coverage............................43
10.6.3 Funded Debt to EBITDA Ratio..........................43
10.6.4 Capital Expenditures.................................43
10.7 Limitations on Debt...........................................43
10.8 Liens.........................................................44
10.9 Operating Leases..............................................45
10.10 Restricted Payments...........................................45
10.11 Mergers, Consolidations, Sales................................45
10.12 Modification of Organizational Documents......................46
10.13 Use of Proceeds...............................................47
10.14 Further Assurances............................................47
10.15 Transactions with Affiliates..................................47
10.16 Employee Benefit Plans........................................47
10.17 Environmental Matters.........................................47
10.18 Unconditional Purchase Obligations............................48
10.19 Inconsistent Agreements.......................................48
10.20 Business Activities...........................................48
10.21 Advances and Other Investments................................49
10.22 Restriction of Amendments to Asset Purchase
Agreement...................................................50
SECTION 11 EFFECTIVENESS; CONDITIONS OF LENDING, ETC.......................50
11.1 Effectiveness..................................................50
11.1.1 Notes................................................50
11.1.2 Resolutions..........................................50
11.1.3 Consents, etc........................................50
11.1.4 Incumbency and Signature Certificates................51
11.1.5 Guaranty.............................................51
11.1.6 Security Agreement...................................51
11.1.7 Pledge Agreements....................................51
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11.1.8 Confirmation.........................................51
11.1.9 Opinion of Counsel for the Company and
the Guarantors.....................................51
11.1.10 Other................................................51
11.2 Conditions...........................................51
11.2.1 Compliance with Warranties, No Default,
etc................................................51
11.2.2 Confirmatory Certificate.............................52
SECTION 12 EVENTS OF DEFAULT AND THEIR EFFECT...............................53
12.1 Events of Default.............................................53
12.1.1 Non-Payment of the Loans, etc.......................53
12.1.2 Non-Payment of Other Debt...........................53
12.1.3 Other Material Obligations..........................53
12.1.4 Bankruptcy, Insolvency, etc.........................53
12.1.5 Non-Compliance with Provisions of This
Agreement.........................................54
12.1.6 Warranties..........................................54
12.1.7 Pension Plans.......................................54
12.1.8 Judgments...........................................54
12.1.9 Invalidity of Guaranty, etc.........................54
12.1.10 Invalidity of Collateral Documents, etc.............55
12.1.11 Change in Control...................................55
12.2 Effect of Event of Default....................................55
SECTION 13 THE AGENT........................................................56
13.1 Appointment and Authorization.................................56
13.2 Delegation of Duties..........................................57
13.3 Liability of Agent............................................57
13.4 Reliance by Agent.............................................57
13.5 Notice of Default.............................................58
13.6 Credit Decision...............................................58
13.7 Indemnification...............................................59
13.8 Agent in Individual Capacity..................................60
13.9 Successor Agent...............................................60
13.10 Withholding Tax...............................................61
13.11 Collateral Matters............................................63
13.12 Co-Agents.....................................................63
SECTION 14 GENERAL..........................................................63
14.1 Waiver; Amendments............................................63
14.2 Confirmations.................................................64
14.3 Notices.......................................................64
14.4 Computations..................................................64
14.5 Regulation U..................................................65
14.6 Costs, Expenses and Taxes.....................................65
14.7 Subsidiary References.........................................66
14.8 Captions......................................................66
14.9 Assignments; Participations...................................66
14.9.1 Assignments.........................................66
14.9.2 Participations......................................67
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14.10 Governing Law.................................................68
14.11 Counterparts..................................................68
14.12 Successors and Assigns........................................68
14.13 Indemnification by the Company................................69
14.14 Forum Selection and Consent to Jurisdiction...................69
14.15 Waiver of Jury Trial..........................................70
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SCHEDULE 1.1 Pricing Schedule
SCHEDULE 2.1 Banks and Percentages
SCHEDULE 9.6(a) Litigation and Contingent Liabilities
SCHEDULE 9.6(b) Contingent Payments
SCHEDULE 9.8 Subsidiaries
SCHEDULE 9.15 Environmental Matters
SCHEDULE 10.6 Approved Acquisitions
SCHEDULE 10.7 Existing Debt
SCHEDULE 10.8 Existing Liens
SCHEDULE 12.1.11 Key Executives
SCHEDULE 14.3 Addresses for Notices
EXHIBIT A Form of Note
(Section 3.1)
EXHIBIT B Form of Compliance Certificate
(Section 10.1.3)
EXHIBIT C Copy of Guaranty
(Section 1)
EXHIBIT D Copy of Security Agreement
(Section 1)
EXHIBIT E Copy of Company Pledge Agreement
(Section 1)
EXHIBIT F-1 Copy of Subsidiary Pledge Agreement
(Mesa Processing, Inc.) (Section 11.1.7)
EXHIBIT F-2 Form of Subsidiary Pledge Agreement
(Section 11.1.7)
EXHIBIT G Form of Assignment Agreement
(Section 14.9)
EXHIBIT H Form of Confirmation
(Section 11.1.8)
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<PAGE>
AMENDED AND RESTATED CREDIT AGREEMENT
This AMENDED AND RESTATED CREDIT AGREEMENT, dated as of April 10, 1998
(this "AGREEMENT"), is entered into among U S LIQUIDS INC., a Delaware
corporation (the "COMPANY"), the financial institutions that are or may from
time to time become parties hereto (together with their respective successors
and assigns, the "BANKS"), BANKBOSTON, N.A. and WELLS FARGO BANK, N.A., as
co-agents for the Banks and BANK OF AMERICA NATIONAL TRUST AND SAVINGS
ASSOCIATION (in its individual capacity, "BOFA"), as agent for the Banks.
WHEREAS, the Company, various financial institutions and the Agent have
entered into a Credit Agreement, dated as of December 17, 1997 (the "EXISTING
AGREEMENT");
WHEREAS, the parties hereto have agreed to amend and restate the
Existing Agreement so as to, among other things, (a) increase the amount of the
revolving credit facility to $100,000,000, (b) amend certain covenants and
various other provisions of the Existing Agreement, (c) add a swing line
facility and (d) add additional financial institutions to the lender group; and
WHEREAS, the parties hereto intend that this Agreement and the documents
executed in connection herewith not effect a novation of the obligations of the
Company under the Existing Agreement, but merely a restatement and, where
applicable, an amendment of the terms governing such obligations;
NOW, THEREFORE, in consideration of the mutual agreements herein
contained, the Existing Agreement is amended and restated in its entirety, and
the parties hereto agree as follows:
SECTION 1 DEFINITIONS.
1.1 DEFINITIONS. When used herein the following terms shall have the
following meanings:
AFFECTED BANK means any Bank that has given notice to the Company (which
has not been rescinded) of (i) any obligation by the Company to pay any amount
pursuant to SECTION 7.6 or 8.1 or (ii) the occurrence of any circumstances of
the nature described in SECTION 8.2 or 8.3.
AFFILIATE of any Person means (i) any other Person which, directly or
indirectly, controls or is controlled by or is under common control with such
Person and (ii) any officer or director of such Person.
<PAGE>
AGENT means BofA in its capacity as agent for the Banks hereunder and
any successor thereto in such capacity.
AGENT-RELATED PERSONS means BofA and any successor agent arising under
SECTION 13.9, together with their respective Affiliates (including, in the case
of BofA, the Arranger), and the officers, directors, employees, agents and
attorneys-in-fact of such Persons and Affiliates.
AGREEMENT - see the PREAMBLE.
APPROVED ACQUISITION - see SECTION 10.6.
ARRANGER means BancAmerica Robertson Stephens, a Delaware corporation.
ASSIGNMENT AGREEMENT - see SECTION 14.9.1.
BANK - see the PREAMBLE. References to the "Banks" shall include the
Issuing Bank and the Swing Line Bank; for purposes of clarification only, to the
extent that BofA (or any successor Issuing Bank or Swing Line Bank) may have any
rights or obligations in addition to those of the other Banks due to its status
as Issuing Bank or Swing Line Bank, its status as such will be specifically
referenced.
BASE RATE means at any time the greater of (a) the Federal Funds Rate
plus 0.5% and (b) the Reference Rate.
BofA - see the PREAMBLE.
BUSINESS DAY means any day on which BofA is open for commercial banking
business in Chicago, New York and San Francisco and, in the case of a Business
Day which relates to a Eurodollar Loan, on which dealings are carried on in the
interbank eurodollar market.
CAPITAL EXPENDITURES means all expenditures which, in accordance with
GAAP, would be required to be capitalized and shown on the consolidated balance
sheet of the Company, but excluding expenditures made in connection with the
replacement, substitution or restoration of assets to the extent financed (i)
from insurance proceeds (or other similar recoveries) paid on account of the
loss of or damage to the assets being replaced or restored or (ii) with awards
of compensation arising from the taking by eminent domain or condemnation of the
assets being replaced.
CAPITAL LEASE means, with respect to any Person, any lease of (or other
agreement conveying the right to use) any real or personal property by such
Person that, in conformity with GAAP, is accounted for as a capital lease on the
balance sheet of such
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Person.
CASH EQUIVALENT INVESTMENT means, at any time, (a) any evidence of Debt,
maturing not more than one year after such time, issued or guaranteed by the
United States Government or any agency thereof, (b) commercial paper, maturing
not more than one year from the date of issue, or corporate demand notes, in
each case (unless issued by a Bank or its holding company) rated at least A-l by
Standard & Poor's Ratings Group or P-l by Moody's Investors Service, Inc., (c)
any certificate of deposit (or time deposits represented by such certificates of
deposit) or bankers acceptance, maturing not more than one year after such time,
or overnight Federal Funds transactions that are issued or sold by a commercial
banking institution that is a member of the Federal Reserve System and has a
combined capital and surplus and undivided profits of not less than
$500,000,000, (d) any repurchase agreement entered into with any Bank (or other
commercial banking institution of the stature referred to in CLAUSE (C)) which
(i) is secured by a fully perfected security interest in any obligation of the
type described in any of CLAUSES (A) through (C) and (ii) has a market value at
the time such repurchase agreement is entered into of not less than 100% of the
repurchase obligation of such Bank (or other commercial banking institution)
thereunder and (e) investments in short-term asset management accounts offered
by any Bank for the purpose of investing in loans to any corporation (other than
the Company or an Affiliate of the Company), state or municipality, in each case
organized under the laws of any state of the United States or of the District of
Columbia.
CERCLA - see SECTION 9.15.
CODE means the Internal Revenue Code of 1986.
COLLATERAL DOCUMENTS means the Company Pledge Agreement, each Subsidiary
Pledge Agreement, the Security Agreement and any other agreement pursuant to
which the Company or any Guarantor grants collateral to the Agent for the
benefit of the Banks.
COMMITMENT AMOUNT means $100,000,000 as reduced from time to time
pursuant to SECTION 6.1.
COMMITMENT means, as to any Bank, such Bank's commitment to make Loans,
and to issue or participate in Letters of Credit, under this Agreement.
COMPANY - see the PREAMBLE.
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COMPANY PLEDGE AGREEMENT means the pledge agreement dated as of December
17, 1997 between the Company and the Agent, a copy of which is attached hereto
as EXHIBIT E.
COMPUTATION PERIOD means each period of four consecutive Fiscal Quarters
ending on the last day of a Fiscal Quarter.
CONSOLIDATED NET INCOME means, with respect to the Company and its
Subsidiaries for any period, the net income (or loss) of the Company and its
Subsidiaries for such period, EXCLUDING any extraordinary gains during such
period.
CONTINGENT PAYMENT means any payment that has been (or is required to
be) made by the Company or any Subsidiary in connection with the achievement of
any particular business goal (excluding (i) employee compensation and bonuses in
the ordinary course of business and (ii) periodic, variable payments based upon
performance-related criteria, such as revenues or earnings).
A Contingent Payment shall be deemed to be "outstanding" from the time
that the Company or any Subsidiary enters into the agreement containing the
obligation to make such Contingent Payment until such time as either such
Contingent Payment has been made in full or it has become certain that such
Contingent Payment will never have to be made. If the amount of any Contingent
Payment is not determinable or is variable based on factors which are not yet
determinable, then the amount of such Contingent Payment shall be deemed to be
the maximum amount which, under any and all reasonably foreseeable
circumstances, the Company or the applicable Subsidiary would reasonably be
expected to be required to pay in respect thereof.
CONTROLLED GROUP means all members of a controlled group of corporations
and all members of a controlled group of trades or businesses (whether or not
incorporated) under common control which, together with the Company, are treated
as a single employer under Section 414 of the Code or Section 4001 of ERISA.
DEBT of any Person means, without duplication, (a) all indebtedness of
such Person for borrowed money, whether or not evidenced by bonds, debentures,
notes or similar instruments, (b) all obligations of such Person as lessee under
Capital Leases which have been or should be recorded as liabilities on a balance
sheet of such Person, (c) all obligations of such Person to pay the deferred
purchase price of property or services (including Contingent Payments but
excluding trade accounts payable in the ordinary course of business), (d) all
indebtedness secured by a Lien on the property of such Person, whether or not
such indebtedness shall have been assumed by such Person (it being understood
that if such Person has not assumed or otherwise become personally liable for
any such indebtedness, the amount of
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the Debt of such Person in connection therewith shall be limited to the lesser
of the face amount of such indebtedness or the fair market value of all property
of such Person securing such indebtedness), (e) all obligations, contingent or
otherwise, with respect to the face amount of all letters of credit (whether or
not drawn) and banker's acceptances issued for the account of such Person
(including the Letters of Credit), (f) net liabilities of such Person under all
Hedging Obligations and (g) all Suretyship Liabilities of such Person.
DISPOSAL - see the definition of "RELEASE".
DOLLAR and the sign "$" mean lawful money of the United States of
America.
EBITDA means, for any period, Consolidated Net Income for such period
PLUS, to the extent deducted in determining such Consolidated Net Income,
Interest Expense, income tax expense, depreciation and amortization for such
period; PROVIDED that for purposes of calculating EBITDA for any period, the
consolidated net income of any Person acquired by the Company or any Subsidiary
during such period (plus, to the extent deducted in determining such
consolidated net income, interest expense, income tax expense, depreciation and
amortization of such Person) shall be included on a PRO FORMA basis for such
period (assuming the consummation of each such acquisition and the incurrence or
assumption of any Debt in connection therewith occurred on the first day of such
period) if (i) the audited consolidated balance sheet of such acquired Person
and its consolidated Subsidiaries as at the end of the fiscal year of such
Person preceding the acquisition of such Person and the related audited
consolidated statements of income, stockholders' equity and cash flows for the
such fiscal year have been provided to the Agent and the Banks and (ii) any
subsequent unaudited financial statements for such Person for the period prior
to the acquisition of such Person were prepared on a basis consistent with such
audited financial statements.
EFFECTIVE DATE - see SECTION 11.1.
ENVIRONMENTAL CLAIMS means all claims, however asserted, by any
governmental, regulatory or judicial authority or other Person alleging
potential liability or responsibility for violation of any Environmental Law, or
for release or injury to the environment.
ENVIRONMENTAL LAWS means all federal, state or local laws, statutes,
common law duties, rules, regulations, ordinances and codes, together with all
administrative orders, directed duties, requests, licenses, authorizations and
permits of, and agreements with, any governmental authority, in each case
relating to environmental matters.
EQUITY OFFERING means an offering (which may be public or
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private) by the Company of its common stock which is completed on or before
December 31, 1998 and pursuant to which the Company receives net cash proceeds
of not less than $50,000,000.
ERISA means the Employee Retirement Income Security Act of 1974.
References to sections of ERISA also refer to any successor sections.
EUROCURRENCY RESERVE PERCENTAGE means, with respect to any Eurodollar
Loan for any Interest Period, a percentage (expressed as a decimal) equal to the
daily average during such Interest Period of the percentage in effect on each
day of such Interest Period, as prescribed by the Board of Governors of the
Federal Reserve System (or any successor), for determining the aggregate maximum
reserve requirements applicable to "Eurocurrency Liabilities" pursuant to
Regulation D or any other then applicable regulation of such Board of Governors
which prescribes reserve requirements applicable to "Eurocurrency Liabilities"
as presently defined in Regulation D.
EURODOLLAR LOAN means any Revolving Loan which bears interest at a rate
determined by reference to the Eurodollar Rate (Reserve Adjusted).
EURODOLLAR MARGIN - see SCHEDULE 1.1.
EURODOLLAR OFFICE means with respect to any Bank the office or offices
of such Bank which shall be making or maintaining the Eurodollar Loans of such
Bank hereunder or such other office or offices through which such Bank
determines its Eurodollar Rate. A Eurodollar Office of any Bank may be, at the
option of such Bank, either a domestic or foreign office.
EURODOLLAR RATE means, with respect to any Eurodollar Loan for any
Interest Period, the rate per annum at which Dollar deposits in immediately
available funds are offered to the Eurodollar Office of BofA two Business Days
prior to the beginning of such Interest Period by major banks in the interbank
eurodollar market as at or about 10:00 A.M., Chicago time, for delivery on the
first day of such Interest Period, for the number of days comprised therein and
in an amount equal or comparable to the amount of the Eurodollar Loan of BofA
for such Interest Period.
EURODOLLAR RATE (RESERVE ADJUSTED) means, with respect to any Eurodollar
Loan for any Interest Period, a rate per annum (rounded upwards, if necessary,
to the nearest 1/100 of 1%) determined pursuant to the following formula:
Eurodollar Rate = EURODOLLAR RATE
(Reserve Adjusted) 1-Eurocurrency
Reserve Percentage
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EVENT OF DEFAULT means any of the events described in SECTION 12.1.
EXISTING AGREEMENT - see the RECITALS.
FEDERAL FUNDS RATE means, for any day, the rate set forth in the weekly
statistical release designated as H.15(519), or any successor publication,
published by the Federal Reserve Bank of New York (including any such successor
publication, "H.15(519)") on the preceding Business Day opposite the caption
"Federal Funds (Effective)"; or, if for any relevant day such rate is not so
published on any such preceding Business Day, the rate for such day will be the
arithmetic mean as determined by the Agent of the rates for the last transaction
in overnight Federal funds arranged prior to 9:00 a.m. (New York City time) on
that day by each of three leading brokers of Federal funds transactions in New
York City selected by the Agent.
FINANCIAL LETTER OF CREDIT means any Letter of Credit determined by the
applicable Issuing Bank to be a "financial guaranty-type Standby Letter of
Credit" as defined in footnote 13 to Appendix A to the Risk Based Capital
Guidelines issued by the Comptroller of the Currency (or in any successor
regulation, guideline or ruling by any applicable banking regulatory authority).
FISCAL QUARTER means a fiscal quarter of a Fiscal Year.
FISCAL YEAR means the fiscal year of the Company and its Subsidiaries,
which period shall be the 12-month period ending on December 31 of each year.
References to a Fiscal Year with a number corresponding to any calendar year
(e.g., "Fiscal Year 1997") refer to the Fiscal Year ending on December 31 of
such calendar year.
FLOATING RATE LOAN means any Loan which bears interest at or by
reference to the Base Rate.
FLOATING RATE MARGIN - see SCHEDULE 1.1.
FUNDED DEBT means all Debt of the Company and its Subsidiaries,
excluding (i) contingent obligations in respect of undrawn letters of credit and
Suretyship Liabilities (except, in each case, to the extent constituting
Suretyship Liabilities in respect of Debt of a Person other than the Company or
any Subsidiary), (ii) Hedging Obligations, (iii) Debt of the Company to
Subsidiaries and Debt of Subsidiaries to the Company or to other Subsidiaries
and (iv) the Contingent Payments incurred in connection with the acquisition of
City Environmental, Inc.
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listed as the first item on SCHEDULE 9.6(b).
FUNDED DEBT TO EBITDA RATIO means, as of the last day of any Fiscal
Quarter, the ratio of (i) Funded Debt as of the last day of such Fiscal Quarter
to (ii) EBITDA for the Computation Period ending on the last day of such Fiscal
Quarter.
GAAP means generally accepted accounting principles set forth from time
to time in the opinions and pronouncements of the Accounting Principles Board
and the American Institute of Certified Public Accountants and statements and
pronouncements of the Financial Accounting Standards Board (or agencies with
similar functions of comparable stature and authority within the U.S. accounting
profession), which are applicable to the circumstances as of the date of
determination.
GROUP - see SECTION 2.2.1.
GUARANTOR means, on any day, each Subsidiary that has executed a
counterpart of the Guaranty on or prior to that day (or is required to execute a
counterpart of the Guaranty on that date).
GUARANTY means the Guaranty dated as of December 17, 1997, executed by
various Subsidiaries of the Company, a copy of which is attached hereto as
EXHIBIT C.
HAZARDOUS SUBSTANCES - see SECTION 9.15.
HEDGING OBLIGATIONS means, with respect to any Person, all liabilities
of such Person under interest rate, currency and commodity swap agreements, cap
agreements and collar agreements, and all other agreements or arrangements
designed to protect such Person against fluctuations in interest rates, currency
exchange rates or commodity prices.
INTEREST COVERAGE RATIO means the ratio of (a) Consolidated Net Income
before deducting Interest Expense and income tax expense for any Computation
Period to (b) Interest Expense for such Computation Period.
INTEREST EXPENSE means for any period the consolidated interest expense
of the Company and its Subsidiaries for such period (including all imputed
interest on Capital Leases and before giving effect to any capitalization of
interest but excluding amortization of deferred financing costs).
INTEREST PERIOD - see SECTION 4.3.
INVESTMENT means, relative to any Person, (a) any loan or advance made
by such Person to any other Person (excluding any commission, travel or similar
advances made to directors,
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officers and employees of the Company or any of its Subsidiaries), (b) any
Suretyship Liability of such Person, (c) any ownership or similar interest held
by such Person in any other Person and (d) deposits and the like relating to
prospective acquisitions of businesses.
ISSUING BANK means BofA in its capacity as an issuer of Letters of
Credit hereunder and any other Bank which, with the written consent of the
Company and the Agent, is the issuer of one or more Letters of Credit hereunder.
L/C APPLICATION means, with respect to any request for the issuance of a
Letter of Credit, a letter of credit application in the form being used by the
applicable Issuing Bank at the time of such request for the type of letter of
credit requested.
LETTER OF CREDIT - see SECTION 2.1.2.
LIEN means, with respect to any Person, any interest granted by such
Person in any real or personal property, asset or other right owned or being
purchased or acquired by such Person which secures payment or performance of any
obligation and shall include any mortgage, lien, encumbrance, charge or other
security interest of any kind, whether arising by contract, as a matter of law,
by judicial process or otherwise.
LOAN DOCUMENTS means this Agreement, the Notes, the Guaranty, the L/C
Applications and the Collateral Documents.
LOANS means Revolving Loans and Swing Line Loans.
MARGIN STOCK means any "margin stock" as defined in Regulation U of the
Board of Governors of the Federal Reserve System.
MATERIAL ADVERSE EFFECT means (a) a material adverse change in, or a
material adverse effect upon, the financial condition, operations, assets,
business, properties or prospects of the Company and its Subsidiaries taken as a
whole, or (b) a material adverse effect upon any substantial portion of the
collateral under the Collateral Documents or upon the legality, validity,
binding effect or enforceability against the Company or any Guarantor of any
Loan Document.
MULTIEMPLOYER PENSION PLAN means a multiemployer plan, as such term is
defined in Section 4001(a)(3) of ERISA, and to which the Company or any member
of the Controlled Group may have any liability.
NET WORTH means the Company's consolidated stockholders' equity
(including preferred stock accounts).
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NON-FINANCIAL LETTER OF CREDIT means any Letter of Credit other than a
Financial Letter of Credit.
NOTE - see SECTION 3.1.
OPERATING LEASE means any lease of (or other agreement conveying the
right to use) any real or personal property by the Company or any Subsidiary, as
lessee, other than any Capital Lease.
PBGC means the Pension Benefit Guaranty Corporation and any entity
succeeding to any or all of its functions under ERISA.
PENSION PLAN means a "pension plan", as such term is defined in Section
3(2) of ERISA, which is subject to Title IV of ERISA (other than a Multiemployer
Pension Plan), and to which the Company or any member of the Controlled Group
may have any liability, including any liability by reason of having been a
substantial employer within the meaning of Section 4063 of ERISA at any time
during the preceding five years, or by reason of being deemed to be a
contributing sponsor under Section 4069 of ERISA.
PERCENTAGE means, with respect to any Bank, the percentage specified
opposite such Bank's name on SCHEDULE 2.1 hereto, reduced (or increased) by
subsequent assignments pursuant to SECTION 14.9.1.
PERSON means any natural person, corporation, partnership, trust,
limited liability company, association, governmental authority or unit, or any
other entity, whether acting in an individual, fiduciary or other capacity.
RCRA - see SECTION 9.15.
RELEASE has the meaning specified in CERCLA and the term "DISPOSAL" (or
"DISPOSED") has the meaning specified in RCRA; PROVIDED that in the event either
CERCLA or RCRA is amended so as to broaden the meaning of any term defined
thereby, such broader meaning shall apply as of the effective date of such
amendment; and PROVIDED, FURTHER, that to the extent that the laws of a state
wherein any affected property lies establish a meaning for "RELEASE" or
"DISPOSAL" which is broader than is specified in either CERCLA or RCRA, such
broader meaning shall apply.
REFERENCE RATE means, for any day, the rate of interest in effect for
such day as publicly announced from time to time by BofA in San Francisco,
California, as its "reference rate." (The "reference rate" is a rate set by BofA
based upon various factors,
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including BofA's costs and desired return, general economic conditions and other
factors, and is used as a reference point for pricing some loans, which may be
priced at, above, or below such announced rate.) Any change in the reference
rate announced by BofA shall take effect at the opening of business on the day
specified in the public announcement of such change.
REQUIRED BANKS means Banks having Percentages aggregating 66-2/3% or
more; PROVIDED that if and so long as any Bank fails to fund its participation
in any Swing Line Loan when required by SECTION 2.4.3, such Bank's Percentage
shall be deemed for purposes of this definition to be reduced by the percentage
which the defaulted amount constitutes of such Bank's Percentage, and the
Percentage of the Swing Line Bank shall be deemed for purposes of this
definition to be increased by such percentage; and PROVIDED, FURTHER, that at
any time there are less than three Banks, "REQUIRED BANKS" shall mean all Banks
and PROVIDED FURTHER, that at any time there are less than three Banks,
"REQUIRED BANKS" shall mean all Banks.
REVOLVING LOAN - see SECTION 2.1.1.
SEC means the Securities and Exchange Commission.
SECURITY AGREEMENT means the Security Agreement among the Company, the
various Subsidiaries of the Company and the Agent, a copy of which is attached
hereto as EXHIBIT D.
SENIOR DEBT means all Debt of the Company and its Subsidiaries other
than Subordinated Debt.
STATED AMOUNT means, with respect to any Letter of Credit at any date of
determination, the maximum aggregate amount available for drawing thereunder at
any time during the then ensuing term of such Letter of Credit under any and all
circumstances, plus the aggregate amount of all unreimbursed payments and
disbursements under such Letter of Credit.
SUBORDINATED DEBT means any unsecured indebtedness of the Company which
(x) is owed to Persons other than officers, employees, directors or Affiliates
of the Company, (y) has no amortization prior to [December 31, 2001] and (z) has
subordination terms, covenants, pricing and other terms applicable to such
indebtedness which have been approved in writing by the Required Banks.
SUBSIDIARY means, with respect to any Person, a corporation of which
such Person and/or its other Subsidiaries own, directly or indirectly, such
number of outstanding shares as have more than 50% of the ordinary voting power
for the election of directors. Unless the context otherwise requires, each
reference
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to Subsidiaries herein shall be a reference to Subsidiaries of the Company.
SUBSIDIARY PLEDGE AGREEMENT means the Subsidiary Pledge Agreement, dated
as of December 17, 1997 between Mesa Processing, Inc. and the Agent, a copy of
which is attached as EXHIBIT F-1 hereto, and each other pledge agreement
substantially in the form of EXHIBIT F-2 issued by any Subsidiary, whether
pursuant to SECTION 11.1.7 or SECTION 10.14.
SURETYSHIP LIABILITY means any agreement, undertaking or arrangement by
which any Person guarantees, endorses or otherwise becomes or is contingently
liable upon (by direct or indirect agreement, contingent or otherwise, to
provide funds for payment, to supply funds to or otherwise to invest in a
debtor, or otherwise to assure a creditor against loss) any indebtedness,
obligation or other liability of any other Person (other than by endorsements of
instruments in the course of collection), or guarantees the payment of dividends
or other distributions upon the shares of any other Person. The amount of any
Person's obligation in respect of any Suretyship Liability shall (subject to any
limitation set forth therein) be deemed to be the principal amount of the debt,
obligation or other liability supported thereby.
SWING LINE BANK means BofA in its capacity as swing line lender
hereunder, together with any replacement swing line lender arising under SECTION
13.9.
SWING LINE LOAN - see SECTION 2.4.1.
TERMINATION DATE means the earlier to occur of (a) April 10, 2001, or
such later date to which the Termination Date may be extended at the request of
the Company and with the consent of each Bank or (b) such other date on which
the Commitments shall terminate pursuant to SECTION 6 or 12.
TOTAL OUTSTANDINGS means at any time the sum of (a) the aggregate
principal amount of all outstanding Loans (including Swing Line Loans) plus (b)
the Stated Amount of all Letters of Credit.
TYPE OF REVOLVING LOAN OR BORROWING - see SECTION 2.2.1. The types of
Revolving Loans or borrowings under this Agreement are as follows: Floating Rate
Loans or borrowings and Eurodollar Loans or borrowings.
UNMATURED EVENT OF DEFAULT means any event that, if it continues
uncured, will, with lapse of time or notice or both, constitute an Event of
Default.
WELFARE PLAN means a "welfare plan", as such term is defined
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in Section 3(1) of ERISA.
1.2 OTHER INTERPRETIVE PROVISIONS. (a) The meanings of
defined terms are equally applicable to the singular and plural
forms of the defined terms.
(b) SECTION, SCHEDULE and EXHIBIT references are to this
Agreement unless otherwise specified.
(c) (i) The term "including" is not limiting and means "including
without limitation."
(ii) In the computation of periods of time from a specified
date to a later specified date, the word "from" means "from and
including"; the words "to" and "until" each mean "to but excluding", and
the word "through" means "to and including."
(d) Unless otherwise expressly provided herein, (i) references to
agreements (including this Agreement) and other contractual instruments shall be
deemed to include all subsequent amendments and other modifications thereto, but
only to the extent such amendments and other modifications are not prohibited by
the terms of any Loan Document, and (ii) references to any statute or regulation
are to be construed as including all statutory and regulatory provisions
consolidating, amending, replacing, supplementing or interpreting such statute
or regulation.
(e) This Agreement and the other Loan Documents may use several
different limitations, tests or measurements to regulate the same or similar
matters. All such limitations, tests and measurements are cumulative and shall
each be performed in accordance with their terms.
(f) This Agreement and the other Loan Documents are the result of
negotiations among and have been reviewed by counsel to the Agent, the Company,
the Banks and the other parties thereto and are the products of all parties.
Accordingly, they shall not be construed against the Agent or the Banks merely
because of the Agent's or Banks' involvement in their preparation.
1.3. REALLOCATION OF PERCENTAGES AND REVOLVING LOANS.
(a) The Company and each Bank agree that, effective on the Effective
Date, (i) this Agreement shall amend and restate in its entirety the Existing
Agreement and (ii) the Percentages of the Banks shall be reallocated in
accordance with the terms hereof.
(b) To facilitate the reallocation described in CLAUSE (a),
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on the Effective Date, (i) all loans under the Existing Agreement shall be
deemed to be Revolving Loans hereunder, (ii) each Bank which is a party to the
Existing Agreement (an "Existing Bank") shall transfer to the Agent an amount
equal to the excess, if any, of such Bank's Percentage of all outstanding
Revolving Loans hereunder (including any Revolving Loans requested by the
Company on the Effective Date) over the amount of all of such Bank's loans under
the Existing Agreement, (iii) each Bank which is not a party to the Existing
Agreement shall transfer to the Agent an amount equal to such Bank's Percentage
of all outstanding Revolving Loans hereunder (including any Revolving Loans
requested by the Company on the Effective Date), (iv) the Agent shall apply the
funds received from the Banks pursuant to CLAUSES (II) and (III), FIRST, on
behalf of the Banks (pro rata according to the amount of the loans each is
required to purchase to achieve the reallocation described in CLAUSE (A)), to
purchase from each Existing Bank which is not a party hereto the loans of such
Existing Bank under the Existing Agreement (and, if applicable to purchase from
any Existing Bank which is a party hereto but which has loans under the Existing
Agreement in excess of such Bank's Percentage of all then-outstanding Revolving
Loans hereunder (including any Revolving Loans requested by the Company on the
Effective Date), a portion of such loans equal to such excess), SECOND, to pay
to each Existing Bank all interest, fees and other amounts (including amounts
payable pursuant to Section 8.4 of the Existing Agreement, assuming for such
purpose that the loans under the Existing Agreement were prepaid rather than
reallocated on the Effective Date) owed to such Existing Bank under the Existing
Agreement (whether or not otherwise then due) and, THIRD, as the Company shall
direct, (v) the Company shall select new Interest Periods to apply to all
Revolving Loans hereunder (or, to the extent the Company fails to do so, such
Revolving Loans shall be Floating Rate Loans).
SECTION 2 COMMITMENTS OF THE BANKS; BORROWING, CONVERSION
AND LETTER OF CREDIT PROCEDURES; SWING LINE LOANS.
2.1 COMMITMENTS. On and subject to the terms and conditions of this
Agreement, each of the Banks, severally and for itself alone, agrees to make
loans to, and to issue or participate in the issuance of letters of credit for
the account of, the Company as follows:
2.1.1 REVOLVING LOAN COMMITMENT. Each Bank will make loans on a
revolving basis ("REVOLVING LOANS") from time to time before the Termination
Date in such Bank's Percentage of such aggregate amounts as the Company may from
time to time request from all Banks; PROVIDED that the Total Outstandings will
not at any time exceed the Commitment Amount.
2.1.2 L/C COMMITMENT. (a) The Issuing Banks will issue
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standby letters of credit, in each case containing such terms and conditions as
are permitted by this Agreement and are reasonably satisfactory to the
applicable Issuing Bank (each, a "LETTER OF CREDIT"), at the request of and for
the account of the Company or any Subsidiary from time to time before the
Termination Date and (b) as more fully set forth in SECTION 2.3.5, each Bank
agrees to purchase a participation in each such Letter of Credit; PROVIDED that
the aggregate Stated Amount of all Letters of Credit shall not at any time
exceed the lesser of (i) [$7,500,000] and (ii) the excess, if any, of the
Commitment Amount over the aggregate principal amount of all outstanding Loans
(including Swing Line Loans).
2.2 REVOLVING LOAN PROCEDURES.
2.2.1 VARIOUS TYPES OF REVOLVING LOANS. Each Revolving Loan shall be
either a Floating Rate Loan or a Eurodollar Loan (each a "TYPE" of Revolving
Loan), as the Company shall specify in the related notice of borrowing or
conversion pursuant to SECTION 2.2.2 or 2.2.3. Eurodollar Loans having the same
Interest Period are sometimes called a "GROUP" or collectively "GROUPS".
Floating Rate Loans and Eurodollar Loans may be outstanding at the same time,
PROVIDED that (i) not more than eight different Groups of Eurodollar Loans shall
be outstanding at any one time, (ii) the aggregate principal amount of each
Group of Eurodollar Loans shall at all times be at least $1,000,000 and an
integral multiple of $250,000 and (iii) during the 60 days immediately following
the Effective Date, the Company may not select any Interest Period for any Group
of Eurodollar Loans which would end after the date specified by the Agent as the
date on which the Arranger plans to complete the primary syndication of the
credit facility established hereunder. All borrowings, conversions and
repayments of Revolving Loans shall be effected so that each Bank will have a
pro rata share (according to its Percentage) of all types and Groups of
Revolving Loans.
2.2.2 BORROWING PROCEDURES. The Company shall give written notice or
telephonic notice (followed immediately by written confirmation thereof) to the
Agent of each proposed borrowing not later than (a) in the case of a Floating
Rate borrowing, 11:00 A.M., Chicago time, on the proposed date of such
borrowing, and (b) in the case of a Eurodollar borrowing, 9:00 A.M., Chicago
time, at least two Business Days prior to the proposed date of such borrowing.
Each such notice shall be effective upon receipt by the Agent, shall be
irrevocable, and shall specify the date, amount and type of borrowing and, in
the case of a Eurodollar borrowing, the initial Interest Period therefor.
Promptly upon receipt of such notice, the Agent shall advise each Bank thereof.
Not later than 1:00 p.m., Chicago time, on the date of a proposed borrowing,
each Bank shall provide the Agent at the office
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specified by the Agent with immediately available funds covering such Bank's
Percentage of such borrowing and, so long as the Agent has not received written
notice that the conditions precedent set forth in SECTION 11 with respect to
such borrowing have not been satisfied (and does not have knowledge of any
default in the payment of any principal, interest or fees to be paid to the
Agent for the account of the Banks), the Agent shall pay over the requested
amount to the Company on the requested borrowing date. Each borrowing shall be
on a Business Day. Each Floating Rate borrowing shall be in an aggregate amount
of at least $1,000,000 and an integral multiple of $250,000.
2.2.3 PROCEDURES FOR CONVERSION OF TYPE OF REVOLVING LOAN. Subject to
the provisions of SECTION 2.2.1, the Company may convert all or any part of any
outstanding Revolving Loan into a Revolving Loan of a different type by giving
written notice or telephonic notice (followed immediately by written
confirmation thereof) to the Agent not later than (a) in the case of conversion
into a Floating Rate Loan, 11:00 A.M., Chicago time, on the proposed date of
such conversion, and (b) in the case of a conversion into a Eurodollar Loan,
9:00 A.M., Chicago time, at least two Business Days prior to the proposed date
of such conversion. Each such notice shall be effective upon receipt by the
Agent, shall be irrevocable, and shall specify the date and amount of such
conversion, the Revolving Loans to be so converted, the type of Revolving Loans
to be converted into and, in the case of a conversion into Eurodollar Loans, the
initial Interest Period therefor. Promptly upon receipt of such notice, the
Agent shall advise each Bank thereof. Subject to SECTION 2.6, such Revolving
Loans shall be so converted on the requested date of conversion. Each conversion
shall be on a Business Day. Each conversion of a Eurodollar Loan on a day other
than the last day of an Interest Period therefor shall be subject to the
provisions of SECTION 8.4.
2.3 LETTER OF CREDIT PROCEDURES.
2.3.1 L/C APPLICATIONS. The Company shall give notice to the Agent and
the applicable Issuing Bank of the proposed issuance of each Letter of Credit on
a Business Day which is at least three Business Days (or such lesser number of
days as the Agent and such Issuing Bank shall agree in any particular instance)
prior to the proposed date of issuance of such Letter of Credit. Each such
notice shall be accompanied by an L/C Application, duly executed by the Company
(together with any Subsidiary for the account of which the related Letter of
Credit is to be issued) and in all respects satisfactory to the Agent and the
applicable Issuing Bank, together with such other documentation as the Agent or
such Issuing Bank may request in support thereof, it being understood that each
L/C Application shall specify, among other things, the date on which the
proposed
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Letter of Credit is to be issued, the expiration date of such Letter of
Credit (which shall not be later than the Termination Date) and whether such
Letter of Credit is to be transferable in whole or in part. So long as the
applicable Issuing Bank has not received written notice that the conditions
precedent set forth in SECTION 11 with respect to the issuance of such Letter of
Credit have not been satisfied, such Issuing Bank shall issue such Letter of
Credit on the requested issuance date. Each Issuing Bank shall promptly advise
the Agent of the issuance of each Letter of Credit by such Issuing Bank and of
any amendment thereto, extension thereof or event or circumstance changing the
amount available for drawing thereunder.
2.3.2 PARTICIPATION IN LETTERS OF CREDIT. Concurrently with the issuance
of each Letter of Credit, the applicable Issuing Bank shall be deemed to have
sold and transferred to each other Bank, and each other Bank shall be deemed
irrevocably and unconditionally to have purchased and received from such Issuing
Bank, without recourse or warranty, an undivided interest and participation, to
the extent of such other Bank's Percentage, in such Letter of Credit and the
Company's reimbursement obligations with respect thereto. For the purposes of
this Agreement, the unparticipated portion of each Letter of Credit shall be
deemed to be the applicable Issuing Bank's "participation" therein. Each Issuing
Bank hereby agrees, upon request of the Agent or any Bank, to deliver to such
Bank a list of all outstanding Letters of Credit issued by such Issuing Bank,
together with such information related thereto as such Bank may reasonably
request.
2.3.3 REIMBURSEMENT OBLIGATIONS. The Company hereby unconditionally and
irrevocably agrees to reimburse the applicable Issuing Bank for each payment or
disbursement made by such Issuing Bank under any Letter of Credit honoring any
demand for payment made by the beneficiary thereunder, in each case on the date
that such payment or disbursement is made. Any amount not reimbursed on the date
of such payment or disbursement shall bear interest from the date of such
payment or disbursement to the date that such Issuing Bank is reimbursed by the
Company therefor, payable on demand, at a rate per annum equal to the Base Rate
from time to time in effect PLUS the Floating Rate Margin from time to time in
effect PLUS, beginning on the three Business Day after receipt of notice from
the Issuing Bank of such payment or disbursement, 2%. The applicable Issuing
Bank shall notify the Company and the Agent whenever any demand for payment is
made under any Letter of Credit by the beneficiary thereunder; PROVIDED,
HOWEVER, that the failure of such Issuing Bank to so notify the Company shall
not affect the rights of such Issuing Bank or the Banks in any manner
whatsoever.
2.3.4 LIMITATION ON OBLIGATIONS OF ISSUING BANKS. In determining whether
to pay under any Letter of Credit, no Issuing
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Bank shall have any obligation to the Company or any Bank other than to confirm
that any documents required to be delivered under such Letter of Credit appear
to have been delivered and appear to comply on their face with the requirements
of such Letter of Credit. Any action taken or omitted to be taken by an Issuing
Bank under or in connection with any Letter of Credit, if taken or omitted in
the absence of gross negligence and willful misconduct, shall not impose upon
such Issuing Bank any liability to the Company or any Bank and shall not reduce
or impair the Company's reimbursement obligations set forth in SECTION 2.3.3 or
the obligations of the Banks pursuant to SECTION 2.3.5.
2.3.5 FUNDING BY BANKS TO ISSUING BANKS. If an Issuing Bank makes any
payment or disbursement under any Letter of Credit and the Company has not
reimbursed such Issuing Bank in full for such payment or disbursement by 11:00
A.M., Chicago time, on the date of such payment or disbursement, or if any
reimbursement received by such Issuing Bank from the Company is or must be
returned or rescinded upon or during any bankruptcy or reorganization of the
Company or otherwise, each other Bank shall be obligated to pay to the Agent for
the account of such Issuing Bank, in full or partial payment of the purchase
price of its participation in such Letter of Credit, its pro rata share
(according to its Percentage) of such payment or disbursement (but no such
payment shall diminish the obligations of the Company under SECTION 2.3.3), and
upon notice from the applicable Issuing Bank, the Agent shall promptly notify
each other Bank thereof. Each other Bank irrevocably and unconditionally agrees
to so pay to the Agent in immediately available funds for the applicable Issuing
Bank's account the amount of such other Bank's Percentage of such payment or
disbursement. If and to the extent any Bank shall not have made such amount
available to the Agent by 2:00 P.M., Chicago time, on the Business Day on which
such Bank receives notice from the Agent of such payment or disbursement (it
being understood that any such notice received after noon, Chicago time, on any
Business Day shall be deemed to have been received on the next following
Business Day), such Bank agrees to pay interest on such amount to the Agent for
the applicable Issuing Bank's account forthwith on demand for each day from the
date such amount was to have been delivered to the Agent to the date such amount
is paid, at a rate per annum equal to (a) for the first three days after demand,
the Federal Funds Rate from time to time in effect and (b) thereafter, the Base
Rate from time to time in effect. Any Bank's failure to make available to the
Agent its Percentage of any such payment or disbursement shall not relieve any
other Bank of its obligation hereunder to make available to the Agent such other
Bank's Percentage of such payment, but no Bank shall be responsible for the
failure of any other Bank to make available to the Agent such other Bank's
Percentage of any such payment or disbursement.
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2.4 SWING LINE LOANS.
2.4.1 SWING LINE LOANS. Subject to the terms and conditions of this
Agreement, the Swing Line Bank may from time to time, in its discretion, make
loans to the Company (collectively the "SWING LINE LOANS" and individually each
a "SWING LINE LOAN") in accordance with this SECTION 2.4 in an aggregate amount
not at any time exceeding $5,000,000; PROVIDED that the Total Outstandings shall
not at any time exceed the Commitment Amount. Amounts borrowed under this
SECTION 2.4 may be borrowed, repaid and (subject to the agreement of the Swing
Line Bank) reborrowed until the Termination Date.
2.4.2 SWING LINE LOAN PROCEDURES. The Company shall give written or
telephonic notice to the Agent (which shall promptly inform the Swing Line Bank)
of each proposed Swing Line Loan not later than 12:00 noon, Chicago time, on the
proposed date of such Swing Line Loan. Each such notice shall be effective upon
receipt by the Agent and shall specify the date and amount of such Swing Line
Loan, which shall be not less than $100,000 or a higher integral multiple
thereof. So long as the Swing Line Bank has not received written notice that the
conditions precedent set forth in SECTION 11 with respect to the making of such
Swing Line Loan have not been satisfied, the Swing Line Bank may make the
requested Swing Line Loan. If the Swing Line Bank agrees to make the requested
Swing Line Loan, the Swing Line Bank shall pay over the requested amount to the
Company on the requested borrowing date. Concurrently with the making of any
Swing Line Loan, the Swing Line Bank shall be deemed to have sold and
transferred, and each other Bank shall be deemed to have purchased and received
from the Swing Line Bank, an undivided interest and participation to the extent
of such other Bank's Percentage in such Swing Line Loan (but such participation
shall remain unfunded until required to be funded pursuant to SECTION 2.4.3).
2.4.3 REFUNDING OF, OR FUNDING OF PARTICIPATIONS IN, SWING LINE LOANS.
The Swing Line Bank may at any time, in its sole discretion, on behalf of the
Company (which hereby irrevocably authorizes the Swing Line Bank to act on its
behalf) deliver a notice to the Agent requesting that each Bank (including the
Swing Line Bank in its individual capacity) make a Revolving Loan (which shall
be a Floating Rate Loan) in such Bank's Percentage of the aggregate amount of
Swing Line Loans outstanding on such date for the purpose of repaying all Swing
Line Loans (and, upon receipt of the proceeds of such Revolving Loans, the Agent
shall apply such proceeds to repay Swing Line Loans); PROVIDED that if the
conditions precedent to a borrowing of Revolving Loans are not then satisfied or
for any other reason the Banks may not then make Revolving Loans, then instead
of making Revolving Loans each Bank (other than the Swing Line Bank) shall
become immediately obligated to fund its participation in all outstanding Swing
Line Loans
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and shall pay to the Agent for the account of the Swing Line Bank an amount
equal to such Bank's Percentage of such Swing Line Loans. If and to the extent
any Bank shall not have made such amount available to the Agent by 2:00 P.M.,
Chicago time, on the Business Day on which such Bank receives notice from the
Agent of its obligation to fund its participation in Swing Line Loans (it being
understood that any such notice received after 12:00 noon, Chicago time, on any
Business Day shall be deemed to have been received on the next following
Business Day), such Bank agrees to pay interest on such amount to the Agent for
the Swing Line Bank's account forthwith on demand for each day from the date
such amount was to have been delivered to the Agent to the date such amount is
paid, at a rate per annum equal to (a) for the first three days after demand,
the Federal Funds Rate from time to time in effect and (b) thereafter, the Base
Rate from time to time in effect. Any Bank's failure to make available to the
Agent its Percentage of the amount of all outstanding Swing Line Loans shall not
relieve any other Bank of its obligation hereunder to make available to the
Agent such other Bank's Percentage of such amount, but no Bank shall be
responsible for the failure of any other Bank to make available to the Agent
such other Bank's Percentage of any such amount.
2.4.4 REPAYMENT OF PARTICIPATIONS. Upon (and only upon) receipt by the
Agent for the account of the Swing Line Bank of immediately available funds from
or on behalf of the Company (a) in reimbursement of any Swing Line Loan with
respect to which a Bank has paid the Agent for the account of the Swing Line
Bank the amount of such Bank's participation therein or (b) in payment of any
interest on a Swing Line Loan, the Agent will pay to such Bank its pro rata
share (according to its Percentage) thereof (and the Swing Line Bank shall
receive the amount otherwise payable to any Bank which did not so pay the Agent
the amount of such Bank's participation in such Swing Line Loan).
