<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON AUGUST 3, 1998.
REGISTRATION NO. 333-_____
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
---------------
SANTI GROUP, INC.
(Exact Name of Registrant as Specified in Its Charter)
---------------
<TABLE>
<CAPTION>
DELAWARE 4953 58-2335973
<S> <C> <C>
(State or Other Jurisdiction of (Primary Standard Industrial (I.R.S. Employer
Incorporation or Organization) Classification Code Number) Identification Number)
</TABLE>
14901 QUORUM DRIVE, SUITE 200
DALLAS, TEXAS 75240
(972) 858-6025
(Address, including Zip Code, and Telephone Number, including
Area Code, of Registrant's Principal Executive Offices)
DONALD F. MOOREHEAD, JR.
CHAIRMAN AND CHIEF EXECUTIVE OFFICER
14901 QUORUM DRIVE, SUITE 200
DALLAS, TEXAS 75240
(972) 858-6025
(Name, Address, including Zip Code, and Telephone Number, including
Area Code, of Agent for Service)
COPIES TO:
LYNN S. SCOTT
KING & SPALDING
191 PEACHTREE STREET
ATLANTA, GEORGIA 30303-1763
(404) 572-4600
Approximate date of commencement of proposed sale to the public: From
time to time after this Registration Statement becomes effective.
If any of the securities being registered on this form are to be offered
on a delayed or continuous basis pursuant to Rule 415 under the Securities Act
of 1933, check the following box. [X]
If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering. [ ]
If this form is a post-effective amendment filed pursuant to Rule 462(C)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If this form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule
434, please check the following box. [ ]
CALCULATION OF REGISTRATION FEE
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===================================================================================================================================
Title Of Class Amount Proposed Maximum Proposed Maximum
Of Securities To Be Offering Price Aggregate Offering Amount Of
To Be Registered Registered(1) Per Share(1) Price (1) Registration Fee (1)
------------- ------------ --------- --------------------
<S> <C> <C> <C> <C>
Common Stock, par value $.0001 per share 13,113,379 $21.25 $278,659,303 $82,204.49
===================================================================================================================================
</TABLE>
(1) Calculated in accordance with Rule 457(c) under the Securities Act of 1933,
as amended, based on the average of the high and low sale prices of the Common
Stock as reported on the Nasdaq OTC Bulletin Board on July 29, 1998.
-------------
The Registrant hereby amends this Registration Statement on such date or
dates as may be necessary to delay its effective date until the Registrant shall
file a further amendment which specifically states that this Registration
Statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933, as amended, or until this Registration Statement
shall become effective on such date as the Commission, acting pursuant to said
Section 8(a), may determine.
================================================================================
<PAGE> 2
EXPLANATORY NOTE
This Registration Statement covers the registration of up to 8,113,379
shares of Common Stock, $0.0001 par value per share (the "Common Stock"), of
SanTi Group, Inc. (the "Company") for sale by certain selling stockholders. This
Registration Statement also covers the registration of 5,000,000 shares of
Common Stock of the Company to be issued from time to time as payment for all or
some portion of the purchase price for one or more acquisitions of companies,
businesses or assets complementary to the Company's existing business, or which
may be offered for sale or other distribution by persons who will acquire such
shares in the acquisitions of such companies, business or assets or by the
donees of such persons or by other persons acquiring such shares (the "Shelf
Registration"). The complete Prospectus relating to the offering of 8,113,379
shares (the "Offering Prospectus") immediately follows this Explanatory Note.
Following the Offering Prospectus are certain pages of the Prospectus relating
solely to the Shelf Registration (together with the remainder of the Prospectus
as modified as indicated below, the "Shelf Prospectus"), including an alternate
front and back cover page, a "Principal Stockholders" table in lieu of the table
entitled "Principal and Selling Stockholders", a section entitled "Selling
Stockholders" (which will be inserted immediately preceding the section entitled
"Description of Capital Stock") and a section entitled "Plan of Distribution".
The Shelf Prospectus will not include the information in the Prospectus Summary
under the heading "Securities To Be Offered", or the section of the Offering
Prospectus entitled "Use of Proceeds". All other sections of the Offering
Prospectus are to be used in the Shelf Prospectus.
2
<PAGE> 3
SUBJECT TO COMPLETION, DATED AUGUST 3, 1998
8,113,379 SHARES
SANTI GROUP, INC.
COMMON STOCK
---------------
This Prospectus relates to the offer and sale from time to time of up to
8,113,379 shares of common stock, $.0001 par value per share (the "Common
Stock"), of SanTi Group, Inc. ("SanTi" or the "Company") by the holders thereof
named herein (collectively, the "Selling Stockholders"). The 8,113,379 shares of
Common Stock being offered hereby by the Selling Stockholders (the "Offering")
were issued primarily in connection with certain private placements, in
acquisitions of assets by the Company, or in connection with the exercise of
options to acquire shares of Common Stock (the "Shares"). The Company is
registering the Shares to provide the Selling Stockholders with freely tradeable
securities, but the registration of the Shares does not necessarily mean that
any or all of such Shares will be offered by the Selling Stockholders. In
addition, certain of the Selling Stockholders have agreed not to sell all or
some portion of their Shares before six to twelve months after the date of this
Prospectus. See "Plan of Distribution" and "Principal and Selling Stockholders".
The Company will not receive any of the proceeds from the sale of shares by the
Selling Stockholders.
Application will be made to have the Common Stock approved for quotation
on the Nasdaq National Market System under the symbol "SNTI." At July 29, 1998,
the Company had 9,498,313 shares of Common Stock outstanding. On July 29, 1998,
the last reported sale price of the 1,384,934 shares Common Stock subject to
trading on the Nasdaq OTC Bulletin Board (of which 9,800 shares traded) was
$20.75 per share.
The Selling Stockholders from time to time may offer and sell the
Shares held by them and registered hereunder directly or through agents or
broker-dealers on terms to be determined at each Selling Stockholder's
discretion at the time of sale. To the extent required, the names of any agent
or broker-dealer and applicable commissions or discounts and any other required
information with respect to any particular offer will be set forth in an
accompanying supplement to this Prospectus (a "Prospectus Supplement"). See
"Plan of Distribution." Each of the Selling Stockholders reserves the sole right
to accept or reject, in whole or in part, any proposed purchase of the Shares to
be made directly or through agents.
The Company will not receive any of the proceeds from the sale of
Shares by the Selling Stockholders but has agreed to bear the expenses of
registration of the Shares under Federal and state securities laws. See "Use of
Proceeds," "Principal and Selling Stockholders" and "Plan of Distribution."
The Selling Stockholders and any agents or broker-dealers that
participate with the Selling Stockholders in the distribution of Shares may be
deemed to be "underwriters" within the meaning of the Securities Act of 1933, as
amended (the "Securities Act"), and any commissions received by them and any
profit on the resale of the Shares may be deemed to be underwriting commissions
or discounts under the Securities Act.
SEE "RISK FACTORS" BEGINNING ON PAGE 7 FOR CERTAIN FACTORS RELATING
TO AN INVESTMENT IN THE COMMON STOCK.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
<PAGE> 4
Information contained herein is subject to completion or
amendment. A registration statement relating to these securities has been filed
with the Securities and Exchange Commission. These securities may not be sold
nor may offers to buy be accepted prior to the time the registration statement
becomes effective. This Prospectus shall not constitute an offer to sell or the
solicitation of an offer to buy nor shall there be any sale of these securities
in any State in which such offer, solicitation or sale would be unlawful prior
to registration or qualification under the securities laws of any such State.
2
<PAGE> 5
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by the more
detailed information and the financial statements, including the notes thereto,
appearing elsewhere in this Prospectus. Unless otherwise indicated, the terms
"Company" and "SanTi" refer collectively to SanTi Group , Inc. and its
subsidiaries, and all information in this Prospectus reflects the reorganization
of the Company's corporate structure effected in May 1998.
THE COMPANY
SanTi Group, Inc. ("SanTi" or the "Company") engages in the following
businesses relating to the nonhazardous liquid waste ("NLW") industry: grease
trap pumping and repair services; septic services (including designing, pumping,
installation and maintenance); sewer and drain cleaning services; high pressure
water jetting services; portable toilet servicing; bulk liquid waste
transportation; biosolids management; on-site biotreatment systems and liquid
waste processing and disposal. SanTi's customers include restaurants, hospitals,
military bases, office buildings, apartments, schools, municipalities,
industrial businesses and single family residences. Effective May 13, 1998,
SanTi merged with and into Microlytics, Inc., a Delaware corporation ("Micro"),
with Micro surviving the merger and changing its name to SanTi. See "Business -
Predecessor Corporations" and "- The Merger." All references to SanTi or the
Company include its operating subsidiaries unless the context indicates
otherwise.
SanTi intends to expand its presence in the NLW industry through internal
growth and acquisitions of local service providers throughout the United States.
The acquisitions will be made primarily with cash, shares of Common Stock or a
combination of cash and shares of Common Stock. The Company believes these
acquisitions, by consolidating smaller local service providers, will create
synergies and improve efficiencies in the area of NLW management.
THE NLW INDUSTRY
The Company estimates that the portable toilet, septic tank and grease trap
business segment of the U.S. domestic NLW industry generates approximately $20
billion in revenues annually. There are approximately 25,000 service providers
currently in the NLW industry and, of these service providers, approximately 75%
generate less than $500,000 of annual revenues. The Company believes the NLW
industry will continue to grow based on increased waste from a growing
population and general economic conditions that are driving new building demand
and the need for NLW services.
Because the NLW industry is so highly fragmented, management believes the
industry has the potential for significant cost savings by the economies of
scale that may be realized in consolidation. These costs savings would include
efficiencies as a result of common billing, the coordination of advertising, the
elimination of duplicative professional and technical support providers, the
standardization and upgrading of equipment and the improvement of employee
training. SanTi intends to determine lines of the NLW business in which an
acquired service provider is not currently engaged and assist the service
provider in expanding into those areas. There can be no assurance, however, that
SanTi will be able to profitability consolidate service providers within the NLW
industry.
THE BUSINESS
SanTi currently engages in each of the NLW businesses described above.
SanTi's operating subsidiaries include: Bone-Dry Enterprises, Inc.; SanTi Group
of Florida, Inc.; SanTi Group of Pennsylvania, Inc.; and SanTi Group of New
York, Inc. Each subsidiary of SanTi intends to acquire additional assets from
local service providers and act as an operating division of SanTi in the area in
which it is located. These local operating divisions operate under various
tradenames, as described below.
Bone-Dry Enterprises, Inc. ("Georgia Group"). The Georgia Group is engaged
in NLW collection and hauling operations in the state of Georgia. The Georgia
Group operates under the following tradenames: Andrews Environmental, Bone-Dry
Enterprises ("Bone-Dry") and Quality Plumbing and Septic.
3
<PAGE> 6
SanTi Group of Florida, Inc. ("Florida Group"). The Florida Group is engaged
in NLW collection and hauling operations in the state of Florida. The Florida
Group operates under the following tradenames: Brownie Environmental Services,
Grease-Tec and A Rapid Rooter Sewer and Drain.
SanTi Group of Pennsylvania, Inc. ("Pennsylvania Group"). The Pennsylvania
Group is engaged in NLW collection and hauling operations in the state of
Pennsylvania. The Pennsylvania Group has one wholly owned subsidiary, Nutrecon,
Inc., which holds the operating permits and the leases for a facility acquired
from Ferrero Wastewater Management, Inc., in Ambler, Pennsylvania. The
Pennsylvania Group operates under the following tradenames: Ferrero Wastewater
Management and Eldredge Wastewater Management.
SanTi Group of New York, Inc. ("New York Group"). The New York Group is
engaged in NLW collection and hauling operations in the state of New York. The
New York Group operates under the following tradenames: RGM Liquid Waste Removal
and Devito Environmental.
The Company receives fees to collect, process and dispose of nonhazardous
liquid wastes. Collection fees charged to customers vary per gallon by waste
stream according to constituents of the waste, expenses associated with
processing the waste and competitive factors. Grease trap waste from restaurant
and other food processing and preparation facilities are transported to SanTi's
facilities in vacuum trucks, trailers and other transportable containers. SanTi
operates a fleet of vehicles to collect waste directly from generators and
receives waste from independent transporters servicing additional waste
generators. Using a variety of physical, chemical, thermal and other biological
techniques, the waste is broken down into constituent components. Water
extracted from the waste is pretreated and then discharged into the municipal
sanitary sewer system or applied to leased grasslands. Solid materials are dried
and disposed of in a solid waste landfill. At some locations where the Company
does not have pretreatment facilities, the waste is transported to private
pretreatment facilities, or, where permitted by local regulations, directly to
municipal or private wastewater treatment facilities.
SanTi also engages in the business of biosolids management through the
reuse of organic materials. SanTi provides transportation, treatment, site
monitoring, and land application to private companies. SanTi's vehicles pick up
and transport biosolids to various sites. SanTi also provides professional
management and consulting services for treatment of biosolids and the monitoring
and application onto leased grasslands of treated biosolids.
The Company benefits from federal, state and local regulations prohibiting
the disposal of grease trap waste and other waste in municipal collection and
treatment systems. Although restaurants, food processing and preparation
facilities and other industrial operations have produced such waste for many
years, regulations governing the management of NLW, and the enforcement of such
regulations, are becoming increasingly stringent. These requirements have
increased the value of SanTi's services to its customers in recent years. As
federal, state and local regulations governing the disposal of NLW increase,
SanTi believes the amount of NLW products delivered to third parties for
processing and disposal will continue to increase.
SanTi will target the acquisition and integration of local service providers
in the NLW industry that SanTi believes will be profitable additions to the
Company. SanTi intends to focus on the integration of entities acquired and to
increase profits and productivity through operational and efficiency
improvements, standardization of procedures, equipment standards and procurement
procedures.
SanTi intends to establish local operating facilities or service centers
throughout the United States, with initial service centers established in major
population centers. Acquired local service providers in these areas will be
converted to service centers. A service center manager at each location will be
responsible for the service center's overall performance. The manager will be
supported by supervisors responsible for one or more lines of business. The
manager will also be supported by maintenance managers responsible for the
maintenance and repair of all equipment. The service center managers will report
to district managers, who will typically have responsibility for eight to twelve
service center managers. The district managers will have general management
responsibility for their geographical areas.
SanTi was incorporated in Delaware and its principal executive offices are
located at 14901 Quorum Drive, Suite 200, Dallas, Texas 75240. Its telephone
number at such offices is (972) 858-6025.
4
<PAGE> 7
SECURITIES TO BE OFFERED
This Prospectus relates to the offer and sale from time to time of up to
8,113,379 Shares by the Selling Stockholders, some of whom may be deemed
affiliates of the Company. The Company will not receive any of the proceeds from
the sale of the Shares but has agreed to bear the expenses of registration under
federal and state securities laws, in consideration for the agreement by certain
of the Selling Stockholders to enter into agreements with the Company not to
sell all or a portion of their Shares for a six to twelve month period without
the prior written consent of the Company (the "Lock-Up Agreements"). The Lock-Up
Agreements provide that any waiver of the terms of a Lock-Up Agreement must be
approved by the unanimous decision of the non-employee directors of the Company.
The Lock-Up Agreements, in certain cases, extend the required holding period for
Selling Stockholders who are not affiliates of the Company. The Selling
Stockholders must pay any expenses or commissions on the sale of the Shares. The
registration of the Shares does not necessarily mean that any of the Shares not
subject to the Lock-Up Agreements will be offered or sold by the Selling
Stockholders or that Shares subject to the Lock-Up Agreements will be offered or
sold upon expiration of the applicable Lock-Up Agreement.
The Shares were issued primarily in connection with private placements,
upon the exercise of options to acquire shares of Common Stock, or as
consideration or partial consideration for the acquisition of assets of service
providers in the NLW industry.
RISK FACTORS
The acquisition of the Shares involves substantial risk. See "RISK FACTORS."
5
<PAGE> 8
SUMMARY CONSOLIDATED FINANCIAL AND OPERATING DATA
<TABLE>
<CAPTION>
PREDECESSOR SUCCESSOR
------------------------------------------------------ ----------------------------
PERIOD FROM
YEAR ENDED DECEMBER 31, PERIOD FROM THREE INCEPTION THREE
JANUARY 1, MONTHS (MARCH 19, MONTHS
1997 TO ENDED 1997) TO ENDED
DECEMBER MARCH 31, DECEMBER MARCH
1995 1996 21, 1997 1997 31, 1997 31, 1998
---- ---- -------- ---- -------- ---------
STATEMENT OF OPERATIONS DATA:
<S> <C> <C> <C> <C> <C> <C>
Revenues $1,499,392 $1,832,043 $1,218,268 $423,911 $ 737,858 $2,634,722
Operating Expenses:
Cost of Operations 615,069 785,996 625,892 204,670 406,638 1,647,530
General and Administrative 754,580 757,655 646,273 216,361 521,372 1,524,389
Depreciation and Amortization 94,948 122,296 121,496 47,486 127,338 177,900
---------- ---------- ---------- -------- ---------- -----------
Total Operating expenses 1,464,597 1,665,947 1,393,661 468,517 1,055,348 3,349,819
---------- ---------- ---------- -------- ---------- -----------
Income (Loss) from Operations 34,795 166,096 (175,393) (44,606) (317,490) (715,097)
Interest Expense 45,475 70,868 22,077 8,381 104,494 106,713
Other Expense (Income) 7,404 (2,500) (204,124) (195,794) -- --
---------- ---------- ---------- -------- ---------- -----------
Income (Loss) Before Income Taxes (18,084) 97,728 6,654 142,807 (421,984) (821,810)
Income Tax Provision (Benefit) (3,304) 39,094 4,334 54,560 (163,632) (318,536)
---------- ---------- ---------- -------- ---------- -----------
Net Income (Loss) $ (14,780) $ 58,634 $ 2,320 $ 88,247 $ (258,352) $ (503,274)
========== ========== ========== ======== ========== ===========
Net Income (Loss) per share - Basic and
Diluted N/A N/A N/A N/A $ (0.28) $ (0.10)
---------- ---------- ---------- -------- ---------- -----------
Weighted average shares outstanding -
Basic and Diluted N/A N/A N/A N/A 913,470 4,874,434
========== ========== ========== ======== ========== ===========
</TABLE>
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BALANCE SHEET DATA: DECEMBER 31, 1997 MARCH 31, 1998
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<S> <C> <C>
Working Capital (deficit) $(1,153,561) $ (873,830)
Total assets 2,614,143 30,927,594
Long-term debt, including current portion 303,955 2,253,123
Accumulated deficit (258,352) (761,626)
Total shareholders' equity 812,453 13,141,179
</TABLE>
6
<PAGE> 9
RISK FACTORS
The following risk factors should be considered carefully in addition to
the other information in this Prospectus before purchasing the shares of Common
Stock offered hereby. Certain statements in this Prospectus are forward-looking
and are sometimes identified by the use of forward-looking words or phrases such
as "intends" or "intended," "will be positioned," "believes," "expects," is or
are "expected," "anticipates," and "anticipated." These forward-looking
statements are based on the Company's current expectations. To the extent any of
the information contained in this Prospectus constitutes a "forward-looking
statement" as defined in Section 27A(i)(1) of the Securities Act, the risk
factors set forth below are cautionary statements identifying important factors
that could cause actual results to differ materially from those in the
forward-looking statement.
OPERATING STRATEGY
SanTi's ability to increase revenues of its existing operations and its
acquired service providers will be affected by various factors, including:
customer demand for NLW treatment and disposal services, SanTi's ability to
expand the range of services offered to customers and SanTi's ability to
develop national and regional accounts for its services and other marketing
programs necessary to attract new customers and attract and retain necessary
personnel. There can be no assurance that SanTi's operating strategy will be
successful or that SanTi will be able to generate cash flows adequate to support
its operations and internal growth.
RISK RELATED TO THE COMPANY'S ACQUISITION STRATEGY
The Company intends to grow significantly through the acquisition of
additional NLW service providers. The Company expects to face competition for
acquisition candidates, which may limit the number of acquisition opportunities
and may lead to higher acquisition prices. There can be no assurance that the
Company will be able to identify, acquire or manage additional businesses
profitably or to integrate successfully any acquired businesses into the Company
without substantial or material unanticipated costs, delays or other operational
or financial problems. Businesses acquired by the Company may have liabilities
that the Company does not discover or may be unable to discover during its
pre-acquisition investigations, including liabilities arising from environmental
contamination or non-compliance by prior owners with environmental laws or
regulatory requirements, and for which the Company, as a successor owner or
operator, may be responsible. Certain environmental liabilities, even if not
expressly assumed by the Company, may nonetheless be imposed on the Company
under certain legal principles of successor liability including those under the
Comprehensive Environmental Response Compensation and Liability Act. The Company
may be required under federal, state or local law to investigate and remediate
any contamination that may have resulted from the processing of any hazardous
substances by any of these businesses. Any indemnities or warranties, due to
their limited scope, amount, duration and the financial limitations of the
indemnitor or warrantor may not fully cover such liabilities. Further,
acquisitions involve a number of other special risks, including failure of the
acquired business to achieve expected results, diversion of management's
attention, failure to retain key personnel of the acquired business and risks
associated with unanticipated events, all of which could have a material adverse
effect on the Company's business, results of operations and earnings resulting
from increased goodwill amortization and interest cost and the costs resulting
from the issuance of securities could also have a material adverse effect. In
addition, if the Company is not able to successfully integrate the operations of
one or more of its acquired businesses, the benefits expected to be derived by
the Company from consolidating certain overhead functions such as cash
management, human resources, finance and insurance will not be realized. The
Company currently has no binding agreements to make acquisitions. See "Business
- -- Acquisitions" and "Management's Discussion and Analysis of Financial
Condition and Results of Operations -- Overview."
RISK RELATED TO ACQUISITION FINANCING
The Company's ability to acquire local NLW service providers at
economically attractive prices, integrate their operations and then grow their
operations profitably, will determine the Company's success. The Company intends
to continue to expand its market presence in its current locations and enter
other markets through acquisitions or the opening of new offices. The Company's
ability to continue its growth and attain profitability will depend on a number
of factors, including the availability of capital to fund acquisitions, existing
and emerging competition and the ability to maintain sufficient profit margins
despite cost increases and pricing pressures. The Company currently intends to
finance future acquisitions by using Common Stock, cash, or a combination of
Common Stock and cash. If Common Stock is issued in connection with future
acquisitions or earn-out provisions of completed acquisitions, purchasers of
Common Stock in this Offering may experience dilution in the earnings, cash flow
and net tangible book
7
<PAGE> 10
value of their stock. If the Common Stock does not maintain a sufficient market
value, or potential acquisition candidates are otherwise unwilling to accept
Common Stock as all or part of the consideration for the sale of their
businesses, the Company may be required to use more of its cash resources, if
available, or incur indebtedness in order to continue its acquisition program.
