SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported) June 5, 1998
WASTE CONNECTIONS, INC.
(Exact name of registrant as specified in its charter)
Delaware
(State or other jurisdiction of incorporation)
0-19674
(Commission File Number)
94-3283464
(IRS Employer Identification No.)
2260 Douglas Boulevard, Suite 280, Roseville, California 95661
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (916) 772-2221
Not Applicable
(Former name or former address, if changed since last report.)
<PAGE>
INFORMATION TO BE INCLUDED IN THE REPORT
Item 2. Acquisition or Disposition of Assets
On June 5, 1998, Waste Connections, Inc. ("WCI") acquired
the stock of B&B Sanitation, Inc., Red Carpet Landfill, Inc. and
Darlin Equipment, Inc. (collectively, the "Oklahoma Companies").
The three acquired companies are Oklahoma corporations engaged,
respectively, in solid waste and recyclables collection and
transportation, landfill operations, and equipment leasing in
Oklahoma.
The aggregate purchase price consisted of approximately
$4.125 million in cash (less certain indebtedness of the acquired
companies), plus certain contingent payments if certain events
occur during a specified period.
WCI intends to continue to operate the Oklahoma
Companies. The purchase price of the acquisition was determined
based on the consideration paid by WCI for similar acquisitions in
the western United States. The acquisition was funded with
borrowings under WCI's credit facility with BankBoston, N.A.
Item 7. Financial Statements, Pro Forma Financial Information and
Exhibits.
(a) Financial Statements of Businesses Acquired. Pursuant to
Rule 3.05(b) of Regulation S-X, the financial statements of the
Oklahoma Companies are not required to be included in this Form 8-
K.
(b) Pro Forma Financial Information. Pursuant to Rule
3.05(b) of Regulation S-X, pro forma financial information relating
to the Oklahoma Companies is not required to be included in this
Form 8-K.
(c) Exhibits.
10.1 Stock Purchase Agreement dated as of
June 5, 1998, by and among
WCI, B&B Sanitation, Inc., Red Carpet
Landfill, Inc., Darlin Equipment,
Inc., Lyle J. Buller, Larue A.
Buller, Lyle J. Buller, Trustee of
the Lyle J. Buller Revocable Trust
dated 10/11/96, and Larue A. Buller,
Trustee of the Larue A. Buller
Revocable Trust dated 10/11/96
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, Registrant has duly caused this report to be signed on its
behalf by the undersigned hereunto duly authorized.
WASTE CONNECTIONS, INC.
(Registrant)
Date: June 19, 1998 By /s/ Ronald J. Mittelstaedt
Ronald J. Mittelstaedt
President and Chief Executive Officer
<PAGE>
EXHIBIT INDEX
10.1 Stock Purchase Agreement dated as of
June 5, 1998, by and among
WCI, B&B Sanitation, Inc., Red Carpet
Landfill, Inc., Darlin Equipment,
Inc., Lyle J. Buller, Larue A.
Buller, Lyle J. Buller, Trustee of
the Lyle J. Buller Revocable Trust
dated 10/11/96, and Larue A. Buller,
Trustee of the Larue A. Buller
Revocable Trust dated 10/11/96
<PAGE>
Exhibit 10.1
<PAGE>
STOCK PURCHASE AGREEMENT
Dated as of June 5, 1998, by and among
Waste Connections, Inc.
B & B Sanitation, Inc.
Red Carpet Landfill, Inc.
Darlin Equipment, Inc.
Lyle J. Buller
Larue A. Buller
Lyle J. Buller, Trustee of the
Lyle J. Buller Revocable Trust dated 10/11/96
Larue A. Buller, Trustee of the
Larue A. Buller Revocable Trust dated 10/11/96
<PAGE>
STOCK PURCHASE AGREEMENT
STOCK PURCHASE AGREEMENT, dated as of June 5, 1998, is entered
into by and among Waste Connections, Inc., a Delaware corporation
("WCI"), B & B Sanitation, Inc., an Oklahoma corporation ("B & B"),
Red Carpet Landfill, Inc., an Oklahoma corporation ("Red Carpet"),
Darlin Equipment, Inc., an Oklahoma corporation ("Darlin", and
collectively with B & B and Red Carpet, the "Corporations", or
singularly, a "Corporation"), Lyle J. Buller ("Lyle"), Larue A.
Buller, Lyle J. Buller, Trustee of the Lyle J. Buller Revocable
Trust dated 10/11/96, and Larue A. Buller, Trustee of the Larue A.
Buller Revocable Trust dated 10/11/96 (the "Shareholders").
WHEREAS, B & B is engaged in collection and transportation of
solid waste and recyclables in each city and municipality listed on
Exhibit A hereto;
WHEREAS, Red Carpet is engaged in landfilling of municipal
solid waste and other acceptable waste streams in the county of
Major, Oklahoma;
WHEREAS, Darlin is engaged in the equipment leasing business
in the county of Garfield, Oklahoma;
WHEREAS, the Shareholders own all of the issued and
outstanding capital stock of the Corporations (the "Corporations'
Stock");
WHEREAS, WCI wishes to acquire from the Shareholders all of
the Corporations' Stock;
NOW, THEREFORE, in consideration of the premises and of the
mutual agreements, representations, warranties, provisions and
covenants herein contained, the parties hereto, each intending to
be bound hereby, agree as follows:
1. PURCHASE OF CORPORATIONS' STOCK
1.1 Shares to be Purchased. At the Closing (as defined in
Section 2), the Shareholders shall sell and deliver to WCI all of
the issued and outstanding shares of the Corporations' Stock, being
the number of shares of the Corporations set forth on Schedule 3.2
opposite each Shareholder's name. At the Closing, WCI shall
purchase the Corporations' Stock and in exchange therefor shall
deliver to the Shareholders at the Closing or thereafter as
provided by this Agreement the purchase price described in Section
1.2 (the "Purchase Price"), plus any and all additions to the
Purchase Price payable pursuant to Section 1.3 (the "Contingent
Purchase Price").
1.2 Purchase Price. The Purchase Price is:
(a) four million one hundred twenty-five thousand
dollars ($4,125,000), (i) minus the Closing Date Debt (as defined
in Section 3.22(a)), and (ii) plus or minus, as the case may be,
the amount by which the Closing Date Current Assets (as defined in
Section 3.22(b)) are greater or less than the Closing Date Current
Liabilities (as defined in Section 3.22(b)), payable to the
Shareholders at Closing in cash by wire transfer or check payable
in clearinghouse funds. The adjustment to the Purchase Price based
on the Closing Date Current Assets and the Closing Date Current
Liabilities shall be based on estimates of such amounts provided at
the Closing and based on the Corporations' balance sheets as of May
31, 1998. For purposes of valuing the accounts receivable of the
Corporation as of the Closing Date ("Closing Date Accounts
Receivable"), in determining Closing Date Current Assets, such
accounts receivable outstanding sixty (60) days or less as of the
Closing Date will be valued at one hundred percent (100%) of their
face value, accounts receivable outstanding sixty-one (61) to
ninety (90) days as of the Closing Date will be valued at fifty
percent (50%) of their face value, and all other accounts
receivable of the Corporation shall be valued at zero and shall be
transferred by the Corporation to the Shareholders' Representative
(as hereinafter defined), who shall hold and attempt to collect
such accounts receivable for the benefit of the Shareholders.
Within 120 days after the Closing, WCI and the Shareholders'
Representative shall determine the actual Closing Date Debt,
Closing Date Current Assets and Closing Date Current Liabilities.
If the difference between the actual amounts of such items and the
estimated amounts provided at the Closing Date results in an
increase in the amount that should have been paid at the Closing
over the amount that was so paid, WCI shall promptly pay such
amount to the Shareholders; if the result is a decrease in the
amount that should have been paid at the Closing from the amount
that was so paid, the Shareholders shall promptly pay such amount
to WCI. Any assets not disclosed in the original prospectus dated
December 31, 1997, and provided to WCI by the Corporations will be
an upward adjustment to the Purchase Price based on the net book
value of such assets less any associated debt.
1.3 Additional Contingent Purchase Price. The Purchase Price
may be increased by the additional contingent payments described in
this Section. If, prior to the first anniversary of the Closing
Date (as defined in Section 2), the Shareholders successfully
assist WCI or any of its subsidiaries in acquiring directly or
indirectly (through asset purchase, stock purchase, merger or
otherwise) the waste collection operations of any other company
providing such services in the state of Oklahoma, WCI shall pay the
Shareholders as additional Contingent Purchase Price a cash amount
equal to three percent (3%) of the pro forma net revenue with
respect to such operations during the first year after they are
acquired by WCI, which amount shall be paid on the Closing Date (as
defined in Section 2) if such acquisition is consummated on or
prior to the Closing Date or thirty (30) days after the date any
such acquisition is consummated if consummated after the Closing
Date. For purposes of determination of the Contingent Purchase
Price, "pro forma net revenue" shall be defined as actual gross
revenues for the twelve-month period prior to the date of payment
of the Contingent Purchase Price less the sum of disposal, transfer
and transportation costs and associated fees. WCI shall have sole
discretion in determining whether and on what terms it will
consummate any such acquisition, and WCI shall not be liable to any
of the Shareholders for any decision not to pursue any such
acquisition or its failure to consummate any such acquisition,
without regard to the reason therefor.
1.4 Allocation of the Purchase Price. Twenty thousand
dollars ($20,000) of the Purchase Price shall be allocated to the
covenant not to compete as described in Section 8.1(a) hereof, and
the balance of the Purchase Price shall be allocated to the
Corporations' Stock.
1.5 Excluded Assets. The Assets of the Corporations listed
on Schedule 1.5 (the "Excluded Assets") shall be distributed to the
Shareholders prior to the Closing, and WCI shall acquire no
interest in or claim to any of the Excluded Assets.
2. CLOSING TIME AND PLACE
Subject to the terms and conditions of this Agreement, the
closing of the transactions contemplated herein (the "Closing")
shall take place concurrent with the execution of this Agreement or
on such date as WCI and the Shareholders' Representative shall
agree (the "Closing Date"). For accounting purposes, the effective
date of the Agreement shall be June 1, 1998. The Closing shall
take place at the Law Offices of Shartsis, Friese & Ginsburg LLP,
One Maritime Plaza, Suite 1800, San Francisco, California 94111, or
through an exchange of consideration and signed documents using
overnight courier service. At the Closing, WCI, the Corporations
and the Shareholders shall deliver to each other the documents,
instruments and other items described in Section 5 of this
Agreement.
3. REPRESENTATIONS AND WARRANTIES OF THE CORPORATIONS AND THE
SHAREHOLDERS
The Corporations and the Shareholders, jointly and severally,
(i) represent and warrant that each of the following
representations and warranties is true as of the Closing Date, and
(ii) agree that such representations and warranties shall survive
the Closing.
3.1 Organization, Standing and Qualification. Each
Corporation is duly organized, validly existing and in good
standing under the laws of the State of Oklahoma. Each Corporation
has full corporate power and authority to own and lease its
properties and to carry on its business as now conducted. None of
the Corporations is required to be qualified or licensed to conduct
business as a foreign corporation in any other jurisdiction.
3.2 Capitalization. Schedule 3.2 sets forth, as of the
Closing Date, the authorized and outstanding capital of each
Corporation, the names, addresses and social security numbers or
taxpayer identification numbers of the record and beneficial owners
thereof, the number of shares so owned, the allocation of the cash
among the Shareholders as agreed to among themselves, and wire
transfer instructions for each Shareholder relating to the bank
account to which the Purchase Price and the Contingent Purchase
Price, if any, should be sent. On the Closing Date, all of the
issued and outstanding shares of the capital stock of the
Corporations are owned of record and beneficially by the
Shareholders, as set forth in Schedule 3.2, and are free and clear
of all liens, security interests, encumbrances and claims of every
kind except as set forth in Schedule 3.2. Each share of the
capital stock of each Corporation is duly and validly authorized
and issued, fully paid and nonassessable, and was not issued in
violation of any preemptive rights of any past or present
shareholder of any Corporation. No option, warrant, call,
conversion right or commitment of any kind (including any of the
foregoing created in connection with any indebtedness of any
Corporation) exists which obligates any of the Corporations to
issue any of its authorized but unissued capital stock or other
equity interest or which obligates any Shareholder to transfer any
Corporations' Stock to any person.