2.4.5 PARTICIPATION OBLIGATIONS UNCONDITIONAL. (a) Each Bank's
obligation to make available to the Agent for the account of the Swing Line Bank
the amount of its participation interest in all Swing Line Loans as provided in
SECTION 2.4.3 shall be absolute and unconditional and shall not be affected by
any circumstance, including (i) any set-off, counterclaim, recoupment, defense
or other right which such Bank may have against the Swing Line Bank or any other
Person, (ii) the occurrence or continuance of an Event of Default or Unmatured
Event of Default, (iii) any adverse change in the condition (financial or
otherwise) of the Company or any Subsidiary thereof, (iv) any termination of the
Commitments or (v) any other circumstance, happening or event whatsoever.
(b) Notwithstanding the provisions of CLAUSE (a) above, no
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Bank shall be required to purchase a participation interest in any Swing Line
Loan if, prior to the making by the Swing Line Bank of such Swing Line Loan, the
Swing Line Bank received written notice specifying that one or more of the
conditions precedent to the making of such Swing Line Loan were not satisfied
and, in fact, such conditions precedent were not satisfied at the time of the
making of such Swing Line Loan.
2.5 COMMITMENTS SEVERAL. The failure of any Bank to make a requested
Loan on any date shall not relieve any other Bank of its obligation (if any) to
make a Loan on such date, but no Bank shall be responsible for the failure of
any other Bank to make any Loan to be made by such other Bank.
2.6 CERTAIN CONDITIONS. Notwithstanding any other provision of this
Agreement, no Bank shall have an obligation to make any Loan, or to permit the
continuation of or any conversion into any Eurodollar Loan, and no Issuing Bank
shall have any obligation to issue any Letter of Credit, if an Event of Default
or Unmatured Event of Default exists.
SECTION 3 NOTES EVIDENCING LOANS.
3.1 NOTES. The Loans of each Bank shall be evidenced by a promissory
note (each a "NOTE") substantially in the form set forth in EXHIBIT A, with
appropriate insertions, payable to the order of such Bank in a face principal
amount equal to such Bank's Percentage of the Commitment Amount (or, in the case
of the Swing Line Bank, an amount equal to the maximum principal amount of all
Revolving Loans and Swing Line Loans which the Swing Line Bank may at any time
have outstanding hereunder).
3.2 RECORDKEEPING. Each Bank shall record in its records, or at its
option on the schedule attached to its Note, the date and amount of each Loan
made by such Bank, each repayment or conversion thereof and, in the case of each
Eurodollar Loan, the dates on which each Interest Period for such Loan shall
begin and end. The aggregate unpaid principal amount so recorded shall be
rebuttable presumptive evidence of the principal amount owing and unpaid on such
Note. The failure to so record any such amount or any error in so recording any
such amount shall not, however, limit or otherwise affect the obligations of the
Company hereunder or under any Note to repay the principal amount of the Loans
evidenced by such Note together with all interest accruing thereon.
SECTION 4 INTEREST.
4.1 INTEREST RATES. The Company promises to pay interest on the unpaid
principal amount of each Loan for the period commencing on the date of such Loan
until such Loan is paid in
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full as follows:
(a) at all times while such Loan is a Floating Rate Loan, at a
rate per annum equal to the sum of the Base Rate from time to time in
effect plus the Floating Rate Margin from time to time in effect;
(b) at all times while such Loan is a Eurodollar Loan, at a rate
per annum equal to the sum of the Eurodollar Rate (Reserve Adjusted)
applicable to each Interest Period for such Loan plus the Eurodollar
Margin from time to time in effect; and
(c) at all times while such Loan is a Swing Line Loan, at a rate
per annum separately agreed to by the Company and the Swing Line Bank
from time to time (provided that if at any time the Banks are obligated
to fund participations in Swing Line Loans pursuant to SECTION 2.4.3,
all of such Swing Line Loans shall bear interest, from the date the
obligation to fund such participations first arises to the date such
Swing Line Loans are paid in full, at a rate per annum equal to the sum
of the Base Rate from time to time in effect plus the Floating Rate
Margin from time to time in effect);
PROVIDED, HOWEVER, that at any time an Event of Default exists, the interest
rate applicable to each Loan shall be increased by 2%.
4.2 INTEREST PAYMENT DATES. Accrued interest on each Floating Rate Loan
and Swing Line Loan shall be payable in arrears on the last Business Day of each
calendar quarter and at maturity. Accrued interest on each Eurodollar Loan shall
be payable on the last day of each Interest Period relating to such Loan (and,
in the case of a Eurodollar Loan with a six-month Interest Period, on the
three-month anniversary of the first day of such Interest Period) and at
maturity. After maturity, accrued interest on all Loans shall be payable on
demand.
4.3 INTEREST PERIODS. Each "Interest Period" for a Eurodollar Loan shall
commence on the date such Eurodollar Loan is made or converted from a Floating
Rate Loan, or on the expiration of the immediately preceding Interest Period for
such Eurodollar Loan, and shall end on the date which is one, two, three or six
months thereafter (or, during the 60 days immediately following the Effective
Date, such other period of time as the Company and all Banks may agree upon), as
the Company may specify:
(a) in the case of an Interest Period which commences on the date
a Eurodollar Loan is made or converted from a
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Floating Rate Loan, in the related notice of borrowing or conversion
pursuant to SECTION 2.2.2 or 2.2.3, or
(b) in the case of a succeeding Interest Period with respect to
any Eurodollar Loan, by written notice or telephonic notice (followed
immediately by written confirmation thereof) to the Agent not later than
9:00 A.M., Chicago time, at least two Business Days prior to the first
day of such succeeding Interest Period, it being understood that (i)
each such notice shall be effective upon receipt by the Agent and (ii)
if the Company fails to give such notice, such Loan shall automatically
become a Floating Rate Loan at the end of its then-current Interest
Period.
Each Interest Period that begins on a day for which there is no numerically
corresponding day in the appropriate subsequent calendar month shall end on the
last Business Day of the appropriate subsequent calendar month. Each Interest
Period which would otherwise end on a day which is not a Business Day shall end
on the immediately succeeding Business Day (unless such immediately succeeding
Business Day is the first Business Day of a calendar month, in which case such
Interest Period shall end on the immediately preceding Business Day). The
Company may not select any Interest Period for a Eurodollar Loan (a) which would
end after the scheduled Termination Date or (b) which would result in the
aggregate principal amount of all Eurodollar Loans having Interest Periods
ending after a date on which the Commitment Amount is scheduled to be reduced
pursuant to SECTION 6.1.2, PLUS the Stated Amount of all Letters of Credit
having expiration dates after the date of such scheduled reduction, being in
excess of the Commitment Amount which is scheduled to be in effect after giving
effect to such scheduled reduction.
4.4 SETTING AND NOTICE OF EURODOLLAR RATES. The applicable Eurodollar
Rate for each Interest Period shall be determined by the Agent, and notice
thereof shall be given by the Agent promptly to the Company and each Bank. Each
determination of the applicable Eurodollar Rate by the Agent shall be conclusive
and binding upon the parties hereto, in the absence of demonstrable error. The
Agent shall, upon written request of the Company or any Bank, deliver to the
Company or such Bank a statement showing the computations used by the Agent in
determining any applicable Eurodollar Rate hereunder.
4.5 COMPUTATION OF INTEREST. All determinations of interest for Floating
Rate Loans and Swing Line Loans when the Base Rate is determined by the
Reference Rate shall be made on the basis of a year of 365 or 366 days, as the
case may be, and the actual number of days elapsed. All other computations of
interest shall be computed for the actual number of days elapsed on the basis of
a year of 360 days. The applicable interest rate for each Floating Rate Loan
shall change simultaneously with each
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change in the Base Rate.
SECTION 5 FEES.
5.1 NON-USE FEE. The Company agrees to pay to the Agent for the account
of each Bank a non-use fee, for the period from the Effective Date to the
Termination Date, at the rate per annum in effect from time to time pursuant to
SCHEDULE 1.1 of the daily average of the unused amount of such Bank's Percentage
of the Commitment Amount. For purposes of calculating usage under this Section,
the Commitment Amount shall be deemed used to the extent of the aggregate
principal amount of all outstanding Loans plus the undrawn amount of all Letters
of Credit. Such non-use fee shall be payable in arrears on the last Business Day
of each calendar quarter and on the Termination Date for any period then ending
for which such non-use fee shall not have theretofore been paid. The non-use fee
shall be computed for the actual number of days elapsed on the basis of a year
of 360 days.
5.2 LETTER OF CREDIT FEES. (a) The Company agrees to pay to the Agent
for the account of the Banks pro rata according to their respective Percentages
a letter of credit fee for each Letter of Credit in an amount equal to the rate
per annum in effect from time to time pursuant to SCHEDULE 1.1 of the undrawn
amount of such Letter of Credit (computed for the actual number of days elapsed
on the basis of a year of 360 days); PROVIDED that the rate applicable to each
Letter of Credit shall be increased by 2% at any time that an Event of Default
exists. Such letter of credit fee shall be payable in arrears on the last
Business Day of each calendar quarter and on the Termination Date for the period
from the date of the issuance of each Letter of Credit to the date such payment
is due or, if earlier, the date on which such Letter of Credit expired or was
terminated.
(b) In addition, with respect to each Letter of Credit, the Company
agrees to pay to the applicable Issuing Bank, for its own account, (i) such fees
and expenses as such Issuing Bank customarily requires in connection with the
issuance, negotiation, processing and/or administration of letters of credit in
similar situations and (ii) a letter of credit fee in the amount separately
agreed to by the Company and such Issuing Bank.
5.3 ARRANGEMENT AND AGENT'S FEES. The Company agrees to pay to the
Arranger and the Agent such arrangement and agent's fees as are mutually agreed
to from time to time by the Company and the Agent.
SECTION 6 REDUCTION AND TERMINATION OF THE COMMITMENTS;
PREPAYMENTS.
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6.1 REDUCTION OR TERMINATION OF THE COMMITMENTS.
6.1.1 VOLUNTARY REDUCTION OR TERMINATION OF THE COMMITMENTS. The
Company may from time to time on at least five Business Days' prior written
notice received by the Agent (which shall promptly advise each Bank thereof)
permanently reduce the Commitment Amount to an amount not less than the Total
Outstandings. Any such reduction shall be in an amount not less than $5,000,000
or a higher integral multiple of $1,000,000. The Company may at any time on like
notice terminate the Commitments upon payment in full of all Loans and all other
obligations of the Company hereunder and cash collateralization in full,
pursuant to documentation in form and substance reasonably satisfactory to the
Banks, of all obligations arising with respect to the Letters of Credit.
6.1.2 MANDATORY REDUCTIONS OF COMMITMENTS. If the Equity Offering
is not completed on or before December 31, 1998, the Commitment Amount shall be
reduced by $3,750,000 on January 1, 1999 and on each April 1, July 1, October 1
and January 1 thereafter until the Termination Date. The scheduled reductions
under this Section shall not be reduced by any reductions under SECTION 6.1.1.
6.1.3 ALL REDUCTIONS OF THE COMMITMENTS. All reductions of the
Commitment Amount shall reduce the Commitments pro rata among the Banks
according to their respective Percentages.
6.2 PREPAYMENTS.
6.2.1 VOLUNTARY PREPAYMENTS. The Company may from time to time
prepay the Loans in whole or in part, PROVIDED that the Company shall give the
Agent (which shall promptly advise each Bank) notice thereof not later than
10:00 A.M. (or, in the case of prepayment of Swing Line Loans, 12:00 noon),
Chicago time, on the day of such prepayment (which shall be a Business Day),
specifying the Loans to be prepaid and the date and amount of prepayment.
6.2.2 MANDATORY PAYMENTS. If, after giving effect to
any reduction of the Commitment Amount pursuant to SECTION 6.1.2, the Total
Outstandings exceed the Commitment Amount, then concurrently with such reduction
the Company shall make a prepayment of the Loans in an amount equal to or
greater than such excess (it being understood that if all outstanding Loans have
been prepaid and the Stated Amount of all Letters of Credit exceeds such reduced
Commitment Amount, the Company shall provide cash collateral in an amount equal
to such excess pursuant to documentation reasonably satisfactory to the Agent).
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6.2.3 ALL PREPAYMENTS. Each partial prepayment shall be in a
principal amount of $100,000 or a higher integral multiple thereof. Any
prepayment of a Eurodollar Loan on a day other than the last day of an Interest
Period therefor shall include interest on the principal amount being repaid and
shall be subject to SECTION 8.4.
SECTION 7 MAKING AND PRORATION OF PAYMENTS; SETOFF; TAXES.
7.1 MAKING OF PAYMENTS. All payments of principal of or interest on the
Notes, and of all non-use fees and Letter of Credit fees, shall be made by the
Company to the Agent in immediately available funds at the office specified by
the Agent not later than noon, Chicago time, on the date due; and funds received
after that hour shall be deemed to have been received by the Agent on the next
following Business Day. The Agent shall promptly remit to each Bank or other
holder of a Note its share of all such payments received in collected funds by
the Agent for the account of such Bank or holder.
All payments under SECTION 8.1 shall be made by the Company directly to
the Bank entitled thereto.
7.2 APPLICATION OF CERTAIN PAYMENTS. Each payment of principal shall be
applied to such Loans as the Company shall direct by notice to be received by
the Agent on or before the date of such payment or, in the absence of such
notice, as the Agent shall determine in its discretion. Concurrently with each
remittance to any Bank of its share of any such payment, the Agent shall advise
such Bank as to the application of such payment.
7.3 DUE DATE EXTENSION. If any payment of principal or interest with
respect to any of the Notes, or of non-use fees or Letter of Credit fees, falls
due on a day which is not a Business Day, then such due date shall be extended
to the immediately following Business Day (unless, in the case of a Eurodollar
Loan, such immediately following Business Day is the first Business Day of a
calendar month, in which case such date shall be the immediately preceding
Business Day) and, in the case of principal, additional interest shall accrue
and be payable for the period of any such extension.
7.4 SETOFF. The Company agrees that the Agent and each Bank have all
rights of set-off and bankers' lien provided by applicable law, and in addition
thereto, the Company agrees that at any time any Event of Default exists, the
Agent and each Bank may apply to the payment of any obligations of the Company
hereunder, whether or not then due, any and all balances, credits, deposits,
accounts or moneys of the Company then or thereafter with the Agent or such
Bank.
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7.5 PRORATION OF PAYMENTS. If any Bank shall obtain any payment or other
recovery (whether voluntary, involuntary, by application of offset or otherwise,
but excluding any payment pursuant to SECTION 8.7 or 14.9 or any payment to the
Swing Line Bank in respect of a Swing Line Loan) on account of principal of or
interest on any Note (or on account of its participation in any Letter of Credit
or Swing Line Loan) in excess of its pro rata share of payments and other
recoveries obtained by all Banks on account of principal of and interest on
Notes (or such participation) then held by them, such Bank shall purchase from
the other Banks such participation in the Notes (or sub-participation in Letters
of Credit or Swing Line Loans) held by them as shall be necessary to cause such
purchasing Bank to share the excess payment or other recovery ratably with each
of them; PROVIDED, HOWEVER, that if all or any portion of the excess payment or
other recovery is thereafter recovered from such purchasing Bank, the purchase
shall be rescinded and the purchase price restored to the extent of such
recovery.
7.6 TAXES. All payments of principal of, and interest on, the Loans and
all other amounts payable hereunder shall be made free and clear of and without
deduction for any present or future income, excise, stamp or franchise taxes and
other taxes, fees, duties, withholdings or other charges of any nature
whatsoever imposed by any taxing authority, but excluding franchise taxes and
taxes imposed on or measured by any Bank's net income or receipts (all
non-excluded items being called "TAXES"). If any withholding or deduction from
any payment to be made by the Company hereunder is required in respect of any
Taxes pursuant to any applicable law, rule or regulation, then the Company will:
(a) pay directly to the relevant authority the full
amount required to be so withheld or deducted;
(b) promptly forward to the Agent an official receipt or other
documentation satisfactory to the Agent evidencing such payment to such
authority; and
(c) pay to the Agent for the account of the Banks such additional
amount or amounts as is necessary to ensure that the net amount actually
received by each Bank will equal the full amount such Bank would have
received had no such withholding or deduction been required.
Moreover, if any Taxes are directly asserted against the Agent or any Bank with
respect to any payment received by the Agent or such Bank hereunder, the Agent
or such Bank may pay such Taxes and the Company will promptly pay such
additional amounts (including any penalty, interest and expense) as is necessary
in order that the net amount received by such Person after the
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payment of such Taxes (including any Taxes on such additional amount) shall
equal the amount such Person would have received had such Taxes not been
asserted.
If the Company fails to pay any Taxes when due to the appropriate taxing
authority or fails to remit to the Agent, for the account of the respective
Banks, the required receipts or other required documentary evidence, the Company
shall indemnify the Banks for any incremental Taxes, interest or penalties that
may become payable by any Bank as a result of any such failure. For purposes of
this SECTION 7.6, a distribution hereunder by the Agent or any Bank to or for
the account of any Bank shall be deemed a payment by the Company.
Upon the request from time to time of the Company or the Agent, each
Bank that is organized under the laws of a jurisdiction other than the United
States of America shall execute and deliver to the Company and the Agent one or
more (as the Company or the Agent may reasonably request) United States Internal
Revenue Service Forms 4224 or Forms 1001 or such other forms or documents,
appropriately completed, as may be applicable to establish the extent, if any,
to which a payment to such Bank is exempt from withholding or deduction of
Taxes.
The obligations of the Company under this SECTION 7.6 are subject to the
limitation set out in SECTION 14.9.1.
SECTION 8 INCREASED COSTS; SPECIAL PROVISIONS FOR
EURODOLLAR LOANS.
8.1 INCREASED COSTS. (a) If, after the date hereof, the adoption of any
applicable law, rule or regulation, or any change therein, or any change in the
interpretation or administration thereof by any governmental authority, central
bank or comparable agency charged with the interpretation or administration
thereof, or compliance by any Bank (or any Eurodollar Office of such Bank) with
any request or directive (whether or not having the force of law) of any such
authority, central bank or comparable agency
(A) shall subject any Bank (or any Eurodollar Office of such
Bank) to any tax, duty or other charge with respect to its Eurodollar
Loans, its Note or its obligation to make Eurodollar Loans, or shall
change the basis of taxation of payments to any Bank of the principal of
or interest on its Eurodollar Loans or any other amounts due under this
Agreement in respect of its Eurodollar Loans or its obligation to make
Eurodollar Loans (except for changes in the rate of tax on the overall
net income of such Bank or its Eurodollar Office imposed by the
jurisdiction in which such Bank's principal executive office or
Eurodollar Office is located); or
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(B) shall impose, modify or deem applicable any reserve
(including any reserve imposed by the Board of Governors of the Federal
Reserve System, but excluding any reserve included in the determination
of interest rates pursuant to SECTION 4), special deposit or similar
requirement against assets of, deposits with or for the account of, or
credit extended by any Bank (or any Eurodollar Office of such Bank); or
(C) shall impose on any Bank (or its Eurodollar Office) any other
condition affecting its Eurodollar Loans, its Note or its obligation to
make Eurodollar Loans;
and the result of any of the foregoing is to increase the cost to (or in the
case of Regulation D of the Board of Governors of the Federal Reserve System, to
impose a cost on) such Bank (or any Eurodollar Office of such Bank) of making or
maintaining any Eurodollar Loan, or to reduce the amount of any sum received or
receivable by such Bank (or its Eurodollar Office) under this Agreement or under
its Note with respect thereto, then within 10 days after demand by such Bank
(which demand shall be accompanied by a statement setting forth the basis for
such demand and a calculation of the amount thereof in reasonable detail, a copy
of which shall be furnished to the Agent), the Company shall pay directly to
such Bank such additional amount as will compensate such Bank for such increased
cost or such reduction.
(b) If any Bank shall reasonably determine that the adoption or phase-in
of any applicable law, rule or regulation regarding capital adequacy, or any
change therein, or any change in the interpretation or administration thereof by
any governmental authority, central bank or comparable agency charged with the
interpretation or administration thereof, or compliance by any Bank or any
Person controlling such Bank with any request or directive regarding capital
adequacy (whether or not having the force of law) of any such authority, central
bank or comparable agency, has or would have the effect of reducing the rate of
return on such Bank's or such controlling Person's capital as a consequence of
such Bank's obligations hereunder or under any Letter of Credit to a level below
that which such Bank or such controlling Person could have achieved but for such
adoption, change or compliance (taking into consideration such Bank's or such
controlling Person's policies with respect to capital adequacy) by an amount
deemed by such Bank or such controlling Person to be material, then from time to
time, within 10 days after demand by such Bank (which demand shall be
accompanied by a statement setting forth the basis for such demand and a
calculation of the amount thereof in reasonable detail, a copy of which shall be
furnished to the Agent), the Company shall pay to such Bank such additional
amount or amounts
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as will compensate such Bank or such controlling Person for such reduction.
8.2 BASIS FOR DETERMINING INTEREST RATE INADEQUATE OR
UNFAIR. If with respect to any Interest Period:
(a) deposits in Dollars (in the applicable amounts) are not being
offered to the Agent in the interbank eurodollar market for such
Interest Period, or the Agent otherwise reasonably determines (which
determination, if made in good faith, shall be binding and conclusive on
the Company) that by reason of circumstances affecting the interbank
eurodollar market adequate and reasonable means do not exist for
ascertaining the applicable Eurodollar Rate; or
(b) Banks having an aggregate Percentage of 40% or more advise
the Agent that the Eurodollar Rate (Reserve Adjusted) as determined by
the Agent will not adequately and fairly reflect the cost to such Banks
of maintaining or funding such Eurodollar Loans for such Interest Period
(taking into account any amount to which such Banks may be entitled
under SECTION 8.1) or that the making or funding of Eurodollar Loans has
become impracticable as a result of an event occurring after the date of
this Agreement which in the opinion of such Banks materially affects
such Loans;
THEN the Agent shall promptly notify the other parties thereof and, so long as
such circumstances shall continue, (i) no Bank shall be under any obligation to
make or convert into Eurodollar Loans and (ii) on the last day of the current
Interest Period for each Eurodollar Loan, such Loan shall, unless then repaid in
full, automatically convert to a Floating Rate Loan.
8.3 CHANGES IN LAW RENDERING EURODOLLAR LOANS UNLAWFUL. In the event
that any change in (including the adoption of any new) applicable laws or
regulations, or any change in the interpretation of applicable laws or
regulations by any governmental or other regulatory body charged with the
administration thereof, should make it (or in the good faith judgment of any
Bank cause a substantial question as to whether it is) unlawful for any Bank to
make, maintain or fund Eurodollar Loans, then such Bank shall promptly notify
each of the other parties hereto and, so long as such circumstances shall
continue, (a) such Bank shall have no obligation to make or convert into
Eurodollar Loans (but shall make Floating Rate Loans concurrently with the
making of or conversion into Eurodollar Loans by the Banks which are not so
affected, in each case in an amount equal to such Bank's pro rata share of all
Eurodollar Loans which would be made or converted into at such time in the
absence of such circumstances) and (b) on the last day of the current Interest
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Period for each Eurodollar Loan of such Bank (or, in any event, on such earlier
date as may be required by the relevant law, regulation or interpretation), such
Eurodollar Loan shall, unless then repaid in full, automatically convert to a
Floating Rate Loan. Each Floating Rate Loan made by a Bank which, but for the
circumstances described in the foregoing sentence, would be a Eurodollar Loan
(an "AFFECTED LOAN") shall remain outstanding for the same period as the Group
of Eurodollar Loans of which such Affected Loan would be a part absent such
circumstances.
8.4 FUNDING LOSSES. The Company hereby agrees that upon demand by any
Bank (which demand shall be accompanied by a statement setting forth the basis
for the amount being claimed, a copy of which shall be furnished to the Agent),
the Company will indemnify such Bank against any net loss or expense which such
Bank may sustain or incur (including any net loss or expense incurred by reason
of the liquidation or reemployment of deposits or other funds acquired by such
Bank to fund or maintain any Eurodollar Loan), as reasonably determined by such
Bank, as a result of (a) any payment, prepayment or conversion of any Eurodollar
Loan of such Bank on a date other than the last day of an Interest Period for
such Loan (including any conversion pursuant to SECTION 8.3) or (b) any failure
of the Company to borrow or convert any Loan on a date specified therefor in a
notice of borrowing or conversion pursuant to this Agreement. For this purpose,
all notices to the Agent pursuant to this Agreement shall be deemed to be
irrevocable.
8.5 RIGHT OF BANKS TO FUND THROUGH OTHER OFFICES. Each Bank may, if it
so elects, fulfill its commitment as to any Eurodollar Loan by causing a foreign
branch or affiliate of such Bank to make such Loan, PROVIDED that in such event
for the purposes of this Agreement such Loan shall be deemed to have been made
by such Bank and the obligation of the Company to repay such Loan shall
nevertheless be to such Bank and shall be deemed held by it, to the extent of
such Loan, for the account of such branch or affiliate.
8.6 DISCRETION OF BANKS AS TO MANNER OF FUNDING. Notwithstanding any
provision of this Agreement to the contrary, each Bank shall be entitled to fund
and maintain its funding of all or any part of its Loans in any manner it sees
fit, it being understood, however, that for the purposes of this Agreement all
determinations hereunder shall be made as if such Bank had actually funded and
maintained each Eurodollar Loan during each Interest Period for such Loan
through the purchase of deposits having a maturity corresponding to such
Interest Period and bearing an interest rate equal to the Eurodollar Rate for
such Interest Period.
8.7 MITIGATION OF CIRCUMSTANCES; REPLACEMENT OF AFFECTED
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BANK. (a) Each Bank shall promptly notify the Company and the Agent of any event
of which it has knowledge which will result in, and will use reasonable
commercial efforts available to it (and not, in such Bank's good faith judgment,
otherwise disadvantageous to such Bank) to mitigate or avoid, (i) any obligation
by the Company to pay any amount pursuant to SECTION 7.6 or 8.1 or (ii) the
occurrence of any circumstances of the nature described in SECTION 8.2 or 8.3
(and, if any Bank has given notice of any such event described in CLAUSE (I) or
(II) above and thereafter such event ceases to exist, such Bank shall promptly
so notify the Company and the Agent). Without limiting the foregoing, each Bank
will designate a different funding office if such designation will avoid (or
reduce the cost to the Company of) any event described in CLAUSE (I) or (II) of
the preceding sentence and such designation will not, in such Bank's sole
judgment, be otherwise disadvantageous to such Bank.
(b) At any time any Bank is an Affected Bank, the Company may replace
such Affected Bank as a party to this Agreement with one or more other bank(s)
or financial institution(s) reasonably satisfactory to the Agent (and upon
notice from the Company such Affected Bank shall assign pursuant to an
Assignment Agreement, and without recourse or warranty, its Commitment, its
Loans, its Note, its participation in Letters of Credit, and all of its other
rights and obligations hereunder to such replacement bank(s) or other financial
institution(s) for a purchase price equal to the sum of the principal amount of
the Loans so assigned, all accrued and unpaid interest thereon, its ratable
share of all accrued and unpaid non-use fees and Letter of Credit fees, any
amounts payable under SECTION 8.4 as a result of such Bank receiving payment of
any Eurodollar Loan prior to the end of an Interest Period therefor and all
other obligations owed to such Affected Bank hereunder).
8.8 CONCLUSIVENESS OF STATEMENTS; SURVIVAL OF PROVISIONS. Determinations
and statements of any Bank pursuant to SECTION 8.1, 8.2, 8.3 or 8.4 shall be
conclusive absent demonstrable error. Banks may use reasonable averaging and
attribution methods in determining compensation under SECTIONS 8.1 and 8.4, and
the provisions of such Sections shall survive repayment of the Loans,
cancellation of the Notes, cancellation or expiration of the Letters of Credit
and any termination of this Agreement.
SECTION 9 WARRANTIES.
To induce the Agent and the Banks to enter into this Agreement and to
induce the Banks to make Loans and issue or purchase participations in Letters
of Credit hereunder, the Company warrants to the Agent and the Banks that:
9.1 ORGANIZATION, ETC. The Company is a corporation duly organized,
validly existing and in good standing under the laws
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of the State of Delaware; each Subsidiary is a corporation duly organized,
validly existing and in good standing under the laws of the state of its
incorporation; and the Company and each Subsidiary is duly qualified to do
business in each jurisdiction where the nature of its business makes such
qualification necessary (except in those instances in which the failure to be
qualified or in good standing does not have a Material Adverse Effect) and has
full power and authority to own its property and conduct its business as
presently conducted by it.
9.2 AUTHORIZATION; NO CONFLICT. The execution and delivery by the
Company of this Agreement and each other Loan Document to which it is a party,
the borrowings hereunder, the execution and delivery by each Guarantor of each
Loan Document to which it is a party and the performance by each of the Company
and each Guarantor of its obligations under each Loan Document to which it is a
party are within the corporate powers of the Company and each Guarantor, have
been duly authorized by all necessary corporate action on the part of the
Company and each Guarantor (including any necessary shareholder action), have
received all necessary governmental approval (if any shall be required), and do
not and will not (a) violate any provision of law or any order, decree or
judgment of any court or other government agency which is binding on the Company
or any Guarantor, (b) contravene or conflict with, or result in a breach of, any
provision of the Certificate of Incorporation, By-Laws or other organizational
documents of the Company or any Guarantor or of any agreement, indenture,
instrument or other document which is binding on the Company, any Guarantor or
any other Subsidiary or (c) result in, or require, the creation or imposition of
any Lien on any property of the Company, any Guarantor or any other Subsidiary
(other than Liens arising under the Loan Documents).
9.3 VALIDITY AND BINDING NATURE. Each of this Agreement and each other
Loan Document to which the Company is a party is the legal, valid and binding
obligation of the Company, enforceable against the Company in accordance with
its terms, subject to bankruptcy, insolvency and similar laws affecting the
enforceability of creditors' rights generally and to general principles of
equity; and each Loan Document to which any Guarantor is a party is, or upon the
execution and delivery thereof by such Guarantor will be, the legal, valid and
binding obligation of such Guarantor, enforceable against such Guarantor in
accordance with its terms, subject to bankruptcy, insolvency and similar laws
affecting the enforceability of creditors' rights generally and to general
principles of equity.
9.4 FINANCIAL CONDITION. The audited consolidated financial statements
of the Company and its Subsidiaries dated December 31, 1997, copies of which
have been furnished prior to the Effective Date to each Bank which is a party
hereto on the
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Effective Date:
(i) were prepared in accordance with GAAP consistently
applied throughout the periods covered thereby, except as otherwise
expressly noted therein; and
(ii) fairly present in all material respects the financial
condition of the Company and its Subsidiaries as of the date thereof and
the results of operations for the period covered thereby.
9.5 NO MATERIAL ADVERSE CHANGE. Since December 31, 1997, there has been
no material adverse change in the financial condition, operations, assets,
business, properties or prospects of the Company and its Subsidiaries taken as a
whole.
9.6 LITIGATION AND CONTINGENT LIABILITIES. (a) No litigation (including
derivative actions), arbitration proceeding, labor controversy or governmental
investigation or proceeding is pending or, to the Company's knowledge,
threatened against the Company or any Subsidiary which might reasonably be
expected to have a Material Adverse Effect, except as set forth in SCHEDULE
9.6(A). Other than any liability incident to such litigation or proceedings,
neither the Company nor any Subsidiary has any material contingent liabilities
not listed in such SCHEDULE 9.6(A) or 9.6(B).
(b) SCHEDULE 9.6(B) sets out descriptions of all arrangements existing
on the Effective Date (or which will be existing after consummating the Approved
Acquisitions) pursuant to which the Company or any Subsidiary may be required to
pay any Contingent Payment.
9.7 OWNERSHIP OF PROPERTIES; LIENS. Each of the Company and each
Subsidiary owns good and, in the case of real property, marketable title to all
of its properties and assets, real and personal, tangible and intangible, of any
nature whatsoever (including patents, trademarks, trade names, service marks and
copyrights), free and clear of all Liens, charges and material claims (including
material infringement claims with respect to patents, trademarks, copyrights and
the like) except as permitted pursuant to SECTION 10.8.
9.8 SUBSIDIARIES. The Company has no Subsidiaries except those listed in
SCHEDULE 9.8.
9.9 PENSION AND WELFARE PLANS. (a) During the twelve-consecutive-month
period prior to the date of the execution and delivery of this Agreement or the
making of any Loan hereunder, (i) no steps have been taken to terminate any
Pension Plan and (ii) no contribution failure has occurred with respect to any
Pension Plan sufficient to give rise to a lien
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under Section 302(f) of ERISA. No condition exists or event or transaction has
occurred with respect to any Pension Plan which could result in the incurrence
by the Company of any material liability, fine or penalty. The Company has no
contingent liability with respect to any post-retirement benefit under a Welfare
Plan, other than liability for continuation coverage described in Part 6 of
Subtitle B of Title I of ERISA.
(b) All contributions (if any) have been made to any Multiemployer
Pension Plan that are required to be made by the Company or any other member of
the Controlled Group under the terms of the plan or of any collective bargaining
agreement or by applicable law; neither the Company nor any member of the
Controlled Group has withdrawn or partially withdrawn from any Multiemployer
Pension Plan, incurred any withdrawal liability with respect to any such plan,
received notice of any claim or demand for withdrawal liability or partial
withdrawal liability from any such plan, and no condition has occurred which, if
continued, might result in a withdrawal or partial withdrawal from any such
plan; and neither the Company nor any member of the Controlled Group has
received any notice that any Multiemployer Pension Plan is in reorganization,
that increased contributions may be required to avoid a reduction in plan
benefits or the imposition of any excise tax, that any such plan is or has been
funded at a rate less than that required under Section 412 of the Code, that any
such plan is or may be terminated, or that any such plan is or may become
insolvent.
9.10 INVESTMENT COMPANY ACT. Neither the Company nor any Subsidiary is
an "investment company" or a company "controlled" by an "investment company",
within the meaning of the Investment Company Act of 1940.
9.11 PUBLIC UTILITY HOLDING COMPANY ACT. Neither the Company nor any
Subsidiary is a "holding company", or a "subsidiary company" of a "holding
company", or an "affiliate" of a "holding company" or of a "subsidiary company"
of a "holding company", within the meaning of the Public Utility Holding Company
Act of 1935.
9.12 REGULATION U. The Company is not engaged principally,
or as one of its important activities, in the business of extending credit for
the purpose of purchasing or carrying Margin Stock.
9.13 TAXES. Each of the Company and each Subsidiary has filed all tax
returns and reports required by law to have been filed by it and has paid all
taxes and governmental charges thereby shown to be owing, except any such taxes
or charges which are being diligently contested in good faith by appropriate
proceedings and for which adequate reserves in accordance with
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GAAP shall have been set aside on its books.
9.14 SOLVENCY, ETC. On the Effective Date (or, in the case of any Person
which becomes a Guarantor after the Effective Date, on the date such Person
becomes a Guarantor), and immediately prior to and after giving effect to the
issuance of each Letter of Credit and each borrowing hereunder and the use of
the proceeds thereof, (a) each of the Company's and each Guarantor's assets will
exceed its liabilities and (b) each of the Company and each Guarantor will be
solvent, will be able to pay its debts as they mature, will own property with
fair saleable value greater than the amount required to pay its debts and will
have capital sufficient to carry on its business as then constituted.
9.15 ENVIRONMENTAL MATTERS.
(a) NO VIOLATIONS. Except as set forth on SCHEDULE 9.15, neither
the Company nor any Subsidiary, nor any operator of the Company's or any
Subsidiary's properties, is in violation, or alleged violation, of any judgment,
decree, order, law, permit, license, rule or regulation pertaining to
environmental matters, including those arising under the Resource Conservation
and Recovery Act ("RCRA"), the Comprehensive Environmental Response,
Compensation and Liability Act of 1980 ("CERCLA"), the Superfund Amendments and
Reauthorization Act of 1986 or any other Environmental Law which (i) in any
single case, requires expenditures in any three-year period of $500,000 or more
by the Company and its Subsidiaries in penalties and/or for investigative,
removal or remedial actions or (ii) individually or in the aggregate otherwise
might reasonably be expected to have a Material Adverse Effect.
(b) NOTICES. Except as set forth on SCHEDULE 9.15, neither the
Company nor any Subsidiary has received notice from any third party, including
any Federal, state or local governmental authority: (a) that any one of them has
been identified by the U.S. Environmental Protection Agency as a potentially
responsible party under CERCLA with respect to a site listed on the National
Priorities List, 40 C.F.R. Part 300 Appendix B; (b) that any hazardous waste, as
defined by 42 U.S.C. ss.6903(5), any hazardous substance as defined by 42 U.S.C.
ss.9601(14), any pollutant or contaminant as defined by 42 U.S.C. ss.9601(33) or
any toxic substance, oil or hazardous material or other chemical or substance
regulated by any Environmental Law, excluding household hazardous waste (all of
the foregoing, "HAZARDOUS SUBSTANCES"), which any one of them has generated,
transported or disposed of has been found at any site at which a Federal, state
or local agency or other third party has conducted a remedial investigation,
removal or other response action pursuant to any Environmental Law; (c) that the
Company or any
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Subsidiary must conduct a remedial investigation, removal, response action or
other activity pursuant to any Environmental Law; or (d) of any Environmental
Claim.
(c) HANDLING OF HAZARDOUS SUBSTANCES. Except as set forth on
SCHEDULE 9.15, (i) no portion of the real property or other assets of the
Company or any Subsidiary has been used for the handling, processing, storage or
disposal of Hazardous Substances except in accordance in all material respects
with applicable Environmental Laws; and no underground tank or other underground
storage receptacle for Hazardous Substances is located on such properties; (ii)
in the course of any activities conducted by the Company, any Subsidiary or the
operators of any real property of the Company or any Subsidiary, no Hazardous
Substances have been generated or are being used on such properties except in
accordance in all material respects with applicable Environmental Laws; (iii)
there have been no Releases or threatened Releases of Hazardous Substances on,
upon, into or from any real property or other assets of the Company or any
Subsidiary, which Releases singly or in the aggregate might reasonably be
expected to have a material adverse effect on the value of such real property or
assets; (iv) to the Company's actual knowledge, there have been no Releases on,
upon, from or into any real property in the vicinity of the real property or
other assets of the Company or any Subsidiary which, through soil or groundwater
contamination, may have come to be located on, and which might reasonably be
expected to have a material adverse effect on the value of, the real property or
other assets of the Company or any Subsidiary; and (v) any Hazardous Substances
generated by the Company and its Subsidiaries have been transported offsite only
by properly licensed carriers and delivered only to treatment or disposal
facilities maintaining valid permits as required under applicable Environmental
Laws, which transporters and facilities have been and are, to the best of the
Company's knowledge, operating in compliance with such permits and applicable
Environmental Laws.
(d) INVESTIGATIONS. Except as set forth on SCHEDULE 9.15, the
Company and its Subsidiaries have taken all reasonable steps to investigate the
past and present condition and usage of the real property of the Company and its
Subsidiaries and the operations conducted by the Company and its Subsidiaries
with regard to environmental matters.
9.16 YEAR 2000 PROBLEM. The Company and its Subsidiaries have reviewed
the areas within their business and operations which could be adversely affected
by, and have developed or are developing a program to address on a timely basis,
the "Year 2000 Problem" (that is, the risk that computer applications used by
the Company and its Subsidiaries may be unable to recognize and perform properly
date-sensitive functions involving certain dates prior to and any date after
December 31, 1999). Based on such
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review and program, the Company reasonably believes that the "Year 2000 Problem"
will not have a Material Adverse Effect.
9.17 INFORMATION. All information heretofore or contemporaneously
herewith furnished in writing by the Company or any Subsidiary to any Bank for
purposes of or in connection with this Agreement and the transactions
contemplated hereby is, and all written information hereafter furnished by or on
behalf of the Company or any Subsidiary to any Bank pursuant hereto or in
connection herewith will be, true and accurate in every material respect on the
date as of which such information is dated or certified, and none of such
information is or will be incomplete by omitting to state any material fact
necessary to make such information not misleading in light of the circumstances
under which made (it being recognized by the Agent and the Banks that (a) any
projections and forecasts provided by the Company are based on good faith
estimates and assumptions believed by the Company to be reasonable as of the
date of the applicable projections or assumptions and that actual results during
the period or periods covered by any such projections and forecasts may differ
from projected or forecasted results and (b) any information provided by the
Company or any Subsidiary with respect to any Person or assets acquired or to be
acquired by the Company or any Subsidiary shall, for all periods prior to the
date of such acquisition, be limited to the knowledge of the Company or the
acquiring Subsidiary after reasonable inquiry).
SECTION 10 COVENANTS.
Until the expiration or termination of the Commitments and thereafter
until all obligations of the Company hereunder and under the other Loan
Documents are paid in full and all Letters of Credit have been terminated, the
Company agrees that, unless at any time the Required Banks shall otherwise
expressly consent in writing, it will:
10.1 REPORTS, CERTIFICATES AND OTHER INFORMATION. Furnish to the Agent
and each Bank:
10.1.1 AUDIT REPORT. Promptly when available and in any event within 90
days after the close of each Fiscal Year: (a) a copy of the annual audit report
of the Company and its Subsidiaries for such Fiscal Year, including therein
consolidated balance sheets of the Company and its Subsidiaries as of the end of
such Fiscal Year and consolidated statements of earnings and cash flow of the
Company and its Subsidiaries for such Fiscal Year certified without
qualification by independent auditors of recognized standing selected by the
Company and reasonably acceptable to the Required Banks, together with a written
statement from such accountants to the effect that in making the examination
necessary for the signing of such annual audit report
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by such accountants, nothing came to their attention that caused them to believe
that the Company was not in compliance with any provision of SECTION 10.6, 10.7,
10.9 or 10.10 of this Agreement insofar as such provision relates to accounting
matters or, if something has come to their attention that caused them to believe
that the Company was not in compliance with any such provision, describing such
non-compliance in reasonable detail (it being understood that any such audit is
not directed primarily toward obtaining knowledge of such non-compliance); and
(b) consolidating balance sheets of the Company and its Subsidiaries as of the
end of such Fiscal Year and a consolidating statement of earnings for the
Company and its Subsidiaries for such Fiscal Year, certified by the Chief
Financial Officer, the Vice President, Finance, Controller or Treasurer of the
Company.
10.1.2 QUARTERLY REPORTS. Promptly when available and in any event
within 45 days after the end of each Fiscal Quarter (except the last Fiscal
Quarter) of each Fiscal Year, consolidated and consolidating balance sheets of
the Company and its Subsidiaries as of the end of such Fiscal Quarter, together
with consolidated and consolidating statements of earnings and a consolidated
statement of cash flows for such Fiscal Quarter and for the period beginning
with the first day of such Fiscal Year and ending on the last day of such Fiscal
Quarter, certified by the Chief Financial Officer, the Vice President, Finance,
Controller or Treasurer of the Company.
10.1.3 COMPLIANCE CERTIFICATES. Contemporaneously with the furnishing of
a copy of each annual audit report pursuant to SECTION 10.1.1 and of each set of
quarterly statements pursuant to SECTION 10.1.2, a duly completed compliance
certificate in the form of EXHIBIT B, with appropriate insertions, dated the
date of such annual report or such quarterly statements and signed by the Chief
Financial Officer, the Vice President, Finance, Controller or Treasurer of the
Company, containing a computation of each of the financial ratios and
restrictions set forth in SECTION 10.6 and to the effect that such officer has
not become aware of any Event of Default or Unmatured Event of Default that has
occurred and is continuing or, if there is any such event, describing it and the
steps, if any, being taken to cure it.
10.1.4 REPORTS TO SEC AND TO SHAREHOLDERS. Promptly upon
the filing or sending thereof, copies of all regular, periodic or special
reports of the Company or any Subsidiary filed with the SEC (excluding
exhibits thereto, provided that the Company shall promptly deliver any such
exhibit to the Agent or any Bank upon request therefor); copies of all
registration statements of the Company or any Subsidiary filed with the SEC
(other than on Form S-8); and copies of all proxy statements or other
communications made to security holders generally concerning material
developments in the business of the Company or any Subsidiary.
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10.1.5 NOTICE OF DEFAULT, LITIGATION AND ERISA MATTERS. Promptly upon
becoming aware of any of the following, written notice describing the same and
the steps being taken by the Company or the Subsidiary affected thereby with
respect thereto:
(a) the occurrence of an Event of Default or an
Unmatured Event of Default;
(b) any litigation, arbitration or governmental investigation or
proceeding not previously disclosed by the Company to the Banks which
has been instituted or, to the knowledge of the Company, is threatened
against the Company or any Subsidiary or to which any of the properties
of any thereof is subject which, if adversely determined, might
reasonably be expected to have a Material Adverse Effect;
(c) the institution of any steps by any member of the Controlled
Group or any other Person to terminate any Pension Plan, or the failure
of any member of the Controlled Group to make a required contribution to
any Pension Plan (if such failure is sufficient to give rise to a lien
under Section 302(f) of ERISA) or to any Multiemployer Pension Plan, or
the taking of any action with respect to a Pension Plan which could
result in the requirement that the Company furnish a bond or other
security to the PBGC or such Pension Plan, or the occurrence of any
event with respect to any Pension Plan or Multiemployer Pension Plan
which could result in the incurrence by any member of the Controlled
Group of any material liability, fine or penalty (including any claim or
demand for withdrawal liability or partial withdrawal from any
Multiemployer Pension Plan), or any material increase in the contingent
liability of the Company with respect to any post-retirement Welfare
Plan benefit, or any notice that any Multiemployer Pension Plan is in
reorganization, that increased contributions may be required to avoid a
reduction in plan benefits or the imposition of an excise tax, that any
such plan is or has been funded at a rate less than that required under
Section 412 of the Code, that any such plan is or may be terminated, or
that any such plan is or may become insolvent;
(d) any cancellation or material change in any insurance
maintained by the Company or any Subsidiary;
(e) any event (including (i) any violation of any Environmental
Law or the assertion of any Environmental Claim or (ii) the enactment or
effectiveness of any law, rule or regulation) which might reasonably be
expected to have a Material Adverse Effect; or
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(f) any setoff, claims, withholdings or other defenses to which
any of the Collateral, or the Banks' rights with respect to the
Collateral, are subject.
10.1.6 SUBSIDIARIES. Promptly upon any change in the list of its
Subsidiaries, a written report of such change.
10.1.7 MANAGEMENT REPORTS. Promptly upon the request of the Agent or any
Bank, copies of all detailed financial and management reports submitted to the
Company by independent auditors in connection with each annual or interim audit
made by such auditors of the books of the Company.
10.1.8 PROJECTIONS. As soon as practicable and in any event within 60
days after the commencement of each Fiscal Year, financial projections for the
Company and its Subsidiaries for such Fiscal Year prepared in a manner
consistent with those projections delivered by the Company to the Banks prior to
the Effective Date or otherwise in a manner reasonably satisfactory to the
Agent.
10.1.9 OTHER INFORMATION. From time to time such other information
concerning the Company and its Subsidiaries as any Bank or the Agent may
reasonably request.
10.2 BOOKS, RECORDS AND INSPECTIONS. Keep, and cause each Subsidiary to
keep, its books and records in accordance with sound business practices
sufficient to allow the preparation of financial statements in accordance with
GAAP; permit, and cause each Subsidiary to permit, any Bank or the Agent or any
representative thereof to inspect the properties and operations of the Company
and of such Subsidiary; and permit, and cause each Subsidiary to permit, at any
reasonable time and with reasonable notice (or at any time without notice if an
Event of Default exists), any Bank or the Agent or any representative thereof to
visit any or all of its offices, to discuss its financial matters with its
officers and its independent auditors (and the Company hereby authorizes such
independent auditors to discuss such financial matters with any Bank or the
Agent or any representative thereof, provided that so long as no Event of
Default exists, a representative of the Company shall be present at any such
discussions), and to examine (and, at the expense of the Company or the
applicable Subsidiary, photocopy extracts from) any of its books or other
corporate records.
10.3 INSURANCE. Maintain, and cause each Subsidiary to maintain, with
responsible insurance companies, such insurance as may be required by any law or
governmental regulation or court decree or order applicable to it and such other
insurance, to such extent and against such hazards and liabilities, as is
customarily maintained by companies similarly situated; and, upon
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request of the Agent or any Bank, furnish to the Agent or such Bank a
certificate setting forth in reasonable detail the nature and extent of all
insurance maintained by the Company and its Subsidiaries.
10.4 COMPLIANCE WITH LAWS; PAYMENT OF TAXES AND LIABILITIES. (a) Comply,
and cause each Subsidiary to comply, in all material respects with all
applicable laws (including Environmental Laws), rules, regulations, decrees,
orders, judgments, licenses and permits; and (b) pay, and cause each Subsidiary
to pay, prior to delinquency, all taxes and other governmental charges against
it or any of its property, as well as claims of any kind which, if unpaid, might
become a Lien on any of its property; PROVIDED, HOWEVER, that the foregoing
shall not require the Company or any Subsidiary to pay any such tax or charge so
long as it shall contest the validity thereof in good faith by appropriate
proceedings and shall set aside on its books adequate reserves with respect
thereto in accordance with GAAP.