The Company has a $40 million credit facility (the "Credit Agreement") under
which the Company may borrow to fund acquisition and working capital
requirements; provided, however, that under the Credit Agreement, the banks'
consent is required in order for the Company to consummate certain acquisitions
and the Company is also constrained by the requirement to satisfy certain
financial covenants in order to incur indebtedness (including without
limitation, debt assumed in connection with acquisitions). See "Management's
Discussion and Analysis of Financial Condition and Results of Operations --
Liquidity and Capital Resources." If the Company does not have sufficient cash
resources to pursue acquisitions, its growth could be limited unless it is able
to obtain additional capital through debt or equity financing. There can be no
assurance that the Company will be able to obtain the financing it will need in
the near future on terms the Company deems acceptable. The inability to acquire
such financing, if needed, could have a material adverse effect on the Company's
business, financial condition and results of operations.
LIMITED OPERATING HISTORY, ABSENCE OF COMBINED OPERATING HISTORY
The Company was organized in 1997 and began active operations at that time.
As a result, the Company has very little operating history as an integrated NLW
business to which investors may look to evaluate the Company's performance.
Since the Company began operations, it has completed nine acquisitions. There
can be no assurance that the Company will be able to successfully integrate the
operations of the acquired businesses or any subsequently acquired businesses or
to institute the necessary systems and procedures, including accounting and
financial reporting systems, to manage the entire combined enterprise on a
profitable basis. In addition, there can be no assurance that the Company's
management group will be able to effectively manage the combined entity or to
effectively implement the Company's acquisition program and internal growth
strategy. The Pro Forma Financial Statements of the Company cover periods when
the acquired businesses were not under common control or management and may not
be indicative of the Company's future financial or operating results. The
inability of the Company to integrate these acquired businesses successfully
would have a material adverse effect on the Company's business, results of
operations and financial condition, as well as its acquisition program. See
"Business -- Acquisitions" and "Management."
MARKET IMPACT OF OFFERING
This Prospectus relates to the sale of up to 8,113,379 Shares of Common
Stock by the Selling Stockholders. The Company will not receive any proceeds
from the sale of the Shares and has prepared this Prospectus at its cost
in return for certain of the Selling Stockholders entering into the Lock-Up
Agreements. Prior to the registration of the Shares pursuant to this Prospectus,
1,384,934 shares of Common Stock or approximately 15% of the 9,498,313 issued
and outstanding shares of Common Stock have been freely tradeable. Pursuant to
the terms of the Lock-Up Agreements, upon the effective date of the registration
statement of which this Prospectus is a part (the "Effective Date"), an
additional 912,808 of the Shares will be eligible for immediate sale by the
Selling Stockholders, an increase of approximately 66% in the number of shares
of Common Stock eligible for sale. Six months after the Effective Date, an
additional 1,259,375 of the Shares will be eligible for sale by the Selling
Stockholders, an increase of approximately 55% in the number of shares of Common
Stock eligible for sale. Nine months after the Effective Date, an additional
2,163,071 of the Shares will be eligible for sale by the Selling Stockholders,
an increase of approximately 61% in the number of shares of Common Stock
eligible for sale. Twelve months after the Effective Date, an additional
3,778,125 of the Shares will be eligible for sale by the Selling Stockholders,
an increase of approximately 66% in the number of shares of Common Stock
eligible for sale. The sales of such significant blocks of stock, or even the
possibility of such sales, could adversely affect the prevailing market price of
and the trading market for the Common Stock and reduce the prices available in
the market. However, there can be no assurance that any or all of the Shares
will be offered for sale by the Selling Stockholders.
HISTORY OF NET LOSSES
The Company has experienced operating losses since its inception, and, as
of March 31, 1998, the Company had an accumulated deficit of $761,626.
Management anticipates that the Company will incur net losses for the three
months ended June 30, 1998. Although the Company anticipates that it will be
profitable in the future, there can be no assurance that the Company will
actually achieve profitability. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations."
8
<PAGE> 11
COMPETITION
SanTi competes with a significant number of other NLW service providers.
Competitors compete primarily on the basis of proximity to collection
operations, fees charged and quality of service. SanTi must compete with area
landfills that accept grease trap waste. Future technological changes and
innovations may result in a reduction in the amount of NLW generated, or in
alternative methods of treatment and disposal being developed. SanTi also faces
competition from customers that may seek to enhance and develop their own
methods of disposal. Increased use of internal treatment and disposal methods
and other competitive factors may have a material adverse effect on SanTi's
business, results of operation and financial condition.
SanTi will be at a disadvantage in competing against service providers that
are better capitalized, have greater name recognition, have more background and
experience, have greater financial, technical, marketing and other resources and
skills, have better facilities and are able to provide services or products at a
lower cost than SanTi. As the NLW industry is currently highly fragmented, the
addition of local NLW service providers is the only strategy by which SanTi may
be able to penetrate existing markets. Even if the Company is successful in
consolidating local service providers in a given area, there can be no assurance
that new competitors will not enter the market due to the low barriers to entry
in the NLW industry. As a result of these competitive factors, there can be no
assurance that SanTi's growth strategy will be successful or that SanTi will be
able to generate cash flow adequate for its operations and to support future
acquisitions and internal growth.
GOVERNMENT REGULATIONS
SanTi is subject to rules and regulations of various federal, state and
local governmental agencies. Environmental laws and regulations are, and will
continue to be, a principal factor affecting the marketability of the services
provided by SanTi. Any changes in these laws or regulations may adversely affect
the operations of SanTi by imposing additional regulatory compliance costs on
SanTi, requiring the modification of or adversely affecting the market for
SanTi's services. To the extent that demand for these services is based upon the
need to comply with these regulations, any modification to these regulations may
decrease the demand for these services and adversely affect SanTi's business
condition and results of operations.
Additionally, if new environmental legislation or regulations are enacted
or existing legislation or regulations are amended or enforced differently,
SanTi may be required to obtain additional operating permits, registrations or
approvals. The process of obtaining required permits, registrations or approvals
can be lengthy and expensive and the issuance of such permits or the obtaining
of such approvals may be subject to public opposition. There can be no assurance
that SanTi will be able to meet the applicable regulatory requirements.
The Resource Conservation and Recovery Act ("RCRA") is the principal
federal statute governing hazardous and solid waste generation, treatment,
storage and disposal. RCRA and state hazardous waste management programs govern
the handling and disposal of "hazardous waste." The U.S. Environmental
Protection Agency ("EPA") has issued regulations pursuant to RCRA. States have
also promulgated regulations under comparable state statutes that govern
hazardous waste generators, transporters and owners and operators of hazardous
waste treatment, storage and disposal facilities. These regulations impose
detailed operating, inspection, training and emergency preparedness and response
standards and requirements for the financial responsibility, manifesting of
wastes, record keeping and reporting, as well as treatment standards for any
hazardous wastes intended for land disposal.
NLW is currently exempt from the requirements of RCRA. The repeal or
modification of the RCRA exemption covering NLW, or the modification of
applicable regulations or interpretations regarding the treatment or disposal of
NLW, may require SanTi to alter its method of treating and disposing of NLW.
SanTi's current methods do not comply with the methods prescribed by the EPA for
treatment and/or disposal of waste as defined by RCRA. These potential changes
may result in decreased demand for SanTi's services and could have a material
adverse effect on SanTi's business.
The Comprehensive Environmental Response, Competition and Liability Act
("CERCLA") provides for immediate response and removal actions coordinated by
the EPA for releases of hazardous substances into the environment and authorizes
the government or private parties to respond to the release or potential release
of hazardous substances. The government may also order persons responsible for
the release to perform any necessary cleanup. Liability extends to the present
owners and operators of waste disposal facilities from which a release occurs,
persons who owned or operated the facilities at the time the substance was
released, persons who arranged for the disposal or treatment of hazardous
substances and waste transporters who selected such facilities for treatment or
disposal of hazardous substances. CERCLA creates strict, joint and several
liability for all costs of removal and remediation, other necessary response
costs and damages for injury to natural resources.
9
<PAGE> 12
Because the Company will be engaged in businesses that involve the
treatment and removal of nonhazardous liquid waste, SanTi does not expect to be
subject to CERCLA. However, if SanTi were to acquire a business that in the past
has disposed of hazardous waste or treated hazardous waste that falls within the
parameters of CERCLA, SanTi may be held jointly and severally liable for the
costs of any damage or required cleanup of the site.
POTENTIAL ENVIRONMENTAL LIABILITY; INSUFFICIENCY OF INSURANCE
During the ordinary course of its operations, the Company has from time to
time received, and expects that it may in the future receive, citations or
notices from governmental authorities that its operations are not in compliance
with its permits or certain applicable regulations, including various
transportation, environmental or land use laws and regulations. The Company
generally seeks to work with the authorities to resolve the issues raised by
such citations or notices. There can be no assurance, however, that the Company
will always be successful in this regard, and the failure to resolve a
significant issue could result in one or more adverse consequences to the
Company described above.
While the Company maintains insurance, such insurance is subject to various
deductible and coverage limits and certain policies exclude coverage for damages
resulting from environmental contamination. There can be no assurance that
insurance will continue to be available to the Company on commercially
reasonable terms, that the possible types of liabilities that may be incurred by
the Company will be covered by its insurance, that the Company's insurance
carriers will be able to meet their obligations under their policies or that the
dollar amount of such liabilities will not exceed the Company's policy limits.
An uninsured claim, if successful and of significant magnitude, could have a
material adverse effect on the Company's business, results of operations and
financial condition.
RELIANCE ON MANAGEMENT AND KEY PERSONNEL
The Company is dependent on its management and key personnel and believes
that its success will depend upon the efforts and abilities of management and
such key personnel. Furthermore, the Company may be dependent on the management
and key personnel of companies that may be acquired in the future. If any of
these individuals do not continue in their positions with the Company, or if the
Company is unable to attract and retain other skilled employees, the Company's
business, financial condition and results of operations could be materially
adversely effected. Competition for qualified personnel is intense and there can
be no assurance that the Company will be able to continue to hire and retain
sufficiently qualified management and other personnel necessary to conduct its
business successfully.
EMPLOYEES
The acquisition and integration of additional NLW service providers should
result in a reduction of employees as duplicate administrative processes are
eliminated. SanTi's ability to manage its growth effectively will require it to
continue to implement and improve its operational, financial and management
information systems and controls and to train, motivate and manage its
employees. SanTi intends to continually review and upgrade its management
information systems and to hire additional management and other personnel in
order to maintain the adequacy of its operational, financial and management
controls. There can be no assurance, however, that SanTi will be able to meet
these objectives.
CONTROL BY EXECUTIVE OFFICERS AND DIRECTORS
The Company's officers and directors currently beneficially own
approximately 53% of the issued and outstanding Common Stock. As a result, these
stockholders acting together would be able to control matters requiring the
approval of a majority of the stockholders, such as election of directors. The
voting power of these stockholders under certain circumstances could have the
effect of delaying or preventing a change in control of the Company. Raymond
Cash, vice chairman and a director of the Company, controls over 38% of the
issued and outstanding Common Stock, individually and through a voting trust of
which he is trustee. See "Management" and "Principal and Selling Stockholders."
Due to the Lock-Up Agreements, none of the Company's officers or directors will
be entitled to sell Shares and potentially decrease these ownership percentages
until six months after the date of this Prospectus, at which time these persons
may sell up to 25% of their Shares, although there can be no assurance that any
of these persons will sell any of their Shares. In addition, certain of the
Company's officers and directors hold options to acquire an aggregate of
1,345,000 shares of Common Stock, subject to vesting and other requirements. See
"Certain Transactions."
10
<PAGE> 13
BENEFITS OF OFFERING TO CERTAIN STOCKHOLDERS
The officers and directors of the Company beneficially own approximately
62% of the Shares subject to this Prospectus. The terms of the Lock-Up
Agreements prohibit these officers and directors from offering for sale any of
their Shares without the prior written consent of the Company until six months
after the date of this Prospectus, at which time, such persons will be entitled
to sell up to 25% of their Shares. After twelve months from the date of this
Prospectus, these officers and directors will be entitled to sell all of their
Shares and will not be subject to the volume limitations of Rule 144 promulgated
under the Securities Act that would apply to the Shares if the Registration
Statement of which this Prospectus is a part was not effective. There can be no
assurance that any of the officers or directors will sell any of their Shares
even when entitled to do so.
POSSIBLE ADVERSE IMPACT OF FUTURE EVENTS ON SHARE PRICE OF COMMON STOCK
Future sales of the Common Stock, including issuances of shares of Common
Stock in acquisitions, or the perception that such sales could occur, could
adversely affect prevailing market prices for the Common Stock. The Company is
registering an additional 5,000,000 shares of Common Stock to be used in
acquisitions of the assets of NLW service providers and intends to file a
Registration Statement on Form S-8 to register shares of Common Stock issuable
upon the exercise of options pursuant to its stock option plan. See "Plan of
Distribution". The market price of the Common Stock could be subject to
significant fluctuations in response to various factors and events, including
the issuance of shares in acquisitions, the liquidity of the market for the
Common Stock, differences between the Company's actual financial or operating
results and those expected by investors and analysts, changes in analysts'
recommendations or projections, new statutes or regulations or changes in
interpretations of existing statutes and regulations affecting the Company's
business, changes in general economic conditions or broad stock market
fluctuations.
SUBSTANTIAL WARRANTS, OPTIONS AND CONTINGENT AND ACQUISITION SHARES
As of July 29, 1998, the Company has issued outstanding warrants and
options to purchase up to 265,559 and 1,345,000 shares of Common Stock,
respectively. The existence of such warrants and options may hinder future
financings by the Company and the exercise of such warrants and options may
dilute the interests of all stockholders. Possible future resale of Common Stock
issuable on the exercise of such warrants and options could adversely affect the
prevailing market price of the Common Stock. The Company intends to file a
Registration Statement on Form S-8 to register the shares of Common Stock
issuable upon the exercise of options. Further, the holders of warrants and
options may exercise them at a time when the Company would otherwise be able to
obtain additional equity capital on terms more favorable to the Company. In
addition, 93,600 shares of Common Stock may be issued as additional
consideration for completed acquisitions, subject to off-sets as provided in the
agreements relating thereto, and 5,000,000 shares of Common Stock may be issued
as partial or full consideration in additional acquisitions.
ISSUANCE OF ADDITIONAL STOCK
The Company has authorized capital of 70,000,000 shares of Common Stock and
30,000,000 shares of Preferred Stock, $.0001 par value per share. As of July 29,
1998, 9,498,313 shares of Common Stock and no shares of Preferred Stock were
issued and outstanding, with an additional 1,657,909 shares of Common Stock
reserved for issuance on the exercise or conversion of warrants, options, and
other outstanding rights to acquire Common Stock. Subject to applicable state
law, the Company's board of directors has authority, without action or vote of
the stockholders, to issue all or part of the authorized but unissued shares of
Common Stock and Preferred Stock. Any such issuance will dilute the percentage
ownership of stockholders and may dilute the book value of the Company's Common
Stock.
POTENTIAL ANTI-TAKEOVER EFFECTS OF CERTIFICATE, BYLAWS, DELAWARE LAW AND THE
EMPLOYMENT AGREEMENTS
Certain provisions of Delaware law and certain provisions of the Company's
Certificate of Incorporation (the "Certificate") and the Company's Bylaws (the
"Bylaws") could delay or impede the removal of incumbent directors and could
make it more difficult for a third-party to acquire, or could discourage a
third-party from attempting to acquire, control of the Company. Such provisions
could limit the price that certain investors might be willing to pay in the
future for shares of the Company's Common Stock. The Certificate and Bylaws
impose various procedural and other requirements (including a staggered board of
directors, removal of directors only for cause and the issuance of Preferred
Stock as described below) that could make it more difficult for stockholders to
effect certain corporate actions. The Certificate gives the Company's Board of
Directors the authority to issue up to 30 million
11
<PAGE> 14
shares of Preferred Stock and to determine the price, rights, preferences and
restrictions, including the voting rights of such shares, without any further
vote or action by the Company's stockholders. The rights of holders of Common
Stock will be subject to, and may be adversely affected by, the rights of the
holders of any Preferred Stock issued in the future. The Company has no current
plans to issue such Preferred Stock. The "business combinations" statute under
Delaware law may restrict certain business combinations by interested
stockholders. See "Description of Capital Stock - Certain Provisions of the
Articles, Bylaws and Delaware Law." The Company's executive officers have
entered into employment agreements with the Company which contain change in
control provisions. The change in control provisions may hinder, delay, deter or
prevent a tender offer, proxy contest or other attempted takeover because the
covered employees can terminate their employment in such event and receive
payments for 24 months to 60 months after termination pursuant to their
respective agreements. See "Management - Employment Agreements and Change of
Control Arrangements."
12
<PAGE> 15
USE OF PROCEEDS
The Company will not receive any proceeds from the sale of Shares of Common
Stock by the Selling Stockholders hereunder. The Company has agreed to pay the
expenses of this Offering as consideration for certain of the Selling
Stockholders entering into the Lock-Up Agreements and anticipates that it will
incur costs of approximately $200,000 in connection with the Offering,
including filing fees, transfer agent costs, printing costs, listing fees and
legal and accounting fees.
DETERMINATION OF OFFERING PRICE
With respect to Shares offered by the Selling Stockholders, such Shares
shall be sold from time to time, subject to the Lock-Up Agreements, at such
prices as the Selling Stockholders shall determine may be in their best
interests and at which a willing buyer can be found. Such prices may not be
related to the assets, earnings, or book value of the Company or any other
recognized criteria of valuation. There can be no assurance that the Selling
Stockholders will sell any or all of the Shares subject to this Prospectus.
DIVIDEND POLICY
The Company has not declared or paid any cash dividends on its Common
Stock. The Company currently intends to retain future earnings to finance its
growth and development and, therefore, does not anticipate paying any cash
dividends in the foreseeable future. Payment of any future dividends will depend
upon the future earnings and capital requirements of the Company and other
factors that the Board of Directors considers appropriate. Additionally, the
terms of the Company's Credit Agreement restrict the payment of cash dividends
on any of its capital stock.
13
<PAGE> 16
SELECTED CONSOLIDATED FINANCIAL DATA
The following table sets forth selected financial data of the Company. The
selected financial data for the period from inception (March 19, 1997) to
December 31, 1997 are derived from the audited financial statements of the
Company, and the selected financial data for the years ended December 31, 1995
and 1996 and for the period from January 1, 1997 to December 21, 1997 are
derived from the audited financial statements of the Predecessor (as defined
below). The selected financial data for the three month period ended March 31,
1998 are derived from the unaudited financial statements of the Company. The
selected financial data for the years ended December 31, 1993 and 1994 and for
the three month period ended March 31, 1997 are derived from the unaudited
financial statements of the Predecessor. As a result of acquisitions occurring
in 1997 and 1998, the Company's historical financial statements are not
representative of the financial results expected for future periods. This
information should be read in conjunction with "Management's Discussion and
Analysis of Financial Condition and Results of Operations," and the consolidated
financial statements of the Company and Predecessor and notes thereto included
elsewhere herein.
<TABLE>
<CAPTION>
PREDECESSOR SUCCESSOR
-------------------------------------------------------------------- -----------------------
PERIOD THREE PERIOD FROM
YEAR ENDED DECEMBER 31, FROM MONTHS INCEPTION THREE
----------------------------------------------- JANUARY 1, ENDED (MARCH 19, MONTHS
1997 TO MARCH 1997) TO ENDED
DECEMBER 31, DECEMBER MARCH
1993 1994 1995 1996 21, 1997 1997 31, 1997 31, 1998
----------------------------------------------- -------- ---- -------- ---------
STATEMENT OF OPERATIONS DATA:
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Revenues $1,260,344 $1,327,348 $1,499,392 $1,832,043 $1,218,268 $423,911 $ 737,858 $2,634,722
Operating Expenses:
Cost of Operations 329,101 573,516 615,069 785,996 625,892 204,670 406,638 1,647,530
General and Administrative 763,420 597,569 754,580 757,655 646,273 216,361 521,372 1,524,389
Depreciation and Amortization 158,605 115,397 94,948 122,296 121,496 47,486 127,338 177,900
---------- ---------- ---------- ---------- ---------- -------- ---------- ----------
Total Operating expenses 1,251,126 1,286,392 1,464,597 1,665,947 1,393,661 468,517 1,055,348 3,349,819
---------- ---------- ---------- ---------- ---------- -------- ---------- ----------
Income (Loss) from Operations 9,218 40,956 34,795 166,096 (175,393) (44,606) (317,490) (715,097)
Interest Expense 40,407 42,453 45,475 70,868 22,077 8,381 104,494 106,713
Other Expense (Income) 0 1,575 7,404 (2,500) (204,124) (195,794) -- --
---------- ---------- ---------- ---------- ---------- -------- ---------- ----------
Income (Loss) Before Income
Taxes (31,189) (3,072) (18,084) 97,728 6,654 142,807 (421,984) (821,810)
Income Tax Provision (Benefit) 0 3,565 (3,304) 39,094 4,334 54,560 (163,632) (318,536)
---------- ---------- ---------- ---------- ---------- -------- ---------- ----------
Net Income (Loss) $ (31,189) $ (6,637) $ (14,780) $ 58,634 $ 2,320 $ 88,247 $ (258,352) $ (503,274)
========== ========== ========== ========== ========== ======== ========== ==========
Net Income (Loss) per share -
Basic and Diluted N/A N/A N/A N/A N/A N/A $ (0.28) $ (0.10)
---------- ---------- ---------- ---------- ---------- -------- ---------- ----------
Weighted average shares
outstanding - Basic and Diluted N/A N/A N/A N/A N/A N/A 913,470 4,874,434
========== ========== ========== ========== ========== ======== ========== ==========
</TABLE>
14
<PAGE> 17
<TABLE>
<CAPTION>
BALANCE SHEET DATA: DECEMBER 31, 1997 MARCH 31, 1998
----------------- --------------
<S> <C> <C>
Working Capital (deficit) $ (1,153,561) $ (873,830)
Total assets 2,614,143 30,927,594
Long-term debt, including current portion 303,955 2,253,123
Accumulated deficit (258,352) (761,626)
Total shareholders' equity 812,453 13,141,179
</TABLE>
15
<PAGE> 18
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion should be read in conjunction with the
Consolidated Financial Statements and the Notes thereto included elsewhere in
this Prospectus. This discussion contains forward-looking statements that
involve risks and uncertainties. The Company's actual results may vary
significantly from the results discussed in the forward-looking statements.