3.3 All Stock Being Acquired. The Corporations' Stock being
acquired by WCI hereunder constitutes all of the outstanding
capital stock of the Corporations.
3.4 Authority for Agreement. Each Corporation and each of
the Shareholders have full right, power and authority to enter into
this Agreement and to perform its, his or her obligations
hereunder. The execution and delivery of this Agreement by each
Corporation and the consummation of the transactions contemplated
hereby by each Corporation have been duly authorized by each
Corporation's Board of Directors. This Agreement has been duly and
validly executed and delivered by each Corporation and each of the
Shareholders and, subject to the due authorization, execution and
delivery by WCI, constitutes the legal, valid and binding
obligation of each Corporation and each of the Shareholders
enforceable against each of them in accordance with its terms.
3.5 No Breach or Default. Except as disclosed on Schedule
3.5, the execution and delivery by the Corporations and the
Shareholders of this Agreement, and the consummation by the
Shareholders of the transactions contemplated hereby, will not:
(a) result in the breach of any of the terms or
conditions of, or constitute a default under, or allow for the
acceleration or termination of, or in any manner release any party
from any obligation under, any mortgage, lease, note, bond,
indenture, or material contract, agreement, license or other
instrument or obligation of any kind or nature to which any
Corporation or any of the Shareholders is a party, or by which any
Corporation or any of the Shareholders, or any of its or their
assets, is or may be bound or affected; or
(b) violate any law or any order, writ, injunction or
decree of any court, administrative agency or governmental
authority, or require the approval, consent or permission of any
governmental or regulatory authority; or
(c) violate the Articles of Incorporation or Bylaws of
any Corporation.
3.6 Subsidiaries. Schedule 3.6 lists as of the Closing Date
any and all subsidiaries of each Corporation and any securities of
any other corporation or any securities or other interest in any
other business entity owned by a Corporation or any of such
Corporation's subsidiaries.
3.7 Financial Statements. Each Corporation has delivered to
WCI, as Schedule 3.7, copies of financial statements (collectively,
"Financial Statements") for its two most recent fiscal years,
compiled by Morley & Associates, CPA, PC, and unaudited interim
financial statements for each Corporation for the period ended
March 31, 1998 (the "Balance Sheet Date"). The Financial
Statements are true and correct and fairly present (i) the
financial position of each Corporation as of the respective dates
of the balance sheets included in said statements, and (ii) the
results of operations for the respective periods indicated. The
Financial Statements have been prepared consistently with prior
periods. Except to the extent reflected or reserved against in a
Corporation's balance sheet as of the Balance Sheet Date, or as
disclosed on Schedule 3.7 or Schedule 3.8, none of the Corporations
had as of the Balance Sheet Date, nor will have as of the Closing
Date, any liabilities of any nature, whether accrued, absolute,
contingent or otherwise, including, without limitation, tax
liabilities due or to become due.
3.8 Liabilities. Parts I, II, III and IV of Schedule 3.8,
are accurate lists and descriptions of all liabilities of each
Corporation required to be described below in the format set forth
below.
(a) Part I of Schedule 3.8 lists, as of the Closing
Date, other than with respect to trade payables and as of the end
of the month prior to the Closing Date with respect to trade
payables, all indebtedness for money borrowed and all other fixed
and uncontested liabilities of any kind, character and description
(excluding all real and personal property leasehold interests
included in Part IV of Schedule 3.8), whether reflected or not
reflected on the Financial Statements and whether accrued or
absolute, and states as to each such liability the amount of such
liability and to whom payable. From the date as of which
information is provided with respect to trade payables, trade
payables have been incurred only in the ordinary course of business
consistent with comparable prior periods.
(b) Part II of Schedule 3.8 lists, as of the Closing
Date, all claims, suits and proceedings which are pending against
each Corporation, all contingent liabilities, and, to the knowledge
of the Corporations and the Shareholders, all contingent
liabilities and all claims, suits and proceedings threatened or
anticipated against each Corporation. Part II of Schedule 3.8
includes a summary description of each such liability, including,
without limitation, (A) the name of each court, agency, bureau,
board or body before which any such claim, suit or proceeding is
pending, (B) the date such claim, suit or proceeding was
instituted, (C) the parties to such claim, suit or proceeding, (D)
a brief description of the factual basis alleged to underlie such
claim, suit or proceeding, including the date or dates of all
material occurrences, and (E) the amount claimed and other relief
sought, together with copies of all material documents, reports and
other records relating thereto to the extent that they are in any
Corporation's or the Shareholders' possession or control.
(c) Part III of Schedule 3.8 lists, as of the Closing
Date and to the extent not otherwise included in Part I of Schedule
3.8, all liens, claims and encumbrances secured by or otherwise
affecting any asset of any Corporation (including any Corporate
Property, as hereafter defined), including a description of the
nature of such lien, claim or encumbrance, the amount secured if it
secures a liability, the nature of the obligation secured, and the
party holding such lien, claim or encumbrance.
(d) Part IV of Schedule 3.8 lists, as of the Closing
Date and to the extent not otherwise included in Part I or Part III
of Schedule 3.8, all real and personal property leasehold interests
to which any Corporation is a party as lessor or lessee or, to the
knowledge of any Corporation or the Shareholders, affecting or
relating to any Corporate Property, and includes a description of
the nature and principal terms of such leasehold interest,
including, without limitation, the identity of the other party
thereto, the term of such leasehold interest (including renewal
options), the base rent and any additional rent owing thereunder
(including any adjustments thereto), security deposits, rights of
first offer or first refusal, purchase options, and restrictions on
transfer.
Except as described on the applicable part of Schedule
3.8, none of the Corporations and none of the Shareholders has made
any payment or committed to make any payment since the Balance
Sheet Date on or with respect to any of the liabilities or
obligations listed on Schedule 3.8 except, in the case of
liabilities and obligations listed on Parts I, III and IV of
Schedule 3.8, periodic payments required to be made under the terms
of the agreements or instruments governing such obligations or
liabilities or made in the ordinary course of business. Between
the Balance Sheet Date and the Closing Date, trade payables have
been incurred only in the ordinary course of business consistent
with comparable prior periods.
3.9 Conduct of Business. Except as set forth on Schedule
3.21, since the Balance Sheet Date:
(a) The business of each Corporation has been conducted
only in the ordinary course; and
(b) There has been no change in the condition (financial
or otherwise) of the assets, liabilities or operations of any
Corporation other than changes in the ordinary course of business,
none of which either singly or in the aggregate has been materially
adverse.
3.10 Permits and Licenses.
(a) Schedule 3.10(a) is a full and complete list, and
includes copies, of all material permits, licenses, franchises, and
service agreements pursuant to which any of the Corporations is
authorized to collect and haul industrial, commercial and
residential solid waste (the "Collection Contracts"), and of all
other material permits, licenses, titles (including motor vehicle
titles and current registrations), fuel permits, zoning and land
use approvals and authorizations, including, without limitation,
any conditional or special use approvals or zoning variances,
occupancy permits, and any other similar documents constituting a
material authorization or entitlement or otherwise material to the
operation of the business of any of the Corporations (collectively
the "Governmental Permits") owned by, issued to, held by or
otherwise benefitting a Corporation or the Shareholders as of the
Closing Date. The status of the Governmental Permits related to
the disposal areas owned or used by the Corporations, including,
without limitation, any conditions thereto and, if applicable, the
expiration dates thereof, are also described in Schedule 3.10(a).
Schedule 3.10(a) also sets forth the name of any governmental
agency or other third party from whom the Shareholders, a
Corporation or WCI must obtain consent (the "Required Governmental
Consents") in order to effect a direct or indirect transfer of the
Collection Contracts or other Governmental Permits required as a
result of the consummation of the transactions contemplated by this
Agreement. All such consents have been obtained. Except as set
forth on Schedule 3.10(a), all of the Collection Contracts and
other Governmental Permits enumerated and listed on Schedule
3.10(a) are adequate for the operation of the businesses of the
Corporations and of each Corporate Property as presently operated
and are valid and in full force and effect. All of said Collection
Contracts and other Governmental Permits and agreements have been
duly obtained and are in full force and effect, and there are no
proceedings pending or, to the knowledge of the Corporations or the
Shareholders, threatened which may result in the revocation,
cancellation, suspension or adverse modification of any of the
same. Neither the Corporations nor any of the Shareholders has any
knowledge of any reason why all such Governmental Permits and
agreements will not remain in effect after consummation of the
transactions contemplated hereby.
(b) Schedule 3.10(b) includes: (i) all records,
notifications, reports, permit and license applications,
engineering and geologic studies, and environmental impact reports,
tests or assessments (collectively, "Records, Notifications and
Reports") that (A) are material to the operation of the businesses
of the Corporations, or (B) relate to the discharge or release of
materials into the environment and/or the handling or
transportation of waste materials or hazardous or toxic substances
or otherwise relate to the protection of the public health or the
environment, or (C) were filed with or submitted to appropriate
governmental agencies during the past 24 months by a Corporation or
any of the Shareholders or their agents with respect to the
business of any Corporation, and (ii) all material notifications
from such governmental agencies to a Corporation, the Shareholders
or their agents in response to or relating to any of such Records,
Notifications and Reports.
(c) Schedule 3.10(c) lists, as of the Closing Date, each
facility owned, leased, operated or otherwise used by the
Corporations, the ownership, lease, operation or use of which is
being transferred to, assumed by or otherwise acquired directly or
indirectly by WCI pursuant to this Agreement (each, a "Facility"
and collectively, the "Facilities"). Except as otherwise disclosed
on Schedule 3.10(c):
(i) Each Facility is fully licensed, permitted and
authorized to carry on its current business under all applicable
federal, state and local statutes, orders, approvals, zoning or
land use requirements, rules and regulations, and no Facility or
the current use thereof constitutes a non-conforming use or is
otherwise subject to any restrictions regarding the operation,
renovation or reconstruction thereof.
(ii) All activities and operations at each Facility
are being and have been conducted in compliance in all material
respects with the requirements, criteria, standards and conditions
set forth in all applicable federal, state and local statutes,
orders, approvals, permits, zoning or land use requirements and
restrictions, variances, licenses, rules and regulations.
(iii)Each Facility is located on real property owned
or leased by a Corporation (each a "Facility Property") and each
Facility Property owned by a Corporation is legally described on
the preliminary title reports, surveys or site plans attached to
Schedule 3.10(c) (the "Facility Surveys/Site Plans"), each of which
accurately depict the respective Facility Property.
(iv) There are no circumstances, conditions or
reasons which are likely to be the basis for revocation or
suspension of any Facility's site assessments, permits, licenses,
consents, authorizations, zoning or land use permits, variances or
approvals relating to any Facility owned by any Corporation or
owned by any of the Shareholders or an Affiliate (as hereinafter
defined) of any of the Shareholders and leased to any Corporation,
and to the knowledge of the Corporations and the Shareholders there
are no circumstances, conditions or reasons which are likely to be
the basis for revocation or suspension of any site assessment,
permits, licenses, consents, authorizations, zoning or land use
permits, variances or approvals relating to any Facility.
3.11 Certain Receivables. Schedule 3.11 is an accurate list
as of the Closing Date of the accounts and notes receivable of each
Corporation from and advances to employees, former employees,
officers, directors, the Shareholders and Affiliates of the
foregoing which have not been repaid. For purposes of this
Agreement, the term "Affiliate" means, with respect to any person,
any person that directly or indirectly through one or more
intermediaries controls or has an ownership interest in, or is
controlled or owned in whole or in part by, or is under common
control or ownership in whole or in part with such person, and in
the case of a Corporation includes directors and officers, in the
case of individuals includes the individual's spouse, father,
mother, grandfather, grandmother, brothers, sisters, children and
grandchildren and in the case of a trust includes the grantors,
trustees and beneficiaries of the trust.
