SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
JANUARY 15, 1999
(Date of earliest event reported)
U S LIQUIDS INC.
(Exact name of registrant as specified in its charter)
DELAWARE 1-13259 76-0519797
(State or other jurisdiction (Commission (IRS Employer
of incorporation) File Number) Identification No.)
411 NORTH SAM HOUSTON PARKWAY EAST, SUITE 400, HOUSTON, TEXAS 77060
(Address of principal executive offices) (Zip Code)
(281) 272-4500
Registrant's telephone number, including area code
Item 2. Acquisition or Disposition of Assets.
On January 15, 1999, the Company acquired Romic Environmental Technologies
Corporation, a California corporation ("Romic Environmental"), in exchange for
approximately $27.3 million in cash and 284,101 shares of common stock, par
value $.01, of the Company. These transactions were consummated pursuant to a
Stock Purchase Agreement between the Company, Romic Environmental and the former
shareholders of Romic Environmental.
Romic Environmental provides distillation, fuel blending and similar
services to generators of hazardous and nonhazardous liquid waste. In addition,
Romic Environmental recycles spent solvents, anti-freeze and other wastes
generated by automotive maintenance and repair facilities. The Company currently
intends to operate Romic Environmental in substantially the same manner as it
was operated prior to this transaction. The Company funded the cash portion of
the purchase price paid for Romic Environmental with borrowings under the
Company's revolving credit facility with Bank of America National Trust and
Savings Association, BankBoston, N.A., Wells Fargo Bank, N.A., Bank Paribas,
Comerica Bank and Union Bank of California. The purchase price was determined
based upon an evaluation of the business of Romic Environmental and the results
of negotiations between the parties.
<PAGE>
The foregoing discussion is only a summary and is qualified in its
entirety by reference to Exhibit 2.1 to this Current Report on Form 8-K filed
herewith.
Item 7. Exhibits.
(a) TO BE FILED BY AMENDMENT. Pursuant to Item 7(a)(4) of Form 8-K, the
Company hereby undertakes to file the financial statements required
in response to this Item in an amendment to this Current Report on
Form 8-K no later than 60 days after January 29, 1999.
(b) TO BE FILED BY AMENDMENT. Pursuant to Item 7(b)(2) of Form 8-K, the
Company hereby undertakes to file the financial statements required
in response to this Item in an amendment to this Current Report on
Form 8-K no later than 60 days after January 29, 1999.
(c) EXHIBITS.
2.1 Stock Purchase Agreement between U S Liquids Inc., Romic
Environmental Technologies Corporation, H. Michael Schneider,
Peter D. Schneider, Thomas R. Schneider, Barbara Morrison,
Custodian for Justin W. Morrison, Barbara Morrison, Custodian
for Melissa L. Morrison, Barbara Morrison, Michael R.
Schneider, Custodian for Bridgette M. Schneider, Laura
Schneider, Peter D. Schneider, Custodian for Patrick Keil
Schneider, Peter D. Schneider, Custodian for Keil Patrick
Schneider, Thomas R. Schneider, Custodian for Jessica L.
Schneider, Thomas R. Schneider, Custodian for Brandon T.
Schneider, Loreen Schneider, John Morrison, and H. Michael
Schneider and Lisa L. Schneider, Trustees for Schneider Living
Trust dated 12/28/81.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
U S LIQUIDS INC.
Date: January 28, 1999 By: /S/ W. GREGORY ORR
W. Gregory Orr, President
EXHIBIT 2.1
STOCK PURCHASE AGREEMENT
among
U S LIQUIDS INC.
a Delaware corporation,
ROMIC ENVIRONMENTAL TECHNOLOGIES CORPORATION
a California corporation,
and
H. Michael Schneider; Peter D. Schneider; Thomas R. Schneider; Barbara Morrison
Custodian Under the California Uniform Transfer to Minors Act ("Cust/CA/UTMA")
for Justin W. Morrison; Barbara Morrison Cust/CA/UTMA for Melissa L. Morrison;
Barbara Morrison; Michael R. Schneider; Michael R. Schneider Cust/CA/UTMA for
Bridgette M. Schneider; Laura Schneider; Peter D. Schneider Cust/CA/UTMA for
Patrick Keil Schneider; Peter D. Schneider Cust/CA/UTMA for Keil Patrick
Schneider; Thomas R. Schneider Cust/CA/UTMA for Jessica L. Schneider; Thomas R.
Schneider Cust/CA/UTMA for Brandon T. Schneider; Loreen Schneider; John
Morrison; H. Michael Schneider and Lisa L. Schneider, as Trustees for Schneider
Living Trust Dated 12/28/81
<PAGE>
TABLE OF CONTENTS
PAGE
RECITALS .................................................................1
TERMS OF AGREEMENT2
ARTICLE 1 PURCHASE AND SALE OF SHARES......................................2
1.1 Transfer of Shares...............................................2
ARTICLE 2 PURCHASE PRICE...................................................2
2.1 Purchase Price...................................................2
2.2 Agreed Value of U S Liquids Common Stock.........................2
2.3 Assumption of Debt...............................................3
2.4 Adjustment to Consideration......................................3
2.5 Effective Date...................................................4
ARTICLE 3 TITLE ASSURANCE..................................................4
3.1 Title Policies...................................................4
3.2 Survey...........................................................4
ARTICLE 4 CLOSING..........................................................5
4.1 Time and Place...................................................5
4.2 Delivery of Shares...............................................5
4.3 Payment of Purchase Price........................................5
ARTICLE 5 REPRESENTATIONS AND WARRANTIES OF PURCHASER......................5
5.1 Corporate Status.................................................6
5.2 Corporate Power and Authority....................................6
5.3 Enforceability...................................................6
5.4 No Violation.....................................................6
5.5 U S Liquids Shares...............................................6
ARTICLE 6 REPRESENTATIONS AND WARRANTIES OF THE SELLERS....................6
6.1 Corporate Status.................................................7
6.2 Power and Authority..............................................7
6.3 Enforceability...................................................7
-1-
<PAGE>
TABLE OF CONTENTS
(CONTINUED)
PAGE
6.4 Capitalization...................................................8
6.5 Subsidiaries.....................................................8
6.6 No Violation.....................................................8
6.7 No Commissions...................................................9
6.8 Financial Statements.............................................9
6.9 Changes Since the Current Balance Sheet..........................9
6.10 Litigation......................................................10
6.11 Liabilities.....................................................10
6.12 Bank Accounts...................................................10
6.13 Environmental Matters...........................................11
6.14 Real Property, Leases and Significant Personal Property.........13
6.15 Good Title, Adequacy and Condition..............................14
6.16 Compliance with Laws............................................14
6.17 Employee Benefit Plans..........................................14
6.18 Tax Returns and Examinations....................................15
6.19 Insurance.......................................................17
6.20 Absence of Certain Changes or Events............................17
6.21 Intellectual Property...........................................17
6.22 Receivables.....................................................18
6.23 Licenses and Permits............................................18
6.24 Contracts and Customer Lists....................................18
6.25 Labor Matters...................................................19
6.26 Governmental Contracts Subject to Price Redetermination or
Renegotiation...................................................19
6.27 Officers, Directors and Key Employees, Employment Agreements,
Compensation....................................................19
6.28 Predecessor Status, Etc.........................................20
-2-
<PAGE>
TABLE OF CONTENTS
(CONTINUED)
PAGE
6.29 Spin-Off by the Corporation.....................................20
6.30 Records of the Corporation......................................20
6.31 Accuracy of Information Furnished by the Corporation and the
Sellers.........................................................20
6.32 Survival........................................................20
ARTICLE 7 CONDUCT OF BUSINESS PENDING THE CLOSING.........................21
7.1 Conduct of Business by the Corporation Pending the Closing......21
ARTICLE 8 CERTAIN AGREEMENTS AND COVENANTS OF THE PARTIES.................22
8.1 Further Assurances..............................................22
8.2 Confidentiality, Publicity......................................23
8.3 No Other Discussions............................................23
8.4 Due Diligence Investigation.....................................23
8.5 Covenant Not to Compete.........................................23
8.6 Related Party Agreements........................................24
8.7 Cooperation.....................................................24
8.8 Other Actions...................................................25
8.9 Notification of Certain Matters.................................25
8.10 Payoff and Estoppel Letters.....................................25
8.11 Corporation Capital Stock; Releases.............................25
8.12 Trading in U S Liquids Common Stock.............................25
8.13 Section 338(h)(10) Election.....................................25
8.14 Guarantee Substitution..........................................25
8.15 H. Michael Schneider Debt.......................................26
ARTICLE 9 CONDITIONS TO THE OBLIGATIONS OF PURCHASER......................26
9.1 Accuracy of Representations and Warranties; Compliance with
Obligations.....................................................26
9.2 No Material Adverse Change or Destruction of Property...........26
9.3 Corporate Certificate...........................................26
9.4 Delivery of Shares..............................................27
-3-
<PAGE>
TABLE OF CONTENTS
(CONTINUED)
PAGE
9.5 Consent.........................................................27
9.6 No Adverse Litigation...........................................27
9.7 Opinion of Counsel..............................................27
9.8 Consummation of the Transactions Contemplated by the AES Asset
Purchase Agreement..............................................27
9.9 Securities Matters..............................................27
9.10 Employment Agreements, Consulting Agreements and Leases.........28
9.11 General.........................................................28
9.12 Newark Option Agreement.........................................28
9.13 Personal Property Option Agreement..............................28
9.14 Purchaser's Satisfaction of Due Diligence Investigation.........28
ARTICLE 10 CONDITIONS TO THE OBLIGATIONS OF THE SELLERS....................28
10.1 Accuracy of Representations and Warranties and Compliance with
Obligations.....................................................29
10.2 Other Conditions................................................29
10.3 Corporate Certificate...........................................29
10.4 No Adverse Litigation...........................................29
10.5 Opinion of Counsel..............................................29
10.6 Other Agreements................................................29
ARTICLE 11 SECURITIES LAW MATTERS..........................................29
11.1 Disposition of U S Liquids Shares...............................29
11.2 Legend..........................................................30
11.3 Contractual Restriction.........................................30
11.4 Contractual Restriction Legend..................................30
11.5 Indemnification of Securities Law Matters.......................30
ARTICLE 12 INDEMNIFICATION.................................................31
12.1 Indemnification.................................................31
-4-
<PAGE>
TABLE OF CONTENTS
(CONTINUED)
PAGE
12.2 Assumption of Specific Liabilities..............................34
12.3 Survival of Representations and Warranties......................34
12.4 Matters Involving Third Parties.................................34
ARTICLE 13 DEFINITIONS.....................................................35
13.1 Defined Terms...................................................35
ARTICLE 14 TERMINATION, AMENDMENT AND WAIVER...............................36
14.1 Termination.....................................................36
14.2 Effect of Termination...........................................36
ARTICLE 15 GENERAL PROVISIONS..............................................37
15.1 Notices.........................................................37
15.2 Entire Agreement................................................37
15.3 Expenses........................................................37
15.4 Amendment; Binding Effect; Assignment...........................38
15.5 Counterparts....................................................38
15.6 Governing Law: Interpretation...................................38
15.7 Access to Records...............................................38
15.8 Attorney Fees...................................................38
-5-
<PAGE>
STOCK PURCHASE AGREEMENT This STOCK PURCHASE AGREEMENT (this "Agreement")
is entered into and made effective as of January 1, 1999, ("Effective Date") by
and among U S LIQUIDS INC., a Delaware corporation ("Purchaser"), ROMIC
ENVIRONMENTAL TECHNOLOGIES CORPORATION, a California corporation (the
"Corporation"), and each of those persons and entities, severally and not
jointly, whose names are set forth as follows: H. Michael Schneider; Peter D.
Schneider; Thomas R. Schneider; Barbara Morrison Custodian Under the California
Uniform Transfer to Minors Act ("Cust/CA/UTMA") for Justin W. Morrison; Barbara
Morrison Cust/CA/UTMA for Melissa L. Morrison; Barbara Morrison; Michael R.
Schneider; Michael R. Schneider Cust/CA/UTMA for Bridgette M. Schneider; Laura
Schneider; Peter D. Schneider Cust/CA/UTMA for Patrick Keil Schneider; Peter D.
Schneider Cust/CA/UTMA for Keil Patrick Schneider; Thomas R. Schneider
Cust/CA/UTMA for Jessica L. Schneider; Thomas R. Schneider Cust/CA/UTMA for
Brandon T. Schneider; Loreen Schneider; John Morrison; H. Michael Schneider and
Lisa L. Schneider, as Trustees for Schneider Living Trust Dated 12/28/81 (which
persons and entities are hereinafter collectively referred to as the "Sellers"
and each individually as "Seller"). Certain other capitalized terms used herein
are defined in Article 13 and throughout this Agreement.
RECITALS
A. WHEREAS, the Corporation is engaged in the business of spent solvent
recycling, hazardous waste processing (including, without limitation,
distillation and fuel blending and related services), and as of the Closing
Date, will also be in the business of anti-freeze recycling and recycling of
other wastes and residues generated by automotive maintenance and repair
facilities (the "Business") with its headquarters located in East Palo Alto,
California;
B. WHEREAS, the Corporation has facilities and operations in East Palo
Alto, California; Redwood City, California; Los Angeles, California; Portland,
Oregon; Chandler, Arizona; and, as of the Effective Date, Automotive
Environmental Service Corporation, a California corporation ("AES") has
facilities and operations in East Palo Alto, California; Irwindale, California;
Tacoma, Washington; and Chandler, Arizona (the "AES Facilities");
C. WHEREAS, the Corporation intends to acquire all or substantially all of
the assets of AES prior to the Closing Date of this transaction (the "AES
Transaction");
D. WHEREAS, as of the Closing Date, the Corporation owns real property
located in East Palo Alto, California; and Newark, California (collectively, the
"Owned Land");
E. WHEREAS, as of the Closing Date, the Corporation leases real property
in Redwood City, California; Los Angeles, California; Portland, Oregon; and
Chandler, Arizona; and AES leases real property at each of the AES Facilities
(collectively, the "Leased Land");
F. WHEREAS, the Sellers are the owners of all of the outstanding capital
stock of
<PAGE>
the Corporation; and
G. WHEREAS, the Sellers wish to sell, and Purchaser wishes to buy, all of
the outstanding capital stock of the Corporation, on the terms and subject to
the conditions hereinafter set forth.
TERMS OF AGREEMENT
In consideration of the mutual representations, warranties, covenants and
agreements contained herein, the parties hereto agree as follows:
ARTICLE 1
PURCHASE AND SALE OF SHARES
1.1 TRANSFER OF SHARES. Upon the Closing, in accordance with the terms and
conditions hereof, the Sellers shall sell, transfer, convey and assign to
Purchaser and Purchaser shall purchase all of the issued and outstanding shares
of the capital stock of the Corporation (the "Shares"), free and clear of all
liens, security interests, encumbrances, adverse claims, pledges, hypothecation,
charges, voting trusts, equities and other restriction on transfer of any nature
whatsoever (collectively, "Adverse Claims").