Factors that might cause such a difference include, but are not limited to,
those discussed in "Risk Factors."
OVERVIEW
SanTi engages in businesses relating to the NLW industry. These
businesses include grease trap pumping, septic tank services (including
designing, pumping, installation and maintenance), sewer and drain cleaning
services; high pressure jetting services, portable toilet servicing; bulk liquid
waste transportation; on-site biotreatment systems; biosolids management; and
liquid waste processing and disposal. The customers of SanTi include
restaurants, hospitals, military bases, office buildings, apartments, schools,
municipalities, industrial businesses and single family residences.
SanTi intends to expand its business in the NLW industry through
internal growth and the acquisition of local service providers throughout the
United States. These acquisitions will be made with cash, shares of Common Stock
or a combination of cash and Common Stock. SanTi's strategy is to increase the
efficiency and profitability of each of the acquisition targets through
operational and marketing synergies with SanTi's existing business operations.
The NLW industry serves a basic need - the collection, treatment and
disposal of food and septic waste. Demand for NLW services is driven primarily
by population and the general level of economic activity. Increasing regulation
at the federal, state and local level, as well as increased awareness of and
demand for, a safer and cleaner environment are creating the need for a more
professional and environmentally responsible NLW industry.
GENERAL
The Company derives the majority of its revenues from commercial and
residential septic services (including designing, pumping, installation and
maintenance) (approximately 59% of current revenues) and to a lesser extent
sewer and drain services (approximately 20% of current revenues). Collection
fees charged to customers vary per gallon by waste stream according to
constituents of the waste, expenses associated with processing the waste and
competitive factors. Cost of operations consist of fixed costs such as salaries
and benefits of vehicle operators and construction labor and variable costs such
as supplies, fuel and equipment rentals. General and administrative costs
consist primarily of compensation and related benefits for executives and
administrative staff, advertising, office rent, communications and professional
fees. Depreciation and amortization expense primarily relates to the
depreciation of capital assets, the amortization of excess cost over the fair
value of net assets acquired (goodwill) and other intangible assets. The
Company's policy is to amortize goodwill over a 40 year life.
From its inception on March 19, 1997 through July 29, 1998, the Company has
acquired nine businesses, all of which were accounted for using the purchase
method of accounting. Prior to their acquisition by the Company, the acquired
businesses were managed as independent private businesses, and their results of
operations reflect different tax structures (S corporations and C corporations),
which have influenced, among other things, their historical levels of owners'
compensation. Certain owners who continued employment with the Company agreed to
reductions in their compensation and benefits in connection with the acquisition
of their businesses by the Company.
In connection with each of its acquisitions, the Company attempts to
implement a number of cost saving measures, including possible reductions in
management levels and other personnel, the implementation of centralized
management and cost controls and the elimination of duplicate collection routes.
RESULTS OF OPERATIONS
On March 20, 1997, the Company purchased certain assets of Andrews
Environmental, Inc. ("Andrews") associated with the Andrews grease disposal
business. On December 22, 1997, the Company acquired the remaining assets and
ongoing business of Andrews. For financial reporting purposes Andrews is
considered the predecessor to the Company (the "Predecessor"). As a result
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<PAGE> 19
of the Company's recent acquisitions and the limited period of ownership of the
acquired businesses, the Company believes that the period-to-period comparisons
and percentage relationships within the periods set forth below are not
meaningful.
The following table sets forth the percentage of certain items in relation to
net revenue:
<TABLE>
<CAPTION>
Predecessor Successor
--------------------------------------------------------- ------------------------
Period From
Three Inception Three
Year Period from months (March 19, months
ended Year ended January 1, 1997 ended 1997) to ended
December 31, December 31, to December 21, March 31, December 31, March 31,
1995 1996 1997 1997 1997 1998
----------- ------------ --------------- --------- ----------- ---------
REVENUES 100% 100% 100% 100% 100% 100%
<S> <C> <C> <C> <C> <C> <C>
EXPENSES
Cost of Operations 41 43 51 49 55 62
General and Administrative 50 41 53 51 71 58
Depreciation and Amortization 7 7 10 11 17 7
---- --- --- ---- ---- ----
TOTAL EXPENSES 98 91 114 111 143 127
---- --- --- ---- ---- ----
INCOME (LOSS) FROM OPERATIONS 2 9 (14) (11) (43) (27)
---- --- --- ---- ---- ----
INTEREST EXPENSE 3 4 2 1 14 4
OTHER (INCOME) EXPENSE 0 0 (17) (46) 0 0
---- --- --- ---- ---- ----
INCOME (LOSS) BEFORE INCOME TAXES (1) 5 1 34 (57) (31)
INCOME TAX PROVISION (BENEFIT) 0 2 1 13 (22) (12)
---- --- --- ---- ---- ----
NET INCOME (LOSS) (1%) 3% 0% 21% (35%) (19%)
==== === === ==== ==== ====
</TABLE>
THREE MONTHS ENDED MARCH 31, 1998
For the three months ended March 31, 1998, the Company reported a loss of
$503,274 on revenues of $2,634,722. Information from the date of inception
(March 19, 1997) to March 31, 1997 has not been presented because the data is
not meaningful.
The Company completed four acquisitions during the first quarter of 1998. In
January 1998, the Company acquired Ferrero Wastewater Management, Inc. located
in Ambler, Pennsylvania. In February 1998, the Company acquired A Rapid Rooter
Sewer and Drain Service, Inc. located in Pompano Beach, Florida, and Quality
Plumbing & Septic located in Douglasville, Georgia. In March 1998, the Company
acquired Seagraves, Inc. located in Orlando, Florida. All acquisitions have been
accounted for using purchase accounting and the results of operations of the
acquired businesses have been included in the Company's consolidated financial
statements from the date of each acquisition.
REVENUES: Revenues for the quarter consist of revenues from each of the
businesses acquired in 1997 plus revenues from businesses acquired during the
quarter from the date of acquisition. The four completed acquisitions
contributed approximately $2.2 million or 82% of revenues for the three months
ended March 31, 1998.
COST OF OPERATIONS: The operating margin was 38%.
GENERAL AND ADMINISTRATIVE: General and administrative expense has been and is
projected to be a significant percentage of revenue in the Company's early
stages of growth. Management anticipates that as revenue increases through
acquisitions, general and administrative expenses will increase in total, but
decrease as a percentage of revenue. For the three months ended March 31, 1998,
general and administrative expense includes non-recurring expenses associated
with the relocation of the corporate
17
<PAGE> 20
headquarters to Dallas, Texas; expenses associated with registering the Company
as a reporting company with the Securities and Exchange Commission; and costs
associated with the establishment of the Company's management team.
DEPRECIATION AND AMORTIZATION: Depreciation and amortization was $177,900 or 7%
or revenues.
LOSS FROM OPERATIONS: The loss from operations is primarily the result of the
high level of general and administrative expense.
INTEREST EXPENSE: Interest expenses for the three months ended March 31, 1998
was $106,713. Interest was incurred at an average rate of approximately 8.1%
during the first quarter.
INCOME TAX BENEFIT: An income tax benefit of 39% of pretax loss has been
computed in accordance with SFAS No. 109 "Accounting for Income Taxes."
Realization of this tax benefit is dependent on the Company generating
sufficient taxable income in future periods. Although realization is not
assured, management believes it is more likely than not that the Company will
generate taxable income in future periods to permit usage of the estimated net
operating loss carry forward. To date, all acquisitions have been taxable asset
purchases in which the Company obtained a full basis in acquired tangible and
intangible assets. To the extent the Company makes future nontaxable
acquisitions, the Company's effective rate may differ significantly from its
statutory rate due to nondeductible goodwill amortization.
PERIOD FROM INCEPTION (MARCH 19, 1997) TO DECEMBER 31, 1997
The financial statements of the Company for the period from inception (March
19, 1997) to December 31, 1997 reflect a net loss of $258,352 on revenues of
$737,858.
The Company completed three acquisitions in 1997: the grease division of
Andrews in March 1997, Atlanta Grease Trap in August 1997 and the remaining
assets of Andrews in December 1997. All three acquisitions have been accounted
for using purchase accounting and the results of operations of the acquired
businesses have been included in the consolidated financial statements from the
date of each acquisition.
REVENUES: Revenues for period from inception (March 19, 1997) to December 31,
1997 consist of revenues from each of the businesses acquired from the date of
each acquisition.
COST OF OPERATIONS: The operating margin was 45%.
GENERAL AND ADMINISTRATIVE: General and administrative expense has been and is
projected to be a significant percentage of revenues in the early stages of the
Company's growth. It is anticipated that as revenues grow from future
acquisitions, that general and administrative expense as a percentage of revenue
will decline. The amounts reported for general and administrative expense
include a number of costs associated with establishing the Company and hiring
employees.
DEPRECIATION AND AMORTIZATION: Depreciation and amortization was $127,338 or 17%
revenues.
LOSS FROM OPERATIONS: The loss from operations is due primarily to the high
level of general and administrative expense as a percentage of revenue.
INTEREST EXPENSE: Interest expense of $104,494 was based on an average interest
rate of 13% over the period.
INCOME TAX BENEFIT: An income tax benefit of 39% of pretax loss was recorded for
the period from inception (March 19, 1997) to December 31, 1997.
PERIOD FROM JANUARY 1, 1997 TO DECEMBER 21, 1997 COMPARED TO YEAR ENDED
DECEMBER 31, 1996
REVENUES: Revenues decreased 34% to $1,218,268 in 1997 from $1,832,043 in 1996.
This decrease was primarily due to the sale of the grease business to SanTi in
March 1997.
18
<PAGE> 21
COST OF OPERATIONS: Cost of operations decreased 20% to $625,892 in 1997 from
$785,996 in 1996. Cost of operations as a percentage of revenues increased to
51% in 1997 from 43% in 1996. The increase in cost of operations as a percentage
of revenues was due to the sale of the more profitable grease business in March
1997.
GENERAL AND ADMINISTRATIVE: General and administrative expense decreased to
$646,273 in 1997 from $757,655 in 1996, a decrease of 15%. The decrease in
general and administrative was a result of the sale of the grease business. As a
percentage of sales, general and administrative increased to 53% in 1997 from
41% in 1996. This increase occurred because certain general and administrative
expenses which supported both the grease business and the continuing business of
Andrews were relatively fixed in nature, and were not decreased as a result of
the sale of the grease business.
DEPRECIATION AND AMORTIZATION: Depreciation and amortization remained relatively
fixed, at approximately $122,000.
LOSS (INCOME) FROM OPERATIONS: The loss from operations of $175,393 for 1997, as
compared to income from operations of $166,096 in 1996, was primarily due to the
loss of revenue from the sale of the grease business and the inability to reduce
expenses to the extent that revenue was diminished.
INTEREST EXPENSE: Interest expense decreased from $70,868 in 1996 to $22,077 in
1997, due to decreased capital expenditures in 1997, and the decrease in debt
and interest payments associated with certain assets sold in conjunction with
the grease business.
OTHER, NET: Other, net includes a gain on sale of assets of approximately
$240,000 recorded in connection with the sale of the grease business.
PROVISION FOR INCOME TAXES: The effective tax rate increased from 40% in 1996 to
65% in 1997 due to the low level of income in 1997 and the relatively fixed
nature of certain items which are not deductible for tax purposes.
YEAR ENDED DECEMBER 31, 1996 COMPARED TO YEAR ENDED DECEMBER 31, 1995
REVENUES: Revenues increased 22.2% to $1,832,043 in 1996 from $1,499,392 in
1995. The increase was due to internal growth of the business.
COST OF OPERATIONS: Cost of operations increased 28% to $785,996 in 1996 from
$615,069 in 1995. The increase was a result of the higher level of revenue. Cost
of operations as a percentage of revenues increased to 43% in 1996 from 41% in
1995. The percentage increase was driven by additional overtime labor incurred
to generate a portion of the additional revenue.
GENERAL AND ADMINISTRATIVE: General and administrative expense remained
relatively stable. at $757,655 in 1996 and $754,580 in 1995. General and
administrative expenses have historically been a significant percentage of
revenues and relatively fixed in nature.
DEPRECIATION AND AMORTIZATION: Depreciation and amortization increased to
$122,296 in 1996 from $94,948 in 1995. This is primarily due to acquisitions of
property and equipment during 1996 and 1995.
INCOME FROM OPERATIONS: The increase of income from operations from 1995 to 1996
of $131,310 was primarily due to the growth of the business and Andrew's ability
to maintain general and administrative expenses at a relatively stable level.
INTEREST EXPENSE: Interest expense increased from $45,475 in 1995 to $70,868 in
1996, due to the financing of capital expenditures in 1996 and late 1995.
PROVISION (BENEFIT) FOR INCOME TAXES: The effective tax rate changed from a
benefit of (19)% in 1995 to a provision of 40.0% in 1996 due to the low level of
income in 1995 and the relatively fixed nature of certain items which are not
deductible for tax purposes.
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SEASONALITY AND INFLATION
The Company's operations are affected by the weather. Rainy weather requires
more frequent septic and grease trap maintenance and snow cover or frozen
conditions prevent installation and need for servicing septic systems. Although
the Company experiences a certain degree of seasonality in its operations due to
weather, this seasonality is lessened through its operations in various
geographic areas.
The Company believes that inflation and changing prices have not had, and are
not expected to have, any material adverse effect on its results of operations
in the near future.
LIQUIDITY AND CAPITAL RESOURCES
At March 31, 1998, the Company had cash of approximately $13.5 million and
negative working capital of ($873,830). Included in current liabilities was
$13.3 million in indebtedness. The negative working capital primarily results
from the financing of acquisitions with such short-term indebtedness.
On June 26, 1998, the Company entered into the $40 million revolving Credit
Agreement with Bank of America. The Company may also obtain up to $5 million in
letters of credit, subject to availability under the Credit Agreement. Interest
is payable monthly at variable rates, depending on the Company's current debt to
cash flow ratio, but is capped at Libor plus 2.5%. The Credit Agreement expires
June 26, 2001, is secured by a first lien on substantially all assets of the
Company and requires the Company to maintain certain financial ratio covenants
beginning September 30, 1998. In connection with entering into the Credit
Agreement, two existing lines of credit (the "Prior Credit Facilities") with
availability of $16.6 million were repaid and canceled.
The Company's primary requirements for capital (other than those related to
acquisitions) consist of purchasing vehicles and equipment used in the operation
of its businesses. During the three months ended March 31, 1998, the Company
made no capital expenditures because all required vehicles and equipment were
acquired in connection with the acquisitions. From March 19, 1997 (inception)
through July 20, 1998, the Company acquired nine businesses for an aggregate
consideration of $19.8 million in cash, $2.3 million in seller notes and 471,400
shares of Common Stock. In addition to the above amounts, the acquisition
agreements include contingent consideration totaling $1,608,900 in cash and
93,600 shares of Common Stock. Funding of the cash portion of the purchase
prices was provided by borrowings under the Prior Credit Facilities and proceeds
from private sales of Common Stock. From March 19, 1997(inception) through June
1998, the Company received approximately $16.3 million in proceeds from private
sales of Common Stock. The Company believes that funds provided by operations,
together with cash on hand and funds available under the Credit Agreement, will
be adequate to meet the Company's anticipated capital expenditures for the
remainder of 1998.
The Company intends to aggressively pursue internal growth and acquisition
opportunities. The timing, size or success of any acquisitions effort and the
associated potential capital commitments are unpredictable. The Company expects
to fund future acquisitions primarily through a combination of cash on hand,
borrowings from the unborrowed portion of the Credit Agreement and the possible
public or private sale of debt and equity securities.
YEAR 2000
The Company is currently in the process of identifying, evaluating and
implementing changes to computer programs necessary to address the year 2000
issue. This issue affects computer systems that have date sensitive programs
that may not property recognize the year 2000. Systems that do not properly
recognize such information could generate erroneous data or cause a system to
fail, resulting in business interruption. The Company does not believe the cost
of converting all internal systems to be year 2000 compliant will be material to
its financial condition or results of operations. Costs related to the year 2000
issue have been minimal to date and are being expensed as incurred.
The year 2000 issue is expected to affect the systems of various entities
with which the Company interacts, including the Company's vendors and customers.
There can be no assurance that the systems of other companies on which the
Company's systems rely will be timely converted or that a failure by another
Company's systems to be year 2000 compliant would not have a material adverse
effect on the Company.
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BUSINESS
GENERAL
SanTi engages in the following businesses relating to the industry: grease
trap pumping and repair services; septic services (including designing, pumping,
installation and maintenance); sewer and drain cleaning services; high pressure
water jetting services; portable toilet servicing; bulk liquid waste
transportation; biosolids management; on-site biotreatment systems and liquid
waste processing and disposal. SanTi's customers include restaurants, hospitals,
military bases, office buildings, apartments, schools, municipalities,
industrial businesses and single family residences. All references to SanTi or
the Company include its operating subsidiaries unless the context indicates
otherwise.
SanTi intends to expand its presence in the NLW industry through internal
growth and acquisitions of local service providers throughout the United States.
The acquisitions will be made primarily with cash, shares of Common Stock or a
combination of cash and shares of the Common Stock. The Company believes that
these acquisitions, by consolidating smaller local service providers, will
create synergies and improve efficiencies in the area of NLW management.
THE NLW INDUSTRY
The Company estimates that the portable toilet, septic tank and grease trap
business segment of the U.S. domestic NLW industry generates approximately $20
billion in revenues annually. There are approximately 25,000 service providers
currently in the NLW industry and, of these service providers, approximately 75%
generate less than $500,000 of annual revenues. The Company believes the NLW
industry will continue to grow based on increased waste from a growing
population and general economic conditions that are driving new building demand
and the need for NLW services.
Because the NLW industry is so highly fragmented, management believes the
industry has the potential for significant cost savings by the economies of
scale that may be realized in consolidation. These costs savings would include
efficiencies as a result of common billing, the coordination of advertising, the
elimination of duplicative professional and technical support providers, the
standardization and upgrading of equipment and the improvement of employee
training. SanTi intends to determine lines of the NLW business in which an
acquired service provider is not currently engaged and assist the service
provider in expanding into those areas. There can be no assurance, however, that
SanTi will be able to profitability consolidate service providers within the NLW
industry.
OPERATIONS
SanTi currently engages in each of the NLW businesses described above.
SanTi's operating subsidiaries include: Bone-Dry Enterprises, Inc.; SanTi Group
of Florida, Inc.; SanTi Group of Pennsylvania, Inc.; and SanTi Group of New
York, Inc. Each subsidiary of SanTi intends to acquire additional assets from
local service providers and act as an operating division of SanTi in the area in
which it is located. These local operating divisions operate under various
tradenames, as described below.
Bone-Dry Enterprises, Inc. ("Georgia Group"). The Georgia Group is engaged
in NLW collection and hauling operations in the state of Georgia. The Georgia
Group operates under the following tradenames: Andrews Environmental, Bone-Dry
Enterprises ("Bone-Dry") and Quality Plumbing and Septic.
SanTi Group of Florida, Inc. ("Florida Group"). The Florida Group is
engaged in NLW collection and hauling operations in the state of Florida. The
Florida Group operates under the following tradenames: Brownie Environmental
Services, Grease-Tec and A Rapid Rooter Sewer and Drain.
SanTi Group of Pennsylvania, Inc. ("Pennsylvania Group"). The Pennsylvania
Group is engaged in NLW collection and hauling operations in the state of
Pennsylvania. The Pennsylvania Group has one wholly owned subsidiary, Nutrecon,
Inc., which holds the operating permits and the leases for a facility acquired
from Ferrero Wastewater Management, Inc., in Ambler, Pennsylvania. The
Pennsylvania Group operates under the following tradenames: Ferrero Wastewater
Management and Eldredge Wastewater Management.
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SanTi Group of New York, Inc. ("New York Group"). The New York Group is
engaged in NLW collection and hauling operations in the state of New York. The
New York Group operates under the following tradenames: RGM Liquid Waste Removal
and Devito Environmental.
The Company receives fees to collect, process and dispose of nonhazardous
liquid wastes. Collection fees charged to customers vary per gallon by waste
stream according to constituents of the waste, expenses associated with
processing the waste and competitive factors. Grease trap waste from restaurant
and other food processing and preparation facilities are transported to SanTi's
facilities in vacuum trucks, trailers and other transportable containers. SanTi
operates a fleet of vehicles to collect waste directly from generators and
receives waste from independent transporters servicing additional waste
generators. Using a variety of physical, chemical, thermal and other biological
techniques, the waste is broken down into constituent components. Water
extracted from the waste is pretreated and then discharged into the municipal
sanitary sewer system or applied to leased grasslands. Solid materials are dried
and disposed of in a solid waste landfill. At some locations where the Company
does not have pretreatment facilities, the waste is transported to private
pretreatment facilities, or, where permitted by local regulations, directly to
municipal or private wastewater treatment facilities.
SanTi also engages in the business of biosolids management through the reuse
of organic materials. SanTi provides transportation, treatment, site monitoring,
and land application to private companies. SanTi's vehicles pick up and
transport biosolids to various sites. SanTi also provides professional
management and consulting services for treatment of biosolids and the monitoring
and application onto leased grasslands of treated biosolids.
The Company benefits from federal, state and local regulations prohibiting
the disposal of grease trap waste and other waste in municipal collection and
treatment systems. Although restaurants, food processing and preparation
facilities and other industrial operations have produced such waste for many
years, regulations governing the management of NLW, and the enforcement of such
regulations, are becoming increasingly stringent. These requirements have
increased the value of SanTi's services to its customers in recent years. As
federal, state and local regulations governing the disposal of NLW increase,
SanTi believes the amount of NLW products delivered to third parties for
processing and disposal will continue to increase.
SanTi will target the acquisition and integration of local service
providers in the NLW industry that SanTi believes will be profitable additions
to the Company. SanTi intends to focus on the integration of entities acquired
and to increase profits and productivity through operational and efficiency
improvements, standardization of procedures, equipment standards and procurement
procedures.
SanTi intends to establish local operating facilities or service centers
throughout the United States, with initial service centers established in major
population centers. Acquired local service providers in these areas will be
converted to service centers. A service center manager at each location will be
responsible for the service center's overall performance. The manager will be
supported by supervisors responsible for one or more lines of business. The
manager will also be supported by maintenance managers responsible for the
maintenance and repair of all equipment. The service center managers will report
to district managers, who will typically have responsibility for eight to twelve
service center managers. The district managers will have general management
responsibility for their geographical areas.