10.5 MAINTENANCE OF EXISTENCE, ETC. Maintain and preserve, and (subject
to SECTION 10.11) cause each Subsidiary to maintain and preserve, (a) its
existence and good standing in the jurisdiction of its incorporation and (b) its
qualification and good standing as a foreign corporation in each jurisdiction
where the nature of its business makes such qualification necessary (except in
those instances in which the failure to be qualified or in good standing does
not have a Material Adverse Effect).
10.6 FINANCIAL COVENANTS.
10.6.1 MINIMUM NET WORTH. Not permit its Net Worth at any time to be
less than the sum of (a) $20,000,000 PLUS (b) 75% of the sum of Consolidated Net
Income during the period beginning on January 1, 1998 and ending on the last day
of the most recently-ended Fiscal Quarter (PROVIDED that, if the sum of
Consolidated Net Income is less than zero for any Fiscal Quarter, for purposes
of this SECTION 10.6.1 such sum will be deemed to have been zero for such
quarter) PLUS (c) 100% of the net proceeds of any equity issued by the Company
or any of its Subsidiaries (on a consolidated basis) after the Effective Date.
10.6.2 MINIMUM INTEREST COVERAGE. Not permit the Interest Coverage Ratio
for any Computation Period to be less than the applicable ratio set forth below:
COMPUTATION INTEREST
PERIOD ENDING: COVERAGE RATIO
-------------- --------------
Effective Date through 12/31/98 2.0 to 1.0
1/1/99 through 12/31/99 2.25 to 1.0
1/1/00 and thereafter 2.5 to 1.0.
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10.6.3 FUNDED DEBT TO EBITDA RATIO. Not permit the Funded Debt to EBITDA
Ratio as of the last day of any Fiscal Quarter to exceed the applicable ratio
set forth below:
FISCAL FUNDED DEBT TO
QUARTER ENDING: EBITDA RATIO
--------------- ------------
Effective Date through 12/31/98 3.75 to 1.0
3/31/00 and thereafter 3.50 to 1.0.
10.6.4 CAPITAL EXPENDITURES. The Company will not permit the aggregate
amount of all Capital Expenditures (excluding amounts, if any, paid to
consummate acquisitions permitted by SECTION 10.11(C) which constitute Capital
Expenditures) made by the Company and its Subsidiaries in any Fiscal Year to
exceed (i) if the Equity Offering does not occur, $8,000,000, and (ii) if the
Equity Offering occurs, the product of 1.5 multiplied by the depreciation and
amortization of the Company and its Subsidiaries during the prior Fiscal Year
(calculated on a PRO FORMA basis giving effect to acquisitions and sales and
other dispositions made subsequent to such prior Fiscal Year).
10.7 LIMITATIONS ON DEBT. Not, and not permit any Subsidiary to, create,
incur, assume or suffer to exist any Debt, except:
(a) obligations in respect of the Loans, the L/C
Applications and the Letters of Credit;
(b) unsecured Debt of the Company (other than Contingent Payments) which
represents all or part of the purchase price payable in connection with
a transaction permitted by SECTION 10.11(C); PROVIDED that the aggregate
principal amount of all such unsecured Debt (excluding Subordinated
Debt) shall not at any time exceed (i) prior to the Equity Offering,
$5,000,000 and (ii) after completion of the Equity Offering,
$10,000,000;
(c) Debt secured by Liens permitted by SUBSECTION 10.8(C) or (D), and
refinancings of any such Debt so long as the terms applicable to such
refinanced Debt are no less favorable to the Company or the applicable
Subsidiary than the terms in effect immediately prior to such
refinancing, PROVIDED that the aggregate amount of all such Debt at any
time outstanding shall not exceed (i) prior to the Equity Offering,
$2,000,000 and (ii) after completion of the Equity Offering,
$10,000,000;
(d) Debt of Subsidiaries owed to the Company;
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(e) unsecured Debt of the Company to Subsidiaries;
(f) Subordinated Debt;
(g) Contingent Payments listed on SCHEDULE 9.6(B) and other Debt
outstanding on the date hereof and listed in SCHEDULE 10.7; and
(h) Contingent Payments, PROVIDED that the aggregate amount of all
Contingent Payments (other than Contingent Payments listed on SCHEDULE
9.6(B))shall not at any time exceed $5,000,000.
10.8 LIENS. Not, and not permit any Subsidiary to, create or permit to
exist any Lien on any of its real or personal properties, assets or rights of
whatsoever nature (whether now owned or hereafter acquired), except:
(a) Liens for taxes or other governmental charges not at the time
delinquent or thereafter payable without penalty or being contested in
good faith by appropriate proceedings and, in each case, for which it
maintains adequate reserves;
(b) Liens arising in the ordinary course of business (such as (i) Liens
of carriers, warehousemen, mechanics and materialmen and other similar
Liens imposed by law and (ii) Liens incurred in connection with worker's
compensation, unemployment compensation and other types of social
security (excluding Liens arising under ERISA) or in connection with
surety bonds, bids, performance bonds and similar obligations) for sums
not overdue or being contested in good faith by appropriate proceedings
and not involving any deposits or advances or borrowed money or the
deferred purchase price of property or services, and, in each case, for
which it maintains adequate reserves;
(c) Liens identified in SCHEDULE 10.8;
(d) subject to the limitation set forth in SECTION 10.7(C),(i) Liens
arising in connection with Capital Leases (and attaching only to the
property being leased), (ii) Liens existing on property at the time of
the acquisition thereof by the Company or any Subsidiary (and not
created in contemplation of such acquisition) and (iii) Liens that
constitute purchase money security interests on any property securing
debt incurred for the purpose of financing all or any part of the cost
of acquiring such property, PROVIDED that any such Lien attaches to such
property within 60 days of the acquisition thereof and such Lien
attaches solely to the property so acquired;
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(e) attachments, appeal bonds, judgments and other similar Liens, for
sums not exceeding $250,000 arising in connection with court
proceedings, provided the execution or other enforcement of such Liens
is effectively stayed and the claims secured thereby are being actively
contested in good faith and by appropriate proceedings;
(f) easements, rights of way, restrictions, minor defects or
irregularities in title and other similar Liens not interfering in any
material respect with the ordinary conduct of the business of the
Company or any Subsidiary; and
(g) Liens in favor of the Agent arising under the Loan Documents.
10.9 OPERATING LEASES. Not permit the aggregate amount of all rental
payments made (or scheduled to be made) by the Company and its Subsidiaries (on
a consolidated basis) in any Fiscal Year to exceed (1) prior to the Equity
Offering, $1,500,000 and (b) after completion of the Equity Offering,
$3,000,000.
10.10 RESTRICTED PAYMENTS. Not, and not permit any Subsidiary to, (a)
declare or pay any dividends on any of its capital stock (other than stock
dividends), (b) purchase or redeem any such stock or any warrants, units,
options or other rights in respect of such stock, (c) make any other
distribution to shareholders, (d) prepay, purchase, defease or redeem any
Subordinated Debt or (e) set aside funds for any of the foregoing; PROVIDED that
any Subsidiary may declare and pay dividends to the Company or to any other
wholly-owned Subsidiary.
10.11 MERGERS, CONSOLIDATIONS, SALES. Not, and not permit any Subsidiary
to, be a party to any merger or consolidation, or purchase or otherwise acquire
all or substantially all of the assets or any stock of any class of, or any
partnership or joint venture interest in, any other Person, or sell, transfer,
convey or lease all or any substantial part of its assets, or sell or assign
with or without recourse any receivables, except for (a) any such merger or
consolidation, sale, transfer, conveyance, lease or assignment of or by any
wholly-owned Subsidiary into the Company or into, with or to any other wholly-
owned Subsidiary; (b) any such purchase or other acquisition by the Company or
any wholly-owned Subsidiary of the assets or stock of any wholly-owned
Subsidiary; (c) any such purchase or other acquisition by the Company or any
wholly-owned Subsidiary of the assets or stock of any other Person where (1)
such assets (in the case of an asset purchase) are for use, or such Person (in
the case of a stock purchase) is engaged, solely in the processing and disposal
of non-hazardous liquid waste and by-products thereof and nonhazardous oil field
waste and businesses which
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are reasonably related thereto (including land farming bio-solids), PROVIDED
that this CLAUSE (1) shall not apply to the acquisitions described on SCHEDULE
10.6 (the "APPROVED ACQUISITIONS"); (2) immediately before or after giving
effect to such purchase or acquisition, no Event of Default or Unmatured Event
of Default shall have occurred and be continuing; (3) either (i) (x) the
aggregate consideration to be paid by the Company and its Subsidiaries
(including any Debt assumed or issued in connection therewith, the amount
thereof to be calculated in accordance with GAAP) in connection with such
purchase or other acquisition (or any series of related acquisitions) is not
greater than $7,000,000 (or $15,000,000 at any time after the Equity Offering)
and (y) the aggregate consideration to be paid in cash by the Company and its
Subsidiaries in connection with such purchase or acquisition (or any series of
related acquisitions) is not greater than $5,000,000 (or $10,000,000 at any time
after the Equity Offering) or (ii) such Acquisition is an Approved Acquisition
or the Required Banks have consented to such purchase or acquisition; (4) the
Company is in PRO FORMA compliance with all the financial ratios and
restrictions set forth in SECTION 10.6; and (5) such Person (or its board of
directors or similar body) has approved such acquisition or other purchase; and
(d) sales and dispositions of assets (including the stock of Subsidiaries) so
long as the net book value of all assets sold or otherwise disposed of in any
Fiscal Year (excluding the sale or other disposition of the stock or assets of
certain Subsidiary of City Environmental Services Inc. of Florida, Inc. ("CITY
ENVIRONMENTAL OF FLORIDA"), it being understood that neither the Company nor any
Subsidiary shall transfer any material assets to City Environmental of Florida
prior to such sale or other disposition) does not exceed (i) if the Equity
Offering does not occur, $500,000, and (ii) if the Equity Offering does occur,
5% of the consolidated assets of the Company as of the first day of such Fiscal
Year.
10.12 MODIFICATION OF ORGANIZATIONAL DOCUMENTS. Not permit the
Certificate of Incorporation, By-Laws or other organizational documents of the
Company or any Subsidiary to be amended or modified in any way which might
reasonably be expected to materially adversely affect the interests of the
Banks.
10.13 USE OF PROCEEDS. Use the proceeds of the Loans solely to finance
the Company's working capital, for acquisitions permitted by SECTION 10.11, for
Capital Expenditures and for other general corporate purposes, including the
payment of Debt to be Repaid; and not use or permit any proceeds of any Loan to
be used, either directly or indirectly, for the purpose, whether immediate,
incidental or ultimate, of "purchasing or carrying" any Margin Stock.
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10.14 FURTHER ASSURANCES. Take, and cause each Subsidiary to take, such
actions as are necessary, or as the Agent or the Required Banks may reasonably
request, from time to time (including the execution and delivery of guaranties,
security agreements, pledge agreements, financing statements and other
documents, the filing or recording of any of the foregoing, and the delivery of
stock certificates and other collateral with respect to which perfection is
obtained by possession) to ensure that (i) the obligations of the Company
hereunder and under the other Loan Documents are secured by substantially all of
the assets (other than real property and, unless the Required Banks otherwise
request in writing, any motor vehicle subject to a statute requiring notation on
a certificate of title to perfect a security interest in such vehicle) of the
Company and guaranteed by all of the Subsidiaries (including, promptly upon the
acquisition or creation thereof, any Subsidiary acquired or created after the
date hereof) by execution of a counterpart of the Guaranty and (ii) the
obligations of each Guarantor under the Guaranty are secured by substantially
all of the assets (other than real property and, unless the Required Banks
otherwise request in writing, any motor vehicle subject to a statute requiring
notation on a certificate of title to perfect a security interest in such
vehicle) of such Guarantor.
10.15 TRANSACTIONS WITH AFFILIATES. Not, and not permit any Subsidiary
to, enter into, or cause, suffer or permit to exist any transaction, arrangement
or contract with any of its other Affiliates (other than the Company and its
Subsidiaries) which is on terms which are less favorable than are obtainable
from any Person which is not one of its Affiliates.
10.16 EMPLOYEE BENEFIT PLANS. Maintain, and cause each Subsidiary to
maintain, each Pension Plan in substantial compliance with all applicable
requirements of law and regulations.
10.17 ENVIRONMENTAL MATTERS. (a) If any material Release or Disposal of
Hazardous Substances shall occur or shall have occurred on any real property or
any other assets of the Company or any Subsidiary, the Company shall, or shall
cause the applicable Subsidiary to, cause the prompt containment and removal of
such Hazardous Substances and the remediation of such real property or other
assets as necessary to comply in all material respects with all Environmental
Laws and to preserve the value of such real property or other assets (provided
that nothing set forth in this sentence shall prevent (a) City Environmental,
Inc. or Northern A-1 Services, Inc. from continuing to engage in the businesses
in which they were engaged on January 1, 1998 in a manner consistent with past
practice and (b) Re-claim Environmental Louisiana L.L.C. from accepting
"F-listed" and "K-listed" waste for reprocessing in the ordinary
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course of business so long as such waste will not be hazardous waste after such
processing). Without limiting the generality of the foregoing, the Company
shall, and shall cause each Subsidiary to, comply in a reasonable and
cost-effective manner with any valid Federal or state judicial or administrative
order requiring the performance at any real property of the Company or any
Subsidiary of activities in response to the Release or threatened Release of a
Hazardous Substance except for the period of time that the Company or such
Subsidiary is diligently and in good faith contesting such order.
(b) To the extent that the transportation of "hazardous waste" as
defined by RCRA is permitted by this Agreement, the Company shall, and shall
cause its Subsidiaries to, dispose of such hazardous waste only at licensed
disposal facilities operating, to the best of the Company's or such Subsidiary's
knowledge after reasonable inquiry, in compliance with Environmental Laws.
10.18 UNCONDITIONAL PURCHASE OBLIGATIONS. Not, and not permit any
Subsidiary to, enter into or be a party to any contract for the purchase of
materials, supplies or other property or services, if such contract requires
that payment be made by it regardless of whether or not delivery is ever made of
such materials, supplies or other property or services; provided that the
foregoing shall not prohibit the Company or any Subsidiary from entering into
options for the purchase of particular assets or businesses.
10.19 INCONSISTENT AGREEMENTS. Not, and not permit any Subsidiary to,
enter into any agreement containing any provision which (a) would be violated or
breached by any borrowing by the Company hereunder or by the performance by the
Company or any Subsidiary of any of its obligations hereunder or under any other
Loan Document or (b) would prohibit the Company or any Subsidiary from granting
to the Agent, for the benefit of the Banks, a Lien on any of its assets.
10.20 BUSINESS ACTIVITIES. Not, and not permit any Subsidiary to, engage
in any line of business other than the processing and disposal of non-hazardous
liquid waste and by-products thereof and non-hazardous oil field waste and
businesses which are reasonably related thereto (including land farming bio-
solids); PROVIDED that City Environmental, Inc. and Northern A-1 Services, Inc.
may continue to engage in the businesses in which they were engaged on January
1, 1998 in a manner consistent with past practice.
10.21 ADVANCES AND OTHER INVESTMENTS. Not, and not permit any Subsidiary
to, make, incur, assume or suffer to exist any Investment in any other Person,
except (without duplication) the
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following:
(a) equity Investments existing on the Effective Date in wholly-owned
Subsidiaries identified in SCHEDULE 9.8;
(b) equity Investments in Subsidiaries acquired after the Effective Date
in transactions permitted as acquisitions of stock or assets pursuant to
SECTION 10.11;
(c) in the ordinary course of business, contributions by the Company to
the capital of any of its Subsidiaries, or by any such Subsidiary to the
capital of any of its Subsidiaries;
(d) in the ordinary course of business, Investments by the Company in
any Subsidiary or by any of the Subsidiaries in the Company, by way of
intercompany loans, advances or guaranties, all to the extent permitted
by SECTION 10.7;
(e) Suretyship Liabilities permitted by SECTION 10.7;
(f) good faith deposits made in connection with prospective acquisitions
of stock or assets permitted by SECTION 10.11;
(g) loans to officers and employees not exceeding (i) $100,000 in the
aggregate to any single individual or (ii) $250,000 in the aggregate for
all such individuals;
(h) Cash Equivalent Investments; and
(i) bank deposits in the ordinary course of business; PROVIDED that the
aggregate amount of all such deposits (excluding (x) amounts in payroll
accounts or for accounts payable, in each case to the extent that checks
have been issued to third parties, and (y) amounts maintained (in the
ordinary course of business consistent with past practice) in accounts
of any Person which is acquired by the Company or a Subsidiary in
accordance with the terms hereof during the 45 days following the date
of such acquisition) which are maintained with any bank other than a
Bank shall not at any time exceed (x) in the case of such deposits with
any single bank, $100,000 for three consecutive Business Days and (y)
in the case of all such deposits, $2,500,000 for three consecutive
Business Days;
PROVIDED, HOWEVER, that no Investment otherwise permitted by CLAUSE (B), (C),
(D), (E), (F) or (G) shall be permitted to be made if, immediately before or
after giving effect thereto, any Event of Default or Unmatured Event of Default
shall have occurred and be continuing.
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10.22 RESTRICTION OF AMENDMENTS TO ASSET PURCHASE AGREEMENT. Not amend
or otherwise modify, or waive any rights under, the Asset Purchase Agreement
dated as of December 2, 1996 by and among Sanifill, Inc., Campbell Wells, L.P.,
Campbell Wells NORM, L.P. and the Company, if such amendment, modification or
waiver is adverse to the interests of the Banks.
SECTION 11 EFFECTIVENESS; CONDITIONS OF LENDING, ETC.
The obligation of each Bank to make its Loans and of any Issuing Bank to
issue Letters of Credit is subject to the following conditions precedent:
11.1 EFFECTIVENESS. This Agreement shall become effective, and all
outstanding loans made and letters of credit issued under the Existing Agreement
shall be deemed to have been made and issued (respectively) hereunder, on the
date (the "EFFECTIVE DATE") that the Agent shall have received (a) all amounts
which are then due and payable pursuant to SECTION 5 and (to the extent billed)
SECTION 14.6, and (b) all of the following, each duly executed and dated the
Effective Date (or such earlier date as shall be satisfactory to the Agent), in
form and substance satisfactory to the Agent, and each (except for the Notes, of
which only the originals shall be signed) in sufficient number of signed
counterparts to provide one for each Bank:
11.1.1 NOTES. The Notes.
11.1.2 RESOLUTIONS. Certified copies of resolutions of the Board of
Directors of the Company authorizing or ratifying the execution, delivery and
performance by the Company of this Agreement, the Notes and the other Loan
Documents to which the Company is a party; and certified copies of resolutions
of the Board of Directors of each Subsidiary (if any) which is to execute and
deliver any document pursuant to SECTION 11.1.5, 11.1.6 or 11.1.7 authorizing or
ratifying the execution, delivery and performance by such Subsidiary of each
Loan Document to which such Subsidiary is a party.
11.1.3 CONSENTS, ETC. Certified copies of all documents evidencing any
necessary corporate action, consents and governmental approvals (if any)
required for the execution, delivery and performance by the Company and each
Subsidiary of the documents referred to in this SECTION 11.
11.1.4 INCUMBENCY AND SIGNATURE CERTIFICATES. A certificate of the
Secretary or an Assistant Secretary of the Company and each Subsidiary of the
Company as of the Effective Date certifying the names of the officer or officers
of such entity authorized to sign the Loan Documents to which such entity is a
party, together with a sample of the true signature of each
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such officer (it being understood that the Agent and each Bank may conclusively
rely on each such certificate until formally advised by a like certificate of
any changes therein).
11.1.5 GUARANTY. A counterpart of the Guaranty executed by each
Subsidiary (if any) as of the Effective Date which has not previously executed a
counterpart thereof.
11.1.6 SECURITY AGREEMENT. A counterpart of the Security Agreement
executed by each Subsidiary (if any) as of the Effective Date which has not
previously executed a counterpart thereof, together with evidence, satisfactory
to the Agent, that all filings necessary to perfect the Agent's Lien on any
collateral granted under the Security Agreement have been duly made and are in
full force and effect.
11.1.7 PLEDGE AGREEMENTS. With respect to any Subsidiary that, as of the
Effective Date has not previously executed a Subsidiary Pledge Agreement and has
one or more Subsidiaries, a Subsidiary Pledge Agreement, in each case together
with all stock certificates, stock powers and other items required to be
delivered in connection therewith.
11.1.8 CONFIRMATION. A Confirmation, substantially in the form of
EXHIBIT H, executed by the Company and each Guarantor.
11.1.9 OPINION OF COUNSEL FOR THE COMPANY AND THE
GUARANTORS. The opinion of Hartzog Conger & Cason.
11.1.10 OTHER. Such other documents as the Agent or any Bank may
reasonably request.
11.2 CONDITIONS. The obligation (a) of each Bank to make each Loan and
(b) of each Issuing Bank to issue each Letter of Credit is subject to the
following further conditions precedent that:
11.2.1 COMPLIANCE WITH WARRANTIES, NO DEFAULT, ETC. Both before and
after giving effect to any borrowing and the issuance of any Letter of Credit
(but, if any Event of Default of the nature referred to in SECTION 12.1.2 shall
have occurred with respect to any other Debt, without giving effect to the
application, directly or indirectly, of the proceeds thereof) the following
statements shall be true and correct:
(a) the representations and warranties of the Company and the
Guarantors set forth in this Agreement (excluding SECTIONS 9.6 and 9.8)
and the other Loan Documents shall be true and correct in all material
respects with the same effect as if then made (except to the extent
stated to relate to an earlier date, in which case such
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representations and warranties shall be true and correct in all material
respects as of such earlier date);
(b) except as disclosed by the Company to the Agent and the Banks
pursuant to SECTION 9.6,
(i) no litigation (including derivative actions),
arbitration proceeding, labor controversy or governmental
investigation or proceeding shall be pending or, to the knowledge
of the Company, threatened against the Company or any of its
Subsidiaries which might reasonably be expected to have a
Material Adverse Effect or which purports to affect the legality,
validity or enforceability of this Agreement, the Notes or any
other Loan Document; and
(ii) no development shall have occurred in any litigation
(including derivative actions), arbitration proceeding, labor
controversy or governmental investigation or proceeding disclosed
pursuant to SECTION 9.6 which might reasonably be expected to
have a Material Adverse Effect; and
(c) no Event of Default or Unmatured Event of Default shall have
then occurred and be continuing, and neither the Company nor any of its
Subsidiaries shall be in violation of any law or governmental regulation
or court order or decree where such violation or violations singly or in
the aggregate might reasonably be expected to have a Material Adverse
Effect.
11.2.2 CONFIRMATORY CERTIFICATE. If requested by the Agent or any Bank,
the Agent shall have received (in sufficient counterparts to provide one to each
Bank) a certificate dated the date of such requested Loan or Letter of Credit
and signed by a duly authorized representative of the Company as to the matters
set out in SECTION 11.2.1 (it being understood that each request by the Company
for the making of a Loan or the issuance of a Letter of Credit shall be deemed
to constitute a warranty by the Company that the conditions precedent set forth
in SECTION 11.2.1 will be satisfied at the time of the making of such Loan or
the issuance of such Letter of Credit), together with such other documents as
the Agent or any Bank may reasonably request in support thereof.
SECTION 12 EVENTS OF DEFAULT AND THEIR EFFECT.
12.1 EVENTS OF DEFAULT. Each of the following shall constitute an Event
of Default under this Agreement:
12.1.1 NON-PAYMENT OF THE LOANS, ETC. Default in the
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payment when due of the principal of any Loan; or default, and continuance
thereof for five days, in the payment when due of any interest, fee,
reimbursement obligation with respect to any Letter of Credit or other amount
payable by the Company hereunder or under any other Loan Document.
12.1.2 NON-PAYMENT OF OTHER DEBT. Any default shall occur under the
terms applicable to any Debt of the Company or any Subsidiary in an aggregate
amount (for all such Debt so affected) exceeding $250,000 and such default shall
(a) consist of the failure to pay such Debt when due (subject to any applicable
grace period), whether by acceleration or otherwise, or (b) accelerate the
maturity of such Debt or permit the holder or holders thereof, or any trustee or
agent for such holder or holders, to cause such Debt to become due and payable
prior to its expressed maturity.
12.1.3 OTHER MATERIAL OBLIGATIONS. Default in the payment when due, or
in the performance or observance of, any material obligation of, or condition
agreed to by, the Company or any Subsidiary with respect to any material
purchase or lease of goods or services where such default, singly or in the
aggregate with other such defaults might reasonably be expected to have a
Material Adverse Effect (except only to the extent that the existence of any
such default is being contested by the Company or such Subsidiary in good faith
and by appropriate proceedings and appropriate reserves have been made in
respect of such default).
12.1.4 BANKRUPTCY, INSOLVENCY, ETC. The Company or any Subsidiary
becomes insolvent or generally fails to pay, or admits in writing its inability
or refusal to pay, debts as they become due; or the Company or any Subsidiary
applies for, consents to, or acquiesces in the appointment of a trustee,
receiver or other custodian for the Company or such Subsidiary or any property
thereof, or makes a general assignment for the benefit of creditors; or, in the
absence of such application, consent or acquiescence, a trustee, receiver or
other custodian is appointed for the Company or any Subsidiary or for a
substantial part of the property of any thereof and is not discharged within 60
days; or any bankruptcy, reorganization, debt arrangement, or other case or
proceeding under any bankruptcy or insolvency law, or any dissolution or
liquidation proceeding (except the voluntary dissolution, not under any
bankruptcy or insolvency law, of a Subsidiary), is commenced in respect of the
Company or any Subsidiary, and if such case or proceeding is not commenced by
the Company or such Subsidiary, it is consented to or acquiesced in by the
Company or such Subsidiary, or remains for 60 days undismissed; or the Company
or any Subsidiary takes any corporate action to authorize, or in furtherance of,
any of the foregoing.
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12.1.5 NON-COMPLIANCE WITH PROVISIONS OF THIS AGREEMENT. (a) Failure by
the Company to comply with or to perform any covenant set forth in SECTIONS 10.5
through 10.13, 10.15 or 10.16; or (b) failure by the Company to comply with or
to perform any other provision of this Agreement (and not constituting an Event
of Default under any of the other provisions of this SECTION 12) and continuance
of such failure described in this CLAUSE (B) for 30 days (or, in the case of
SECTION 10.14, five Business Days) after notice thereof to the Company from the
Agent or any Bank.
12.1.6 WARRANTIES. Any warranty made by the Company herein is breached
or is false or misleading in any material respect, or any schedule, certificate,
financial statement, report, notice or other writing furnished by the Company to
the Agent or any Bank in connection herewith is false or misleading in any
material respect on the date as of which the facts therein set forth are stated
or certified.
12.1.7 PENSION PLANS. (i) Institution of any steps by the Company or any
other Person to terminate a Pension Plan if as a result of such termination the
Company could be required to make a contribution to such Pension Plan, or could
incur a liability or obligation to such Pension Plan, in excess of $250,000;
(ii) a contribution failure occurs with respect to any Pension Plan sufficient
to give rise to a Lien under section 302(f) of ERISA; or (iii) there shall occur
any withdrawal or partial withdrawal from a Multiemployer Pension Plan and the
withdrawal liability (without unaccrued interest) to Multiemployer Pension Plans
as a result of such withdrawal (including any outstanding withdrawal liability
that the Company and the Controlled Group have incurred on the date of such
withdrawal) exceeds $250,000.
12.1.8 JUDGMENTS. Final judgments which exceed an aggregate of $250,000
shall be rendered against the Company, or any Subsidiary and shall not have been
paid, discharged or vacated or had execution thereof stayed pending appeal
within 30 days after entry or filing of such judgments.
12.1.9 INVALIDITY OF GUARANTY, ETC. The Guaranty shall cease to be in
full force and effect with respect to any Guarantor, any Guarantor shall fail
(subject to any applicable grace period) to comply with or to perform any
applicable provision of the Guaranty, or any Guarantor (or any Person by,
through or on behalf of such Guarantor) shall contest in any manner the
validity, binding nature or enforceability of the Guaranty with respect to such
Guarantor.
12.1.10 INVALIDITY OF COLLATERAL DOCUMENTS, ETC. Any Collateral Document
shall cease to be in full force and effect with respect to the Company or any
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Guarantor, the Company or any Guarantor shall fail (subject to any applicable
grace period) to comply with or to perform any applicable provision of any
Collateral Document to which such entity is a party, or the Company or any
Guarantor (or any Person by, through or on behalf of the Company or such
Guarantor) shall contest in any manner the validity, binding nature or
enforceability of any Collateral Document.
12.1.11 CHANGE IN CONTROL. (a) Any Person or group of Persons (within
the meaning of Section 13 or 14 of the Securities Exchange Act of 1934, but
excluding the executive managers of the Company as of the Effective Date) shall
acquire beneficial ownership (within the meaning of Rule 13d-3 promulgated under
such Act) of 30% or more of the outstanding shares of common stock of the
Company; (b) during any 24-month period, individuals who at the beginning of
such period constituted the Company's Board of Directors (together with any new
directors whose election by the Company's Board of Directors or whose nomination
for election by the Company's shareholders was approved by a vote of at least
two-thirds of the directors who either were directors at beginning of such
period or whose election or nomination was previously so approved) cease for any
reason to constitute a majority of the Board of Directors of the Company; or (c)
a period of 60 consecutive days shall have elapsed during which any of the
individuals named in SCHEDULE 12.1.11 shall have ceased to hold executive
offices with the Company at least equal in seniority to such individual's
present offices, as set out in such SCHEDULE 12.1.11, EXCLUDING any such
individual who has been replaced by another individual or individuals reasonably
satisfactory to the Required Banks (it being understood that any such
replacement individual shall be deemed added to SCHEDULE 12.1.11 on the date of
approval thereof by the Required Banks).
12.2 EFFECT OF EVENT OF DEFAULT. If any Event of Default described in
SECTION 12.1.4 shall occur, the Commitments (if they have not theretofore
terminated) shall immediately terminate and the Notes and all other obligations
hereunder shall become immediately due and payable and the Company shall become
immediately obligated to deliver to the Agent cash collateral in an amount equal
to the outstanding face amount of all Letters of Credit, all without
presentment, demand, protest or notice of any kind; and, if any other Event of
Default shall occur and be continuing, the Agent (upon written request of the
Required Banks) shall declare the Commitments (if they have not theretofore
terminated) to be terminated and/or declare all Notes and all other obligations
hereunder to be due and payable and/or demand that the Company immediately
deliver to the Agent cash collateral in amount equal to the outstanding face
amount of all Letters of Credit, whereupon the Commitments (if they have not
theretofore terminated) shall immediately terminate and/or all Notes and all
other obligations hereunder shall become
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immediately due and payable and/or the Company shall immediately become
obligated to deliver to the Agent cash collateral in an amount equal to the face
amount of all Letters of Credit, all without presentment, demand, protest or
notice of any kind. The Agent shall promptly advise the Company of any such
declaration, but failure to do so shall not impair the effect of such
declaration. Notwithstanding the foregoing, the effect as an Event of Default of
any event described in SECTION 12.1.1 or SECTION 12.1.4 may be waived by the
written concurrence of all of the Banks, and the effect as an Event of Default
of any other event described in this SECTION 12 may be waived by the written
concurrence of the Required Banks. Any cash collateral delivered hereunder shall
be held by the Agent (without liability for interest thereon) and applied to
obligations arising in connection with any drawing under a Letter of Credit.
After the expiration or termination of all Letters of Credit, such cash
collateral shall be applied by the Agent to any remaining obligations hereunder
and any excess shall be delivered to the Company or as a court of competent
jurisdiction may elect.
SECTION 13 THE AGENT.
13.1 APPOINTMENT AND AUTHORIZATION. (a) Each Bank hereby irrevocably
(subject to SECTION 13.9) appoints, designates and authorizes the Agent to take
such action on its behalf under the provisions of this Agreement and each other
Loan Document and to exercise such powers and perform such duties as are
expressly delegated to it by the terms of this Agreement or any other Loan
Document, together with such powers as are reasonably incidental thereto.
Notwithstanding any provision to the contrary contained elsewhere in this
Agreement or in any other Loan Document, the Agent shall not have any duties or
responsibilities except those expressly set forth herein, nor shall the Agent
have or be deemed to have any fiduciary relationship with any Bank, and no
implied covenants, functions, responsibilities, duties, obligations or
liabilities shall be read into this Agreement or any other Loan Document or
otherwise exist against the Agent.
(b) Each Issuing Bank shall act on behalf of the Banks with respect to
any Letters of Credit issued by it and the documents associated therewith. Each
Issuing Bank shall have all of the benefits and immunities (i) provided to the
Agent in this SECTION 13 with respect to any acts taken or omissions suffered by
such Issuing Bank in connection with Letters of Credit issued by it or proposed
to be issued by it and the applications and agreements for letters of credit
pertaining to such Letters of Credit as fully as if the term "Agent", as used in
this SECTION 13, included such Issuing Bank with respect to such acts or
omissions and (ii) as additionally provided in this Agreement with respect to
the Issuing Banks.
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(c) The Swing Line Bank shall have all of the benefits and immunities
(i) provided to the Agent in this SECTION 13 with respect to any acts taken or
omissions suffered by the Swing Line Bank in connection with Swing Line Loans
made or proposed to be made by it as fully as if the term "Agent", as used in
this SECTION 13, included the Swing Line Bank with respect to such acts or
omissions and (ii) as additionally provided in this Agreement with respect to
the Swing Line Bank.
13.2 DELEGATION OF DUTIES. The Agent may execute any of its duties under
this Agreement or any other Loan Document by or through agents, employees or
attorneys-in-fact and shall be entitled to advice of counsel concerning all
matters pertaining to such duties. The Agent shall not be responsible for the
negligence or misconduct of any agent or attorney-in-fact that it selects with
reasonable care.
13.3 LIABILITY OF AGENT. None of the Agent-Related Persons shall (i) be
liable for any action taken or omitted to be taken by any of them under or in
connection with this Agreement or any other Loan Document or the transactions
contemplated hereby (except for its own gross negligence or willful misconduct),
or (ii) be responsible in any manner to any of the Banks for any recital,
statement, representation or warranty made by the Company or any Subsidiary or
Affiliate of the Company, or any officer thereof, contained in this Agreement or
in any other Loan Document, or in any certificate, report, statement or other
document referred to or provided for in, or received by the Agent under or in
connection with, this Agreement or any other Loan Document, or the validity,
effectiveness, genuineness, enforceability or sufficiency of this Agreement or
any other Loan Document, or for any failure of the Company or any other party to
any Loan Document to perform its obligations hereunder or thereunder. No
Agent-Related Person shall be under any obligation to any Bank to ascertain or
to inquire as to the observance or performance of any of the agreements
contained in, or conditions of, this Agreement or any other Loan Document, or to
inspect the properties, books or records of the Company or any of the Company's
Subsidiaries or Affiliates.
13.4 RELIANCE BY AGENT. The Agent shall be entitled to rely, and shall
be fully protected in relying, upon any writing, resolution, notice, consent,
certificate, affidavit, letter, telegram, facsimile, telex or telephone message,
statement or other document or conversation believed by it to be genuine and
correct and to have been signed, sent or made by the proper Person or Persons,
and upon advice and statements of legal counsel (including counsel to the
Company), independent accountants and other experts selected by the Agent. The
Agent shall be fully justified in failing or refusing to take any action under
this Agreement or any other Loan Document unless it
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shall first receive such advice or concurrence of the Required Banks as it deems
appropriate and, if it so requests, confirmation from the Banks of their
obligation to indemnify the Agent against any and all liability and expense
which may be incurred by it by reason of taking or continuing to take any such
action. The Agent shall in all cases be fully protected in acting, or in
refraining from acting, under this Agreement or any other Loan Document in
accordance with a request or consent of the Required Banks and such request and
any action taken or failure to act pursuant thereto shall be binding upon all of
the Banks.
13.5 NOTICE OF DEFAULT. The Agent shall not be deemed to have knowledge
or notice of the occurrence of any Event of Default or Unmatured Event of
Default except with respect to defaults in the payment of principal, interest
and fees required to be paid to the Agent for the account of the Banks, unless
the Agent shall have received written notice from a Bank or the Company
referring to this Agreement, describing such Event of Default or Unmatured Event
of Default and stating that such notice is a "notice of default". The Agent will
notify the Banks of its receipt of any such notice. The Agent shall take such
action with respect to such Event of Default or Unmatured Event of Default as
may be requested by the Required Banks in accordance with SECTION 12; PROVIDED,
HOWEVER, that unless and until the Agent has received any such request, the
Agent may (but shall not be obligated to) take such action, or refrain from
taking such action, with respect to such Event of Default or Unmatured Event of
Default as it shall deem advisable or in the best interest of the Banks.
13.6 CREDIT DECISION. Each Bank acknowledges that none of the
Agent-Related Persons has made any representation or warranty to it, and that no
act by the Agent hereafter taken, including any review of the affairs of the
Company and its Subsidiaries, shall be deemed to constitute any representation
or warranty by any Agent-Related Person to any Bank. Each Bank represents to the
Agent that it has, independently and without reliance upon any Agent-Related
Person and based on such documents and information as it has deemed appropriate,
made its own appraisal of and investigation into the business, prospects,
operations, property, financial and other condition and creditworthiness of the
Company and its Subsidiaries, and all applicable bank regulatory laws relating
to the transactions contemplated hereby, and made its own decision to enter into
this Agreement and to extend credit to the Company hereunder. Each Bank also
represents that it will, independently and without reliance upon any
Agent-Related Person and based on such documents and information as it shall
deem appropriate at the time, continue to make its own credit analysis,
appraisals and decisions in taking or not taking action under this Agreement and
the other Loan
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Documents, and to make such investigations as it deems necessary to inform
itself as to the business, prospects, operations, property, financial and other
condition and creditworthiness of the Company. Except for notices, reports and
other documents expressly herein required to be furnished to the Banks by the
Agent, the Agent shall not have any duty or responsibility to provide any Bank
with any credit or other information concerning the business, prospects,
operations, property, financial or other condition or creditworthiness of the
Company which may come into the possession of any of the Agent-Related Persons.
13.7 INDEMNIFICATION. Whether or not the transactions contemplated
hereby are consummated, the Banks shall indemnify upon demand the Agent-Related
Persons (to the extent not reimbursed by or on behalf of the Company and without
limiting the obligation of the Company to do so), pro rata, from and against any
and all Indemnified Liabilities; PROVIDED, HOWEVER, that no Bank shall be liable
for any payment to the Agent-Related Person of any portion of the Indemnified
Liabilities resulting solely from such Person's gross negligence or willful
misconduct. Without limitation of the foregoing, each Bank shall reimburse the
Agent upon demand for its ratable share of any costs or out-of-pocket expenses
(including reasonable fees of attorneys for the Agent (including the allocable
costs of internal legal services and all disbursements of internal counsel))
incurred by the Agent in connection with the preparation, execution, delivery,
administration, modification, amendment or enforcement (whether through
negotiations, legal proceedings or otherwise) of, or legal advice in respect of
rights or responsibilities under, this Agreement, any other Loan Document, or
any document contemplated by or referred to herein, to the extent that the Agent
is not reimbursed for such expenses by or on behalf of the Company. The
undertaking in this Section shall survive repayment of the Loans, cancellation
of the Notes, any foreclosure under, or any modification, release or discharge
of, any or all of the Collateral Documents, any termination of this Agreement
and the resignation or replacement of the Agent.
For the purposes of this SECTION 13.7, "INDEMNIFIED LIABILITIES" shall
mean: any and all liabilities, obligations, losses, damages, penalties, actions,
judgments, suits, costs, charges, expenses and disbursements (including
reasonable fees of attorneys for the Agent (including the allocable costs of
internal legal services and all disbursements of internal counsel)) of any kind
or nature whatsoever which may at any time (including at any time following
repayment of the Loans and the termination, resignation or replacement of the
Agent or the replacement of any Bank) be imposed on, incurred by or asserted
against any Agent-Related Person in any way relating to or arising out of this
Agreement or any document contemplated by or referred to herein, or the
transactions contemplated hereby, or
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any action taken or omitted by any such Person under or in connection with any
of the foregoing, including with respect to any investigation, litigation or
proceeding (including (a) any case, action or proceeding before any court or
other governmental authority relating to bankruptcy, reorganization, insolvency,
liquidation, receivership, dissolution, winding-up or relief of debtors, or (b)
any general assignment for the benefit of creditors, composition, marshalling of
assets for creditors, or other, similar arrangement in respect of its creditors
generally or any substantial portion of its creditors; undertaken under U.S.
Federal, state or foreign law, including the Bankruptcy Code, and including any
appellate proceeding) related to or arising out of this Agreement or the
Commitments or the use of the proceeds thereof, whether or not any Agent-Related
Person, any Bank or any of their respective officers, directors, employees,
counsel, agents or attorneys-in-fact is a party thereto.
13.8 AGENT IN INDIVIDUAL CAPACITY. BofA and its Affiliates may make
loans to, issue letters of credit for the account of, accept deposits from,
acquire equity interests in and generally engage in any kind of banking, trust,
financial advisory, underwriting or other business with the Company and its
Subsidiaries and Affiliates as though BofA were not the Agent, the Issuing Bank
or the Swing Line Bank hereunder and without notice to or consent of the Banks.
The Banks acknowledge that, pursuant to such activities, BofA or its Affiliates
may receive information regarding the Company or its Affiliates (including
information that may be subject to confidentiality obligations in favor of the
Company or such Subsidiary) and acknowledge that the Agent shall be under no
obligation to provide such information to them. With respect to their Loans,
BofA and its Affiliates shall have the same rights and powers under this
Agreement as any other Bank and may exercise the same as though BofA were not
the Agent, the Issuing Bank and the Swing Line Bank, and the terms "Bank" and
"Banks" include BofA and its Affiliates, to the extent applicable, in their
individual capacities.
13.9 SUCCESSOR AGENT. The Agent may, and at the request of the Required
Banks shall, resign as Agent upon 30 days' notice to the Banks. If the Agent
resigns under this Agreement, the Required Banks shall, with (so long as no
Event of Default exists) the consent of the Company (which shall not be
unreasonably withheld or delayed), appoint from among the Banks a successor
agent for the Banks. If no successor agent is appointed prior to the effective
date of the resignation of the Agent, the Agent may appoint, after consulting
with the Banks and the Company, a successor agent from among the Banks. Upon the
acceptance of its appointment as successor agent hereunder, such successor agent
shall succeed to all the rights, powers and duties of the retiring Agent and the
term "Agent" shall mean such
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successor agent, and the retiring Agent's appointment, powers and duties as
Agent shall be terminated. After any retiring Agent's resignation hereunder as
Agent, the provisions of this SECTION 13 and SECTIONS 14.6 and 14.13 shall inure
to its benefit as to any actions taken or omitted to be taken by it while it was
Agent under this Agreement. If no successor agent has accepted appointment as
Agent by the date which is 30 days following a retiring Agent's notice of
resignation, the retiring Agent's resignation shall nevertheless thereupon
become effective and the Banks shall perform all of the duties of the Agent
hereunder until such time, if any, as the Required Banks appoint a successor
agent as provided for above. Notwithstanding the foregoing, however, BofA may
not be removed as the Agent at the request of the Required Banks unless BofA
shall also simultaneously be replaced as an "Issuing Bank" and the "Swing Line
Bank" hereunder pursuant to documentation in form and substance reasonably
satisfactory to BofA.
13.10 WITHHOLDING TAX.
(a) If any Bank is a "foreign corporation, partnership or trust"
within the meaning of the Code and such Bank claims exemption from, or a
reduction of, U.S. withholding tax under Sections 1441 or 1442 of the
Code, such Bank agrees to deliver to the Agent:
(i) if such Bank claims an exemption from, or a reduction
of, withholding tax under a United States tax treaty, properly
completed Internal Revenue Service ("IRS") Forms 1001 and W-8
before the payment of any interest in the first calendar year and
before the payment of any interest in each third succeeding
calendar year during which interest may be paid under this
Agreement;
(ii) if such Bank claims that interest paid under this
Agreement is exempt from United States withholding tax because it
is effectively connected with a United States trade or business
of such Bank, two properly completed and executed copies of IRS
Form 4224 before the payment of any interest is due in the first
taxable year of such Bank and in each succeeding taxable year of
such Bank during which interest may be paid under this Agreement,
and IRS Form W-9; and
(iii) such other form or forms as may be required under
the Code or other laws of the United States as a condition to
exemption
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from, or reduction of, United States withholding tax.
Such Bank agrees to promptly notify the Agent of any change in
circumstances which would modify or render invalid any claimed
exemption or reduction.
(b) If any Bank claims exemption from, or reduction of,
withholding tax under a United States tax treaty by providing IRS Form
1001 and such Bank sells, assigns, grants a participation in, or
otherwise transfers all or part of the obligations of the Company to
such Bank, such Bank agrees to notify the Agent of the percentage amount
in which it is no longer the beneficial owner of such obligations of the
Company hereunder. To the extent of such percentage amount, the Agent
will treat such Bank's IRS Form 1001 as no longer valid.
(c) If any Bank claiming exemption from United States withholding
tax by filing IRS Form 4224 with the Agent sells, assigns, grants a
participation in, or otherwise transfers all or part of the obligations
of the Company to such Bank hereunder, such Bank agrees to undertake
sole responsibility for complying with the withholding tax requirements
imposed by Sections 1441 and 1442 of the Code.
(d) If any Bank is entitled to a reduction in the applicable
withholding tax, the Agent may withhold from any interest payment to
such Bank an amount equivalent to the applicable withholding tax after
taking into account such reduction. If the forms or other documentation
required by SUBSECTION (A) of this Section are not delivered to the
Agent, then the Agent may withhold from any interest payment to such
Bank not providing such forms or other documentation an amount
equivalent to the applicable withholding tax.
(e) If the IRS or any other governmental authority of the United
States or any other jurisdiction asserts a claim that the Agent did not
properly withhold tax from amounts paid to or for the account of any
Bank (because the appropriate form was not delivered or was not properly
executed, or because such Bank failed to notify the Agent of a change in
circumstances which rendered the exemption from, or reduction of,
withholding tax ineffective, or for any other reason) such Bank shall
indemnify the Agent fully for all amounts paid, directly or indirectly,
by the Agent as tax or otherwise, including penalties and
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interest, and including any taxes imposed by any jurisdiction on the
amounts payable to the Agent under this Section, together with all costs
and expenses (including reasonable fees of attorneys for the Agent
(including the allocable costs of internal legal services and all
disbursements of internal counsel)). The obligation of the Banks under
this subsection shall survive the repayment of the Loans, cancellation
of the Notes, any termination of this Agreement and the resignation or
replacement of the Agent.
13.11 COLLATERAL MATTERS. The Banks irrevocably authorize the Agent, at
its option and in its discretion, to release any Lien granted to or held by the
Agent under any Collateral Document (i) upon termination of the Commitments and
payment in full of all Loans and all other obligations of the Company hereunder
and the expiration or termination of all Letters of Credit; (ii) constituting
property sold or to be sold or disposed of as part of or in connection with any
disposition permitted hereunder; or (iii) subject to SECTION 14.1, if approved,
authorized or ratified in writing by the Required Banks. Upon request by the
Agent at any time, the Banks will confirm in writing the Agent's authority to
release particular types or items of collateral pursuant to this SECTION 13.11.
13.12 CO-AGENTS. No Bank identified on the facing page or the signature
pages of this Agreement as a "Co-Agent" shall have any right, power, obligation,
liability, responsibility or duty under this Agreement other than those
applicable to all Banks as such. Without limiting the foregoing, no Bank so
identified as a "Co-Agent" shall have or be deemed to have any fiduciary
relationship with any Bank. Each Bank acknowledges that it has not relied, and
will not rely, on any Bank so identified in deciding to enter into this
Agreement or in taking or not taking action hereunder.
SECTION 14 GENERAL.
14.1 WAIVER; AMENDMENTS. No delay on the part of the Agent, any Bank or
any other holder of a Note in the exercise of any right, power or remedy shall
operate as a waiver thereof, nor shall any single or partial exercise by any of
them of any right, power or remedy preclude other or further exercise thereof,
or the exercise of any other right, power or remedy. No amendment, modification
or waiver of, or consent with respect to, any provision of this Agreement or the
Notes shall in any event be effective unless the same shall be in writing and
signed and delivered by Banks having an aggregate Percentage of not less than
the aggregate Percentage expressly designated herein with respect thereto or, in
the absence of such designation as to any provision of this Agreement or the
Notes, by the Required Banks,
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and then any such amendment, modification, waiver or consent shall be effective
only in the specific instance and for the specific purpose for which given. No
amendment, modification, waiver or consent shall change the Percentage of any
Bank without the consent of such Bank. No amendment, modification, waiver or
consent shall (i) extend or increase the amount of the Commitments, (ii) extend
the date for payment of any principal of or interest on the Loans or any fees
payable hereunder, (iii) reduce the principal amount of any Loan, the rate of
interest thereon or any fees payable hereunder, (iv) release the Guaranty (other
than with respect to a Guarantor which ceases to be a Subsidiary as a result of
a transaction permitted hereunder) or all or substantially all of the collateral
granted under the Collateral Document or (v) reduce the aggregate Percentage
required to effect an amendment, modification, waiver or consent without, in
each case, the consent of all Banks. No provisions of SECTION 13 or other
provision of this Agreement affecting the Agent in its capacity as such shall be
amended, modified or waived without the consent of the Agent. No provision of
this Agreement relating to the rights or duties of an Issuing Bank in its
capacity as such shall be amended, modified or waived without the consent of
such Issuing Bank. No provision of this Agreement affecting the Swing Line Bank
in its capacity as such shall be amended, modified or waived without the written
consent of the Swing Line Bank.