3.12 Fixed Assets and Real Property.
(a) Schedule 3.12(a) lists, as of the Closing Date,
substantially all the fixed assets (other than real estate) of each
Corporation, including, without limitation, identification of each
vehicle by description and serial number, identification of
machinery, equipment and general descriptions of parts, supplies
and inventory. Except as described on Schedule 3.12(a), all of the
Corporations' containers, vehicles, machinery and equipment
necessary for the operation of the Corporations' businesses are in
operable condition, and all of the motor vehicles and other rolling
stock of the Corporations are in material compliance with all
applicable laws, rules and regulations. All such containers,
vehicles, machinery and equipment are substantially free of known
defects that would cause them to fail. All leases of fixed assets
are in full force and effect and binding upon the parties thereto;
none of the Corporations and, to the knowledge of the Corporations
or the Shareholders, no other party to such leases is in breach of
any of the material provisions thereof.
(b) Each parcel of real property leased, owned or being
purchased by a Corporation as of the Closing Date (the "Corporate
Property"), including the street address and, in the case of
Corporate Property owned or being purchased, the legal description
thereof, is listed on Schedule 3.12(b) - Part I, and attached to
said Schedule 3.12(b) - Part I are copies of all leases, deeds,
outstanding mortgages, other encumbrances and any existing title
insurance policies or lawyer's title opinions relating to each
Corporate Property, as well as a current commitment for title
insurance issued by a title insurance company satisfactory to WCI
with respect to each Corporate Property owned or being purchased by
a Corporation, together with copies of all of the title exceptions
referred to in each such commitment. All leases listed on Schedule
3.12(b) - Part I are in full force and effect and binding on the
parties thereto; none of the Corporations and no other party to any
such lease is in breach of any of the material provisions thereof;
the landlord's interest in any such lease has not been assigned to
any third party nor has any such interest been mortgaged, pledged
or hypothecated; and none of the Corporations has assigned any such
lease or sublet all or any part of the Corporate Property which is
the subject of any such lease. Except as described on Schedule
3.12(b) - Part II, there are no material physical or mechanical
defects in any Facility located on any Corporate Property and each
such Facility is in good condition and repair.
(c) Each Corporation has good, valid and marketable
title to all properties and assets, real, personal, and mixed,
tangible and intangible, actually used or necessary for the conduct
of its business, free of any encumbrance or charge of any kind
except: (i) liens for current taxes not yet due; (ii) minor
imperfections of title and encumbrances, if any, that are not
substantial in amount, do not materially reduce the value or impair
the use of the property subject thereto, do not materially impair
the value of any Corporation, and have arisen only in the ordinary
course of business and consistent with past practice; and (iii) the
liens identified on Part III of Schedule 3.8 (collectively, the
"Permitted Liens"). Except as described on Schedule 3.12(b) - Part
I, there are no leases, occupancy agreements, options, rights of
first refusal or any other agreements or arrangements, either oral
or written, that create or confer in any person or entity the right
to acquire, occupy or possess, now or in the future, any Facility,
any Corporate Property, or any portion thereof, or create in or
confer on any person or entity any right, title or interest therein
or in any portion thereof.
3.13 Acquisition/Disposal of Assets. Except as indicated on
Schedule 3.13, since the Balance Sheet Date, none of the
Corporations has acquired or sold or otherwise disposed of any
properties or assets which, singly or in the aggregate, have a
value in excess of $10,000, or which are material to the operation
of any Corporation's business as presently conducted, without the
prior written consent of WCI.
3.14 Contracts and Agreements; Adverse Restrictions.
(a) Schedule 3.14(a) lists, as of the Closing Date, and
includes copies of, all material contracts and agreements (other
than leases and documents included with Schedule 3.12(b)) to which
any of the Corporations is a party or by which it or any of its
property is bound (including, but not limited to, joint venture or
partnership agreements, contracts with any labor organizations,
promissory notes, loan agreements, bonds, mortgages, deeds of
trust, liens, pledges, conditional sales contracts or other
security agreements). Except as disclosed on Schedule 3.14(a), all
such contracts and agreements included in Schedule 3.14(a) are in
full force and effect and binding upon the parties thereto. Except
as described or cross referenced on Schedule 3.14(a), none of the
Corporations nor, to the Corporations' or any of the Shareholder's
knowledge, and no other parties to such contracts and agreements is
in breach thereof, and none of the parties has threatened to breach
any of the material provisions thereof or notified any of the
Corporations or any of the Shareholders of a default thereunder, or
exercised any options thereunder.
(b) Except as set forth on Schedule 3.14(b), there is no
outstanding judgment, order, writ, injunction or decree against any
Corporation, the result of which could materially adversely affect
a Corporation or its business or any of the Corporate Properties,
nor has any Corporation been notified that any such judgment,
order, writ, injunction or decree has been requested.
3.15 Insurance. Schedule 3.15 is a complete list and includes
copies, as of the Closing Date, of all insurance policies in effect
on the Closing Date or, with respect to "occurrence" policies that
were in effect, carried by a Corporation in respect of the
Corporate Properties or any other property used by a Corporation
specifying, for each policy, the name of the insurer, the type of
risks insured, the deductible and limits of coverage, and the
annual premium therefor. Each Corporation currently carries
insurance in the type and amount ordinarily carried by owners or
corporations in similar circumstances, in respect to that
Corporation's properties, assets and business. During the last
five years, there has been no lapse in any material insurance
coverage of any Corporation. For each insurer providing coverage
for any of the contingent or other liabilities listed on Schedule
3.8, except to the extent otherwise set forth in Part II of
Schedule 3.8, each such insurer, if required, has been properly and
timely notified of such liability, no reservation of rights letters
have been received by any Corporation and the insurer has assumed
defense of each suit or legal proceeding. All such proceedings are
fully covered by insurance, subject to normal deductibles. 3.16
Personnel. Schedule 3.16 is a complete list, as of the Closing
Date, of all officers, directors and employees (by type or
classification) of each Corporation and their respective rates of
compensation, including (i) the portions thereof attributable to
bonuses, (ii) any other salary, bonus, stock option, equity
participation, or other compensation arrangement made with or
promised to any of them, and (iii) copies of all employment
agreements with non-union officers, directors and employees.
Schedule 3.16 also lists the driver's license number for each
driver of each Corporation's motor vehicles.
3.17 Benefit Plans and Union Contracts.
(a) Schedule 3.17(a) is a complete list as of the
Closing Date, and includes complete copies (or, in the case of oral
arrangements, descriptions), of all employee benefit plans and
agreements (written or oral) currently maintained or contributed to
by any Corporation, including employment agreements and any other
agreements containing "golden parachute" provisions, retirement
plans, welfare benefit plans and deferred compensation agreements,
together with copies of such plans, agreements and any trusts
related thereto, and classifications of employees covered thereby
as of the Closing Date. Except for the employee benefit plans
described on Schedule 3.17(a), none of the Corporations has other
pension, retirement, welfare, profit sharing, deferred
compensation, stock option, employee stock purchase or other
employee benefit plans or arrangements with any party. Except as
disclosed on Schedule 3.17(a), all employee benefit plans listed on
Schedule 3.17(a) are fully funded and in substantial compliance
with all applicable federal, state and local statutes, ordinances
and regulations. All such plans that are intended to qualify under
Section 401(a) of the Internal Revenue Code have been determined by
the Internal Revenue Service to be so qualified, and copies of such
determination letters are included as part of Schedule 3.17(a).
Except as disclosed on Schedule 3.17(a), all reports and other
documents required to be filed with any governmental agency or
distributed to plan participants or beneficiaries (including, but
not limited to, actuarial reports, audits or tax returns) have been
timely filed or distributed, and copies thereof are included as
part of Schedule 3.17(a). All employee benefit plans listed on
such Schedule have been operated in accordance with the terms and
provisions of the plan documents and all related documents and
policies. None of the Corporations has incurred any liability for
excise tax or penalty due to the Internal Revenue Service or U.S.
Department of Labor nor any liability to the Pension Benefit
Guaranty Corporation for any employee benefit plan, nor has any
Corporation, nor party- in-interest or disqualified person, engaged
in any transaction or other activity which would give rise to such
liability. None of the Corporations has participated in or made
contributions to any "multi-employer plan" as defined in the
Employee Retirement Income Security Act of 1974 ("ERISA"), nor
would any Corporation or any affiliate be subject to any withdrawal
liability with respect to such a plan if any such employer withdrew
from such a plan immediately prior to the Closing Date. No
employee pension benefit plan is under funded on a termination
basis as of the date of this Agreement.
(b) Schedule 3.17(b) is a complete list, as of the
Closing Date, and includes complete copies of all union contracts
and agreements between any Corporation and any collective
bargaining group. Each Corporation is in compliance in all
material respects with all applicable federal and state laws
respecting employment and employment practices, terms and
conditions of employment, wages and hours, and nondiscrimination in
employment, and is not engaged in any unfair labor practice. There
is no charge pending or, to any Corporation's or the Shareholders'
knowledge, threatened, against any Corporation before any court or
agency and alleging unlawful discrimination in employment practices
and there is no charge of or proceeding with regard to any unfair
labor practice against it pending before the National Labor
Relations Board. There is no labor strike, dispute, slow down or
stoppage as of the Closing Date, existing or threatened against any
Corporation; no union organizational activity exists respecting
employees of any Corporation not currently subject to a collective
bargaining agreement; the union contracts or other agreements
delivered as part of Schedule 3.17(b) constitute all agreements
with the unions or other collective bargaining groups, and there
are no other arrangements or established practices relating to the
employees covered by any collective bargaining agreement; and
Schedule 3.17(b) contains as of the date it is delivered a list of
all arbitration or grievance proceedings that have occurred since
the Balance Sheet Date. No one has petitioned within the last five
years, and no one is now petitioning, for union representation of
any employees of any Corporation. No Corporation has experienced
any labor strike, slow-down, work stoppage, labor difficulty or
other job action during the last five years.
(c) No payment made to any employee, officer, director
or independent contractor of any Corporation (the "Recipient")
pursuant to any employment contract, severance agreement or other
arrangement (the "Golden Parachute Payment") will be nondeductible
by any Corporation because of the application of Sections 280G and
4999 of the Code to the Golden Parachute Payment, nor will any
Corporation be required to compensate any Recipient because of the
imposition of an excise tax (including any interest or penalties
related thereto) on the Recipient by reason of Sections 280G and
4999 of the Code.
3.18 Taxes.
(a) Each Corporation has timely filed all requisite
federal, state, local and other tax and information returns due for
all fiscal periods ended on or before the Closing Date. All such
returns are accurate and complete. Except as set forth on Schedule
3.18, there are no open years (other than those within the statute
of limitations), examinations in progress, extensions of any
statute of limitations or claims against any Corporation relating
to federal, state, local or other taxes (including penalties and
interest) for any period or periods prior to and including the
Closing Date and no notice of any claim for taxes has been
received. Copies of (i) any tax examinations, (ii) extensions of
statutory limitations and (iii) the federal income, and state
franchise, income and sales tax returns of each Corporation for its
last three fiscal years are attached as part of Schedule 3.18.
Copies of all other federal, state, local and other tax and
information returns for all prior years of each Corporation's
existence have been made available to WCI and are among the records
of the Corporations which will accrue to WCI at the Closing. No
Corporation has been contacted by any federal, state or local
taxing authority regarding a prospective examination.
(b) Except as set forth on Schedule 3.18 (which schedule
also includes the amount due with respect to each Corporation),
each Corporation has duly paid all taxes and other related charges
required to be paid prior to the Closing Date. The reserves for
taxes contained in the Financial Statements of each Corporation are
adequate to cover its tax liability as of the Closing Date.
(c) Each Corporation has withheld all required amounts
from its employees for all pay periods in full and complete
compliance with the withholding provisions of applicable federal,
state and local laws. All required federal, state and local and
other returns with respect to income tax withholding, social
security, and unemployment taxes have been duly filed by each
Corporation for all periods for which returns are due, and the
amounts shown on all such returns to be due and payable have been
paid in full.