PREDECESSOR CORPORATIONS
SanTi Group, Inc. ("SGI"), a privately-held corporation, was incorporated
in Delaware on August 19, 1997 for the purpose of engaging, through its
operating subsidiaries, in the following businesses related to the NLW industry:
grease trap pumping, septic tank services (including designing, pumping,
installation, and maintenance); sewer and drain cleaning services; high pressure
jetting services; portable toilet servicing; bulk liquid waste transportation;
biosolids management; on-site biotreatment systems and liquid waste processing
and disposal. In December 1997, SGI acquired the assets of Bone-Dry in a share
exchange in which each share of Bone-Dry was exchanged for 1.3 shares of SGI.
Bone-Dry was formed in March 1997 to acquire businesses in the NLW industry. SGI
and Bone-Dry were primarily controlled by Mr. Raymond M. Cash, Vice Chairman of
the Board of Directors of the Company, and entities controlled by Mr. Cash.
Following a stock split effected in the form of a 0.25 per share stock dividend
effective January 30, 1998 (the "Stock Dividend"), SGI had approximately
8,088,379 shares of common stock, $.0001 par value per share (the"SGI Stock"),
issued and outstanding as of the date of the merger of SGI into Microlytics,
Inc., as described below.
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Microlytics, Inc. ("Micro") was incorporated in Delaware in 1985 for the
purposes of engaging in the business of developing, manufacturing and marketing
electronic reference products, including computer software programs which
provided linguistic and information compression technology, bilingual
dictionaries and thesaurus products. In 1989, Micro operated as a wholly owned
subsidiary of Selectronics, Inc. ("Selectronics"). In 1995, Selectronics changed
its name to Microlytics, Inc. In the early 1990's, Micro began experiencing
financial difficulties as a result of the highly competitive nature of the
computer software industry. On November 27, 1996, Micro filed for protection
under Chapter 11 of the United States Bankruptcy Code in the United States
Bankruptcy Court for the Western District of New York (the "Court"). In July of
1997, substantially all of the intangible assets of Micro and its subsidiary
were sold to Metro One Telecommunications, Inc. In August of 1997, substantially
all of the tangible assets of Micro were also sold. The proceeds of these sales
were held in a segregated trust account by the debtor's counsel prior to the
Court's confirmation of Micro's plan of reorganization.
In April of 1998, Micro filed a Plan of Reorganization (the "Plan") that
was approved by its stockholders, the creditor's committee and the Court.
Pursuant to the Plan, Micro effected a 1 for 400 reverse stock split,
distributed the proceeds from asset liquidations to its creditors, and
distributed shares and warrants to its creditors and stockholders. The Plan
provided for this reverse stock split prior to the merger of SGI and Micro, as
described below. Pursuant to the Plan, any shareholder of Micro as of April 30,
1998 who, as a result of the 1 for 400 reverse stock split, held less than 100
shares, had his or her shares rounded up to 100 shares. As of July 20, 1998,
after the 1 for 400 reverse stock split and rounding of shares, approximately
1,027,066 shares of Micro common stock were issued and outstanding. Also under
the Plan, Micro issued warrants for 500,000 shares of Micro common stock,
exercisable at $5.80 per share.
THE MERGER
On May 13, 1998, SGI was merged with and into Micro under an agreement and
plan of merger, with Micro surviving and changing its name to SanTi Group, Inc.
("the Merger"). The Merger was subject to the approval of the Court. On the
effective date of the Merger, each issued and outstanding share of SGI Stock was
converted into one share of common stock of Micro (now SanTi). These exchange
ratios were determined after the 1 for 400 reverse split of Common Stock
pursuant to the Plan. This exchange resulted in the receipt by SGI stockholders
of approximately 8,088,379 shares of Common Stock, representing approximately
86.2% of the shares of Common Stock issued and outstanding on the effective date
of the Merger. As of July 29, 1998, after the issuance of shares pursuant to the
Plan, the Merger, the reverse split, and the exercise of warrants to acquire
284,441 shares of Common Stock, SanTi had 9,498,313 shares of Common Stock
outstanding. All options to acquire shares of SGI Stock were also converted into
options to receive shares of Common Stock. As of July 29, 1998, such options to
acquire 3,750 shares of Common Stock were vested and options to acquire 45,000
shares of Common Stock vest over the next two years. SanTi succeeded to all of
the assets, liabilities and NLW business of SGI.
ACQUISITIONS
SanTi intends to expand its business in the NLW industry through internal
growth and the acquisition of local NLW service providers throughout the United
States. These acquisitions will be made with cash, shares of Common Stock, or a
combination of cash and shares of Common Stock. SanTi's acquisition strategy has
been developed with the goal of increasing the efficiency and profitability of
acquisition targets through operational and marketing synergies with SanTi's
existing business operations. SanTi will provide professional management to
these acquired entities to eliminate duplicative processes and procedures among
the acquired businesses. The services that SanTi intends to provide to the
acquired entities include: sales management, accounts receivable and accounts
payable management, debt collection, financial reporting, tax management,
advertising, purchasing, legal, health and safety, environmental, human
resources, training and capital. Customer service representatives will also be
provided. These services are intended to allow the local managers to focus on
the growth of regional business.
Between March 1997 and July 1998, SanTi (or Bone-Dry) completed several
acquisitions of NLW local service providers. These acquisitions geographically
extended SanTi's processing operations to New York, Philadelphia and Miami, and
increased its market penetration in Georgia. The total cost of the acquisitions,
including contingent consideration, was $21,374,120 in cash, $2,257,350 in notes
to sellers and 565,000 shares of Common Stock. In addition, SanTi entered into
one-year agreements with certain key managers that include severance payments if
terminated before expiration.
Andrews Environmental, Inc. ("Andrews"). In March 1997, Bone-Dry acquired a
portion of the assets of Andrews, operating as Andrews' grease disposal business
for $475,000 in cash and $257,350 in notes. Andrews was in the business of
commercial
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and governmental grease extraction, collection, and transportation services in
the state of Georgia. In December 1997, Bone-Dry acquired the remaining assets
of Andrews for $660,000 in cash and 21,400 shares of Common Stock. Contingent
consideration of 13,600 shares of Common Stock is payable within 90 days of the
first anniversary of the date of the purchase, net of offsets for losses, as
defined in the purchase agreement. These assets included customer accounts,
trucks and containers to be used in the NLW and septic waste collection,
transportation, management and disposal business. Andrews specializes in the
area of NLW and disposal in Georgia.
Atlanta Grease Trap ("Atlanta Grease"). In August 1997, Bone-Dry
acquired the assets of Atlanta Grease, for approximately $360,000 in cash.
Atlanta Grease was in the business of commercial and governmental grease
extraction, collection and transportation services in Georgia. The assets
acquired included customer accounts, software, and certain physical assets to be
used in the NLW and septic waste collection, transportation, management and
disposal business.
Ferrero Wastewater Management, Inc. ("Ferrero"). In January 1998, the
Pennsylvania Group acquired the assets of Ferrero for $2,240,100 in cash and
90,000 shares of Common Stock. Contingent consideration of $248,900 in cash and
10,000 shares of Common Stock is payable 270 days after the date of purchase,
net of offsets for losses, as defined in the purchase agreement. These assets
included customer accounts, trucks and containers to be used in the business of
NLW and septic waste collection, transportation and management and disposal in
the Ambler, Pennsylvania area. In connection with this asset purchase, the
Pennsylvania Group agreed to assume certain liabilities of Ferrero, excluding
any liability for environmental, health and safety requirements and any taxes
arising out of the asset purchase. All third party liabilities were paid by
Ferrero prior to the closing.
A Rapid Rooter Sewer and Drain Service, Inc. ("A Rapid"). In February
1998, the Florida Group acquired the assets of A Rapid for $3,300,000 in cash,
payment of existing debt totaling approximately $690,120 and 100,000 shares of
Common Stock. These assets included customer accounts, trucks, containers and
other assets used in the NLW collection and disposal business. A Rapid operates
primarily in the Miami/Dade, Broward and Palm Beach, Florida areas. In
connection with this asset purchase, the Florida Group agreed to assume certain
liabilities of A Rapid, excluding any liability for environmental, health and
safety requirements and any taxes arising out of the asset purchase. All third
party liabilities were paid by A Rapid prior to the closing.
Quality Plumbing & Septic ("Quality"). In February 1998, the Georgia
Group acquired the assets of Quality for $2,000,000 in cash. Contingent
consideration of $250,000 in cash was paid in June 1998 and 10,000 shares of
Common Stock were issued in July 1998. These assets included customer accounts,
trucks and containers and other assets to be used in the NLW collection and
disposal business in the Lithia Springs, Georgia area. In connection with this
asset purchase, the Georgia Group agreed to assume certain liabilities of
Quality, excluding any liability for environmental, health and safety
requirements and any taxes arising out of the asset purchase. All third party
liabilities were paid by Quality prior to the closing.
Seagraves, Inc.. ("Seagraves") and Grease-Tec, Inc. ("Grease-Tec").
The Florida Group acquired the assets of Seagraves and Grease-Tec in March 1998
for $3,250,000 in cash, a promissory note in the amount of $2,000,000 and 60,000
shares of Common Stock. A security interest in the assets of Seagraves and
Grease-Tec was granted to the sellers to secure the promissory note. These
assets included customer accounts, trucks, containers and other assets used in
the NLW collection and disposal business in the Orange County, Florida area.
Seagraves also operated under the names Brownie Environmental Services, Brownie
Sewer & Drain Cleaning Services and Brownie Septic Tank Contractors. In
connection with this asset purchase, the Florida Group agreed to assume certain
liabilities of Seagraves, excluding any environmental, health and safety
requirements and any taxes arising out of the asset purchase. All third party
liabilities were paid by Seagraves and Grease-Tec prior to the closing.
R.G.M. Liquid Waste Removal Corporation and Affiliates. ("RGM"). In
May 1998, the New York Group acquired certain assets of RGM and its affiliates
for $4,500,000 in cash and 105,000 shares of Common Stock. Contingent
consideration of $1,000,000 and 55,000 shares of Common Stock is payable one
year after the date of purchase, net of offsets for losses, as defined in the
purchase agreement. These assets included contract rights, customer accounts,
trucks and containers and other assets to be used in the NLW collection and
disposal business in the New York metropolitan area. In connection with this
asset purchase, the New York Group agreed to assume certain liabilities of RGM
and its affiliates, excluding any liability for environmental, health and safety
requirements and any taxes arising out of the asset purchase. RGM's affiliates
include: Devito Environmental Corporation ("Devito"), Advanced Transfer
Technology, Inc. ("ATT") and Envirotec Leasing and Rental Corporation
("Envirotec"). All third party liabilities were paid by RGM prior to the
closing.
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Eldredge Wastewater Management, Inc ("Eldredge"). In May 1998, the
Pennsylvania Group acquired certain assets of Eldredge for $2,040,000 in cash
and 85,000 shares of Common Stock. Contingent consideration of $360,000 in cash
and 15,000 shares of Common Stock is payable 13 months after the date of
purchase, net of offsets for losses, as defined in the purchase agreement.
Eldredge was engaged in the collection and disposal of wastewater from
commercial, industrial and residential facilities related to food processing,
preparation and elimination and municipal liquid and sludge wastes. These assets
included customer accounts, trucks and containers and other assets to be used in
the NLW collection and disposal business in the Lancaster, Montgomery, Bucks and
Chester Counties of Pennsylvania and Sussex and New Castle, Delaware. In
connection with this asset purchase, the Pennsylvania Group agreed to assume
certain liabilities of Eldredge, excluding any environmental, health and safety
requirements and any taxes arising out of the asset purchase. All third party
liabilities were paid by Eldredge prior to the closing.
In connection with each acquisition, SanTi may have assumed or
succeeded to certain liabilities of the acquired businesses, which may include
environmental liabilities except as described above. SanTi has obtained
representations from the sellers of the acquired businesses that no undisclosed
liabilities exist and certain rights to indemnification from the sellers for any
liabilities. There can be no assurance, however, that undisclosed liabilities do
not exist or that SanTi will receive full or partial compensation pursuant to
its rights to indemnification.
In addition to internal growth, the growth of SanTi, to a significant
extent, will depend on its continued acquisition of NLW service providers. SanTi
expects competition to exist in the industry to acquire these candidates, which
may limit the number of acquisition opportunities and may lead to higher
acquisition prices. Acquisitions of these entities entail various risks,
including failure of the acquired service providers to achieve expected results,
diversion of management's attention, failure to retain key personnel of the
acquired service providers and risks associated with unanticipated events and
liabilities. All of these risks may have an adverse effect on the ability of
SanTi to acquire additional acquisition candidates and on its business condition
and results of operations. Any complementary businesses that are acquired also
may not be successfully integrated.
DEBT FINANCING
SanTi obtained a revolving line of credit on June 26, 1998 from Bank
of America National Trust and Savings Association ("Bank of America"), acting as
an agent for various lending institutions, including Bank of America
(collectively, the "Banks"). Under this credit agreement, each of the lending
institutions agrees to make loans to, and to issue or participate in the
issuance of letters of credit for the account of SanTi on a revolving basis
during the term of the agreement as requested by SanTi. The total outstanding
revolving credit and the aggregate amount of all letters of credit outstanding
are not to exceed the commitment amount of $40,000,000. Various financial
covenants in the Credit Agreement restrict the Company's ability to draw on this
line of credit. A pledge agreement was executed concurrent with the Credit
Agreement, requiring SanTi to pledge all shares of stock owned by SanTi in each
of its subsidiaries (both current subsidiaries as well as any subsidiary formed
in the future), as security for the payment of all liabilities incurred under
the revolving line of credit. A security agreement provides for a continuing
security interest to the Banks in all of the subsidiaries' accounts receivable,
securities, chattel paper, computer hardware and software, contract rights,
deposit accounts, documents, general intangibles, goods, instruments,
intellectual property, money, commodities and all personal property. A stock
purchase warrant was also granted to Bank of America for the right to purchase
50,000 shares of Common Stock at a price of $13.00 per share, expiring on June
26, 2003. SanTi anticipates that it will use this line of credit, alone or in
combination with shares of its Common Stock, to acquire local NLW service
providers, as well as for working capital.
COMPETITION
SanTi competes with a significant number of other NLW service
providers. Competitors compete primarily on the basis of proximity to collection
operations, fees charged and quality of service. Future technological changes
and innovations may result in a reduction in the amount of NLW generated, or in
alternative methods of treatment and disposal being developed. SanTi also faces
competition from customers that may seek to enhance and develop their own
methods of disposal. Increased use of internal treatment and disposal methods
and other competitive factors may have a material adverse effect on SanTi's
business, results of operation and financial condition.
SanTi will be at a disadvantage in competing against service
providers that are better capitalized, have greater name recognition, have more
background and experience, have greater financial, technical, marketing and
other resources and skills, have better facilities and are able to provide
services or products at a lower cost than SanTi. Because the NLW industry is
currently
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highly fragmented, the acquisition of local NLW service providers is the only
strategy by which SanTi may be able to penetrate existing markets. As a result
of these competitive factors, there can be no assurance that SanTi's growth
strategy will be successful or that SanTi will be able to generate cash flow
adequate for its operations and to support future acquisitions and internal
growth.
EMPLOYEES
As of July 20, 1998, SanTi had 315 employees. It is anticipated that
the acquisition and integration of additional NLW service providers will add
employees as acquisitions are made but that the number of employees in acquired
businesses may be reduced as duplicate administrative processes are eliminated.
GOVERNMENT REGULATIONS
SanTi is subject to rules and regulations of various federal, state
and local governmental agencies. Environmental laws and regulations are, and
will continue to be, a principal factor affecting the marketability of the
services provided by SanTi. Any changes in these laws or regulations may affect
the operations of SanTi by imposing additional regulatory compliance costs on
SanTi, requiring the modification of or adversely affecting the market for
SanTi's NLW services. To the extent that demand for these services is based upon
the need to comply with these regulations, any modification to these regulations
may increase the cost of or decrease the demand for these services and adversely
affect SanTi's business condition and results of operations.
Additionally, if new environmental legislation or regulations are
enacted or existing legislation or regulations are amended or enforced
differently, SanTi may be required to obtain additional operating permits,
registrations or approvals. The process of obtaining a required permit,
registration or approval can be lengthy and expensive and the issuance of such
permit or the obtaining of such approval may be subject to public opposition.
There can be no assurance that SanTi will be able to meet the applicable
regulatory requirements.
RCRA is the principal federal statute governing hazardous and solid
waste generation, treatment, storage and disposal. RCRA and state hazardous
waste management programs govern the handling and disposal of "hazardous waste."
The U.S. Environmental Protection Agency ("EPA") has issued regulations pursuant
to RCRA. States have also promulgated regulations under comparable state
statutes that govern hazardous waste generators, transporters and owners and
operators of hazardous waste treatment, storage and disposal facilities. These
regulations impose detailed operating, inspection, training and emergency
preparedness and response standards and requirements for the financial
responsibility, manifesting of wastes, record keeping and reporting, as well as
treatment standards for any hazardous wastes intended for land disposal.
NLW is currently exempt from the requirements of RCRA. The repeal or
modification of the RCRA exemption covering NLW, or the modification of
applicable regulations or interpretations regarding the treatment or disposal of
NLW, may require SanTi to alter its method of treating and disposing of NLW.
SanTi's current methods do not comply with the methods prescribed by the EPA for
treatment and/or disposal of waste as defined by RCRA. These potential changes
may result in decreased demand for SanTi's services or increased costs to SanTi
and could have a material adverse effect on SanTi's business.
CERCLA provides for immediate response and removal actions
coordinated by the EPA for releases of hazardous substances into the environment
and authorizes the government or private parties to respond to the release or
threatened release of hazardous substances. The government may also order
persons responsible for the release to perform any necessary cleanup. Liability
extends to the present owners and operators of waste disposal facilities from
which a release occurs, persons who owned or operated the facilities at the time
the substance was released, persons who arranged for the disposal or treatment
of hazardous substances and waste transporters who selected such facilities for
treatment or disposal of hazardous substances. CERCLA creates strict, joint and
several liability for all costs of removal and remediation, other necessary
response costs and damages for injury to natural resources.
As SanTi will be engaged in businesses that involve the treatment and
removal of nonhazardous liquid waste, SanTi should not be subject to CERCLA.
However, if SanTi were to acquire a business that has disposed of hazardous
waste or treated hazardous waste that falls within the parameters of CERCLA,
SanTi may be held jointly and severally liable for the costs of any damage or
required cleanup of the site.
26
<PAGE> 29
PROPERTY
Neither SanTi nor any of its subsidiaries currently own any real property.
SanTi's corporate offices are located in Dallas, Texas, and are under a sublease
from VHA Southwest, Inc., for a current rate of $12,953.33 per month, expiring
July 31, 2003.
The following properties are currently leased by SanTi and its subsidiaries:
The following properties are leased by the Florida Group: (i) property
leased from William E. and Joan C. Rice for a term of two and one-half years,
commencing on February 13, 1998 at a rate of $4,000 per month; this lease is
guaranteed by SanTi (ii) property in Orlando, Florida, leased for $96,000
annually to be used for NLW business; the lease expires March 6, 2003 and is
guaranteed by SanTi.
The following properties are leased by the Georgia Group: (i) property in
Lithia Springs, Georgia; the lease expires August 16, 1998, is for a rate of
$2,500 per month and is used for NLW business (ii) property in Austell, Georgia
used for NLW business is leased under a sublease from BFI Services Group, Inc.
for a rate of $4,680 per month, terminating January 13, 2001 (iii) property
located in Gwinnett County, Georgia, formerly used by Andrews to conduct its NLW
business; the rate of the sublease is $2,200 per month for a monthly term, with
automatic renewal until receipt of tenant's written notice of termination.
The following properties are leased by the New York Group: (i) property in
Deer Park, New York, leased for $11,500 per month for NLW business; the lease
expires May 31, 1999 (ii) property in Deer Park, New York, leased for $2,000 per
month for NLW business; the lease expires May 31, 1999.
The following properties are leased by the Pennsylvania Group: (i)
property in Ambler, Pennsylvania, leased to Nutrecon, Inc. by Ambler Realty for
use by the Pennsylvania Group for NLW business, expiring on December 21, 2000;
the lease is for a monthly rate of $6,000 (ii) sublease from Eldredge
Associates, Inc., for all real property formerly utilized by Eldredge Associates
in operation of its NLW business in West Chester, Pennsylvania, at a rate of
$7,600 per month, terminating on May 7, 1999.
LEGAL PROCEEDINGS
There are currently no claims or suits against SanTi, Inc, or its
operating subsidiaries. SanTi may become involved in litigation and claims
arising out of the ordinary course of its business.
MARKET PRICE FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
Of the 9,498,313 shares of Common Stock issued and outstanding as of July
29, 1998, approximately 1,384,934 shares are subject to over-the-counter trading
on the Nasdaq Market OTC Bulletin Board. Trading began on the Nasdaq OTC
Bulletin Board in June of 1998, at a closing price of $13 per share. The closing
price on July 29, 1998 for the 1,384,934 shares of Common Stock subject to
such trading, of which 9,800 shares traded, was $20.75 and the average closing
price of shares subject to such trading was $21.25.
SanTi has contractual obligations to issue up to 93,600 additional shares
if the conditions relating to revenue guarantees contained in the acquisition
agreements with NLW service providers are met. As of July 29, 1998,
approximately 215,559 warrants to purchase shares of Common Stock with an
exercise price of $5.80 were outstanding. SanTi has also issued a warrant to
purchase 50,000 shares of Common Stock with an exercise price of $13.00 per
share to Bank of America pursuant to the Credit Agreement.
27
<PAGE> 30
MANAGEMENT
DIRECTORS AND EXECUTIVE OFFICERS
The following table sets forth information concerning the directors and
executive officers of SanTi as of July 29, 1998. The executive officers will
serve until their successors are appointed by the Board of Directors. The terms
of the directors are as set forth below.