14.2 CONFIRMATIONS. The Company and each holder of a Note agree from
time to time, upon written request received by it from the other, to confirm to
the other in writing (with a copy of each such confirmation to the Agent) the
aggregate unpaid principal amount of the Loans then outstanding under such Note.
14.3 NOTICES. Except as otherwise provided in SECTIONS 2.2, 2.4 and 4.3,
all notices hereunder shall be in writing (including facsimile transmission) and
shall be sent to the applicable party at its address shown on SCHEDULE 14.3 or
at such other address as such party may, by written notice received by the other
parties, have designated as its address for such purpose. Notices sent by
facsimile transmission shall be deemed to have been given when sent; notices
sent by mail shall be deemed to have been given three Business Days after the
date when sent by registered or certified mail, postage prepaid; and notices
sent by hand delivery or overnight courier service shall be deemed to have been
given when received. For purposes of SECTIONS 2.2, 2.4 and 4.3, the Agent and
the Swing Line Bank shall be entitled to rely on telephonic instructions from
any person that the Agent or the Swing Line Bank in good faith believes is an
authorized officer or employee of the Company, and the Company shall hold the
Agent, the Swing Line Bank and each other Bank harmless from any loss, cost or
expense resulting from any such reliance.
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14.4 COMPUTATIONS. Where the character or amount of any asset or
liability or item of income or expense is required to be determined, or any
consolidation or other accounting computation is required to be made, for the
purpose of this Agreement, such determination or calculation shall, to the
extent applicable and except as otherwise specified in this Agreement, be made
in accordance with GAAP, consistently applied; PROVIDED that if the Company
notifies the Agent that the Company wishes to amend any covenant in SECTION 10
to eliminate or to take into account the effect of any change in GAAP on the
operation of such covenant (or if the Agent notifies the Company that the
Required Banks wish to amend SECTION 10 for such purpose), then the Company's
compliance with such covenant shall be determined on the basis of GAAP in effect
immediately before the relevant change in GAAP became effective, until either
such notice is withdrawn or such covenant is amended in a manner satisfactory to
the Company and the Required Banks.
14.5 REGULATION U. Each Bank represents that it in good faith is not
relying, either directly or indirectly, upon any Margin Stock as collateral
security for the extension or maintenance by it of any credit provided for in
this Agreement.
14.6 COSTS, EXPENSES AND TAXES. The Company agrees to pay on demand all
reasonable out-of-pocket costs and expenses of the Agent (including the
reasonable fees and charges of counsel for the Agent and of local counsel, if
any, who may be retained by said counsel) in connection with the preparation,
execution, delivery and administration of this Agreement, the other Loan
Documents and all other documents provided for herein or delivered or to be
delivered hereunder or in connection herewith (including any amendments,
supplements or waivers to any Loan Documents), and all reasonable out-of-pocket
costs and expenses (including reasonable attorneys' fees, court costs and other
legal expenses and allocated costs of staff counsel) incurred by the Agent and
each Bank after an Event of Default in connection with the enforcement of this
Agreement, the other Loan Documents or any such other documents. Each Bank
agrees to reimburse the Agent for such Bank's pro rata share (based on its
respective Percentage) of any such costs and expenses of the Agent not paid by
the Company. In addition, the Company agrees to pay, and to save the Agent and
the Banks harmless from all liability for, (a) any stamp or other taxes
(excluding income taxes and franchise taxes based on net income) which may be
payable in connection with the execution and delivery of this Agreement, the
borrowings hereunder, the issuance of the Notes or the execution and delivery of
any other Loan Document or any other document provided for herein or delivered
or to be delivered hereunder or in connection herewith and (b) any fees of the
Company's auditors in connection with any reasonable exercise by the Agent and
the
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<PAGE>
Banks of their rights pursuant to SECTION 10.2. All obligations provided for
in this SECTION 14.6 shall survive repayment of the Loans, cancellation of the
Notes and any termination of this Agreement.
14.7 SUBSIDIARY REFERENCES. The provisions of this Agreement relating to
Subsidiaries shall apply only during such times as the Company has one or more
Subsidiaries.
14.8 CAPTIONS. Section captions used in this Agreement are for
convenience only and shall not affect the construction of this Agreement.
14.9 ASSIGNMENTS; PARTICIPATIONS.
14.9.1 ASSIGNMENTS. Any Bank may, with the prior written consents of the
Company and the Agent (which consents shall not be unreasonably delayed or
withheld), at any time assign and delegate to one or more commercial banks or
other Persons (any Person to whom such an assignment and delegation is to be
made being herein called an "ASSIGNEE"), all or any fraction of such Bank's
Revolving Loans and Commitment (which assignment and delegation shall be of a
constant, and not a varying, percentage of all the assigning Bank's Revolving
Loans and Commitment) in a minimum aggregate amount equal to the lesser of (i)
the amount of the assigning Bank's remaining Commitment and (ii) $5,000,000;
PROVIDED, HOWEVER, that (a) no assignment and delegation may be made to any
Person if, at the time of such assignment and delegation, the Company would be
obligated to pay any greater amount under SECTION 7.6 or SECTION 8 to the
Assignee than the Company is then obligated to pay to the assigning Bank under
such Sections (and if any assignment is made in violation of the foregoing, the
Company will not be required to pay the incremental amounts) and (b) the Company
and the Agent shall be entitled to continue to deal solely and directly with
such Bank in connection with the interests so assigned and delegated to an
Assignee until the date when all of the following conditions shall have been
met:
(x) five Business Days (or such lesser period of time as the
Agent and the assigning Bank shall agree) shall have passed after
written notice of such assignment and delegation, together with payment
instructions, addresses and related information with respect to such
Assignee, shall have been given to the Company and the Agent by such
assigning Bank and the Assignee,
(y) the assigning Bank and the Assignee shall have executed and
delivered to the Company and the Agent an assignment agreement
substantially in the form of EXHIBIT G (an "ASSIGNMENT AGREEMENT"),
together with any documents required to be delivered thereunder, which
Assignment
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<PAGE>
Agreement shall have been accepted by the Agent, and
(z) the assigning Bank or the Assignee shall have paid the Agent
a processing fee of $3,500.
From and after the date on which the conditions described above have been met,
(x) such Assignee shall be deemed automatically to have become a party hereto
and, to the extent that rights and obligations hereunder have been assigned and
delegated to such Assignee pursuant to such Assignment Agreement, shall have the
rights and obligations of a Bank hereunder, and (y) the assigning Bank, to the
extent that rights and obligations hereunder have been assigned and delegated by
it pursuant to such Assignment Agreement, shall be released from its obligations
hereunder. Within five Business Days after effectiveness of any assignment and
delegation, the Company shall execute and deliver to the Agent (for delivery to
the Assignee and the Assignor, as applicable) a new Note in the principal amount
of the Assignee's Percentage of the Commitment Amount and, if the assigning Bank
has retained a Commitment hereunder, a replacement Note in the principal amount
of the Percentage of the Commitment Amount retained by the assigning Bank (such
Note to be in exchange for, but not in payment of, the predecessor Note held by
such assigning Bank). Each such Note shall be dated the effective date of such
assignment. The assigning Bank shall mark the predecessor Note "exchanged" and
deliver it to the Company. Accrued interest on that part of the predecessor Note
being assigned shall be paid as provided in the Assignment Agreement. Accrued
interest and fees on that part of the predecessor Note not being assigned shall
be paid to the assigning Bank. Accrued interest and accrued fees shall be paid
at the same time or times provided in the predecessor Note and in this
Agreement. Any attempted assignment and delegation not made in accordance with
this SECTION 14.9.1 shall be null and void.
Notwithstanding the foregoing provisions of this SECTION 14.9.1 or any
other provision of this Agreement, any Bank may at any time assign all or any
portion of its Loans and its Note to a Federal Reserve Bank (but no such
assignment shall release any Bank from any of its obligations hereunder).
14.9.2 PARTICIPATIONS. Any Bank may at any time sell to one or more
commercial banks or other Persons participating interests in any Loan owing to
such Bank, the Note held by such Bank, the Commitment of such Bank, the direct
or participation interest of such Bank in any Letter of Credit or any other
interest of such Bank hereunder (any Person purchasing any such participating
interest being herein called a "PARTICIPANT"); PROVIDED that any Bank selling
any such participating interest shall give notice thereof to the Company. In the
event of a sale by a Bank of a participating interest to a Participant, (x) such
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<PAGE>
Bank shall remain the holder of its Note for all purposes of this Agreement, (y)
the Company and the Agent shall continue to deal solely and directly with such
Bank in connection with such Bank's rights and obligations hereunder and (z) all
amounts payable by the Company shall be determined as if such Bank had not sold
such participation and shall be paid directly to such Bank. No Participant shall
have any direct or indirect voting rights hereunder except with respect to any
of the events (excluding the events described in CLAUSE (V) thereof) described
in the fourth sentence of SECTION 14.1. Each Bank agrees to incorporate the
requirements of the preceding sentence into each participation agreement which
such Bank enters into with any Participant. The Company agrees that if amounts
outstanding under this Agreement and the Notes are due and payable (as a result
of acceleration or otherwise), each Participant shall be deemed to have the
right of setoff in respect of its participating interest in amounts owing under
this Agreement, any Note and with respect to any Letter of Credit to the same
extent as if the amount of its participating interest were owing directly to it
as a Bank under this Agreement or such Note; PROVIDED that such right of setoff
shall be subject to the obligation of each Participant to share with the Banks,
and the Banks agree to share with each Participant, as provided in SECTION 7.5.
The Company also agrees that each Participant shall be entitled to the benefits
of SECTION 7.6 and SECTION 8 as if it were a Bank (provided that no Participant
shall receive any greater compensation pursuant to SECTION 7.6 or SECTION 8 than
would have been paid to the participating Bank if no participation had been
sold).
14.10 GOVERNING LAW. This Agreement and each Note shall be a contract
made under and governed by the internal laws of the State of Illinois. Whenever
possible each provision of this Agreement shall be interpreted in such manner as
to be effective and valid under applicable law, but if any provision of this
Agreement shall be prohibited by or invalid under applicable law, such provision
shall be ineffective to the extent of such prohibition or invalidity, without
invalidating the remainder of such provision or the remaining provisions of this
Agreement. All obligations of the Company and rights of the Agent, the Banks and
any other holder of a Note expressed herein or in any other Loan Document shall
be in addition to and not in limitation of those provided by applicable law.
14.11 COUNTERPARTS. This Agreement may be executed in any number of
counterparts and by the different parties hereto on separate counterparts and
each such counterpart shall be deemed to be an original, but all such
counterparts shall together constitute but one and the same Agreement.
14.12 SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon the
Company, the Banks and the Agent and their
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respective successors and assigns, and shall inure to the benefit of the
Company, the Banks and the Agent and the successors and assigns of the Banks and
the Agent.
14.13 INDEMNIFICATION BY THE COMPANY.
(a) In consideration of the execution and delivery of this Agreement by
the Agent and the Banks and the agreement to extend the Commitments provided
hereunder, the Company hereby agrees to indemnify, exonerate and hold the Agent,
each Bank and each of the officers, directors, employees, Affiliates and agents
of the Agent and each Bank (each a "BANK PARTY") free and harmless from and
against any and all actions, causes of action, suits, losses, liabilities,
damages and expenses, including reasonable attorneys' fees and charges and
allocated costs of staff counsel (collectively, for purposes of this SECTION
14.13, called the "INDEMNIFIED LIABILITIES"), incurred by the Bank Parties or
any of them as a result of, or arising out of, or relating to (i) any tender
offer, merger, purchase of stock, purchase of assets or other similar
transaction financed or proposed to be financed in whole or in part, directly or
indirectly, with the proceeds of any of the Loans, (ii) the use, handling,
release, emission, discharge, transportation, storage, treatment or disposal of
any hazardous substance at any property owned or leased by the Company or any
Subsidiary, (iii) any violation of any Environmental Laws with respect to
conditions at any property owned or leased by the Company or any Subsidiary or
the operations conducted thereon, (iv) the investigation, cleanup or remediation
of offsite locations at which the Company or any Subsidiary or their respective
predecessors are alleged to have directly or indirectly disposed of hazardous
substances or (v) the execution, delivery, performance or enforcement of this
Agreement or any other Loan Document by any of the Bank Parties, except for any
such Indemnified Liabilities arising on account of any such Bank Party's gross
negligence or willful misconduct. If and to the extent that the foregoing
undertaking may be unenforceable for any reason, the Company hereby agrees to
make the maximum contribution to the payment and satisfaction of each of the
Indemnified Liabilities which is permissible under applicable law. Nothing set
forth above shall be construed to relieve any Bank Party from any obligation it
may have under this Agreement.
(b) All obligations provided for in this SECTION 14.13 shall survive
repayment of the Loans, cancellation of the Notes, any foreclosure under, or any
modification, release or discharge of any or all of the Collateral Documents and
any termination of this Agreement.
14.14 FORUM SELECTION AND CONSENT TO JURISDICTION. ANY LITIGATION BASED
HEREON, OR ARISING OUT OF, UNDER, OR IN
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<PAGE>
CONNECTION WITH THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT, SHALL BE BROUGHT AND
MAINTAINED EXCLUSIVELY IN THE COURTS OF THE STATE OF ILLINOIS OR IN THE UNITED
STATES DISTRICT COURT FOR THE NORTHERN DISTRICT OF ILLINOIS; PROVIDED, HOWEVER,
THAT ANY SUIT SEEKING ENFORCEMENT AGAINST ANY COLLATERAL OR OTHER PROPERTY MAY
BE BROUGHT, AT THE AGENT'S OPTION, IN THE COURTS OF ANY JURISDICTION WHERE SUCH
COLLATERAL OR OTHER PROPERTY MAY BE FOUND. THE COMPANY HEREBY EXPRESSLY AND
IRREVOCABLY SUBMITS TO THE JURISDICTION OF THE COURTS OF THE STATE OF ILLINOIS
AND OF THE UNITED STATES DISTRICT COURT FOR THE NORTHERN DISTRICT OF ILLINOIS
FOR THE PURPOSE OF ANY SUCH LITIGATION AS SET FORTH ABOVE. THE COMPANY FURTHER
IRREVOCABLY CONSENTS TO THE SERVICE OF PROCESS BY REGISTERED MAIL, POSTAGE
PREPAID, OR BY PERSONAL SERVICE WITHIN OR WITHOUT THE STATE OF ILLINOIS. THE
COMPANY HEREBY EXPRESSLY AND IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED
BY LAW, ANY OBJECTION WHICH IT MAY NOW OR HEREAFTER HAVE TO THE LAYING OF VENUE
OF ANY SUCH LITIGATION BROUGHT IN ANY SUCH COURT REFERRED TO ABOVE AND ANY CLAIM
THAT ANY SUCH LITIGATION HAS BEEN BROUGHT IN AN INCONVENIENT FORUM. TO THE
EXTENT THAT THE COMPANY HAS OR HEREAFTER MAY ACQUIRE ANY IMMUNITY FROM
JURISDICTION OF ANY COURT OR FROM ANY LEGAL PROCESS (WHETHER THROUGH SERVICE OR
NOTICE, ATTACHMENT PRIOR TO JUDGMENT, ATTACHMENT IN AID OF EXECUTION OR
OTHERWISE) WITH RESPECT TO ITSELF OR ITS PROPERTY, THE COMPANY HEREBY
IRREVOCABLY WAIVES SUCH IMMUNITY IN RESPECT OF ITS OBLIGATIONS UNDER THIS
AGREEMENT AND THE OTHER LOAN DOCUMENTS.
14.15 WAIVER OF JURY TRIAL. EACH OF THE COMPANY, THE AGENT AND EACH BANK
HEREBY WAIVES ANY RIGHT TO A TRIAL BY JURY IN ANY ACTION OR PROCEEDING TO
ENFORCE OR DEFEND ANY RIGHTS UNDER THIS AGREEMENT, ANY NOTE, ANY OTHER LOAN
DOCUMENT AND ANY AMENDMENT, INSTRUMENT, DOCUMENT OR AGREEMENT DELIVERED OR WHICH
MAY IN THE FUTURE BE DELIVERED IN CONNECTION HEREWITH OR THEREWITH OR ARISING
FROM ANY BANKING RELATIONSHIP EXISTING IN CONNECTION WITH ANY OF THE FOREGOING,
AND AGREES THAT ANY SUCH ACTION OR PROCEEDING SHALL BE TRIED BEFORE A COURT AND
NOT BEFORE A JURY.
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<PAGE>
Delivered at Chicago, Illinois, as of the day and year first above written.
U S LIQUIDS INC.
By
Title
BANK OF AMERICA NATIONAL TRUST AND
SAVINGS ASSOCIATION, as Agent
By
Title
BANK OF AMERICA NATIONAL TRUST AND
SAVING ASSOCIATION, as Issuing Bank,
as Swing Line Bank and as a Bank
By
Title
WELLS FARGO BANK, N.A., individually and
as Co-Agent
By
Title
78
<PAGE>
BANKBOSTON, N.A., individually and
as Co-Agent
By
Title
79
<PAGE>
NOTE
$50,000,000 April 10, 1998
Chicago, Illinois
On the Termination Date (as defined in the Credit Agreement referred to
below), the undersigned, for value received, promises to pay to the order of
Bank of America National Trust and Savings Association at the principal office
of Bank of America National Trust and Savings Association (the "AGENT"), in
Chicago, Illinois, Fifty Million Dollars ($50,000,000) or, if less, the
aggregate unpaid amount of all Loans made by the payee to the undersigned
pursuant to the Credit Agreement (as shown in the records of the payee or, at
the payee's option, on the schedule attached hereto and any continuation
thereof).
The undersigned further promises to pay interest on the unpaid principal
amount of each Loan evidenced hereby from the date of such Loan until such Loan
is paid in full, payable at the rate(s) and at the time(s) set forth in the
Credit Agreement. Payments of both principal and interest are to be made in
lawful money of the United States of America.
This Note evidences indebtedness incurred under, and is subject to the
terms and provisions of, the Amended and Restated Credit Agreement dated as of
April 10, 1998 (as amended or otherwise modified from time to time, the "CREDIT
AGREEMENT"), among the undersigned, certain financial institutions (including
the payee) and the Agent, to which Credit Agreement reference is hereby made for
a statement of the terms and provisions under which this Note may or must be
paid prior to its due date or may have its due date accelerated.
In addition to and not in limitation of the foregoing and the provisions
of the Credit Agreement, the undersigned further agrees, subject only to any
limitation imposed by applicable law, to pay all reasonable expenses, including
reasonable attorneys' fees and legal expenses, incurred by the holder of this
Note in endeavoring to collect any amounts payable hereunder which are not paid
when due, whether by acceleration or otherwise.
<PAGE>
This Note is made under and governed by the laws of the State of
Illinois applicable to contracts made and to be performed entirely within such
State.
U S LIQUIDS INC.
By:____________________________
Name Printed:__________________
Title:_________________________
<PAGE>
Schedule Attached to Note dated April 10, 1998 of U S LIQUIDS INC. payable to
the order of Bank of America National Trust and Savings Association.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Amount of Amount Notation
Date Loan Maturity Date Repaid Made By
================ ===================== ====================== ===================== ===================
================ ===================== ====================== ===================== ===================
</TABLE>
NOTE
$25,000,000 April 10, 1998
Chicago, Illinois
On the Termination Date (as defined in the Credit Agreement referred to
below), the undersigned, for value received, promises to pay to the order of
BankBoston, N.A. at the principal office of Bank of America National Trust and
Savings Association (the "AGENT"), in Chicago, Illinois, Twenty-Five Million
Dollars ($25,000,000) or, if less, the aggregate unpaid amount of all Loans made
by the payee to the undersigned pursuant to the Credit Agreement (as shown in
the records of the payee or, at the payee's option, on the schedule attached
hereto and any continuation thereof).
The undersigned further promises to pay interest on the unpaid principal
amount of each Loan evidenced hereby from the date of such Loan until such Loan
is paid in full, payable at the rate(s) and at the time(s) set forth in the
Credit Agreement. Payments of both principal and interest are to be made in
lawful money of the United States of America.
This Note evidences indebtedness incurred under, and is subject to the
terms and provisions of, the Amended and Restated Credit Agreement dated as of
April 10, 1998 (as amended or otherwise modified from time to time, the "CREDIT
AGREEMENT"), among the undersigned, certain financial institutions (including
the payee) and the Agent, to which Credit Agreement reference is hereby made for
a statement of the terms and provisions under which this Note may or must be
paid prior to its due date or may have its due date accelerated.
In addition to and not in limitation of the foregoing and the provisions
of the Credit Agreement, the undersigned further agrees, subject only to any
limitation imposed by applicable law, to pay all reasonable expenses, including
reasonable attorneys' fees and legal expenses, incurred by the holder of this
Note in endeavoring to collect any amounts payable hereunder which are not paid
when due, whether by acceleration or otherwise.
<PAGE>
This Note is made under and governed by the laws of the State of
Illinois applicable to contracts made and to be performed entirely within such
State.
U S LIQUIDS INC.
By:____________________________
Name Printed:__________________
Title:_________________________
<PAGE>
Schedule Attached to Note dated April 10, 1998 of U S LIQUIDS INC. payable to
the order of BankBoston, N.A.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Amount of Amount Notation
Date Loan Maturity Date Repaid Made By
================ ===================== ====================== ===================== ===================
================ ===================== ====================== ===================== ===================
</TABLE>
NOTE
$25,000,000 April 10, 1998
Chicago, Illinois
On the Termination Date (as defined in the Credit Agreement referred to
below), the undersigned, for value received, promises to pay to the order of
Wells Fargo Bank, N.A. at the principal office of Bank of America National Trust
and Savings Association (the "AGENT"), in Chicago, Illinois, Twenty-Five Million
Dollars ($25,000,000) or, if less, the aggregate unpaid amount of all Loans made
by the payee to the undersigned pursuant to the Credit Agreement (as shown in
the records of the payee or, at the payee's option, on the schedule attached
hereto and any continuation thereof).
The undersigned further promises to pay interest on the unpaid principal
amount of each Loan evidenced hereby from the date of such Loan until such Loan
is paid in full, payable at the rate(s) and at the time(s) set forth in the
Credit Agreement. Payments of both principal and interest are to be made in
lawful money of the United States of America.
This Note evidences indebtedness incurred under, and is subject to the
terms and provisions of, the Amended and Restated Credit Agreement dated as of
April 10, 1998 (as amended or otherwise modified from time to time, the "CREDIT
AGREEMENT"), among the undersigned, certain financial institutions (including
the payee) and the Agent, to which Credit Agreement reference is hereby made for
a statement of the terms and provisions under which this Note may or must be
paid prior to its due date or may have its due date accelerated.
In addition to and not in limitation of the foregoing and the provisions
of the Credit Agreement, the undersigned further agrees, subject only to any
limitation imposed by applicable law, to pay all reasonable expenses, including
reasonable attorneys' fees and legal expenses, incurred by the holder of this
Note in endeavoring to collect any amounts payable hereunder which are not paid
when due, whether by acceleration or otherwise.
<PAGE>
This Note is made under and governed by the laws of the State of
Illinois applicable to contracts made and to be performed entirely within such
State.
U S LIQUIDS INC.
By:____________________________
Name Printed:__________________
Title:_________________________
<PAGE>
Schedule Attached to Note dated April 10, 1998 of U S LIQUIDS INC. payable to
the order of Wells Fargo Bank, N.A.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Amount of Amount Notation
Date Loan Maturity Date Repaid Made By
================ ===================== ====================== ===================== ===================
================ ===================== ====================== ===================== ===================
</TABLE>
EXHIBIT 5.1
May 7, 1998
U S Liquids Inc.
411 N. Sam Houston Parkway East
Suite 400
Houston, TX 77060
Gentlemen:
We have acted as counsel for U S Liquids Inc., a Delaware corporation (the
"Company"), in connection with the registration by the Company under the
Securities Act of 1933, as amended (the "Securities Act"), of the sale of up to
4,312,500 shares of Common Stock, par value $.01 per share (the "Shares"), of
the Company pursuant to a Registration Statement on Form S-1 (as amended or
supplemented, the "Registration Statement") filed with the Securities and
Exchange Commission (the "Commission") on May 7, 1998. All terms used and not
defined herein shall have the meanings set forth in the Registration Statement.
We have examined such documents, records and matters of law as we have
deemed necessary for the purposes of this opinion, and based thereon, we are of
the opinion that the Shares to be issued and sold by the Company have been duly
and validly authorized for issuance and, upon issuance pursuant to the terms of
the Underwriting Agreement, will be validly issued, fully paid and
nonassessable.
The foregoing opinion is based on and is limited to the laws of the
General Corporation Law of the State of Delaware, and we render no opinion with
respect to any other law.
We hereby consent to the filing of the foregoing opinion as an exhibit to
the Registration Statement and the reference to our firm under the caption
"Legal Matters" in the Prospectus constituting a part of the Registration
Statement.
Sincerely,
HARTZOG CONGER & CASON
EXHIBIT 10.49
PURCHASE AND SALE OF ASSETS AGREEMENT
THIS PURCHASE AND SALE OF ASSETS AGREEMENT (this "Agreement") is
executed and delivered as of January 1, 1998, between ENVIRONMENT MANAGEMENT,
INC., a Texas corporation ("Buyer"); ENVIRO-PLUMBING, INC., a Texas corporation
("Seller"); and MICHAEL L. BRIGGLE, and MARK A. EMMERT the sole stockholders of
Seller ("Stockholders").
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
Austin, Texas area (the "Business");
WHEREAS, as part of the Business, Seller subleases certain
improved real property located at 5119 E. 7th Street in Austin, Texas and more
fully described on Exhibit A attached hereto and made a part hereof (the
"Land"), pursuant to a oral lease between Seller and Buyer (the "Real Estate
Lease");
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, Stockholders hold all of the outstanding capital stock
of Seller and Buyer is unwilling to enter into this Agreement without the
covenants and promises of Stockholders 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 agrees to 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");
<PAGE>
(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 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 (subject, however, to such license or other agreements as
may be applicable to such software, programs or other assets);
(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, consents, 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) the Equipment leases specified on Schedule 1.1(h) (the
"Assumed Leases"), which schedule shall set forth the lessor of such
Equipment, a description of the Equipment leased and the remaining
payment obligations under each Assumed Lease.
(i) Seller's leasehold interest in the Land (subject to the terms
of the Real Estate Lease) and all of Seller's right, title, estate and
interest in and to the buildings and other improvements on the Land;
(j) all right, title, and interest of Seller in and to the
telephone number (512) 385-2397 and the telecopier number (512) 385-1617
used by Seller in the conduct of the Business;
(k) all of Seller's right, title and interest in and to the name
"Enviro Plumbing, Inc." and the right to use such name (the "Business
Name");
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(l) all of Seller's existing documents, files and other material
related to all current or past customers of the Business;
(m) all of Seller's shop tools, nuts and bolts relating to the
Business; and
(n) all of the goodwill of the Business.
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
December 31, 1997; (c) all real property (whether owned or leased) and all
buildings on and fixtures to all real property of Seller (whether owned or
leased) other than the Land; (d) all contracts and contract rights and
obligations of Seller (whether oral or in writing) other than the Customer
Accounts, the Assumed Leases and all commitments, lists, leases, permits,
licenses, consents, approvals, franchises and other instruments not relating to
the Customer Accounts, the Assumed Leases or the Business; (e) all employment
contracts to which Seller is a party or by which Seller is bound; and (f) all
motor vehicles of Seller that are not Rolling Stock.
SECTION 1.3 NON-ASSIGNMENT OF CERTAIN CUSTOMER ACCOUNTS AND
ASSUMED LEASES. Notwithstanding anything to the contrary in this Agreement, to
the extent that the assignment hereunder of any Customer Account or Assumed
Lease 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 or
Assumed Lease, 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 or
Assumed Lease by such other person, or otherwise. Attached hereto as Schedule
1.3 is a list of all Customer Accounts or Assumed Leases 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 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 the close of business on
December 31, 1997.
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(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 December 31, 1997, all cash on hand or on deposit
with Seller consisting of sums paid to Seller pursuant to any 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 December
31, 1997, 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 CHANGE OF NAME. On the date of Closing, Seller shall
take all necessary action to change Seller's current Business Name, to a name
not the same as or similar to Enviro Plumbing, Inc. or any other symbol,
trademark, service mark, logo or trade name now used by Seller. Seller shall, on
the date of closing, deliver to Buyer, in form suitable for filing, such
certificates, consents and other documents as are necessary to effect the
transfer of the registration of the Business Name conveyed by Buyer pursuant to
this Agreement in Texas, and shall grant any consents and take any other and
further action, all at Seller's own expense, requested by Buyer to enable Buyer
to reserve or register any such name for use of Buyer in Texas.
ARTICLE 2. PURCHASE PRICE
SECTION 2.1 AGGREGATE PURCHASE PRICE. U S Liquids Inc., a
Delaware corporation ("Parent") shall pay to Seller for the Assets and the
restrictive covenants set forth herein: (A) the sum of $1,750,000 in immediately
available funds on the Closing Date; and (B) the sum of $950,000 in immediately
available funds on January 16, 1999.
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"), to be effective
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for all purposes as of January 1, 1998. The Closing shall take place at a time
and location mutually acceptable to Buyer and Seller.
SECTION 3.2 DELIVERIES BY SELLER AND STOCKHOLDERS. At the
Closing, Seller and Stockholders shall deliver to Buyer, all duly executed:
(a) an assignment of the Real Estate Lease containing the
consent of the Landlord if required;
(b) 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 (other than the
Land) (the "Bill of Sale");
(c) an assignment and assumption of the Assumed Leases;
(d) motor vehicle Certificates of Title and/or registrations to
the Rolling Stock, properly endorsed to Buyer;
(e) a receipt acknowledging payment by Buyer of the purchase
price;
(f) fully executed consents to the assignment of the Customer
Accounts and the Assumed Leases set forth on Schedule 1.3, if any, in
form and substance reasonably satisfactory to Buyer;
(g) the documents evidencing Seller's change of name as required
by Section 1.6;
(h) 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, along with an incumbency certificate of Seller; and
(i) 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 an
assignment and assumption of the Assumed Leases.
SECTION 3.4 PRORATIONS AND CHARGES. The parties shall prorate and
apportion, on a calendar year basis, as of the close of business on the date of
Closing, the rent under the Real Estate Lease.
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ARTICLE 4. COVENANTS OF SELLER AND STOCKHOLDER
SECTION 4.1 USE OF BUSINESS NAME. Seller and Stockholders
covenant not to use the Business Name or any similar names from and after the
close of business on the date of Closing.
SECTION 4.2 TRANSITION. Neither Seller nor Stockholders 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 Stockholders will refer all customer inquiries relating
to the Business to Buyer from and after the Closing. Further, Seller and
Stockholders 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 Stockholders 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 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 STOCKHOLDERS
SECTION 5.1 Seller and each Stockholder, severally (and not
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
Stockholders 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 any Stockholder is a party or by which Seller or any
Stockholder is bound. This Agreement constitutes a valid
obligation of Seller and Stockholders enforceable against Seller
and each Stockholder in accordance with its terms except as
limited by bankruptcy, insolvency, reorganization or other such
laws concerning the rights of creditors.
(ii) Each 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.
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(iii) All of the issued and outstanding shares of Seller
are owned of record and beneficially by Stockholders, free and
clear of all liens, security interests and encumbrances
whatsoever.
(b) COMPLIANCE WITH LAW. To the best of Stockholders' and
Seller's knowledge, except as set forth on Schedule 5.1(b), neither
Seller nor any 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
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 used or for use in connection with the
Business. 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 any
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
Leases, and, by virtue of the grant, conveyance, sale, transfer, and
assignment of the Assets hereunder, Buyer shall receive good and
marketable title to the
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Assets, free and clear of all liens, lease payments (including lease-end
buy-out payments), encumbrances, security interests, equities or
restrictions whatsoever, except the Assumed Leases. The Assets include
all of the permits, licenses, franchises, consents and other approvals
necessary or desirable to conduct the Business.
(g) TITLE TO REAL PROPERTY. Seller has never owned, leased or
otherwise occupied, had an interest in or operated any real property
other than the Land. Seller has good, valid leasehold title to the Land.
Except as set forth on Schedule 5.1(g):
(i) The Land is, and at all times during operation of the
Business has been, fully licensed, permitted and authorized for
the operation of the Business under all Applicable Laws relating
to the protection of the environment, the Land and the conduct of
the Business thereon (including, without limitation, all zoning
restrictions and land use requirements).
(ii) The Land is usable for its current uses and to the
best of Stockholders' and Seller's knowledge, 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 Seller's 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.
(iii) 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 Seller.
(iv) Neither Seller, 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.
(v) No third party has a present or future right to
possession of all or any part of the Land except the landlord
under the Real Estate Lease.
(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, to the best of Stockholders' and
Seller's knowledge, 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 any 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.
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(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 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) FINANCIAL STATEMENTS. Seller has delivered to Buyer copies of
Seller's Statement of Assets, Liabilities and Equity-- Income Tax Basis
as of December 31, 1996 (the "Balance Sheet Date"), and a Statement of
Revenue and Expenses-- Income Tax Basis for the year then ended (the
"Financial Statements"). The Financial Statements are true, complete and
correct and present fairly the financial condition and the results of
the operations of Seller for the period indicated thereon. All reserves
for contingent risks are appropriate and sufficient to cover all costs
reasonably expected to be incurred from such risks. The Financial
Statements are consistent with the books and records of Seller (which
books and records are correct and complete).
(l) 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.
(m) HAZARDOUS MATERIALS. Neither Seller nor Stockholders 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
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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. To the best of Stockholders' and
Sellers's knowledge, 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 Stockholders' and Seller'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 Stockholders' and Seller'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 onto the
Land or into the environment. Further, no portion of the Land is listed
on the CERCLA list or the National Priorities List of Hazardous Waste
Sites or any similar list maintained by the State of Texas. Attached
hereto as Schedule 5.1(m) 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, Stockholders nor the Land is listed as a potentially
responsible party under CERCLA or any comparable or similar Texas
statute; neither Seller nor Stockholders has received any written notice
of such a listing; and neither Seller nor Stockholders knows of any
facts or circumstances which could give rise to such a listing.
(n) 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.
(o) 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.
(p) GROSS REVENUES. The gross revenues generated by the Business
for the 12- month period immediately preceding the month in which the
Closing occurs were $657,675.88.
(q) UNDERGROUND STORAGE TANKS. Except for the Land, 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.
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Set forth on Schedule 5.1(q) is a list of all above and below ground
tanks located on the Land, each of which are being used and maintained
in accordance with Applicable Laws.
(r) COMPLETENESS OF DISCLOSURE. To the best of Stockholders' and
Seller's knowledge, 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 Stockholders
become aware of any fact or circumstance which would change a
representation or warranty of Seller or Stockholders in this Agreement,
the party with such knowledge shall immediately give notice of such fact
or circumstance to Buyer. However, such notification shall not relieve
Seller or Stockholders 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 Stockholders at the date of
this Agreement shall be a precondition to the consummation of this
transaction, provided that no party shall be entitled to rely on any
representation or warranty provided in this Agreement to the extent such
party has actual knowledge that such representation or warranty is
inaccurate or incorrect.
SECTION 5.2 SURVIVAL. Each of the representations and warranties
set forth in this Article 5 shall survive the Closing hereunder for a period of
one year after the Closing Date; provided, however, that the representations and
warranties in Sections 5.1(a) and 5.1(b) shall survive until the expiration of
the applicable status of limitations; and that the representations and
warranties in Sections 5.1(g) and 5.1(m) shall survive for a period of a three
years after the Closing Date.
ARTICLE 6. REPRESENTATIONS AND WARRANTIES OF BUYER AND PARENT
SECTION 6.1 Buyer and Parent represent and warrant to Seller and
Stockholders 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
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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 until the expiration of
the applicable statute of limitations.
ARTICLE 7. NON-ASSUMPTION OF LIABILITIES; INDEMNIFICATION
SECTION 7.1 NON-ASSUMPTION OF LIABILITIES. Except as explicitly
set forth in Section 7.2 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 Stockholders
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 Stockholders of any
materials, including, without limitation, Hazardous Materials; (e) an agreement
or arrangement between Seller and the employees of Seller or Stockholders 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 Stockholders or to which Seller or any Stockholder contributes or any
contributions, benefits or liabilities therefor or any liability 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; (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 Land,
including, without limitation, the environmental condition thereof and any
dispute between Seller and the owner of the Land; and (k) the liabilities or
obligations of Seller or any Stockholder for brokerage or other commissions
relative to this Agreement or the transactions contemplated hereunder. Seller
and Stockholders each agree to indemnify Buyer, its successors and assigns from
and against all of the above liabilities and obligations in accordance with
Section 7.3 below.
SECTION 7.2 ASSUMPTION OF SPECIFIC LIABILITIES. Buyer agrees to
perform all of Seller's contractual obligations related to the Customer Accounts
and the Assumed Leases, to the
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extent, and only to the extent, such obligations first mature and are required
to be performed after the close of business on the Closing Date.
SECTION 7.3 INDEMNIFICATION BY SELLER AND STOCKHOLDERS.
Notwithstanding investigation at any time made by or on behalf of Buyer, Seller
and each Stockholder, severally (and not 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, either
before or after the date of this Agreement, from:
(a) inaccuracy in any representation or warranty made by Seller
or Stockholders in this Agreement;
(b) breach of any representation or warranty under this Agreement
by Seller or Stockholder;
(c) failure of Seller or Stockholders duly to perform and observe
any term, provision, covenant, agreement or condition under this
Agreement;
(d) liability of Seller or Stockholders 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(m) hereof);
(e) misrepresentation in or omission from any Schedule to this
Agreement;
(f) failure of Seller or Stockholders 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 Stockholders imposed upon Buyer as a
result of Seller's failure to comply with the bulk transfer law of
Texas;
(h) liability of Seller or Stockholders resulting from one or
more pending or threatened lawsuits whether or not listed on Schedule
5.1(h);
(i) liability of Seller or any Stockholder to creditors of Seller
or any Stockholder which is imposed on Buyer whether as a result of
bankruptcy proceedings or otherwise and whether as an account payable by
Seller or any Stockholder or as a claim of alleged fraudulent conveyance
or preferential payments within the meaning of the United States
Bankruptcy Code or otherwise; and
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(j) the existence of creditors of Seller which are not disclosed
to Buyer;
(k) any of the matters described in Section 7.1(a)-(k) hereof;
and
(l) any claim by a third party that, if true, would mean that a
condition for indemnification set forth in this Section 7.3 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) - (l) of this Section 7.3 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 7.4 INDEMNIFICATION BY BUYER AND PARENT. Buyer and
Parent, severally (and not 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 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;
(d) the operation of the Business of Buyer after the Closing,
including, without limitation, the Customer Accounts and the Assumed
Leases; and
(e) any claim by a third party that, if true, would mean that a
condition for indemnification set forth in this Section 7.4 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 7.4 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,
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cause of action, damage, liability, expense or other cost suffered, paid or
incurred by such subsidiary, affiliate, or successor.
SECTION 7.5 LIMITATION ON LIABILITY. The indemnification
obligations set forth in this Agreement shall apply only after the aggregate
amount of such obligations exceed $50,000, when combined with the Agreement and
Plan of Reorganization among U S Liquids/EMI Acquisition Corporation, U S
Liquids Inc., Buyer and Stockholders (the "Merger Agreement"), and the Stock
Purchase Agreement among Buyer, U S Liquids Inc., Enviro Waste Type V of Texas,
Inc. and Stockholders (the "Stock Purchase Agreement"), at which time the
indemnification obligations shall be effective as to all amounts, including the
initial $50,000 and shall in no event exceed a maximum of $4,585,000.
SECTION 7.6 PROCEDURE FOR INDEMNIFICATION.
(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.
(b) Any Indemnifying Party will have the right to defend the
Indemnified Party against a Third Party Claim with counsel of its choice
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, (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 only monetary damages
and does not seek an injunction or equitable relief 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.
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(c) So long as the Indemnifying Party is conducting the defense
of the Third Party Claim in accordance with Section 7.6(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 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 7.6(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 attorneys' fees
and 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 7; 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.
ARTICLE 8. GENERAL
SECTION 8.1 FURTHER ASSURANCE. From time to time after the
Closing, Seller and Stockholders will, without further consideration, but
without incurring any cost or expense, 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 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
Stockholders will cooperate and use its reasonable efforts, but without
incurring any cost or expense, 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 8.2 JOINT AND SEVERAL OBLIGATIONS. All representations,
warranties and agreements of Seller or Stockholders under this Agreement, the
Schedules and the transactions
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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 8.3 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 8.4 TIME OF THE ESSENCE. Time is of the essence of this
Agreement.
SECTION 8.5 NOTICE. All notices or communications required or
permitted under this Agreement shall be given in 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:
Enviro-Plumbing, Inc.
5119 E. 7th
Austin, TX 78702
Attn: Michael L. Briggle
with copies to:
Michael L. Briggle
3511 Woodcutters Way
Austin, TX 78746
and
Mark A. Emmert
808 Westlake Drive
Austin, TX 78746
and
Richard Cox, Esq.
300 Crescent Court
Suite 1400
Dallas, TX 75201
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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 LLP
3200 National City Center
1900 E. 9th Street
Cleveland, OH 44114-3485
Notice shall be deemed given and effective the day personally delivered (if
delivered during normal business hours on a business day, or on the next
business day if not so 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 8.6 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 written, relative to said subject matter.
SECTION 8.7 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.
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SECTION 8.8 EXPENSES OF TRANSACTION. Seller shall pay all costs
and expenses incurred by Seller or Stockholders 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 8.9 BROKER'S COMMISSION. Seller and Stockholders
represent and warrant to Buyer and Buyer represents and warrants to Seller and
Stockholders 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 8.10 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 8.11 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 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 8.12 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.
SECTION 8.13 COSTS OF LITIGATION.
(a) If Parent fails to make a required payment when due under the
terms of this Agreement, then Parent shall pay to Seller interest on the
amount due at the rate of 18% per annum from the date the payment was
due until the date paid.
(b) Parent shall not be in default of its obligations to make the
payment pursuant to Section 2.1(B) hereof until and unless Seller shall
have: (i) delivered a written notice
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to Parent demanding payment and a period of 45 days shall have expired
after Parent's receipt of such notice; and (ii) delivered a second
written notice to Parent two weeks prior to the expiration of such 45
day period. Upon default in accordance with the previous sentence,
Parent shall pay to Seller, on demand, the additional sum of $218,500
(as interest at the rate of eighteen percent (18%) per annum on the
$950,000 portion of the Purchase Price which was deferred plus a five
percent (5%) late payment penalty), together with any other amounts due
under this Section 8.13.
(c) Additionally, Parent shall not be in default of its
obligations to make the payment pursuant to Section 2.1(B) hereof and
shall not have to pay any amounts under 8.13 (b) hereof in the event
that on the date such payment is due and payable, there is pending
litigation related to that certain Executory Agreement between Austin
Liquids Disposal Co., Inc. ("ALD"), and Enviro-Waste Management, Inc.,
dated July 1, 1996 (the "Executory Agreement"). After such litigation is
resolved or Parent receives a written release from ALD to Parent in a
form satisfactory to Parent releasing Parent, Buyer and their affiliates
(the "Resolution Date"), Parent shall then make any payment due under
Section 2.1(B) hereof, less any amounts set off pursuant to Section 11.5
of the Agreement and Plan of Reorganization among U S Liquids/EMI
Acquisition Corporation, Parent, Buyer and Stockholders dated of even
date herewith (the "Merger Agreement"). The terms of Section 8.13(b)
(including the required notice provisions) shall apply to any failure to
make payment on the Resolution Date. Parent shall also pay to
Stockholders interest on such payment from January 16, 1999, at the
current rate of interest at which Parent is able to borrow funds plus
two percent (2%) payable monthly in arrears commencing March 1, 1999.
(d) 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, attorney's fees and expenses,
investigation costs and court costs.
SECTION 8.14 SIMULTANEOUS CLOSINGS. The closings under the
Merger Agreement and that certain Stock Purchase Agreement among Buyer, Parent,
Enviro-Waste Type V of Texas, Inc. and Stockholders shall occur
contemporaneously with the Closing hereunder.
[REMAINDER OF THIS PAGE LEFT INTENTIONALLY BLANK]
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement
to be executed as of the day and year first above written.
BUYER:
ENVIRONMENT MANAGEMENT, INC.
By: __________________________
Its: __________________________
SELLER:
ENVIRO PLUMBING, INC.
(EIN: 75-2584534)
By: __________________________
Its: __________________________
STOCKHOLDERS:
_________________________________
Michael Briggle
(SSN: ###-##-####)
_________________________________
Mark Emmert
(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: ___________________________
Its: __________________________
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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 1.1(h) -- Assumed Leases
Schedule 1.3 -- Customer Accounts Requiring Consent to Assignment
Schedule 1.4 -- Accounts Receivable
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(m) -- List of Disposal Sites
Schedule 5.1(q) -- List of Storage Tanks
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EXHIBIT 10.50
AGREEMENT AND PLAN OF REORGANIZATION
AMONG
U S LIQUIDS/EMI ACQUISITION CORPORATION
U S LIQUIDS INC.
AND
ENVIRONMENT MANAGEMENT, INC.