ARTICLE 2
PURCHASE PRICE
2.1 PURCHASE PRICE. Subject to the terms set forth in this Agreement, and
in consideration of the sale and delivery to Purchaser of the certificates
representing the Shares, Purchaser shall deliver to the Sellers on the Closing
Date (or with respect to the U S Liquid Shares (as defined below), within a
reasonable time following the Closing Date), an aggregate of Thirty-Four Million
One Hundred Fifty-One Thousand Twelve Dollars ($34,151,012) consisting of: (a)
immediately available funds in an amount determined by subtracting from
Thirty-Four Million One Hundred Fifty-One Thousand Twelve Dollars ($34,151,012)
the amounts to be transferred or assumed, as the case may be, pursuant to
subparagraphs (b), (c) and (d) hereof; (b) that total number of shares of the
common stock of Purchaser, par value one cent ($.01) per share (the "U S Liquids
Common Stock"), which shall have an Agreed Value (hereinafter defined) equal to
Four Million Dollars ($4,000,000), all of which will be contractually restricted
for a period of one (1) year in accordance with Article 11 hereof; (c) that
total number of U S Liquids Common Stock which shall have an Agreed Value of Two
Million Two Hundred Fifty Thousand Dollars ($2,250,000), all of which will be
contractually restricted for a period of two (2) years in accordance with
Article 11 hereof (collectively, the "U S Liquids Shares"); and (d) assumption
and payment by Purchaser of certain debts of the Corporation. The consideration
set forth in this Section 2.1 shall be allocated among the Sellers as set forth
on Annex I attached hereto and made a part hereof.
2
<PAGE>
2.2 AGREED VALUE OF U S LIQUIDS COMMON STOCK. For purposes of this
Agreement, the "Agreed Value" per share of the U S Liquids Common Stock shall be
the closing price of a share of such stock of Purchaser on the American Stock
Exchange the day before the Closing Date, as reported in the WALL STREET
JOURNAL.
2.3 ASSUMPTION OF DEBT. As a portion of the Purchase Price payable in
Section 2.1 above, at Closing, Purchaser shall assume the obligations of the
Corporation, as set forth in Schedule 2.3, and repay, at Closing or as soon
thereafter as is practicable, the indebtedness of the Corporation set forth in
Schedule 2.3. Such payment of indebtedness by Purchaser shall result in a
reduction in the cash payment to Seller required under Section 2.1(a).
2.4 ADJUSTMENT TO CONSIDERATION.
(a) The parties agree that the consideration set forth in Section
2.1 was determined as if the net working capital of the Corporation according to
the June 30, 1998 Balance Sheet was One Million Five Hundred Ten Thousand Four
Hundred Thirty-Four Dollars ($1,510,434) at the close of business on the
Effective Date. Accordingly, the parties agree that the consideration set forth
in Section 2.1(a) shall be adjusted on the Adjustment Date to reflect the actual
net working capital of the Corporation on the Effective Date (the "Actual Net
Working Capital"), as shown on the balance sheet to be prepared in the manner
described in subparagraph (b) below. If the Actual Net Working Capital so
reflected is greater than One Million Five Hundred Ten Thousand Four Hundred
Thirty-Four Dollars ($1,510,434) on the Effective Date, then the consideration
paid pursuant to Section 2.1(a) shall be increased dollar for dollar for each
dollar the Actual Net Working Capital of the Corporation exceeds One Million
Five Hundred Ten Thousand Four Hundred Thirty-Four Dollars ($1,510,434) on the
Effective Date. If the Actual Net Working Capital so reflected is less than One
Million Five Hundred Ten Thousand Four Hundred Thirty-Four Dollars ($1,510,434)
on the Effective Date, then the consideration paid pursuant to Section 2.1(a)
shall be decreased dollar for dollar for each dollar the Actual Net Working
Capital falls below One Million Five Hundred Ten Thousand Four Hundred
Thirty-Four Dollars ($1,510,434) on the Effective Date. For purposes of this
Agreement, Actual Net Working Capital shall mean the current assets of the
Corporation on the Effective Date minus all current liabilities of the
Corporation on the Effective Date. Actual Net Working Capital shall be
calculated in accordance with generally accepted accounting principles ("GAAP"),
except that the same method of accounting used by the Corporation on its June
30, 1998 Balance Sheet to account for its (i) off-site disposal sites, (ii)
solvents inventory held for resale, and (iii) environmental liabilities relating
to the sites listed on Schedule 12.1(c) shall be used in calculating Actual Net
Working Capital.
(b) On the date which is no more than one hundred twenty (120)
after the Closing Date (the "Adjustment Date"), Purchaser shall notify the
Sellers of any adjustment in the Purchase Price in accordance with this Section
2.4 based on the balance sheet of the Corporation as of the close of business on
the Effective Date, prepared by Purchaser in accordance with GAAP and delivered
to the Sellers, together with reasonable supporting documentation for all
current assets and liabilities used to prepare such balance sheet, at least
seven (7) days prior to the Adjustment Date.
3
<PAGE>
(c) In the event of a dispute between the parties as to the
Actual Net Working Capital, the parties will have thirty (30) days to resolve
the dispute among themselves. If the parties have not resolved such dispute
within such thirty (30) day period, then the parties shall select an arbitrator
who shall decide the dispute within thirty (30) days after being selected. If
the parties cannot agree on an arbitrator, then Purchaser (on the one hand) and
the Controlling Shareholders (on the other hand), shall each select an
arbitrator and the two (2) 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 (3) 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 50/50 between Purchaser and each of the Sellers (as a
group).
2.5 EFFECTIVE DATE. The parties agree that notwithstanding the actual
Closing Date, the transactions contemplated hereunder shall be effective on and
as of the Effective Date for accounting purposes, and that all revenues, income
and losses of the Corporation shall be accounted for as if the Purchaser was the
owner of all of the stock of the Corporation on the Effective Date. Purchaser
shall indemnify Sellers for the net cost of any additional income tax imposed on
the Sellers as a result of such accounting treatment.
ARTICLE 3
TITLE ASSURANCE
3.1 TITLE POLICIES. On the Closing Date, or as soon thereafter as may be
reasonably practicable, the Sellers shall furnish to Purchaser extended coverage
ALTA Owner's policies of title insurance from First American Title Insurance
Company (the "Title Company") in an aggregate amount mutually acceptable to
Purchaser and the Sellers insuring title to the Leased Land and Owned Land in
the Corporation, subject only to the exceptions described herein (the "Title
Policies"). Not less than fourteen (14) days prior to the Closing Date, the
Sellers shall deliver to Purchaser preliminary title commitments in respect of
the Leased Land and 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, the Sellers. The Title Policies shall insure the interest of the
Corporation in the Owned Land to be free and clear of all encumbrances
whatsoever except: (a) zoning ordinances and regulations which do not, in
Purchaser's reasonable judgment, adversely affect continued use of the Leased
Land and Owned Land for its current uses after the Closing; (b) real estate
taxes and assessments, both general and special, which are a lien but are not
yet due and payable at the Closing Date; and (c) easements, encumbrances,
covenants, conditions, reservations and restrictions of record, if any, as have
been approved in writing by Purchaser. Purchaser shall pay all of the costs
associated with the delivery of the Title Policies.
3.2 SURVEY. On the Closing Date, or as soon thereafter as may be reasonably
practicable, the Sellers shall obtain for Purchaser's use and for the use of the
Title Company in connection with the issuance of the Title Policies a current
and complete survey of the Owned Land (excluding the Newark Land), made on the
ground by a competent registered surveyor,
4
<PAGE>
showing for each: (a) the exact boundary lines of the Owned Land; (b) the
location thereon of all, if any, buildings, improvements, and easements now
existing; (c) the number of acres in the Owned Land; (d) the location of any
buildings, fences or other improvements which encroach on the Owned Land; (e)
the location of any improvements on 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 Owned Land;
and (g) all public access to the Owned Land, and representing that the
boundaries of the Owned Land are contiguous with the boundaries of all adjoining
parcels (together, the "Survey"). A copy of the Survey complying with the above
requirements shall be delivered to Purchaser and the Title Company, together
with certification to each entity by the surveyor and with such additional
supporting reports and other certificates as the Title Company may require to
enable the Title Company to delete its standard survey exceptions from the Title
Policies. Purchaser shall pay all of the costs of the Survey.
ARTICLE 4
CLOSING
4.1 TIME AND PLACE. Subject to the terms and conditions of this Agreement,
the closing of the purchase and sale of the Shares and all other transactions
and undertakings required to occur at close or immediately prior to close,
pursuant to the terms of this Agreement (the "Closing") shall take place on
January 15, 1999 or such other time mutually agreed by both parties, at the
offices of McDermott, Will & Emery, 2700 Sand Hill Road, Menlo Park, California.
The date on which the Closing occurs shall be referred to as the "Closing Date."
4.2 DELIVERY OF SHARES. At the Closing, the Sellers shall deliver to
Purchaser certificates representing the Shares, duly endorsed (or accompanied by
duly executed stock powers), and such other instruments of transfer of title as
are necessary to transfer to Purchaser good and marketable title to the Shares.
The Sellers agree to execute and deliver to Purchaser from time to time such
further and particular assignments, consents, or other instruments in writing as
Purchaser may request as appropriate or desirable to confirm its title in and to
the Shares. At or prior to the Closing, Purchaser may, in its sole and absolute
discretion, instruct the Sellers to transfer the Shares to a direct or indirect
wholly-owned subsidiary of Purchaser.
4.3 PAYMENT OF PURCHASE PRICE. Purchaser shall pay the Purchase Price in
accordance with Section 2.1 and deliver original executed certificates
representing the U S Liquids Shares.
ARTICLE 5
REPRESENTATIONS AND WARRANTIES OF PURCHASER
As a material inducement to the Sellers to enter into this Agreement and
to consummate the transactions contemplated hereby, Purchaser represents and
warrants to the Sellers and the Corporation that the statements contained in
this Article 5, except as set forth in any schedules to the subsections of this
Article 5 delivered by Purchaser to the Sellers on the date hereof (such
5
<PAGE>
schedules hereinafter collectively referred to as the "Schedules" and,
individually, as a "Schedule"), if any, which schedules may be required to be
supplemented from time to time by Purchaser after the date of this Agreement in
order to make such representations and warranties true as of the date such
representation and warranties are given: (i) are correct and complete as of the
date of this Agreement; (ii) will be correct as of the Effective Date and the
Closing Date (as though made then and as though the Effective Date and the
Closing Date, respectively, were substituted for the date of this Agreement
throughout this Article 5); and (iii) shall survive the Closing.
5.1 CORPORATE STATUS. Purchaser is a corporation duly organized, validly
existing and in good standing under the laws of the State of Delaware and has
the requisite power and authority to own or lease its properties and to carry on
its business as now being conducted.
5.2 CORPORATE POWER AND AUTHORITY. Purchaser has the corporate power and
authority to execute and deliver this Agreement, to perform its obligations
hereunder and to consummate the transactions contemplated hereby. Purchaser has
taken all action necessary to authorize the execution and delivery of this
Agreement, the performance of its obligations hereunder and the consummation of
the transactions contemplated hereby.
5.3 ENFORCEABILITY. This Agreement has been duly executed and delivered by
Purchaser and constitutes a legal, valid and binding obligation of Purchaser,
enforceable against Purchaser in accordance with its terms, except as the same
may be limited by applicable bankruptcy, insolvency, reorganization, moratorium
or similar laws affecting the enforcement of creditors' rights generally and
general equitable principles regardless of whether such enforceability is
considered in a proceeding at law or in equity.
5.4 NO VIOLATION. The execution and consummation of this Agreement by
Purchaser will not: (i) contravene any provision of the certificate of
incorporation or bylaws of Purchaser; (ii) violate or conflict with any law,
statute, ordinance, rule, regulation, decree, writ, injunction, judgment or
order of any Governmental Authority or of any arbitration award which is either
applicable to, binding upon or enforceable against Purchaser; or (iii) require
the consent, approval, authorization or permit of, or filing with or
notification to, any Governmental Authority, any court or tribunal or any other
Person, other than the filings made necessary pursuant to the Hart-Scott-Rodino
Antitrust Improvements Act of 1976, actions undertaken by the Purchaser's board
of directors with respect to the transaction contemplated hereby and any actions
required by Purchaser's lender with respect to Purchaser's credit facility, all
as previously disclosed to the Sellers.
5.5 U S LIQUIDS SHARES. Upon the issuance and delivery of certificates
representing the U S Liquids Shares to the Sellers, the U S Liquids Shares will
be validly issued, fully paid and non-assessable shares of U S Liquids Common
Stock and subject to no Liens and issued in compliance with applicable federal
and state laws.
6
<PAGE>
ARTICLE 6
REPRESENTATIONS AND WARRANTIES OF THE SELLERS
As a material inducement to Purchaser to enter into this Agreement and to
consummate the transactions contemplated hereby, H. Michael Schneider, H.
Michael Schneider and Lisa L. Schneider, as Trustees for Schneider Living Trust
Dated 12/28/81, Peter D. Schneider, and Thomas R. Schneider (collectively, the
"Controlling Shareholders"), jointly and severally, represent and warrant to
Purchaser that the statements contained in this Article 6, except as set forth
in the Schedules to the subsections of this Article 6 delivered by the Sellers
to Purchaser on the date hereof, if any, which schedules may be required to be
supplemented from time to time by the Sellers after the date of this Agreement
in order to make such representations and warranties true as of the date such
representations and warranties are given: (i) are correct and complete as of the
date of this Agreement; (ii) will be correct as of the Effective Date and the
Closing Date (as though made then and as though the Effective Date and the
Closing Date, respectively, were substituted for the date of this Agreement
throughout this Article 6); and (iii) shall survive the Closing. Notwithstanding
anything contained herein to the contrary, all representations and warranties
made by the Controlling Shareholders expressly encompasses the business engaged
by AES at the AES Facilities. Further, for purposes of this Article 6,
"Schedule" shall include the schedules made a part of that certain Asset
Purchase Agreement by and between the Corporation and AES of even date herewith,
made in connection with the AES Transaction. All such schedules are accordingly
incorporated herein by reference and made a part of this Agreement. Nothing in
the Schedules shall be deemed adequate to disclose an exception to a
representation or warranty made herein unless the Schedule identifies the
exception with particularity and describes the relevant facts in detail. In
addition, nothing in the Schedules shall be deemed to limit the indemnification
provisions set forth in Articles 11 and 12 hereof. Without limiting the
generality of the foregoing, the mere listing (or inclusion of a copy) of a
document or other item shall not be deemed adequate to disclose an exception to
a representation or warranty made herein (unless the representation or warranty
has to do with the existence of a document or other item itself). Nothing in
this paragraph shall require the disclosure of an exception on more than one (1)
Schedule made a part of this Agreement; PROVIDED, HOWEVER, that in all such
instances, the Schedule on which the requested information is located must be
cross-referenced on the appropriate Schedule.
6.1 CORPORATE STATUS. The Corporation is a corporation duly organized,
validly existing and in good standing under the laws of the State of California
and is in good standing and is qualified to conduct business under all
applicable laws, regulations, ordinances and orders of Governmental Authorities
to carry on its business, including but not limited to, the laws of: the State
of Washington, the State of Oregon, and the State of Arizona and has the
requisite power and authority to own or lease its properties and to carry on the
Business as now being conducted. The Corporation is duly authorized and
qualified, under all applicable laws, regulations, ordinances and orders of
Governmental Authorities, to carry on the Business in the places and in the
manner as now conducted except where the failure to be so authorized or
qualified would not have a Material Adverse Effect on the Business or on the
operations, properties, assets or
7
<PAGE>
conditions (financial or otherwise), of the Corporation.
6.2 POWER AND AUTHORITY. Each of the Sellers has taken all action necessary
to authorize the execution and delivery of this Agreement, the performance of
its obligations hereunder and the consummation of the transactions contemplated
hereby. Each Seller has the requisite competence and authority to execute and
deliver this Agreement, to perform his, her or its respective obligations
hereunder and to consummate the transactions contemplated hereby.