<TABLE>
<CAPTION>
Name Age Position
- ---- --- --------
<S> <C> <C>
Donald F. Moorehead, Jr. 47 Chief Executive Officer
Chairman of the Board (term expires 2001)
Terry W. Patrick 52 President and Chief Operating Officer
Director (term expires 2000)
Kenneth Peak 53 Vice President and Chief Financial Officer
Director (term expires 1999)
Raymond M. Cash 68 Vice Chairman of the Board
(term expires 2001)
William P. Hulligan 55 Director (term expires 2000)
Elroy "Gene" Roelke 67 Director (term expires 1999)
</TABLE>
Donald F. Moorehead, Jr., Chief Executive Officer and Chairman of the Board
of SanTi, served as Vice Chairman and Chief Development Officer of USA Waste
Services, Inc. ("USA Waste") from May 1994 through August 1997. From October
1990 until May 1994, he served as Chairman of the Board and Chief Executive
Officer of USA Waste. Mr. Moorehead was also a founder of USA Waste. Mr.
Moorehead has served as Director for the Environmental Research and Education
Foundation since November of 1996. Mr. Moorehead serves on the Board of FYI,
Inc., a document and information outsourcing company, and United Road Services,
Inc., a towing and transport service company. Mr. Moorehead was a member of the
compensation committee for FYI, Inc.
Terry W. Patrick, President, Chief Operating Officer and Director of SanTi,
served as Chief Operating Officer of Eastern Environmental, a solid waste
management company, from June 1996 to December 1997. From 1995 to April 1996, he
served as President and was the founder of Chem-Mark Services, a commercial
chemical manufacturing and distributing company. From August 1993 to August
1994, he served as President and Chief Executive Officer of EDM Corporation, a
subsidiary of USA Waste. From April 1990 to August 1993, he served as President
and Chief Operating Officer of USA Waste, Inc., a solid waste management
company.
Kenneth Peak, Vice President, Chief Financial Officer and Director of SanTi
is currently a director of Cheniere Energy, Hogan Energy, and NL Industries,
Inc. From 1991 to 1998, Mr. Peak has been the President of Peak Enernomics,
Inc., a company engaged in financial consulting activities to the oil and gas
industry.
Raymond M. Cash, Vice Chairman and Director of SanTi, is a founder of
Sanifill, Inc. and Southern States Environmental Services, Inc. Mr. Cash is also
a founder of SanTi. From 1997 to June 1998, he served as Chairman of the Board
and Chief Executive Officer of SanTi. From 1993 to 1997, he served as Chairman
and President of Resource, Recovery, Transfer & Transportation, Inc.
William P. Hulligan, Director of SanTi, was employed by Waste Management,
Inc. from 1979 to November 1997. The last position he held at Waste Management
was Executive Vice President. Mr. Hulligan currently serves on the Board of
Directors for NSC Corporation and has been a board member of John Carroll
University since 1994.
28
<PAGE> 31
Elroy "Gene" Roelke, director of SanTi, has served as the Chairman and
Founder of the Knollwood Mercantile Company from 1985 to the present. From 1989
to 1996, Mr. Roelke served as Senior Vice President and General Counsel of the
Renaissance Capital Group. Mr. Roelke also served as the administrator of the
Portfolio Management Division and as a director designee to portfolio companies.
Mr. Roelke also served as the President and Director of Island Marine Supply
Company and was managing partner for Roelke & Jordan in Dallas, Texas. Mr.
Roelke also served as a Director of Micro and as Chairman of the Board of Micro
in 1996. He is also a Director and member of the Audit Committee of Titogen
Medical, Inc.
EXECUTIVE COMPENSATION
Summary Compensation Table
The following table sets forth certain information concerning the
compensation of the chief executive officer of the Company.
<TABLE>
<CAPTION>
Annual Compensation Long-Term
------------------------------- Compensation
------------
Securities
Other Annual Underlying All Other
Name and Principal Position Year Salary Bonus Compensation Options/SARs Compensation
- --------------------------- ---- ------ ----- ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Raymond Cash (1) 1997 $ 0 162,500(2)
Chief Executive Officer
</TABLE>
(1) Mr. Cash served in the indicated position from August 19, 1997 and resigned
from such position effective June 29, 1998.
(2) Mr. Cash exercised the options to acquire these shares effective April 30,
1998 at an exercise price of $.65 a share.
Option Grants in Last Fiscal Year
The following table sets forth certain information concerning option
grants to the chief executive officer during the last fiscal year.
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
INDIVIDUAL GRANTS VALUE OF ASSUMED
----------------------------------------------------------------------------- ANNUAL RATE OF STOCK
NUMBER OF PERCENT OF PRICE APPRECIATION
SECURITIES TOTAL OPTIONS FOR OPTION TERM
UNDERLYING GRANTED TO EXERCISE ----------------------
OPTIONS EMPLOYEES PRICE PER EXPIRATION
GRANTED IN FISCAL 1997 SHARE DATE 5% 10%
------- -------------- ----- ----- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Raymond Cash(1)..... 162,500 36% $0.65 12/4/00 $21,125 $42,250
</TABLE>
(1) Mr. Cash exercised the options to acquire these shares effective April 30,
1998.
29
<PAGE> 32
Aggregated Option Exercises in Last Fiscal Year and Option Values at December
31, 1997
The following table sets forth certain information concerning the
value of unexercised options held by the chief executive officer as of December
31, 1997:
<TABLE>
<CAPTION>
NUMBER OF SECURITIES
UNDERLYING UNEXERCISED VALUE OF UNEXERCISED
OPTIONS AT IN-THE-MONEY OPTIONS
DECEMBER 31, 1997 AT DECEMBER 31, 1997 (1)
----------------- ------------------------
EXERCISABLE EXERCISABLE
----------------- ------------------------
<S> <C> <C>
Raymond Cash 162,500 $24,375
</TABLE>
- ------------------
(1) Based on a fair market value of $.80 per share as of December 31, 1997.
EMPLOYMENT AGREEMENTS
On June 1, 1998, Donald F. Moorehead and SanTi entered into an employment
agreement. The agreement provides for Mr. Moorehead to serve in the capacity of
Chief Executive Officer and Chairman of the Board of SanTi and provides for a
base salary of $150,000 annually. Mr. Moorehead has elected not to take any
salary until January 1, 1999, at the earliest. Mr. Moorehead will also be
eligible for an annual bonus, which will be a minimum 50% of his annual salary.
The agreement term is five years, with automatic renewal for twelve month
periods. Upon the merger, consolidation or other business combination of SanTi
with another publicly traded or private entity where SanTi is not the surviving
entity or upon the sale of substantially all of SanTi's assets, Mr. Moorehead is
entitled to terminate the agreement and receive a severance payment equal to the
remaining salary and bonus for each of the remaining years (or portions thereof)
under the full term of the agreement. The agreement also entitles Mr. Moorehead
to participate in any stock option plan instituted by SanTi. The agreement
contains a noncompetition and nonsolicitation clause for the term of the
agreement and for one year after termination of Mr. Moorehead's employment.
On June 1, 1998, Terry Patrick and SanTi entered into an employment
agreement which provides for Mr. Patrick to serve as President and Chief
Operating Officer of SanTi and provides for a base salary of $150,000 annually.
Mr. Patrick has elected not to take any salary until January 1, 1999, at the
earliest. Mr. Patrick will also be eligible for an annual bonus, which will be a
minimum of 50% of his annual salary. The agreement term is five years, with
automatic renewal for twelve month periods. Upon the merger, consolidation or
other business combination of SanTi with another publicly traded or private
entity where SanTi is not the surviving entity or upon the sale of substantially
all of SanTi's assets, Mr. Patrick is entitled to terminate the agreement and
receive a severance payment equal to the remaining salary and bonus for each of
the remaining years (or portions thereof) under the full term of the agreement.
The agreement also entitles Mr. Patrick to participate in any stock option plan
instituted by SanTi. The agreement contains a noncompetition and nonsolicitation
clause for the term of the agreement and for one year after termination of Mr.
Patrick's employment.
On June 1, 1998, Kenneth Peak and SanTi entered into an employment
agreement which provides for Kenneth Peak to serve in the capacity of Vice
President and Chief Financial Officer of SanTi and provides for a base salary of
$100,000 annually. Mr. Peak will also be eligible for an annual bonus, which
will be a minimum of 25% of his annual salary. The agreement term is two years,
with automatic renewal for twelve month periods. Upon the merger, consolidation
or other business combination of SanTi with another publicly traded or private
entity where SanTi is not the surviving entity or upon the sale of substantially
all of SanTi's assets, Mr. Peak is entitled to terminate the agreement and
receive a severance payment equal to the remaining salary and bonus for each of
the remaining years (or portions thereof) under the full term of the agreement.
The agreement also entitles Mr. Peak to participate in any stock option plan
instituted by SanTi. The agreement contains a noncompetition and nonsolicitation
clause for the term of the agreement and for one year after the termination of
Mr. Peak's employment.
DIRECTOR COMPENSATION
Non-employee directors are compensated $1,500 for each non-telephonic
meeting attended. All directors are reimbursed for any expenses incurred in
attending board or committee meetings. Each non-employee director receives an
option to acquire 25,000 shares upon appointment or election to the Board of
Directors.
30
<PAGE> 33
BOARD OF DIRECTORS
The Company's Board of Directors (the "Board") is divided into three
classes which consist, as nearly as practicable, of one-third of the total
number of directors serving on the Board. The Board may have up to fifteen
members, with the exact number set by resolution of the Board from time to time
pursuant to the Bylaws. The members of each class serve staggered three-year
terms following the initial terms. The initial terms of Class I, Class II and
Class III directors expire at the annual stockholders' meetings in 1999, 2000
and 2001, respectively, or until their successors are elected and duly
qualified. Messrs. Peak and Roelke are members of Class I; Messrs. Patrick and
Hulligan are members of Class II; and Messrs. Moorehead and Cash are members of
Class III. The Board has established three standing committees: (i) the
Compensation Committee, (ii) the Audit Committee, and (iii) the Executive
Committee.
The Audit Committee currently consists of two directors, Messrs. Roelke and
Hulligan. The Audit Committee selects the Company's auditors, reviews the audit
and has other authority customary for an audit committee.
Messrs. Hulligan (Chairman), Roelke and Cash are members of the
Compensation Committee. The Compensation Committee approves the bonus component
of the Employment Agreements and administers the Stock Option Plan.
The Executive Committee is composed of Messrs. Moorehead (Chairman), Cash
and Patrick and is authorized by the Board to take all action that may be
delegated by the Board under Delaware law.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
All of the members of the Board (Messrs. Rock Payne and Raymond Cash and
Ms. Joyce Bone) served as members of the Compensation Committee until June 29,
1998, at which time, the Board designated a Compensation Committee composed of
Messrs. Hulligan, Roelke and Cash. Mr. Cash is vice chairman of the Board and
was president and chief executive officer of the Company until June 29, 1998.
Transactions between Mr. Cash and the Company are described below under Certain
Transactions.
CERTAIN TRANSACTIONS
In 1997, Bone-Dry entered into a note payable agreement with an entity
controlled by SanTi's majority owner and Vice Chairman of the Board of
Directors, Raymond M. Cash. The note was in the amount of $650,000, with an
interest rate of 13%. This entity received approximately $56,000 in interest
during 1997. This note was paid in full in December 1997. After the note was
paid in full, Mr. Cash purchased 990,00 shares of Bone-Dry for $650,000. After
the share exchange of Bone-Dry and SGI described previously and the Stock
Dividend, Mr. Cash received 1,608,750 shares of SGI Stock.
The Company periodically uses a plane owned by Mr. Cash for SanTi
executives for corporate travel. A fee is charged for this use based upon pilot
time, fuel, depreciation and insurance. There is currently no contract for the
use of this plane for corporate travel.
On June 29, 1998, the Board of Directors granted options to Messrs.
Moorehead, Patrick, and Peak in the following amounts: (i) Mr. Moorehead:
175,000 options, exercisable at $6.00 per share, 150,000 options, exercisable at
$15.00 per share, and 200,000 options exercisable at $25.00 per share; (ii) Mr.
Terry Patrick: options in amount and exercise price identical to Mr. Moorehead;
and (iii) Mr. Kenneth Peak: 50,000 options, exercisable at $6.00 per share,
50,000 options exercisable at $15.00 per share, and 100,000 options exercisable
at $25.00 per share. These options vest over a four year period. The options
will vest automatically, however, upon any termination of employment of Mr.
Moorehead, Mr. Patrick or Mr. Peak upon the merger, consolidation or other
business combination of SanTi with another publicly traded or private entity
where SanTi is not the surviving entity or upon the sale of substantially all of
SanTi's assets.
31
<PAGE> 34
PRINCIPAL AND SELLING STOCKHOLDERS
The following table sets forth certain information with respect to
beneficial ownership of the Common Stock as of July 29, 1998, by (i) each person
known by the Company to be a beneficial owner of more than 5% of the Common
Stock, (ii) each of the Company's directors and named executive officers, (iii)
all directors and executive officers as a group and (iv) each Selling
Stockholder. Unless otherwise specified, the named beneficial owner has sole
voting and investment power.
<TABLE>
<CAPTION>
Common Common Common Stock
Stock Beneficially Stock Beneficially
Owned Before the To Be Sold in Owned After
Offering(1) the Offering(2) the Offering(3)
----------- --------------- ---------------
Name of Beneficial Owner Number Percent Number Percent
- ------------------------ ------ ------- ------ -------
<S> <C> <C> <C> <C> <C>
Raymond M. Cash(4)(10) 3,642,500 38% 3,642,500 -- *
Cash Family Limited 1,658,750 18% 1,658,750 -- *
Partnership(5)(10)
Donald F. Moorehead, Jr.(6)(10) 998,000 11% 975,000 23,000 *
Terry W. Patrick (7)(10) 300,000 3% 300,000 --
William P. Hulligan(10) 100,000 1% 100,000 -- *
Elroy Roelke (8)(10) 25,000 * 0 25,000 *
Kenneth Peak 0 * 0 -- *
David Towery(9) 6,000 * 6,000 -- *
Terry White 18,750 * 18,750 -- *
Founders Equity Group, Inc. 153,125 2% 150,000 3,125 *
George O. Moorehead 250,000 3% 250,000 -- *
Stoli, Ltd. 175,000 2% 175,000 -- *
William R. Andrews 32,379 * 32,379 -- *
J.D. Dawson (9) 3,500 * 3,500 -- *
Ferrero Wastewater Management, Inc. 90,000 1% 90,000 -- *
A Rapid Rooter Sewer and Drain 100,000 1% 100,000 -- *
Service, Inc.
Seagraves, Inc. 60,000 * 60,000 -- *
Bernard Arkules (9) 10,000 * 10,000 -- *
David I. Arkules(9) 10,000 * 10,000 -- *
John Beardmore(9) 10,000 * 10,000 -- *
Bluebird Partners 20,000 * 20,000 -- *
Boone Investors Group, LLC 50,000 * 50,000 -- *
</TABLE>
32
<PAGE> 35
<TABLE>
<S> <C> <C> <C> <C> <C>
Thomas C. Bowen 50,000 * 50,000 -- *
Edward L. Cash(9) 10,000 * 10,000 -- *
Eric W. Cash(9) 10,000 * 10,000 -- *
Karen C. Cash 139,050 1% 139,050 -- *
Environmental Opportunities Fund, 311,395 3% 311,395 -- *
L.P.
Environmental Opportunities Fund 38,605 * 38,605 -- *
(Cayman), L.P.
Tom Ferrero(9) 10,000 * 10,000 -- *
Daryl R. Griswold(9) 9,418 * 9,418 -- *
Lola E. (Gena) and Stewart F. Hard 70,000 * 70,000 -- *
Sharon Hurlburt 10,916 * 10,916 -- *
M. Beckmann Ltd. 20,000 * 20,000 -- *
Mantua Holdings Ltd.(9) 10,000 * 10,000 -- *
James McClure(9) 7,416 * 7,416 -- *
George O. Moorehead and Nancy 100,000 1% 100,000 -- *
Moorehead
John Neely(9) 10,000 * 10,000 -- *
Rock Payne 100,000 1% 100,000 -- *
RCD Investments, Ltd. 100,000 1% 100,000 -- *
Joyce Bone(9) 3,500 * 3,500 -- *
Ellis Rubenstein and Harold 10,000 * 10,000 -- *
Rubenstein(9)
Robert Smith 160,000 2% 160,000 -- *
William C. Skuba 50,000 * 50,000 -- *
Joseph P. Tate 130,000 1% 130,000 -- *
Leon J. Watkins and M. Janie Watkins 20,000 * 20,000 -- *
Howell Waldrup(9) 5,000 * 5,000 -- *
Clark Ullom 150,000 2% 150,000 -- *
DeVito Environmental, Inc. 52,500 * 52,500 -- *
Envirotec Leasing and Rental Corp. 52,500 * 52,500 -- *
Eldredge Wastewater Management, 85,000 1% 85,000 -- *
Inc.
</TABLE>
33
<PAGE> 36
<TABLE>
<S> <C> <C> <C> <C> <C>
Sherri Spicer (9) 8,000 * 8,000 -- *
Bruce Slovin 12,000 * 12,000 -- *
Stephen D. Scott 32,000 * 32,000 -- *
Susan K. Keller(9) 6,000 * 6,000 -- *
Laura K. Sanders(9) 6,000 * 6,000 -- *
Katherine U. Sanders 24,000 * 24,000 -- *
Christine M. Sanders(9) 8,000 * 8,000 -- *
Bret D. Sanders(9) 6,000 * 6,000 -- *
Brad D. Sanders(9) 6,000 * 6,000 -- *
John M. O'Quinn 24,000 * 24,000 -- *
John I. Mundy 12,000 * 12,000 -- *
Ben T. Morris 16,000 * 16,000 -- *
Robert Larry Kinney(9) 4,000 * 4,000 -- *
Louis Del Homme 16,000 * 16,000 -- *
William M. Dearman 12,000 * 12,000 -- *
Charles L. Davis(9) 2,000 * 2,000 -- *
Morton A. Cohn 32,000 * 32,000 -- *
Michael S. Chadwick(9) 4,000 * 4,000 -- *
George L. Ball 16,000 * 16,000 -- *
Samuel A. Jones(9) 4,000 * 4,000 -- *
Bruce R. McMaken(9) 6,000 * 6,000 -- *
John E. Drury 32,000 * 32,000 -- *
Don A. Sanders 56,000 * 56,000 -- *
Robert Gist 20,000 * 20,000 -- *
Quality Plumbing & Septic(9) 10,000 * 10,000 -- *
Thomas V. Chorey Jr.(9) 5,259 * 5,259 -- *
John L. Taylor, Jr.(9) 5,259 * 5,259 -- *
Susan Shivers Fink(9) 432 * 432 -- *
All oficers and
Directors as a
group (6 persons) 5,065,000 53% 5,017,000 48,000 *
</TABLE>
34
<PAGE> 37
(1) Includes shares of Common Stock that may be acquired upon the exercise of
stock options exercisable within 60 days. Each person named above has sole
voting and dispositive power with respect to the all shares listed opposite such
person's name, unless indicated otherwise. Unless otherwise indicated, each
stockholder's address is 14901 Quorum Drive, Suite 200, Dallas, Texas 75240.
(2)Does not reflect the applicable Lock-Up Agreement that prohibits the sale of
all or a portion of certain Selling Stockholders' Shares for a six to twelve
month period. Except as indicated by footnotes (9) and (10), the Selling
Stockholders are entitled to sell 25% of their Shares upon the Effective Date
and the remainder of their Shares after nine months following the Effective
Date. There can be no assurance that any of the Selling Stockholders will offer
to sell or sell any or all of their Shares.
(3) Assumes that all Shares subject to this Prospectus are sold and does not
reflect the applicable Lock-Up Agreements.
(4) These shares are held in a voting trust of which Mr. Cash is trustee and has
sole voting power. Includes 1,251,534 shares held by Mr. Cash and 1,658,750
shares held by the Cash Family Limited Partnership which is controlled by an
entity controlled by Mr. Cash. Does not include 139,050 shares held by Mr.
Cash's wife, for which shares Mr. Cash disclaims beneficial ownership.
(5) Does not include 1,251,534 shares held by Mr. Cash or 732, 216 shares held
in a voting trust of which Mr. Cash is trustee and has sole voting power.
(6) Includes 200,000 shares held by Moorehead Property Company Ltd., a company
controlled by Mr. Moorehead.
(7) Includes 300,000 shares held by Beacon Holdings Limited, a family limited
partnership of which Mr. Patrick is a general partner.
(8) Includes warrants to acquires 25,000 shares of Common Stock that are
exercisable within 60 days.
(9) These Selling Stockholders are not parties to the Lock-Up Agreements and are
eligible sell their Shares upon the Effective Date.
(10) These Selling Stockholders are eligible to sell 25% of their Shares after
six months following the Effective Date and the remainder of their Shares after
twelve months following the Effective Date.
DESCRIPTION OF SECURITIES
DESCRIPTION OF CAPITAL STOCK
SanTi is authorized to issue 100,000,000 shares of capital stock. Seventy
million of these shares are common stock, $.0001 par value (the "Common Stock"),
entitled to one vote per share on any matter on which stockholders of SanTi are
entitled to vote and are entitled to participate in dividends and to receive the
remaining net assets of SanTi upon dissolution, subject to the rights of any
existing holders of preferred stock having a liquidation preference. Of these
shares of Common Stock, 9,498,313 shares are currently outstanding. The shares
of Common Stock have no preemptive rights and no subscription, redemption or
conversion privileges. The holders of shares of Common Stock do not have
cumulative voting rights. All of the outstanding shares of Common Stock are
fully paid and nonassessable.
Thirty million of the authorized shares of capital stock are designated as
preferred stock, $.0001 par value per share. The Board will have the full power
and authority to fix the number of shares constituting a series and to fix the
relative rights and preferences of the shares of the series to the full extent
allowable by the law, with respect to dividends, redemptions, payment on
liquidation, sinking fund provisions, conversion privileges and voting rights.
CERTAIN PROVISIONS OF THE CERTIFICATE, BYLAWS AND DELAWARE LAW
Classification of Board of Directors. The Certificate and Bylaws
of the Company divide the Board of Directors into three classes, designated as
Class I, Class II and Class III, respectively, each class to be as nearly equal
in number as possible. The term of Class I, Class II and Class III directors
will expire at the 1999, 2000 and 2001 annual meetings of stockholders,
respectively, and in all cases directors elected will serve until their
respective successors are elected and qualified. At each annual meeting of
stockholders, directors will be elected to succeed those in the class whose
terms then expire, each elected director to serve for a term expiring at the
third succeeding annual meeting of stockholders after such director's election,
and until the director's successor is elected and qualified. Thus, directors
elected stand for election only once in three years. The Certificate provides
that directors may only be removed for cause.