AND
MICHAEL L. BRIGGLE AND MARK A. EMMERT
<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........................................ 3
1.6 Endorsement of Company Stock.............................. 4
2. CONVERSION AND EXCHANGE OF STOCK..................................... 4
2.1 Conversion of Stock....................................... 4
2.2 Assumption of Debt........................................ 4
2.3 Adjustment to Purchase Price.............................. 4
3. TITLE ASSURANCE...................................................... 5
3.1 Title Policies............................................ 5
3.2 Permitted Encumbrances.................................... 6
3.3 Survey.................................................... 6
4. CLOSING.............................................................. 7
5. REPRESENTATIONS AND WARRANTIES OF STOCKHOLDERS AND
COMPANY.............................................................. 7
5.1 Organization; Authority................................... 7
5.2 Stock Ownership; Absence of Adverse Claims................ 8
5.3 Capitalization............................................ 8
5.4 Predecessor Entities; Trade Names......................... 8
5.5 No Subsidiaries........................................... 9
5.6 Financial Statements...................................... 9
5.7 Non-Balance Sheet Liabilities............................. 9
5.8 Accounts Receivable....................................... 10
5.9 Proprietary Rights; Environmental Documents............... 10
5.10 Real Property; Reporting................................. 11
5.11 Personal Property; New Projects.......................... 12
5.12 Contracts................................................ 13
5.13 Insurance Policies....................................... 14
5.14 Directors, Officers and Employees; Compensation.......... 14
5.15 Employee Plans........................................... 14
<PAGE>
SECTION PAGE
5.16 Compliance with ERISA.................................... 14
5.17 Compliance with Law; No Conflicts........................ 15
5.18 Taxes.................................................... 16
5.19 Litigation............................................... 16
5.20 Absence of Price Renegotiation Contracts................. 16
5.21 Conduct of Business Since Balance Sheet Date............. 17
5.22 Bank Accounts; Depositories.............................. 18
5.23 Hazardous Materials...................................... 18
5.24 Storage Tanks............................................ 19
5.25 Absence of Certain Business Practices.................... 19
5.26 Complete Disclosure...................................... 19
6. REPRESENTATIONS AND WARRANTIES OF BUYER AND PARENT................... 19
6.1 Corporate Organization.................................... 20
6.2 Corporate Authority....................................... 20
6.3 No Conflicts.............................................. 20
6.4 Binding Agreement......................................... 20
7. COVENANTS............................................................ 20
7.1 Access to Land and Records................................ 20
7.2 Company Activities Prior to Closing....................... 21
7.3 Prohibited Activities Prior to Closing.................... 22
7.4 Contact with Government Officials......................... 23
8. CONDITIONS PRECEDENT TO OBLIGATIONS OF COMPANY AND
STOCKHOLDERS......................................................... 23
8.1 Representations and Warranties............................ 23
8.2 Consents.................................................. 23
8.3 No Adverse Proceeding..................................... 23
8.4 Noncompetition Agreement.................................. 23
8.5 Simultaneous Closings..................................... 23
9. CONDITIONS PRECEDENT TO OBLIGATIONS OF BUYER AND PARENT.............. 24
9.1 Representations and Warranties............................ 24
9.2 Covenants................................................ 24
9.3 No Adverse Proceeding..................................... 24
9.4 General Release........................................... 24
9.5 Consents.................................................. 24
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SECTION PAGE
9.6 Resignations.............................................. 24
9.7 Good Standing Certificates................................ 25
9.8 Updated Agreements........................................ 25
9.9 Noncompetition Agreement.................................. 25
9.10 Delivery of Company Stock................................ 25
9.11 Environmental Review..................................... 25
9.12 Transferability of Permits............................... 25
9.13 General.................................................. 25
9.14 Simultaneous Closings.................................... 25
10. POST CLOSING COVENANTS............................................... 26
10.1 Taxes.................................................... 26
10.2 Post Closing Balance Sheet............................... 26
10.3 Closing Date Actions..................................... 26
10.4 Further Assurance........................................ 27
10.5 Transition............................................... 27
10.6 Survival................................................. 27
11. INDEMNIFICATION...................................................... 27
11.1. Indemnification by Stockholders and Company.............. 27
11.2 Indemnification by the Surviving Corporation............. 28
11.3 Procedure for Indemnification with Respect to Third
Party Claims............................................. 28
11.4 Limitation on Liability.................................. 29
11.5 Escrow................................................... 30
12.1 Termination by Buyer..................................... 30
12.2 Termination by Stockholders.............................. 30
12.3 Termination by Lapse..................................... 30
13. NONDISCLOSURE OF CONFIDENTIAL INFORMATION............................ 30
13.1 Nondisclosure by Stockholders............................ 30
13.2 Nondisclosure by Parent.................................. 30
14. GENERAL.............................................................. 31
14.1 Assignment; Binding Effect; Amendment.................... 31
14.2 Entire Agreement......................................... 31
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14.3 Counterparts............................................. 31
14.4 No Brokers............................................... 31
14.5 Expenses of Transaction.................................. 32
14.6 Notices.................................................. 32
14.7 Governing Law............................................ 33
14.8 Appointment of Agent..................................... 33
14.9 No Waiver................................................ 33
14.10 Time of the Essence..................................... 33
14.11 Captions................................................ 33
14.12 Severability............................................ 34
14.13 Construction............................................ 34
14.14 Standstill Agreement.................................... 34
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<PAGE>
AGREEMENT AND PLAN OF REORGANIZATION
THIS AGREEMENT AND PLAN OF REORGANIZATION (the "Agreement") is
executed and delivered as of January 1, 1998, among U S LIQUIDS/EMI ACQUISITION
CORPORATION, a Texas corporation ("Buyer"); U S LIQUIDS INC., a Delaware
corporation ("Parent"); ENVIRONMENT MANAGEMENT, INC., a Texas corporation
("Company"); and MICHAEL L. BRIGGLE and MARK A. EMMERT, the sole stockholders of
Company ("Stockholders");
W I T N E S S E T H:
WHEREAS, Company owns all the stock of MLB Investments, Inc., a
Texas corporation ("Subsidiary");
WHEREAS, Subsidiary operates a non-hazardous commercial waste
collection, transportation and processing business in the Austin, Texas area
(the "Business");
WHEREAS, as part of the Business, Subsidiary leases certain real
property located at 5119 E. 7th Street in Austin, Texas and more fully described
on Exhibit A, attached hereto and made a part hereof (the "Austin Land"), and
operates thereon a fully permitted facility for the collection transportation
and processing of non-hazardous commercial waste (the "Facility") pursuant to a
written lease dated January 22, 1993, with Michael J. Kuhn, Trustee, as amended
by a letter agreement dated June 3, 1996 (the "Austin Lease");
WHEREAS, as part of the Business, Subsidiary leases certain real
property located at 1375 Creekview in San Antonio, Texas and more fully
described on Exhibit B, attached hereto and made a part hereof (the "San Antonio
Land"), pursuant to a written lease dated June 23, 1993, with Douglas M. Jones
("the San Antonio Lease," together with the Austin Lease, the "Real Estate
Leases");
WHEREAS, as part of the Business, Subsidiary owns certain real
property located in San Antonio, Texas and more fully described on Exhibit C,
attached hereto and made a part hereof (the "Owned Land," together with the
Austin Land and the San Antonio Land, the "Land");
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 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; and
<PAGE>
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:
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 the Surviving Corporation shall
be amended to reflect the Articles of Incorporation of Buyer; 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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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, without par value ("Buyer Stock"), of which 1,000 shares
are issued and outstanding; and
(ii) the authorized capital stock of Company consists of 100,000
shares of common stock, without par value per share, of which 3,000 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. 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, be entitled to receive the consideration set
forth in Article 2 below.
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1.6 ENDORSEMENT OF COMPANY STOCK. Stockholders shall deliver at Closing
the certificates representing the Company Stock, duly endorsed in blank by
Stockholders 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 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 $1,125,000 in
cash subject to adjustment in accordance with Sections 2.2 and 2.3 below.
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 ASSUMPTION OF DEBT. Attached hereto as Schedule 2.2 is a listing of
all of the actual long-term debt of Company (including the current portion of
such debt) plus all lease debt (including lease end buy out payments) (the
"Assumed Debt") and evidence establishing the Assumed Debt. If the Assumed Debt
is more than $710,000 on the Closing Date, the consideration payable in Section
2.1 shall be reduced by an amount equal to the difference between $710,000 and
the Assumed Debt.
2.3 ADJUSTMENT TO PURCHASE PRICE. The parties agree that the purchase
price was determined as if the net working capital of Company, together with
Enviro-Plumbing, Inc. and Enviro-Waste Type V of Texas, Inc. (collectively, the
"Combined Companies"), was going to be $125,000 at the close of business on
December 31, 1997. 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 the
Combined Companies on December 31, 1997 (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 the Combined Companies so reflected
is greater than $125,000 on December 31, 1997, 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 $125,000 on December 31, 1997. If the Actual
Net Working Capital of the Combined Companies so reflected is less than $125,000
on December 31, 1997, 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 $125,000 on December 31, 1997. For purposes of this Agreement,
Actual Net Working Capital shall mean the current assets of the Combined
Companies on December 31, 1997, minus all current liabilities of the Combined
Companies (exclusive of the Assumed Debt) on December 31, 1997, calculated in
accordance with the method and principles of accounting used by the Combined
Companies in the
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preparation of the Combined Companies's financial information delivered pursuant
to Section 5.6 hereof.
In order to facilitate the contemplated adjustment to purchase price on
the Adjustment Date, at least five business days before December 31, 1997, the
parties will prepare and agree upon an estimated net working capital balance for
the Combined Companies as of November 30, 1997 (the "Estimated Working
Capital"). The amount of Estimated Working Capital (positive or negative) will
be an adjustment to the purchase price on December 31, 1997. In computing the
adjustment amounts provided for this Section, the party owing payment to the
other pursuant to this Section shall make such payment in cash.
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 TITLE POLICIES. On the Closing Date, Stockholders shall furnish to
Buyer:
(a) an extended coverage owners policy of title insurance from
Chicago Title Insurance Company (the "Title Company") in the amount of
$200,000 with each of the Title Company's standard printed exceptions
deleted and including comprehensive, access, contiguity, non-arbitration,
going concern, non-imputation and zoning endorsements (to the extent such
endorsements are available in Texas), insuring title to the Owned Land to
be in fee simple in the Surviving Corporation subject only to the
exceptions permitted by Section 3.2 hereof (the "Owners Policy"). At least
ten business days prior to the Closing, Stockholders shall deliver to
Buyer a preliminary title commitment in respect of the Owned 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.
(b) an extended coverage leasehold policy of title insurance from
the Title Company in the amount of $500,000 with each of the Title
Company's standard printed exceptions deleted and including comprehensive,
access, contiguity, non-arbitration, going concern, non-imputation and
zoning endorsements (to the extent such endorsements are available in
Texas), insuring valid leasehold title to the Austin Land in the Surviving
Corporation subject only to the exceptions permitted by Section 3.2 hereof
(the "Austin Policy"). At least ten business days prior to the Closing,
Stockholders shall deliver to Buyer a preliminary title commitment in
respect of the Austin Land, together with copies of all exception
instruments referenced therein, and any unrecorded leases, option
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agreements, contracts and any other items affecting title which are in the
possession of, or known to, Stockholders.
(c) an extended coverage leasehold policy of title insurance from
the Title Company in the amount of $100,000 with each of the Title
Company's standard printed exceptions deleted and including comprehensive,
access, contiguity, non-arbitration, going concern, non-imputation and
zoning endorsements (to the extent such endorsements are available in
Texas), insuring valid leasehold title to the San Antonio Land in the
Surviving Corporation subject only to the exceptions permitted by Section
3.2 hereof (the "San Antonio Policy," together with the Owners Policy and
the Austin Policy, the "Title Policies"). At least ten business days prior
to the Closing, Stockholders shall deliver to Buyer a preliminary title
commitment in respect of the San Antonio 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 Title Policies 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;
(iii) easements, encumbrances, covenants, conditions, reservations and
restrictions of record, if any, as have been approved in writing by Buyer; and
(iv) in the case of the San Antonio Policy and the Austin Policy, the Real
Estate Leases. Buyer shall pay all of the costs associated with the delivery of
the Title Policies to the Surviving Corporation.
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 Title Policies current
and complete surveys of the San Antonio Land, the Austin Land and the Owned
Land, respectively, each made on the ground by a competent registered surveyor,
showing: (a) the exact boundary lines of the San Antonio Land, the Austin Land
and the Owned Land; (b) the location thereon of all, if any, buildings,
improvements, and easements now existing; (c) the number of acres in the San
Antonio Land, the Austin Land and the Owned Land; (d) the location of any
buildings, fences or other improvements which encroach on the San Antonio Land,
the Austin Land and the Owned Land; (e) the location of any improvements on the
San Antonio Land, the Austin Land and the Owned 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 San Antonio
Land, the Austin Land and the Owned Land; and (g) all public access to the Land,
and representing that the boundaries of the San Antonio Land, the Austin Land
and the Owned Land are contiguous with the boundaries of all adjoining parcels
(the "Surveys"). At least ten business days prior to the Closing, a copy of the
Surveys 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
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enable the Title Company to delete its standard survey exceptions from the Title
Policies. Buyer shall pay all of the costs of the Surveys.
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; provided, however,
that in the event that the Closing shall not have occurred by February 28, 1998,
either Company or Buyer may terminate this Agreement by giving written notice to
the other party. 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." The effective date of this Agreement for all
accounting purposes shall be January 1, 1998.
5. REPRESENTATIONS AND WARRANTIES OF STOCKHOLDERS AND
COMPANY. For purposes of this Section, the term Company shall be deemed to refer
to both Company and Subsidiary. Company, as to the time period before Closing
only, and each Stockholder, severally (and not 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
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 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 11 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 any Stockholder, after reasonable inquiry.
5.1 ORGANIZATION; AUTHORITY.
(i) Company and Subsidiary are each a Texas corporation duly
organized, validly existing and in good standing under the laws of the
State of Texas and each 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 the 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). Copies
of the Subsidiary's Articles of Incorporation (certified by the Secretary
of State of Texas) and Bylaws (certified by the Secretary of Subsidiary),
each as amended, are attached hereto as Schedule 5.1(i).
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(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,
"Adverse Claims"). All of the issued and outstanding shares of Subsidiary are
owned of record and beneficially by Company and are free and clear of 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 100,000 shares of voting common stock, no par value, of which 3,000
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. 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.
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.
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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 and Subsidiary.
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 Statement of Assets, Liabilities and Equity--Income
Tax Basis as of December 31, 1996, and a Statement of Revenue and
Expenses--Income Tax Basis for the year then ended (the "Balance Sheet
Date");
(b) Company's Statement of Assets, Liabilities and Equity--Income
Tax Basis as of August 31, 1997, and a Statement of Revenue and
Expenses--Income Tax Basis for the eight months then ended; and
(c) Company's monthly interim Statement of Assets, Liabilities and
Equity--Income Tax Basis and Statements of Revenue and Expenses--Income
Tax Basis commencing for the month ended September 30, 1997, and
continuing for each month end until the end of the month immediately
preceding the month in which the Closing Date occurs.
Except as set forth on Schedule 5.6, each of the Financial Statements
(including all footnotes thereto) has been prepared in accordance with the
income tax basis, applied on a consistent basis throughout the periods
indicated. Each of the Financial Statements is true, complete and correct. Each
of the Statements of Assets, Liabilities and Equity--Income Tax Basis 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. All
reserves for contingent risks 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 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
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or is contested, Stockholders shall provide the following information to the
extent such information is in the possession of the Company or Stockholders or
is reasonably available to them:
(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
(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. Except to the extent reflected on Schedule 5.8, 90% of the
aggregate amount of the accounts and notes receivable shown on Schedule 5.8 are
collectible.
5.9 PROPRIETARY RIGHTS; ENVIRONMENTAL DOCUMENTS.
(i) Attached as Schedule 5.9(i) is a 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 which are
material to the operation of the principal business of the 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;
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(ii) Stockholders 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 written notifications from
governmental agencies and any other person or entity and any other
documents of Company of which the Stockholders have knowledge 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. Company has
good, fee simple title to the Owned Land and a valid leasehold interest in
the Austin Land and San Antonio Land. Attached hereto as Schedule 5.10(i)
are true and correct copies of the Real Estate Leases together with all
amendments or other modifications. Except as set forth on Schedule
5.10(i):
(a) The Austin 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 Austin 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, to the best
of Stockholders' knowledge, 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 Surviving Corporation to use the
Land for its current uses after the Closing Date.
(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.
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(e) Neither Company, Stockholders nor the Land now is or, to
the best of Stockholders' knowledge (with respect to the Land), 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.
(f) To the best of Stockholders' knowledge, no third party has
a present or future right to possession of all or any part of the
Land except pursuant to the Real Estate Leases.
(g) To the best of Stockholders' knowledge, 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) There are no levied or pending special assessments
affecting all or any part of the Land and, to the best of
Stockholders' knowledge, 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, 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 having a value greater than $2,000 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 in all
material respects;
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(ii) Company has good title to, or a valid leasehold interest in,
the properties and assets used by it shown on its Statement of Assets,
Liabilities and Equity--Income Tax Basis 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, as applicable;
(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 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 reasonably necessary for and material to the operation
of the Business both by Company and by the Surviving Corporation
immediately following the Closing and, to the best of Stockholders'
knowledge, 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, free and clear of all debts and lease payments
(including lease end buy-out payments) except for 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 which are material to the operation of the Business and 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, the
Real Estate Leases, 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 a material 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. To the best of Stockholders' and Company's
knowledge, except as noted in Schedule 5.13, Company has complied with all
obligations pertaining to it contained in such contracts, commitments and other
agreements, is not in
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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, 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. Except as set forth on Schedule 5.13, 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). 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 Internal Revenue Code (the "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 ERISA Section
3(2)) which is subject to the provisions of Title IV of ERISA. Except for the
Plans, 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
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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 or 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) attached hereto as Schedule 5.16(ii) is a copy of the claims
history under Company's group health plan for the past three years; and
(iii) with respect to any Plan which qualifies as a group health
plan, such plan is fully insured 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.
5.17 COMPLIANCE WITH LAW; NO CONFLICTS.
(i) To the best of Stockholders' knowledge and except as set forth
on Schedule 5.17, 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") with regard to which the noncompliance by Company would or could
have a material adverse affect on Company or the Business. Neither Company
nor Stockholders have received any written notice (nor, to the best of
Stockholders' knowledge, oral other notice) that Company is under
investigation or other form of review with respect to any Applicable Law;
and
(ii) to the best of Stockholders' knowledge, 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
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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 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. The amounts shown as accruals
for taxes on the Financial Statements as of the respective dates thereof are
sufficient as of such respective dates for the payment of all taxes of the kinds
indicated (including penalties and interest) for all fiscal periods ended on or
before such date. 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 fiscal year ended May 31; however,
Company will file a return for the period from June 1, 1992 to December 31,
1997. 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 and of which the Company or any Stockholder has received notice 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, to the best of Stockholders'
knowledge, 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.
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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 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 material increase from prior years 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 the amounts shown on Schedule 5.14;
(vi) work interruption, labor grievance or material 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) except as set forth herein 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 material rights or claims of Company;
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(xii) breach, amendment or termination of any material 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 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. Except as set forth on Schedule 5.23, Company
has never owned, leased, had an interest in, generated, transported, handled,
recycled, reclaimed, disposed of, or contracted for the disposal of, hazardous
materials, hazardous wastes, hazardous substances, toxic wastes or substances as
those terms are defined by 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; the
Occupational Health and Safety Act; 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 (collectively, "Hazardous Materials"). 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, and, to the best of Stockholders' knowledge, no facts or circumstances
exist which would give rise to the same. 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 is listed as a potentially responsible party under CERCLA, any
comparable state statute or other Applicable Law, and neither Company nor any
Stockholder has received a written notice of such a listing.
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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, none
of which sites is listed on the CERCLA list or the National Priorities List of
hazardous waste sites or any comparable state list.
There have been no spills, leaks, deposits or other releases into the
environment or onto the Land by Company of any Hazardous Materials and, to the
best of Stockholders' knowledge, Company 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.
5.24 STORAGE TANKS. Except as set forth on Schedule 5.24, the Company has
not placed and, to the best of Stockholders' knowledge, the Land 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 on the Land are being used and maintained in accordance
with all Applicable Laws.
5.25 ABSENCE OF CERTAIN BUSINESS PRACTICES. 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.
5.26 COMPLETE DISCLOSURE. To the best of Stockholders' knowledge, 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 material fact or circumstance which would
materially 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, provided that no party
shall be entitled to rely on any representation or warranty provided in this
Agreement to the extent such party has actual knowledge that such representation
or warranty is inaccurate or incorrect.
6. REPRESENTATIONS AND WARRANTIES OF BUYER AND PARENT. Buyer and
Parent represent and warrant 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
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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 Buyer and Parent have taken all necessary
corporate action to authorize the execution, delivery and, subject to receipt of
required regulatory approvals, performance of this Agreement. All corporate
action by Buyer and Parent necessary to approve the transaction, including both
director and shareholder approvals (if required), 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 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 material 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 or Parent, enforceable against them in accordance with its terms.
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
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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 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 and to indemnify Company and Stockholders
from any claims, causes of action, liabilities or expenses of any kind arising
from the actions or omissions of Buyer, Parent or either of their agents in
entering onto the Land. 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 in all material
respects;
(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 in effect
at the Balance Sheet Date;
(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.
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7.3 PROHIBITED ACTIVITIES PRIOR TO CLOSING. Between the date of this
Agreement and the Closing Date, and except as otherwise permitted by this
Agreement, Stockholders will cause Company not, without the prior written
consent of Buyer (which consent shall not be unreasonably withheld or delayed):
(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, assume or permit to exist 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 CONTACT WITH GOVERNMENT OFFICIALS. Company and Stockholders shall each
use their reasonable best efforts (provided that neither Company nor
Stockholders will be required to expend any funds in connection with such
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 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 SIMULTANEOUS CLOSINGS. The closings under that certain Stock Purchase
Agreement among Parent, Company, Stockholders and Enviro-Waste Type V of Texas,
Inc. and that certain Purchase and Sale of Assets Agreement among Parent,
Company, Stockholders and Enviro-Plumbing, Inc. shall occur contemporaneously
with the Closing hereunder.
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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;
provided, however, that if Parent and Buyer close on the transactions
contemplated by this Agreement after receipt of a certificate containing
discrepancies between the representations and warranties provided in this
Agreement and the contents of the certificate, the representations and
warranties in this Agreement shall thereby be modified to conform to the
contents of the certificate.
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 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.
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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 9.9) dated the Closing Date, listing all agreements entered
into by Company since the date of Schedule 5.12, which new agreements must have
been determined to be in accordance with the provisions of this Agreement.
9.9 NONCOMPETITION AGREEMENT. The Noncompetition Agreement shall have been
executed and delivered by all parties thereto at the Closing.
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 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.
9.14 SIMULTANEOUS CLOSINGS. The closings under that certain Stock Purchase
Agreement among Parent, Company, Stockholders and Enviro-Waste Type V of Texas,
Inc. and that certain Purchase and Sale of Assets Agreement among Parent,
Company, Stockholders and Enviro-Plumbing, Inc. shall occur contemporaneously
with the Closing hereunder.
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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 from the audit, examination, review or other
adjustment of tax liabilities made pursuant to applicable law by
appropriate governmental agencies 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) Stockholders 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. The Surviving Corporation agrees to
cooperate with Stockholders in the preparation of such returns.
Stockholders further agree that they shall pay all taxes (including all
penalties and interest, if any) due for such tax period. Prior to filing
the returns provided for in this paragraph, Stockholders agree to allow
the Surviving Corporation 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 2.3 based on a balance sheet of the Combined
Companies for the period ending on the close of business on the Closing Date,
prepared by Buyer in accordance with the Combined Companies' past accounting
practices and delivered to 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. Any accounts
receivable which are written off in whole or in part in connection with
preparing such balance sheet that are subsequently collected by the Surviving
Corporation after the Adjustment Date will be paid to Stockholders as soon as
possible, but at least on a quarterly basis. Any dispute between the parties as
to this Section 10.2 shall be resolved in accordance with the procedure set
forth in Section 2.3.
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.
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10.4 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 but also
without cost, agree to reasonably cooperate with the Surviving Corporation and
to use their 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
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.
10.5 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
agrees 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).
10.6 SURVIVAL. The covenants in this Article 10 shall survive the Closing
in accordance with Article 12 hereof.
11. INDEMNIFICATION.
11.1. INDEMNIFICATION BY STOCKHOLDERS AND COMPANY. Company and each
Stockholder agree that they will each, severally (and not jointly and
severally), indemnify, defend (as to third party claims only), protect and hold
harmless Buyer, its officers, shareholders, directors, divisions, subdivisions,
affiliates, subsidiaries, parent, agents, employees, successors and assigns 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 expenses of investigation) 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 any Stockholder (including, without
limitation, those relating to Company's environmental compliance), set forth
herein or in the Schedules, Exhibits or certificates attached hereto or
delivered pursuant hereto; (b) nonfulfillment or
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nonperformance of any agreement, covenant or condition on the part of
Stockholders or Company made in this Agreement; (c) the matters set forth in
Section 10.1; (d) the existence of liabilities of Company in excess of the
liabilities represented by Stockholders and Company; (e) the imposition upon
Buyer of any liability or obligation of Company or Stockholders resulting from
one or more pending or threatened lawsuits, legal or regulatory proceedings,
investigations or judgments; (f) the Executory Agreement between Austin Liquids
Disposal Co., Inc., and Enviro Waste Management, Inc., dated July 1, 1996 (the
"Executory Agreement") (including, without limitation, the right of first
refusal set forth therein); (g) any surcharge imposed by the City of Austin for
sewer discharge; or (h) any claim by a third party that, if true, would mean
that a condition for indemnification set forth in subsections (a) through (g) of
this Section 11.1 had been satisfied.
11.2 INDEMNIFICATION BY THE SURVIVING CORPORATION. Parent and the
Surviving Corporation agrees that it will indemnify, defend, protect and hold
harmless Stockholders, their respective heirs, executors 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) incurred
by Stockholders 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 or Parent made in this
Agreement; incident to operations by Buyer and Parent after the Closing Date;
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.
11.3 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.
(b) Any Indemnifying Party will have the right to defend the
Indemnified Party against a Third Party Claim with counsel of its choice
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
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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, (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 only monetary damages and does not seek an injunction or
equitable relief 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 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 attorneys' fees and 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.
11.4 LIMITATION ON LIABILITY. The indemnification obligations set forth in
this Agreement shall apply only after the aggregate amount of such obligations
exceed $50,000 when combined with the Stock Purchase Agreement among Company,
Parent, Enviro-Waste Type V of Texas, Inc. and Stockholders (the "Stock Purchase
Agreement") and the Purchase and Sale of Assets Agreement among Company,
Enviro-Plumbing, Inc. and Stockholders (the "Purchase
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Agreement"), at which time the indemnification obligations shall be effective as
to all amounts, including the initial $50,000 and in shall in no event exceed a
maximum of $4,585,000.
11.5 RIGHT OF SET OFF. Stockholders agree that Parent shall be entitled to
off-set on a dollar for dollar basis any liabilities, claims, damages, actions,
suits, proceedings, demands, assessments, adjustments, penalties, losses costs
and expenses whatsoever paid by the Surviving Corporation related to the
Executory Agreement listed in Section 11.1(f) or the surcharge listed in Section
11.1(g) hereof.
11.6 SURVIVAL OF REPRESENTATIONS, WARRANTIES AND COVENANTS. Except for the
representations and warranties of Company, which shall each expire as of the
Closing, 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 hereunder for a period of
one year after the Closing Date; provided, however, that the representations and
warranties in Sections 5.1, 5.2, 5.3, 5.17, 6.1, 6.2 and 10.1 shall survive
until the expiration of the applicable statute of limitations; and that the
representations and warranties in Sections 5.9, 5.10 and 5.23 shall survive for
a period of three years after the Closing Date (in each case, the "Expiration
Date").
12. TERMINATION OF AGREEMENT.
12.1 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.
12.2 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.
12.3 TERMINATION BY LAPSE. Either Buyer or Stockholders may, by notice in
the manner hereinafter provided, terminate this Agreement in the event that the
Closing shall not have occurred on or before February 28, 1998.
13. NONDISCLOSURE OF CONFIDENTIAL INFORMATION.
13.1 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
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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 Closing.
13.2 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, such as lists of customers,
operational policies, and pricing and cost policies that are valuable, special
and unique assets of Company 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
without Stockholders'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 Stockholders. In the event of a
breach or threatened breach by Parent of the provisions of this Section,
Stockholders 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 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 termination of this Agreement without a Closing having occurred.
14. GENERAL.
14.1 ASSIGNMENT; BINDING EFFECT; AMENDMENT. This Agreement and the rights
of the parties hereunder may not be assigned (except by operation of law) 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.
14.2 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.
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14.3 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.
14.4 NO BROKERS. Company and Stockholders represent and warrant to Buyer
and Buyer represents 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. 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.
14.5 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 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) Stockholders will pay personally 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 by
Stockholders 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 2.3.
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.
14.6 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
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ATTN: Dave 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:
Michael L. Briggle
3511 Woodcutters Way
Austin, TX 78746
and
Mark A. Emmert
808 Westlake Drive
Austin, TX 78746
with a copy to:
Richard D. Cox, Esq.
300 Crescent Court
Suite 1400
Dallas, TX 75201
Notice shall be deemed given and effective the day personally delivered (if
delivered during normal business hours on a business day, or on the next
business day if not so 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.
14.7 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.
14.8 APPOINTMENT OF AGENT. Stockholders agrees to maintain a registered
agent in the State of Texas to accept and acknowledge service of process. Each
Stockholders initially hereby appoints Richard Cox, Esq. as such registered
agent and agrees to notify the Surviving
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Corporation in the manner set forth in Section 15.7 of any change in registered
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, in the manner prescribed in such
Section.
14.9 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 deemed a waiver of any
other breach of default occurring before or after that waiver.
14.10 TIME OF THE ESSENCE. Time is of the essence of this Agreement.
14.11 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.
14.12 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.
14.13 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.
14.14 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 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.
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the day and year first above written.
U S LIQUIDS/EMI ACQUISITION CORPORATION
By:
Its:
U S LIQUIDS INC.
By:
Its:
ENVIRONMENT MANAGEMENT, INC.
(EIN: 74-2515981)
By:
Its:
Michael Briggle
(SSN: ###-##-####)
Mark Emmert
(SSN: ###-##-####)
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LIST OF SCHEDULES
Exhibit A -- Legal Description of the Land
Schedule 2.2 -- 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 5.16(ii) -- Claims History
Schedule 5.17 -- Compliance With Laws
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 9.9 -- Updated Agreements
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ANNEX I
CERTIFICATE OF MERGER
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ANNEX II
TO THAT CERTAIN AGREEMENT AND PLAN OF REORGANIZATION
Among
U S LIQUIDS/EMI ACQUISITION CORPORATION
U S LIQUIDS INC.
and
ENVIRONMENT MANAGEMENT, INC.
and
MICHAEL BRIGGLE and MARK EMMERT
DATED AS OF January 1, 1997.
SHARES OF COMPANY ALLOCATION
SHAREHOLDERS STOCK OWNED OF CONSIDERATION
Michael Briggle 2160 72%
Mark Emmert 840 28%
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EXHIBIT 10.51
STOCK PURCHASE AGREEMENT
AMONG
ENVIRONMENT MANAGEMENT, INC.
AND
U S LIQUIDS INC.
AND
ENVIRO-WASTE TYPE V OF TEXAS, INC.
AND
MICHAEL L. BRIGGLE AND MARK A. EMMERT
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TABLE OF CONTENTS
SECTION PAGE
1. DELIVERY OF SHARES; ENDORSEMENT OF COMPANY STOCK..................... 1
1.1 Delivery of Shares.................................... 1
1.2 Endorsement of Company Stock.......................... 1
2. PURCHASE PRICE....................................................... 2
2.1 Purchase Price........................................ 2
3. [INTENTIONALLY OMITTED].............................................. 2
4. CLOSING.............................................................. 2
5. REPRESENTATIONS AND WARRANTIES OF STOCKHOLDERS AND
COMPANY............................................................. 2
5.1 Organization; Authority............................... 2
5.2 Stock Ownership; Absence of Adverse Claims............ 3
5.3 Capitalization........................................ 3
5.4 Predecessor Entities; Trade Names..................... 3
5.5 No Subsidiaries....................................... 4
5.6 Financial Statements.................................. 4
5.7 Non-Balance Sheet Liabilities......................... 4
5.8 Accounts Receivable................................... 5
5.9 Proprietary Rights; Environmental Documents........... 5
5.10 Real Property; Reporting............................... 6
5.11 Personal Property; New Projects....................... 6
5.12 Contracts............................................. 7
5.13 Insurance Policies.................................... 7
5.14 Directors, Officers and Employees; Compensation....... 7
5.15 Employee Plans........................................ 7
5.16 Compliance with ERISA................................. 7
5.17 Compliance with Law; No Conflicts..................... 8
5.18 Taxes................................................. 9
5.19 Litigation............................................ 9
5.20 Absence of Price Renegotiation Contracts.............. 10
5.21 Conduct of Business Since Balance Sheet Date.......... 10
5.22 Bank Accounts; Depositories........................... 11
5.23 Hazardous Materials................................... 11
5.24 Absence of Certain Business Practices................. 12
5.25 Complete Disclosure................................... 12
6. REPRESENTATIONS AND WARRANTIES OF BUYER AND PARENT.................. 12
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SECTION PAGE
6.1 Corporate Organization................................ 12
6.2 Corporate Authority................................... 13
6.3 No Conflicts.......................................... 13
6.4 Binding Agreement..................................... 13
7. COVENANTS........................................................... 13
7.1 Access to Land and Records............................ 13
7.2 Company Activities Prior to Closing................... 14
7.3 Prohibited Activities Prior to Closing................ 14
7.4 Contact with Government Officials..................... 15
8. CONDITIONS PRECEDENT TO OBLIGATIONS OF COMPANY AND
STOCKHOLDERS........................................................ 16
8.1 Representations and Warranties........................ 16
8.2 Consents.............................................. 16
8.3 No Adverse Proceeding................................. 16
8.4 Noncompetition Agreement.............................. 16
8.5 Simultaneous Closings................................. 16
9. CONDITIONS PRECEDENT TO OBLIGATIONS OF BUYER AND PARENT............. 16
9.1 Representations and Warranties........................ 16
9.2 Covenants............................................. 17
9.3 No Adverse Proceeding................................. 17
9.4 General Release....................................... 17
9.5 Consents.............................................. 17
9.6 Resignations.......................................... 17
9.7 Good Standing Certificates............................ 17
9.8 Updated Agreements.................................... 17
9.9 Noncompetition Agreement.............................. 17
9.10 Delivery of Company Stock............................. 18
9.11 Environmental Review.................................. 18
9.12 General............................................... 18
9.13 Simultaneous Closings................................. 18
10. POST CLOSING COVENANTS.............................................. 18
10.1 Taxes................................................. 18
10.2 Closing Date Actions.................................. 19
10.3 Further Assurance..................................... 19
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10.4 Transition............................................ 19
10.5 Survival.............................................. 19
11. INDEMNIFICATION...................................................... 19
11.1. Indemnification by Stockholders and Company........... 19
11.2 Indemnification by Buyer.............................. 20
11.3 Procedure for Indemnification with Respect to Third
Party Claims.......................................... 20
11.4 Limitation on Liability............................... 22
11.5 Survival of Representations, Warranties and Covenants. 22
12. TERMINATION OF AGREEMENT............................................. 22
12.1 Termination by Buyer.................................. 22
12.2 Termination by Stockholders........................... 22
12.3 Termination by Lapse.................................. 22
13. NONDISCLOSURE OF CONFIDENTIAL INFORMATION........................... 22
13.1 Nondisclosure by Stockholders......................... 22
13.2 Nondisclosure by Parent............................... 23
14. GENERAL............................................................. 23
14.1 Assignment; Binding Effect; Amendment................. 23
14.2 Entire Agreement...................................... 23
14.3 Counterparts.......................................... 24
14.4 No Brokers............................................ 24
14.5 Expenses of Transaction............................... 24
14.6 Notices............................................... 24
14.7 Governing Law......................................... 25
14.8 Appointment of Agent.................................. 25
14.9 No Waiver............................................. 26
14.10 Time of the Essence................................... 26
14.11 Captions.............................................. 26
14.12 Severability.......................................... 26
14.13 Construction.......................................... 26
14.14 Standstill Agreement.................................. 26
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STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT (this "Agreement") is executed and
delivered as of January 1, 1998, among ENVIRONMENT MANAGEMENT, INC., a Texas
corporation ("Buyer"); U S LIQUIDS INC., a Delaware corporation ("Parent");
ENVIRO-WASTE TYPE V OF TEXAS, INC., a Texas corporation ("Company"); and MICHAEL
L. BRIGGLE and MARK A. EMMERT, the sole stockholders of Company
("Stockholders");
W I T N E S S E T H:
WHEREAS, Company owns the Permit for Municipal Solid Waste
Management Site issued by the Texas Natural Resource Conversation Commission
(the "TNRCC") under provisions of Texas Health & Safety Code Ann. Chapter 361,
Permit No. M.S.W. 2250, Issued and effective July 25, 1997 to MLB Investments,
Inc., dba ENVIRO WASTE MANAGEMENT, endorsed to Company by the TNRCC on October
17, 1997 (the "Permit"), and allows Buyer to use the Permit in connection with
Buyer's operation of its business of collection and processing non-hazardous
commercial waste; and
WHEREAS, Stockholders own all of the issued and outstanding
shares of the capital stock of Company;
WHEREAS, Buyer is a wholly owned subsidiary of Parent; and
WHEREAS, Buyer desires to acquire all of the issued and
outstanding shares of the capital stock of Company from Stockholders and
Stockholders 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 SHARES; ENDORSEMENT OF COMPANY STOCK.
1.1 DELIVERY OF SHARES. Upon the terms and subject to the conditions set
forth in this Agreement, Stockholders shall, at the Closing (hereinafter
defined), sell, assign, transfer and deliver to Buyer certificates representing
the number of shares set forth opposite each Stockholder's name on Annex I
attached hereto and made a part hereof (the "Company Stock"), which certificates
represent all of the issued and outstanding capital stock of Company.
Stockholders shall transfer the Company Stock 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 ENDORSEMENT OF COMPANY STOCK. Stockholders shall deliver at Closing
the certificates representing the Company Stock, duly endorsed in blank by
Stockholders or accompanied by stock powers duly endorsed in blank and with all
necessary transfer tax and other revenue stamps, acquired at Stockholders'
expense, affixed and cancelled. Stockholders, at their sole expense,
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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. PURCHASE PRICE.
2.1 PURCHASE PRICE. Subject to Section 2.2 below, in consideration of
the sale to Buyer in accordance with this Agreement of certificates representing
the Company Stock, Parent, Company and Buyer shall be jointly and severally
obligated to pay to Stockholders the sum of $50,000 at Closing in immediately
available funds. The consideration provided for in this Section 2.1 shall be
allocated among the Stockholders as set forth on Annex I attached hereto and
made a part hereof.
3. [INTENTIONALLY OMITTED].
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; provided, however,
that in the event that the Closing shall not have occurred by February 28, 1998,
either Company or Buyer may terminate this Agreement by giving written notice to
the other party. 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." The effective date of this Agreement for all
accounting purposes shall be January 1, 1998.
5. REPRESENTATIONS AND WARRANTIES OF STOCKHOLDERS AND
COMPANY. Company as to the time period before Closing only, and each
Stockholder, severally (and not 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 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 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 11
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 any Stockholder, after reasonable inquiry.
5.1 ORGANIZATION; AUTHORITY.
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(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 the 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 I and are free and clear of 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 50,000 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. 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.
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
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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.
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 Statement of Assets, Liabilities and
Equity--Income Tax Basis as of December 31, 1997, and a Statement of
Revenue and Expenses--Income Tax Basis for the year then ended (the
"Balance Sheet Date");
Except as set forth on Schedule 5.6, each of the Financial Statements
(including all footnotes thereto) has been prepared in accordance with the
income tax basis, applied on a consistent basis throughout the periods
indicated. Each of the Financial Statements is true, complete and correct. Each
of the Statements of Assets, Liabilities and Equity--Income Tax Basis 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. All
reserves for contingent risks 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 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, Stockholders shall provide the following information to the
extent such information is in the possession of the Company or Stockholders or
is reasonably available to them:
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(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
(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. Except to the extent reflected on Schedule 5.8, 90% of the
aggregate amount of the accounts and notes receivable set forth on Schedule 5.8
are collectible.
5.9 PROPRIETARY RIGHTS; ENVIRONMENTAL DOCUMENTS.
(i) Attached as Schedule 5.9(i) is a 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
which are material to the operation of the principal business of the
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 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 written notifications
from governmental
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agencies and any other person or entity and any other documents of
Company of which the Stockholders have knowledge 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. Company has never owned, leased or
otherwise occupied, had an interest in or operated any real property.
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 having a value greater than $2,000
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 in all material respects;
(ii) Company has good title to, or a valid leasehold interest in,
the properties and assets used by it shown on its Statement of Assets,
Liabilities and Equity--Income Tax Basis 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, as applicable;
(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 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 reasonably necessary for and material to the operation
of the Business both by Company and by Buyer immediately following the
Closing and, to the best of Stockholders' knowledge, 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, free and clear of all debts and lease payments
(including lease end buy-out payments) except for the Assumed Debt.
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5.12 CONTRACTS. Attached as Schedule 5.12 is a complete and accurate
list as of the date hereof of all contracts, commitments and other agreements
which are material to the operation of the business of the Company to which
Company is a party or by which Company or its properties are bound. 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. Except as noted in Schedule 5.13, 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, 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. Except as set forth on Schedule 5.13, 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). 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 Internal Revenue Code (the "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 ERISA Section
3(2)) which is subject to the provisions of Title IV of ERISA. Except for the
Plans, Company does not maintain or sponsor, nor is a contributing employer to,
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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
or 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) attached hereto as Schedule 5.16(ii) is a copy of the claims
history under Company's group health plan for the past three years; and
(iii) with respect to any Plan which qualifies as a group health
plan, such plan is fully insured 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.
5.17 COMPLIANCE WITH LAW; NO CONFLICTS.
(i) To the best of Stockholders' knowledge and except as set
forth on Schedule 5.17, 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") with regard to which the noncompliance by Company
would or could have a material adverse affect on Company or the
Business. Neither Company nor Stockholders have received any written
notice (nor, to the best of Stockholders' knowledge, oral other notice)
that Company is under investigation or other form of review with respect
to any Applicable Law; and
(ii) to the best of Stockholders' knowledge, 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:
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(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 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. The amounts shown as accruals
for taxes on the Financial Statements as of the respective dates thereof are
sufficient for the payment of all taxes of the kinds indicated (including
penalties and interest) for all fiscal periods ended on or before such date.
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 are attached hereto as Schedule 5.18. Company made a
valid election under Subchapter S of the Code. 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 and of which the Company or any Stockholder has received
notice 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, to the best of Stockholders'
knowledge, 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.
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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 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 material increase from prior years 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 the amounts shown on Schedule 5.14;
(vi) work interruption, labor grievance or material 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) except as set forth herein 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;
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(xi) waiver of any material rights or claims of Company;
(xii) breach, amendment or termination of any material 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 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. Except as set forth on Schedule 5.23, Company
has never owned, leased, had an interest in, generated, transported, handled,
recycled, reclaimed, disposed of, or contracted for the disposal of, hazardous
materials, hazardous wastes, hazardous substances, toxic wastes or substances as
those terms are defined by 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; the
Occupational Health and Safety Act; 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 (collectively, "Hazardous Materials"). No liens with respect to
environmental liability have been imposed against Company under CERCLA, any
comparable state statute affecting the Business or other Applicable Law, and, to
the best of Stockholders' knowledge, no facts or circumstances exist which would
give rise to the same. Neither Company nor any Stockholder is listed as a
potentially responsible party under CERCLA, any comparable state statute or
other Applicable Law, and neither Company nor any Stockholder has received a
written notice of such a listing.
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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, none
of which sites is listed on the CERCLA list or the National Priorities List of
hazardous waste sites or any comparable state list.
There have been no spills, leaks, deposits or other releases into the
environment or onto the Land by Company of any Hazardous Materials and Company
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.
5.24 ABSENCE OF CERTAIN BUSINESS PRACTICES. 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.
5.25 COMPLETE DISCLOSURE. To the best of Stockholder's knowledge, 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 material fact or circumstance which would
materially 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, provided that no party
shall be entitled to rely on any representation or warranty provided in this
Agreement to the extent such party has actual knowledge that such representation
or warranty is inaccurate or incorrect.
6. REPRESENTATIONS AND WARRANTIES OF BUYER AND PARENT. Buyer and
Parent represent and warrant 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
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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 Buyer and Parent have taken all necessary
corporate action to authorize the execution, delivery and, subject to receipt of
required regulatory approvals, performance of this Agreement. All corporate
action by Buyer and Parent necessary to approve the transaction, including both
director and shareholder approvals (if required), 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 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 material 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 or Parent, enforceable against them in accordance with its
terms.
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 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 Buyer may from time to time
reasonably request. 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.
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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 in all
material respects;
(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
in effect at the Balance Sheet Date;
(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, and except as otherwise permitted by this
Agreement, Stockholders will cause Company not, without the prior written
consent of Buyer (which consent shall not be unreasonably withheld or delayed):
(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;
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(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, assume or permit to exist 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
(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 CONTACT WITH GOVERNMENT OFFICIALS. Company and Stockholders shall
each use their reasonable best efforts (provided that neither Company nor
Stockholders will be required to expend any funds in connection with such
efforts) to cooperate with Buyer in making contact with the appropriate
governmental agencies and officials having information about or jurisdiction
over Company or the Stockholders, including, without limitation, environmental
and land use agencies and officials in order to assist Buyer in completing its
regulatory evaluation of Company.
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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 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. Buyer 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 SIMULTANEOUS CLOSINGS. The closings under that certain Agreement and
Plan of Reorganization among Parent, Company, Stockholders and Environment
Management, Inc. and that certain Purchase and Sale of Assets Agreement among
Parent, Company, Stockholders and Enviro Plumbing, Inc. shall occur
contemporaneously with the Closing hereunder.
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
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representation or warranty of Stockholders or Company is inaccurate as of the
Closing Date; provided, however, that if Parent and Buyer close on the
transactions contemplated by this Agreement after receipt of a certificate
containing discrepancies between the representations and warranties provided in
this Agreement and the contents of the certificate, the representations and
warranties in this Agreement shall thereby be modified to conform to the
contents of the certificate.
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 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 and Buyer from any
and all claims of Stockholders against Company, Parent and Buyer 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 9.9) dated the Closing Date, listing all agreements entered
into by Company since the date of Schedule 5.12, which new agreements must have
been determined to be in accordance with the provisions of this Agreement.
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 or required pursuant
to the Company's organizational documents.
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 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.
9.13 SIMULTANEOUS CLOSINGS. The closings under that certain Agreement
and Plan of Reorganization among Parent, Company, Stockholders and Environment
Management, Inc. and that certain Purchase and Sale of Assets Agreement among
Parent, Company, Stockholders and Enviro Plumbing, Inc. shall occur
contemporaneously with the Closing hereunder.
10. POST CLOSING COVENANTS.
10.1 TAXES. (i) Stockholders 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 made pursuant to applicable law by
appropriate governmental agencies 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 Stockholders to
Buyer in fulfillment of his obligation pursuant to this Section
10.1(i).
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(ii) Stockholders 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 Stockholders in the preparation of such returns.
Stockholders further agree that they shall pay all taxes (including all
penalties and interest, if any) due for such tax period. Prior to filing
the returns provided for in this paragraph, Stockholders agree to allow
Buyer 20 business days to review and approve such returns, approval of
which will not unreasonably be withheld.
10.2 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.
10.3 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 but also
without cost, agree to reasonably cooperate with Buyer and to use their
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. Stockholders 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.
10.4 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 Buyer
after the Closing that it maintained with Company before the Closing.
Stockholders will refer all customer inquiries relating to the Business to Buyer
from and after the Closing. Further, Stockholders agrees that for a period of 90
days following the Closing Date, Stockholders will assist Buyer, at Buyer's
request and expense, with the orderly transition of the operations of Company
from Stockholders to Buyer (including, without limitation, recommendations,
advice and interaction with customers and potential customers of Company, and
governmental agencies).
10.5 SURVIVAL. The covenants in this Article 10 shall survive the
Closing in accordance with Article 12 hereof.
11. INDEMNIFICATION.
SECTION 11.1. INDEMNIFICATION BY STOCKHOLDERS AND COMPANY. Company and
each Stockholder agree that they will each, severally (and not jointly and
severally), indemnify, defend (as to third party claims only), protect and hold
harmless Buyer, its officers, shareholders,
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directors, divisions, subdivisions, affiliates, subsidiaries, parent, agents,
employees, successors and assigns 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 expenses of investigation)
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 any Stockholder
(including, without limitation, those relating to 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 or Company made in this Agreement; (c) the matters set forth in
Section 10.1; (d) the existence of liabilities of Company in excess of the
liabilities represented by Stockholders and Company; (e) the imposition upon
Buyer of any liability or obligation of Company or Stockholders resulting from
one or more pending or threatened lawsuits, legal or regulatory proceedings,
investigations or judgments; (f) [any specific items discovered in due
diligence]; or (g) any claim by a third party that, if true, would mean that a
condition for indemnification set forth in subsections (a) through (f) of this
Section 11.1 had been satisfied.
11.2 INDEMNIFICATION BY BUYER. Parent and Buyer each agrees that it will
indemnify, defend, protect and hold harmless Stockholders, their respective
heirs, executors 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) incurred by Stockholders 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 or Parent made in this Agreement; incident to operations by Buyer
and Parent after the Closing Date; 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.
11.3 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
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, (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 only monetary damages
and does not seek an injunction or equitable relief 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 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 attorneys' fees
and 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.
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<PAGE>
11.4 LIMITATION ON LIABILITY. The indemnification obligations set forth
in this Agreement shall apply only after the aggregate amount of such
obligations exceed $50,000 when combined with the Agreement and Plan of
Reorganization among Buyer, Parent, U S Liquids/EMI Acquisition Corporation and
Stockholders (the "Merger Agreement") and the Purchase and Sale of Assets
Agreement among Buyer, Enviro Plumbing, Inc. and Stockholders (the "Purchase
Agreement"), at which time the indemnification obligations shall be effective as
to all amounts, including the initial $50,000 and in shall in no event exceed a
maximum of $4,585,000.
11.5 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 hereunder for a period of one year after the
Closing Date; provided, however, that the representations and warranties in
Sections 5.1, 5.2, 5.3, 5.17, 6.1, 6.2 and 10.1 shall survive until the
expiration of the applicable statute of limitations; and that the
representations and warranties in Sections 5.9, 5.10 and 5.23 shall survive for
a period of three years after the Closing Date.
12. TERMINATION OF AGREEMENT.
12.1 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.
12.2 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.
12.3 TERMINATION BY LAPSE. Either Buyer or Stockholders may, by notice
in the manner hereinafter provided, terminate this Agreement in the event that
the Closing shall not have occurred on or before February 28, 1998.
13. NONDISCLOSURE OF CONFIDENTIAL INFORMATION.
13.1 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
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<PAGE>
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 Closing.
13.2 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, such as lists of customers,
operational policies, and pricing and cost policies that are valuable, special
and unique assets of Company 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
without Stockholders'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 Stockholders. In the event of a
breach or threatened breach by Parent of the provisions of this Section,
Stockholders 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 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 termination of this Agreement without a Closing having occurred.
14. GENERAL.
14.1 ASSIGNMENT; BINDING EFFECT; AMENDMENT. This Agreement and the
rights of the parties hereunder may not be assigned (except by operation of law)
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.
14.2 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.
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<PAGE>
14.3 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.