6.3 ENFORCEABILITY. This Agreement has been duly executed and delivered by
each Seller, and constitutes the legal, valid and binding obligation of each
Seller, enforceable against each Seller in accordance with its terms, except as
the same may be limited by applicable bankruptcy, insolvency, reorganization,
moratorium or similar laws affecting the enforcement of creditors' rights
generally and general equitable principles regardless of whether such
enforceability is considered in a proceeding at law or in equity.
6.4 CAPITALIZATION.
(a) Schedule 6.4 sets forth for the Corporation, as of the date
hereof: (i) the number of shares of capital stock authorized; (ii) the number of
shares of capital stock issued and outstanding; (iii) the number of shares of
capital stock held in treasury; and (iv) the number of such shares which
constitute voting or non-voting stock, and the identity of the holders of each.
All outstanding shares of capital stock are duly authorized, validly issued,
fully paid and non-assessable, and were not issued in violation of any
preemptive, subscription or other right of any person to acquire securities.
There are no outstanding subscriptions, options, convertible or exchangeable
securities, preemptive rights, warrants, calls or agreements (other than this
Agreement) relating to the capital stock or other obligations or commitments
(contingent or otherwise) to issue, repurchase or otherwise acquire or retire
any shares of capital stock of the Corporation. All shares of the Corporation's
capital stock, whether or not currently outstanding, were issued in compliance
(and if reacquired or cancelled by the Corporation, reacquired or cancelled in
compliance) with all laws, including all federal and state securities laws.
There are no voting trusts or other agreements, arrangements or understandings
applicable to the exercise of voting or any other rights with respect to any
shares of capital stock. There are no restrictions affecting the transferability
of the capital stock. Each of the Sellers has good, marketable and indefeasible
title to all of the capital stock and the absolute right, power and capacity to
sell, assign, transfer and deliver all right, title and interest both legal and
equitable, in and to the capital stock registered in his, her or its name as set
forth in Schedule 6.4, to Purchaser, free and clear of all Liens, claims,
charges, escrows, options, proxies, rights of first refusal, preemptive rights,
mortgages, hypothecations, prior assignments, title retention agreements,
indentures, security agreements or any other limitation, encumbrance or
restriction of any kind. Except as set forth on Schedule 6.4, the Corporation
has no obligation (contingent or otherwise) to purchase, redeem or otherwise
acquire any of its equity securities or any interest therein or to pay any
dividends or make any distribution with respect thereof. The Corporation has not
lent or advanced any money to, or borrowed any money from, or guaranteed or
otherwise become liable for any indebtedness or other obligations of, or
acquired any capital stock, obligations or securities of, any Seller or any
other person except as provided in Schedule 6.4.
8
<PAGE>
(b) Upon the completion of the transactions contemplated hereby,
Purchaser will have good and marketable title to and ownership of the Shares
free and clear of all Liens, claims, charges, escrows, options, proxies, rights
of first refusal, preemptive rights, mortgages, hypothecations, prior
assignments, title retention agreements, indentures, security agreements or any
other limitation, encumbrance or restriction of any kind.
6.5 SUBSIDIARIES. The Corporation does not presently 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 corporation,
association or business entity, nor is the Corporation, directly or indirectly,
a participant in any joint venture, partnership or other non-corporate entity,
except as provided in Schedule 6.5.
6.6 NO VIOLATION. The execution and consummation of this Agreement will
not: (i) contravene any provision of the articles of incorporation or bylaws of
the Corporation (the "Charter Documents"); (ii) violate or conflict with any
law, statute, ordinance, rule, regulation, decree, writ, injunction, judgment or
order of any Governmental Authority or of any arbitration award, which is either
applicable to, binding upon or enforceable against the Corporation, its assets
or securities, or any Seller; (iii) conflict with, result in any breach of, or
constitute a default (or an event which would, with the passage of time or the
giving of notice or both, constitute a default) under, or give rise to a right
to terminate, amend, modify, abandon or accelerate, any Contract which is
applicable to, binding upon or enforceable against any Seller or the assets or
securities of the Corporation; (iv) result in or require the creation or
imposition of any Lien upon or with respect to any of the assets or securities
of the Corporation; or (v) to the best of each of Seller's or the Corporation's
knowledge, require the consent, approval, authorization or permit of, or filing
with or notification to, any Governmental Authority, any court or tribunal or
any other Person, other than the filings made necessary pursuant to the
Hart-Scott-Rodino Antitrust Improvements Act of 1976.
6.7 NO COMMISSIONS. None of the Sellers or the Corporation has incurred any
obligation for any finder's or broker's or agent's fees or commissions or
similar compensation in connection with the transactions contemplated hereby.
6.8 FINANCIAL STATEMENTS. The Sellers have delivered to Purchaser the
financial statements of the Corporation for the years ending June 30, 1996, 1997
and 1998 and for the three (3) months ending September 30, 1998, including the
notes thereto, (collectively, the "Financial Statements"), a copy of which is
attached hereto as Schedule 6.8. The balance sheet dated as of September 30,
1998 of the Corporation included in the Financial Statements is referred to
herein as the "Current Balance Sheet." The Financial Statements fairly present
the financial position of the Corporation at each of the balance sheet dates and
the results of operations for the periods covered thereby, and have been
prepared in accordance with generally accepted accounting principles
consistently applied throughout the periods indicated, except as disclosed in
Schedule 6.8 and Note 6(a) to the Financial Statements for the years ended June
30, 1997 and 1998, (which Note 6(a) indicates that the Corporation did not
account for the investment of certain common stock in Sepragen Corporation, a
California corporation, by the equity method). The books and records of the
Corporation fully and fairly reflect all transactions,
9
<PAGE>
properties, assets and liabilities of the Corporation. There are no material
special or non-recurring items of income or expense during the periods covered
by the Financial Statements, and the Current Balance Sheet does not reflect any
write-up or revaluation increasing the book value of any assets, except as
specifically disclosed in the notes thereto. The Financial Statements reflect
all adjustments necessary for a fair presentation of the financial information
contained therein.
6.9 CHANGES SINCE THE CURRENT BALANCE SHEET. Except as provided in Schedule
6.9, since the date of the Current Balance Sheet, the Corporation has not: (i)
issued any capital stock or other securities; (ii) made any distribution of or
with respect to its capital stock or other securities or purchased or redeemed
any of its securities; (iii) except in the ordinary course of business and
consistent with its past practice, paid any bonus to or increased the rate of
compensation of any of its officers or salaried employees, or amended any other
terms of employment of such persons; (iv) sold, leased or transferred any of its
properties or assets other than in the ordinary course of business; (v) made or
obligated itself to make capital expenditures other than in the ordinary course
of business consistent with past practice; (vi) made any payment in respect of
its liabilities other than in the ordinary course of business consistent with
past practice; (vii) incurred any obligations or liabilities (including any
indebtedness) or entered into any transaction or series of transactions other
than in the ordinary course of business, except for this Agreement and the
transactions contemplated hereby; (viii) waived, cancelled, compromised or
released any rights; (ix) made or adopted any change in its accounting practice
or policies; (x) made any adjustment to its books and records other than in
respect of the conduct of its business activities in the ordinary course
consistent with past practice; (xi) entered into any transaction with any
Affiliate other than transactions in the ordinary course of business consistent
with past practice and except for the AES Transaction; (xii) entered into any
employment agreement; (xiii) terminated, amended or modified any agreement;
(xiv) imposed any security interest or other Lien on any of its assets; (xv)
delayed paying any account payable which is due and payable except to the extent
being contested in good faith; (xvi) made or pledged any charitable
contribution; (xvii) entered into any other transaction or was subject to any
event which had or may have a Material Adverse Effect on the Corporation or the
Business; (xviii) except as contemplated in this section, engaged in any other
transaction out of the ordinary course of the Business; (xix) suffered or
incurred any work interruptions, labor grievances, or claims filed, or any
similar event which has or is reasonably likely to have a Material Adverse
Effect on the Corporation or the Business; or (xx) agreed to do or authorized
any of the foregoing.
6.10 LITIGATION. Except as provided in Schedule 6.10, there is no action,
suit, or other legal or administrative proceeding or governmental investigation
pending or to any Seller's knowledge threatened against, by or affecting any
Seller, the Corporation, the Business, or the assets of the Corporation, or
which questions the validity or enforceability of this Agreement or the
transactions contemplated hereby, and to any Seller's knowledge there is no
basis for any of the foregoing. There are no outstanding orders, decrees or
stipulations issued by any Governmental Authority in any proceeding to which the
Controlling Shareholders or the Corporation is or was a party which have not
been complied with in full or which continue to impose any material obligations
on the Controlling Shareholders, the Corporation or the assets of the
Corporation.
10
<PAGE>
6.11 LIABILITIES. Schedule 6.11 sets forth all liabilities or obligations,
whether accrued, absolute, contingent or otherwise, including, without
limitation, all indebtedness for borrowed money and capitalized lease
obligations (including the outstanding principal amount and accrued but unpaid
interest and the name of the lender) owed to a bank or any other Person by the
Corporation not reflected on the Current Balance Sheet, including: (i)
liabilities and obligations existing on the date hereof, incurred in the
ordinary course of business consistent with past practice since the date of the
Current Balance Sheet; and (ii) liabilities incurred in the ordinary course of
business prior to the date of the Current Balance Sheet which were not required
to be recorded thereon, including but not limited to liabilities arising out of
guarantees, repurchases of any of the Corporation's securities, and
indemnification agreements (the liabilities and obligations referenced in (i)
and (ii) above are referred to as the "Designated Liabilities"). Except as set
forth in Schedule 6.11, none of the Designated Liabilities relates to any breach
of contract, breach of warranty, tort infringement, or violation of law, and
none arose out of any action, suit, claim, governmental investigation, or
arbitration proceeding.
6.12 BANK ACCOUNTS. Schedule 6.12 sets forth the account numbers and names
of each bank, broker or other depository institution at which the Corporation
maintains a depository account, and the names of all persons authorized to
withdraw funds from each such account.
11
<PAGE>
6.13 ENVIRONMENTAL MATTERS.
(a) Except as provided in Schedule 6.13(a), and to the best of each of
the Corporation's and the Controlling Shareholders' knowledge, during the ten
(10) year period immediately preceding the Closing Date the Corporation: (i) has
not caused, allowed to be caused or permitted, either by action or inaction, a
release, discharge, spill or leak, or a threatened release, discharge, spill or
leak, of any Hazardous Substance on, into or beneath the surface of any Owned or
Lease Property, nor is there presently occurring, a release, discharge, spill or
leak, or discharge of any Hazardous Substance on, into or beneath the surface of
the Owned or Lease Property; (ii) has not received any notice from any federal
or state agency having jurisdiction over the Business, its operations,
properties or assets or responsibility for the enforcement of Environmental,
Health and Safety Laws (as defined in this Section) of any violation of any
Environmental, Health and Safety Laws by the Corporation or its officers or
employees, including, without limitation, Environmental, Health and Safety Laws
relating to discharges or releases into the ground water, surface water and
soil, emissions into the ambient air and the generation, storage, treatment,
transportation, labeling, handling, manufacturing, use or disposal of Hazardous
Substances (as defined herein) or other Waste (as described herein); (iii)
except for minor occurrences, events or matters that have not had, or would not
be reasonably expected to have, a materially adverse impact on the Corporation
or have not resulted, or would not be reasonably expected to result in the
assessment of a material fine or penalty, has not failed to report any
condition, circumstance, event or occurrence, including, without limitation, any
release, discharge, spill or leak at the Owned Land or any other of its
facilities or in connection with any of its operations or conduct of the
Business that was required to be reported under any of the Environmental, Health
and Safety Laws; (iv) except for minor occurrences, events or matters that have
not had, or would not be reasonably expected to have, a materially adverse
impact on the Corporation or have not resulted, or would not be reasonably
expected to result in the assessment of a material fine or penalty has conducted
its operations at the Owned Land and its other facilities in material compliance
with all applicable Environmental, Health and Safety Laws; (v) is not currently
liable for, nor are the Corporation or the Controlling Shareholders aware of any
pending or threatened penalties, fines or forfeitures for failure to comply with
any Environmental, Health and Safety Laws; and (vi) has complied with, and is
currently in compliance with all notice, record keeping and reporting
requirements of all Environmental, Health and Safety Laws, and has complied with
all informational requests or demands arising under the Environmental, Health
and Safety Laws.
(b) Except as provided in Schedule 6.13(b), and to the best of
the Corporation's and the Controlling Shareholders' knowledge, the Corporation:
(i) has not generated, manufactured, used, transported, transferred, stored,
handled, treated, recycled, reclaimed, or disposed of, nor has it allowed or
arranged for any third parties to generate, manufacture, use, transport,
transfer, store, handle, treat, recycle, reclaim, or dispose of, Hazardous
Substances or other Waste to or at any location other than a site lawfully
permitted to receive such Hazardous Substances or other Waste for such purposes,
nor has it performed, arranged for or allowed by any method or procedure such
generation, manufacture, use, transportation, transfer, storage, treatment,
recycling, reclamation, spillage, leakage, dumping,
12
<PAGE>
discharge, release or disposal in contravention of any Environmental, Health and
Safety Laws; and (ii) has not allowed any third parties to generate,
manufacture, use, store, handle, treat, recycle, reclaim, spill, leak, dump,
discharge, release or dispose of Hazardous Substances or other Waste upon
property owned or leased by it, except as permitted by law. For purposes of this
Section 6.13, the term "Hazardous Substances" shall be construed broadly to
include any toxic, infectious, medical, radioactive, or hazardous substance,
material, or waste, and any other contaminant, pollutant or constituent thereof,
whether liquid, solid, semi-solid, sludge and/or gaseous, including, without
limitation, chemicals, compounds, by-products, pesticides, asbestos-containing
materials, petroleum or petroleum products, and polychlorinated biphenyls, the
presence of which requires investigation or remediation under any Environmental,
Health and Safety Laws or which are or become regulated, listed or controlled
by, under or pursuant to any Environmental Health and Safety Laws. For purposes
of this section, the term "Waste" shall be construed broadly to include
agricultural wastes, biological wastes, bulky wastes, industrial solid wastes,
liquid wastes, recyclable materials, sludge, solid wastes, special wastes, and
used oils.
(c) Except as provided in Schedule 6.13(c), and to the best of
the Corporation's and the Controlling Shareholders' knowledge, the Corporation:
(i) has not generated, handled, manufactured, treated, stored, used, recycled,
reclaimed, shipped, transported, transferred, or disposed of, nor has it allowed
or arranged, by contract, agreement or otherwise, for any third parties to
generate, handle, manufacture, treat, store, use, ship, transport, transfer or
dispose of, any Hazardous Substance or other Waste to or at a site which
pursuant to CERCLA or any similar law of the states of California, Washington,
Oregon, Nevada, New Mexico, Utah or Arizona; has been placed on the National
Priorities List or its state equivalent; or as to which the Environmental
Protection Agency or the relevant state agency has notified the Corporation that
it has proposed or is proposing to place on the National Priorities List or its
state equivalent; (ii) has received no notice, and neither the Corporation nor
any of the Sellers has knowledge of any facts which could give rise to any
notice, that the Corporation is a potentially responsible party for a federal or
state environmental cleanup site or for corrective action under CERCLA, RCRA or
any other applicable Environmental Health and Safety Laws; (iii) has not
submitted nor was required to submit any notice pursuant to Section 103(c) of
CERCLA with respect to the Corporation's facilities; (iv) has not received any
written or oral request for information in connection with any federal or state
environmental cleanup site, or in connection with any of the real property or
premises where the Corporation has transported, transferred or disposed of other
Wastes; (v) has not been required to undertake, nor has it undertaken, any
response or remedial actions or clean-up actions of any kind at the request of
any Governmental Authorities or at the request of any other third party; and
(vi) has no liability under any Environmental, Health and Safety Laws for
personal injury, property damage, natural resource damage, or clean up
obligations.