Additional Directorships, Vacancies and Removal of Directors. The
Bylaws of the Company provide that the Board shall consist of up to fifteen
members, the exact number to be determined by resolution of the Board from time
to time. If one or more directors resigns, a majority of the directors then in
office have the power to fill the vacancy.
Anti-Takeover Effects. The foregoing provisions of the Articles
and Bylaws could discourage potential acquisition proposals and could delay or
prevent a change in control of the Company. These provisions are intended to
enhance the continuity and stability of the Board and the policies formulated by
the Board and to discourage certain types of transactions that may involve an
actual or threatened change in control of the Company. These provisions are also
designed to reduce the
35
<PAGE> 38
vulnerability of the Company to an unsolicited acquisition proposal and to
discourage certain tactics that may be used in proxy fights, however, such
provisions may discourage third parties from making tender offers for the
Company's shares. As a result, the market price of the Common Stock may not
benefit from any premium that might occur in anticipation of a threatened or
actual change in control. Such provisions also may have the effect of preventing
changes in the management of the Company.
WARRANTS
In connection with financing provided to the Company in June 1998, the
Company issued to Bank of America a warrant to purchase 50,000 shares of Common
Stock at an exercise price of $13.00 per share. The Bank of America warrant is
exercisable at any time until June 2003. In connection with the Merger, the
Company issued warrants to purchase 500,000 shares of Common Stock, with
approximately 215,559 outstanding.
STATUTORY BUSINESS COMBINATION PROVISION
As a Delaware corporation, the Company is subject to Section 203 of the
Delaware General Corporation Law. In general, Section 203 prevents an
"interested stockholder" of a publicly held Delaware corporation (defined
generally as a person together with affiliates and associates owns (or within
the prior three years, owned) 15% or more of a Delaware corporation's
outstanding voting stock) from engaging in a "business combination" (includes
mergers, asset sales and certain other transactions resulting in a financial
benefit to an interested stockholder) with the Corporation for three years
following the date such person became an interested stockholder unless: (i)
before such person became an interested stockholder, the board of directors of
the corporation approved the transaction in which the interested stockholder
became an interested stockholder or approved the business combination; (ii) on
consummation of the transaction that resulted in the interested stockholder's
becoming an interested stockholder, the interested stockholder owned at least
85% of the voting stock of the corporation outstanding at the time the
transaction commenced (excluding stock held by directors who are also officers
of the corporation and by employee stock plans that do not provide employees
with the right to determine confidentially whether shares held subject to the
plan will be tendered in a tender or exchange offer); or (iii) following the
transaction in which such person became an interested stockholder, the business
combination was approved by the board of directors of the corporation and
authorized at a meeting of stockholders by the affirmative vote of the holders
of 66 2/3% of the outstanding voting stock of the corporation not owned by the
interested stockholder. Under Section 203, the restrictions described above also
do not apply to certain business combinations proposed by an interested
stockholder following the announcement or notification of one of certain
extraordinary transactions involving the corporation and a person who had not
been an interested stockholder during the previous three years or who became an
interested stockholder with the approval of a majority of the corporation's
directors, if such extraordinary transaction is approved or not opposed by a
majority of the directors who were directors prior to any person becoming an
interested stockholder during the previous three years or were recommended for
election or elected to succeed such directors by a majority of such directors.
INDEMNIFICATION MATTERS
As permitted by the Delaware General Corporation Law, the Company's
Certificate provides that directors of the Company will not be personally liable
to the Company or its stockholders for monetary damages for breach of fiduciary
duty as a director, except for liability (i) for any breach of the director's
duty of loyalty to the Company or its stockholders, (ii) for acts or omissions
not in good faith or which involve intentional misconduct or a knowing violation
of law, (iii) under Section 174 of the Delaware General Corporation Law,
relating to prohibited dividends, distributions and repurchases or redemptions
of stock, or (iv) for any transaction from which the director derives an
improper personal benefit. The Company's Certificate of Incorporation provides
that the Company shall indemnify its directors, officers, employees and other
agents, to the fullest extent provided by Delaware law. Specifically upon
request, the Company will advance expenses to any officer or director who was or
is a party to, or is threatened to be made a party to, any threatened, pending
or completed action, suit or proceeding, including civil, criminal,
administrative, investigative or otherwise, by reason of the fact that such
person is or was a director or officer of the Company, or is or was acting at
the request of the Company as a director, officer, partner, trustee, employee or
agent of another corporation, partnership, joint venture, trust, employee
benefit plan or other enterprise. This indemnification will not apply if the
indemnitee is adjudged liable to the Company , unless and only if the court in
which the action is brought determines the indemnitee is fairly and reasonably
entitled to indemnification by the Company. The Company may also purchase and
maintain insurance on the behalf of its directors and officers against any such
liability that may be asserted as a result of the director's or officer's
service in such a capacity.
36
<PAGE> 39
TRANSFER AGENT AND REGISTRAR
The transfer agent and registrar for the Common Stock is Securities Transfer
Corporation.
PLAN OF DISTRIBUTION
This Prospectus relates to the offer and sale from time to time of the
Shares by the Selling Stockholders. The Company has registered the Shares for
sale to provide the Selling Stockholders with freely tradeable securities, but
registration of such shares does not necessarily mean that any of such shares
will be offered or sold by the Selling Stockholders. The Company will not
receive any proceeds from the offering of the Shares by the Selling
Stockholders.
The Shares may be sold from time to time to purchasers directly by any of
the Selling Stockholders subject to the Lock-Up Agreements between the Company
and certain of the Selling Stockholders, which prohibit such Selling
Stockholders from offering for sale or selling certain of their Shares for a six
to twelve month period. See "Principal and Selling Stockholders." Alternatively,
the Selling Stockholders may from time to time offer the Shares through dealers
or agents, who may receive compensation in the form of commissions from the
Selling Stockholders and/or the purchasers of Shares for whom they may act as
agent. Without limiting the foregoing, such sales may be in the form of
secondary distributions, exchange distributions, block trades, ordinary
brokerage transactions or a combination of such methods of sale. The Selling
Stockholders and any dealers or agents that participate in the distribution of
Shares may be deemed to be "underwriters" within the meaning of the Securities
Act and any profit on the sale of Shares by them and any commissions received by
any such dealers or agents might be deemed to be underwriting commissions under
the Securities Act.
At the time a particular offering of Shares is made, a Prospectus
Supplement, if required, will be distributed that will set forth the name and
names of any dealers or agents and any commissions and other terms constituting
compensation from the Selling Stockholders and any other required information.
The Shares may be sold from time to time at varying prices determined at the
time of sale or at negotiated prices.
In order to comply with the securities laws of certain states, if
applicable, the Shares may be sold only through registered or licensed brokers
or dealers. In addition, in certain states, the Shares may not be sold unless
they have been registered or qualified for sale in such state or an exemption
from such registration or qualification requirement is available and is complied
with.
LEGAL MATTERS
The validity of the Common Stock offered hereby will be passed upon for the
Company by King & Spalding, Atlanta, Georgia.
EXPERTS
The audited financial statements included in this Prospectus and elsewhere
in the registration statement have been audited by Arthur Andersen LLP,
independent public accountants, as indicated in their reports with respect
thereto, and are included herein in reliance upon the authority of said firm as
experts in giving said reports.
ADDITIONAL INFORMATION
The Company has filed with the Securities and Exchange Commission, (the
"Commission"), a Registration Statement on Form S-1 (together with all
Amendments, schedules and exhibits thereto, the "Registration Statement") under
the Securities Act with respect to the Common Stock offered hereby. This
Prospectus, which constitutes a part of the Registration Statement, does not
contain all of the information set forth in the Registration Statement, certain
parts of which are omitted in accordance with the rules and regulations of the
Commission. For further information with respect to the Company and the Common
Stock, reference is made to the Registration Statement. Statements contained in
this Prospectus as to the contents of any contract, agreement, or other document
referred to are not necessarily complete, and in each instance reference is made
to the copy of such contract or
37
<PAGE> 40
other document filed as an exhibit to the Registration Statement. The
Registration Statement may be inspected without charge at the Commission's
principal offices in Washington, D.C., and copies of all or any part of the
Registration Statement, of which this Prospectus forms a part, each such
statement being qualified in all respects by such reference. The Registration
Statement may be inspected without charge at the public reference facilities
maintained by the Securities and Exchange Commission in Room 1024, 450 Fifth
Street, N.W., Washington, D.C. 20549, and the following regional offices of the
Commission: 13th Floor, Seven World Trade Center, New York, New York 10048 and
Northwestern Atrium Center, 500 West Madison Street, Suite 1400, Chicago,
Illinois 60661. Copies of such material can be obtained from the Public
Reference Section of the Commission, Washington, D.C. at prescribed rates. The
Registration Statement may also be obtained through the Commission's Internet
address at "http://www.sec.gov".
Upon the effectiveness of the Company's Form 10, that was filed on July 24,
1998, the Company will be subject to the informational reporting requirements of
the Securities Exchange Act of 1934, as amended, and, in accordance therewith,
will file reports, proxy statements and other information with the Commission.
38
<PAGE> 41
INDEX TO FINANCIAL INFORMATION
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C>
PRO FORMA FINANCIAL STATEMENTS
SanTi Group, Inc. and Subsidiaries
Introduction to Unaudited Pro Forma Combined Financial Statements F-3
Pro Forma Combined Balance Sheet as of March 31, 1998 (Unaudited) F-5
Pro Forma Combined Statements of Operations for the Year Ended
December 31, 1997 and the Three Months Ended March 31, 1998 (Unaudited) F-6
Notes to Unaudited Pro Forma Combined Financial Statements F-8
HISTORICAL FINANCIAL STATEMENTS
SanTi Group, Inc. and Subsidiaries
Report of Independent Public Accountants F-11
Consolidated Balance Sheets F-12
Consolidated Statements of Operations F-13
Consolidated Statements of Stockholders' Equity F-14
Consolidated Statements of Cash Flows F-15
Notes to Consolidated Financial Statements F-16
The historical financial statements of certain acquired companies are
included in this filing since each acquiree will contribute significant revenue
to the Company. The operating results of these acquirees should not be
considered indicative of the Company's future operating results.
Andrews Environmental Services, Inc.
Report of Independent Public Accountants F-24
Balance Sheet F-25
Statements of Operations F-26
Statements of Stockholders' Equity F-27
Statements of Cash Flows F-28
Notes to Financial Statements F-29
Ferrero Wastewater Management, Inc.
Report of Independent Public Accountants F-33
Balance Sheets F-34
Statements of Operations F-35
Statements of Stockholders' Equity F-36
Statements of Cash Flows F-37
Notes to Financial Statements F-38
A Rapid Rooter Sewer & Drain Service, Inc.
Report of Independent Public Accountants F-42
Balance Sheets F-43
Statements of Operations F-44
Statements of Stockholders' Equity F-45
Statements of Cash Flows F-46
Notes to Financial Statements F-47
</TABLE>
F-1
<PAGE> 42
<TABLE>
<S> <C> <C>
Seagraves, Inc. (d.b.a. Brownie Environmental Services) and Grease-Tec, Inc.
Report of Independent Public Accountants F-51
Combined Balance Sheets F-52
Combined Statements of Operations F-53
Combined Statements of Stockholders' Equity F-54
Combined Statements of Cash Flows F-55
Notes to Combined Financial Statements F-56
RGM Liquid Waste Removal Corporation and Affiliates
Report of Independent Public Accountants F-60
Combined Balance Sheets F-61
Combined Statements of Operations F-62
Combined Statements of Stockholders' Equity F-63
Combined Statements of Cash Flows F-64
Notes to Combined Financial Statements F-65
Eldredge Wastewater Management, Inc.
Report of Independent Public Accountants F-72
Balance Sheets F-73
Statements of Operations F-74
Statements of Stockholder's Equity F-75
Statements of Cash Flows F-76
Notes to Financial Statements F-77
</TABLE>
F-2
<PAGE> 43
SANTI GROUP, INC. AND SUBSIDIARIES
UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS
BASIS OF PRESENTATION
The following unaudited pro forma combined financial statements give effect to
the acquisitions by SanTi Group, Inc. ("SanTi") of businesses during the period
from March 19, 1997 (inception) through May 8, 1998 (the "Acquired Businesses").
The unaudited pro forma combined financial statements also give effect to the
merger with Microlytics, Inc. ("Microlytics") on May 13, 1998, which has been
accounted for as a capital transaction accompanied by a recapitalization of
Santi ("Recapitalization"). SanTi, the Acquired Businesses and Microlytics are
hereafter referred to as the Company. The Acquired Businesses are as follows:
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------
BUSINESS DATE ACQUIRED
- -----------------------------------------------------------------------------------------------------
<S> <C>
Grease business of Andrews Environmental Services, Inc. March 20, 1997
("Andrews Grease")
- -----------------------------------------------------------------------------------------------------
Atlanta Grease Trap Service, Inc. ("Atlanta Grease") August 27, 1997
- -----------------------------------------------------------------------------------------------------
Remaining business of Andrews Environmental Services, Inc. December 22, 1997
("Andrews Other")
- -----------------------------------------------------------------------------------------------------
Ferrero Wastewater Management, Inc. ("Ferrero") January 22, 1998
- -----------------------------------------------------------------------------------------------------
A Rapid Rooter Sewer & Drain Service, Inc. ("A Rapid") February 13, 1998
- -----------------------------------------------------------------------------------------------------
Quality Plumbing and Septic ("Quality") February 17, 1998
- -----------------------------------------------------------------------------------------------------
Seagraves, Inc. (d.b.a. Brownie Environmental Services, Inc.)
and Grease-Tec, Inc. ("Seagraves") March 6, 1998
- -----------------------------------------------------------------------------------------------------
RGM Liquid Waste Removal Corporation and Affiliates ("RGM") May 1, 1998
- -----------------------------------------------------------------------------------------------------
Eldredge Wastewater Management, Inc. ("Eldredge") May 8, 1998
- -----------------------------------------------------------------------------------------------------
</TABLE>
Andrews Grease and Andrews Other are hereafter referred to as "Andrews".
All of the above acquisitions were accounted for using the purchase method of
accounting. These statements are based on the historical financial statements of
the Acquired Businesses and the estimates and assumptions set forth below and in
the notes to the unaudited pro forma combined financial statements.
The unaudited pro forma combined balance sheet gives effect to the acquisitions
of RGM and Eldredge and the Recapitalization as if they had occurred on March
31, 1998. The unaudited pro forma combined statements of operations give effect
to these transactions as if they had occurred January 1, 1997.
SanTi has preliminarily analyzed the savings that it expects to be realized from
reductions in salaries and certain benefits to the owners. To the extent the
owners of the Acquired Businesses have agreed prospectively to reductions in
salary, bonuses and benefits, these reductions have been reflected in the pro
forma combined statements of operations. With respect to other potential cost
savings, SanTi cannot fully quantify these savings at this time. It is
anticipated that these savings will be partially offset by costs related to
SanTi's corporate management and by the costs associated with being a public
company. These costs cannot be quantified accurately. Accordingly, only those
anticipated savings and costs that are factually supportable have been included
in the accompanying pro forma financial information of the Company.
F-3
<PAGE> 44
The pro forma adjustments are based on estimates, available information and
certain assumptions and may be revised as additional information becomes
available. The pro forma financial data do not purport to represent what SanTi's
financial position or results of operations would actually have been if such
transactions in fact had occurred on those dates and are not necessarily
representative of the SanTi financial position or results of operations for any
future period. Since the Acquired Businesses were not under common control or
management, historical combined results may not be comparable to, or indicative
of, future performance. The unaudited pro forma combined financial statements
should be read in conjunction with the historical financial statements and notes
thereto included elsewhere herein.
F-4
<PAGE> 45
UNAUDITED PRO FORMA COMBINED BALANCE SHEET
AS OF MARCH 31, 1998
<TABLE>
<CAPTION>
PRO FORMA PRO FORMA
SANTI RGM ELDREDGE ADJUSTMENTS COMBINED
(Note 5)
<S> <C> <C> <C> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $13,504,967 $ - $ - $ (6,540,000)(b) $ 6,964,967
Accounts receivable, net 1,115,501 - - - 1,115,501
Prepaids and other 157,494 - - - 157,494
----------- ---------- ---------- ------------ -------------
Total current assets 14,777,962 - - (6,540,000) 8,237,962
PROPERTY AND EQUIPMENT, net 3,853,494 933,560 388,731 502,709 (a) 5,678,494
INTANGIBLES 11,795,776 - - 5,817,000 (a) 17,612,776
OTHER ASSETS 500,362 - - - 500,362
----------- ---------- ---------- ------------ -------------
$30,927,594 $ 933,560 $ 388,731 $ (220,291) $ 32,029,594
=========== ========== ========== ============ =============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable and accrued expenses $ 2,260,344 $ - $ - $ - $ 2,260,344
Line of Credit 13,272,948 - - - 13,272,948
Current portion of long-term debt 118,500 - - - 118,500
----------- ---------- ---------- ------------ -------------
Total current liabilities 15,651,792 - - - 15,651,792
LONG-TERM LIABILITIES:
Long-term debt, net of current portion 2,134,623 - - - 2,134,623
----------- ---------- ---------- ------------ -------------
Total liabilities 17,786,415 - - - 17,786,415
----------- ---------- ---------- ------------ -------------
STOCKHOLDERS' EQUITY
Common stock 679 - - 26 (b) 705
Additional paid-in-capital 13,902,126 - - 1,101,974 (b) 15,004,100
Net Assets Acquired - 933,560 388,731 (1,322,291)(c) -
Accumulated deficit (761,626) - - - (761,626)
----------- ---------- ---------- ------------ -------------
Total stockholders' equity 13,141,179 933,560 388,731 (220,291) 14,243,179
----------- ---------- ---------- ------------ -------------
$30,927,594 $ 933,560 $ 388,731 $ (220,291) $ 32,029,594
=========== ========== ========== ============ =============
<CAPTION>
RECAPITALIZATION AS ADJUSTED
(Note 5)
<C> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ - $ 6,964,967
Accounts receivable, net - 1,115,501
Prepaids and other - 157,494
------------------ -------------
Total current assets - 8,237,962
PROPERTY AND EQUIPMENT, net - 5,678,494
INTANGIBLES - 17,612,776
OTHER ASSETS - 500,362
------------------ -------------
$ - 32,029,594
================== =============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable and accrued expenses - 2,260,344
Line of Credit - 13,272,948
Current portion of long-term debt - 118,500
------------------ -------------
Total current liabilities - 17,786,415
LONG-TERM LIABILITIES:
Long-term debt, net of current portion - 2,134,623
------------------ -------------
Total liabilities - 17,269,992
------------------ -------------
STOCKHOLDERS' EQUITY
Common stock 103 d) 808
Additional paid-in-capital (103)d) 15,003,997
Net Assets Acquired - -
Accumulated deficit - (761,626)
------------------ -------------
Total stockholders' equity - 14,243,179
------------------ -------------
$ - $ 32,029,594
================== =============
</TABLE>
F-5
<PAGE> 46
UNAUDITED PRO FORMA COMBINED STATEMENT OF OPERATIONS
FOR THE THREE MONTHS ENDED MARCH 31, 1998
<TABLE>
<CAPTION>
SANTI FERRERO A RAPID QUALITY SEAGRAVES RGM ELDREDGE
<S> <C> <C> <C> <C> <C> <C> <C>
Revenues $2,634,722 $257,982 $680,870 $194,786 $1,342,431 $1,842,449 $1,000,365
EXPENSES
Cost of operations 1,647,530 175,443 338,971 118,620 930,687 1,083,204 741,425
Selling, General and
Administrative Expense 1,524,389 73,399 244,591 61,894 350,137 502,748 276,702
Depreciation and
Amortization 177,900 23,334 41,476 5,179 32,886 99,643 49,742
---------- -------- -------- -------- --------- --------- ---------
INCOME (LOSS) FROM OPERATIONS (715,097) (14,194) 55,832 9,093 28,721 156,854 (67,504)
Other expense (income):
Interest 106,713 5,913 11,148 1,684 8,659 (14,903) 9,670
Other - (33) (476) 60 (105,984) - 76
---------- -------- -------- -------- --------- --------- ---------
INCOME (LOSS) BEFORE TAXES (821,810) (20,074) 45,160 7,349 126,046 171,757 (77,250)
Provision (benefit)
for taxes (318,536) - - - - 66,985 (18,153)
---------- -------- -------- -------- --------- --------- ---------
NET INCOME(LOSS) $ (503,274) $(20,074) $ 45,160 $ 7,349 $ 126,046 $ 104,772 $ (59,097)
========== ======== ======== ======== ========= ========= =========
PRO FORMA NET LOSS
PER SHARE
Basic and Diluted $ (0.10)
==========
PRO FORMA WEIGHTED AVERAGE
SHARES OUTSTANDING
Basic and Diluted 4,874,434
==========
<CAPTION>
PRO FORMA PRO FORMA RECAPITAL- AS
ADJUSTMENTS COMBINED IZATION ADJUSTED
(Note 6) (Note 6)
<S> <C> <C> <C> <C>
Revenues $ - $7,953,605 $ - $7,953,605
EXPENSES
Cost of operations 5,035,880 5,035,880
Selling, General and
Administrative Expense (51,250)(d) 2,982,610 2,982,610
Depreciation and Amortization 188,957 (a) 619,117 619,117
---------- ---------- ----------- ----------
INCOME (LOSS) FROM OPERATIONS (137,707) (684,002) - (684,002)
Other expense (income):
Interest 30,000 (b) 109,842 109,842
(49,042)(c)
Other (106,357) (106,357)
---------- ---------- ----------- ----------
INCOME (LOSS) BEFORE TAXES (118,665) (687,487) - (687,487)
Provision (benefit)
for taxes (47,863)(e) (268,120) (268,120)
(46,279)(f)
---------- ---------- ----------- ----------
NET INCOME(LOSS) $ (120,249) $ (419,367) $ - $ (419,367)
========== ========== =========== ==========
PRO FORMA NET (LOSS)
PER SHARE
Basic and Diluted $ (0.08) $ (0.07)
========== ==========
PRO FORMA WEIGHTED AVERAGE
SHARES OUTSTANDING
Basic and Diluted 381,445 5,255,879 1,027,066(g) 6,282,945
========== ========== =========== ==========
</TABLE>
F-6
<PAGE> 47
UNAUDITED PRO FORMA COMBINED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1997
<TABLE>
<CAPTION>
SANTI ANDREWS ATLANTA GREASE FERRERO A RAPID QUALITY
<S> <C> <C> <C> <C> <C> <C>
Revenues $ 737,858 $1,218,268 $ 198,255 $4,122,100 $4,629,655 $1,558,288
- --------
EXPENSES
Cost of operations 406,638 625,892 133,741 2,797,821 2,364,794 948,963
Selling, General and Administrative
Expenses 521,372 646,273 41,941 1,045,315 1,730,394 495,149
Depreciation and Amortization 127,338 121,496 220,432 319,001 41,529
--------- --------- ------------ --------- --------- ---------
INCOME (LOSS) FROM OPERATIONS (317,490) (175,393) 22,573 58,532 215,466 72,647
Other expense (income):
Interest 104,494 22,077 3,692 50,920 86,367 13,472
Other (204,124) (2,821) 27,413 476
--------- --------- ------------ --------- --------- ---------
INCOME (LOSS) BEFORE TAXES (421,984) 6,654 18,881 10,433 101,686 58,699
Provision (benefit) for taxes (163,632) 4,334
--------- --------- ------------ --------- --------- ---------
NET INCOME (LOSS) $(258,352) $ 2,320 $ 18,881 $ 10,433 $ 101,686 $ 58,699
========= ========= ============ ========= ========= =========
PRO FORMA NET LOSS PER SHARE
Basic and Diluted $ (0.28)
=========
PRO FORMA WEIGHTED AVERAGE
SHARES OUTSTANDING
Basic and Diluted 913,470
=========
<CAPTION>
PRO FORMA PRO FORMA
SEAGRAVES RGM ELDREDGE ADJUSTMENTS COMBINED
(Note 6)
<C> <C> <C> <C> <C> <C>
Revenues $6,924,493 $7,459,143 $4,074,248 $ - $30,922,308
- --------
EXPENSES
Cost of operations 4,868,591 4,485,210 2,841,432 - 19,473,082
Selling, General and Administrative
Expenses 1,636,989 2,407,013 1,081,150 (205,000)(d) 9,400,596
Depreciation and Amortization 248,938 394,420 192,534 1,031,389 (a) 2,697,077
--------- --------- --------- ---------- ----------
INCOME (LOSS) FROM OPERATIONS 169,975 172,500 (40,868) (826,389) (648,447)
Other expense (income):
Interest 36,425 (88,518) 34,828 124,621 (b) 443,990
55,612 (c)
Other (75,529) (73,276) (6,509) (334,370)
--------- --------- --------- ---------- ----------
INCOME (LOSS) BEFORE TAXES 209,079 334,294 (69,187) (1,006,622) (758,067)
Provision (benefit) for taxes 156,526 (17,957) 117,665 (e) (295,646)
(392,582)(f)
--------- --------- --------- ---------- ----------
NET INCOME (LOSS) $ 209,079 $ 177,768 $ (51,230) $ (731,705) $ (462,421)
========= ========= ========= ========== ==========
PRO FORMA NET LOSS PER SHARE
Basic and Diluted $ (0.32)
==========
PRO FORMA WEIGHTED AVERAGE
SHARES OUTSTANDING
Basic and Diluted 540,652 1,454,122
========== ==========
<CAPTION>
RECAPITALIZATION AS ADJUSTED
(Note 6)
<C> <C> <C>
Revenues $ - 30,922,308
- --------
EXPENSES
Cost of operations - 19,473,082
Selling, General and Administrative
Expenses - 9,400,596
Depreciation and Amortization - 2,697,077
----------------- ----------
INCOME (LOSS) FROM OPERATIONS - (648,447)
Other expense (income):
Interest - 443,990
Other - (334,370)
----------------- ----------
INCOME (LOSS) BEFORE TAXES - (758,067)
Provision (benefit) for taxes - (295,646)
----------------- ----------
NET INCOME (LOSS) $ - $ (462,421)
================= ==========
PRO FORMA NET LOSS PER SHARE
Basic and Diluted $ (0.19)
==========
PRO FORMA WEIGHTED AVERAGE
SHARES OUTSTANDING
Basic and Diluted 1,027,066(g) 2,481,188
================= ==========
</TABLE>
F-7
<PAGE> 48
SANTI GROUP, INC. AND ACQUIRED BUSINESSES
NOTES TO UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS
MARCH 31, 1998 AND DECEMBER 31, 1997
1. BACKGROUND
SanTi Group, Inc. ("SanTi") was formed to act as a consolidator of nonharzardous
liquid waste businesses. From its inception on March 19, 1997 through May 8,
1998, SanTi has acquired nine businesses involved in the nonhazardous liquid
waste business ("Acquired Businesses").