14.4 NO BROKERS. Company and Stockholders represent and warrant to Buyer
and Buyer represents 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. 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.
14.5 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 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) Stockholders will pay personally 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 by
Stockholders 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 2.3. 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.
14.6 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
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<PAGE>
ATTN: Dave 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:
Michael L. Briggle
3511 Woodcutters Way
Austin, TX 78746
and a copy to:
Mark A. Emmert
808 Westlake Drive
Austin, TX 78746
with a copy to:
Richard D. Cox, Esq.
300 Crescent Court
Suite 1400
Dallas, TX 75201
Notice shall be deemed given and effective the day personally delivered (if
delivered during normal business hours on a business day, or on the next
business day if not so 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.
14.7 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.
14.8 APPOINTMENT OF AGENT. Stockholders agrees to maintain a registered
agent in the State of Texas to accept and acknowledge service of process. Each
Stockholders initially hereby appoints Richard Cox, Esq. as such registered
agent and agrees to notify Buyer in the manner set
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forth in Section 15.7 of any change in registered 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, in the manner prescribed in such Section.
14.9 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 deemed a waiver of any
other breach of default occurring before or after that waiver.
14.10 TIME OF THE ESSENCE. Time is of the essence of this Agreement.
14.11 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.
14.12 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.
14.13 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.
14.14 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 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.
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year first above written.
ENVIRONMENT MANAGEMENT, INC.
By:
Its:
U S LIQUIDS INC.
By:
Its:
ENVIRO-WASTE TYPE V OF TEXAS, INC.
(EIN: 74-2843943)
By:
Its:
_________________________________
Michael Briggle
(SSN: ###-##-####)
_________________________________
Mark Emmert
(SSN: ###-##-####)
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<PAGE>
LIST OF SCHEDULES
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 5.11(i) -- Personal Property of Company
Schedule 5.12 -- Contracts
Schedule 5.13 -- Insurance Policies
Schedule 5.14 -- Employees
Schedule 5.15 -- Employee Plans
Schedule 5.16(ii) -- Claims History
Schedule 5.17 -- Compliance With Laws
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 9.9 -- Updated Agreements
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ANNEX I
TO THAT CERTAIN STOCK PURCHASE AGREEMENT
Among
ENVIRONMENT MANAGEMENT, INC.
U S LIQUIDS INC.
and
ENVIRO-WASTE TYPE V OF TEXAS, INC.
and
MICHAEL BRIGGLE and MARK EMMERT
DATED AS OF January 1, 1997.
SHARES OF COMPANY ALLOCATION
SHAREHOLDERS STOCK OWNED OF CONSIDERATION
Michael Briggle 720 72%
Mark Emmert 280 28%
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EXHIBIT 10.52
PURCHASE AND SALE OF ASSETS AGREEMENT
THIS PURCHASE AND SALE OF ASSETS AGREEMENT (the "Agreement") is
executed and delivered as of January 1, 1998, among U S LIQUIDS NORTHEAST, INC.,
a Delaware corporation ("Buyer"); U S LIQUIDS INC., a Delaware corporation
("Parent"); SUBURBAN WASTEWATER SERVICES INC., a Massachusetts corporation
("Seller"); and GLENN A. PRATT ("Pratt"), JAMES D. BAIRD, PETER J. COLLINS AND
JOHN J. BAILEY ("Bailey") its sole stockholders ("Stockholders").
P R E M I S E S:
WHEREAS, Seller operates a non-hazardous commercial waste
transportation, and disposal business in the Braintree, Massachusetts area (the
"Business");
WHEREAS, as part of the Business, Seller subleases certain
improved real property located in Braintree, Massachusetts pursuant to a written
lease dated July 1, 1995 with Suburban Contract Cleaning, Inc. (the "Land");
WHEREAS, Buyer desires to purchase and acquire substantially all
of the 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, Stockholders hold all of the outstanding capital stock
of Seller and Buyer is unwilling to enter into this Agreement without the
covenants and promises of Stockholders 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 assign to Buyer the following assets, properties and
contractual rights of Seller, wherever located, subject to the exclusions
hereinafter set forth:
(a) all equipment 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");
<PAGE>
(b) all of the motor vehicles used or for use in the Business,
and all radios, attachments, accessories and materials handling
equipment 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;
(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, consents, approvals, franchises and other instruments relating
to the Customer Accounts (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 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) 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 are attached to Schedule 1.1(g);
(h) Seller's leasehold interest in the Land;
(i) all of Seller's right, title and interest in and to the name
"Suburban Wastewater Services Inc." and the right to use such name (the
"Business Name");
(j) all of Seller's existing documents, files and other material
related to all current or past customers of the Business;
(k) all of Seller's shop tools, nuts and bolts relating to the
Business; and
(l) all of the goodwill of the Business.
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<PAGE>
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 other than Seller's
leasehold interest in the Land; (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; and (f) 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 best 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 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 January 1, 1998.
(b) All sums representing Accounts Receivable as set forth on
Schedule 1.4 collected by Buyer from the customers
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<PAGE>
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 regular basis (but at least monthly),
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. Seller shall pay all
expenses and be entitled to all revenues related to the Business up to and
including the close of business on December 31, 1997. Commencing January 1,
1998, Buyer shall pay all expenses and be entitled to all revenues related to
the Business. The parties agree that on or before 90 days after the Closing Date
they will conduct a final accounting of such revenues and expenses and the party
owing any additional adjustment shall make payment in cash within seven business
days thereafter.
SECTION 1.6 CHANGE OF NAME. On the date of Closing, Seller shall
take all necessary action to change Seller's current Business Name, to a name
not the same as or similar to Suburban Wastewater Services Inc. or any other
symbol, trademark, service mark, logo or trade name now used by Seller. Seller
shall, on the date of closing, deliver to Buyer, in form suitable for filing,
such certificates, consents and other documents as are necessary to effect the
transfer of the registration of the Business Name conveyed by Buyer pursuant to
this Agreement in Massachusetts and shall grant any consents and take any other
and further action, all at Seller's own expense, requested by Buyer to enable
Buyer to reserve or register any such name for use of Buyer in Massachusetts.
Notwithstanding the foregoing, Seller currently uses the name "Suburban" in
other contexts and may continue to do so after the date of Closing.
ARTICLE 2. PURCHASE PRICE
SECTION 2.1 PURCHASE PRICE. Subject to Sections 2.3 and 2.4
below, Parent shall pay to Seller for the Assets and the restrictive covenants
set forth herein $1,200,000 (the "Purchase Price"). The Purchase Price shall be
payable on the Closing Date as follows: (i) the assumption by Buyer of the
Assumed Debt (as hereinafter defined); (ii) the balance by delivery of that
total number of shares of the common stock of Parent, $.01 par value (the
"Parent Stock"), which shall have an aggregate Agreed Value equal to $1,200,000
minus the amount of the Assumed Debt, calculated in accordance with Section 2.2
below.
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<PAGE>
SECTION 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 only class of common stock of Parent, $.01
par value per share, on the American Stock Exchange as reported in THE WALL
STREET JOURNAL for the following trading days: December 24, 1997; December 26,
1997; December 29, 1997; December 30, 1997; and December 31, 1997, adjusted for
any stock splits, stock dividends and other capital changes between the first
date of the valuation period and the date of issuance.
SECTION 2.3 ASSUMPTION OF DEBT. As a portion of the Purchase
Price payable in Section 2.1 above, Buyer shall assume or pay off at Closing,
the actual debt of Seller up to a maximum of $197,383, which amount constitutes
all of the debts of Seller (including lease payments and lease-end buy-out
payments) related to the Assets (the "Assumed Debt"). Attached hereto as
Schedule 2.3 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.
SECTION 2.4 CONTINGENT ADDITIONAL PURCHASE PRICE.
(a) In addition to the consideration payable pursuant to Section
2.1 above, Parent will pay to Pratt and Bailey an aggregate additional
consideration in Parent Stock for the Assets if the operation of the
Northeast Region (as hereinafter defined) due to the efforts of the
Pratt and Bailey after closing generates the specified amount of
earnings before taxes ("Pre-Tax Earnings") (as defined below), as
follows:
(i) Parent Stock which shall have an aggregate Agreed
Value of $500,000 if the Pre-Tax Earnings exceed $3,000,000
within the period from July 1, 1998 to June 30, 1999 (the "First
Period");
(ii) the Parent Stock payable in (i) above plus Parent Stock
which shall have an aggregate Agreed Value of $250,000 if the
Pre-Tax Earnings exceed $4,000,000 within the First Period; and
(iii) the Parent Stock payable in (i) and (ii) above plus
Parent Stock which shall have an aggregate Agreed Value of
$250,000 if the Pre-Tax Earnings exceed $5,900,000 within the
First Period.
(b) The Agreed Value of the Parent Stock issued pursuant to
Section 2.4(a) above shall not be more than 125% greater than the Agreed
Value of the Parent Stock issued at Closing.
(c) In addition to the consideration payable pursuant to Section
2.1 above, Parent will pay to Stockholders an
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aggregate additional consideration in Parent Stock for the Assets if the
operation of the Northeast Region due to the efforts of the Pratt and
Bailey after closing generates Pre-Tax Earnings, as follows:
(i) Parent Stock which shall have an aggregate Agreed
Value of $900,000 if the Pre-Tax Earnings exceed $8,000,000
within the period from July 1, 1999 to June 30, 2000 (the "Second
Period");
(ii) the Parent Stock payable in (i) above plus Parent Stock
which shall have an aggregate Agreed Value of $375,000 if the
Pre-Tax Earnings exceed $10,000,000 within the Second Period; and
(iii) the Parent Stock payable in (i) and (ii) above plus
Parent Stock which shall have an aggregate Agreed Value of
$225,000 if the Pre-Tax Earnings exceed $11,900,000 within the
Second Period.
(d) The Agreed Value of the Parent Stock issued pursuant to
Section 2.4(c) above shall not be more than 140% greater than the Agreed
Value of the Parent Stock issued at Closing.
(e) Pre-Tax Earnings will be calculated within 60 days after the
end of the First Period or Second Period, respectively, and any payments
owed to Pratt and Bailey shall be paid on the date that is 90 days after
the end of the First Period or Second Period, respectively.
(f) For purposes of this Agreement, "Pre-Tax Earnings" shall mean
the gross revenues derived from the Assets calculated in accordance with
generally accepted accounting principles ("GAAP") consistently applied
minus (i) all costs incurred in operating the Business (including,
without limitation, all payroll costs, 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) reserves for financial assurance, closure and post
closure costs (as applicable in the case of the acquisition or
permitting of a treatment facility) and doubtful accounts. All of the
foregoing shall be determined by Buyer in accordance with Parent's past
practices and in accordance with GAAP consistently applied.
(g) For purposes of this Agreement, "Northeast Region" shall mean
the States of New Jersey, New York, Connecticut, Rhode Island,
Massachusetts, New Hampshire, Vermont and Maine.
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(h) In the event that Parent abandons its acquisition efforts in
the Northeast Region prior to June 30, 2000, all future payments which
could still be payable pursuant to the terms of Section 2.4(a) or
Section 2.4(c) above, respectively, shall be paid by Parent to Pratt and
Bailey within 60 days after such discontinuance.
(i) All consideration which becomes payable under this Section
2.4 shall be allocated among the Pratt and Bailey in the percentages set
forth on Exhibit A attached hereto and made a part hereof.
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 STOCKHOLDERS. At the
Closing, Seller and Stockholders shall deliver to Buyer, all duly executed:
(a) an assignment of Seller's leasehold interest in the
Land;
(b) 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 (other than the
Land) (the "Bill of Sale");
(c) motor vehicle Certificates of Title and/or registrations to
the Rolling Stock, properly endorsed to Buyer;
(d) a receipt acknowledging payment by Buyer of the Purchase
Price;
(e) fully executed consents to the assignment of the Customer
Accounts set forth on Schedule 1.3, if any, in form and substance
satisfactory to Buyer;
(f) the documents evidencing Seller's change of name as required
by Section 1.6;
(g) a certified copy of the resolutions 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, along with an incumbency certificate of Seller; and
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(h) 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 and shall assume
or make payment in full on the Assumed Debt.
ARTICLE 4. COVENANTS OF SELLER AND STOCKHOLDERS
SECTION 4.1 USE OF BUSINESS NAME. Except as set forth in Section
1.6 above, Seller and Stockholders covenant not to use the Business Name or any
similar names from and after the close of business on the date of Closing.
SECTION 4.2 TRANSITION. Neither Seller nor Stockholders 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 Stockholders will refer all customer inquiries relating
to the Business to Buyer from and after the Closing.
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 STOCKHOLDERS
SECTION 5.1 Seller and Stockholders, 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 Commonwealth of
Massachusetts. The execution and delivery of this Agreement, the
consummation of the transactions contemplated hereby and the
compliance by Seller and Stockholders 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 Stockholders are a party or by which
Seller or Stockholders are bound. This Agreement constitutes a
valid obligation of Seller and Stockholders enforceable against
Seller and Stockholders in accordance with its terms except as
limited by bankruptcy, insolvency, reorganization or other such
laws concerning the rights of creditors.
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(ii) Stockholders are each competent, under no duress or
legal restraint, and have all necessary authority to enter into
this Agreement, perform their 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 Stockholders, free and clear
of all liens, security interests and encumbrances whatsoever.
(b) COMPLIANCE WITH LAW. Neither Seller nor any of the
Stockholders, to the best of their knowledge, 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 the Assets or the Business. 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. To the best knowledge of Seller and Stockholders, 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 used or for use in connection with the
Business. Each piece of Equipment is in good working order and repair.
(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 good working order and repair.
(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
Stockholders
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has received any notice that any person intends or desires to modify,
waive, amend, rescind, release, cancel or terminate any Customer
Account. By virtue of the grant, conveyance, sale, transfer and
assignment of the 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 PERSONAL PROPERTY. Seller has good and
marketable title to all of the Assets constituting personal property,
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 all of the
Assets constituting personal property, free and clear of all liens,
lease payments (including lease-end buy-out payments), encumbrances,
security interests, equities or restrictions whatsoever except the
Assumed Debt. The Assets include all of the permits, licenses,
franchises, consents and other approvals necessary or desirable to
conduct the Business.
(g) TITLE TO REAL PROPERTY. Seller has never owned, leased or
otherwise occupied, had an interest in or operated any real property
other than the Land. Seller has good, leasehold title to the Land.
Attached hereto as Schedule 5.1(g) is a true and complete copy of the
lease for the Land.
Except as set forth on Schedule 5.1(g):
(i) The Land is, and at all times during operation of the
Business has been, fully licensed, permitted and authorized for
the operation of the Business under all Applicable Laws relating
to the protection of the environment, the Land and the conduct of
the Business thereon (including, without limitation, all zoning
restrictions and land use requirements).
(ii) 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 Seller's 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.
(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
Stockholders, or involving the Assets or the Business, at law or in
equity, before any federal, state or
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local court or regulatory agency, or other governmental authority.
Neither Seller nor Stockholders 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 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) FINANCIAL STATEMENTS. Seller has delivered to Buyer copies of
Seller's balance sheet as of October 31, 1997 (the "Balance Sheet
Date"), and a statement of income, cash flow and retained earnings for
the period then ended (the "Financial Statements"). The Financial
Statements (including any footnotes thereto) have been prepared in
accordance with GAAP, applied on a consistent basis throughout the
periods indicated. The Financial Statements (including all footnotes
thereto) are true, complete and correct and present fairly the financial
condition and the results of the operations of Seller for the period
indicated thereon. 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. The Financial
Statements are consistent with the books and records of Seller (which
books and records are correct and complete).
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(l) 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.
(m) HAZARDOUS MATERIALS. To the best of Seller's and
Shareholders' knowledge, neither Seller nor Stockholders 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 Massachusetts 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 Seller's and
Stockholders' 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 Seller's and
Stockholders' knowledge, Seller has no direct or contingent liability or
obligation for or in connection with any claimed release, discharge or
leak of any substance onto the Land or into the environment. Further, to
the best of Seller's and Stockholders' knowledge, no portion of the Land
is listed on the CERCLA list or the National Priorities List of
Hazardous Waste Sites or any similar list maintained by the Commonwealth
of Massachusetts. Attached hereto as Schedule 5.1(m) 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, to the best of
Seller's and Stockholders' knowledge, is listed on the CERCLA list or
the National Priorities List of Hazardous Waste Sites or any comparable
Massachusetts list. Neither Seller nor Stockholders is listed as a
potentially responsible party under CERCLA or any comparable or similar
Massachusetts statute; neither Seller
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nor Stockholders has received any notice of such a listing; and neither
Seller nor Stockholders knows of any facts or circumstances which could
give rise to such a listing.
(n) 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.
(o) 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.
(p) GROSS REVENUES. Set forth on Schedule 5.1(p) are the gross
revenues generated by the Business for the 12-month period immediately
preceding the month in which the Closing occurs.
(q) UNDERGROUND STORAGE TANKS. Except for the Land, 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. Set forth
on Schedule 5.1(q) is a list of all above and below ground tanks located
on the Land, each of which are being used and maintained in accordance
with Applicable Laws.
(r) 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
Stockholders become aware of any fact or circumstance which would change
a representation or warranty of Seller or Stockholders in this
Agreement, the party with such knowledge shall immediately give notice
of such fact or circumstance to Buyer. However, such notification shall
not relieve Seller or Stockholders 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 Stockholders 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, in accordance with Article 8 hereof.
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ARTICLE 6. REPRESENTATIONS AND WARRANTIES OF BUYER AND PARENT
SECTION 6.1 Buyer and Parent represent and warrant to Seller and
Stockholders that:
(a) CORPORATE ORGANIZATION. Buyer is a corporation duly
organized, validly existing and in good standing under the laws of the
State of Delaware. 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.
(c) PARENT STOCK. The Parent Stock to be delivered to Seller 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 restriction on transfer other than restrictions imposed by the
Securities Act of 1933, as amended, or the regulations promulgated
thereunder.
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, in accordance with Article 8 hereof.
ARTICLE 7. NONCOMPETITION
SECTION 7.1 NONCOMPETITION COVENANTS. Seller and each of the
Stockholders, jointly and severally, agree that for a period of four years
following the date of Closing, none of them shall directly or indirectly,
through a subsidiary or affiliate, without the prior express written consent of
Buyer:
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(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 nonhazardous liquid waste (including, without limitation,
waste oil, waste water, grease trap waste, grit trap waste and oil
contaminated water); and transportation or collection of any such
materials, in each case within a radius of 100 air miles of Braintree,
Massachusetts (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); 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 Stockholders or for which Seller or Stockholders 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 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 Stockholders 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.
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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
Stockholders agree that, 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 Stockholders 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 INDEPENDENT COVENANTS. All of the covenants in this
Section 7 shall be construed as an agreement independent of any other provision
of this Agreement, and the existence of any claim or clause of action of Seller
or Stockholders against Buyer, whether predicated on this Agreement or
otherwise, shall not constitute a defense to the enforcement by Buyer of such
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 Stockholders 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 Stockholders or
in which any person contests the validity of such agreements and covenants or
their enforceability or seeks to avoid their performance or enforcement.
SECTION 7.6 MATERIALITY. Seller and Stockholders 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,
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become responsible for or incur any liability or obligation of any nature of
Seller or Stockholders 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
Stockholders; (d) the generation, collection, transportation, storage or
disposal by Seller or Stockholders of any materials, including, without
limitation, Hazardous Materials; (e) an agreement or arrangement between Seller
and the employees of Seller or Stockholders 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 Stockholders
or to which Seller or Stockholders contributes or any contributions, benefits or
liabilities therefor or any liability for the withdrawal or partial withdrawal
from or termination of any such plan or program by Seller or Stockholders; (g)
the debts of Seller or Stockholders other than the Assumed Debt; (h) any
litigation against Seller or Stockholders, 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 Land
related to the time prior to the Closing Date, including, without limitation,
the environmental condition thereof; and (k) the liabilities or obligations of
Seller or Stockholders for brokerage or other commissions relative to this
Agreement or the transactions contemplated hereunder. Seller and Stockholders
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 Contracts to the extent, and
only to the extent, such obligations first mature and are required to be
performed after the close of business on the Closing Date.
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SECTION 8.3 INDEMNIFICATION BY SELLER AND STOCKHOLDERS.
Notwithstanding investigation at any time made by or on behalf of Buyer, Seller
and Stockholders, 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, either before or after the date of this
Agreement, from:
(a) inaccuracy in any representation or warranty made by Seller
or Stockholders in this Agreement;
(b) breach of any representation or warranty under this Agreement
by Seller or Stockholders;
(c) failure of Seller or Stockholders duly to perform and observe
any term, provision, covenant, agreement or condition under this
Agreement;
(d) liability of Seller or Stockholders 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(m) hereof);
(e) misrepresentation in or omission from any Schedule to this
Agreement;
(f) failure of Seller or Stockholders 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 Stockholders resulting from one or
more pending or threatened lawsuits whether or not listed on Schedule
5.1(h);
(h) liability of Seller or Stockholders to creditors of Seller or
Stockholders which is imposed on Buyer whether as a result of bankruptcy
proceedings or otherwise and whether as an account payable by Seller or
Stockholders 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;
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(j) any of the matters described in Section 8.1(a)-(k) hereof;
and
(k) subject to Section 8.5 hereof, 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) - (l) 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 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 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
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<PAGE>
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.
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 payments made pursuant to Article
2 hereof.
SECTION 8.6 SURVIVAL OF INDEMNIFICATION. The indemnification
obligations of the parties contained herein shall survive until July 1, 2001.
ARTICLE 9. FEDERAL SECURITIES ACT RESTRICTIONS ON STOCK
SECTION 9.1 REGISTERED STOCK. Parent represents and warrants to
Seller and Seller acknowledges that all of the shares of Parent Stock to be
delivered to Seller pursuant to this Agreement will be registered under the
Securities Act of 1933, as amended (the "Act") prior to delivery to Seller.
SECTION 9.2 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.
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<PAGE>
SECTION 9.3 COMPLIANCE WITH LAW. Seller covenants, warrants and
represents 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. Further, no Stockholder has any current plan or intention to seller,
exchange or otherwise dispose of any of the Parent Stock following the Closing.
ARTICLE 10. GENERAL
SECTION 10.1 FURTHER ASSURANCE. From time to time after the
Closing, Seller and Stockholders 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 consents of third parties, to
endeavor to obtain such consents promptly, and if any be unobtainable, to use
their best efforts to provide Buyer with the benefits thereof in some other
manner. Seller and Stockholders will cooperate and use their best 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 10.2 JOINT AND SEVERAL OBLIGATIONS. All representations,
warranties and agreements of Seller or Stockholders under this Agreement, the
Schedules and the transactions contemplated hereby shall be joint and several.
SECTION 10.3 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 10.4 TIME OF THE ESSENCE. Time is of the essence of this
Agreement.
SECTION 10.5 NOTICE. All notices or communications required or
permitted under this Agreement shall be given in writing and served either by
personal delivery, overnight courier or by deposit in the United States mail and
sent by first class
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<PAGE>
registered or certified mail, return receipt requested, postage prepaid:
If to Seller or Stockholders:
Glenn A. Pratt
482 King Street
Cohasset, MA 02025
with a copy to:
Lawrence C. Zalcman
Bonin & Zalcman, P.C.
One Boston Place
Boston, MA 02108
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 LLP
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 10.6 ENTIRE AGREEMENT. This Agreement, the Schedules
hereto, the consulting agreements 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 written, relative to said subject matter.
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<PAGE>
SECTION 10.7 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 10.8 EXPENSES OF TRANSACTION. Seller shall pay all costs
and expenses incurred by Seller or Stockholders 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 10.9 BROKER'S COMMISSION. Seller and Stockholders
represent and warrant to Buyer and Buyer represents and warrants to Seller and
Stockholders 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 10.10 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 10.11 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 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
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<PAGE>
of this Agreement shall not in any way be affected or impaired thereby.
SECTION 10.12 GOVERNING LAW. This Agreement shall in all respects
be governed by and construed in accordance with the internal laws of the
Commonwealth of Massachusetts, without giving effect to any choice or conflict
of law provision or rule (whether of the Commonwealth of Massachusetts or any
other jurisdiction) that would cause the application of the laws of any
jurisdiction other than the Commonwealth of Massachusetts.
[REMAINDER OF PAGE LEFT INTENTIONALLY BLANK]
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement
to be executed as of the day and year first above written.
BUYER:
U S LIQUIDS NORTHEAST, INC.
By: ___________________________
Its: ___________________________
PARENT:
U S LIQUIDS INC.
By: ___________________________
Its: ___________________________
SELLER:
SUBURBAN WASTEWATER SERVICES, INC.
(EIN: 04-3287019)
By: ___________________________
Its: ___________________________
STOCKHOLDERS:
______________________________
Glenn A. Pratt
(SSN: ###-##-####)
______________________________
James D. Baird
(SSN: ###-##-####)
______________________________
Peter J. Collins
(SSN: ###-##-####)
______________________________
John J. Bailey
(SSN: ###-##-####)
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<PAGE>
LIST OF SCHEDULES
Exhibit A -- Allocation of Contingent Additional Purchase Price
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 2.3 -- Assumed Debt
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(m) -- List of Disposal Sites
Schedule 5.1(p) -- Gross Revenues
Schedule 5.1(q) -- Storage Tanks
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EXHIBIT 10.53
FIRST AMENDMENT TO PURCHASE AND SALE OF ASSETS AGREEMENT
THIS FIRST AMENDMENT TO PURCHASE AND SALE OF ASSETS AGREEMENT
(this "Amendment") is executed and delivered as of January 1, 1998, among U S
LIQUIDS NORTHEAST, INC., a Delaware corporation ("Buyer"); U S LIQUIDS INC., a
Delaware corporation ("Parent"); SUBURBAN WASTEWATER SERVICES INC., a
Massachusetts corporation ("Seller"); and GLENN A. PRATT ("Pratt"), JAMES D.
BAIRD, PETER J. COLLINS AND JOHN J. BAILEY ("Bailey") its sole stockholders
("Stockholders").
WHEREAS, Buyer, Seller and Stockholders entered into that certain
Purchase and Sale of Assets Agreement dated as of January 1, 1998 (the "Purchase
Agreement"); and
WHEREAS, Buyer, Seller and Stockholders are desirous of amending
the Purchase Agreement;
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:
1. The following shall be inserted as Section 2.5 of the Purchase
Agreement:
SECTION 2.5 ADDITIONAL PURCHASE PRICE. In addition to the
consideration payable pursuant to Section 2.1 and Section 2.4 above,
Parent will pay on the Closing Date additional consideration equal to
20,000 shares of Parent Stock to Pratt and 20,000 shares of Parent Stock
to Bailey.
2. Section 2.2 of the Purchase Agreement shall be deleted in its
entirety and the following inserted in lieu thereof:
SECTION 2.2 AGREED VALUE OF PARENT STOCK. For purposes of Section
2.1, the "Agreed Value" per share of Parent Stock shall be the average
of the closing prices of a share of the only class of common stock of
Parent, $.01 par value per share, on the American Stock Exchange as
reported in THE WALL STREET JOURNAL for the following trading days:
December 24, 1997; December 26, 1997; December 29, 1997; December 30,
1997; and December 31, 1997, adjusted for any stock splits, stock
dividends and other capital changes between the first date of the
valuation period and the date of issuance. For purposes of Section 2.4,
the "Agreed Value" per share of Parent Stock shall be the average of the
closing prices of a share of the only class of 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 prior to
the date of issuance, adjusted for any stock splits, stock dividends and
other capital expenditures between the first date of the valuation
period and the date of issuance.
3. This Amendment shall be deemed to form a part of and shall be
construed in connection with and as part of the Purchase Agreement. Except as
hereinbefore expressly amended, all of the other terms, covenants and conditions
contained in the Purchase Agreement
<PAGE>
shall continue to remain unchanged and in full force and effect and are hereby
ratified and confirmed. Capitalized terms used herein but not defined herein
shall have the meanings ascribed to them in the Purchase Agreement.
[REMAINDER OF THIS PAGE LEFT INTENTIONALLY BLANK]
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement
to be executed as of the day and year first above written.
BUYER:
U S LIQUIDS NORTHEAST, INC.
By: __________________________
Its: __________________________
PARENT:
U S LIQUIDS INC.
By: __________________________
Its: __________________________
SELLER:
SUBURBAN WASTEWATER SERVICES, INC.
(EIN: 04-3287019)
By: ___________________________
Its: ___________________________
STOCKHOLDERS:
_______________________________
Glenn A. Pratt
(SSN: ###-##-####)
_______________________________
James D. Baird
(SSN: ###-##-####)
_______________________________
Peter J. Collins
(SSN: ###-##-####)
_______________________________
John J. Bailey
(SSN: ###-##-####)
EXHIBIT 10.54
PURCHASE AND SALE OF ASSETS AGREEMENT
THIS PURCHASE AND SALE OF ASSETS AGREEMENT (the "Agreement") is
executed and delivered as of March 15, 1998, between ENVIRONMENT MANAGEMENT,
INC., a Texas corporation ("Buyer"); TRAPMASTER, INC., a Texas corporation
("Seller"); and JOEL CURTIS, SID ANKROM AND SCOTT ANKROM, its sole stockholders
("Stockholders").
P R E M I S E S:
WHEREAS, Seller operates a non-hazardous commercial waste
transportation business in the San Antonio, Texas area (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, Stockholders hold all of the outstanding capital stock of
Seller and Buyer is unwilling to enter into this Agreement without the covenants
and promises of Stockholders 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 assign to Buyer the following assets, properties and contractual
rights of Seller, wherever located, subject to the exclusions hereinafter set
forth:
(a) all equipment 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 used or for use in the Business, and
all radios, attachments, accessories and materials handling equipment now
located in or on such motor vehicles (the "Rolling Stock"), as the same
are listed and
<PAGE>
more completely described by manufacturer, model number and model year on
Schedule 1.1(b), attached hereto and made a part hereof;
(c) a copy of all manual and automated routing and billing
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, consents, approvals, franchises and other instruments relating
to the Customer Accounts (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 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) subject to Section 4.2, 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) 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 of Seller's right, title, estate and interest in and to the
Assumed Leases (hereinafter defined);
(i) all of Seller's existing documents, files and other material
related to all current or past customers of the Business;
(j) all of Seller's shop tools, nuts and bolts relating to the
Business; and
(k) all of the goodwill of the Business.
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
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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); (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 Terminix Agreement (hereinafter
defined); (g) subject to Section 4.2, all of Seller's right, title and interest
in and to the name "Trapmaster" and the right to use such name (the "Business
Name"); and (h) any items listed on Schedule 1.2 hereof.
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 best 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 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) below. Attached hereto as
Schedule 1.4 is a true and complete list of all Accounts Receivable of Seller as
of February 26, 1998.
(b) All sums representing Accounts Receivable as set
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<PAGE>
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 remitted to Seller on a regular basis (but at
least monthly), together with a reasonably detailed 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 any 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.
ARTICLE 2. PURCHASE PRICE
SECTION 2.1 AGGREGATE PURCHASE PRICE. Subject to Section 2.3 below,
on the Closing Date (hereinafter defined) U S Liquids Inc., a Delaware
corporation ("Parent") shall pay to Seller for the Assets and the restrictive
covenants set forth herein: (A) the sum of $1,041,000 in immediately available
funds; and (B) that total number of shares of the common stock of Parent, $.01
par value, which shall have an aggregate Agreed Value of $1,041,000 calculated
in accordance with Section 2.2 below (the "Parent Stock").
SECTION 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
a period of five consecutive trading days. The days used to obtain the average
will be the tenth trading day through the sixth trading day before the date of
Closing.
SECTION 2.3 PAYMENT OF DEBTS OF SELLER. Seller agrees that on the
Closing Date all of the Assets (whether owned or leased) shall be delivered to
Buyer free of all debts, liens and other encumbrances whatsoever (including bank
debt, lease payments and lease end buy-out provisions) except the Assumed
Leases.
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<PAGE>
Seller shall be responsible, at its sole cost, for the payment in full of all
such debts, liens and other encumbrances. At Seller's request and direction,
Buyer agrees to cause a portion of the purchase price set forth in Section
2.1(A) above otherwise payable to Seller on the Closing Date to be paid directly
to creditors of Seller. Set forth on Schedule 2.3 is a listing of all debts,
liens and other encumbrances relating to the Assets and their respective payoff
amounts as of the Closing Date.
SECTION 2.4 ASSUMPTION OF LEASES. Buyer agrees to assume the
obligations of Seller under the leases related to three motor vehicles used in
the operation of the Business (the "Assumed Leases") and which are listed as
part of the Rolling Stock, to the extent (and only to the extent) that such
obligations arise and are required to be performed after the Closing Date.
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") to be effective on March 15, 1998 (the
"Closing Date"). The Closing shall take place at a location mutually acceptable
to Buyer and Seller.
SECTION 3.2 DELIVERIES BY SELLER AND STOCKHOLDERS. At the Closing,
Seller and Stockholders 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;
(c) a receipt acknowledging payment by Buyer of the purchase price;
(d) a release by Seller and Stockholders for claims against Buyer or
the Assets (not including any claims pursuant to this Agreement);
(e) fully executed consents to the assignment of the Customer
Accounts set forth on Schedule 1.3, if any, in form and substance
satisfactory to Buyer;
(f) the documents evidencing Seller's change of name
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as required by Section 1.6;
(g) a certified copy of the resolutions 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, along with an incumbency certificate of Seller; and
(h) 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 (B).
ARTICLE 4. COVENANTS
SECTION 4.1 USE OF BUSINESS NAME BY BUYER. Seller and Stockholders
covenant not to use the Business Name or any similar names from and after the
close of business on the date of Closing, in connection with sales and service
to customers or potential customers in the Territory.
SECTION 4.2 CONSULTING AND ROYALTY AGREEMENT WITH TERMINIX.
(a) Buyer has received and reviewed a copy of the Consulting and
Royalty Agreement dated May 1, 1996, between Seller and The Terminix
International Company, L.P. (the "Terminix Agreement"). Buyer acknowledges
that the Terminix Agreement grants to Terminix exclusive rights to the
name "Trapmaster" and to the use of the Trapmaster processes and protocols
outside of the geographic area described on Exhibit B attached hereto and
made a part hereof. Buyer, for itself and its officers, employees,
affiliates, successors and assigns, covenants and agrees with Seller and
Stockholders not to use the name, processes or protocols of Trapmaster
outside such geographic area and to indemnify and hold Seller and
Stockholders harmless against any breach of the foregoing covenant.
(b) Seller and Stockholders agree that Buyer is not acquiring any
rights in nor assuming any obligations relating to the Terminix Agreement
except as set forth in clause (a) above. Seller further covenants and
agrees with Buyer that Buyer shall have the exclusive right to use the
Business Name within the geographic area set forth in Exhibit B and that
Seller has not previously granted such rights to any other party.
SECTION 4.3 NO DEFENSE OF BUSINESS NAME. Buyer
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acknowledges that neither Seller nor any Stockholder will have any obligation to
Buyer to defend or protect the name "Trapmaster" against unauthorized use by
third parties. Notwithstanding the foregoing, Seller and Stockholders each agree
not to use the name Trapmaster within the geographic area set forth in Exhibit
B.
SECTION 4.4 ACCESS. Seller and Stockholders agree to provide Buyer
with full access to all of the computer software and programs of Seller
containing customer information as Buyer may consider necessary to assist Buyer
with the transition of the operation of the Business. Access will be provided at
all reasonable times and upon reasonable notice from Buyer.
SECTION 4.5 TRANSITION. Neither Seller nor Stockholders 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 Stockholders will refer all customer inquiries relating
to the Business to Buyer from and after the Closing. Further, Seller and
Stockholders 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 Stockholders 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 4.6 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 STOCKHOLDERS
SECTION 5.1 Seller and Stockholders, 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 Stockholders
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
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or other agreement to which Seller or Stockholders are a party or by
which Seller or Stockholders are bound. This Agreement constitutes a
valid obligation of Seller and Stockholders enforceable against
Seller and Stockholders in accordance with its terms except as
limited by bankruptcy, insolvency, reorganization or other such laws
concerning the rights of creditors.
(ii) Stockholders are each competent, under no duress or legal
restraint, and have all necessary authority to enter into this
Agreement, perform their 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 Stockholders, free and clear of
all liens, security interests and encumbrances whatsoever.
(b) COMPLIANCE WITH LAW. Neither Seller nor any of the Stockholders
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 the Assets or the Business. 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 used or for use in connection with the
Business. Each piece of Equipment is in good working order and repair.
(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 good working order and repair.
(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
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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
Stockholders has received any notice that any person intends or desires to
modify, waive, amend, rescind, release, cancel or terminate any Customer
Account. By virtue of the grant, conveyance, sale, transfer and assignment
of the 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 PERSONAL PROPERTY. Seller has good and marketable
title to all of the Assets constituting personal property, free and clear
of all liens, encumbrances, security interests, equities or restrictions
whatsoever, except the Assumed Leases and, by virtue of the grant,
conveyance, sale, transfer, and assignment of the Assets hereunder, Buyer
shall receive good and marketable title to all of the Assets constituting
personal property, free and clear of all liens, lease payments (including
lease-end buy-out payments), encumbrances, security interests, equities or
restrictions whatsoever, except the Assumed Leases. The Assets include all
of the permits, licenses, franchises, consents and other approvals
necessary or desirable to conduct the Business.
(g) TITLE TO REAL PROPERTY. Seller currently leases property located
at 3507 Sun Belt Drive North, San Antonio, Texas (the "Land") and has
never owned, leased or otherwise occupied, had an interest in or operated
any real property other than the Land. Except as set forth on Schedule
5.1(g):
(i) The Land is, and at all times during operation of the
Business has been, fully licensed, permitted and authorized for the
operation of the Business under all Applicable Laws relating to the
protection of the environment, the Land and the conduct of the
Business thereon (including, without limitation, all zoning
restrictions and land use requirements).
(ii) Neither Seller, Stockholder 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.
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(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 Stockholders, 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 Stockholders 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 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) FINANCIAL STATEMENTS. Seller has delivered to Buyer copies of
Seller's balance sheet as of December 31, 1997 (the "Balance Sheet Date"),
and a statement of income, cash flow and retained earnings for the period
then ended (the "Financial Statements"). The Financial Statements
(including any footnotes thereto) have been prepared in accordance with
generally accepted accounting principles ("GAAP"), applied on a consistent
basis throughout the periods indicated. The Financial Statements
(including all
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footnotes thereto) are true, complete and correct and present fairly the
financial condition and the results of the operations of Seller for the
period indicated thereon. 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. The
Financial Statements are consistent with the books and records of Seller
(which books and records are correct and complete).
(l) 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.
(m) HAZARDOUS MATERIALS. Neither Seller nor any of the Stockholders
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. No employee, contractor or agent of Seller has, in the course
and scope of employment with Seller, been harmed by exposure to Hazardous
Materials. Seller has no direct or contingent liability or obligation for
or in connection with any claimed release, discharge or leak of any
substance onto the Land or into the environment. Further, no portion of
the Land is listed on the CERCLA list or the National Priorities List of
Hazardous Waste Sites or any similar list maintained by the State of
Texas. Attached
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hereto as Schedule 5.1(m) 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 any of the Stockholders is listed as a potentially responsible party
under CERCLA or any comparable or similar Texas statute; neither Seller
nor any of the Stockholders has received any notice of such a listing; and
neither Seller nor Stockholders knows of any facts or circumstances which
could give rise to such a listing.
(n) 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.
(o) 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.
(p) GROSS REVENUES. The gross revenues generated by the Business for
the 12-month period immediately preceding the month in which the Closing
occurs were $______________.
(q) UNDERGROUND STORAGE TANKS. Except for the Land, 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. Set forth on
Schedule 5.1(q) is a list of all above and below ground tanks located on
the Land, each of which are being used and maintained in accordance with
Applicable Laws.
(r) 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 Stockholders
become aware of any fact or circumstance which would change a
representation or warranty of Seller or Stockholders in this Agreement,
the party with such knowledge shall immediately give notice of such fact
or circumstance to Buyer. However, such notification shall not relieve
Seller or Stockholders of their obligations under this Agreement, and at
the sole
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option of Buyer, the truth and accuracy of any and all warranties and
representations of Seller and Stockholders 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.
ARTICLE 6. REPRESENTATIONS AND WARRANTIES OF BUYER AND PARENT
SECTION 6.1 Buyer and Parent represent and warrant to Seller and
Stockholders 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.
(c) PARENT STOCK. The Parent Stock to be delivered to Seller 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
restriction on transfer other than restrictions imposed by the Securities
Act of 1993, as amended, or the regulations promulgated thereunder.
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.
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ARTICLE 7. NONCOMPETITION
SECTION 7.1 NONCOMPETITION COVENANTS. Seller and each of the
Stockholders, jointly and severally, agree that for a period of five years
following the date of Closing, none 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 San
Antonio, 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 Stockholders or
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for which Seller or Stockholders 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 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 Stockholders from: (A) 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; (B)
continuing to operate the portion of its drain treatment business that utilizes
on site organic chemicals as the treatment process; or (C) taking such actions
necessary to comply with the terms and conditions of the Terminix Agreement.
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
Stockholders agree that, 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 Stockholders 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 INDEPENDENT COVENANTS. All of the covenants in this
Section 7 shall be construed as an agreement independent of any other provision
of this Agreement, and the
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existence of any claim or clause of action of Seller or Stockholders against
Buyer, whether predicated on this Agreement or otherwise, shall not constitute a
defense to the enforcement by Buyer of such 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 Stockholders
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 Stockholders or in which any person contests the validity
of such agreements and covenants or their enforceability or seeks to avoid their
performance or enforcement.
SECTION 7.6 MATERIALITY. Seller and Stockholders 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 any of the Stockholders
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 Stockholders; (d) the generation,
collection, transportation, storage or disposal by Seller or Stockholders of any
materials, including, without limitation, Hazardous Materials; (e) an agreement
or arrangement between Seller and the employees of Seller or Stockholders or any
labor or collective bargaining unit representing any such employees; (f) the
severance pay obligation of Seller or any employee benefit
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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 Stockholders or to which Seller or Stockholders
contributes or any contributions, benefits or liabilities therefor or any
liability for the withdrawal or partial withdrawal from or termination of any
such plan or program by Seller or Stockholders; (g) the debts of Seller or
Stockholders; (h) any litigation against Seller or Stockholders, 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 Land, including, without limitation, the environmental condition
thereof; (k) any liability or obligation in connection with the Terminix
Agreement except as set forth in Section 4.2 hereof; and (l) the liabilities or
obligations of Seller or Stockholders for brokerage or other commissions
relative to this Agreement or the transactions contemplated hereunder. Seller
and Stockholders 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. Buyer agrees to
perform all of Seller's contractual obligations related to the Customer Accounts
and Assumed Leases to the extent, and only to the extent, such obligations first
mature and are required to be performed after the close of business on the
Closing Date.
SECTION 8.3 INDEMNIFICATION BY SELLER AND STOCKHOLDERS.
Notwithstanding investigation at any time made by or on behalf of Buyer, Seller
and Stockholders, 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, either before or after the date of this
Agreement, from:
(a) inaccuracy in any representation or warranty made by Seller or
Stockholders in this Agreement;
(b) breach of any representation or warranty under this Agreement by
Seller or Stockholders;
(c) failure of Seller or Stockholders duly to perform and observe
any term, provision, covenant, agreement or condition under this
Agreement;
(d) liability of Seller or Stockholders imposed upon
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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(m) hereof);
(e) misrepresentation in or omission from any Schedule to this
Agreement;
(f) failure of Seller or Stockholders 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 Stockholders imposed upon Buyer as a
result of Seller's failure to comply with the bulk transfer law of Texas;
(h) liability of Seller or Stockholders resulting from one or more
pending or threatened lawsuits whether or not listed on Schedule 5.1(h);
(i) liability of Seller or Stockholders to creditors of Seller or
Stockholders which is imposed on Buyer whether as a result of bankruptcy
proceedings or otherwise and whether as an account payable by Seller or
Stockholders or as a claim of alleged fraudulent conveyance or
preferential payments within the meaning of the United States Bankruptcy
Code or otherwise; and
(j) the existence of creditors of Seller which are not disclosed to
Buyer;
(k) any of the matters described in Section 8.1(a)-(l) hereof; and
(l) 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) - (l) 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.
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SECTION 8.4 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 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
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<PAGE>
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 Stockholders 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 consents of third parties, to endeavor to
obtain such consents promptly, and if any be unobtainable, to use their best
efforts to provide Buyer with the benefits thereof in some other manner. Seller
and Stockholders will cooperate and use their best 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 JOINT AND SEVERAL OBLIGATIONS. All representations,
warranties and agreements of Seller or Stockholders under this Agreement, the
Schedules and the transactions contemplated hereby shall be joint and several.
SECTION 9.3 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 9.4 TIME OF THE ESSENCE. Time is of the essence of this
Agreement.
SECTION 9.5 NOTICE. All notices or communications required or
permitted under this Agreement shall be given in 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:
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<PAGE>
If to Seller or Stockholders:
3507 Sun Belt Drive North
San Antonio, TX 78218
with a copy to:
Cheree Kinzie, Esq.
Davidson & Troilo
7550 W. IH10
Suite 800
San Antonio, TX 78229-5815
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 LLP
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 9.6 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
written, relative to said subject matter.
SECTION 9.7 BINDING EFFECT; ASSIGNMENT. This Agreement and the
various rights and obligations arising hereunder
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<PAGE>
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 9.8 EXPENSES OF TRANSACTION. Seller shall pay all costs and
expenses incurred by Seller or Stockholders 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 9.9 BROKER'S COMMISSION. Seller and Stockholders represent
and warrant to Buyer and Buyer represents and warrants to Seller and
Stockholders 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 9.10 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 9.11 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 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
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<PAGE>
impaired thereby.
SECTION 9.12 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:
ENVIRONMENT MANAGEMENT, INC.
By:___________________________
Its:__________________________
SELLER:
TRAPMASTER, INC.
(EIN: 74-2715564)
By:___________________________
Its:__________________________
STOCKHOLDERS:
______________________________
Joel Curtis
(SSN: ###-##-####)
______________________________
Sid Ankrom
(SSN: ###-##-####)
______________________________
Scott Ankrom
(SSN: ###-##-####)
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<PAGE>
LIST OF SCHEDULES
Exhibit A -- Legal Description of Land
Exhibit B -- Business Name Territory
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 1.2 -- Excluded Assets
Schedule 1.3 -- Customer Accounts Requiring Consent to Assignment
Schedule 1.4 -- Accounts Receivable
Schedule 2.3 -- Debt Payoff Amounts
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(m) -- List of Disposal Sites
Schedule 5.1(q) -- Storage Tanks
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EXHIBIT 10.55
PURCHASE AND SALE OF ASSETS AGREEMENT
THIS PURCHASE AND SALE OF ASSETS AGREEMENT (the "Agreement") is
executed and delivered as of March 16, 1998, to be effective March 15, 1998,
between ENVIRONMENT MANAGEMENT, INC., a Texas corporation ("Buyer"); BUG MASTER
EXTERMINATING SERVICE, INC., a Texas corporation ("Seller"); and NED EWART, its
majority stockholder ("Stockholder").
P R E M I S E S:
WHEREAS, Seller operates a non-hazardous commercial waste
transportation business in the Austin, Texas area (the "Business");
WHEREAS, Seller also operates a pest control service business (the
"Excluded Business");
WHEREAS, Buyer desires to purchase and acquire certain assets,
properties and contractual rights of Seller used in connection with the Business
(but not the Excluded 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 a majority 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 assign to Buyer the following assets, properties and contractual
rights of Seller, wherever located, subject to the exclusions hereinafter set
forth:
(a) the equipment listed on Schedule 1.1(a) attached hereto and made
a part hereof (the "Equipment");
(b) the motor vehicles and all radios, attachments, accessories and
materials handling equipment now located in or on such motor vehicles (the
"Rolling Stock"), as the same
<PAGE>
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) a copy of all manual and automated routing and billing
information about customers of the Business (but not the Excluded
Business);
(d) all contractual rights of Seller with Seller's customers
(whether oral or in writing) relating to the conduct of the Business (but
not the Excluded Business) (the "Customer Accounts"), and all commitments,
lists, leases, permits, licenses, consents, approvals, franchises and
other instruments relating to the Customer Accounts (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 Customer Accounts
and Related Approvals shall be delivered to Buyer simultaneously with the
execution and delivery of this Agreement;
(e) all permits, licenses, franchises, consents and other approvals
relating to the Business (but not the Excluded Business) set forth on
Schedule 1.1(e), 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);
(f) all of Seller's existing documents, files and other material
related to all current or past customers of the Business (but not the
Excluded Business);
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); (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) all of Seller's right, title and interest in and to the name "Bug Master
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<PAGE>
Exterminating Service"; (g) all assets and obligations related to the Excluded
Business; and (h) any items listed on Schedule 1.2.
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 best 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 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)
below. Attached hereto as Schedule 1.4 is a true and complete list of all
Accounts Receivable of Seller as of __________, 1998.