(d) Except in the ordinary course of its business, and/or as
listed on Schedule 6.13(d), the Corporation does not use, nor has it used, any
Aboveground Storage Tanks, and does not use, nor has it ever used any
Underground Storage Tanks, containing hazardous materials, petroleum products,
or wastes or other hazardous substances regulated by 40 C.F.R. 280 or other
applicable law, and to the best of the Corporation's and the Controlling
13
<PAGE>
Shareholders' knowledge, there are not now nor have there ever been any
Underground Storage Tanks at the Corporation's facilities. For purposes of this
section, the terms "Aboveground Storage Tanks" and "Underground Storage Tanks"
shall have the meanings given them in Section 6901 ET SEQ. as amended, of RCRA,
or any applicable state or local statute, law, ordinance, code, rule,
regulation, order ruling, or decree governing Aboveground Storage Tanks or
Underground Storage Tanks.
(e) For purposes of this section, the terms "release",
"discharge", "spill" or "leak" shall have the meanings given them in the
Environmental, Health and Safety Laws . As used in this Agreement,
"Environmental, Health and Safety Laws" means all federal, state, regional or
local statutes, laws, rules, regulations, codes, orders, plans, injunctions,
decrees, rulings, and changes or ordinances or judicial or administrative
interpretations thereof currently in existence any of which govern (or purport
to govern) or relate to pollution, protection of the environment, public health
and safety, air emissions, water discharges, hazardous or toxic substances,
solid or hazardous waste or occupational health and safety, as any of these
terms are or may be defined in such statutes, laws, rules, regulations, codes,
orders, plans, injunctions, decrees, rulings and ordinances, or judicial or
administrative interpretations thereof, including, without limitation, the Solid
Waste Disposal Act, as amended by the Resource Conservation and Recovery Act of
1976 and subsequent Hazardous and Solid Waste Amendments of 1984 (collectively,
"RCRA"); the Comprehensive Environmental Response, Compensation and Liability
Act of 1980, as amended by the Superfund Amendment and Reauthorization Act
(collectively, "CERCLA"); the Hazardous Materials Transportation Act; the Toxic
Substances Control Act; the Clean Air Act; the Clean Water Act; the Federal
Insecticide, Fungicide and Rodenticide Act, as amended ("FIFRA"); the Emergency
Planning and Community Right-to-Know Act of 1986, as amended ("EPCRA") and the
Occupational Safety and Health Act of 1970, as amended ("OSHA").
(f) Schedule 6.13(f) identifies the operations and activities,
and locations thereof, which have been conducted and are being conducted by the
Corporation at its facilities which have involved the generation, accumulation,
storage, treatment, transportation, labeling, handling, release, reclamation,
manufacturing, use or off-site disposal of Hazardous Substances.
(g) Schedule 6.13(g) identifies each third party treatment or
disposal facility or location to which the Corporation has transported, hauled,
or disposed of Waste regulated by the Environmental, Health, and Safety Laws
over the past five (5) years and the types of Waste transported, hauled, or
disposed of to each such location. For purposes of this Section 6.13(g), the
definition of "Waste" shall not include non-hazardous municipal solid waste of
the kind normally generated by office, lunchroom and similar activities which is
generated by the Corporation in the operation of its Business, including the
business of AES.
6.14 REAL PROPERTY, LEASES AND SIGNIFICANT PERSONAL PROPERTY. Schedule
6.14 sets forth:
(a) All real and personal property owned by the Corporation or
used by
14
<PAGE>
the Business as of the Current Balance Sheet date, included on the Current
Balance Sheet, all of which is included in the accounts reflected on the Current
Balance Sheet;
(b) All other real and personal property of the Corporation
acquired since the Current Balance Sheet date; and
(c) All leases for real and personal property to which the
Corporation is a party, including in each case true, complete and correct copies
of all such leases and including an indication as to which real and personal
property is currently owned, or was formerly owned, by any of the Sellers. All
of the material machinery and equipment and all other tangible assets of the
Corporation are in good working order and condition, ordinary wear and tear
excepted, and have been maintained in accordance with industry practice. All
leases set forth in Schedule 6.14, are in full force and effect and constitute
valid and binding agreements of the Corporation and constitute valid and binding
agreements of the other parties thereto in accordance with their respective
terms, and all fixed assets used by the Corporation are either owned by the
Corporation or leased under a valid agreement. Schedule 6.14 also sets forth a
summary description of all plans or projects involving the opening of new
operations or the acquisition of any real property or existing business, with
respect to which the Corporation has made any material expenditure in the one
(1) year period prior to the date of the Agreement, or entered into a written
commitment therefor, which if pursued by the Corporation would require
additional expenditures of capital.
6.15 GOOD TITLE, ADEQUACY AND CONDITION.
(a) Except as set forth on Schedule 6.15(a), the Corporation has,
and at Closing will have, good and marketable title to the assets of the
Corporation with full power to sell, transfer and assign the same, free and
clear of any Lien, except for Liens relating to indebtedness that will be paid
at time of Closing.
(b) The assets of the Corporation constitute, in the aggregate,
all of the assets and properties necessary for the conduct of the Business in
the manner in which and to the extent to which such business is currently being
conducted and, except as provided in Schedule 6.15(b), include, without
limitation, all tangible and intangible assets owned by the Corporation
including all vehicles, equipment and inventory (more particularly described in
Schedule 6.15(b)), and all Contracts, customer lists, intellectual property,
cash and accounts receivable, and licenses and permits of the Corporation.
6.16 COMPLIANCE WITH LAWS. Except as provided in Schedule 6.16 and to the
best of the Corporation's and the Controlling Shareholders' knowledge, the
Corporation is in compliance with all laws and regulations and is not in
violation of any order of any court or federal, state, municipal or other
governmental department, commission, board, bureau, agency or instrumentality
having jurisdiction over the Corporation and there are no claims, actions, suits
or proceedings pending or, to the knowledge of the Corporation or any of the
Sellers, threatened, against or affecting the Corporation or the Business, at
law or in equity, before or by any federal, state, municipal or other
governmental department, commission, board, bureau, agency or instrumentality
having jurisdiction over any of them, and no notice of any such claim, action,
suit
15
<PAGE>
or proceeding, whether pending or threatened, has been received.
6.17 EMPLOYEE BENEFIT PLANS.
(a) Schedule 6.17 contains a list setting forth each employee
benefit plan or arrangement of the Corporation, including, but not limited to,
employee profit sharing plans, as defined in Section 3(2) of the Employee
Retirement Income Security Act of 1974, as amended ("ERISA"), multiemployer
plans, as defined in Section 3(37) of ERISA, employee welfare benefit plans, as
defined in Section 3(l) of ERISA, deferred compensation plans, stock option
plans, bonus plans, stock purchase plans, hospitalization, disability and other
insurance plans, severance or termination pay plans and policies, whether or not
described in Section 3(3) of ERISA, in which employees, their spouses or
dependents, of the Corporation participate ("Employee Benefit Plans") (true and
accurate copies of which, together with the most recent annual reports on Form
5500 and summary plan descriptions with respect thereto, were furnished to
Purchaser). With respect to each Employee Benefit Plan: (i) each has been
administered in all material respects in compliance with its terms and with all
applicable laws, including, but not limited to, ERISA and the Code, except as
set forth in Schedule 6.17; (ii) no actions, suits, claims or disputes are
pending, or to the Corporation's or any Seller's knowledge threatened; (iii) no
audits, inquiries, reviews, proceedings, claims, or demands are pending with any
governmental or regulatory agency; (iv) to the Corporation's or any Seller's
knowledge there are no facts which could give rise to any material liability in
the event of any investigation, claim, action, suit, audit, review, or other
proceeding; (v) all material reports, returns, and similar documents required to
be filed with any governmental agency or distributed to any plan participant
have been duly or timely filed or distributed; and (vi) no "prohibited
transaction" has occurred within the meaning of the applicable provisions of
ERISA or the Code.
(b) QUALIFIED PLANS. With respect to each Employee Benefit Plan
intended to qualify under Code Section 401(a) or 403(a): (i) the Internal
Revenue Service has issued a favorable determination letter, true and correct
copies of which have been furnished to Purchaser, that such plans are qualified
and exempt from federal income taxes; (ii) no such determination letter has been
revoked nor has revocation been threatened, nor has any amendment or other
action or omission occurred with respect to any such plan since the date of its
most recent determination letter or application therefor in any respect which
would adversely affect its qualification or materially increase its costs; (iii)
no such plan has been amended in a manner that would require security to be
provided in accordance with Section 401(a)(29) of the Code; and (iv) no
reportable event (within the meaning of Section 4043 of ERISA) has occurred,
other than one for which the thirty (30) day notice requirement has been waived;
and (v) as of the Closing Date, the present value of all liabilities that would
be "benefit liabilities" under Section 4001(a)(16) of ERISA if benefits
described in Code Section 41l(d)(6)(B) were included will not exceed the then
current fair market value of the assets of such plan (determined using the
actuarial assumptions used for the most recent actuarial valuation for such
plan).
(c) OTHER LIABILITIES. None of the Employee Benefit Plans
obligates the Corporation to pay separation, severance, termination or similar
benefits solely as a result of any transaction contemplated by this Agreement or
solely as a result of a "change of control" (as such
16
<PAGE>
term is defined in Section 280G of the Code), all required or discretionary (in
accordance with historical practices) payments, premiums, contributions,
reimbursements, or accruals for all periods ending prior to or as of the Closing
shall have been made or properly accrued on the Current Balance Sheet of the
Corporation as of the Closing, and none of the Employee Benefit Plans has any
unfunded liabilities which are not reflected on the Current Balance Sheet of the
Corporation.
6.18 TAX RETURNS AND EXAMINATIONS. Except as provided in Schedule 6.18,
with respect to Tax Returns and Examinations: (i) all Tax Returns required to
have been filed by or with respect to the Corporation and any affiliated,
combined, consolidated, unitary or similar group of which the Corporation is or
was a member (a "Relevant Group") with any Governmental Authority have been duly
filed, and each such Tax Return correctly and completely reflects the income,
franchise or other tax liability and all other information, including the tax
basis and recovery periods for assets, required to be reported thereon; (ii) the
Corporation has furnished or made available to Purchaser complete and accurate
copies of all income and franchise tax returns, and any amendments thereto,
filed by the Corporation for all taxable years ending on or after June 30, 1995;
(iii) all Taxes (whether or not shown on any Tax Return and whether or not
assessed) owed by the Corporation have been paid; (iv) the provisions for Taxes
due by the Corporation (as opposed to any reserve for deferred Taxes established
to reflect timing differences between book and tax income) in the Financial
Statements are sufficient for, and adequate to cover, all unpaid Taxes of the
Corporation as of such date; (v) the Corporation is not a party to any current
agreement extending the time within which to file any Tax Return; (vi) no claim
has ever been made by any Taxing Authority in a jurisdiction in which the
Corporation does not file Tax Returns that it is or may be subject to taxation
by that jurisdiction; (vii) the Corporation has withheld and paid all Taxes
required to have been withheld and paid in connection with amounts paid or owing
to any employee, creditor, independent contractor or other third party; (viii)
the Sellers do not expect any Governmental Authority to assess any additional
Taxes against or in respect of the Corporation for any past period; (ix) there
is no dispute or claim concerning any tax liability of the Corporation either
(a) claimed or raised by any Governmental Authority or (b) otherwise known to
the Corporation or any of the Sellers; (x) no issues have been raised in any
examination by any Governmental Authority with respect to which, by application
of similar principles, reasonably could be expected to result in a proposed
deficiency for any other period not so examined; (xi) Schedule 6.18 lists all
federal, state, local and foreign income Tax Returns filed by or with respect to
the Corporation for all taxable periods ended on or after June 30, 1995, and
indicates those tax returns that currently are the subject of audit; (xii) the
Corporation has delivered to Purchaser complete and correct copies of all
federal, state, local and foreign income Tax Returns filed by, and all Tax
examination reports and statements of deficiencies assessed against or agreed to
by, the Corporation since June 30, 1995; (xiii) the Corporation has not waived
any statute of limitations in respect of Taxes or agreed to any extension of
time with respect to any Tax assessment or deficiency; (xiv) the Corporation has
not made any payments, is not obligated to make any payments, and is not a party
to any agreement that under certain circumstances could require it to make any
payments, that would not be deductible by reason of the application of Section
280G of the Code; (xv) the Corporation is not a party to any Tax allocation or
sharing agreement; (xvi) none of the assets of the Corporation constitutes
tax-exempt bond-financed
17
<PAGE>
property or tax-exempt use property, within the meaning of Section 168 of the
Code; (xvii) the Corporation is not a party to any "safe harbor lease" that is
subject to the provisions of Section 168(f)(8) of the Code as in effect prior to
the Tax Reform Act of 1986, or to any "long-term contract" within the meaning of
Section 460 of the Code; (xviii) the Corporation is not a party to any joint
venture, partnership or other arrangement that is treated as a partnership for
federal income Tax purposes; (xix) there are no accounting method changes, or
proposed or threatened accounting method changes, of the Corporation that could
give rise to any adjustment under Section 481 of the Code for periods after the
Closing Date; (xx) the Corporation has not received any written ruling of a
Governmental Authority related to Taxes or entered into any written and legally
binding agreement with a Governmental Authority relating to Taxes; (xxi) the
Corporation has substantial authority for the treatment of, or has disclosed (in
accordance with Section 6662(d)(2)(ii) of the Code) on its federal income Tax
Returns, all positions taken on its relevant federal income Tax Returns that
could give rise to a substantial understatement of federal income Tax within the
meaning of Section 6662(d) of the Code; (xxii) the Corporation has no liability
for Taxes of any Person other than the Corporation (a) under Section 1.1502-6 of
the Treasury Regulations (or any similar provision of state, local or foreign
law), (b) as a transferee or successor, (c) by contract or (d) otherwise;
(xxiii) no consent has been filed relating to the Corporation pursuant to
Section 341(f) of the Code, nor has the Corporation made any tax election that
would materially increase the amount of Taxes payable by the Corporation in any
period after the Closing; and (xxiv) the Corporation's election to be treated as
an "S Corporation" pursuant to Section 1362(a) of the Code is currently valid
and, with respect to Tax Returns for taxable periods ended on or after June 30,
1998, Seller is not aware of any facts which could form the basis for the
termination of such election.
6.19 INSURANCE. Attached as Schedule 6.19 are complete and accurate copies
as of the date hereof of all insurance policies carried by the Corporation and
an accurate list of all insurance loss runs and workers' compensation claims
received for the past three (3) policy years. The Corporation and the Business
are covered by valid, outstanding and enforceable policies of insurance issued
to the Corporation by reputable insurers covering its properties, assets and the
Business (the "Insurance Policies"). All insurance policies are in full force
and effect and shall remain in full force and effect through the Closing Date.