3.19 Copies Complete; Required Consents. Except as disclosed
on Schedule 3.19, the certified copies of the Articles of
Incorporation and Bylaws of each Corporation, both as amended to
the Closing Date, and the copies of all leases, instruments,
agreements, licenses, permits, certificates or other documents that
have been delivered to WCI in connection with the transactions
contemplated hereby are complete and accurate as of the Closing
Date and are true and correct copies of the originals thereof.
Except as specifically disclosed on Schedule 3.19, the rights and
benefits of the Corporations will not be adversely affected by the
transactions contemplated hereby, and the execution of this
Agreement and the performance of the obligations hereunder will not
violate or result in a breach or constitute a default under any of
the terms or provisions thereof. None of such leases, instruments,
agreements, licenses, permits, site assessments, certificates or
other documents requires notice to, or consent or approval of, any
governmental agency or other third party to any of the transactions
contemplated hereby, except the Required Governmental Consents,
such consents and approvals as are listed on Schedule 3.19; all of
which will have been given or obtained prior to the Closing.
3.20 Customers, Billings, Current Receipts and Receivables.
Schedule 3.20 is a current, accurate and complete list of, and
includes:
(a) the customers that each Corporation serves on an
ongoing basis, including name, location and current billing rate,
as of the Closing Date;
(b) an accurate and complete aging of all accounts and
notes receivable from customers as of the last day of the month
preceding the month in which such Schedule is delivered, showing
amounts due in 30-day aging categories; and
(c) the average monthly revenues of each Corporation
derived from billings to its customers for each of the twelve
months preceding the Closing Date. Except as set forth on Schedule
3.20, the Corporations and the Shareholders have no knowledge of
any reason why each Corporation's average monthly revenues derived
from billings to its customers after the Closing Date should not
continue at approximately the same rate as before the Closing Date.
3.21 No Change With Respect to the Corporations. Except as
set forth on Schedule 3.21, since the Balance Sheet Date, the
business of each Corporation has been conducted only in the
ordinary course and there has been no change in the condition
(financial or otherwise) of the assets, liabilities or operations
of any Corporation other than changes in the ordinary course of
business, none of which either singly or in the aggregate has been
materially adverse. Specifically, and without limiting the
generality of the foregoing, except as set forth on Schedule 3.21,
with respect to each Corporation, since the Balance Sheet Date,
there has not been:
(a) any material change in its financial condition,
assets, liabilities (contingent or otherwise), income, operations
or business which would have a material adverse effect on the
financial condition, assets, liabilities (contingent or otherwise),
income, operations or business of that Corporation, taken as a
whole;
(b) any material damage, destruction or loss (whether or
not covered by insurance) adversely affecting any material portion
of its properties or business;
(c) any change in or agreement to change (i) its
shareholders, (ii) ownership of its authorized capital or
outstanding securities, or (iii) its securities;
(d) any declaration or payment of, or any agreement to
declare or pay, any dividend or distribution in respect of its
capital stock or any direct or indirect redemption, purchase or
other acquisition of any of its capital stock;
(e) any material increase or bonus or promised increase
or bonus in the compensation payable or to become payable by it, in
excess of usual and customary practices, to any of its directors,
officers, employees or agents, or any accrual or arrangement for or
payment of any bonus or other special compensation to any employee
or any severance or termination pay paid to any of its present or
former officers or other key employees;
(f) any labor dispute or any other event or condition of
any character with respect to that Corporation's employees,
materially adversely affecting its business or future prospects;
(g) any sale or transfer, or any agreement to sell or
transfer, any of its material assets, property or rights to any
other person, including, without limitation, the Shareholders and
their Affiliates, other than in the ordinary course of business;
(h) any cancellation, or agreement to cancel, any
material indebtedness or other material obligation owing to it,
including, without limitation, any indebtedness or obligation of
any of the Shareholders or any Affiliate thereof;
(i) any plan, agreement or arrangement granting any
preferential rights to purchase or acquire any interest in any of
its assets, property or rights or requiring consent of any party to
the transfer and assignment of any such assets, property or rights;
(j) any purchase or acquisition of, or any agreement,
plan or arrangement to purchase or acquire, any of its property,
rights or assets outside the ordinary course of its business;
(k) any waiver of any of its material rights or claims;
(l) any new or any amendment or termination of any
existing material contract, agreement, license, permit or other
right to which it is a party;
(m) any other material transaction outside the ordinary
course of its business.
3.22 Debt; Current Assets and Current Liabilities.
(a) Schedule 3.22(a) sets forth, for the Corporations as
of the Closing Date, (i) the amount of the aggregate debt
(excluding trade payables) of each Corporation outstanding on the
Closing Date required to be repaid by WCI at or immediately after
the Closing Date and all prepayment penalties incurred or to be
incurred by WCI or a Corporation in connection with the repayment
of any such debt, (ii) the amount of the aggregate debt (excluding
trade payables) of each Corporation outstanding on the Closing Date
which will remain outstanding obligations of a Corporation after
the Closing Date, and all prepayment penalties applicable to such
debt if repaid prior to maturity, including in each case all
interest accrued through and including the Closing Date, (iii) the
aggregate amount of the present value, discounted at the lease rate
factor, if known, inherent in the lease or, if the lease rate
factor is not known, at the rate charged to a Corporation by a
third party lender in connection with its most recent borrowing to
finance equipment, of all lease obligations of the Corporations
that are not capitalized lease obligations and (iv) the aggregate
amount of the present value of all capitalized lease obligations
(determined in accordance with generally accepted accounting
principles) of the Corporations (the "Closing Date Debt").
Schedule 3.22(a) includes wire transfer instructions for creditors
whose Closing Date Debt WCI has designated for payment, and
attached to Schedule 3.22(a) are pay-off letters or instructions
from such creditors in the form provided by WCI's bank.
(b) Schedule 3.22(b) is an estimate based on the
Corporations' balance sheets for the period ending on the Closing
Date of the amount of the aggregate current liabilities (including
any reserve for unpaid taxes and excluding the current portion of
long-term debt to the extent such current portion is included in
Closing Date Debt) and trade payables of the Corporations as of the
Closing Date (the "Closing Date Current Liabilities") and the
amount of the aggregate cash and other current assets of the
Corporations as of the Closing Date, including prepaid expenses the
benefit of which survives the Closing Date and the accounts
receivable of the Corporations earned prior to the Closing Date,
and collectible on or after the Closing Date (the "Closing Date
Current Assets").
3.23 Bank Accounts.
(a) Schedule 3.23(a) is a complete and accurate list, as
of the Closing Date, of:
(i) the name of each bank in which each Corporation
has accounts or safe deposit boxes;
(ii) the name(s) in which the accounts or boxes are
held;
(iii)the type of account; and
(iv) the name of each person authorized to draw
thereon or have access thereto.
(b) Schedule 3.23(b) is a complete and accurate list, as
of the Closing Date, of:
(i) each credit card or other charge account issued
to each Corporation; and
(ii) the name of each person to whom such credit
cards or other charge accounts have been issued.
3.24 Compliance With Laws. Except as disclosed on Schedule
3.24, each Corporation has complied with, and each Corporation is
presently in compliance with, federal, state and local laws,
ordinances, codes, rules, regulations, Governmental Permits,
orders, judgments, awards, decrees, consent judgments, consent
orders and requirements applicable to it (collectively "Laws"),
including, but not limited to, the Americans with Disabilities Act,
the Federal Occupational Safety and Health Act, and Laws relating
to the public health, safety or protection of the environment
(collectively, "Environmental Laws"). Except as disclosed on
Schedule 3.24, there has been no assertion by any party that a
Corporation is in violation of any Laws. Specifically and without
limiting the generality of the foregoing, except as disclosed on
Schedule 3.24:
(a) Except as permitted under applicable laws and
regulations, including, without limitation, the federal Resource
Conservation Recovery Act, 42 USC sec 6901 et seq. ("RCRA"), the
Corporations have not accepted, processed, handled, transferred,
generated, treated, stored or disposed of any Hazardous Material
(as defined in Section 3.24(e) below) nor have they accepted,
processed, handled, transferred, generated, treated, stored or
disposed of asbestos, medical waste, radioactive waste or municipal
waste, except in compliance with Environmental Laws.
(b) During each Corporation's ownership or leasing of
the Corporate Property owned or leased by it and, to the knowledge
of the Corporations and the Shareholders, prior to each
Corporation's ownership or leasing of such Corporate Property, no
Hazardous Material, other than that allowed under Environmental
Laws, including, without limitation, RCRA, has been disposed of, or
otherwise released on any Corporate Property.
(c) During each Corporation's ownership or leasing of
the Corporate Property owned or leased by it and, to the knowledge
of the Corporations and the Shareholders, prior to each
Corporation's ownership or leasing of such Corporate Property, no
Corporate Property has ever been subject to or received any notice
of any private, administrative or judicial action, or notice of any
intended private, administrative or judicial action relating to the
presence or alleged presence of Hazardous Material in, under, upon
or emanating from any Corporate Property or any real property now
or previously owned or leased by a Corporation. There are no
pending and, to the Corporations' and Shareholders' knowledge, no
threatened actions or proceedings from any governmental agency or
any other entity involving remediation of any condition of the
Corporate Property, including, without limitation, petroleum
contamination, pursuant to Environmental Laws.
(d) Except as allowed under Environmental Laws, no
Corporation has knowingly sent, transported or arranged for the
transportation or disposal of any Hazardous Material, to any site,
location or facility.
(e) As used in this Agreement, "Hazardous Material"
means the substances (i) defined as "Hazardous Waste" in 40 CFR
261, and substances defined in any comparable Oklahoma statute or
regulation; (ii) any substance the presence of which requires
remediation pursuant to any Environmental Laws; and (iii) any
substance disposed of in a manner not in compliance with
Environmental Laws.
3.25 Powers of Attorney. No Corporation has granted any power
of attorney (except routine powers of attorney relating to
representation before governmental agencies) or entered into any
agency or similar agreement whereby a third party may bind or
commit a Corporation in any manner.
3.26 Underground Storage Tanks. Except as set forth on
Schedule 3.26, no underground storage tanks containing petroleum
products or wastes or other hazardous substances regulated by 40
CFR 280 or Environmental Laws are currently or have been located on
any Corporate Property. Except as set forth on Schedule 3.26, no
Corporation has ever owned or leased any real property not included
in the Corporate Property having any underground storage tanks
containing petroleum products or wastes or other hazardous
substances regulated by 40 CFR 280. As to each such underground
storage tank ("UST") identified on Schedule 3.26, each Corporation
has provided to WCI, on Schedule 3.26:
(a) the location of the UST, information and material,
including any available drawings and photographs, showing the
location, and whether that Corporation currently owns or leases the
property on which the UST is located (and if that Corporation does
not currently own or lease such property, the dates on which it did
and the current owner or lessee of such property);
(b) the date of installation and specific use or uses of
the UST;
(c) copies of tank and piping tightness tests and
cathodic protection tests and similar studies or reports for each
UST;
(d) a copy of each notice to or from a governmental body
or agency relating to the UST;
(e) other material records with regard to the UST,
including, without limitation, repair records, financial assurance
compliance records and records of ownership; and
(f) to the extent not otherwise set forth pursuant to
the above, a summary description of instances, past or present, in
which, to the Corporations', or the Shareholders', knowledge, the
UST failed to meet applicable standards and regulations for
tightness or otherwise and the extent of such failure, and any
other operational or environmental problems with regard to the UST,
including, without limitation, spills, including spills in
connection with delivery of materials to the UST, releases from the
UST and soil contamination.
Except to the extent set forth on Schedule 3.26, each
Corporation has complied with Environmental Laws regarding the
installation, use, testing, monitoring, operation and closure of
each UST described on Schedule 3.26.