(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 remitted to Seller on a regular basis (but at least
monthly), 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 any 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
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<PAGE>
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 in connection with the
Business (but not the Excluded Business). Seller shall be entitled to all such
sums allocable to services performed on or before the close of business on the
date of Closing in connection with the Business (but not the Excluded Business)
and Buyer shall be entitled to all such sums allocable to services to be
performed thereafter in connection with the Business (but not the Excluded
Business).
ARTICLE 2. PURCHASE PRICE
SECTION 2.1 AGGREGATE PURCHASE PRICE. Subject to Section 2.3 below,
on the Closing Date U S Liquids Inc., a Delaware corporation ("Parent") shall
pay to Seller for the Assets and the restrictive covenants set forth herein: (A)
the sum of $209,000 in immediately available funds; and (B) that total number of
shares of the common stock of Parent, $.01 par value, which shall have an
aggregate Agreed Value of $209,000 calculated in accordance with Section 2.2
below (the "Parent Stock").
SECTION 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
a period of five consecutive trading days. The days used to obtain the average
will be the tenth trading day through the sixth trading day before the date of
Closing.
SECTION 2.3 PAYMENT OF DEBTS OF SELLER. Seller agrees that on the
Closing Date all of the Assets (whether owned or leased) shall be delivered to
Buyer free of all debts, liens and other encumbrances whatsoever (including bank
debt, lease payments and lease end buy-out provisions). Seller shall be
responsible, at its sole cost, for the payment in full of all such debts, liens
and other encumbrances. At Seller's request and direction, Buyer agrees to cause
a portion of the purchase price set forth in Section 2.1(A) above otherwise
payable to Seller on the Closing Date to be paid directly to creditors of
Seller. Set forth on Schedule 2.3 is a listing of all debts, liens, and other
encumbrances relating to the Assets and their respective payoff amounts as of
the Closing Date.
ARTICLE 3. CLOSING
SECTION 3.1 TIME AND PLACE OF CLOSING. Unless the parties otherwise
agree, this transaction shall be closed
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<PAGE>
simultaneously with the execution and delivery of this Agreement and the other
documents and instruments referred to in this Article 3 (the "Closing") to be
effective on March 15, 1998 (the "Closing Date"). 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;
(c) a receipt acknowledging payment by Buyer of the purchase price;
(d) a release by Seller and Stockholder for claims against Buyer or
the Assets (not including any claims pursuant to this Agreement);
(e) fully executed consents to the assignment of the Customer
Accounts set forth on Schedule 1.3, if any, in form and substance
satisfactory to Buyer;
(g) a certified copy of the resolutions 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, along with an incumbency certificate of Seller; and
(h) 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 (B).
ARTICLE 4. COVENANTS OF SELLER AND STOCKHOLDER
SECTION 4.1 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
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<PAGE>
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,
subject to the time Stockholder needs to operate the Excluded Business. 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 4.2 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 are a
party or by which Seller or Stockholder are 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) A majority 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.
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<PAGE>
(b) COMPLIANCE WITH LAW. 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 the Assets or the Business. 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 used or for use in connection with the
Business. Each piece of Equipment is in good working order and repair.
(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 good working order and repair.
(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 Customer Account. By virtue of the grant,
conveyance, sale, transfer and assignment of the 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 PERSONAL PROPERTY. Seller has good
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<PAGE>
and marketable title to all of the Assets constituting personal property,
free and clear of all liens, encumbrances, security interests, equities or
restrictions whatsoever and, by virtue of the grant, conveyance, sale,
transfer, and assignment of the Assets hereunder, Buyer shall receive good
and marketable title to all of the Assets constituting personal property,
free and clear of all liens, lease payments (including lease-end buy-out
payments), encumbrances, security interests, equities or restrictions
whatsoever. The Assets include all of the permits, licenses, franchises,
consents and other approvals necessary or desirable to conduct the
Business.
(g) TITLE TO REAL PROPERTY. Seller currently owns property located
at 8411 N. 1H35 Austin, Texas 78753 (the "Land") and has never owned,
leased or otherwise occupied, had an interest in or operated any real
property other than the Land. Except as set forth on Schedule 5.1(g):
(i) The Land is, and at all times during operation of the
Business has been, fully licensed, permitted and authorized for the
operation of the Business under all Applicable Laws relating to the
protection of the environment, the Land and the conduct of the
Business thereon (including, without limitation, all zoning
restrictions and land use requirements).
(ii) Neither Seller, Stockholder 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.
(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.
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<PAGE>
(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 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) FINANCIAL STATEMENTS. Seller has delivered to Buyer copies of
Seller's balance sheet as of December 31, 1997 (the "Balance Sheet Date"),
and a statement of income, cash flow and retained earnings for the period
then ended (the "Financial Statements"). The Financial Statements
(including any footnotes thereto) have been prepared in accordance with
generally accepted accounting principles ("GAAP"), applied on a consistent
basis throughout the periods indicated. The Financial Statements
(including all footnotes thereto) are true, complete and correct and
present fairly the financial condition and the results of the operations
of Seller for the period indicated thereon. 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. The Financial Statements are consistent with the books and records
of Seller (which books and records are correct and complete).
(l) TAXES. No federal, state, local or other tax returns or reports
filed by Seller (whether filed prior to,
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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.
(m) HAZARDOUS MATERIALS. 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. No employee, contractor or agent of Seller has, in the course
and scope of employment with Seller, been harmed by exposure to Hazardous
Materials. Seller has no direct or contingent liability or obligation for
or in connection with any claimed release, discharge or leak of any
substance onto the Land or into the environment. Further, no portion of
the Land is listed on the CERCLA list or the National Priorities List of
Hazardous Waste Sites or any similar list maintained by the State of
Texas. Attached hereto as Schedule 5.1(m) 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 is listed as a potentially
responsible party under CERCLA or any comparable or similar Texas statute;
neither Seller nor Stockholder has received any notice of such a listing;
and neither Seller nor Stockholder knows of any facts or circumstances
which could give rise to such a listing.
(n) GOVERNMENT NOTICES. Seller has delivered to
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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.
(o) 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.
(p) GROSS REVENUES. The gross revenues generated by the Business for
the 12-month period immediately preceding the month in which the Closing
occurs were $______________.
(q) UNDERGROUND STORAGE TANKS. Except for the Land, 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. Set forth on
Schedule 5.1(q) is a list of all above and below ground tanks located on
the Land, each of which are being used and maintained in accordance with
Applicable Laws.
(r) 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 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.
ARTICLE 6. REPRESENTATIONS AND WARRANTIES OF BUYER AND PARENT
SECTION 6.1 Buyer and Parent represent and warrant to
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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.
(c) PARENT STOCK. The Parent Stock to be delivered to Seller 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
restriction on transfer other than restrictions imposed by the Securities
Act of 1993, as amended, or the regulations promulgated thereunder.
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.
ARTICLE 7. NONCOMPETITION
SECTION 7.1 NONCOMPETITION COVENANTS. Seller and Stockholder,
jointly and severally, agree that for a period of five years following the date
of Closing, none 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
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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 Austin,
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 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.
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Notwithstanding the above, the foregoing covenant shall not be
deemed to prohibit Seller or Stockholder from: (A) 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; or (B)
owning, operating or selling the Excluded Business.
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, 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 INDEPENDENT COVENANTS. All of the covenants in this
Section 7 shall be construed as an agreement independent of any other provision
of this Agreement, and the existence of any claim or clause of action of Seller
or Stockholder against Buyer, whether predicated on this Agreement or otherwise,
shall not constitute a defense to the enforcement by Buyer of such 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.
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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 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; (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 or the Excluded Business; (j) any liability, obligation cost or expense
related to the Land, including, without limitation, the environmental condition
thereof; 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
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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. Buyer agrees to
perform all of Seller's contractual obligations related to the Customer Accounts
to the extent, and only to the extent, such obligations first mature and are
required to be performed after the close of business on the Closing Date.
SECTION 8.3 INDEMNIFICATION BY SELLER AND STOCKHOLDER.
Notwithstanding investigation at any time made by or on behalf of Buyer, 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, either before or after the date of this
Agreement, 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(m) hereof);
(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 imposed upon Buyer as a
result of Seller's failure to comply with the bulk transfer law of Texas;
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(h) liability of Seller or Stockholder resulting from one or more
pending or threatened lawsuits whether or not listed on Schedule 5.1(h);
(i) 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
(j) the existence of creditors of Seller which are not disclosed to
Buyer;
(k) any of the matters described in Section 8.1(a)-(k) hereof; and
(l) 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) - (l) 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 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 faith and the claim does not
involve injunctive or equitable
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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 consents of third parties, to endeavor to
obtain such consents
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promptly, and if any be unobtainable, to use their best efforts to provide Buyer
with the benefits thereof in some other manner. Seller and Stockholder will
cooperate and use their best 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 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.
SECTION 9.3 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 9.4 TIME OF THE ESSENCE. Time is of the essence of this
Agreement.
SECTION 9.5 NOTICE. All notices or communications required or
permitted under this Agreement shall be given in 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:
____________________________
____________________________
____________________________
with a copy to:
Cheree Kinzie, Esq.
Davidson & Troilo
7550 W. IH10
Suite 800
San Antonio, TX 78229-5815
If to Buyer:
U S Liquids Inc.
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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 LLP
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 9.6 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
written, relative to said subject matter.
SECTION 9.7 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 9.8 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
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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 9.9 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 9.10 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 9.11 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 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 9.12 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:
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ENVIRONMENT MANAGEMENT, INC.
By:___________________________
Its:__________________________
SELLER:
BUG MASTER EXTERMINATING
SERVICE, INC.
(EIN: ______________)
By:___________________________
Its:__________________________
STOCKHOLDER:
______________________________
Ned Ewart
(SSN: _____________)
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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(e) -- Permits
Schedule 1.2 -- Excluded Assets
Schedule 1.3 -- Customer Accounts Requiring Consent to Assignment
Schedule 1.4 -- Accounts Receivable
Schedule 2.3 -- Debt Payoff Amounts
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(m) -- List of Disposal Sites
Schedule 5.1(q) -- Storage Tanks
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PURCHASE AND SALE OF ASSETS AGREEMENT
THIS PURCHASE AND SALE OF ASSETS AGREEMENT (the "Agreement") is executed
and delivered as of April 1, 1998, between MESA PROCESSING, INC., a Texas
corporation ("Buyer"); RECLAMATION TECHNOLOGY MANAGEMENT, INC. d/b/a EFFLUENT
TREATMENT SERVICES, INC., a Texas corporation ("Seller") and Don E.
Henley, the sole shareholder of Seller ("Shareholder").
W I T N E S S E T H:
WHEREAS, Seller operates a non-hazardous commercial waste, collection,
transportation, reclamation, treatment, processing and disposal business in the
North and Central Texas (the "Business");
WHEREAS, as part of the Business, Seller leases certain improved real
property located in Tarrant County, Texas consisting of approximately 7,750
square feet of office and warehouse space (the "Facility");
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, Shareholder holds all of the outstanding capital stock of
Seller and Buyer is unwilling to enter into this Agreement without the covenants
and promises of Shareholder herein set forth; and
NOW, THEREFORE, in consideration of Ten Dollars ($10.00), the mutual
promises and covenants herein contained and other good and valuable
consideration, receive to the full satisfaction of each of them, the parties
hereby agree as follows:
ARTICLE I
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 assign to Buyer the following assets, properties and contractual
rights of Seller, wherever located, subject to the exclusions hereinafter set
forth:
(a) all equipment used or for use in the operations of the
Business, including, without limitation, the equipment listed on
Schedule 1.1(a) attached hereto and made a part hereof (the
"Equipment"), other than equipment specifically relating to MIDOS and
identified on Schedule 1.2(b) attached hereto;
(b) all furniture, appliances, business machinery, office
equipment and supplies used or for use in the Business, including
without limitation, the items listed on Schedule 1.1(b) attached hereto
and made a part hereof (collectively, the "Office Furnishings");
(c) all of the motor vehicles used or for use in the Business,
and all radios, attachments, accessories and materials handling
equipment 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(c), attached
hereto and made a part hereof;
(d) all manual and automated routing and billing information and
components thereof, including without limitation all routing and billing
computer hardware, software
<PAGE>
and programs containing any customer information;
(e) 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, consents, approvals, franchises and other instruments relating
to the Customer Accounts (the "Related Approvals"); a complete and
accurate list of the Customer Accounts and the Related Approvals is set
forth on Schedule 1.1(e), attached hereto and made a part hereof, and
true and complete copies of all Customer Accounts (or descriptions of
unwritten arrangements) and Related Approvals shall be delivered to
Buyer simultaneously with the execution and delivery of this Agreement;
(f) all of Seller's inventory of parts, tires, supplies and
accessories of every kind, nature and description used or for use in
connection with the Business (the "Inventory");
(g) 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, excluding any of the foregoing
relating to MIDOS;
(h) all permits, licenses, franchises, consents and other
approvals relating to the Business set forth on Schedule 1.1(h),
attached hereto and made a part hereof (the "Permits"), true and
complete copies of which are attached to Schedule 1.1(h);
(i) all of Seller's right, title, estate and interest in and to
the lease of the buildings and other improvements comprising the
Facility;
(j) all right, title and interest of Seller in and to the
telephone number (817) 429-4039 used by Seller in the conduct of the
Business;
(k) all of Seller's right, title and interest in and to the names
"Reclamation Technology Management, Inc." or "Effluent Treatment
Services, Inc." and the right to use such names (the "Business Names");
(l) all of Seller's existing documents, files and other material
related to all current or past customers of the Business;
(m) all of Seller's shop tools, nuts and bolts relating to the
Business; and
(n) all of the goodwill of the Business.
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) other than the Facility; (d) all contracts and contract rights and
obligations of Seller (whether oral or in writing) other than the Customer
Accounts, the leases with respect to the Facility and any other contracts
expressly assigned to Buyer hereunder, (e) all commitments, lists, leases,
permits, licenses, consents, approvals, franchises and other instruments not
relating to the Customer Accounts or the Business; (f) all employment contracts
to which Seller is a party or by which Seller is bound; (g) all motor vehicles
of Seller that are not Rolling Stock and (h) all proprietary information of
Buyer in and to the MIDOS machine and process as more particularly described on
Schedule 1.2(a) attached hereto; (i) any assets or equipment relating to MIDOS
as set forth on Schedule 1.2(b) attached hereto.
<PAGE>
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 best 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. The Buyer shall be entitled to adjust the purchase price set
forth in Section 2.1 hereof and enforce for the account and benefit of Buyer,
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 agreement.
SECTION 1.4 SELLER ACCOUNTS RECEIVABLE. Buyer shall have no liability or
obligation whatsoever to Seller in connection with the Accounts Receivable.
However, if Buyer receives any payments which are designated by the customer as
being toward such Accounts Receivable, then Buyer shall forward such payments to
Seller on a regular basis (but at least monthly), together with an itemized list
of the sources thereof. Seller shall not hire an outside agency to collect the
Accounts Receivable, take any legal action on the Accounts Receivable or write
any threatening letters in an attempt to collect Accounts Receivable for a
period of ninety (90) days after the date of Closing. Attached hereto as
Schedule 1.4 is a true and complete list of all Accounts Receivable of Seller as
of April 1, 1998.
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 $0.00.
SECTION 1.6 ADJUSTMENTS. The operation of the Business and the income
and normal operating expenses attributable thereto through March 31, 1998 (the
"Adjustment Date") shall be for the account of Seller and thereafter for the
account of Buyer. The expenses to be prorated shall include but not be limited
to expenses for goods or services received both before and after the Adjustment
Date, power and utilities charges, frequency discounts, commissions, ad valorem
taxes, wages, payroll taxes, vacation pay and other fringe benefits of employees
of Seller who enter the employment of Buyer, and rents and similar prepaid and
deferred items. To the extent that any of the foregoing prorations and
adjustments cannot be determined as of the Closing Date, Buyer and Seller shall
conduct a final accounting and make any further payments, as required on a date
mutually agreed upon, within 90 days after the Closing.
SECTION 1.7 CHANGE OF NAME. On the date of Closing, Seller shall take
all necessary action to change Seller's current Business Names to a name not the
same as or similar to Effluent Treatment Services, Inc. or any other symbol,
trademark, service mark, logo or trade name now used by Seller. Seller shall, on
the date of closing, deliver to Buyer, in form suitable for filing, such
certificates, consents and other documents as are necessary to effect the
transfer of the registration of the Business Names conveyed by Buyer pursuant to
this Agreement in Texas and shall grant any consents and take any other and
further action, all at Seller's own expense, requested by Buyer to enable Buyer
to reserve or register any such name for use of Buyer in Texas.
ARTICLE II
PURCHASE PRICE
<PAGE>
SECTION 2.1 PURCHASE PRICE.
(a) Subject to Sections 2.3 below, Buyer shall pay to Seller for
the Assets and the restrictive covenants set forth herein up to
$2,100,000 (the "Purchase Price").
(b) The Purchase Price, to the extent payable, shall be payable
as follows:
(i) on the Closing Date, (A) Buyer shall pay Seller
cash in the amount of $750,000, and (B) Buyer shall
deliver to Seller that total number of whole shares
of common stock, par value $.01 per share ("Parent
Stock"), of U S Liquids, Inc., a Delaware
corporation and the parent corporation of Buyer
("Parent"), which shall have an aggregate Agreed
Value (as defined in Section 2.2 below) of $500,000
calculated in accordance with Section 2.2 below;
(ii) on each of the first and the second anniversaries
of the Closing Date, Buyer shall pay Seller a cash
payment in the amount of $50,000;
(iii) on the dates specified and upon satisfaction of the
conditions set forth in Section 2.3 below, Buyer
shall pay Seller the contingent consideration
described therein.
SECTION 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 of issuance, adjusted for any stock splits, stock dividends
and other capital changes between the first date of the valuation period and the
date of issuance. Only whole shares shall be delivered. Any fractional shares
resulting from applying the Agreed Value to the amount of consideration payable
shall be paid in cash.
SECTION 2.3 CONTINGENT ADDITIONAL PURCHASE PRICE.
(a) In addition to the consideration payable pursuant to Section
2.1(b)(i) and 2.1 (b)(ii) above, Buyer would pay to Seller additional
consideration in the form of Parent Stock (subject to clause (b) below)
for the Assets if the operations arising out of the acquired Assets
(collectively, with the assets to be acquired pursuant to Section 2.3(c)
below, the "Facility") generate the specified amount of earnings before
taxes ("Pre-Tax Earnings") (as defined below), as follows:
(i) if the Pre-Tax Earnings from the operation of the
Facility exceeds $335,000 for either the 1998 or the 1999 fiscal
year, but not both, Buyer shall deliver to Seller that number of
shares of Parent Stock, which shall have an aggregate value of
$375,000 (rounded to the nearest whole share with any resulting
fractional shares paid in cash) determined by using the closing
price of the Parent Stock, as reported in THE WALL STREET
JOURNAL, on the last trading day of applicable calendar year,
1998 or 1999, in which the Pre-Tax Earnings required by this
subclause (i) were first achieved; and
(ii) if the Pre-Tax earnings from the operation of the
Assets exceeds $405,000 for the 1999 fiscal year or the 2000
fiscal year, Buyer shall deliver to Seller that number of shares
of Parent Stock, which shall have an aggregate value of $375,000
(rounded to the nearest whole share with any resulting fractional
shares paid in cash) determined by using the closing price of the
Parent Stock, as reported in THE WALL STREET JOURNAL, on the last
trading day of applicable calendar year, 1999 or 2000, in which
the Pre-Tax Earnings required by this subclause (ii) were first
achieved; and
(iii) notwithstanding the above and foregoing, the Seller
shall not be
<PAGE>
entitled to more than one payment under either Section 2.3(a)(i)
or (ii). Seller shall be entitled to the maximum compensation
under this Section 2.3(a) (i.e. Parent Stock with an aggregate
market value of $750,000 at the respective times of issuance)
if, and only if, the conditions of both subclause (i) and (ii)
of this Section 2.3(a) are satisfied in two separate years.
(b) Pre-Tax Earnings will be calculated within 60 days after the
end of the 1998, 1999 and 2000 fiscal years, respectively, and any
payments owed to Seller shall be paid on the date that is 90 days after
the end of the 1998, 1999 and 2000 fiscal years, respectively.
(c) Buyer agrees to make capital expenditures of up to the
amounts set forth on Schedule 2.3 attached hereto toward the purchase of
the various assets described on such Schedule 2.3 for use at the
Facility. Each such purchase shall be subject to the submission of
appropriate capital purchase orders in accordance with Buyer's corporate
policies. If Buyer fails to make the required capital expenditures prior
to December 31, 1998, unless such failure is occasioned by events
outside of Buyer's reasonable control or the acts or omissions of Seller
or Shareholder, the condition precedent to Seller's entitlement to the
contingent consideration set forth in Section 2.3(a)(i) above shall be
deemed satisfied. If Buyer has failed to make the required capital
expenditures prior to December 31, 1999, unless such failure is
occasioned by events outside of Buyer's reasonable control or the acts
or omissions of Seller or Shareholder, the condition precedent to
Seller's entitlement to the contingent consideration set forth in
Section 2.3(a)(ii) above shall be deemed satisfied. The parties agree
that there shall exist no other state of facts, other than actual
satisfaction of such conditions, which shall cause the conditions set
forth in Section 2.3(a)(i) or (ii) to be deemed satisfied.
(d) For purposes of this Agreement, "Pre-Tax Earnings" shall mean
the gross revenues derived from the Assets calculated in accordance with
generally accepted accounting principles ("GAAP") minus (i) all costs
incurred in operating the Facility (including, without limitation, all
payroll costs, 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); all
taxes on operations of the Facility 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)
reserves for financial assurance, closure and post closure costs and
doubtful accounts of the Facility; and (iv) 2% of such gross revenues
constituting a charge for corporate overhead. All of the foregoing shall
be determined by Buyer in accordance with Parent's past practices and in
accordance with GAAP. Corporate overhead charges relating to operations
outside the Facility shall not exceed 2% of the gross revenues generated
by the operation of the Facility.
ARTICLE III
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 III (the "Closing"). The Closing shall take place at a location
mutually acceptable to Buyer and Seller.
SECTION 3.2 DELIVERIES BY SELLER AND SHAREHOLDER. At the Closing, Seller
and Shareholder shall deliver to Buyer, all duly executed:
(a) assignment of leasehold interests to the Facility;
(b) 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");
<PAGE>
(c) motor vehicle Certificates of Title and/or registrations to
the Rolling Stock, properly endorsed to Buyer;
(d) a receipt acknowledging payment by Buyer of the Purchase
Price;
(e) fully executed consents to the assignment of the Customer
Accounts set forth on Schedule 1.3, if any, in form and substance
satisfactory to Buyer;
(f) the documents evidencing Seller's change of name as required
by Section 1.7;
(g) a certified copy of the resolutions 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, along with an incumbency certificate of Seller; and
(h) 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 (d) and shall assume
all obligations to make rent and other contractual payments arising after the
Closing Date under the leases of the Facility. Rent for the month in which the
Closing occurs shall be prorated and paid by the respective parties based on the
number of days in the month the Facility was occupied by each party. Taxes,
assessments and other charges required to be paid by the tenant under the
leases, and not paid prior to Closing, shall be prorated between the parties
based upon the number of days in the tax year each of Buyer and Seller occupied
the Facility.
ARTICLE IV
COVENANTS OF SELLER AND SHAREHOLDER
SECTION 4.1 USE OF BUSINESS NAMES. Seller and Shareholder covenant not
to use the Business Names or any similar names from and after the close of
business on the date of Closing.
SECTION 4.2 TRANSITION. Neither Seller nor Shareholder will take any
action that is designed or intended to have the effect or 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 Shareholder will refer all customer inquiries relating
to the Business to Buyer from and after the Closing. Further, Seller and
Shareholder agree that until December 31, 2000, 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 Shareholder assisting Buyer to obtain contacts with
Seller's current customers, routing transition activities and development of
sufficient information to allow Buyer to compile accurate customer billings.
SECTION 4.3 SURVIVAL. Each of the covenants set forth in this Article IV
shall survive the Closing and the transfer of the Assets.
ARTICLE V
REPRESENTATIONS AND WARRANTIES
OF SELLER AND SHAREHOLDER
SECTION 5.1 Seller and Shareholder, jointly and severally, represent and
warrant to Buyer that:
(a) AUTHORITY.
<PAGE>
(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
Shareholder 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 instruments or other agreement to which
Seller or Shareholder are a party or by which Seller or
Shareholder are bound. This Agreement constitutes a valid
obligation of Seller and Shareholder enforceable against Seller
and Shareholder in accordance with its terms except as limited by
bankruptcy, insolvency, reorganization or other such laws
concerning the rights of creditors.
(ii) Shareholder 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 Shareholder, free and
clear of all liens, security interests and encumbrances
whatsoever.
(b) COMPLIANCE WITH LAW. Neither Seller nor the Shareholder 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 the Assets or the Business.
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 used or for use in connection with the
Business. Each piece of Equipment is in good working order and repair.
(d) OFFICE FURNISHINGS. Listed on Schedule 1.1(b) is a complete
and accurate list of all Office Furnishings. All items of Office
Furnishings are in good working order and repair.
(e) ROLLING STOCK. Listed on Schedule 1.1(c) 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 good working order and repair.
(f) 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 Shareholder
has received any notice that any person intends or desires to modify,
waive, amend, rescind, release, cancel or terminate any Customer
Account. By virtue of the grant, conveyance, sale, transfer and
assignment of the 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
<PAGE>
person or entity.
(g) TITLE TO THE PERSONAL PROPERTY. Seller has good and
marketable title to all of the Assets constituting personal property,
free and clear of all liens, encumbrances, security interests, equities
or restrictions whatsoever and, by virtue of the grant, conveyance,
sale, transfer, and assignment of the Assets hereunder, Buyer shall
receive good and marketable title to all of the Assets constituting
personal property, free and clear of all liens, lease payments
(including lease-end buy-out payments), encumbrances, security
interests, equities or restrictions whatsoever. The Assets include all
of the permits, licenses, franchises, consents and other approvals
necessary or desirable to conduct the Business.
(h) TITLE TO REAL PROPERTY. Seller has never owned, leased or
otherwise occupied, had an interest in or operated any real property
other than the Facility. Seller has good, leasehold title to the
Facility. Attached hereto as Schedule 5.1(h) are true and complete
copies of the leases of the Facility. Except as set forth on Schedule
5.1(h):
(i) The Facility is, and at all times during operation of
the Business has been, fully licensed, permitted and authorized
for the operation of the Business under all Applicable Laws
relating to the protection of the environment, the Facility and
the conduct of the Business thereon (including, without
limitation, all zoning restrictions and land use requirements).
(ii) The Facility 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 Seller's
knowledge, threatened by, any third party which would result in a
change in the allowable uses of the Facility or which could
modify the right of Buyer to use the Facility for its current
uses after the Closing Date.
(iii) Shareholder and Company have made available to Buyer
all engineering, geologic and other similar reports,
documentation and maps relating to the Facility in the possession
or control of Seller.
(iv) Neither Seller, Shareholder nor the Facility 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.
(i) LITIGATION. Except as set forth on Schedule 5.1(i) hereof,
there is no claim, litigation, action, suit or proceeding,
administrative or judicial, pending or threatened against Seller or
Shareholder, 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 Shareholder 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.
(j) EMPLOYEES. Attached as Schedule 5.1(j) 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.
(k) EMPLOYEE RELATIONS AND BENEFIT PLANS. Set forth on Schedule
5.1(k) 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
<PAGE>
of 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.
(l) FINANCIAL STATEMENTS. Attached hereto as Schedule 5.1(l) are
copies of Seller's balance sheet as of December 31, 1997, and a
statement of income, cash flow and retained earnings for the year ended
December 31, 1997, and Seller's balance sheet as of March 31, 1998 (the
"Balance Sheet Date"), and a statement of income, cash flow and retained
earnings for the three-month period then ended (the "Financial
Statements"). The Financial Statements (including any footnotes thereto)
have been prepared in accordance with GAAP, applied on a consistent
basis throughout the periods indicated. The Financial Statements
(including all footnotes thereto) are true, complete and correct and
present fairly the financial condition and the results of the operations
of Seller for the period indicated thereon. 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. The Financial Statements are consistent with the books
and records of Seller (which books and records are correct and complete.
(m) 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.
(n) HAZARDOUS MATERIALS. Neither Seller nor Shareholder 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 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. No
employee, contractor or agent of Seller has, in the course and scope of
employment with Seller, been harmed by exposure to Hazardous Materials.
Seller has no direct or contingent liability or obligation for or in
connection with any claimed release, discharge or leak of any substance
onto the Facility or into the environment. Further, no portion of
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<PAGE>
the Facility is listed on the CERCLA list or the National Priorities
List of Hazardous Waste Sites or any similar list maintained by the
State of Texas. Attached hereto as Schedule 5.1(n) 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, Shareholder nor the Facility is
listed as a potentially responsible party under CERCLA or any comparable
or similar state statute; neither Seller nor Shareholder has received
any notice of such a listing; and neither Seller nor Shareholder knows
of any
<PAGE>
facts or circumstances which could give rise to such a listing.
(o) 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.
(p) 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.
(q) GROSS REVENUES. The gross revenues generated by the Business
for the 12-month period immediately preceding the month in which the
Closing occurs were $483,062.
(r) UNDERGROUND STORAGE TANKS. Except for the Facility, 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. Set forth on Schedule 5.1(r) is a list of all above and
below ground tanks located on the Facility, each of which are being used
and maintained in accordance with Applicable Laws.
(s) 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
Shareholder become aware of any fact or circumstance which would change
a representation or warranty of Seller or Shareholder in this Agreement,
the party with such knowledge shall immediately give notice of such fact
or circumstance to Buyer. However, such notification shall not relieve
Seller or Shareholder 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 Shareholder 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 V shall survive the Closing and the transfer of the
Assets.
ARTICLE VI
REPRESENTATIONS AND WARRANTIES OF BUYER AND PARENT
SECTION 6.1 Buyer and Parent represent and warrant to Seller and
Shareholder 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
<PAGE>
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.
(c) PARENT STOCK. The Parent Stock to be delivered to Seller 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 restriction on transfer
other than restrictions imposed by the Securities Act of 1993, as amended, or
the regulations promulgated thereunder.
SECTION 6.2 SURVIVAL. Each of the representations and warranties set
forth in this Article VI shall survive the Closing and the transfer of the
Assets.
ARTICLE VII
NONCOMPETITION
SECTION 7.1 NONCOMPETITION COVENANTS. Seller and Shareholder, jointly
and severally, agree that for a period of ten 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 200 air miles of Seller's facilities in
Haltom City, 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 two years 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 Shareholder or for which Seller or Shareholder
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 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
<PAGE>
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 Shareholder from (i) marketing or selling MIDOS technology or
consulting with other companies in the use of the MIDOS technology, provided
that no such activities targeted to businesses in the waste treatment industry
will take place within the Territory, nor will any such activities be reasonably
likely to have an adverse effect on the Business or the operations of the
Facility, and (ii) 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 Shareholder
agree that, 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 Article VII impose a reasonable restraint
on Seller and Shareholder in light of the activities and business of the Buyer
on the date of the execution of this Agreement and future plans of the Buyer.
SECTION 7.4 SEVERABILITY OF COVENANTS. The covenants in this Article VII
are severable and separate, and the unenforceability of any specific covenant
shall not affect the provisions of any other covenants. 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 INDEPENDENT COVENANTS. All of the covenants in this Article
VII shall be construed as an agreement independent of any other provision of
this Agreement, and the existence of any claim or cause of action of Seller or
Shareholder against Buyer, whether predicated on this Agreement or otherwise,
shall not constitute a defense to the enforcement by Buyer of such 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 Shareholder is in violation of any provision of this Article VII.
SECTION 7.6 MATERIALITY. Seller and Shareholder hereby agree that the
foregoing noncompetition covenants are a material and substantial part of this
transaction.
ARTICLE VIII
NON-ASSUMPTION OF LIABILITIES; INDEMNIFICATION
SECTION 8 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 Shareholder 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
<PAGE>
Shareholder; (d) the generation, collection, transportation, storage or disposal
by Seller or Shareholder of any materials, including, without limitation,
hazardous materials; (e) an agreement or arrangement between Seller and the
employees of Seller or Shareholder 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 Shareholder or to which Seller or
Shareholder contributes or any contributions, benefits or liabilities therefor
or any liability for the withdrawal or partial withdrawal from or termination of
any such plan or program by Seller or Shareholder; (g) the debts of Seller or
Shareholder; (h) any litigation against Seller or Shareholder, whether or not
listed on Schedule 5.1(h); (i) any liability, obligation cost or expense related
to the Facility related to the time prior to the Closing Date, including,
without limitation, the environmental condition thereof; and (k) the liabilities
or obligations or Seller or Shareholder for brokerage or other commissions
relative to this Agreement or the transactions contemplated hereunder. Seller
and Shareholder 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. Buyer agrees to perform
all of Seller's contractual obligations related to the Customer Contracts and
the leases of the Facility to the extent, and only to the extent, such
obligations first mature and are required to be performed after the close of
business on the Closing Date.
SECTION 8.3 INDEMNIFICATION BY SELLER AND SHAREHOLDER. Notwithstanding
investigation at any time made by or on behalf of Buyer, Seller and Shareholder,
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, either before or after the date of this Agreement, from:
(a) inaccuracy in any representation or warranty made by Seller
or Shareholder in this Agreement;
(b) breach of any representation or warranty under this
Agreement by Seller or Shareholder;
(c) failure of Seller or Shareholder duly to perform and observe
any term, provision, covenant, agreement or condition under this
Agreement;
(d) liability of Seller or Shareholder 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(n) hereof);
(e) misrepresentation in or omission from any Schedule to this
Agreement;
(f) liability of Seller or Shareholder imposed upon Buyer as a
result of Seller's failure to comply with any applicable bulk transfer
law;
(g) liability of Seller or Shareholder resulting from one or
more pending or threatened lawsuits whether or not listed on Schedule
5.1(i);
(h) liability of Seller or Shareholder to creditors of Seller or
Shareholder which is imposed on Buyer whether as a result of bankruptcy
proceedings or otherwise and whether as a result of bankruptcy
proceedings or otherwise and whether as an account payable by Seller or
Shareholder or as a claim of alleged fraudulent conveyance or
preferential payments within the meaning of the United States Bankruptcy
Code or
<PAGE>
otherwise; and
(i) the existence of creditors of Sellers 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) - (l) 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, aid or incurred by such
parent, subsidiary, affiliate, or successor.
SECTION 8.4 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 Notices 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 faith and the claim does not involve injunction or
equitable relief or involve 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 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 IX
NONDISCLOSURE AND CONFIDENTIALITY
<PAGE>
SECTION 9.1 NONDISCLOSURE AND CONFIDENTIALITY AGREEMENT. Buyer agrees
not to disclose to any other person, corporation, or entity any information
relating to the MIDOS machine or process, except for information that is or
becomes generally known or in the public domain or with respect to which, based
on an opinion of its legal counsel, it is compelled to produce by court order or
other legal process. Buyer shall take all reasonable action necessary to prevent
any of its employees, representatives and agents (other than Shareholder or his
affiliates) from disclosing any confidential information related to the MIDOS
machine and process. Buyer shall not use the MIDOS technology in any way without
the express permission of Shareholder. Buyer acknowledges that the MIDOS
technology is a trade secret of Shareholder.
SECTION 9.2 DAMAGES. Buyer agrees that it shall be responsible for any
damages to Seller and Shareholder that result from any disclosure of the MIDOS
technology by Buyer.
SECTION 9.3 INJUNCTIVE RELIEF. Because of the difficulty of measuring
economic losses to Seller and Shareholder as a result of the breach of the
foregoing covenant, and because of the immediate and irreparable damage that
would be caused to Seller and Shareholder for which it would have no other
adequate remedy, Buyer agrees that, in the event of breach by any of them of the
foregoing covenant, the covenant may be enforced by Seller and Shareholder by,
without limitation, injunctions and restraining orders.
SECTION 9.4 SURVIVAL. The representations and warranties set forth in
this Article IX shall survive the Closing.
SECTION 9.5 OBLIGATIONS OF SELLER AND SHAREHOLDER. Seller and
Shareholder jointly and severally agree that they shall take all reasonable
actions and precautions to protect their proprietary information relating to the
MIDOS technology, including without limitation, maintaining all records,
prototypes and other materials of a confidential nature in a secure location
away from the Facility, disclosing confidential information only to persons with
a need to know such information and only if such persons are obligated to retain
such information in confidence. Seller shall not disclose any confidential
information regarding the MIDOS technology to any employee, representative or
agent of Buyer without providing Buyer with written notice of such disclosure to
enable Buyer to fulfill its obligations under this Article IX.
SECTION 9.6 INDEPENDENT COVENANTS. All of the covenants in this Article
IX shall be construed as an agreement independent of any other provisions of
this Agreement and the existence of any claim or cause of action of Buyer
against Seller or Shareholder, whether predicated on this Agreement or otherwise
(except for any claims of Seller's or Shareholder's breach of Section 9.5
above), shall not constitute a defense to the enforcement by Shareholder or
Seller of this Article IX.
ARTICLE X
MIDOS TECHNOLOGY
SECTION 10.01 RIGHT OF FIRST REFUSAL. Seller and Shareholder shall grant
to Buyer a right of first refusal for the period beginning on the date hereof
and ending at 11:59 p.m. on December 31, 2000. In the event Seller and/or
Shareholder receives an offer to purchase the MIDOS machine and/or technology,
the Seller and/or Shareholder must promptly submit to Buyer a written
notification of such offer setting forth all of the terms of the proposed sale.
The Buyer shall have the irrevocable right and option to purchase the MIDOS
machine and technology, including without limitation all records, prototypes,
drawings and other information pertaining thereto, on the same terms as are
applicable to the offer. Buyer may exercise this right and option by notifying
Seller and/or Shareholder in writing of its election within 45 days after Buyer
receives the written offer. If Buyer does not notify Seller and/or Shareholder
within such 45 day period, the sale to the offering third party may be
consummated, provided that such sale must take place within a 60 day period
after lapse of the option period, and must be consummated pursuant to the same
terms as were set forth in the offer notice.
SECTION 10.02 NO MARKETING TO WASTE TREATMENT COMPANIES. Seller and/or
Shareholder
<PAGE>
shall not market the MIDOS machine and/or technology to other waste treatment
companies until after December 31, 2000.
SECTION 10.03 RIGHT TO SELL TO UNRELATED INDUSTRIES. Seller and/or
Shareholder will retain the right to sell the MIDOS machine and/or technology to
persons in industries unrelated to waste treatment. In the event Seller and/or
Shareholder sells the MIDOS machine and/or technology to a purchaser in an
unrelated industry, Seller and/or Shareholder shall obtain an agreement from the
purchaser that they will not market or sell the MIDOS machine and/or technology
to a waste treatment company until after December 31, 2000.
ARTICLE XI
FEDERAL SECURITIES ACT RESTRICTIONS ON STOCK
SECTION 11.1 REGISTERED STOCK. Parent represents and warrants to Seller
and Seller acknowledges that all of the shares of Parent Stock to be delivered
to Seller pursuant to this Agreement will be registered under the Securities Act
of 1933, as amended (the "Act") prior to delivery to Seller.
SECTION 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.
SECTION 11.3 COMPLIANCE WITH LAW. Seller covenants, warrants and
represents 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.
ARTICLE XII
GENERAL
SECTION 12.1 FURTHER ASSURANCE. From time to time after the Closing,
Seller and Shareholder 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 consents of third parties, to endeavor to
obtain such consents promptly, and if any be unobtainable, to use their best
efforts to provide Buyer with the benefits thereof in some other manner. Seller
and Shareholder will cooperate and use their best 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 Closing.
SECTION 12.2 JOINT AND SEVERAL OBLIGATIONS. All representations,
warranties and agreements of Seller or Shareholder under this Agreement, the
Schedules and the transactions contemplated hereby shall be joint and several.
SECTION 12.3 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; nor shall any waiver of any single breach or default
<PAGE>
be deemed a waiver of any other breach or default occurring before or after that
waiver.
SECTION 12.4 TIME OF THE ESSENCE. Time is of the essence of this
Agreement.
SECTION 12.5 NOTICE. All notices or communications required or permitted
under this Agreement shall be given in 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 the Seller and Shareholder:
Don E. Henley
2717 Hartlee Court
Denton, TX 76208
with a copy to:
Leigh Hilton
Hilton & Davidge, L.L.P.
101 South Locust, Suite 707
Denton, TX 76201
If to Buyer:
Mesa Processing, Inc.
411 N. Sam Houston Parkway East
Houston, TX 77060
Attn: W. Gregory Orr
with a copy to:
Jared D. Nielsen, Esq.
Krasny & Nielsen, L.L.P.
440 Benmar
Suite 2090
Houston, TX 77060
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 12.6 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
written, relative to said subject matter.
SECTION 12.7 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 12.8 EXPENSES OF TRANSACTION. Seller shall pay all costs and
expenses incurred by Seller or Shareholder in connection with this Agreement and
the transactions contemplated
<PAGE>
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 12.9 BROKER'S COMMISSION. Seller and Shareholder represent and
warrant to Buyer and Buyer represents and warrants to Seller and Shareholder
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 12.10 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 12.11 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 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 12.12 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:
MESA PROCESSING, INC.
By:/s/ C. ERIC WARDEN
Name: C. Eric Warden
Title: Attorney-in-fact
SELLER:
RECLAMATION TECHNOLOGY
MANAGEMENT, INC. d/b/a EFFLUENT
TREATMENT SERVICES,
INC.
By:/s/ DON E. HENELY
<PAGE>
Name: DON E. HENELY
Title: President
EIN______________________________
SHAREHOLDER:
/s/ DON E. HENELY
DON E. HENLEY
SSN_____________________________
PURCHASE AND SALE OF ASSETS AGREEMENT
THIS PURCHASE AND SALE OF ASSETS AGREEMENT (the "Agreement") is executed
and delivered as of April 1, 1998, between MESA PROCESSING, INC., a Texas
corporation ("Buyer"); BETTS PUMP SERVICE, INC., a Texas corporation ("Seller"),
KEITH BETTS, the sole shareholder of Seller ("Shareholder").
W I T N E S S E T H:
WHEREAS, Seller operates a used cooking oil and grease trap, collection,
transportation and disposal services business throughout Texas, Louisiana and
Arkansas (the "Business"), and also operates a sludge de-watering business in
Kemp, Texas;
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, Shareholder holds all of the outstanding capital stock of
Seller and Buyer is unwilling to enter into this Agreement without the covenants
and promises of Shareholder herein set forth; and
NOW, THEREFORE, in consideration of Ten Dollars ($10.00), the mutual
promises and covenants herein contained and other good and valuable
consideration, receive to the full satisfaction of each of them, the parties
hereby agree as follows:
ARTICLE I
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 assign to Buyer the following assets, properties and contractual
rights of Seller, wherever located, subject to the exclusions hereinafter set
forth:
(a) all equipment used or for use in the operations 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 used or for use in the Business,
and all radios, attachments, accessories and materials handling
equipment 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, consents, approvals, franchises and other instruments relating
to the Customer Accounts (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 Customer Accounts (or descriptions of
unwritten arrangements) and Related Approvals shall be delivered to
Buyer simultaneously with the execution and delivery of this
<PAGE>
Agreement;
(e) all of Seller's inventory of parts, tires, supplies 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) 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, including without limitation,
Seller's pending Type V permit and all notes, records and information
associated therewith (the "Permits"), true and complete copies of which
are attached to Schedule 1.1(g);
(h) all of Seller's right, title and interest in and to the name
"Betts Pump Service, Inc." and the right to use such name (the "Business
Name");
(i) all of Seller's existing documents, files and other material
related to all current or past customers of the Business;
(j) all of Seller's shop tools, nuts and bolts relating to the
Business; and
(k) all of the goodwill of the Business.
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); (d) all contracts and contract rights and obligations of Seller
(whether oral or in writing) other than the Customer Accounts and any other
contracts expressly assigned to Buyer hereunder, (e) all commitments, lists,
leases, permits, licenses, consents, approvals, franchises and other instruments
not relating to the Customer Accounts or the Business; (f) all employment
contracts to which Seller is a party or by which Seller is bound; (g) all motor
vehicles of Seller that are not Rolling Stock, and (h) all assets used or for
use in the Seller's waste water treatment business.
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 best 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 agreement.
SECTION 1.4 SELLER ACCOUNTS RECEIVABLE. Buyer shall have no liability or
obligation whatsoever to Seller in connection with the Accounts Receivable.
However, if Buyer receives any payments which are designated by the customer as
being toward such Accounts Receivable, then Buyer shall forward such payments to
Seller on a regular basis (but at least monthly),
<PAGE>
together with an itemized list of the sources thereof. Seller shall make no
attempt to collect the Accounts Receivable for a period of 90 days after the
date of Closing. Attached hereto as Schedule 1.4 is a true and complete list of
all Accounts Receivable of Seller as of March 27, 1998.
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 $0.00.
SECTION 1.6 CHANGE OF NAME. On the date of Closing, Seller shall take
all necessary action to change Seller's current Business Name to a name not the
same as or similar to Betts Pump Service, Inc. or any other symbol, trademark,
service mark, logo or trade name now used by Seller. Seller shall, on the date
of closing, deliver to Buyer, in form suitable for filing, such certificates,
consents and other documents as are necessary to effect the transfer of the
registration of the Business Name conveyed by Buyer pursuant to this Agreement
in Texas, Louisiana and Arkansas and shall grant any consents and take any other
and further action, all at Seller's own expense, requested by Buyer to enable
Buyer to reserve or register any such name for use of Buyer in Texas, Louisiana
and Arkansas.
ARTICLE II
PURCHASE PRICE
SECTION 2.1 PURCHASE PRICE.
(a) Subject to Sections 2.3 below, Buyer shall pay to Seller for
the Assets and the restrictive covenants set forth herein up to
$1,950,000 (the "Purchase Price").
(b) The Purchase Price shall be payable on the Closing Date as
follows:
(i) Buyer shall pay Seller cash in the amount of
$847,473 (subject to adjustment in accordance with
Section 2.3 below;
(ii) Buyer shall assume the Assumed Debt (as defined in
Section 2.3 below); and
(iii) Buyer shall deliver to Seller that total number of
whole shares of common stock, par value $.01 per
share ("Parent Stock"), of U S Liquids, Inc., a
Delaware corporation and the parent corporation of
Buyer ("Parent"), which shall have an aggregate
Agreed Value (as defined in Section 2.2 below) of
$600,000 calculated in accordance with Section 2.2
below, and subject to the restrictions set forth in
Section 2.4 below.
SECTION 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 of issuance, adjusted for any stock splits, stock
dividends and other capital changes between the first date of the valuation
period and the date of issuance. Only whole shares shall be delivered. Any
fractional shares resulting from applying the Agreed Value to the amount of
consideration payable shall be paid in cash.
SECTION 2.3 ASSUMPTION OF DEBT; ADJUSTMENTS. As a portion of the
Purchase Price
<PAGE>
payable in Section 2.1 above, Buyer shall assume or pay off at Closing, the
actual debt of Seller of $502,527, which amount constitutes all of the debts of
Seller (including lease payments and lease-end buy-out payments) related to the
Assets (the "Assumed Debt"). Attached hereto as Schedule 2.3 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
$502,527, the purchase price payable in Section 2.1(b)(i) shall be increased by
an amount equal to the difference between $502,527 and the Assumed Debt. If the
Assumed Debt is more than $502,527, the purchase price payable in Section
2.1(b)(i) shall be reduced by an amount equal to the difference between the
Assumed Debt and $502,527.
SECTION 2.4 RESTRICTION ON RESALE OF PARENT STOCK. Seller agrees that
fifty percent (50%) of the shares of Parent Stock to be delivered to Seller
pursuant to Section 2.1(b)(iii) hereunder shall not be transferred, sold, traded
or otherwise disposed of for a period of one year following the Closing Date.
Seller acknowledges that certificates representing such shares shall bear
legends referencing such restrictions and that the transfer agent of the Parent
shall be given appropriate stop transfer notification with respect to such
shares.
ARTICLE III
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 III (the "Closing"). The Closing shall take place at a location
mutually acceptable to Buyer and Seller.
SECTION 3.2 DELIVERIES BY SELLER AND SHAREHOLDER. At the Closing, Seller
and Shareholder 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;
(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
satisfactory to Buyer;
(e) the documents evidencing Seller's change of name as required
by Section 1.6;
(f) a certified copy of the resolutions 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, along with an incumbency certificate of Seller;
(g) such other separate instruments of sale, assignment or
transfer reasonably required by Buyer; and
(h) evidence of payment in full by Seller of all outstanding
amounts owed to 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 (d) and shall assume
or make payment in full on the Assumed Debt.
<PAGE>
ARTICLE IV
COVENANTS OF SELLER AND SHAREHOLDER
SECTION 4.1 USE OF BUSINESS NAME. Seller and Shareholder covenant not to
use Business Name or any similar names from and after the close of business on
the date of Closing; provided, however, that Seller may continue to use the name
"Betts Environmental" after the Closing date.