The Corporation's insurance has never been cancelled and the Corporation has
never been denied coverage. The Corporation has not failed to give, in a timely
manner, any notice required under any of the Insurance Policies to preserve its
rights thereunder.
6.20 ABSENCE OF CERTAIN CHANGES OR EVENTS. Except as provided in Schedule
6.20, since June 30, 1998, there has not been: (i) any Material Adverse Change
in the business, operations, properties, condition (financial or other) or
prospects of the Business, taken as a whole, and no factor or condition exists
and no event has occurred that would be likely to result in any such change;
(ii) any material loss, damage, or other casualty to the assets of the Business;
or (iii) any loss of the employment, services or benefits of any key employee of
the Business. Since June 30, 1998, the Sellers have operated the Business in the
ordinary course of business consistent with past practice and has not: (i)
incurred or failed to pay or satisfy any material obligation or liability
(whether accrued, contingent or otherwise) relating to the operations of the
18
<PAGE>
Business except in the ordinary course of business consistent with past
practice; (ii) incurred or failed to discharge or satisfy any Lien other than
Liens arising in the ordinary course of business that do not, individually or in
the aggregate, interfere with the use, operation, enjoyment or marketability of
any of the assets of the Business, all of which shall be released as of the
Closing Date; (iii) sold or transferred any of the assets of the Business or
canceled any debts or claims or waived any rights material to the Business
relating to the operations of the Business, except in the ordinary course of
business consistent with past practices; (iv) defaulted on any material
obligation relating to the Business; (v) entered into any transaction material
to the Business, or materially amended or terminated any arrangement material to
the Business or relating to the Business, except in the ordinary course of
business consistent with past practice; or (vi) entered into any agreement or
made any commitment to do any of the foregoing.
6.21 INTELLECTUAL PROPERTY. Schedule 6.21 hereto sets forth a true and
complete list of all of the Sellers' patents, patent applications, licenses,
copyrights, copyright registrations, copyright registration applications, trade
names, trademarks, trademark registrations, trademark applications,
servicemarks, servicemark registrations and servicemark applications, trade
secrets and similar rights, and any applications in respect thereto (the
"Intellectual Property") used by the Sellers in whole or in part for the conduct
of the Business as now conducted. All the Intellectual Property is owned by the
Sellers free and clear of any and all Liens, and no licenses for the use of any
of such rights have been granted by the Sellers or the Corporation to any third
parties. All of such rights are valid and in good standing and are adequate and
appropriate for the Business as now conducted. Except as listed on Schedule
6.21, all of such rights will be acquired by Purchaser at the Closing, and the
transfer of and use by Purchaser of such rights will not require the consent of
any other person. To the Sellers' and the Corporation's best knowledge, the
operation of the Business does not infringe in any way on or conflict with any
registered or unregistered patent, trademark, trade name, copyright, license or
other right, of any person, and the Sellers do not license any such right from
others. The Sellers do not know of any person who has wrongfully used, or
threatened to use, any of the Intellectual Property. No claim is pending or
threatened or has been made within the past five (5) years, to the effect that
any such infringement or conflict has occurred. The Intellectual Property is
adequate and appropriate for the Business as now conducted, and the Sellers'
rights in the same are valid and subsisting. The Sellers have the full right to
use their name in every jurisdiction where they do business.
6.22 RECEIVABLES. Except as provided in Schedule 6.22, all of the
receivables of the Corporation are valid and legally binding, represent bona
fide transactions, and arose in the ordinary course of business of the
Corporation. To the best of the Corporation's and the Controlling Shareholders'
knowledge, all of such receivables are good and collectible receivables and will
be collected in full in accordance with the terms of such receivables, without
set-off or counterclaims; PROVIDED, HOWEVER, that to the extent that such
receivables are not collected, the allowance for doubtful accounts contained in
the June 30, 1998 Financial Statement is adequate based on the Corporation's
historical experience.
6.23 LICENSES AND PERMITS. Except as provided in Schedule 6.23, and to the
best of the Corporation's and Controlling Shareholders' knowledge, the
Corporation possesses all licenses
19
<PAGE>
and required governmental or official approvals, permits or authorizations
(collectively, the "Permits") for its Business and operations. All Permits are
valid and in full force and effect, the Corporation is in compliance in all
material respects with their requirements, and no proceeding is pending or to
the Corporation's or any Seller's knowledge threatened to revoke or amend any of
the Permits. None of the Permits is or will be impaired or in any way affected
by the execution and delivery of this Agreement or the transactions contemplated
hereby.
6.24 CONTRACTS AND CUSTOMER LISTS. Schedule 6.24 lists all customers and
contracts of the Corporation that account for more than 1% of the Corporation's
annual gross revenue, all contracts of the Corporation requiring payment or
performance involving Ten Thousand Dollars ($10,000) or more, and all contracts
and obligations with a term longer than one (1) year (collectively, the
"Material Contracts"). All of the Material Contracts: (i) are valid and binding
obligations of the parties; (ii) are not in default and will not become in
default solely upon notice or the passage of time without curative action; and
(iii) will remain in full force and effect following the Closing, without
requiring the consent of the other parties thereto and without causing a
default, right to terminate or right to modify any terms under any such Material
Contracts, notwithstanding any provisions in any such Material Contracts which
may set forth a restriction or change in control of the Corporation. The
Corporation has delivered to Purchaser true, complete and correct copies of all
Material Contracts prior to Closing. None of the parties to the Material
Contracts (which include all of the Corporation's significant Customers) has
cancelled or substantially reduced or, to the knowledge of the Corporation or
any of the Sellers, is currently attempting or threatening to cancel any
Material Contract or substantially reduce utilization of the services provided
by the Corporation, and the Corporation has complied with all commitments and
obligations pertaining to any Material Contract, and is not in default under any
such Material Contract, and no notice of default has been received.
6.25 LABOR MATTERS. The Corporation has not been the subject of any
election in respect of union representation of employees and is not bound by or
subject to any arrangement with any labor union. No employees of the Corporation
are or, within the preceding six (6) years have been, represented by any labor
union or covered by any collective bargaining agreement and no campaign to
establish such representation has ever occurred or is in progress. There is no
pending, or to the Corporation's or any Seller's knowledge, threatened labor
dispute involving the Corporation and any group of employees, nor has the
Corporation experienced any labor interruptions over the past three (3) years.
Set forth in Schedule 6.25 hereto is a list of all labor or collective
bargaining units applicable to the Corporation, or with respect to which the
Corporation is otherwise bound, together with all outstanding agreements with
any such collective bargaining units. Except as set forth in Schedule 6.25, (i)
the Corporation and the Controlling Shareholders are in compliance with all
Applicable Laws respecting employment and employment practices, terms and
conditions of employment, age and sex discrimination, and Applicable Laws
respecting wages and hours; (ii) the Corporation and the Controlling
Shareholders have not engaged, and are not now engaging, in any unfair labor
practice or other unlawful employment practice; (iii) no unfair labor practice
complaints have been filed against the Corporation or the Sellers with any
governmental or regulatory agency; (iv) the Corporation and the Sellers have not
received any notice or communication reflecting an intention or threat to file
20
<PAGE>
any such complaint; (v) no person has made any claim against the Corporation or
the Sellers arising out of any Applicable Laws relating to discrimination with
respect to employees or employment practices; and (vi) there is no strike, work
stoppage or labor disturbance pending or threatened against or involving the
Corporation or the Sellers or any group of employees of the Corporation or the
Sellers.
6.26 GOVERNMENTAL CONTRACTS SUBJECT TO PRICE REDETERMINATION OR
RENEGOTIATION. The Corporation is not now a party to any governmental contracts
subject to price redetermination or renegotiation during their current term.
6.27 OFFICERS, DIRECTORS AND KEY EMPLOYEES, EMPLOYMENT AGREEMENTS,
COMPENSATION. Schedule 6.27 sets forth an accurate list showing all officers,
directors and key employees of the Corporation, listing all employment
agreements with such officers, directors and key employees and the rate of
compensation (and the portions thereof attributable to salary, bonus and other
compensation, respectively) of each of such persons. Schedule 6.27 any increase
in compensation or any special bonus payable to any officer, director, key
employee or other employee. There is no pending or threatened labor dispute
involving the Corporation and any group of its employees, nor has the
Corporation experienced any labor interruptions over the past three (3) years.
6.28 PREDECESSOR STATUS, ETC. There have been no predecessor corporations
for the past five (5) years of the Corporation. The Corporation has not been a
subsidiary or division of another corporation or part of an acquisition which
was later rescinded.
6.29 SPIN-OFF BY THE CORPORATION. Within the preceding two (2) years, there
has not been any sale, spin-off or split-up of material assets of the
Corporation or any other person or entity that directly, or indirectly through
one or more intermediaries, controls, or is controlled by, or is under common
control with, the Corporation other than in the ordinary course of business. If
the Sellers become aware of any fact or circumstance which would change a
representation or warranty of the Sellers in this Agreement, the party with such
knowledge shall immediately give notice of such fact or circumstance to
Purchaser. However, such notification shall not relieve the Sellers of their
obligations under this Agreement, and at the sole option of Purchaser, the truth
and accuracy of any and all warranties and representations of the Sellers at the
date of this Agreement shall be a precondition to the consummation of this
transaction.
6.30 RECORDS OF THE CORPORATION. The copies of the articles of
incorporation and bylaws of the Corporation which were provided to Purchaser are
true, accurate and complete and reflect all amendments made through the date of
this Agreement. The minute books for the Corporation made available to Purchaser
for review were correct and complete in all material respects as of the date of
such review, no further entries have been made through the date of this
Agreement, such minute books contain the true signatures of the persons
purporting to have signed them, and such minute books contain an accurate record
of all material corporate actions of the shareholders and directors (and any
committees thereof) of the Corporation taken by written consent or at a meeting
since incorporation. All material corporate actions taken by the Corporation
have been duly authorized or ratified. All accounts, books, ledgers and official
and
21
<PAGE>
other records of the Corporation have been fully, properly and accurately kept
and completed in all material respects, and there are no material inaccuracies
or discrepancies of any kind contained therein. The stock ledgers of the
Corporation, as previously made available to Purchaser, contain accurate and
complete records of all issuances, transfers and cancellations of shares of the
capital stock of the Corporation.
6.31 ACCURACY OF INFORMATION FURNISHED BY THE CORPORATION AND THE SELLERS.
No statement or information contained in this Agreement and the various
Schedules and Annex attached hereto or in any certificate furnished to Purchaser
pursuant hereto, contains or shall contain any untrue statement of a fact or
omits or shall omit any fact necessary to make the information contained therein
not misleading. The Sellers have provided Purchaser with true, accurate and
complete copies of all documents listed or described in the various Schedules
attached hereto. If the Sellers become aware of any fact or circumstance which
would change a representation or warranty of Seller in this Agreement, the party
with such knowledge shall immediately give notice of such fact or circumstance
to Purchaser. However, such notification shall not relieve the Sellers of their
obligation under this Agreement, and at the sole option of Purchaser, the truth
and accuracy of any and all warranties and representations of Seller at the date
of this Agreement shall be a precondition to the consummation of this
transaction.
6.32 SURVIVAL. Each of the representations and warranties set forth in this
Article 6 shall survive the Closing.
ARTICLE 7
CONDUCT OF BUSINESS PENDING THE CLOSING
7.1 CONDUCT OF BUSINESS BY THE CORPORATION PENDING THE CLOSING. Except as
provided in Schedule 7.1, the Corporation and the Controlling Shareholders,
jointly and severally, covenant and agree that, except as otherwise expressly
required or permitted by the terms of this Agreement, between the date of this
Agreement and the Closing, the Business of the Corporation shall be conducted
only in, and the Corporation shall not take any action except in, the ordinary
course of business consistent with past practice. The Corporation and the
Sellers shall use its or their reasonable best efforts to preserve intact the
Corporation's business organizations, to keep available the services of its
current officers, employees and consultants, and to preserve its present
relationships with customers, suppliers and other Persons with which it has
business relations. By way of amplification and not limitation, the Corporation
shall not, except as expressly required or permitted by the terms of this
Agreement between the date of this Agreement and the Closing, directly or
indirectly, do or propose or agree to do any of the following without the prior
written consent of Purchaser:
(a) amend or otherwise change its Charter Documents;
(b) issue, sell, pledge, dispose of, encumber, or authorize the
issuance, sale, pledge, disposition, grant or encumbrance of any of its assets,
tangible or intangible, except in the ordinary course of business consistent
with past practice; or any shares of its capital stock
22
<PAGE>
of any class, or any options, warrants, convertible securities or other rights
of any kind to acquire any shares of such capital stock;
(c) declare, set aside, make or pay any dividend or other
distribution, payable in cash, stock, property or otherwise, with respect to any
of its capital stock or other securities;
(d) reclassify, combine, split, subdivide or redeem, purchase or
otherwise acquire, directly or indirectly, any of its capital stock or other
securities;
(e) sell, lease or transfer any of its properties or assets
(other than in the ordinary course of business consistent with past practice),
or acquire (including, without limitation, for cash or shares of stock, by
merger, consolidation or acquisition of stock or assets) any interest in any
corporation, partnership or other business organization or division thereof or
any assets; or make any investment either by purchase of stock or securities,
contributions of capital or property transfer, or purchase any property or
assets of any other Person (except in the ordinary course of business consistent
with past practice); make or obligate itself to make capital expenditures out of
the ordinary course of business consistent with past practice; other than in the
ordinary course of business consistent with past practice, incur any obligations
or liabilities including, without limitation, any indebtedness for borrowed
money, issue any debt securities or assume, guarantee or endorse or otherwise as
an accommodation become responsible for, the obligations of any Person, or make
any loans or advances, modify, terminate, amend or enter into any Contract other
than as expressly required or permitted herein or in the ordinary course of
business consistent with past practice, or impose any security interest or other
Lien on any of its assets other than in the ordinary course of business
consistent with past practice;
(f) pay any bonus to its officers or employees, or increase the
compensation payable or to become payable to its officers or employees or,
except as presently bound to do, grant any severance or termination pay to, or
enter into any employment or severance agreement with, any of its directors,
officers or employees, or establish, adopt, enter into or amend or take any
action to accelerate any rights or benefits which any collective bargaining,
bonus, profit sharing trust, compensation, stock option, restricted stock,
pension, retirement, deferred compensation, employment, termination, severance
or other plan, agreement, trust, fund, policy or arrangement for the benefit of
any directors, officers or employees;
(g) take any action with respect to accounting policies or
procedures other than in the ordinary course of business and in a manner
consistent with past practices;
(h) pay, discharge or satisfy any existing claims, liabilities or
obligations (absolute, accrued, asserted or unasserted, contingent or
otherwise), other than the payment, discharge or satisfaction in the ordinary
course of business and consistent with past practice of due and payable
liabilities reflected or reserved against in the Financial Statements, as
appropriate, or liabilities incurred after the date thereof in the ordinary
course of business and consistent with past practice or delay paying any amount
payable beyond forty-five (45) days following the date on which it is due,
except as set forth in Schedule 7.1(h);
23
<PAGE>
(i) enter into any transaction or agreement with any of the
Sellers or an Affiliate thereof except for such transactions or agreements
expressly permitted herein;
(j) make or pledge any charitable contributions; or
(k) agree, in writing or otherwise, to take or authorize any of
the foregoing actions or any action which would make any representation or
warranty in Article 6 untrue or incorrect in any respect.