3.27 Patents, Trademarks, Trade Names, etc. Schedule 3.27
lists all patents, tradenames, fictitious business names,
trademarks, service marks, and copyrights owned by the Corporations
or which they are licensed to use (other than licenses to use
software for personal computer operating systems that were provided
when the computer was purchased and licenses to use software for
personal computers that are granted to retail purchasers of such
software). No patents, trade secrets, know-how, intellectual
property, trademarks, trade names, assumed names, copyrights, or
designations used by the Corporations in their businesses infringe
on any patents, trademarks, or copyrights, or any other rights of
any person. Neither the Corporations nor any of the Shareholders
knows or has any reason to believe that there are any claims of
third parties to the use of any such names or any similar name, or
knows of or has any reason to believe that there exists any basis
for any such claim or claims.
3.28 Assets, etc., Necessary to Business. Each Corporation
owns or leases all properties and assets, real, personal, and
mixed, tangible and intangible, and, except as disclosed on
Schedules 3.5, 3.10(a), 3.10(c), 3.14(a) and 3.19, is a party to
all Collection Contracts and Governmental Permits and other
agreements necessary to permit it to carry on its business as
presently conducted. All of said Collection Contracts and
Governmental Permits and agreements have been duly obtained and,
except as disclosed on Schedules 3.5, 3.8-Part II, 3.10(a), 3.10(c)
3.14(a) and 3.19, are in full force and effect and there are no
proceedings pending or threatened which may result in the
revocation, cancellation, suspension or adverse modification of any
of the same. Neither the Corporations nor any of the Shareholders
have any knowledge of any reason why all such Collection Contracts
and Governmental Permits and agreements will not remain in effect
after consummation of the transactions contemplated hereby.
3.29 Condemnation. No Corporate Property owned or leased by
a Corporation is the subject of, or would be affected by, any
pending condemnation or eminent domain proceedings, and, to the
knowledge of the Corporations and the Shareholders, no such
proceedings are threatened.
3.30 Suppliers and Customers. The relations between each
Corporation and its customers are good. Neither the Corporations
nor any of the Shareholders has knowledge of any fact (other than
general economic and industry conditions) which indicates that any
of the suppliers supplying products, components, materials or
providing use of, or access to, landfills or disposal sites to a
Corporation intends to cease providing such items to that
Corporation, nor do the Corporations or any of the Shareholders
have knowledge of any fact (other than general economic and
industry conditions) which indicates that any of the customers of
a Corporation intends to terminate, limit or reduce its business
relations with that Corporation.
3.31 Absence of Certain Business Practices. Neither the
Corporations nor any of the Shareholders has directly or indirectly
within the past five years given or agreed to give any gift or
similar benefit to any customer, supplier, governmental employee or
other person who is or may be in a position to help or hinder the
business of any Corporation in connection with any actual or
proposed transaction which (a) might subject a Corporation to any
damage or penalty in any civil, criminal or governmental litigation
or proceeding, (b) if not given in the past, might have had an
adverse effect on the financial condition, business or results of
operations of a Corporation, or (c) if not continued in the future,
might adversely affect the financial condition, business or
operations of a Corporation or which might subject a Corporation to
suit or penalty in any private or governmental litigation or
proceeding.
3.32 Related Party Transactions. None of the Shareholders or
their respective Affiliates has entered into any transaction with
or is a party to any agreement, lease or other instrument, or as of
the date of this Agreement is indebted to or is owed money by, any
Corporation not disclosed on the Financial Statements delivered to
WCI prior to the date of this Agreement. Except as disclosed in
the Financial Statements, none of the Shareholders or their
Affiliates owns any direct or indirect interest of any kind in, or
controls or is a director, officer, employee, shareholder or
partner of, or consultant or lender to or borrower from or has the
right to participate in the profits of, any Person which is a
competitor, supplier, customer, landlord, tenant, creditor or
debtor of any Corporation.
3.33 Disclosure Schedules. Any matter disclosed on any
Schedule to this Agreement shall be deemed to have been disclosed
on every other Schedule that refers to such Schedule by cross
reference so long as the nature of the matter disclosed is obvious
from a fair reading of the Schedule on which the matter is
disclosed.
3.34 No Misleading Statements. The representations and
warranties of the Corporations and the Shareholders contained in
this Agreement, the Exhibits and Schedules hereto and all other
documents and information furnished to WCI and its representatives
pursuant hereto are complete and accurate in all material respects
and do not include any untrue statement of a material fact or omit
to state any material fact necessary to make the statements made
and to be made not misleading.
3.35 Accurate and Complete Records. The corporate minute
books, stock ledgers, books, ledgers, financial records and other
records of the Corporations:
(a) have been made available to WCI and its agents at
the Corporations' offices or at the offices of WCI's attorneys or
the Corporations' attorneys;
(b) have been, in all material respects, maintained in
accordance with all applicable laws, rules and regulations; and
(c) are accurate and complete, reflect all material
corporate transactions required to be authorized by the Boards of
Directors and/or shareholders of the Corporations and do not
contain or reflect any material discrepancies.
3.36 Knowledge. Wherever reference is made in this Agreement
to the "knowledge" of the Shareholders, such term means the actual
knowledge of the Shareholders or any knowledge which should have
been obtained by the Shareholders upon reasonable inquiry by a
reasonable business person. In the case of a Shareholder that is
a trust, the term "knowledge" means the actual knowledge of the
trustee or trustees of the trust or any knowledge which should have
been obtained by the trustee or trustees upon reasonable inquiry by
a reasonable business person. Wherever reference is made in this
Agreement to the "knowledge" of a Corporation, such term means the
actual knowledge of any management employee, officer or director of
that Corporation or any knowledge which should have been obtained
by any such person upon reasonable inquiry by a reasonable business
person.
3.37 Brokers; Finders. No person has acted directly or
indirectly as a broker, finder or financial advisor for the
Corporations or the Shareholders in connection with the
transactions contemplated by this Agreement and no person is
entitled to any broker's, finder's, financial advisory or similar
fee or payment in respect thereof based in any way on any
agreement, arrangement or understanding made by or on behalf of the
Corporations or the Shareholders.
3.38 S Corporation. Each Corporation has elected to be taxed
as an S Corporation under the Internal Revenue Code of 1986, as
amended, for all of the years listed on Schedule 3.38.
4. REPRESENTATIONS AND WARRANTIES OF WCI
WCI represents and warrants to the Shareholders that each of
the following representations and warranties is true as of the date
of this Agreement and will be true as of the Closing Date, and
agrees that such representations and warranties shall survive the
Closing:
4.1 Existence and Good Standing. WCI is a corporation duly
organized, validly existing and in good standing under the laws of
the State of Delaware. WCI has full corporate power and authority
to own and lease its properties and to carry on its business as now
conducted. WCI is not required to be qualified or licensed to
conduct business as a foreign corporation in any jurisdiction where
the failure to be so qualified would have a material adverse effect
on its financial condition.
4.2 No Contractual Restrictions. No provisions exist in any
article, document or instrument to which WCI is a party or by which
it is bound which would be violated by consummation of the
transactions contemplated by this Agreement.
4.3 Authorization of Agreement. This Agreement has been duly
authorized, executed and delivered by WCI and, subject to the due
authorization, execution and delivery by the Corporations and the
Shareholders, constitutes a legal, valid and binding obligation of
WCI. WCI has full corporate power, legal right and corporate
authority to enter into and perform its obligations under this
Agreement and to carry on its business as presently conducted. The
execution and delivery of this Agreement and the consummation of
the transactions contemplated hereby and the fulfillment of and
compliance with the terms and conditions hereof do not and will
not, after the giving of notice, or the lapse of time or otherwise:
(a) violate any provisions of any judicial or administrative order,
award, judgment or decree applicable to WCI;
(b) conflict with any of the provisions of the Amended and Restated
Certificate of Incorporation or Amended and Restated Bylaws of WCI;
or (c) conflict with, result in a breach of or constitute a default
under any material agreement or instrument to which WCI is a party
or by which it is bound.
4.4 No Misleading Statements. The representations and
warranties of WCI contained in this Agreement, the Exhibits and
Schedules hereto and all other documents and information furnished
to the Shareholders pursuant hereto are materially complete and
accurate, and do not include any untrue statement of a material
fact or omit to state any material fact necessary to make the
statements made and to be made not misleading as of the Closing
Date.
4.5 Brokers; Finders. No person has acted directly or
indirectly as a broker, finder or financial advisor for WCI in
connection with the transactions contemplated by this Agreement and
no person is entitled to any broker's, finder's, financial advisory
or similar fee or payment in respect thereof based in any way on
any agreement, arrangement or understanding made by or on behalf of
WCI.
4.6 Disclosure Schedules. Any matter disclosed by WCI on any
Schedule to this Agreement shall be deemed to have been disclosed
on every other Schedule that refers to such Schedule by cross
reference so long as the nature disclosed is obvious from a fair
reading of the Schedule on which the matter is disclosed.
5. CLOSING DELIVERIES
At the Closing, the respective parties shall make the
deliveries indicated:
5.1 WCI Deliveries.
(a) WCI shall deliver the cash portion of the Purchase
Price required to be delivered on the Closing Date pursuant to
Section 1.2(a).
(b) WCI shall deliver to the Shareholders any payments
due pursuant to Section 1.3.
(c) WCI shall execute and deliver a Consulting Agreement
with Lyle substantially in the form of the draft included in
Exhibit 5.1(c).
5.2 Shareholders Deliveries.
(a) The Shareholders shall deliver to WCI the
certificates representing the outstanding Corporations' Stock free
and clear of all liens, security interests, claims and
encumbrances, accompanied by a stock power duly executed in blank.
(b) The Shareholders shall deliver to WCI an opinion of
counsel for the Shareholders, dated as of the Closing Date, in
substantially the form attached hereto as Exhibit 5.2(b).
(c) The Shareholders shall deliver evidence reasonably
satisfactory to WCI that all required third-party consents to the
transactions contemplated hereby, including without limitation all
Required Governmental Consents and all required consents of the
landlords under all real estate leases to which any Corporation is
a party, were obtained and the Shareholders shall deliver an
estoppel certificate from the landlords under all real estate
leases to which any Corporation is a party confirming the terms
thereof and the rental amount owing thereunder, certifying that
such lease is in full force and effect, that such Corporation is
not in default under any of the terms or conditions thereof, that
there have been no amendments or modifications to any such lease
(or specifying the same), and otherwise containing such statements
and certifications as the Corporations may require.
(d) Each Corporation shall deliver to WCI evidence
satisfactory to WCI showing that all written employment contracts
and all oral employment contracts other than those that are
terminable "at will" without payment of severance (other than
normal severance benefits approved by WCI) or other benefits with
non-union employees of that Corporation (including, without
limitation, stock options or other rights to obtain equity in that
Corporation) have been terminated, effective on or before the
Closing Date.
(e) The Shareholders shall cause each officer and
director of each Corporation to deliver a resignation as an officer
and/or director of such Corporation together with a general release
of each officer and director who is not a Shareholder releasing the
Corporations from all obligations under any indemnification
agreements, the charter documents of the Corporations, or
otherwise, arising out of or relating to this Agreement or the
consummation of the transactions contemplated thereby, other than
obligations arising after the Closing Date under this Agreement.
(f) The Shareholders shall deliver to WCI a counterpart
of the Consulting Agreement executed by Lyle in the form of Exhibit
5.1(c).
6. ADDITIONAL COVENANTS OF WCI, THE CORPORATIONS AND THE
SHAREHOLDERS
6.1 Release of Guaranties. WCI shall use reasonable efforts
to obtain the termination and release promptly after the Closing
Date of the personal guaranties of the Shareholders listed on
Schedule 6.1, all of which relate to indebtedness of the
Corporations included in the Financial Statements as of the Balance
Sheet Date or WCI shall indemnify the Shareholders and hold them
harmless from and against all losses, expenses or claims by third
parties to enforce or collect indebtedness owed by the Corporations
as of the Closing Date which is personally guaranteed by the
Shareholders pursuant to such guaranties. The Shareholders may
notify the obligees under such guaranties that they have terminated
their obligations under such guaranties. The Shareholders shall
cooperate with WCI in obtaining such releases.