SECTION 4.2 TRANSITION. Neither Seller nor Shareholder will take any
action that is designed or intended to have the effect or 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 Shareholder will refer all customer inquiries relating
to the Business to Buyer from and after the Closing. Further, Seller and
Shareholder 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 Shareholder assisting
Buyer to obtain contacts with Seller's current customers, routing transition
activities and development of sufficient information to allow Buyer to compile
accurate customer billings.
SECTION 4.3 SURVIVAL. Each of the covenants set forth in this Article IV
shall survive the Closing and the transfer of the Assets.
ARTICLE V
REPRESENTATIONS AND WARRANTIES
OF SELLER AND SHAREHOLDER
SECTION 5.1 Seller and Shareholder, 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
Shareholder 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 instruments or other agreement to which
Seller or Shareholder are a party or by which Seller or
Shareholder are bound. This Agreement constitutes a valid
obligation of Seller and Shareholder enforceable against Seller
and Shareholder in accordance with its terms except as limited by
bankruptcy, insolvency, reorganization or other such laws
concerning the rights of creditors.
(ii) Shareholder 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 Shareholder, free and
clear of all liens, security interests and encumbrances
whatsoever.
(b) COMPLIANCE WITH LAW. Neither Seller nor the Shareholder 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 the Assets or the Business.
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
<PAGE>
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 used or for use in connection with the
Business. Each piece of Equipment is in good working order and repair.
(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 good working order and repair.
(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 Shareholder
has received any notice that any person intends or desires to modify,
waive, amend, rescind, release, cancel or terminate any Customer
Account. By virtue of the grant, conveyance, sale, transfer and
assignment of the 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 PERSONAL PROPERTY. Seller has good and
marketable title to all of the Assets constituting personal property,
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 all of the
Assets constituting personal property, free and clear of all liens,
lease payments (including lease-end buy-out payments), encumbrances,
security interests, equities or restrictions whatsoever except the
Assumed Debt. The Assets include all of the permits, licenses,
franchises, consents and other approvals necessary or desirable to
conduct the Business.
(g) LITIGATION. Except as set forth on Schedule 5.1(g) hereof,
there is no claim, litigation, action, suit or proceeding,
administrative or judicial, pending or threatened against Seller or
Stockholders, 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 Stockholders 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.
(h) EMPLOYEES. Attached as Schedule 5.1(h) 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.
(i) EMPLOYEE RELATIONS AND BENEFIT PLANS. Set forth on Schedule
5.1(i) 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 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
<PAGE>
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.
(j) FINANCIAL STATEMENTS. Attached hereto as Schedule 5.1(j) are
copies of Seller's balance sheet as of December 31, 1997, and a
statement of income, cash flow and retained earnings for the year ended
December 31, 1997, and Seller's balance sheet as of February 28, 1998
(the "Balance Sheet Date"), and a statement of income, cash flow and
retained earnings for the two-month period then ended (the "Financial
Statements"). The Financial Statements (including any footnotes thereto)
have been prepared in accordance with GAAP, applied on a consistent
basis throughout the periods indicated. The Financial Statements
(including all footnotes thereto) are true, complete and correct and
present fairly the financial condition and the results of the operations
of Seller for the period indicated thereon. 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. The Financial Statements are consistent with the books
and records of Seller (which books and records are correct and complete.
(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. Neither Seller nor Shareholder 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 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. No
employee, contractor or agent of Seller has, in the course and scope of
employment with Seller, been harmed by exposure to Hazardous Materials.
Seller has no direct or contingent liability or obligation for or in
connection with any claimed release, discharge or leak of any substance
onto any property or into the environment. Further, no portion of the
facilities operated by Seller is listed on the CERCLA list or the
National Priorities List of Hazardous Waste Sites or any similar list
maintained by the State of Texas. 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 Shareholder
is listed as a potentially responsible party under CERCLA or any
comparable or similar state statute; neither Seller nor Shareholder has
received any notice of such a listing; and neither Seller nor
Shareholder knows of any facts or circumstances which could give rise to
such a listing.
<PAGE>
(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 the 12- month period ending December 31, 1997 were $1,587,203.93.
(p) 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
Shareholder become aware of any fact or circumstance which would change
a representation or warranty of Seller or Shareholder in this Agreement,
the party with such knowledge shall immediately give notice of such fact
or circumstance to Buyer. However, such notification shall not relieve
Seller or Shareholder 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 Shareholder 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 V shall survive the Closing and the transfer
of the Assets.
ARTICLE VI
REPRESENTATIONS AND WARRANTIES OF BUYER AND PARENT
SECTION 6.1 Buyer and Parent represent and warrant to Seller and
Shareholder 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.
(c) PARENT STOCK. The Parent Stock to be delivered to Seller 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 restriction on transfer
other than restrictions imposed by the Securities Act of 1993, as amended, or
the regulations promulgated thereunder.
SECTION 6.2 SURVIVAL. Each of the representations and warranties set
forth in this Article VI shall survive the Closing and the transfer of the
Assets.
<PAGE>
ARTICLE VII
NONCOMPETITION
SECTION 7.1 NONCOMPETITION COVENANTS. Seller and Shareholder, jointly
and severally, agree that for a period of ten years following the date of
Closing, neither of them shall directly or indirectly, through a subsidiary or
affiliate (including without limitation, Betts Environmental or any of its
successors or assigns), 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 the states of Texas, Louisiana and Arkansas (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 two years 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 Shareholder or for which Seller or Shareholder
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 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 Shareholder from (i) continuing to carry on its current
sludge de-watering operations from its present location and providing services
of a nature currently provided to clean water plants and publicly operated
treatment works, or (ii) 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
<PAGE>
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 Shareholder agree that, 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 Article VII impose a reasonable restraint
on Seller and Shareholder in light of the activities and business of the Buyer
on the date of the execution of this Agreement and future plans of the Buyer.
SECTION 7.4 SEVERABILITY OF COVENANTS. The covenants in this Article VII
are severable and separate, and the unenforceability of any specific covenant
shall not affect the provisions of any other covenants. 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 INDEPENDENT COVENANTS. All of the covenants in this Article
VII shall be construed as an agreement independent of any other provision of
this Agreement, and the existence of any claim or cause of action of Seller or
Shareholder against Buyer, whether predicated on this Agreement or otherwise,
shall not constitute a defense to the enforcement by Buyer of such 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 Shareholder is in violation of any provision of this Article VII 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 Shareholder or in which any person
contests the validity or such agreements and covenants or their enforceability
or seeks to avoid their performance or enforcement.
SECTION 7.6 MATERIALITY. Seller and Shareholder hereby agree that the
foregoing noncompetition covenants are a material and substantial part of this
transaction.
ARTICLE VIII
NON-ASSUMPTION OF LIABILITIES; INDEMNIFICATION
SECTION 8 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 Shareholder 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
Shareholder; (d) the generation, collection, transportation, storage or disposal
by Seller or Shareholder of any materials, including, without limitation,
hazardous materials; (e) an agreement or arrangement between Seller and the
employees of Seller or Shareholder 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 Shareholder
<PAGE>
or to which Seller or Shareholder contributes or any contributions, benefits or
liabilities therefor or any liability for the withdrawal or partial withdrawal
from or termination of any such plan or program by Seller or Shareholder; (g)
the debts of Seller or Shareholder other than the Assumed Debt; (h) any
litigation against Seller or Shareholder, whether or not listed on Schedule
5.1(h); (i) any liability, obligation cost or expense related to any facility
operated by Seller, including, without limitation, the environmental condition
thereof; and (k) the liabilities or obligations or Seller or Shareholder for
brokerage or other commissions relative to this Agreement or the transactions
contemplated hereunder. Seller and Shareholder 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 Contracts to the extent, and only to the
extent, such obligations first mature and are required to be performed after the
close of business on the Closing Date.
SECTION 8.3 INDEMNIFICATION BY SELLER AND SHAREHOLDER. Notwithstanding
investigation at any time made by or on behalf of Buyer, Seller and Shareholder,
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, either before or after the date of this Agreement, from:
(a) inaccuracy in any representation or warranty made by Seller
or Shareholder in this Agreement;
(b) breach of any representation or warranty under this Agreement
by Seller or Shareholder;
(c) failure of Seller or Shareholder duly to perform and observe
any term, provision, covenant, agreement or condition under this
Agreement;
(d) liability of Seller or Shareholder 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);
(e) misrepresentation in or omission from any Schedule to this
Agreement;
(f) failure of Seller or Shareholder 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 Shareholder imposed upon Buyer as a
result of Seller's failure to comply with any applicable bulk transfer
law;
(h) liability of Seller or Shareholder resulting from one or more
pending or threatened lawsuits whether or not listed on Schedule 5.1(g);
(i) liability of Seller or Shareholder to creditors of Seller or
Shareholder which is imposed on Buyer whether as a result of bankruptcy
proceedings or otherwise and whether as a result of bankruptcy
proceedings or otherwise and whether as an account payable by Seller or
Shareholder or as a claim of alleged fraudulent conveyance or
preferential payments within the meaning of the United States Bankruptcy
Code or otherwise; and
(j) the existence of creditors of Sellers which are not disclosed
to Buyer;
<PAGE>
(k) any of the matters described in Section 8.1(a) - (k) hereof;
and
(l) 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) - (l) 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, aid or incurred by such
parent, subsidiary, affiliate, or successor.
SECTION 8.4 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 Notices 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 faith and the claim does not involve injunction or
equitable relief or involve 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 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 IX
FEDERAL SECURITIES ACT RESTRICTIONS ON STOCK
SECTION 9.1 REGISTERED STOCK. Parent represents and warrants to Seller
and Seller acknowledges that all of the shares of Parent Stock to be delivered
to Seller pursuant to this Agreement will be registered under the Securities Act
of 1933, as amended (the "Act") prior to
<PAGE>
delivery to Seller.
SECTION 9.2 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.
In addition, all certificates representing shares of Parent Stock which are
subject to the restrictions set forth in Section 2.4 hereof, shall bear the
following additional legend:
THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO
RESTRICTIONS ON SALE AND TRANSFER WHICH ARE SET FORTH IN A
CERTAIN PURCASE AND SALE OF ASSETS AGREEMENT DATED AS OF APRIL 1,
1998, A TRUE AND CORRECT COPY OF WHICH IS ON FILE AT THE
PRINCIPAL OFFICE OF THE COMPANY.
SECTION 9.3 COMPLIANCE WITH LAW. Seller covenants, warrants and
represents 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. Further, Shareholder represents and acknowledges that he has no
current plan or intention to sell, exchange or otherwise dispose of any of the
Parent Stock following the Closing.
ARTICLE X
GENERAL
SECTION 10.1 FURTHER ASSURANCE. From time to time after the Closing,
Seller and Shareholder 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 consents of third parties, to endeavor to
obtain such consents promptly, and if any be unobtainable, to use their best
efforts to provide Buyer with the benefits thereof in some other manner. Seller
and Shareholder will cooperate and use their best 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 Closing.
SECTION 10.2 JOINT AND SEVERAL OBLIGATIONS. All representations,
warranties and agreements of Seller or Shareholder under this Agreement, the
Schedules and the transactions contemplated hereby shall be joint and several.
SECTION 10.3 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; nor shall any waiver of any single breach or default be
deemed a waiver of any other breach or default occurring before or after that
waiver.
SECTION 10.4 TIME OF THE ESSENCE. Time is of the essence of this
Agreement.
<PAGE>
SECTION 10.5 NOTICE. All notices or communications required or permitted
under this Agreement shall be given in 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 the Seller and Shareholder:
Betts Pump Service, Inc.
6960 CR. 4023
Kemp, TX 75143
Attn: Keith Betts
If to Buyer:
Mesa Processing, Inc.
411 N. Sam Houston Parkway East
Houston, TX 77060
Attn: W. Gregory Orr
with a copy to:
Jared D. Nielsen, Esq.
Krasny & Nielsen, L.L.P.
440 Benmar
Suite 2090
Houston, TX 77060
Notice shall be deemed given and effective the day personally delivered, the day
after bing 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 10.6 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
written, relative to said subject matter.
SECTION 10.7 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 10.8 EXPENSES OF TRANSACTION. Seller shall pay all costs and
expenses incurred by Seller or Shareholder 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 10.9 BROKER'S COMMISSION. Seller and Shareholder represent and
warrant to Buyer and Buyer represents and warrants to Seller and Shareholder
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
<PAGE>
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 10.10 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 10.11 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 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 10.12 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:
MESA PROCESSING, INC.
By:______________________________
Name:____________________________
Title:_____________________________
SELLER:
BETTS PUMP SERVICE, INC.
By:______________________________
Name:____________________________
Title:_____________________________
EIN _____________________________
SHAREHOLDER:
--------------------------------
KEITH BETTS
SSN_____________________________
EXHIBIT 10.58
AGREEMENT FOR PURCHASE AND SALE OF ASSETS
AGREEMENT entered into this 2nd day of April, 1998, by and among SOUTH
SHORE PUMPING CORP., a Massachusetts corporation ("Seller"), RANDY S. BERN, who
is Seller's sole stockholder (collectively "Stockholder"), and US LIQUIDS NORTH
EAST, INC., a Delaware corporation ("U.S. Liquids" or "Buyer").
IN CONSIDERATION OF the mutual representations, warranties and covenants
set forth herein, and for other good and valuable consideration the receipt and
sufficiency of which is hereby acknowledged, and intending to be legally bound,
the parties hereby agree as follows:
SECTION 1. PURCHASE AND SALE OF ASSETS.
1.1 ASSETS TO BE TRANSFERRED. Seller shall sell, convey, transfer and
assign to Buyer and, subject to the terms and conditions of this Agreement and
in reliance upon the covenants, representations and warranties of Seller and
Stockholder contained herein, Buyer shall purchase and acquire from Seller, at
the Closing described in Section 1.4, the following assets of Seller, as they
shall exist on the Closing Date:
(a) All of the Seller's interest in and to its business goodwill and
other intangible assets of every kind and description, to the extent assignable,
including Seller's license and the exclusive right to the name "South Shore
Pumping Corp." ("Intangibles");
(b) Seller's furniture, fixtures and equipment set forth on SCHEDULE
1.1 attached hereto ("Furniture, Fixtures and Equipment") and any applicable
rights under warranties and guaranties related thereto;
1
<PAGE>
(c) All of Seller's rights or interests under the contracts,
agreements, leases, dumping plants, licenses for waste water disposal and
transportation, set forth on Schedule 1.2 and purchase orders relating to
Seller's business ("Contract Rights") set forth on Schedule 1.3;
(d) All of Seller's prepaid expenses, advances and deferred charges,
relating exclusively to its business, to the extent assignable, and any deposits
of Seller, including without limitation any deposits relating to Contract Rights
set forth on Schedule 1.4; and
(e) Telephone numbers, Yellow Pages advertising, overflow tanks,
route lists, and customer lists set forth on Schedule 1.5.
The foregoing items (a) through (e) are hereinafter collectively referred
to as the "Acquired Assets." All of the Acquired Assets will be transferred to
Buyer free and clear of any liens or encumbrances. Seller and Buyer specifically
acknowledge that (i) no properties not specifically identified as being sold to
Buyer hereunder are being sold to Buyer hereunder, and title thereto shall be
retained by Seller; and (ii) Buyer is assuming no liabilities of the Seller
whatsoever, excepting only the liabilities specifically referred to in Section
1.3 hereto, and Seller shall remain solely liable therefor.
1.2 PURCHASE PRICE; PAYMENT.
(a) PURCHASE PRICE. The Buyer will pay to the Seller for the
Acquired Assets an amount (the "Purchase Price") equal to the sum of:
ITEM AMOUNT
- ----------- -----------
Intangibles (including goodwill), $326,212.45
Contract Rights,
Furniture, Fixtures, Supplies $ 25,000
and Equipment
Customer Lists
2
<PAGE>
(b) PAYMENT. Payment of the Purchase Price by Buyer shall be made as
follows:
(i) By delivery to Seller, on the Closing Date, of a certified or
bank cashier's check in the amount of Three Hundred and Fifty One
Thousand, Two Hundred and Twelve and 45/100 Dollars ($351,212.45).
1.3 CLOSING. The closing hereunder (the "Closing") will take place at the
offices of Bonin & Zalcman, as of 10:00 a.m. on March 31, 1998, or such other
time and place as the parties may agree. (The date on which the Closing occurs
is hereinafter referred to as the "Closing Date").
SECTION 2. REPRESENTATIONS AND WARRANTIES RELATING TO SELLER
Seller and Stockholder, jointly and severally, hereby represent and
warrant to Buyer as follows:
2.1 ORGANIZATION AND QUALIFICATION. Seller is a corporation duly
organized, validly existing and in good standing under the laws of the
Commonwealth of Massachusetts and has full power and authority to own, use or
lease its properties and to conduct its business as such properties are owned,
used or leased and as such business is conducted. Seller is not qualified to do
business as a foreign corporation in any other jurisdiction and no such
qualification is required.
2.2 AUTHORIZATION. The execution and delivery of this Agreement by Seller,
and the performance by Seller of all of its obligations hereunder, have been
duly authorized by Seller's Stockholder and Directors and by all other necessary
corporate action on the part of Seller. This Agreement is binding upon and
enforceable against Seller and Stockholder in accordance with its terms.
-39-
<PAGE>
2.3 EFFECT OF AGREEMENT. The entry into this Agreement by Seller does not,
and the consummation by Seller of the transactions contemplated by this
Agreement will not, violate the
3
<PAGE>
provisions of (a) Seller's Articles of Organization or Bylaws or (b) any
mortgage, lien, lease, agreement, contract, instrument, order, arbitration
award, judgment, license or decree to which Seller is a party or by which Seller
or any of the Acquired Assets is bound. No default or breach will occur in any
material respect by virtue of the consummation of the transactions contemplated
hereunder under any contract, agreement, lease, deed of trust, indenture or
other instrument applicable to Seller or Stockholder; no rights of Seller or
Stockholder under any such existing contract, agreement, lease, indenture, deed
of trust or other instrument will be limited, impaired or extinguished by virtue
of the consummation of the transactions contemplated hereunder, nor will the
consummation of the transactions contemplated hereunder result in the creation
of any lien, charge or encumbrance upon the assets of Seller.
2.4 TITLE TO PROPERTIES; LIENS; CONDITION OF PROPERTIES.
(a) Seller owns no real property at the date hereof and, except as
disclosed in SCHEDULE 2.4 (Leases) attached hereto, Seller is not a party to any
leases for real or personal property. Seller owns no furniture, fixtures or
equipment with a book value in excess of $1,000.00, except as set forth in
SCHEDULE 1.1 (Furniture, Fixtures and Equipment) attached hereto. Seller has
good and marketable title to all of the property owned by it, including without
limitation all of the property described in said Schedules, and all of its
leases are valid and subsisting and no default by Seller or, to Seller's
knowledge, by the other parties thereto exists under any thereof, and none of
the properties or assets owned or leased by Seller is subject to any mortgage,
pledge, lien, conditional sale agreement, security interest, encumbrance or
other charge, except as specifically disclosed in said Schedules;
4
<PAGE>
(b) All furniture, fixtures and equipment, including motor vehicles
owned or leased by Seller are transferred to the Buyer "as is".
2.5 TAXES. Except as set forth on SCHEDULE 2.5 attached hereto, upon the
Seller and the Stockholder's knowledge, Seller has filed all federal, state and
local income, excise, franchise, real estate and sales and use tax returns
required to be filed by it and has paid all taxes owing by it except taxes which
have not yet accrued or otherwise become due for which adequate provision has
been made. No extensions of time for the assessment of deficiencies for any year
are in effect. Neither the IRS nor any other taxing authority is now asserting
or threatening to assert against Seller any deficiency or claim for additional
taxes or interest thereon or penalties in connection therewith.
2.6 ABSENCE OF UNDISCLOSED LIABILITIES. As of March 23, 1998, to the
knowledge and belief of Stockholder and Seller, Seller had no material
liabilities of any nature, whether accrued, absolute, contingent or otherwise
(including without limitation liabilities as guarantor or otherwise with respect
to obligations of others, or liabilities for taxes due or then accrued or to
become due), except liabilities reflected on Schedule 2.6 attached hereto or
other Schedules furnished to Buyer hereunder. As of the date hereof, Seller has
no material liabilities of any nature, whether accrued, contingent or otherwise
(including without limitation liabilities as guarantor or otherwise with respect
to obligations of others, or liabilities for taxes due or accrued or to become
due), except liabilities reflected on SCHEDULE 2.6 attached hereto or other
Schedules furnished to Buyer hereunder.
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2.7 ABSENCE OF CERTAIN CHANGES. Except as otherwise disclosed in SCHEDULE
2.7 attached hereto, since March 23, 1998, to the Seller's and Stockholder's
best knowledge and belief, there has not been:
(a) Any change in the financial condition, properties, assets,
liabilities, business or operations of Seller (other than a change brought about
by prevailing economic conditions generally), which change, by itself or in
conjunction with all other such changes, whether or not arising in the ordinary
course of business, has been or is likely to be adverse with respect to Seller;
(b) Any mortgage, encumbrance or lien placed on any properties owned
or leased by Seller which remains in existence on the date hereof;
(c) Any obligation or liability incurred by Seller other than
obligations and liabilities incurred in the ordinary course of business;
(d) Any purchase, sale or other disposition, or any agreement or
other arrangement for the purchase, sale or other disposition, of any part of
the properties or assets owned or leased by Seller other than purchases for and
sales from inventory in the ordinary course of business;
(e) Any other transaction entered into by Seller other than
transactions in the ordinary course of business; or
(f) Any change with respect to the employment status or terms of
employment of Seller's management or supervisory personnel.
2.8 CONTRACTS. Except for contracts, commitments, plans, agreements and
licenses described in SCHEDULE 2.8 attached hereto, to the best knowledge and
belief of Stockholder and Seller, Seller is not a party to or subject to:
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(a) Any plan or contract providing for bonuses, pensions, options,
stock purchases, deferred compensation, retirement payments, profit sharing,
collective bargaining or the like, or any contract or agreement with any labor
union;
(b) Any employment contract or contract for services not terminable
within 30 days by and without penalty or further liability to Seller;
(c) Any contract or agreement for the purchase of any inventory,
commodity, material, furniture, fixtures or equipment, other than in the
ordinary course of business;
(d) Any contract or agreement for the sale of any inventory
commodity, material, furniture, fixtures, equipment or service, other than
contracts with customers entered into in the ordinary course of business;
(e) Any contract or agreement providing for the delivery of all or
substantially all of its waste of a particular type of waste to a particular
disposal facility, or for periodic minimum disposal of a particular type of
waste to a particular disposal facility; or
(f) Any contract containing covenants limiting Seller's freedom to
compete in any line of business or with any person or entity.
Copies of all such contracts, commitments, plans, agreements or licenses
have been provided to the Buyer or its counsel prior to the execution of this
Agreement, and all such copies are true, correct and complete, and have been
subject to no amendment, extension or other modification as of the date hereof.
Seller is not, and to the knowledge of Seller and Stockholder none of the
other parties thereto is, in default under any such contracts, commitments,
plans, agreements or licenses described in said SCHEDULE 2.8 (a "default" being
defined for purposes hereof as an actual default
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or any set of facts which would, upon receipt of notice or passage of time,
constitute a default), except as reflected on Schedule 2.8 attached hereto and
other schedules furnished to Buyer hereunder.
(g) HAZARDOUS MATERIALS. To the best of Seller's and Stockholder's
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
Massachusetts 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 Seller's and
Stockholder, 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 Seller's and 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 onto the Land or into the
environment. Further, to the best of Seller's and Stockholder's knowledge, no
portion of
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the Property is listed on the CERCLA list or the National Priorities List of
Hazardous Waste Sites or any similar list maintained by the Commonwealth of
Massachusetts. Attached hereto as Schedule 2.8(g) 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, to the best of Seller's knowledge, is
listed on the CERCLA list or the National Priorities List of Hazardous Waste
Sites or any comparable Massachusetts list. Neither Seller nor Stockholder is
listed as a potentially responsible party under CERCLA 'or any comparable or
similar Massachusetts statute; neither Seller nor Stockholder has received any
notice of such a listing; and neither Seller nor Stockholder knows of any facts
or circumstances which could give rise to such a listing.
(h) GOVERNMENT NOTICES. Seller has delivered to Buyer, a description and
copies, as of the date of this Agreement, of all notifications, 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 described in Schedule
2.8(h).
(i) UNDERGROUND STORAGE TANKS. To the best knowledge and belief of Seller
and Stockholder, 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. Set forth
on Schedule 2.8(i) is a list of all above and below ground tanks located on the
Property, each of which are being used and maintained in accordance with
Applicable Laws.
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2.9 LITIGATION. Except as disclosed on SCHEDULE 2.9 attached hereto, there
are no proceedings or litigation pending or, to the best knowledge and belief of
Seller or Stockholder, threatened against or affecting Seller or Seller's
business, or properties or assets owned or leased by Seller, at law or in
equity, before any federal, state or local courts or any other governmental or
administrative agency, and there are no judgments, orders, consent decrees,
injunctions, administrative orders, notices of violation or other mandates
outstanding which adversely affect or may adversely affect Seller or its
business or operations, or properties or assets owned or leased by Seller, or
Seller's financial condition or prospects, or which could prevent or restrict in
any manner the consummation of the transaction contemplated hereby.
2.10 COMPLIANCE WITH LAWS. Except as otherwise disclosed herein or on the
Schedules hereto, Seller has received no written notice asserting that it is in
violation in any material respect of any laws and regulations which apply to the
conduct by Seller of its business, or to any properties or assets owned or
leased by Seller, the violation of which could have a material, adverse effect
on Seller or its assets.
2.11 WAGES AND BENEFITS DUE. All wages and all other payments due from
Seller on account of group employee health, life and accident insurance, accrued
vacation and other fringe benefits have been paid and Seller is not liable for
any severance payments or for any payments or penalties for failure to comply
with any law regulating the employment of labor.
2.12 EMPLOYEE BENEFIT PLANS.
(a) SCHEDULE 2.12 attached hereto contains true and complete lists
of each written, and each generally announced or generally applied oral,
agreement, policy, plan or other arrangement to which Seller is a party which is
a pension, option, bonus, deferred compensation,
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retirement, stock purchase, profit-sharing, severance pay, health, retiree
health, welfare, incentive, vacation, sick leave, medical, disability,
hospitalization, life or other insurance or fringe or other employee benefit
plan, policy or arrangement, including any type of self-insured agreement, plan,
policy or arrangement (such agreements, plans, policies and arrangements are
herein referred to collectively as "Plans" and individually as a "Plan").
SCHEDULE 2.12 further identifies each employee benefit trust maintained with
respect to any such Plan and the trustees of each such trust.
(b) Attached to SCHEDULE 2.12 is a copy of each written Plan as
currently in effect (including all amendments thereto), and included in SCHEDULE
2.12 is an accurate summary of all provisions of each oral Plan, as presently in
effect.
(c) All benefits accrued under any of the foregoing as of the date
hereof have been, and as of the Closing Date will have been, paid or are and
will be otherwise fully funded, and there are no unfunded obligations or
liabilities or actuarial deficits of Seller under any of such Plans nor will any
such obligations, liabilities or deficits exist at the Closing. SCHEDULE 2.12
further identifies all disputed claims for benefits under any of such Plans
which have been asserted or which are probable of assertion to the extent such
claims have not been accrued or funded, as aforesaid.
(d) Each Plan which is intended or required to be qualified or
maintained under the Employee Retirement Income Security Act of 1974, as amended
("ERISA"), and the Internal Revenue Code, as amended (the "Code") has been at
all times and continues to be operated and maintained in material compliance
therewith.
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(e) Seller has not, with respect to any Plan, engaged in a
"prohibited transaction" as defined in Section 4975(c) of the Code and Section
406(a) of ERISA which could subject Seller to a tax or a penalty with respect
thereto.
2.13 COPIES OF DOCUMENTS. Seller has made available for inspection and
copying by Buyer and its counsel true and correct copies of all documents
referred to in this Section 2 or in the Schedules delivered to Buyer pursuant to
this Agreement.
SECTION 3. REPRESENTATIONS AND WARRANTIES OF BUYER.
Buyer hereby represents and warrants to Seller as follows:
3.1 ORGANIZATION AND QUALIFICATION. Buyer is a corporation duly organized,
validly existing and in good standing under the laws of the Commonwealth of
Massachusetts, with full power and authority to own, use or lease its properties
and to conduct its business as such properties are owned, used or leased and as
such business is conducted. Buyer is not qualified to do business as a foreign
corporation in any other jurisdiction.
3.2 AUTHORITY. Buyer has the corporate power to enter into this Agreement
and to carry out the transactions contemplated hereby. The execution, delivery
and performance of this Agreement have been duly and validly authorized and
approved by all necessary corporate action on the part of Buyer, and this
Agreement is the legal and binding obligation of Buyer. The entering into of
this Agreement by Buyer does not and the consummation by Buyer of the
transactions contemplated hereby will not violate the provisions of (a) Buyer's
Articles of Organization or By-laws or (b) any mortgage, lien, lease, agreement,
contract, instrument, order, arbitration award, judgment, or decree to which
Buyer is a party or by which Buyer is bound, or to which any property of Buyer
is subject. No default or breach
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will occur in any material respect by virtue of the consummation of the
transactions contemplated herein under any material contract, agreement,
indenture or other instrument applicable to Buyer.
SECTION 4. CONDITIONS.
4.1 CONDITIONS TO OBLIGATIONS OF BUYER. The obligations of Buyer to
consummate this Agreement and the transactions contemplated hereby is subject to
the fulfillment, on or before the Closing Date, of the following conditions
precedent:
(a) REPRESENTATIONS, WARRANTIES AND COVENANTS OF SELLER. Each of the
representations, warranties and covenants of Seller and Stockholder in Section 2
hereof shall remain true and correct at the Closing Date as fully as if made on
the Closing Date; Seller shall have performed, on or before the Closing Date,
all of its obligations hereunder which by the terms hereof are to be performed
on or before the Closing Date.
(b) ABSENCE OF LITIGATION. No order shall have been entered by any court
or administrative body, and no private or governmental proceeding shall be
pending or threatened which seeks to restrain, enjoin or otherwise prevent the
consummation of the transactions contemplated herein.
(c) CERTIFICATES OF LEGAL EXISTENCE AND GOOD STANDING; TAX LIEN WAIVER.
Seller shall have delivered to Buyer (i) Certificates of the Secretary of the
Commonwealth of Massachusetts certifying as to Seller's legal existence and
corporate good standing and (ii) a
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waiver by the Massachusetts Department of Revenue of the lien imposed by M.G.L.,
C.62C, Section 51.
SECTION 5. COMPETITION.
5.1 NONCOMPETITION COVENANTS. Seller and the Stockholder, jointly and
severally, agree that for a period of five (5) years following the date of
Closing, none 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, permitting or operating a business of transport and disposal of
nonhazardous liquid waste (including, without limitation, waste oil, waste
water, grease trap waste, grit trap waste, septic waste and oil contaminated
water) ; and transportation or collection of any such materials, in each case
within a radius of 100 air miles of Braintree, Massachusetts (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 the business of transport
and disposal of non-hazardous liquid waste (including, without limitation, waste
oil, waste water, grease trap waste, grit trap waste
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and oil contaminated water); 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 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 n 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 5.2 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, 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.
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SECTION 5.3 REASONABLENESS OF COVENANTS. It is agreed by the parties that
the foregoing covenants in this Section 5 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 5.4 SEVERABILITY OF COVENANTS. The covenants in this Section 5 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 5.5 INDEPENDENT COVENANTS. All of the covenants in this Section 5
shall be construed as an agreement independent of any other provision of this
Agreement. Said covenants shall be effective as of the Closing Date and upon
payment of the agreed Purchase Price to Seller. 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 5 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 further
performance or enforcement.
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SECTION 5.6 MATERIALITY. Seller and Stockholder hereby acknowledge that
the foregoing noncompetition covenants are a material and substantial part of
this transaction.
SECTION 6. INDEMNIFICATION BY SELLER AND STOCKHOLDER FOR BREACHES OF WARRANTIES
AND REPRESENTATIONS OF SELLER AND COVENANTS OF SELLER.
6.1 TERMS OF INDEMNIFICATION. Seller and Stockholder, jointly and
severally, (the "Indemnitors") agree to indemnify and hold harmless Buyer, its
officers, directors, employees, agents, successors and assigns, and the assets
from and against any and all damages resulting from any breach of any
representation, warranty, covenant or agreement of Seller set forth in this
Agreement. The Indemnitors further agree to indemnify and hold harmless Buyer,
its officers, directors, employees, agents, successors and assigns, from and
against any and all debts, liabilities, choses in action, or claims of any
nature, absolute or contingent, resulting from any such breach, (collectively,
"claims"). For any claims with respect to any taxes of any type or nature
whatsoever owed to any federal, state or local government or agency thereof, or
any interest or penalties with respect thereto, this indemnity shall survive the
Closing for the period of the statute of limitations applicable to any such
taxes, interest or penalty. For all claims, this indemnity shall survive the
Closing for a period of two (2) years. The Indemnitors shall pay to Buyer any
amounts due Buyer from the Indemnitors pursuant to the terms of this section
within thirty (30) days after demand therefor by Buyer.
6.2 NOTICE OF CLAIMS. Buyer shall give prompt written notice to Seller of
the assertion of any claim, the amount of which together with any anticipated
expenses of defense, settlement or investigation, Buyer reasonably expects to
exceed Two Hundred Fifty and 00/100 Dollars ($250.00). Seller may, by written
notice to Buyer, received by Buyer
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within ten (10) days after receipt by Seller of the original notice from Buyer,
assume the defense of any such claim with counsel satisfactory to Buyer. If
Seller has assumed the defense of a claim, Buyer shall have the right, but not
the obligation, to participate at its own expense in the defense of, or in any
negotiation with respect to, such claim. If Seller does not assume the defense
of a claim under this Section 6 within ten (10) days after receipt of notice
from Buyer of such claim, the Indemnitors shall be obligated to pay all the
reasonable fees and expenses incurred by Buyer in any defense, settlement or
compromise of such claim and Buyer shall have the right to control the defense.
In all events, no settlement or compromise of any claim, the defense of which
Seller has the right to assume hereunder, shall be made in any event without the
consent of Seller. Any such consent shall not be unreasonably withheld or
delayed; provided, however, that in the event Seller shall refuse to join in any
such settlement or compromise, Buyer shall have the right to deposit with Seller
the settlement amount and Seller shall assume the defense of the claim at its
expense and become solely liable therefor. Delay on the part of Buyer in giving
notice of a claim for which indemnification is sought shall reduce the liability
of the Indemnitors under this Section 6 only to the extent that the Indemnitors
was demonstrably and materially prejudiced by such delay in notice.
SECTION 7. MISCELLANEOUS.
7.1 FEES AND EXPENSES. Each of the parties to this Agreement will bear his
or its own expenses in connection with the negotiation and consummation of the
transactions contemplated by this Agreement.
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7.2 GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the laws of the Commonwealth of Massachusetts.
7.3 NOTICES. All notices, requests, demands and other communications
hereunder shall be deemed to have been duly given if delivered, telegraphed or
mailed by certified or registered mail:
To Seller or
Stockholder: South Shore Pumping Corp.
130 Clay Pit Road
Marshfield, MA 02050
With a copy to: Jean O'Callaghan Morris
615 Harland Street
Milton, MA 02186
To Buyer: US LIQUIDS NORTH EAST, INC.
55 Messina Drive
Braintree, MA 02184
With a copy to: Lawrence L. Lewis, Esq.
Bonin & Zalcman
One Boston Place, #3225
Boston, MA 02108
or to such other address of which any party may notify the other parties as
provided above.
7.4 ENTIRE AGREEMENT. This Agreement, including the Schedules and Exhibits
referred to herein, is complete, and all promises, representations,
understandings, warranties and agreements with reference to the subject matter
hereof, and all inducements to the making of this Agreement relied upon by all
the parties hereto, have been expressed herein or in said Schedules or Exhibits.
Buyer specifically acknowledges that it is relying solely on the representations
and warranties set forth in Section 2 hereof in determining to acquire the
Acquired Assets and that no other representations or warranties have been made
by Seller.
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7.5 BINDING EFFECT. This Agreement shall be binding upon, and shall be
enforceable by and inure to the benefit of, the parties named herein and their
respective successors and assigns.
7.6 WAIVERS; SEVERABILITY. The failure of any of the parties to this
Agreement to require the performance of a term or obligation under this
Agreement or the waiver by any of the parties to this Agreement of any breach
hereunder shall not prevent subsequent enforcement of such term or obligation or
be deemed a waiver of any subsequent breach hereunder. In case any one or more
of the provisions of this Agreement shall for any reason be held to be invalid,
illegal or unenforceable in any respect, such invalidity, illegality or
unenforceability shall not affect any other provision or part of a provision of
this Agreement but this Agreement shall be construed as if such invalid or
illegal or unenforceable provision or part of a provision had never been
contained herein.
7.7 COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which shall be deemed an original and all of which shall
constitute one agreement.
7.8 MODIFICAtION OF AGREEMENt. This Agreement may not be modified, waived,
amended or terminated except in writing signed by the parties hereto. No waiver
of any breach of any term hereof shall be effective unless made in writing
signed by the party having the right to enforce such breach, and no such waiver
shall be construed as a waiver of any subsequent breach. No course of dealing or
delay or omission on the part of any party in exercising any right or remedy
shall operate as a waiver thereof or otherwise be prejudicial thereto.
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7.9 HEADINGS. The headings in this Agreement are for the convenience of
reference only, and shall not affect in any manner any of the terms and
provisions hereof.
7.10 COMPLETENESS OF AGREEMENT. Any and all prior and contemporaneous
discussions, undertaking, agreements and understandings of the parties are
merged in this Agreement, which alone fully and completely expresses their
entire agreement. No warranties, representations, covenants or agreements of any
nature whatsoever have been made by any party hereto except as expressly set
forth herein.
7.11 RIGHTS AND DUTIES OF PARTIES AND SUCCESSORS. The rights and duties of
the parties under this Agreement shall inure to the benefit of and be binding
upon the parties hereto and their respective heirs, successors and assigns.
IN WITNESS WHEREOF the parties hereto have executed this Agreement as of
the date first set forth above.
SELLER: SOUTH SHORE PUMPING CORP.
By:/s/ RANDY S. BERN
President
/s/ RANDY S. BERN
RANDY S. BERN, Shareholder
individually
BUYER: US LIQUIDS NORTH EAST, INC.
By:/s/ GLENN PRATT
Vice President
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EXHIBIT 10.59
ESTOPPEL AND WAIVER AGREEMENT
This Estoppel and Waiver Agreement (the Agreement") is made and entered
into effective as of the 10th day of April, 1998 by and between Sanifill, Inc.,
a Delaware Corporation ("Sanifill"), and U S Liquids Inc., a Delaware
Corporation ("Liquids).
RECITALS
WHEREAS, pursuant to the terms of that certain Asset Purchase Agreement
(the "Asset Purchase Agreement"), dated as of December 2, 1996, among Liquids,
Sanifill, Campbell Wells, L.P., and Campbell Wells NORM, L.P., Liquids acquired
substantially all of the assets of and assumed certain liabilities relating to
Campbell Wells L.P., and Campbell Wells NORM, L.P., each a Delaware limited
partnership and a wholly-owned subsidiary of Sanifill;
WHEREAS, in connection with the consummation of the transactions
contemplated by the Asset Purchase Agreement, Liquids (i) issued to Sanifill a
warrant to purchase shares of common stock of Liquids, dated December 13, 1996
(the "Warrant"), and (ii) executed and delivered to Sanifill that certain Buyer
Non competition Agreement, dated December 13, 1996, whereby Liquids agreed for a
period of five (5) years not to engage in any aspect of the business of
collecting, treating and disposing of municipal solid wastes, construction and
demolition debris within the United States;
WHEREAS, Liquids is aggressively pursuing acquisitions of companies
engaged in the business of managing liquid wastes, some of which companies are
also engaged in the management of solid wastes and/or the recycling of certain
materials;
WHEREAS, Liquids is also exploring the possibility of conducting a public
offering of its Common Stock (the "Public Offering.
NOW, THEREFORE, in consideration of the mutual covenants and conditions
contained herein, and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties agree as follows:
1. WAIVER OF CERTAIN REGISTRATION RIGHTS. Provided that the Public
Offering is completed by August 1, 1998, Sanifill hereby waives its right to
have any Warrant Shares (as defined in the Warrant) registered for resale in
connection with the Public Offering. Notwithstanding anything to the contrary in
the Warrant, Sanifill further waives its rights under Section 3.2 of the
Warrant; provided, however, that Sanifill's rights under said Section 3.2 shall
be reinstated immediately upon the withdrawal or closing of the currently
contemplated Public Offering, or, if at any time hereafter (i) the registration
statement filed by Liquids on Form S-1, SEC File No. 333-34875 (the
"Registration Statement"), shall cease to include the Warrant Shares, (ii) the
Registration Statement shall be withdrawn prior to the sale of all Warrant
Shares, or (iii) Liquids breaches, in any material respect, any of its duties or
obligations under the Warrant.
<PAGE>
2. SUSPENSION OF SHELF REGISTRATION STATEMENT. Sanifill acknowledges that
the Registration Statement will become "stale" immediately following the closing
of several acquisitions to be consummated by Liquids on or about April 15, 1998.
Within thirty (30) days after the closing or withdrawal of the Public Offering,
Liquids shall file a post-effective amendment to the Registration Statement and
use its commercially reasonable efforts to cause such amendment to become
effective.
3. LOCK-UP LETTER. Contemporaneously with the execution of this Agreement,
Sanifill shall execute and deliver to Liquids a lock-up letter in the form
attached hereto as Exhibit "A".
4. PERMITTED ACTIVITIES. Notwithstanding anything to the contrary in the
Buyer Non competition Agreement, Sanifill hereby agrees that (i) Liquids and its
Affiliates (as that term is defined in the Buyer Non competition Agreement)
shall be entitled to (a) sell packaging materials (e.g., aluminum, glass,
plastic and cardboard) recovered from unsaleable beverages accepted for
processing and disposal by the Company and its Affiliates, and (ii) treat and
dispose of municipal solid wastes; provided, however, that the total revenue of
the Company and its Affiliates generated from the treatment and disposal of
municipal solid waste shall not exceed two percent (2%) of their consolidated
revenues in any calendar year.
5. REPRESENTATION OF OWNERSHIP. Sanifill hereby represents that it is the
sole owner of the Warrant, such ownership is free and clear of all liens,
encumbrances or other charges of any kind and no person or entity has any right
to acquire the Warrant or any interest therein.
6. MISCELLANEOUS. This Agreement shall be governed by and construed in
accordance with the laws of the State of Texas. This Agreement may not be
modified or amended except by an instrument in writing signed by Sanifill and
Liquids. This Agreement shall inure to the benefit of and shall be binding upon
Sanifill and Liquids and their respective successors and assigns.
IN WITNESS WHEREOF, this Agreement has been duly executed by each of the
parties effective as of the date first above written.
SANIFILL INC.
By: __________________________________
Name: ____________________________
Title:____________________________
U S LIQUIDS INC.
By: _________________________________
Michael P. Lawlor, Chief Executive
Officer
EXHIBIT 10.61
AMENDMENT NO. 1 TO WARRANT AGREEMENT
This Amendment No. 1 to Warrant Agreement is made and entered into this
20th day of April, 1998 by and between U S Liquids Inc., a Delaware corporation
(the "Company"), Van Kasper & Company ("VKCO") and Sanders Morris Mundy Inc.
("SMM") (VKCO and SMM are hereinafter collectively referred to as the
"Representatives").
WHEREAS, the Company and the Representatives are parties to that certain
Warrant Agreement, dated as of August 25, 1997 (the "Warrant Agreement"); and
WHEREAS, the parties hereto desire to amend the Warrant Agreement.
NOW, THEREFORE, the parties hereto agree as follows:
1. The capitalized terms used herein and not otherwise defined herein
shall have their respective meanings as set forth in the Warrant Agreement.
2. Section 6(c)(vi) of the Warrant Agreement is hereby amended to read in
its entirety as follows:
"(vi) EXCLUDED EVENTS. Notwithstanding anything in this Section 6 to
the contrary, the Exercise Price shall not be adjusted by virtue of
(i) the Warrants or the existence or exercise of any Options of the
Company outstanding on the date hereof and disclosed in the
Prospectus, or (ii) the issuance or sale of, or the grant of Options
to purchase, Common Stock to employees, directors, or officers of
the Company or its subsidiaries, or to other persons who do not
beneficially own more than one percent of the Common Stock (assuming
for this purpose that all Options then held by the person, including
new Options then being granted, but no other Option or Convertible
Securities, have then been exercised in full) and are not the
children of such a one percent or greater shareholder or the spouses
of such children, pursuant to stock option plans currently existing
or hereafter approved by the Board of Directors of the Company,
provided that the exercise price is no less than the lower of fair
market value at the time of grant (as determined in accordance with
the applicable stock option plan) or the Current Market Price at the
time of grant (all as determined in accordance with this Section
6(c)), or (iii) the issuance or sale of any Common Stock as all or
part of the consideration for an acquisition by the Company of
assets or securities of a third party, provided that the acquisition
is approved by the Board of Directors of the Company or a duly
appointed committee thereof."
<PAGE>
3. Notwithstanding anything to the contrary in the Warrant Agreement, each
of the Representatives hereby agrees that no adjustments to the Exercise Price
shall be made as the result of any acquisition made by the Company prior to the
date hereof.
4. Except as specifically provided herein, the terms and provisions of the
Warrant Agreement shall remain unchanged and in full force and effect. This
Amendment No. 1 may be executed in any number of counterparts, all of which
taken together shall constitute one and the same amendatory instrument, and any
of the parties hereto may execute this Amendment No. 1 by signing any such
counterpart. This Amendment No. 1 shall be governed by, and construed in
accordance with, the laws of the State of Texas without regard to principles of
conflicts of law.
IN WITNESS WHEREOF, the parties have caused this Amendment No. 1 to be
executed as of the date first above written.
U S LIQUIDS INC.
By: ____________________________________
Name:_______________________________
Title:________________________________
VAN KASPER & COMPANY
By: _____________________________________
Name:_______________________________
Title:________________________________
SANDERS MORRIS MUNDY INC.
By: _____________________________________
Name:_______________________________
Title:________________________________
EXHIBIT 21.1
MBO Inc., a Delaware corporation
US Liquids L.P. Holding Co., a Delaware corporation
US Liquids of La., L.P., a Delaware limited partnership
American WasteWater Inc., a Texas corporation
Mesa Processing, Inc., a Texas corporation
Mesa International, Inc., a Barbados corporation
Re-Claim Environmental, Inc., a Texas corporation
Re-Claim Environmental Louisiana L.L.C., a Louisiana limited liability company
USL Management Limited Partnership, a Texas limited partnership
USL General Management, Inc., a Texas corporation
GEM Management, Inc., a Delaware corporation
U S Liquids Northeast, Inc., a Delaware corporation
Environment Management, Inc., a Texas corporation
Enviro-Waste Type V of Texas, Inc., a Texas corporation
Waste Stream Environmental, Inc., a New York corporation
Earth Blends, Inc., a New York corporation
Amigo Diversified Services, Inc., a Texas corporation
The National Solvent Exchange Corp., a Georgia corporation
USL Parallel Products of California, a California corporation
Parallel Products of Kentucky, Inc., a Kentucky corporation
Parallel Products of Florida, Inc., a Florida corporation
USL City Environmental, Inc., a Michigan corporation
USL City Environmental Services of Florida, Inc., a Florida corporation
EXHIBIT 23.1
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the use of our
reports and all references to our Firm included in this registration statement
on Form S-1 filed by U S Liquids Inc.
ARTHUR ANDERSEN LLP
Houston, Texas
May 7, 1998
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THE FINANCIAL DATA SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED
FROM US LIQUIDS, INC. AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> DEC-31-1997
<CASH> 2,203
<SECURITIES> 0
<RECEIVABLES> 5,778
<ALLOWANCES> 342
<INVENTORY> 567
<CURRENT-ASSETS> 8,827
<PP&E> 43,281
<DEPRECIATION> 4,171
<TOTAL-ASSETS> 55,016
<CURRENT-LIABILITIES> 6,705
<BONDS> 17,436
0
0
<COMMON> 73
<OTHER-SE> 20,833
<TOTAL-LIABILITY-AND-EQUITY> 55,016
<SALES> 12,383
<TOTAL-REVENUES> 38,159
<CGS> 24,173
<TOTAL-COSTS> 30,093
<OTHER-EXPENSES> 41
<LOSS-PROVISION> 77
<INTEREST-EXPENSE> 1,734
<INCOME-PRETAX> 6,291
<INCOME-TAX> 2,416
<INCOME-CONTINUING> 3,875
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3,875
<EPS-PRIMARY> .65
<EPS-DILUTED> .55
</TABLE>