2. HISTORICAL FINANCIAL STATEMENTS
The historical financial statements of the Acquired Businesses were derived from
the respective Acquired Businesses' financial statements. Balance sheet
information of the Acquired Businesses reflects only those assets purchased by
SanTi. All Acquired Businesses have a December 31 year-end, or their financial
results have been recast to a December 31 year-end, with the exception of RGM
which has an October 31 year-end. The audited historical financial statements
included elsewhere in this Registration Statement have been included in
accordance with Securities and Exchange Commission (SEC) Staff Accounting
Bulletin No. 80.
3. ACQUISITION OF ACQUIRED BUSINESSES
The acquisitions of the Acquired Businesses were financed by borrowings under
two credit agreements with total availability of $16.6 million and cash proceeds
of $16.3 million from sales of common stock. All acquisitions have been
accounted for using the purchase method of accounting.
The following table sets forth the consideration paid in (a) cash, (b) seller
notes and (c) value of common stock to the shareholders of the Acquired
Businesses:
<TABLE>
<CAPTION>
COMMON TOTAL
CASH SELLER NOTES STOCK CONSIDERATION
-----------------------------------------------------------------------
<S> <C> <C> <C> <C>
Andrews $ 1,135,000 $ 257,350 $ 17,120 $ 1,409,470
Atlanta Grease 360,000 0 0 360,000
Ferrero 2,240,100 0 72,000 2,312,100
A Rapid 3,990,120 0 100,000 4,090,120
Quality 2,250,000 0 58,000 2,308,000
Seagraves 3,250,000 2,000,000 60,000 5,310,000
RGM 4,500,000 0 609,000 5,109,000
Eldredge 2,040,000 0 493,000 2,533,000
-----------------------------------------------------------------------
Total $19,765,220 $2,257,350 $1,409,120 $23,431,690
-----------------------------------------------------------------------
</TABLE>
F-8
<PAGE> 49
In addition to the above amounts, the agreements include contingent
consideration totaling $1,608,900 in cash and 93,600 shares of common stock.
These amounts are payable by the Company to the Acquired Businesses on various
dates specified by the agreements, contingent upon the meeting of certain goals
as defined in the agreements. For purposes of computing the estimated purchase
price for accounting purposes, the value of the common stock was determined
using an estimated fair value of $.80 - $1 per share for all acquisitions except
for RGM and Eldredge, for which the common stock was valued at $5.80 per share.
These per share prices are based on the offering prices of the Company's common
stock issued in private transactions occurring in January and April of 1998.
The allocation of purchase prices to the assets acquired has been initially
assigned and recorded based on preliminary estimates of fair value and may be
revised as additional information concerning the valuation of such assets
becomes available. Based upon management's preliminary analysis, the historical
carrying value of the acquired assets approximates fair value, with the
exception of property and equipment, for which the carrying value has been
increased by approximately $700,000. The amount allocated to noncompete
agreements and goodwill is approximately $1.2 million and $16.3 million,
respectively. Management of SanTi has not identified any other material tangible
or identifiable intangible assets of the Acquired Businesses to which a portion
of the purchase prices could reasonably be allocated.
4. RECAPITALIZATION
On May 13, 1998 SanTi merged ("Merger") with Microlytics, Inc. ("Microlytics").
Under the terms of the Merger each outstanding share of SanTi common stock was
exchanged for one share of Microlytics common stock. Immediately prior to the
merger, Microlytics had 1,027,066 shares of common stock outstanding and
warrants to purchase an additional 500,000 shares of common stock at an exercise
price of $5.80. The Merger resulted in the receipt by Santi shareholders of
approximately 8,088,379 shares of common stock, representing approximately 86.2%
of the Microlytics shares outstanding on the effective date of the Merger. As a
result of the Merger, SanTi Group, Inc. was merged into Microlytics and
Microlytics certificate of incorporation was amended as of the effective date of
the Merger to change Microlytics' name to SanTi Group, Inc. For accounting
purposes, the Merger has been accounted for as a capital transaction accompanied
by a recapitalization of SanTi.
5. UNAUDITED PRO FORMA COMBINED BALANCE SHEET ADJUSTMENTS:
(a) Reflects adjustments to record the fair market value of assets acquired plus
the resulting goodwill related to the excess purchase price over the fair value
of assets acquired:
<TABLE>
<S> <C>
--------------------------------------------------------------------------------------
Total consideration $7,642,000
--------------------------------------------------------------------------------------
Fair value of assets purchased (includes an increase 1,825,000
of $502,709 over the historical carrying value) ----------
--------------------------------------------------------------------------------------
Excess of purchase price over fair value of net assets acquired 5,817,000
--------------------------------------------------------------------------------------
Value associated with noncompete agreements 500,000
----------
--------------------------------------------------------------------------------------
Adjustment to goodwill $5,317,000
==========
--------------------------------------------------------------------------------------
</TABLE>
F-9
<PAGE> 50
(b) Reflects purchase price consideration for Eldredge and RGM of $6.5 million
in cash and 190,000 shares of common stock with an estimated value of $1.1
million.
(c) Reflects the elimination of the net assets acquired.
(d) Reflects the merger with Microlytics.
6. UNAUDITED PRO FORMA COMBINED STATEMENT OF OPERATIONS ADJUSTMENTS:
(a) Reflects additional amortization of noncompete agreements using a weighted
average life of 2.2 years and goodwill using a 40 year life. Also includes
additional depreciation of property and equipment using a weighted average
remaining life of 5 years.
(b) Reflects additional interest expense on the $2.3 million in seller notes at
a weighted average annual rate of 6.2%.
(c) Reflects elimination of interest expense of Acquired Businesses net of
additional interest expense on $3.9 million in line of credit borrowings at
8.21%. The elimination of interest expense of the acquired businesses is
required as the Company assumed no debt in the purchase transactions. Additional
borrowings under the Company's line of credit of $3.9 million were required to
supplement equity proceeds from the sale of common stock to pay the cash portion
of the purchase prices.
(d) Adjusts compensation to the level that the owners of the Acquired Businesses
have contractually agreed to receive subsequent to the Acquisitions. The
employment agreements have terms of one to three years and include certain
severance provisions in the event of termination without cause.
(e) Reflects additional income tax provision for state and federal taxes at a
combined statutory tax rate of 39% as certain Acquired Businesses previously
were taxed as Subchapter S Corporations.
(f) Reflects (benefit) for income taxes for the tax effect of adjustments (a)
thru (d).
(g) Reflects issuance of additional shares in connection with the
Recapitalization. Warrants to purchase an additional 500,000 shares of common
stock at $5.80 per share have been excluded as their impact is antidilutive.
F-10
<PAGE> 51
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To SanTi Group, Inc.:
We have audited the accompanying consolidated balance sheet of SANTI GROUP, INC.
(a Delaware corporation) AND SUBSIDIARIES as of December 31, 1997 and the
related consolidated statements of operations, stockholders' equity, and cash
flows for the period from inception (March 19, 1997) to December 31, 1997. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of SanTi Group, Inc. and
subsidiaries as of December 31, 1997 and the results of their operations and
their cash flows for the period from inception (March 19, 1997) to December 31,
1997 in conformity with generally accepted accounting principles.
ARTHUR ANDERSEN LLP
Atlanta, Georgia
April 2, 1998 (except for the last six
paragraphs of Note 10 as to which
the date is June 29, 1998)
F-11
<PAGE> 52
SANTI GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31, MARCH 31,
ASSETS 1997 1998
- ------------------------------------------------- ------------ ------------
(unaudited)
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 195,552 $ 13,504,967
Accounts receivable, net of allowance for
doubtful accounts of $17,875 and $77,659 in
1997 and 1998, respectively 125,777 1,115,501
Prepaid expenses 81,089 157,494
Deferred income taxes 65,471 0
------------ ------------
Total current assets 467,889 14,777,962
------------ ------------
MACHINERY AND EQUIPMENT 593,416 3,989,205
Less accumulated depreciation (31,874) (135,711)
------------ ------------
561,542 3,853,494
------------ ------------
OTHER NONCURRENT ASSETS:
Intangibles, net 1,473,489 11,795,776
Deferred income taxes 98,161 482,168
Other assets 13,062 18,194
------------ ------------
1,584,712 12,296,138
------------ ------------
$ 2,614,143 $ 30,927,594
============ ============
LIABILITIES AND
STOCKHOLDERS' EQUITY
- -------------------------------------------------
CURRENT LIABILITIES:
Accounts payable $ 37,774 $ 1,122,238
Accrued expenses 339,961 1,138,106
Lines of credit 1,120,000 13,272,948
Current portion of long-term debt 123,715 118,500
------------ ------------
Total current liabilities 1,621,450 15,651,792
------------ ------------
LONG-TERM DEBT, NET OF CURRENT PORTION 180,240 2,134,623
------------ ------------
COMMITMENTS (NOTE 6)
STOCKHOLDERS' EQUITY:
Common stock, $.0001 par value; 100,000,000
shares authorized, 3,285,879 and 6,785,879
shares issued and outstanding in 1997 and
1998, respectively 329 679
Additional paid-in capital 1,070,476 13,902,126
Accumulated deficit (258,352) (761,626)
------------ ------------
Total stockholders' equity 812,453 13,141,179
------------ ------------
$ 2,614,143 $ 30,927,594
============ ============
</TABLE>
The accompanying notes are an integral part of these
consolidated balance sheets.
F-12
<PAGE> 53
SANTI GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
PERIOD FROM THREE-MONTH
INCEPTION PERIOD ENDED
(MARCH 19, 1997) TO MARCH 31,
DECEMBER 31, 1997 1998
------------------ -----------
(unaudited)
<S> <C> <C>
REVENUES $ 737,858 $ 2,634,722
----------- -----------
EXPENSES:
Cost of operations 406,638 1,647,530
General and administrative 521,372 1,524,389
Depreciation and amortization 127,338 177,900
----------- -----------
Total expenses 1,055,348 3,349,819
----------- -----------
(LOSS) FROM OPERATIONS (317,490) (715,097)
OTHER EXPENSE (INCOME):
Interest 104,494 106,713
----------- -----------
(LOSS) BEFORE INCOME TAX BENEFIT (421,984) (821,810)
INCOME TAX (BENEFIT) (163,632) (318,536)
----------- -----------
NET (LOSS) $ (258,352) $ (503,274)
=========== ===========
(LOSS) PER SHARE:
Basic and diluted $ (.28) $ (.10)
=========== ===========
WEIGHTED AVERAGE SHARES OUTSTANDING:
Basic and diluted 913,470 4,874,434
=========== ===========
</TABLE>
The accompanying notes are an integral part of these consolidated statements.
F-13
<PAGE> 54
SANTI GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
COMMON STOCK ADDITIONAL
------------------------------ PAID-IN ACCUMULATED
SHARES AMOUNT CAPITAL DEFICIT TOTAL
------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
BALANCE, MARCH 19, 1997 (INCEPTION) 0 $ 0 $ 0 $ 0 $ 0
Sale of common stock 3,250,000 325 789,675 0 790,000
Issuance of common stock in
settlement of notes payable 14,479 2 263,683 0 263,685
Issuance of common stock for
acquired business 21,400 2 17,118 0 17,120
Net loss 0 0 0 (258,352) (258,352)
------------ ------------ ------------ ------------ ------------
BALANCE, DECEMBER 31, 1997 3,285,879 329 1,070,476 (258,352) 812,453
Sale of common stock 3,250,000 325 12,599,675 0 12,600,000
Issuance of common stock for
acquired businesses 250,000 25 231,975 0 232,000
Net loss 0 0 0 (503,274) (503,274)
------------ ------------ ------------ ------------ ------------
BALANCE, MARCH 31, 1998 (UNAUDITED) 6,785,879 $ 679 $ 13,902,126 $ (761,626) $ 13,141,179
============ ============ ============ ============ ============
</TABLE>
The accompanying notes are an integral part of these consolidated statements.
F-14
<PAGE> 55
SANTI GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
PERIOD FROM THREE-MONTH
INCEPTION PERIOD ENDED
(MARCH 19, 1997) TO MARCH 31,
DECEMBER 31, 1997 1998
------------------- ------------
(unaudited)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (258,352) $ (503,274)
------------ ------------
Adjustments to reconcile net loss to net cash (used
in) provided by operating activities:
Depreciation and amortization 127,338 177,900
Changes in assets and liabilities, excluding
effects of acquired businesses:
Accounts receivable (125,777) (989,724)
Prepaid expenses (81,089) (76,405)
Deferred income taxes (163,632) (318,536)
Intangibles (36,337) (79,919)
Other assets (13,062) (5,132)
Accounts payable 37,774 1,084,464
Accrued expenses 339,961 798,145
------------ ------------
Total adjustments 85,176 590,793
------------ ------------
Net cash (used in) provided by operating
activities (173,176) 87,519
------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (15,432) 0
Business acquisitions (1,495,000) (11,480,220)
------------ ------------
Net cash used in investing activities (1,510,432) (11,480,220)
------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net borrowings under lines of credit 1,120,000 12,152,948
Payments of long-term debt (30,840) (50,832)
Sale of common stock 790,000 12,600,000
------------ ------------
Net cash provided by financing activities 1,879,160 24,702,116
------------ ------------
NET INCREASE IN CASH AND CASH EQUIVALENTS 195,552 13,309,415
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 0 195,552
------------ ------------
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 195,552 $ 13,504,967
============ ============
SUPPLEMENTAL CASH FLOW INFORMATION:
Cash paid for interest $ 78,763 $ 0
============ ============
Cash paid for income taxes $ 0 $ 0
============ ============
NONCASH INVESTING AND FINANCING ACTIVITIES:
Notes payable issued for business acquisitions $ 257,350 $ 2,000,000
============ ============
Notes payable issued for noncompete agreements $ 341,130 $ 0
============ ============
Common stock issued for business acquisitions $ 17,120 $ 232,000
============ ============
Common stock issued in settlement of notes payable $ 263,685 $ 0
============ ============
</TABLE>
The accompanying notes are an integral part of these consolidated statements.
F-15
<PAGE> 56
SANTI GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1997 AND MARCH 31, 1998 (UNAUDITED)
1. ORGANIZATION AND BASIS OF PRESENTATION
SanTi Group, Inc. ("SanTi" or the "Company") was incorporated on August
19, 1997 as a Delaware corporation. The Company operates as a
consolidator of the highly fragmented nonhazardous liquid waste
management industry through acquisition of businesses with operating
service centers that treat, process, and recover nonhazardous liquid
waste to serve a variety of customers from private residences and
municipalities to large industrial companies.
Bone-Dry Enterprises, Inc. ("Bone-Dry") was incorporated on March 19,
1997 as a Georgia corporation. On December 1, 1997, all shares of
Bone-Dry common stock were exchanged for SanTi common stock. Since the
Company and Bone-Dry were under common ownership since their respective
dates of inception, the accompanying financial statements are for the
period from the inception of Bone Dry (March 19, 1997) to December 31,
1997. The accompanying consolidated financial statements include the
accounts of the Company and its wholly owned subsidiaries. All material
intercompany balances and transactions have been eliminated.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
CASH AND CASH EQUIVALENTS
The Company considers all highly liquid investments with maturities of
three months or less at the date of purchase as cash equivalents.
At March 31, 1998, cash includes restricted funds of $522,000 due to be
refunded to prospective investors as a result of the over subscription
of the March private placement of SanTi common stock (Note 10).
MACHINERY AND EQUIPMENT
Machinery and equipment are recorded at cost. Depreciation is provided
over the estimated useful lives of the assets using the straight-line
method. The estimated useful lives for machinery and equipment range
from five to seven years.
INTANGIBLES
As of December 31, 1997, intangibles consist primarily of goodwill of
$1,214,228 and noncompete agreements of $259,261 associated with
business acquisitions. Noncompete agreements are being amortized over
the lives of the
F-16
<PAGE> 57
contracts. Goodwill is being amortized over 40 years. Amortization
expense associated with intangibles was $95,464 for the period from
inception (March 19, 1997) to December 31, 1997.
REVENUE RECOGNITION
The Company recognizes revenues as services are provided.
LONG-LIVED ASSETS
The Company periodically reviews the values assigned to long-lived
assets, such as property and equipment and intangibles, to determine
whether any impairments are other than temporary. Management believes
that long-lived assets in the accompanying balance sheet are
appropriately stated.
EARNINGS PER SHARE
Basic earnings per share are based on the weighted average number of
shares outstanding. Diluted earnings per share are based on the
weighted average number of shares outstanding and the dilutive effect
of stock options outstanding (using the treasury stock method) and
contingently issuable shares. For the period from inception (March 19,
1997) to December 31, 1997, outstanding options of 612,500 and
contingently issuable shares have been excluded from diluted weighted
average shares outstanding, as their impact was antidilutive.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the
date of the financial statements and the reported amounts of revenues
and expenses during the reporting period. Actual results could differ
from those estimates.
UNAUDITED INTERIM FINANCIAL INFORMATION
The accompanying financial statements as of March 31, 1998, and for the
three month period ended March 31, 1998, are unaudited. In the opinion
of management, these financial statements reflect all adjustments,
consisting only of normal recurring adjustments, necessary for a fair
presentation of the financial statements. The results of operations for
the three month period ended March 31, 1998 are not necessarily
indicative of the results that may be expected for the full year.
NEW ACCOUNTING PRONOUNCEMENTS
In June 1997, the Financial Accounting Standards Board (the "FASB")
issued Statement of Financial Accounting Standards ("SFAS") No. 130,
"Reporting Comprehensive Income." SFAS No. 130 is designed to improve
the reporting of changes in equity from period to period. The Company
currently has no other comprehensive income items as defined by SFAS
No. 130.
In June 1997, the FASB issued SFAS No. 131, "Disclosures About
Segments of an Enterprise and Related Information." SFAS No. 131
requires that an enterprise disclose certain information about
operating segments. SFAS No. 131 is effective for financial
statements for the Company's fiscal year ending December 31, 1998.
The Company does not expect that SFAS No. 131 will require revision of
prior disclosures.