ARTICLE 8
CERTAIN AGREEMENTS AND COVENANTS OF THE PARTIES
8.1 FURTHER ASSURANCES. Each party shall execute and deliver such
additional instruments and other documents and shall take such further actions
as may be necessary or appropriate to effectuate, carry out and comply with all
of the terms of this Agreement and the transactions contemplated hereby and to
satisfy the conditions set forth in Articles 9 and 10. The Sellers shall cause
the Corporation to comply with all of the covenants of the Corporation under
this Agreement. The Sellers covenant and agree to deliver to Purchaser at the
Closing the certificates, opinions and other documents required to be delivered
to Purchaser pursuant to Article 9, and Purchaser covenants and agrees to
deliver to the Sellers the certificates and other documents required to be
delivered to the Sellers pursuant to Article 10.
8.2 CONFIDENTIALITY, PUBLICITY. Except as required by law, neither party
shall disclose the terms of this transaction to any third party nor make any
public announcement related to this Agreement or the transactions contemplated
hereby without the prior written approval of the other party hereto, which
approval shall not be unreasonably withheld. The disclosing party shall provide
the other party with a copy of all public announcements proposed to be made by
such party which relate to this Agreement or the transactions contemplated
hereby prior to the release of such announcements to the public.
8.3 NO OTHER DISCUSSIONS. Until this Agreement is terminated as herein
provided, none of the Sellers, the Corporation or their respective Affiliates,
employees, agents and representatives will: (i) initiate, encourage the
initiation by others of discussions or negotiations with third parties or
respond to solicitations by third persons relating to any merger, sale or other
disposition of any substantial part of the assets, the Business or the
properties of the Corporation (whether by merger, consolidation, sale of stock,
sale of assets, or otherwise); or (ii) enter into any agreement or commitment
(whether or not binding) with respect to any of the foregoing transactions. The
Sellers will immediately notify Purchaser if any third party attempts to
initiate any solicitation, discussion or negotiation with respect to any of the
foregoing transactions.
8.4 DUE DILIGENCE INVESTIGATION. Purchaser shall be entitled to conduct,
prior to Closing, a due diligence investigation of the Corporation, its assets
and the Business, including the review of matters set forth on all Schedules to
this Agreement in their final form. The Corporation shall provide Purchaser and
its designated agents and consultants with reasonable
24
<PAGE>
access during normal business hours to the Corporation's Business and its assets
and all books, records, documents, correspondence and other materials
("Proprietary Documents") related thereto which Purchaser, its agents and
consultants reasonably require to conduct such due diligence review; PROVIDED,
HOWEVER, that without the prior consent of the Corporation, Purchaser shall not
contact, interview, meet, solicit or otherwise discuss the transactions
contemplated by this Agreement with any customers, employees or suppliers of the
Corporation. Purchaser agrees to keep strictly confidential and not to disclose
to third parties all or any portion of Proprietary Documents. Upon termination
of this Agreement, Purchaser shall return all Proprietary Documents, copies,
extracts, and summaries thereof, in any form or medium, in its possession, to
the Corporation.
8.5 COVENANT NOT TO COMPETE. In order to assure that Purchaser will realize
the benefits of the transactions contemplated hereby, H. Michael Schneider, Lisa
L. Schneider, Peter D. Schneider, Thomas R. Schneider, Barbara Morrison, Michael
R. Schneider, Laura Schneider, Loreen Schneider, and John Morrison agree with
Purchaser that such Sellers will not, except as otherwise expressly set forth in
Schedule 8.5, directly or indirectly, alone or as a partner, joint venturer,
officer, director, employee, consultant, agent, independent contractor, trustee,
custodian, fiduciary, lender or security holder of any company, business, or
entity, or otherwise:
(a) for a period of five (5) years following the Closing Date,
engage in, or finance or provide financial assistance with respect to, any
business activity currently conducted by the Corporation or AES, or conducted by
either of them in the preceding three (3) years, including without limitation,
the Business in the Restricted Territory; PROVIDED, HOWEVER, that the beneficial
ownership of less than five percent (5%) of the shares of stock of any
corporation having a class of equity securities actively traded on a national
securities exchange or over-the-counter market shall not be deemed, in and of
itself, to violate the prohibitions of this section;
(b) for a period of five (5) years following the Closing Date,
directly or indirectly: (i) induce any Person which is a customer of Purchaser,
its subsidiaries (including the Corporation and AES), and their respective
Affiliates, successors or assigns (collectively, the "U S Liquids Companies") to
patronize any business directly or indirectly in competition with the Business
as conducted by the U S Liquids Companies in the Restricted Territory; (ii)
canvass, solicit or accept from any Person which is a customer of the U S
Liquids Companies in the Restricted Territory, any such competitive business; or
(iii) request or advise any Person which has a business relationship with the U
S Liquids Companies in the Restricted Territory to withdraw, curtail or cancel
any such Person's business with such entity;
(c) for a period of five (5) years following the Closing Date,
directly or indirectly employ, or solicit the employment of, any person who was
employed by the Corporation (including AES), or the U S Liquids Companies at or
within the prior six (6) months, or in any manner seek to induce any such person
to leave his or her employment; PROVIDED, HOWEVER, that the Sellers may hire any
employee that is terminated by Purchaser; and
(d) at any time following the Closing Date, directly or
indirectly, in any
25
<PAGE>
way utilize, disclose, copy, reproduce or retain in his or her possession the
Corporation's proprietary rights or records, including, but not limited to, any
of its customer lists.
The Sellers agree and acknowledge that the restrictions contained in this
Section 8.5 are reasonable in scope and duration and are necessary to protect
the U S Liquids Companies after the Closing. The parties agree and acknowledge
that any breach of this section will cause irreparable damage to the U S Liquids
Companies and upon breach of any provision of this section, the U S Liquids
Companies shall be entitled to injunctive relief, specific performance or other
equitable relief; PROVIDED, HOWEVER, that, this shall in no way limit any other
remedies which the U S Liquids Companies may have (including, without
limitation, the right to seek monetary damages). Purchaser and each of the
Sellers hereby agrees that Purchaser may assign, without limitation, the
foregoing restrictive covenants to its affiliates or to any successor to
Purchaser's business.
8.6 RELATED PARTY AGREEMENTS. Set forth in Schedule 8.6 are all of the
existing agreements between the Corporation and the Sellers or their Affiliates
and unless otherwise stated, such agreements shall continue to survive after the
Closing.
8.7 COOPERATION. Each of the parties agrees to cooperate with the others in
the preparation and filing of all forms, notifications, reports and information,
if any, required or reasonably deemed advisable pursuant to any law, rule or
regulation or the rules of The American Stock Exchange (or any exchange on which
the common stock of Purchaser may be listed) in connection with the transactions
contemplated by this Agreement and to use their respective best efforts to agree
jointly on a method to overcome any objections by any Governmental Authority to
any such transactions.
8.8 OTHER ACTIONS. Prior to the Closing, each of the parties hereto shall
take all appropriate actions, and do, or cause to be done, all things necessary,
proper or advisable under any applicable laws, regulations and contracts to
consummate and make effective the transactions contemplated herein, including,
without limitation, obtaining all licenses, permits, consents, approvals,
authorizations, qualifications and orders of any Governmental Authority and
parties to Contracts with the Corporation as are necessary for the consummation
of the transactions contemplated hereby. Each of the parties shall make on a
prompt and timely basis all governmental or regulatory notifications and filings
required to be made by it for the consummation of the transactions contemplated
hereby. The parties also agree to use best efforts to defend all lawsuits or
other legal proceedings challenging this Agreement or the consummation of the
transactions contemplated hereby and to lift or rescind any injunction or
restraining order or other order adversely affecting the ability of the parties
to consummate the transactions contemplated hereby.
8.9 NOTIFICATION OF CERTAIN MATTERS. The Sellers shall give prompt notice
to Purchaser of the occurrence or non-occurrence of any event which would likely
cause any representation or warranty contained herein to be untrue or
inaccurate, or any covenant, condition, or agreement contained herein not to be
complied with or satisfied.
26
<PAGE>
8.10 PAYOFF AND ESTOPPEL LETTERS. Prior to the Closing, the Sellers shall
request and deliver to Purchaser, with respect to any Indebtedness that may be
paid off by the Corporation within sixty (60) days after the Closing, payoff and
estoppel letters from such holders of any Indebtedness of the Corporation, which
letters shall contain payoff amounts, per diem interest, wire transfer
instructions and an agreement to deliver to Purchaser, upon full payment of any
such Indebtedness, UCC-3 termination statements, satisfactions of mortgage or
other appropriate releases and any original promissory notes or other evidences
of indebtedness marked canceled.
8.11 CORPORATION CAPITAL STOCK; RELEASES. At the Closing, each Seller
covenants and agrees to deliver to Purchaser: (i) all certificates evidencing
the Shares duly endorsed to Purchaser by the Sellers; and (ii) a release in such
form as is reasonably satisfactory to Purchaser releasing all claims of any
nature against the Corporation, if any, existing or relating to events prior to
the Closing Date.
8.12 TRADING IN U S LIQUIDS COMMON STOCK. From the date of this Agreement
until the Closing Date, the Sellers and the Corporation (and any Affiliates
thereof) shall not directly or indirectly purchase or sell (including short
sales) any shares of U S Liquids Common Stock.
8.13 SECTION 338(H)(10) ELECTION. Purchaser and the Sellers agree to make
the election (the "Election") provided for by Section 338(h)(10) of the Code
with respect to the sale of the Shares, to cooperate with each other in taking
every action necessary to make the Election and to report the transactions
contemplated by this Agreement in a manner consistent with the Election and to
take no positions inconsistent with the Election.
8.14 GUARANTEE SUBSTITUTION. Prior to Close, the Corporation shall have
obtained insurance or other financial assurances to replace certain letters of
credit guaranteed by H. Michael Schneider in connection with the financial
assurance requirements imposed on permitted hazardous waste facilities.
Purchaser agrees after Close to cause the Corporation to pursue and obtain, with
all due diligence, releases or cancellation of the letters of credit guaranteed
by H. Michael Schneider in connection with the financial assurances requirements
for permitted hazardous waste facilities. If such releases or cancellation
cannot be obtained by the Corporation prior to Close, the Corporation and
Purchaser will do all things reasonably necessary to cause such releases,
substitutions or cancellations within a reasonable period following the Closing,
including without limitation substituting the guaranty of Purchaser for that of
H. Michael Schneider.
8.15 H. MICHAEL SCHNEIDER DEBT. Immediately after the Closing, H. Michael
Schneider shall repay to the Corporation an amount equal to the then balance
owed as of the close of the indebtedness shown on the Corporation Balance Sheet
due to the loans previously made by the Corporation to H. Michael Schneider in
approximately Six Hundred Thousand Dollars ($600,000).
27
<PAGE>
ARTICLE 9
CONDITIONS TO THE OBLIGATIONS OF PURCHASER
The obligations of Purchaser to effect the transactions contemplated
hereby shall be subject to the fulfillment at or prior to the Closing Date of
the following conditions, any or all of which may be waived in whole or in part
by Purchaser;
9.1 ACCURACY OF REPRESENTATIONS AND WARRANTIES; COMPLIANCE WITH
OBLIGATIONS. The representations and warranties of the Sellers and the
Corporation contained in this Agreement shall be true and correct in all
material respects at and as of the Closing Date with the same force and effect
as though made at and as of that time except: (i) for changes specifically
permitted by or disclosed pursuant to this Agreement; and (ii) that those
representations and warranties which address matters only as of a particular
date shall remain true and correct as of such date. The Sellers and the
Corporation shall have performed and complied with all of their obligations
required by this Agreement to be performed or complied with at or prior to the
Closing Date, including those obligations set forth in Article 8 herein. The
Sellers and the Corporation shall have delivered to Purchaser a certificate,
dated as of the Closing Date, duly signed, certifying that all such obligations
have been performed and complied with.
9.2 NO MATERIAL ADVERSE CHANGE OR DESTRUCTION OF PROPERTY. Between the date
hereof and the Closing Date: (i) there shall have been no Material Adverse
Change in the Corporation or the Business; (ii) there shall have been no adverse
federal, state or local legislative or regulatory change affecting in any
material respect the service, or products of the Corporation or the Business;
and (iii) no material portion of the assets of the Corporation shall have been
damaged by fire, flood, casualty, riot or other cause (regardless of insurance
coverage for such damage), and there shall have been delivered to Purchaser a
certificate to that effect, dated as of the Closing Date and signed by the
Sellers.
9.3 CORPORATE CERTIFICATE. The Corporation shall have delivered to
Purchaser the following: (i) copies of the Charter Documents as in effect
immediately prior to the Closing Date; (ii) copies of resolutions adopted by its
Board of Directors and shareholders authorizing the transactions contemplated by
this Agreement; (iii) written resignations of the Corporation's officers and
Board of Directors; (iv) a certificate of good standing issued by the
Secretaries of State for the states of California, Arizona, Oregon, and
Washington, as of a date not more than sixty (60) days prior to the Closing
Date; and (v) tax status certificates issued by the applicable departments of
revenues or such similar agencies for the states of California, Arizona, Oregon,
and Washington, certified in the case of subsections (i) and (ii) as of the
Closing Date by the Secretary of the Corporation as being true, correct and
complete.
9.4 DELIVERY OF SHARES. At Closing, the Sellers and the Corporation shall
deliver to Purchaser certificates representing the Shares duly endorsed (or
accompanied by duly executed stock powers), and such other instruments of
transfer of title as are necessary to transfer to Purchaser good and marketable
title to the Shares.
28
<PAGE>
9.5 CONSENT. Except as provided in Schedule 9.5, the Corporation and the
Sellers shall have received consents to the transactions contemplated hereby and
waivers of rights to terminate or modify any material rights or obligations of
the Corporation and the Sellers from any person from whom such consent or waiver
is required under any contract to which the Sellers, the Corporation or the
Assets are bound, or who, as a result of the transactions contemplated hereby,
would have such rights to terminate or modify such contracts, either by the
terms thereof or as a matter of law. Without limiting the foregoing, the Sellers
shall have received all necessary consents to the transactions contemplated by
this Agreement including, without limitation, the transfer and assignment of all
operating permits necessary for the operation of the Business, and shall have
provided all proper notifications to and obtained all necessary consents from
the City of East Palo Alto, California; Chandler, Arizona; and such other local,
municipal, state or governmental authorities as may be required.
9.6 NO ADVERSE LITIGATION. There shall not be pending or threatened any
action or proceeding by or before any court or other governmental body which
shall seek to restrain, prohibit, invalidate or collect damages arising out of
the transactions contemplated hereby, and which, in the judgment of Purchaser,
makes it inadvisable to proceed with the transactions contemplated hereby.
9.7 OPINION OF COUNSEL. Purchaser shall have received an opinion dated as
of the Closing Date from counsel for the Corporation and the Sellers, in
substantially the form attached hereto as Annex II.
9.8 CONSUMMATION OF THE TRANSACTIONS CONTEMPLATED BY THE AES ASSET PURCHASE
AGREEMENT. Purchaser shall have received a fully executed asset purchase
agreement by and between the Corporation and AES pursuant to which the
Corporation shall have purchased all of the assets of AES, in form and substance
satisfactory to Purchaser and its counsel (the "AES Purchase Agreement"), and
each of the conditions precedent to closing to such transaction shall have been
satisfied without waiver.