6.2 Release of Security Interests. On or after the Closing
Date, the Shareholders and their respective Affiliates shall cause
those security interests in the assets of the Corporations that
have been created in favor of financial institutions or other
lenders to secure indebtedness (other than indebtedness of the
Corporations) of the Shareholders or their respective Affiliates to
be released in a manner reasonably satisfactory to WCI, and shall
cause all guaranties by the Corporations relating to the
indebtedness of the Shareholders to be released to the reasonable
satisfaction of WCI.
6.3 Confidentiality. Neither the Corporations nor any of the
Shareholders shall disclose or make any public announcements of the
transactions contemplated by this Agreement without the prior
written consent of WCI, unless required to make such disclosure or
announcement by law, in which event the party making the disclosure
or announcement shall notify WCI at least 24 hours before such
disclosure or announcement is expected to be made. WCI shall not
disclose or make any public announcement of the transactions
contemplated by this Agreement without the prior written consent of
the Shareholders' Representative, unless in connection with the
initial public offering of WCI Stock or otherwise required to make
such disclosure or announcement by law, in which event WCI shall
notify the Shareholders' Representative at least 24 hours before
such disclosure or announcement is expected to be made.
6.4 Brokers and Finders Fees. Each party shall pay and be
responsible for any broker's, finder's or financial advisory fee
incurred by such party in connection with the transactions
contemplated by this Agreement.
6.5 Taxes. WCI shall reasonably cooperate, at the expense of
the Shareholders, with the Shareholders with respect to any matters
involving the Shareholders arising out of the Shareholders'
ownership of the Corporations prior to the Closing, including
matters relating to tax returns and any tax audits, appeals, claims
or litigation with respect to such tax returns or the preparation
of such tax returns. In connection therewith, WCI shall make
available to the Shareholders such files, documents, books and
records of the Corporations for inspection and copying as may be
reasonably requested by the Shareholders and shall cooperate with
the Shareholders with respect to retaining information and
documents which relate to such matters.
6.6 Short Year Tax Returns. After the Closing Date, the
Shareholders shall prepare at their sole cost and expense, all
short year federal, state, county, local and foreign tax returns
required by law for the period beginning with the first day of each
Corporation's fiscal year in which the Closing occurs and ending
with the Closing Date. Each such return shall be prepared in a
financially responsible and conservative manner and shall be
delivered to WCI together with all necessary supporting schedules
within 120 days following the Closing Date for its approval (but
such approval shall not relieve the Shareholders of their
responsibility for the taxes assessed under these returns). The
Shareholders shall be responsible for the payment of all taxes
shown to be due or that may come to be due on such returns or
otherwise relating to the period prior to the Closing Date in
excess of the amount of any reserve for taxes included in Effective
Date Current Liabilities. The Shareholders shall also be
responsible for all taxes arising from the conversion of any
Corporation from a cash to accrual basis of reporting whether or
not due on such returns or on the first return filed by a
Corporation for the period commencing after the Closing Date. At
the time of the delivery of the returns, the Shareholders shall
contemporaneously deliver to WCI checks payable to the respective
taxing authorities in amounts equal to the amount due. WCI shall
sign tax returns and cause such returns to be timely filed with the
appropriate authorities. The Shareholders shall be entitled to
receive all refunds shown on said returns and any such refunds
received by the Corporations or WCI shall be remitted to the
Shareholders.
6.7 Certain Tax Matters. The Shareholders acknowledge that
WCI may make an election under Section 338(h)(10) of the Internal
Revenue Code of 1986, as amended. The Shareholders agree that WCI,
in its discretion, may make such election; provided, however, that
such election shall be made no later than the due date for such
election. If such election is made by WCI:
(a) WCI shall be authorized to complete Form 8023-A;
(b) The Shareholders shall sign such completed Form
8023-A at the Closing; and
(c) WCI and the Shareholders shall agree upon the
allocation of the Purchase Price among the assets (including
intangible assets).
(d) If WCI does make its election under Section
338(h)(10) of the Internal Revenue Code of 1986, as amended, WCI
shall reimburse the Shareholders and the S Corporations for any
additional taxes, penalties, interest and costs of preparation of
amended income tax returns incurred due to such election resulting
from the recapture of depreciation previously taken on various
assets of the S Corporations at ordinary income instead of capital
gain rates. Such reimbursement shall be in a sum computed by a
simultaneous equation computing the additional tax owed by the
Shareholders, as well as the tax on the payment of that sum.
6.8 Shareholders' Representative.
(a) In order to administer efficiently the rights and
obligations of the Shareholders under this Agreement, the
Shareholders hereby designate and appoint Lyle as the Shareholders'
Representative, to serve as the Shareholders' agent, proxy and
attorney-in-fact for the limited purposes set forth in this
Agreement.
(b) Each of the Shareholders hereby appoints the
Shareholders' Representative as such Shareholder's agent, proxy and
attorney-in-fact, with full power of substitution, for all purposes
set forth in this Agreement, including, without limitation, the
full power and authority on such Shareholder's behalf (i) to
consummate the transactions contemplated by this Agreement, (ii) to
disburse any funds received hereunder to the Shareholders, (iii) to
execute and deliver on behalf of each Shareholder any amendment or
waiver under this Agreement, to agree to the amount of the actual
Closing Date Debt, Closing Date Current Assets and Closing Date
Current Liabilities pursuant to Sections 1.5(a), and to agree to
resolution of all Claims hereunder, (iv) to retain legal counsel
and other professional services, at the expense of the
Shareholders, in connection with the performance by the
Shareholders' Representative of this Agreement, and (v) to do each
and every act and exercise any and all rights which such
Shareholder or Shareholders are permitted or required to do or
exercise under this Agreement and the other agreements, documents
and certificates executed in connection herewith. Each of the
Shareholders agrees that such agency and proxy are coupled with an
interest, are therefore irrevocable without the consent of the
Shareholders' Representative and shall survive the death,
bankruptcy or other incapacity of any Shareholder.
(c) Each of the Shareholders hereby agrees that any
amendment or waiver under this Agreement, and any action taken on
behalf of the Shareholders to enforce the rights of the
Shareholders under this Agreement, and any action taken with
respect to any adjustment or Claim (including any action taken to
object to, defend, compromise or agree to the payment of such
adjustment or Claim), shall be effective if approved in writing by
persons who were the holders of a majority of the Corporations'
Stock immediately prior to the Closing, and that each and every
action so taken shall be binding and conclusive on every
Shareholder, whether or not such Shareholder had notice of, or
approved, such amendment or waiver.
(d) Lyle shall serve as the Shareholders' Representative
until he resigns or is otherwise unable or unwilling to serve. In
the event that a Shareholders' Representative resigns from such
position or is otherwise unable or unwilling to serve, the
remaining Shareholders shall select, by the vote of the holders of
a majority of the Corporations' Stock immediately prior to the
Closing, a successor representative to fill such vacancy, shall
provide prompt written notice to WCI of such change and such
substituted representative shall then be deemed to be the
Shareholders' Representative for all purposes of this Agreement.
6.9 General Release by Shareholders. Each of the
Shareholders hereby fully releases and discharges each Corporation
and its directors, officers, agents and employees from all rights,
claims and actions, known or unknown, of any kind whatsoever, which
any of such Shareholders now has or may hereafter have against any
Corporation and its directors, officers, agents and employees,
arising out of or relating to events arising prior to or on the
Closing Date, except (a) as may be described in written contracts
disclosed in Schedule 6.9 and expressly described and specifically
excepted from this release in Schedule 6.9, (b) compensation as an
employee of a Corporation for current periods expressly described
and excepted from such release on schedule 6.9, and (c) for the
obligations of the Corporations arising after the Closing Date
under this Agreement. Specifically, but not by way of limitation,
each of the Shareholders waives any right of indemnification,
contribution or other recourse against each Corporation which he
now has or may hereafter have against a Corporation with respect to
representations, warranties or covenants made in this Agreement by
a Corporation.
Each of the Shareholders hereby waives and relinquishes
all rights and benefits afforded by Section 1542 of the California
Civil Code, which states as follows:
"A general release does not extend to claims to which the
creditor does not know or suspect to exist in his favor at the time
of executing the release, which if known by him must have
materially affected his settlement with the debtor."
Each of the Shareholders understands and acknowledges the
significance and consequence of this waiver of Section 1542 and
nevertheless elects to, and does, release those claims described in
this Section 6.9, known or unknown, that it may have now or in the
future arising out of or relating to any event arising on or prior
to the date of this Agreement.
6.10 Title Insurance. The Shareholders shall arrange for an
irrevocable commitment from a title insurance company reasonably
acceptable to WCI to issue, within ten (10) business days after the
Closing Date, a CLTA Owner's Policy of title insurance for the
Corporate Property, in an amount as shall be reasonably agreed upon
by the Shareholders and WCI, insuring fee simple title to the
Corporate Property in the Corporation, subject only to current real
property taxes and assessments, standard printed conditions and
exceptions, and such title exceptions as shall have been accepted
in writing by WCI, and containing such endorsements as WCI may
reasonably require. The cost of such title insurance shall be paid
one-half by the Shareholders and one-half by WCI.
7. INDEMNIFICATION
7.1 Indemnity by the Shareholders. Each of the Shareholders,
jointly and severally, subject to the limitations set forth in
Section 7.2, covenants and agrees that he or she will indemnify and
hold harmless WCI, the Corporations and their respective directors,
officers and agents and their respective successors and assigns
(collectively the "WCI Indemnitees"), from and after the date of
this Agreement and until the fifth anniversary of the Closing Date,
against any and all losses, damages, assessments, fines, penalties,
adjustments, liabilities, claims, deficiencies, costs, expenses
(including specifically, but without limitation, reasonable
attorneys' fees and expenses of investigation), expenditures,
including, without limitation, any "Environmental Site Losses" (as
such term is hereinafter defined) identified by a WCI Indemnitee in
a Claims Notice (as defined in Section 7.3(a)), or asserted by a
WCI Indemnitee in litigation commenced against the Shareholders
provided that in either case any such Claims Notice shall be given
or the litigation commenced prior to the earlier of the third
anniversary of this Agreement or the expiration of the applicable
statute of limitations (irrespective of the date of discovery),
with respect to each of the following contingencies (all, the "7.1
Indemnity Events"):
(a) Any misrepresentation, breach of warranty, or
nonfulfillment of any agreement or covenant on the part of the
Shareholders or the Corporations pursuant to the terms of this
Agreement or any misrepresentation in or omission from any Exhibit,
Schedule, list, certificate, or other instrument furnished or to be
furnished to WCI pursuant to the terms of this Agreement,
regardless of whether, in the case of a breach of a representation
or a warranty, WCI relied on the truth of such representation or
warranty or had any knowledge of any breach thereof.
(b) The design, development, construction or operation
of any Facility (including without limitation the Red Carpet
Landfill) or any other "Environmental Site" as hereinafter defined,
or the installation or operation of a UST during any period on or
prior to the Closing Date, in excess of the amount of liability
with respect thereto, if any, set forth on Part II of Schedule 3.8.
As used in this Agreement, "Environmental Site" shall mean any
Facility, any UST and any other waste storage, processing,
treatment or disposal facility, and any other business site or any
other real property owned, leased, controlled or operated by a
Corporation or by any predecessor thereof on or prior to the
Closing Date. As used in this Agreement, "Environmental Site
Losses" shall mean any and all losses, damages (including exemplary
damages and penalties), liabilities, claims, deficiencies, costs,
expenses, and expenditures (including, without limitation, expenses
in connection with site evaluations, risk assessments and
feasibility studies) arising out of or required by an interim or
final judicial or administrative decree, judgment, injunction,
mandate, interim or final permit condition or restriction, cease
and desist order, abatement order, compliance order, consent order,
clean-up order, exhumation order, reclamation order or any other
remedial action that is required to be undertaken under federal,
state or local law in respect of operating activities on or
affecting any Facility, any UST or any other Environmental Site,
including, but not limited to (x) any actual or alleged violation
of any law or regulation respecting the protection of the
environment, including, but not limited to, RCRA and CERCLA or any
other law or regulation respecting the protection of the air, water
and land and (y) any remedies or violations, whether by a private
or public action, alleged or sought to be assessed as a
consequence, directly or indirectly, of any "Release" (as defined
below) of pollutants (including odors) or Hazardous Substances from
any Facility, any UST or any other Environmental Site resulting
from activities thereat, whether such Release is into the air,
water (including groundwater) or land and whether such Release
arose before, during or after the Closing Date. The term "Release"
as used herein means any spilling, leaking, pumping, pouring,
emitting, emptying, discharging, injecting, escaping, leaching,
dumping or disposing into the ambient environment. Notwithstanding
anything in this paragraph to the contrary, it is specifically
understood and agreed that a Release composed solely of Hazardous
Substances contained in household waste lawfully disposed of in a
landfill during the time a Corporation owned and/or operated such
landfill does not constitute an Environmental Site Loss.