9.9 SECURITIES MATTERS. Purchaser shall have received all necessary
consents and otherwise complied with any state or federal securities laws
applicable to the issuance of the U S Liquids Shares in connection with the
transactions contemplated hereby, and each of the Sellers shall have delivered
agreements limiting transfer of such shares (each, a "Lock-Up Agreement") in the
form attached hereto as Annex III and in form and substance satisfactory to
Purchaser and its counsel.
9.10 EMPLOYMENT AGREEMENTS, CONSULTING AGREEMENTS AND LEASES. Each of the
persons listed on Schedule 9.10(a) shall have entered into an employment
agreement with Purchaser substantially in the form of Annex IV ("Employment
Agreement"), each of the persons listed on Schedule 9.10(b) shall have entered
into a consulting agreement ("Consulting Agreement") with Purchaser
substantially in the form of Annex V.
9.11 GENERAL. All actions taken by the Sellers and Purchaser in connection
with the consummation of the transaction contemplated hereby and all
certificates, opinions and other
29
<PAGE>
documents required to effect the transactions contemplated hereby, will be
reasonably satisfactory in form and substance to Purchaser.
9.12 NEWARK OPTION AGREEMENT. Prior to the Closing, all actions shall have
been taken by the Corporation to enter into an option agreement for the sale of
that certain real property owned by the Corporation, located in Newark,
California ("Newark Property") to one or more of its shareholders. The
Corporation shall have delivered to Purchaser at or prior to the Closing, a copy
of a fully executed option agreement in a form reasonably satisfactory to
Purchaser and shall deliver, upon consummation of the sale of the Newark
Property, a copy of a quitclaim deed evidencing change of ownership of same to
one or more of its shareholders, which deed shall be in a form reasonably
satisfactory to Purchaser.
9.13 PERSONAL PROPERTY OPTION AGREEMENT. Prior to the Closing, all actions
shall have been taken by the Corporation to enter into an option agreement for
the sale of certain personal properties of the Corporation to one or more of its
shareholders. The Corporation shall have delivered to Purchaser at or prior to
the Closing, a copy of a fully executed option agreement in form reasonably
satisfactory to Purchaser and shall deliver, upon consummation of the sale of
such personal properties of the Corporation, a copy of a bill of sale evidencing
the sale and purchase of such assets of the Corporation, which bill of sale
shall be in a form reasonably satisfactory to Purchaser.
9.14 PURCHASER'S SATISFACTION OF DUE DILIGENCE INVESTIGATION. In the event
that Purchaser, in its sole and absolute discretion, determines prior to the
Closing that any matter described or referred to in any Schedule hereto (or
otherwise disclosed pursuant to Purchaser's due diligence inquiry) is sufficient
to cause Purchaser not to proceed to Closing, Purchaser shall notify Sellers
immediately of such matter and of Purchaser's decision not to proceed to
Closing. At such time, Purchaser shall have no further obligation to proceed to
Closing and Purchaser may, at it sole option, terminate this Agreement without
further obligation or liability.
ARTICLE 10
CONDITIONS TO THE OBLIGATIONS OF THE SELLERS
The obligations of the Sellers to effect the transactions contemplated
hereby shall be subject to the fulfillment at or prior to the Closing Date of
the following conditions, any or all of which may be waived in whole or in part
by the Sellers:
10.1 ACCURACY OF REPRESENTATIONS AND WARRANTIES AND COMPLIANCE WITH
OBLIGATIONS. The representations and warranties of Purchaser contained in this
Agreement shall be true and correct in all material respects at and as of the
Closing Date with the same force and effect as though made at and as of that
time except: (i) for changes specifically permitted by or disclosed pursuant to
this Agreement; and (ii) that those representations and warranties which address
matters only as of a particular date shall remain true and correct as of such
date. Purchaser shall have performed and complied in all material respects with
all of its obligations required by this Agreement to be performed or complied
with at or prior to the Closing Date.
30
<PAGE>
Purchaser shall have delivered to the Sellers a certificate, dated as of the
Closing Date, and signed by an executive officer thereof, certifying that such
representations and warranties are true and correct, and that all such
obligations have been performed and complied with, in all material respects.
10.2 OTHER CONDITIONS. At the Closing, Purchaser shall have delivered to
the Sellers the Purchase Price.
10.3 CORPORATE CERTIFICATE. Purchaser shall have delivered to the
Corporation the following: (i) copies of Purchaser's Certificate of
Incorporation as in effect immediately prior to the Closing Date; (ii) copies of
resolutions adopted by its Board of Directors authorizing the transactions
contemplated by this Agreement; (iii) a certificate of good standing with tax
status issued by the Secretary of State of the State of Delaware as of a date
not more than sixty (60) days prior to the Closing Date, certified in the case
of subsections (i) and (ii) as of the Closing Date by the Secretary of Purchaser
as being true, correct and complete.
10.4 NO ADVERSE LITIGATION. There shall not be pending or threatened any
action or proceeding by or before any court or other governmental body which
shall seek to restrain, prohibit, invalidate or collect damages arising out of
the transactions contemplated hereby, and which, in the judgment of the Sellers,
makes it inadvisable to proceed with the transactions contemplated hereby.
10.5 OPINION OF COUNSEL. Seller shall have received an opinion dated as of
the Closing Date from counsel for Purchaser in substantially the form attached
hereto as Annex II.
10.6 OTHER AGREEMENTS. Each of the agreements described in Sections 9.10,
9.12 and 9.13 shall have been entered into by the parties to such agreements.
ARTICLE 11
SECURITIES LAW MATTERS
11.1 DISPOSITION OF U S LIQUIDS SHARES. The Sellers represent and warrant
that the shares of U S Liquids Shares being acquired by them hereunder are being
acquired and will be acquired for their own respective accounts, and will not be
sold or otherwise disposed of, except pursuant to: (a) an exemption from the
registration requirements under the Securities Act, which does not require the
filing by Purchaser with the SEC of any registration statement, offering
circular or other document, in which case, the Sellers shall first supply to
Purchaser an opinion of counsel (which counsel and opinions shall be
satisfactory to Purchaser) that such exception is available; or (b) an effective
registration statement filed by Purchaser with the SEC under the Securities Act.
11.2 LEGEND. The certificates representing the U S Liquids Shares shall
bear the following legend:
31
<PAGE>
THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO THE
PROVISIONS OF RULE 145 PROMULGATED UNDER THE SECURITIES ACT OF 1933,
AS AMENDED (THE "ACT"), AND MAY NOT BE SOLD, TRANSFERRED OR
OTHERWISE DISPOSED OF BY THE HOLDER EXCEPT: (A) IN ACCORDANCE WITH
RULE 145(D) UNDER THE ACT; OR (B) IN ACCORDANCE WITH AN OPINION OF
COUNSEL IN FORM AND SUBSTANCE SATISFACTORY TO THE ISSUER THAT AN
EXEMPTION FROM SUCH REGISTRATION IS AVAILABLE.
11.3 CONTRACTUAL RESTRICTION. Notwithstanding the above, each of the
Sellers agree to not sell or transfer the U S Liquids Share described in Section
2.1 for the applicable time periods set forth therein (the "Contractually
Restricted Stock").
11.4 CONTRACTUAL RESTRICTION LEGEND.
(a) All one (1) year Contractually Restricted Stock shall bear
the following legend:
THE SALE OR OTHER TRANSFER OF THE SHARES REPRESENTED HEREBY HAS BEEN
CONTRACTUALLY RESTRICTED. THE HOLDER AGREES THAT SUCH SHARES MAY NOT
BE SOLD OR OTHERWISE TRANSFERRED WITHOUT THE PRIOR WRITTEN CONSENT
OF U S LIQUIDS INC., UNTIL THE EXPIRATION OF SUCH RESTRICTION ON
JANUARY 15, 2000.
(b) All two (2) year Contractually Restricted Stock shall bear the
following legend:
THE SALE OR OTHER TRANSFER OF THE SHARES REPRESENTED HEREBY HAS BEEN
CONTRACTUALLY RESTRICTED. THE HOLDER AGREES THAT SUCH SHARES MAY NOT
BE SOLD OR OTHERWISE TRANSFERRED WITHOUT THE PRIOR WRITTEN CONSENT
OF U S LIQUIDS INC., UNTIL THE EXPIRATION OF SUCH RESTRICTION ON
JANUARY 15, 2001.
11.5 INDEMNIFICATION OF SECURITIES LAW MATTERS. The Controlling
Shareholders severally and jointly, agree to indemnify and hold harmless
Purchaser, its directors and officers, and each person, if any, who controls
Purchaser within the meaning of either Section 15 of the Securities Act or
Section 20 of the Exchange Act from and against any and all losses, claims,
damages, liabilities, and expenses (including reasonable costs of investigation)
arising out of or based upon any untrue statement or alleged untrue statement of
a material fact (contained in any
32
<PAGE>
registration statement or prospectus or in any preliminary prospectus, or
filings required of Purchaser under the Act or the Securities Exchange Act of
1934, as amended, or the rules promulgated pursuant thereto), arising out of or
based upon any omission or alleged omission to state therein a material fact
required to be stated therein necessary to make the statements therein not
misleading, which is based on any representation or warranty made in this
Agreement or any certificate or other document delivered by the Sellers pursuant
to this Agreement.
ARTICLE 12
INDEMNIFICATION
12.1 INDEMNIFICATION.
(a) The Controlling Shareholders agree, jointly and severally, to
indemnify and hold Purchaser and its Affiliates harmless from and against the
aggregate of all expenses, losses, costs, deficiencies, liabilities and damages
(including, without limitation, related counsel and paralegal fees and expenses)
incurred or suffered by Purchaser, or, as described in Section 12.1(d) hereof,
incurred or suffered by the Corporation (collectively, "Indemnifiable Damages")
resulting from or arising out of: (i) any breach of a representation or warranty
made by the Sellers, the Controlling Shareholders or the Corporation pursuant to
this Agreement; (ii) any breach of the covenants or agreements made by the
Sellers, the Controlling Shareholders or the Corporation in this Agreement;
(iii) any inaccuracy in any certificate delivered by the Sellers, the
Controlling Shareholders or the Corporation pursuant to this Agreement; (iv) any
misrepresentation or omission from any Schedule to this Agreement; (v) any
liability of the Sellers or the Corporation to creditors of the Sellers or the
Corporation which Purchaser has not explicitly assumed or permitted to exist
hereunder after the Closing Date, whether as a result of bankruptcy or similar
proceedings and whether as an account payable by the Sellers or the Corporation
or as a claim of alleged fraudulent conveyance or preferential payments within
the meaning of the United States Bankruptcy Code; (vi) the existence of
creditors of the Sellers or the Corporation which are not disclosed to
Purchaser; or (vii) any violation by the Controlling Shareholders or the
Corporation of the requirements of any governmental authority relating to the
reporting and payment of federal, state, local or other income, sales, use,
franchise, excise, property or other tax liabilities of the Corporation, which
occurs or exists prior to the Closing Date. The indemnity obligation contained
in this Section 12.1(a) shall continue for a period of three (3) years from and
after the Closing Date; PROVIDED, HOWEVER, that the indemnity obligations
hereunder shall continue until the fifth anniversary of the Closing Date with
respect to any claim arising from or relating to matters for which Purchaser
shall have discovered facts to establish the existence of the type of claims
described in (i) through (vii) of this Section 12.1(a) and provided notice to
the Controlling Shareholders of Purchaser's intent to seek indemnification for
such claims prior to the expiration of such three (3) year period. Purchaser
shall not be entitled to assert any claim for indemnification under this Section
12.1(a) unless and until such time as the total amount of all claims of
Purchaser for indemnification under this Section 12.1(a) in the aggregate exceed
Fifty Thousand Dollars ($50,000). Further, the Controlling Shareholders shall
not be liable under this subsection for aggregate Indemnifiable Damages in
excess of the aggregate value of all
33
<PAGE>
consideration received by the Controlling Shareholders under this Agreement.
(b) The Controlling Shareholders agree, jointly and severally, to
indemnify and hold Purchaser and its Affiliates harmless from and against the
aggregate of all Indemnifiable Damages (including those described in Section
12.1(d) hereof), resulting from or arising out of: (i) any occurrence or
circumstance (whether known or unknown) which occurs or exists on or prior to
the Closing Date and which constitutes, or which by the lapse of time or giving
notice (or both) would constitute, a breach or default by the Corporation under
any lease, Contract or other instrument or agreement whether written or oral; or
(ii) any injury to or death of any person or damage to or destruction of any
property which occurs or exists prior to the Closing Date, whether based on
negligence, breach of warranty, or any other theory, which injury, death, damage
or destruction is attributable to or caused by the Corporation or of any
stockholder, officer, director, employee or agent of the Corporation or which
occurred during, in connection with or incidental to the conduct of the
Business; PROVIDED, HOWEVER, that any such injury, death, damage or destruction
attributable to or caused by events or occurrences for which indemnity is
required pursuant to Section 12.1(c) below shall be excluded from the indemnity
obligation contained in this Section 12.1(b). The indemnity obligation contained
in this Section 12.1(b) shall continue for a period of two (2) years from and
after the Closing Date. Notwithstanding the foregoing time limitation, the
obligation of the Controlling Shareholders to indemnify Purchaser hereunder
shall continue indefinitely with respect to any claim arising from or relating
to matters for which Purchaser shall have received a formal demand or claim from
a third party and provided notice thereof to the Controlling Shareholders and of
Purchaser's intent to seek indemnification for such claims hereunder within two
(2) years of the Closing Date. Purchaser shall not be entitled to assert any
claim for indemnification under this Section 12.1(b) unless and until such time
as the amount of all claims of Purchaser for indemnification under this Section
12.1(b) exceeds Fifty Thousand Dollars ($50,000) in the aggregate, at which time
any and all claims of Purchaser for indemnification in excess of Fifty Thousand
Dollars ($50,000) may be asserted; PROVIDED, HOWEVER, that the Controlling
Shareholders shall not be liable under this Section 12.1(b) for aggregate
Indemnifiable Damages in excess of Five Hundred Thousand Dollars ($500,000) or
any matter described in part 1 of Schedule 6.10; PROVIDED, HOWEVER, that in no
event shall any schedules which are cross-referenced in any such Schedule be
excluded from such indemnity obligations.