(c) All matters on Schedule 3.8, Part II.
(d) All actions, suits, proceedings, demands,
assessments, adjustments, costs and expenses (including
specifically, but without limitation, reasonable attorneys' fees
and expenses of investigation) incident to any of the foregoing.
7.2 Limitations on Shareholders' Indemnities.
(a) Subject to the provisions of 7.2(b) hereof, the
obligations of the Shareholders to indemnify the WCI Indemnitees as
provided in Section 7.1 shall be equal to the amount by which the
cumulative amount of all such liabilities, claims, damages
deficiencies, actions, suits, proceedings, demands, assessments,
adjustments, costs and expenses, expenditures and Environmental
Site Losses with respect to any or all 7.1 Indemnity Events exceed
$25,000 (the "General Deductible Amount"); provided, that the
amount of any obligation of indemnity arising pursuant to Section
7.1(a) with respect to any representation, warranty or covenant
contained in Sections 3.1 through 3.5, 3.7, 3.18, 3.22 and 6.6
hereof and pursuant to Section 7.1(c) shall not be subject to the
General Deductible Amount.
(b) The maximum amount which WCI can recover as a result
of one or more 7.1 Indemnity Events shall not exceed:
(i) sixty-five percent (65%) of the Purchase Price
(as adjusted pursuant to Section 1.2(a) hereof) plus 65% of the
Contingent Purchase Price paid or payable, if the 7.1 Indemnity
Event occurs during the time period from the Closing Date to, and
including, the first anniversary of the Closing Date; and
(ii) fifty percent (50%) of the Purchase Price (as
adjusted pursuant to Section 1.2(a) hereof) plus 50% of the
Contingent Purchase Price paid or payable, if the 7.1 Indemnity
Event occurs during the time period from the first anniversary of
the Closing Date to, and including, the third anniversary of the
Closing Date.
(c) WCI shall use reasonable efforts to pursue any
insurance coverage it may have with respect to any matter resulting
in a 7.1 Indemnity Event and shall apply any insurance recoveries
it receives in connection with any 7.1 Indemnity Event towards its
recovery from the Shareholder for such 7.1 Indemnity Event.
Nothing herein shall require WCI from pursuing any such insurance
coverage prior to pursuing any claim against the Shareholder.
7.3 Notice of Indemnity Claim.
(a) In the event that any claim ("Claim") is hereafter
asserted against or arises with respect to any WCI Indemnitee as to
which such Indemnitee may be entitled to indemnification hereunder,
the WCI Indemnitee shall notify the Shareholders (as applicable
collectively, the "Indemnifying Party") in writing thereof (the
"Claims Notice") within 60 days after (i) receipt of written notice
of commencement of any third party litigation against such WCI
Indemnitee, (ii) receipt by such WCI Indemnitee of written notice
of any third party claim pursuant to an invoice, notice of claim or
assessment, against such WCI Indemnitee, or (iii) such WCI
Indemnitee becomes aware of the existence of any other event in
respect of which indemnification may be sought from the
Indemnifying Party (including, without limitation, any inaccuracy
of any representation or warranty or breach of any covenant). The
Claims Notice shall describe the Claim and the specific facts and
circumstances in reasonable detail, and shall indicate the amount,
if known, or an estimate, if possible, of the losses that have been
or may be incurred or suffered by the WCI Indemnitee.
(b) The Indemnifying Party may elect to defend any Claim
for money damages where the cumulative total of all Claims
(including such Claims) do not exceed the limit set forth in
Section 7.2 at the time the Claim is made, by the Indemnifying
Party's own counsel; provided, however, the Indemnifying Party may
assume and undertake the defense of such a third party Claim only
upon written agreement by the Indemnifying Party that the
Indemnifying Party is obligated to fully indemnify the WCI
Indemnitee with respect to such action. The WCI Indemnitee may
participate, at the WCI Indemnitee's own expense, in the defense of
any Claim assumed by the Indemnifying Party. Without the written
approval of the WCI Indemnitee, which approval shall not be
unreasonably withheld, the Indemnifying Party shall not agree to
any compromise of a Claim defended by the Indemnifying Party.
(c) If, within thirty (30) days of the Indemnifying
Party's receipt of a Claims Notice, the Indemnifying Party shall
not have provided the written agreement required by Section 7.3(b)
and elected to defend the Claim, the WCI Indemnitee shall have the
right to assume control of the defense and/or compromise of such
Claim, and the costs and expenses of such defense, including
reasonable attorneys' fees, shall be added to the Claim. The
Indemnifying Party shall promptly, and in any event within thirty
(30) days after demand therefor, reimburse the WCI Indemnitee for
the costs of defending the Claim, including attorneys' fees and
expenses.
(d) The party assuming the defense of any Claim shall
keep the other party reasonably informed at all times of the
progress and development of its or their defense of and compromise
efforts with respect to such Claim and shall furnish the other
party with copies of all relevant pleadings, correspondence and
other papers. In addition, the parties to this Agreement shall
cooperate with each other and make available to each other and
their representatives all available relevant records or other
materials required by them for their use in defending, compromising
or contesting any Claim. The failure to timely deliver a Claims
Notice or otherwise notify the Indemnifying Party of the
commencement of such actions in accordance with this Section 7.3
shall not relieve the Indemnifying Party from the obligation to
indemnify hereunder but only to the extent that the Indemnifying
Party establishes by competent evidence that it has been prejudiced
thereby.
(e) In the event both the WCI Indemnitee and the
Indemnifying Party are named as defendants in an action or
proceeding initiated by a third party, they shall both be
represented by the same counsel (on whom they shall agree), unless
such counsel the WCI Indemnitee, or the Indemnifying Party shall
determine that such counsel has a conflict of interest in
representing both the WCI Indemnitee and the Indemnifying Party in
the same action or proceeding and the WCI Indemnitee and the
Indemnifying Party do not waive such conflict to the satisfaction
of such counsel.
7.4 Survival of Representations, Warranties and Agreements.
The representations and warranties of the parties contained in this
Agreement and in any certificate, Exhibit or Schedule delivered
pursuant hereto, or in any other writing delivered pursuant to the
provisions of this Agreement (the "Representations and Warranties")
and the liability of the party making such Representations and
Warranties for breaches thereof shall survive the consummation of
the transactions contemplated hereby. The parties hereto in
executing and delivering and in carrying out the provisions of this
Agreement are relying solely on the representations, warranties,
Schedules, Exhibits, agreements and covenants contained in this
Agreement, or in any writing or document delivered pursuant to the
provisions of this Agreement, and not upon any representation,
warranty, agreement, promise or information, written or oral, made
by any persons other than as specifically set forth herein or
therein.
7.5 No Exhaustion of Remedies or Subrogation; Right of Set
Off. The Shareholders waive any right to require any WCI
Indemnitee to (i) proceed against any Corporation; (ii) proceed
against any other person; or (iii) pursue any other remedy
whatsoever in the power of any WCI Indemnitee. WCI may, but shall
not be obligated to, set off against any and all payments due any
Shareholder any amount to which any WCI Indemnitee is entitled to
be indemnified hereunder with respect to any 7.1 Indemnity Event.
Such right of set off shall be separate and apart from any and all
other rights and remedies that the Indemnities may have against
Shareholders or their successors.
8. OTHER POST-CLOSING COVENANTS OF THE SHAREHOLDERS AND WCI
8.1 Restrictive Covenants. As to the Corporations, the
Shareholders and their Affiliates acknowledge that (i) WCI, as the
purchaser of the Corporations' Stock, is and will be engaged in the
same business as the Corporations (the "Business"); (ii) the
Shareholders and their Affiliates are intimately familiar with the
Business; (iii) the Business is currently conducted in the State of
Oklahoma, and WCI intends to continue the Business in Oklahoma and
intends, by acquisition or otherwise, to expand the Business into
other geographic areas of Oklahoma where it is not presently
conducted; (iv) the Shareholders and their Affiliates have had
access to trade secrets of, and confidential information
concerning, the Business; (v) the agreements and covenants
contained in this Section 8.1 are essential to protect the Business
and the goodwill being acquired; and (vi) the Shareholders and
their Affiliates have the means to support themselves and their
dependents other than by engaging in a business substantially
similar to the Business and the provisions of this Section 8 will
not impair such ability. The Shareholders covenant and agree as
set forth in (a), (b) and (c) below with respect to the
Corporation:
(a) Non-Compete. For a period commencing on the Closing
Date and terminating five years thereafter (the "Restricted
Period"), neither the Shareholders nor any of their Affiliates
shall, anywhere in all cities and counties listed on Exhibit A
hereto, where WCI or one of its subsidiaries owns or operates a
business similar to the Business (the "Restricted Counties"),
directly or indirectly, acting individually or as the owner,
shareholder, partner, or employee of any entity, (i) engage in the
operation of a solid waste collection, transporting, disposal
and/or composting business, transfer facility, recycling facility,
materials recovery facility or solid waste landfill; (ii) enter the
employ of, or render any personal services to or for the benefit
of, or assist in or facilitate the solicitation of customers for,
or receive remuneration in the form of salary, commissions or
otherwise from, any business engaged in such activities; (iii) as
owner or lessor of real estate or personal property, rent to lease
any facility, equipment or other assets to any business engaged in
the same business as the Corporations; or (iv) receive or purchase
a financial interest in, make a loan to, or make a gift in support
of, any such business in any capacity, including, without
limitation, as a sole proprietor, partner, shareholder, officer,
director, principal, agent, trustee or lender; provided, however,
that any of the Shareholders may own, directly or indirectly,
solely as an investment, securities of any business traded on any
national securities exchange or NASDAQ, provided none of the
Shareholders is a controlling person of, or a member of a group
which controls, such business and further provided that the
Shareholders do not, in the aggregate, directly or indirectly, own
2% or more of any class of securities of such business.
(b) Confidential Information. During the Restricted
Period and thereafter, the Shareholders and their Affiliates shall
keep secret and retain in strictest confidence, and shall not use
for the benefit of themselves or others, all data and information
relating to the Business ("Confidential Information"), including
without limitation, know-how, trade secrets, customer lists,
supplier lists, details of contracts, pricing policies, operational
methods, marketing plans or strategies, bidding information,
practices, policies or procedures, product development techniques
or plans, and technical processes; provided, however, that the term
"Confidential Information" shall not include information that (i)
is or becomes generally available to the public other than as a
result of disclosure by the Shareholders or (ii) is general
knowledge in the solid waste handling and landfill business and not
specifically related to the Business.
(c) Property of the Business. All memoranda, notes,
lists, records and other documents or papers (and all copies
thereof) relating to the Business, including such items stored in
computer memories, on microfiche or by any other means, made or
compiled by or on behalf of the Shareholders or the Corporations or
made available to them relating to the Business, but excluding any
materials (other than the minute books of the Corporations)
maintained by any attorneys for the Corporations or the
Shareholders prior to the Closing, are and shall be the property of
WCI and have been delivered or will be delivered or made available
to WCI at the Closing.
(d) Non-Solicitation. Without the consent of WCI, which
may be granted or withheld by WCI in its discretion, the
Shareholders and their Affiliates shall not solicit any employees
of any Corporation to leave the employ of that Corporation and join
the Shareholders or any Affiliate in any business endeavor owned or
pursued by the Shareholders.