(c) The Controlling Shareholders agree, jointly and severally, to
indemnify and hold Purchaser and its Affiliates harmless from and against the
aggregate of all Indemnifiable Damages (including those described in Section
12.1(d) hereof), resulting from or arising out of: (i) the generation,
collection, transportation, storage or disposal, by the Corporation or during,
in connection with or incidental to the conduct of the Business prior to the
Closing Date, of any materials, including, without limitation, hazardous
materials; or (ii) any act or omission by the Corporation or any stockholder,
officer, director, employee or agent of the Corporation prior to the Closing
Date which causes or contributes to a release of any materials, pollutants,
heat, smoke, fire, odors, or fumes into the environment (including air, surface
water and groundwater and land), whether such release actually occurs or arises
before, on or after the Closing Date (the term "release" as used herein means
any spilling, leaking, pumping, pouring, emitting, emptying,
34
<PAGE>
discharging, injecting, escaping, leaching, dumping or disposing into the
ambient environment), including, without limitation, any claim, suit, demand or
action in connection therewith based upon a toxic tort theory (including
damages, costs or expenses for personal injury, medical evaluation or
surveillance or property devaluation) and any claim, demand, action, suit or
proceeding brought or arising under the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, as amended ("CERCLA"), or similar state
law; or (iii) the violation by the Corporation or any stockholder, officer,
director, employee or agent of the Corporation prior to the Closing Date of any
law or regulation, whether federal, state or local, governing, relating or
applicable to the environment or the protection thereof; PROVIDED, HOWEVER, that
in each case (i) through (iii) of this Section 12.1(c), the liabilities listed
on Schedule 12.1(c) and the matters described in part 1 of Schedule 6.10 and on
Schedules 6.13(a), 6.13(b), part 1 of 6.13(c), and 6.23, shall be expressly
excluded from the indemnity obligation contained in this Section 12.1(c);
PROVIDED, HOWEVER, that in no event shall any schedules which are
cross-referenced in any such Schedule be excluded from such indemnity
obligations. Purchaser shall not be entitled to assert any claim for
indemnification under this Section 12.1(c) unless and until such time as the
amount of all claims of Purchaser for indemnification hereunder exceeds One
Million Five Hundred Thousand Dollars ($1,500,000) in the aggregate, at which
time any and all claims of Purchaser for indemnification in excess of the One
Million Five Hundred Thousand Dollars ($1,500,000) may be asserted; PROVIDED,
HOWEVER, that the Controlling Shareholders shall not have liability under this
Section 12.1(c) in excess of Two Million Dollars ($2,000,000). The indemnity
obligation contained in this Section 12.1(c) shall relate to claims made within
a period of three (3) years from and after the Closing Date; if prior to the
expiration of such three (3) year period, Purchaser shall have received a
Qualifying Notice (as defined herein) with respect to such claim and provided
notice to the Controlling Shareholders thereof and of Purchaser's intent to seek
indemnification for such claim. A "Qualifying Notice" shall include any of the
following: (i) a notice that the Corporation or its Affiliates, employees or
agents have been designated as a potentially responsible party; (ii) a notice of
violation, notice of deficiency, or formal demand, order or decree from a
governmental agency; (iii) a formal demand or notice of intent to file suit
under any citizen suit provision of any state or federal environmental laws;
(iv) a demand letter or the filing of a lawsuit alleging damages or cleanup
responsibility against the Corporation or its Affiliates, employees or agents;
or (v) a similar written demand or notice alleging liability against the
Corporation, its Affiliates, employees or agents. The Controlling Shareholders'
indemnity obligations for claims made within the three (3) year period following
the Closing Date in accordance with the above-described procedure, shall
continue until the fifth anniversary of the Closing Date; PROVIDED, HOWEVER,
that in the event such claims have not been fully paid or the full amounts have
not become payable or fixed in amounts prior to such date, Purchaser may elect
to have an estimate conducted, in which event the parties shall mutually agree
upon an independent qualified expert to determine the estimated present value of
the claim based on all available information from the parties, from third
parties, from governmental agencies or from any other source such expert deems
appropriate in the circumstances. Such estimate shall be accepted by all parties
as the fixed value of the claim for purposes of this Section 12.1(c), and the
Controlling Shareholders shall pay Purchaser such amount (subject to the Two
Million Dollar ($2,000,000) maximum indemnification liability under this Section
12.1(c) as described above) as if the claim had been due and payable on the
fifth anniversary of the Closing Date. All costs of such estimates
35
<PAGE>
of the expert will be paid by Purchaser.
(d) The parties hereto agree and acknowledge that the AES
Transaction is an integral part of the transactions contemplated by this
Agreement, and that the Controlling Shareholders will receive substantial
benefit from the AES Transaction. Therefore, the Controlling Shareholders agree
that the indemnification obligations set forth in this Section 12.1 shall
include and encompass the AES Transaction and the representations, warranties,
covenants and other obligations made or undertaken by AES thereunder or pursuant
to the documents delivered thereunder (the "AES Documents"), and that
notwithstanding the terms of the AES Documents, such indemnification obligations
of the Controlling Shareholders shall be in favor of Purchaser. As a result, for
purposes of determining the Controlling Shareholders' indemnification obligation
hereunder, all references in this Section 12.1 to the Corporation shall be
deemed to include AES; any reference to this Agreement shall be deemed to
include the AES Documents; and any reference to Purchaser shall be deemed to
include the Corporation in its capacity as the Purchaser of the AES assets in
the AES Transaction.
(e) Notwithstanding anything contained in this Section 12.1 to the
contrary, any claim made pursuant to this Section 12.1 shall be reduced by the
amount of any insurance proceeds received by the Corporation with respect to
such claim.
12.2 ASSUMPTION OF SPECIFIC LIABILITIES. Purchaser agrees to perform all of
the Sellers' contractual obligations related to the Business to the extent, and
only to the extent, such obligations first mature and are required to be
performed by Purchaser after the close of business on the Closing Date.
12.3 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. Each of the
representations and warranties made by the Corporation and the Sellers in this
Agreement or pursuant hereto shall survive for a period of three (3) years
following the Closing Date; PROVIDED, HOWEVER, that the representations and
warranties contained in Sections 6.17, 6.18, and Article 11 shall survive the
Closing Date for the applicable statute of limitation periods. Notwithstanding
any knowledge of facts determined or determinable by any party by investigation,
each party shall have the right to fully rely on the representations,
warranties, covenants and agreements of the other parties contained in this
Agreement or in any other documents or papers delivered in connection herewith.
Each representation, warranty, covenant and agreement of the parties contained
in this Agreement is independent of each other representation, warranty,
covenant and agreement.
12.4 MATTERS INVOLVING THIRD PARTIES.
(a) If any third party shall notify Purchaser or any of the
Sellers with respect to any matter (a "Third Party Claim") which may give rise
to a claim for indemnification against the other party under this Article 12,
then the party receiving such Third Party Claim shall promptly notify the other
party in writing; PROVIDED, HOWEVER, that no delay on the part of the notifying
party in notifying the other party shall relieve such party from any obligation
hereunder unless (and then solely to the extent) the indemnifying party is
thereby prejudiced.
36
<PAGE>
(b) The indemnifying party will have the right to defend the
notifying party against Third Party Claim with counsel of its choice reasonably
satisfactory to the other party, so long as the indemnifying party notifies the
notifying party in writing within thirty (30) days after the making of a Third
Party Claim. The notifying party may retain separate co-counsel at its sole cost
and expense and participate in the defense of the Third Party Claim. Neither
party will consent to the entry of any judgment or enter into any settlement
which does 22not include as an unconditional term thereof the giving to the
notifying party by the third party of a release of all liability in respect of
such Third Party Claim or which seeks an injunction, specific performance or a
declaration of rights or other equitable relief that, in the good faith judgment
of notifying party, will likely have a material adverse effect on the notifying
party's operations without the prior written consent of the notifying party
which shall not be withheld unreasonably.
ARTICLE 13
DEFINITIONS
13.1 DEFINED TERMS. As used herein, the following terms shall have the
following meanings:
"Affiliate" shall have the meaning ascribed to it in Rule 12b-2 of the
General Rules and Regulations under the Exchange Act, as in effect on the date
hereof.
"Controlling Shareholders" means H. Michael Schneider; H. Michael
Schneider and Lisa L. Schneider, as Trustees for Schneider Living Trust Dated
12/28/81; Peter D. Schneider; and Thomas R. Schneider.
"Contract" means any indenture, lease, sublease, license, loan agreement,
mortgage, note, indenture, restriction, will, trust, commitment, obligation or
other contract, agreement or instrument, whether written or oral.
"Governmental Authority" means any nation or government, any state,
regional, local or other political subdivision thereof, and any entity or
official exercising executive, legislative, judicial, regulatory or
administrative functions of or pertaining to government.
"Knowledge" or "to the best knowledge" or similar terms as used in this
Agreement, unless otherwise specifically defined herein, shall mean the actual
knowledge, after reasonable inquiry, of each or any of the Controlling
Shareholders and/or those senior managers of the Corporation who report directly
to any of the Controlling Shareholders and who are primarily responsible for
management of the activities or functions of the Corporation as to which the
applicable representation is being made.
"Lien" means any mortgage, pledge, security interest, encumbrance, lien or
charge of any kind (including, but not limited to, any conditional sale or other
title retention agreement, any lease in the nature thereof, and the filing of or
agreement to give any financing statement under the Uniform Commercial Code or
comparable law or any jurisdiction in connection with such
37
<PAGE>
mortgage, pledge, security interest, encumbrance, lien or charge).
"Material Adverse Change (or Effect)" means a change (or effect), in the
condition (financial or otherwise), properties, assets, liabilities, rights,
obligations, operations, business or prospects which change (or effect)
individually or in the aggregate, is materially adverse to such condition,
properties, assets, liabilities, rights, obligations, operations, business or
prospects.
"Person" means an individual, partnership, corporation, business trust,
joint stock corporation, estate, trust, unincorporated association, joint
venture, Governmental Authority or other entity, of whatever nature.
"Restricted Territory" means the following states and counties: (i) All
counties in the State of California; (ii) Multnomah County, Oregon; (iii)
Maricopa County, Arizona; and (iv) King County and Pierce County, Washington.
"Tax Return" means any tax return, filing or information statement
required to be filed in connection with or with respect to any Taxes; and
"Taxes" means all taxes, fees or other assessments, including, but not
limited to, income, excise, property, sales, franchise, intangible, withholding,
social security and unemployment taxes imposed by any federal, state, local or
foreign governmental agency, and any interest or penalties related thereto.
ARTICLE 14
TERMINATION, AMENDMENT AND WAIVER
14.1 TERMINATION. This Agreement may be terminated at any time prior to
the Closing:
(a) by mutual written consent of all of the parties hereto at any
time prior to Closing; or
(b) by Purchaser in the event of a material breach by the Sellers
of any provision of this Agreement; or
(c) by Seller in the event of a material breach by Purchaser of
any provision of this Agreement; or
(d) by either party if the Closing shall not have occurred by
January 31, 1999, through no fault of either party or circumstances beyond
reasonable control of either parties, and the parties hereto have not agreed to
extend the date to close.
14.2 EFFECT OF TERMINATION. Except as expressly stated herein, in the event
of termination of this Agreement pursuant to Section 14.1, this Agreement shall
forthwith become void; PROVIDED, HOWEVER, that nothing herein shall relieve any
party from liability for the willful breach of any of its representations,
warranties, covenants or agreements set forth in this
38
<PAGE>
Agreement. Purchaser shall immediately return to the Sellers any and all
documents pursuant to Section 8.4.
ARTICLE 15
GENERAL PROVISIONS
15.1 NOTICES. All notices, requests, demands, claims, and other
communications hereunder shall be in writing and shall be delivered (and shall
be deemed delivered) by certified or registered mail (first class postage
pre-paid), guaranteed overnight delivery, or facsimile transmission if such
transmission is confirmed by delivery by certified or registered mail (first
class postage pre-paid) or guaranteed overnight delivery, to the following
addresses and telecopy numbers (or to such other addresses or telecopy numbers
which such party shall designate in writing to the other party):
(a) If to Purchaser or, following the Closing, the Corporation:
U S Liquids Inc.
411 N. Sam Houston Parkway East, Suite 400
Houston, TX 77060
Attention: General Counsel
Telecopy: (281) 272-4545
(b) If to the Sellers or, prior to the Closing, the Corporation:
Romic Environmental Technologies Corporation
2081 Bay Road
East Palo Alto, CA 94303
Attention: H. Michael Schneider, Chairman of the Board
Telecopy: (650) 463-5040
With a copy to:
Cooper, White & Cooper
1333 North California Blvd., Suite 400
Walnut Creek, CA 94596
Attention: Keith Howard, Esq.
Telecopy: (925) 256-9428
15.2 ENTIRE AGREEMENT. This Agreement (including the Schedules and Annex
attached hereto) and other documents delivered at the Closing pursuant hereto,
contains the entire understanding of the parties in respect of its subject
matter and supersedes all prior agreements and understandings (oral or written)
between or among the parties with respect to such subject matter. The Schedules
and Annex constitute a part hereof as though set forth in full above.
39
<PAGE>
15.3 EXPENSES. Except as otherwise provided herein, the parties shall pay
their own fees and expenses, including their own counsel fees, incurred in
connection with the negotiation and preparation of this Agreement or any
transaction contemplated hereby.
15.4 AMENDMENT; BINDING EFFECT; ASSIGNMENT. This Agreement may not be
modified, amended, supplemented, canceled or discharged, except by written
instrument executed by all parties. The rights and obligations of this Agreement
shall bind and inure to the benefit of the parties and their respective
successors and assigns. Except as expressly provided herein, the rights and
obligations of this Agreement may not be assigned by the Sellers without the
prior written consent of Purchaser.
15.5 COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which shall be an original but all of which together shall
constitute one and the same instrument.
15.6 GOVERNING LAW: INTERPRETATION. This Agreement shall be construed in
accordance with and governed for all purposes by the laws of the State of
California applicable to contracts executed and to be wholly performed within
such State.
15.7 ACCESS TO RECORDS. After the Closing Date, the Sellers shall have
reasonable access during regular business hours to the books and records of the
Corporation that are necessary to permit the Sellers to exercise their rights
hereunder and to obtain any information necessary for their personal tax
matters.
15.8 ATTORNEY FEES. If either party to this Agreement shall bring any
action for any relief against the other, declaratory or otherwise, arising out
of or in connection with this Agreement or the breach or interpretation hereof,
the losing party shall pay to the prevailing party a reasonable sum for attorney
fees incurred in bringing such suit and/or enforcing any judgment granted
therein, all of which shall be deemed to have accrued upon the commencement of
such action and shall be paid whether or not such action is prosecuted to
judgment. Any judgment or order entered in such action shall contain a specific
provision providing for the recovery of attorney fees and costs incurred in
enforcing such judgment. For the purposes of this section, attorney fees shall
include, without limitation, fees incurred in the following: (1) post-judgment
motions; (2) contempt proceedings; (3) garnishment, levy, and debtor and third
party examination; and (4) discovery.
40
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed and delivered on this 14th day of January, 1999.
U S LIQUIDS INC.
a Delaware corporation
By:
Name:
Title:
ROMIC ENVIRONMENTAL
TECHNOLOGIES CORPORATION
a California corporation
By:
Name:
Title:
41
<PAGE>
H. MICHAEL SCHNEIDER
PETER D. SCHNEIDER
THOMAS R. SCHNEIDER
BARBARA MORRISON CUST/CA/UTMA FOR
JUSTIN W. MORRISON
BARBARA MORRISON CUST/CA/UTMA FOR
MELISSA L. MORRISON
BARBARA MORRISON
MICHAEL R. SCHNEIDER
MICHAEL R. SCHNEIDER CUST/CA/UTMA
FOR BRIDGETTE M. SCHNEIDER
LAURA SCHNEIDER
PETER D. SCHNEIDER CUST/CA/UTMA FOR
PATRICK KEIL SCHNEIDER
42
<PAGE>
[SIGNATURE PAGE TO STOCK PURCHASE AGREEMENT]
PETER D. SCHNEIDER CUST/CA/UTMA FOR
KEIL PATRICK SCHNEIDER
THOMAS R. SCHNEIDER CUST/CA/UTMA
FOR JESSICA L. SCHNEIDER
THOMAS R. SCHNEIDER CUST/CA/UTMA
FOR BRANDON T. SCHNEIDER
LOREEN SCHNEIDER
JOHN MORRISON
________________________________________
H. MICHAEL SCHNEIDER AND LISA L.
SCHNEIDER, AS TRUSTEES FOR SCHNEIDER
LIVING TRUST DATED 12/28/81
43
<PAGE>
[SIGNATURE PAGE TO STOCK PURCHASE AGREEMENT]
44