(e) No Disparagement. From and after the Closing Date,
none of the Shareholders shall, in any way or to any person or
entity or governmental or regulatory body or agency, denigrate or
derogate WCI or any of its subsidiaries, or any officer, director
or employee, or any product or service or procedure of any such
company whether or not such denigrating or derogatory statements
shall be true and are based on acts or omissions which are learned
by the Shareholders from and after the date hereof or on acts or
omissions which occur from and after the date hereof, or otherwise.
A statement shall be deemed denigrating or derogatory to any person
or entity if it adversely affects the regard or esteem in which
such person or entity is held by investors, lenders or licensing,
rating, or regulatory entities. Without limiting the generality of
the foregoing, none of the Shareholders shall, directly or
indirectly in any way in respect of any such company or any such
directors or officers, communicate with, or take any action which
is adverse to the position of any such company with any person,
entity or governmental or regulatory body or agency who or which
has dealings or prospective dealings with any such company or
jurisdiction or prospective jurisdiction over any such company.
This paragraph does not apply to the extent that testimony is
required by legal process, provided that WCI has received not less
than five days' prior written notice of such proposed testimony.
8.2 Rights and Remedies Upon Breach. If any of the
Shareholders or any Affiliate breaches, or threatens to commit a
breach of, any of the provisions of Section 8.1 herein (the
"Restrictive Covenants"), WCI shall have the following rights and
remedies, each of which rights and remedies shall be independent of
the others and severally enforceable, and each of which is in
addition to, and not in lieu of, any other rights and remedies
available to WCI at law or in equity:
(a) Specific Performance. The right and remedy to have
the Restrictive Covenants specifically enforced by any court of
competent jurisdiction, it being agreed that any breach or
threatened breach of the Restrictive Covenants would cause
irreparable injury to WCI and that money damages would not provide
an adequate remedy to WCI. Accordingly, in addition to any other
rights or remedies, WCI shall be entitled to injunctive relief to
enforce the terms of the Restrictive Covenants and to restrain the
Shareholders from any violation thereof.
(b) Accounting. The right and remedy to require the
Shareholders to account for and pay over to WCI all compensation,
profits, monies, accruals, increments or other benefits derived or
received by the Shareholders as the result of any transactions
constituting a breach of the Restrictive Covenants.
(c) Severability of Covenants. The Shareholders
acknowledge and agree that the Restrictive Covenants are reasonable
and valid in geographical and temporal scope and in all other
respects. If any court determines that any of the Restrictive
Covenants, or any part thereof, is invalid or unenforceable, the
remainder of the Restrictive Covenants shall not thereby be
affected and shall be given full effect, without regard to the
invalid portions.
(d) Blue-Penciling. If any court determines that any of
the Restrictive Covenants, or any part thereof, is unenforceable
because of the duration or geographic scope of such provision, such
court shall reduce the duration or scope of such provision, as the
case may be, to the extent necessary to render it enforceable and,
in its reduced form, such provision shall then be enforced.
(e) Enforceability in Jurisdiction. WCI and the
Shareholders intend to and hereby confer jurisdiction to enforce
the Restrictive Covenants upon the courts of any jurisdiction
within the geographic scope of the Restrictive Covenants. If the
courts of any one or more of such jurisdictions hold the
Restrictive Covenants unenforceable by reason of the breadth of
such scope or otherwise, it is the intention of WCI and the
Shareholders that such determination not bar or in any way affect
WCI's right to the relief provided above in the courts of any other
jurisdiction within the geographic scope of the Restrictive
Covenants as to breaches of such covenants in such other respective
jurisdictions, such covenants as they relate to each jurisdiction
being, for this purpose, severable into diverse and independent
covenants.
9. GENERAL
9.1 Additional Conveyances. Following the Closing, the
Shareholders and WCI shall each deliver or cause to be delivered at
such times and places as shall be reasonably agreed upon such
additional instruments as WCI or the Shareholders may reasonably
request for the purpose of carrying out this Agreement. The
Shareholders will cooperate with WCI and/or the Corporations on and
after the Closing Date in furnishing information, evidence,
testimony and other assistance in connection with any actions,
proceedings or disputes of any nature with respect to matters
pertaining to all periods prior to the date of this Agreement.
9.2 Assignment. This Agreement shall be binding upon and
shall inure to the benefit of the parties hereto, the successors or
assigns of WCI and the heirs, legal representatives or assigns of
the Shareholders; provided, however, that any such assignment shall
be subject to the terms of this Agreement and shall not relieve the
assignor of its or his responsibilities under this Agreement.
9.3 Public Announcements. Except as required by law, no
party shall make any public announcement or filing with respect to
the transactions provided for herein prior to the Closing Date
without the prior consent of the other parties hereto.
9.4 Counterparts. This Agreement may be executed in two or
more counterparts, each of which shall be deemed an original and
all of which together shall constitute one and the same instrument.
9.5 Notices. All notices, requests, demands and other
communications hereunder shall be deemed to have been duly given if
in writing and either delivered personally, sent by facsimile
transmission or by air courier service, or mailed by postage
prepaid registered or certified U.S. mail, return receipt
requested, to the addresses designated below or such other
addresses as may be designated in writing by notice given
hereunder, and shall be effective upon personal delivery or
facsimile transmission thereof or upon delivery by registered or
certified U.S. mail or one business day following deposit with an
air courier service:
If to the Shareholders:
at their respective addresses set forth on Schedule 3.2
With a copy to:
Tom L. Newby, Esq.
Elliott, Enabnit, Newby & Ezzell
114 East Broadway, 5th Floor
Enid, Oklahoma 73701
Facsimile: (580) 233-1441
If to WCI:
Waste Connections, Inc.
2260 Douglas Boulevard, Suite 280
Roseville, California 95661
Attention: Ronald J. Mittelstaedt
Facsimile: (916) 772-2920
With a copy to:
Robert D. Evans, Esq.
Shartsis, Friese & Ginsburg LLP
One Maritime Plaza, 18th Floor
San Francisco, California 94111
Facsimile: (415) 421-2922
9.6 Attorneys' Fees. In the event of any dispute or
controversy between WCI on the one hand and the Corporations or the
Shareholders on the other hand relating to the interpretation of
this Agreement or to the transactions contemplated hereby, the
prevailing party shall be entitled to recover from the other party
reasonable attorneys' fees and expenses incurred by the prevailing
party. Such award shall include post-judgment attorney's fees and
costs.
9.7 Applicable Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of California
without regard to its conflict of laws provisions.
9.8 Payment of Fees and Expenses. Whether or not the
transactions herein contemplated shall be consummated, each party
hereto will pay its own fees, expenses and disbursements incurred
in connection herewith and all other costs and expenses incurred in
the performance and compliance with all conditions to be performed
hereunder (including, in the case of the Shareholders, any such
fees, expenses and disbursements paid or accrued by, or charged to,
the Corporations).
9.9 Incorporation by Reference. All Schedules and Exhibits
attached hereto are incorporated herein by reference as though
fully set forth at each point referred to in this Agreement.
9.10 Captions. The captions in this Agreement are for
convenience only and shall not be considered a part hereof or
affect the construction or interpretation of any provisions of this
Agreement.
9.11 Number and Gender of Words; Corporation. Whenever the
singular number is used herein, the same shall include the plural
where appropriate, and shall apply to all of such number, and to
each of them, jointly and severally, and words of any gender shall
include each other gender where appropriate.
9.12 Entire Agreement. This Agreement (including the
Schedules and Exhibits hereto) and the other documents delivered
pursuant hereto constitute the entire Agreement and understanding
between the Corporations, the Shareholders and WCI and supersedes
any prior agreement and understanding relating to the subject
matter of this Agreement. This Agreement may be modified or
amended only by a written instrument executed by the Corporations,
the Shareholders (or the Shareholders' Representative on their
behalf) and WCI acting through its officers, thereunto duly
authorized by its Board of Directors.
9.13 Waiver. No waiver by any party hereto at any time of any
breach of, or compliance with, any condition or provision of this
Agreement to be performed by any other party hereto may be deemed
a waiver of similar or dissimilar provisions or conditions at the
same time or at any prior or subsequent time.
9.14 Construction. The language in all parts of this
Agreement must be in all cases construed simply according to its
fair meaning and not strictly for or against any party. Unless
expressly set forth otherwise, all references herein to a "day" are
deemed to be a reference to a calendar day. All references to
"business day" mean any day of the year other than a Saturday,
Sunday or a public or bank holiday in Oklahoma or California.
Unless expressly stated otherwise, cross-references herein refer to
provisions within this Agreement and are not references to the
overall transaction or to any other document.
10. GLOSSARY
The definitions of the terms used below can be found at the
Section indicated:
Term -- Section
Act -- Section 3.38
Affiliate -- Section 3.11
B & B -- Parties
Balance Sheet Date -- Section 3.7
Business -- Section 8.1
business day -- Section 9.14
Claim -- Section 7.3(a)
Claims Notice -- Section 7.3(a)
Closing -- Section 2
Closing Date -- Section 2
Closing Date Debt -- Section 3.22(a)
Closing Date Accounts Receivable -- Section 1.2(a)
Closing Date Current Assets -- Section 3.22(b)
Closing Date Current Liabilities -- Section 3.22(b)
Collection Contracts -- Section 3.10(a)
Confidential Information -- Section 8.1(b)
Contingent Purchase Price -- Section 1.1
Corporate Property -- Section 3.12(b)
Corporations -- Parties
Corporations' Stock -- Third Recital
Darlin -- Parties
Environmental Laws -- Section 3.24
Environmental Site -- Section 7.1(b)
Environmental Site Losses -- Section 7.1
Environmental Site Losses -- Section 7.1(b)
ERISA -- Section 3.17(a)
Excluded Assets -- Section 1.5
Facility -- Section 3.10(c)
Facilities -- Section 3.10(c)
Facility Property -- Section 3.10(c)(iii)
Facility Surveys/Site Plans -- Section 3.10(c)(iii)
Financial Statements -- Section 3.7
General Deductible Amount -- Section 7.2(a)
Governmental Permits -- Section 3.10(a)
Hazardous Material -- Section 3.24(e)
Hazardous Waste -- Section 3.24(e)
Indemnifying Party -- Section 7.3(a)
7.1 Indemnity Events -- Section 7.1
knowledge -- Section 3.36
Laws -- Section 3.24
Lyle -- Parties
Permitted Liens -- Section 3.12(c)
Purchase Price -- Section 1.1
RCRA -- Section 3.24(a)
Recipient -- Section 3.17(c)
Records, Notifications and Reports -- Section 3.10(b)
Release -- Section 7.1(b)
Representations and Warranties -- Section 7.4
Restricted Counties -- Section 8.1(a)
Restricted Period -- Section 8.1(a)
Restrictive Covenants -- Section 8.2
Required Governmental Consents -- Section 3.10(a)
SEC -- Section 3.38(g)
Shareholders -- Parties
UST -- Section 3.26
WCI Indemnitees -- Section 7.1
WCI -- Parties
WCI Stock -- Section 1.2(b)
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement by persons thereunto duly authorized as of the date first
above written.
WCI: WASTE CONNECTIONS, INC.
By: __________________________________
Ronald J. Mittelstaedt
Chief Executive Officer & President
THE CORPORATIONS: B & B SANITATION, INC.
By: __________________________________
Lyle J. Buller, President
RED CARPET LANDFILL, INC.
By: __________________________________
Lyle J. Buller, President
DARLIN EQUIPMENT, INC.
By: __________________________________
Lyle J. Buller, President
THE SHAREHOLDERS:
__________________________________
Lyle J. Buller
__________________________________
Larue A. Buller
__________________________________
Lyle J. Buller, Trustee of the
Lyle J. Buller Revocable Trust dated
10/11/96
__________________________________
Larue A. Buller, Trustee of the
Larue A. Buller Revocable Trust
dated 10/11/96
5119/022/0262773.07