3. ACQUISITIONS
On March 20, 1997, Bone-Dry purchased certain assets of Andrews
Environmental Services, Inc. ("Andrews") associated with Andrews Grease
Disposal Business ("Andrews Grease"). Andrews Grease is in the business
of commercial and governmental grease
F-17
<PAGE> 58
extraction, collection, and transportation services primarily in the
state of Georgia. Consideration associated with the purchase was
$475,000 in cash and $257,350 in notes payable.
On August 27, 1997, Bone-Dry purchased Atlanta Grease Trap Service
("Atlanta Grease"), a Georgia sole proprietorship, for $360,000 in
cash. Atlanta Grease is in the business of commercial and governmental
grease extraction, collection, and transportation services in the state
of Georgia.
On December 22, 1997, Bone-Dry purchased substantially all of the
remaining assets of Andrews. Andrews is engaged in the nonhazardous
liquid waste and septic waste collection, transportation, management,
and disposal business primarily in the state of Georgia. Consideration
associated with the purchase was $660,000 in cash and 21,400 shares of
SanTi common stock. Contingent consideration of 13,600 shares of SanTi
common stock is payable within 90 days of the first anniversary of the
date of purchase, net of offsets for losses, as defined in the purchase
agreement.
The acquisitions of Andrews Grease, Atlanta Grease, and Andrews were
accounted for using the purchase method of accounting; accordingly, the
purchase prices have been allocated to the assets acquired based on
their respective fair values at the dates of acquisition. The resulting
excess of purchase prices over fair values of assets acquired was
recorded as goodwill. Goodwill recorded in the purchases of Andrews
Grease, Atlanta Grease, and Andrews was $482,350, $360,000, and
$349,136, respectively.
The Company's unaudited pro forma consolidated results of operations
for the period from inception (March 19, 1997) to December 31, 1997
shown below are presented assuming that the December 22, 1997
acquisition of Andrews had been consummated on March 19, 1997:
<TABLE>
<S> <C>
Pro forma revenue $1,778,126
Pro forma net (loss) (256,113)
Pro forma (loss) per share $ (.27)
</TABLE>
The Company's unaudited pro forma results of operations are presented
for informational purposes only and may not necessarily reflect the
future results of operations of the Company or what the results of
operations would have been had the Company owned and operated Andrews
as of March 19, 1997. The Company's acquisition of Atlanta Grease is
not significant for purposes of presenting pro forma information.
Subsequent to year-end, the Company acquired the following businesses:
- On January 22, 1998, the Company purchased Ferrero
Wastewater Management, Inc. ("Ferrero"), a
Pennsylvania corporation. Ferrero is engaged in the
nonhazardous liquid waste and septic waste
collection, transportation, management, and disposal
business in and around Ambler, Pennsylvania.
Consideration was $2,240,100 in cash and 90,000
shares of SanTi common stock. Contingent
consideration of $248,900 in cash and 10,000 shares
of SanTi common stock is payable 270 days after the
date of purchase, net of offsets for losses, as
defined in the purchase agreement.
F-18
<PAGE> 59
- On February 13, 1998, the Company purchased A Rapid
Rooter Sewer & Drain Service, Inc. ("A Rapid"), a
Florida corporation. A Rapid is engaged in the
nonhazardous liquid waste and septic waste
collection, transportation, management, and disposal
business in and around Pompano Beach, Florida.
Consideration was $3,990,120 in cash and 100,000
shares of SanTi common stock.
- On February 17, 1998, the Company purchased Quality
Plumbing and Septic, Inc. ("Quality"), a Georgia
corporation. Quality is engaged in the nonhazardous
liquid waste and septic waste collection,
transportation, management, and disposal business in
and around Douglasville, Georgia. Consideration was
$2,000,000 in cash. Contingent consideration of
$250,000 and 10,000 shares of SanTi common stock is
payable 120 days after the date of purchase, net of
offsets for losses, as defined in the purchase
agreement. In June 1998, all contingent consideration
was paid to Quality in accordance with the purchase
agreement.
- On March 6, 1998, the Company purchased Seagraves,
Inc. (d/b/a Brownie Environmental) and Grease-Tec,
Inc. (collectively, "Seagraves"), two Florida
corporations. Seagraves is engaged in the
nonhazardous liquid waste and septic waste
collection, transportation, management, and disposal
business in and around Orlando, Florida.
Consideration was $3,250,000 in cash, a note payable
of $2,000,000, and 60,000 shares of SanTi common
stock.
- On May 1, 1998, the Company purchased RGM Liquid
Waste Removal Corporation and Affiliates ("RGM"),
consisting of four New York corporations. RGM is
engaged in the nonhazardous liquid waste and septic
waste collection, transportation, management, and
disposal business in and around Long Island, New
York. Consideration was $4,500,000 in cash and
105,000 shares of SanTi common stock. Contingent
consideration of $1,000,000 and 55,000 shares of
SanTi common stock is payable 365 days after the date
of purchase, net of offsets for losses, as defined in
the purchase agreement.
- On May 8, 1998, the Company purchased Eldredge
Wastewater Management, Inc., a Pennsylvania
corporation. Eldredge is engaged in the nonhazardous
liquid waste and septic waste collection,
transportation, management, and disposal business in
and around Philadelphia, Pennsylvania. Consideration
was $2,040,000 in cash and 85,000 shares of SanTi
common stock. Contingent consideration of $360,000
and 15,000 shares of SanTi common stock is payable 13
months after the date of purchase, net of offsets for
losses, as defined in the purchase agreement.
4. LINE OF CREDIT
At December 31, 1997, the Company had a $6,600,000 revolving line of
credit (the "Revolver"). The Revolver has an interest rate of LIBOR
plus 2.25% (8.21% at December 31, 1997) and is secured by substantially
all assets of the Company. At December 31, 1997, $1,120,000 was
outstanding and $5,480,000 was available for future borrowings. The
F-19
<PAGE> 60
Revolver matures August 12, 1998, is renewable for successive one-year
periods, and is personally guaranteed by the majority owner of the
Company. Subsequent to year-end, the Company borrowed funds under the
majority owner's personal line of credit. These borrowings were used to
finance the Company's acquisitions of businesses discussed in Note 3.
In June 1998, the lines of credit were paid in full in conjunction with
the Company obtaining new financing from another bank (Note 10).
5. LONG-TERM DEBT
At December 31, 1997, long-term debt consisted of the following:
<TABLE>
<S> <C>
Subordinated notes payable to former owners of acquired
businesses, interest imputed at 8.1%, payable in various
installments through April 1, 2000, unsecured $ 303,955
Less current portion (123,715)
---------
$ 180,240
=========
</TABLE>
Future aggregate annual maturities of long-term debt are as follows as
of December 31, 1997:
<TABLE>
<S> <C>
1998 $123,715
1999 103,431
2000 76,809
--------
$303,955
========
</TABLE>
6. RELATED-PARTY TRANSACTIONS
In 1997, the Company entered into a note payable agreement with an
entity controlled by the Company's majority owner. The note was for
$650,000, had an interest rate of 13%, and was paid in full during
1997. In December 1997, after the note was paid in full, the related
party purchased 1,608,750 shares of SanTi common stock for $650,000.
In March 1997, the Company entered into a four-year consulting
agreement with a former owner of an acquired business. The Company paid
its obligation of $75,000 in full during 1997, as required by the
agreement, and is recognizing the expense over the life of the
agreement. For the period from inception (March 19, 1997) to December
31, 1997, consulting expense related to the agreement was $13,021 and
is included in general and administrative expenses in the accompanying
statement of operations.
During 1997, the Company entered into three noncompete agreements with
former owners of acquired businesses in exchange for notes payable
totaling $341,130. In connection with the December 22, 1997 purchase of
Andrews, one of the former owners of Andrews exchanged $263,685 of
outstanding notes payable, issued in connection with the March 1997
purchase of Andrews Grease, for 14,479 shares of SanTi common stock.
F-20
<PAGE> 61
LEASES
The Company leases office space and equipment from an entity controlled
by the Company's majority owner under a lease agreement which expires
January 31, 1998 and is renewable for successive one-month periods.
Rental expense under the lease was $11,690 for the period from
inception (March 19, 1997) to December 31, 1997.
7. STOCK-BASED COMPENSATION
In August 1997 and December 1997, the Company issued nonqualified stock
options to purchase 125,000 and 487,500 SanTi common stock,
respectively, at $.65 per share, which represented the fair market
value as of the dates of grant as determined by the Company's board of
directors. The options are exercisable for a period of three years
beginning on the dates of grant. See Note 10 where exercised
subsequent to year end.
The Company has adopted the disclosure-only provisions of SFAS No. 123,
"Accounting for Stock-Based Compensation." Accordingly, no compensation
cost has been recognized for the stock options granted. Had
compensation cost for the Company's stock options granted been
determined consistent with the provisions of SFAS No. 123, the
Company's net loss would have been increased to the pro forma amount
indicated below for the period from inception (March 19, 1997) to
December 31, 1997.
<TABLE>
<S> <C>
Net (loss), as reported $(258,352)
Net (loss), pro forma (322,729)
Pro forma net (loss) per share (.35)
</TABLE>
The fair values of options granted were estimated on the date of grant
using the minimum value approach, an expected life of three years, and
risk-free interest rate of 5.88%.
8. INCOME TAXES
The accompanying financial statements include an income tax benefit
computed in accordance with SFAS No. 109, "Accounting for Income
Taxes." The following summarizes the components of the income tax
benefit:
<TABLE>
<S> <C>
Current provision $ 0
Deferred taxes 163,632
--------
Income tax benefit $163,632
========
</TABLE>
Reconciliation from the federal statutory rate to the actual income tax
benefit is as follows:
<TABLE>
<S> <C>
Statutory federal tax rate (34.0)%
State income taxes, net of federal tax benefit (5.0)
Other 2.3
-----
(36.7)%
=====
</TABLE>
F-21
<PAGE> 62
The sources of differences between the financial accounting and tax
bases of the Company's assets and liabilities which give rise to the
deferred tax asset and liabilities and the tax effects of each are as
follows as of December 31, 1997:
<TABLE>
<S> <C>
Deferred tax assets:
Allowance for doubtful accounts $ 6,971
Intangibles 17,210
Accrued expenses 58,500
Net operating loss carryforward 107,471
---------
Total deferred tax assets 190,152
Deferred tax liability:
Depreciation (26,520)
---------
Net deferred tax asset $ 163,632
=========
</TABLE>
As of December 31, 1997, deferred tax assets include a net operating
loss carryforward of $275,566 which is available to offset future
taxable income through 2012. Realization of the net deferred tax asset
is dependent on generating sufficient taxable income in future periods.
Although realization is not assured, management believes it is more
likely than not that the net deferred tax asset will be realized.
9. ENVIRONMENTAL REGULATIONS
The Company is subject to extensive and evolving federal, state, and
local environmental laws and regulations that have been enacted in
response to technological advances and the public's increased concern
over environmental issues. The majority of the expenditures necessary
to comply with the environmental laws and regulations is made in the
normal course of business. The Company, to the best of its knowledge,
is in compliance, in all material respects, with the laws and
regulations affecting its operations.
10. SUBSEQUENT EVENTS
On January 12, 1998, a group of investors purchased 1,250,000 shares of
the Company's common stock for $.80 per share.
On January 30, 1998, the Company declared a 1.25-for-1 stock split
effected in the form of a stock dividend. All share amounts have been
restated for this stock split.
During March and April, 1998, the Company sold 2,500,000 shares of its
common stock through private offerings. Proceeds from the offerings
totaled $14.5 million.
In connection with certain 1998 acquisitions, the Company has entered
into employment agreements with 8 employees. Upon termination of
employment (other than voluntarily by the employee or by the Company
for cause or upon death of the employee), the Company is committed to
pay certain benefits, including specified monthly severance of not more
than $6,667 per month. The benefits are to be paid from the date of
termination to dates ranging from January 22, 1999 to March 6, 2001.
On April 30, 1998, certain employees of the Company exercised
options to purchase 612,500 shares at a price of $.65 per share.
On May 13, 1998, pursuant to a Plan of Reorganization in the United
States Bankruptcy Court, Microlytics, Inc. ("Microlytics") completed a
merger (the "Merger") with the Company. Under the terms of the Merger,
each outstanding share of SanTi common stock was exchanged for one
share of Microlytics common stock. Immediately prior to the Merger,
Microlytics had 1,027,066 shares of common stock outstanding and
warrants to purchase an additional 500,000 shares with an exercise
price of $5.80, of which 250,000 were exercised immediately following
the Merger. The Merger resulted in the receipt by SanTi shareholders of
approximately 8,088,379 shares of common stock,
F-22
<PAGE> 63
representing approximately 86.2% of the Microlytics shares outstanding
on the effective date of the Merger. As a result of the Merger, SanTi
was merged into Microlytics and Microlytics' certificate of
incorporation was amended as of the effective date of the Merger to
change Microlytics' name to SanTi. The Merger will be accounted for as
a capital transaction accompanied by a recapitalization of SanTi. All
costs incurred in connection with the Merger will be expensed.
Effective with the Merger, the capital structure of SanTi consists of
70,000,000 shares authorized, 9,365,445 shares issued and outstanding
of $.0001 par value common stock and 30,000,000 shares authorized, 0
shares issued and outstanding of $.0001 par value preferred stock.
On June 1, 1998, the Company entered into employment agreements with
three executive officers which provide for minimum aggregate annual
compensation of $575,000. The agreements expire either June 1, 2000 or
June 1, 2003, and automatically renew for twelve month periods. Upon
termination of employment related to the change in control of the
Company, the Company is committed to immediately pay in full the
minimum compensation for each of the remaining years or portion
thereof.
On June 26, 1998, the Company entered into a $40 million revolving
credit facility with a bank. The Company may also obtain up to $5
million in letters of credit, subject to availability under the
facility. Interest is payable monthly at variable rates, depending on
the Company's current debt to cash flow ratio, but is capped at LIBOR
plus 2.5%. The facility expires June 26, 2001, is secured by a first
lien on substantially all assets of the Company and requires the
Company to maintain certain financial ratio covenants beginning
September 30, 1998.
On June 29, 1998, three executive officers received options to purchase
an aggregate of 1,250,000 shares of common stock as follows; 400,000
exercisable at $6 per share, 350,000 exercisable at $15 per share and
500,000 exercisable at $25 per share.
F-23
<PAGE> 64
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Andrews Environmental Services, Inc.:
We have audited the accompanying balance sheet of ANDREWS ENVIRONMENTAL
SERVICES, INC. (a Georgia corporation) as of December 31, 1996 and the related
statements of operations, stockholders' equity, and cash flows for the years
ended December 31, 1995 and 1996 and the period from January 1, 1997 to December
21, 1997. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Andrews Environmental Services,
Inc. as of December 31, 1996 and the results of its operations and its cash
flows for the years ended December 31, 1995 and 1996 and the period from January
1, 1997 to December 21, 1997 in conformity with generally accepted accounting
principles.
ARTHUR ANDERSEN LLP
Atlanta, Georgia
June 18, 1998
F-24
<PAGE> 65
ANDREWS ENVIRONMENTAL SERVICES, INC.
BALANCE SHEET
<TABLE>
<CAPTION>
DECEMBER 31,
ASSETS 1996
- ------------------------------------------------------ ------------
<S> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 14,414
Accounts receivable, net of allowance for
doubtful accounts of $9,300 177,166
Due from related party 51,202
Prepaid expenses and other 25,588
Deferred income taxes 3,575
----------
Total current assets 271,945
PROPERTY AND EQUIPMENT, NET 830,102
----------
$1,102,047
==========
<CAPTION>
LIABILITIES AND DECEMBER 31,
STOCKHOLDERS' EQUITY 1996
- ------------------------------------------------------ ------------
CURRENT LIABILITIES:
Accounts payable $ 142,364
Accrued expenses 19,983
Income taxes payable 10,148
Current portion of long-term debt 229,638
----------
Total current liabilities 402,133
----------
LONG-TERM DEBT, NET OF CURRENT PORTION 310,221
----------
DEFERRED INCOME TAXES 118,752
----------
COMMITMENTS (NOTE 6)
STOCKHOLDERS' EQUITY:
Common stock, no par value, $.50 stated
value; 1,000,000 shares authorized, 1,000
shares issued and outstanding 500
Retained earnings 270,441
----------
Total stockholders' equity 270,941
----------
$1,102,047
==========
</TABLE>
The accompanying notes are an integral part of this balance sheet.
F-25
<PAGE> 66
ANDREWS ENVIRONMENTAL SERVICES, INC.
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31 PERIOD FROM THREE-MONTH
------------------------ JANUARY 1, 1997 TO PERIOD ENDED
1995 1996 DECEMBER 21, 1997 MARCH 31, 1997
----------- ----------- ------------------ --------------
(unaudited)
<S> <C> <C> <C> <C>
REVENUES $ 1,499,392 $ 1,832,043 $ 1,218,268 $ 423,911
----------- ----------- ----------- -----------
EXPENSES:
Cost of operations 615,069 785,996 625,892 204,670
General and administrative 754,580 757,655 646,273 216,361
Depreciation and amortization 94,948 122,296 121,496 47,486
----------- ----------- ----------- -----------
Total expenses 1,464,597 1,665,947 1,393,661 468,517
----------- ----------- ----------- -----------
INCOME (LOSS) FROM OPERATIONS 34,795 166,096 (175,393) (44,606)
----------- ----------- ----------- -----------
OTHER EXPENSE (INCOME):
Interest expense 45,475 70,868 22,077 8,381
Other, net 7,404 (2,500) (204,124) (195,794)
----------- ----------- ----------- -----------
52,879 68,368 (182,047) (187,413)
----------- ----------- ----------- -----------
INCOME (LOSS) BEFORE INCOME TAXES (18,084) 97,728 6,654 142,807
PROVISION (BENEFIT) FOR INCOME TAXES (3,304) 39,094 4,334 54,560
----------- ----------- ----------- -----------
NET INCOME (LOSS) $ (14,780) $ 58,634 $ 2,320 $ 88,247
=========== =========== =========== ===========
</TABLE>
The accompanying notes are an integral part of these statements.
F-26
<PAGE> 67
ANDREWS ENVIRONMENTAL SERVICES, INC.
STATEMENTS OF STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
COMMON STOCK
------------------ RETAINED
SHARES AMOUNT EARNINGS TOTAL
------ ------ -------- ---------
<S> <C> <C> <C> <C>
BALANCE, DECEMBER 31, 1994 1,000 $ 500 $ 226,587 $ 227,087
Net loss 0 0 (14,780) (14,780)
------ ------ --------- ---------
BALANCE, DECEMBER 31, 1995 1,000 500 211,807 212,307
Net income 0 0 58,634 58,634
------ ------ --------- ---------
BALANCE, DECEMBER 31, 1996 1,000 500 270,441 270,941
Purchase of treasury stock (585) (292) (136,108) (136,400)
Net income 0 0 2,320 2,320
------ ------ --------- ---------
BALANCE, DECEMBER 21, 1997 415 $ 208 $ 136,652 $ 136,860
====== ====== ========= =========
</TABLE>
The accompanying notes are an integral part of these statements.
F-27
<PAGE> 68
ANDREWS ENVIRONMENTAL SERVICES, INC.
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
YEARS ENDED
DECEMBER 31 PERIOD FROM THREE-MONTH
---------------------- JANUARY 1, 1997 TO PERIOD ENDED
1995 1996 DECEMBER 21, 1997 MARCH 31, 1997
--------- --------- ------------------- --------------
(unaudited)
<S> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net (loss) income $ (14,780) $ 58,634 $ 2,320 $ 88,247
--------- --------- --------- ---------
Adjustments to reconcile net (loss) income to
net cash provided by (used in) operating
activities:
Depreciation and amortization 94,948 122,296 121,496 47,486
Gain on sale of fixed assets 0 0 (204,124) (196,125)
Changes in assets and liabilities:
Accounts receivable 25,101 (72,882) 68,676 8,019
Prepaid expenses and other 9,233 13,694 (24,555) 2,697
Due from related party 0 (51,202) (60,152) (35,022)
Deferred taxes (3,304) 28,946 (29,905) (7,476)
Accounts payable (14,990) 51,664 (11,633) 13,243
Accrued expenses 9,457 (579) 238 (4,366)
Income taxes payable 0 10,148 34,239 71,953
--------- --------- --------- ---------
Total adjustments 120,445 102,085 (105,720) (99,591)
--------- --------- --------- ---------
Net cash provided by (used in)
operating activities 105,665 160,719 (103,400) (11,344)
--------- --------- --------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (229,810) (249,024) (144,745) (15,487)
Proceeds from sales of fixed assets 56,358 0 425,000 250,000
--------- --------- --------- ---------
Net cash (used in) provided by
investing activities (173,452) (249,024) 280,255 234,513
--------- --------- --------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Borrowings of long-term debt 206,075 321,504 194,679 0
Repayments of long-term debt (137,693) (219,380) (247,677) (60,555)
Purchase of treasury stock 0 0 (136,400) (136,400)
--------- --------- --------- ---------
Net cash provided by (used in)
financing activities 68,382 102,124 (189,398) (196,955)
--------- --------- --------- ---------
NET INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS 595 13,819 (12,543) 26,214
CASH AND CASH EQUIVALENTS, BEGINNING OF
PERIOD 0 595 14,414 14,414
--------- --------- --------- ---------
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 595 $ 14,414 $ 1,871 $ 40,628
========= ========= ========= =========
SUPPLEMENTAL CASH FLOW INFORMATION:
Cash paid for interest $ 45,475 $ 43,275 $ 38,352 $ 8,381
========= ========= ========= =========
Cash paid for income taxes $ 207 $ 1,644 $ 10 $ 0
========= ========= ========= =========
</TABLE>
The accompanying notes are an integral part of these statements.
F-28
<PAGE> 69
ANDREWS ENVIRONMENTAL SERVICES, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1996
1. ORGANIZATION AND BASIS OF PRESENTATION
Andrews Environmental Services, Inc. ("Andrews" or the "Company"), a Georgia
corporation, operates a service center that treats, processes, and recovers
nonhazardous liquid waste to serve a variety of customers from private
residences and municipalities to large industrial companies.
On March 20, 1997, certain assets of the Company associated with its grease
disposal business were sold to SanTi Group, Inc. ("SanTi"). The grease
disposal business was primarily involved with commercial and governmental
grease extraction, collection, and transportation services. Consideration
associated with the sale was $475,000 in cash and $257,350 in notes
receivable. In conjunction with the sale, the Company recorded a gain on the
sale of fixed assets of $204,124 which is included in other income in the
accompanying statement of operations for the period from January 1, 1997 to
December 21, 1997.
On December 22, 1997, substantially all of the remaining property and
equipment and the ongoing business of the Company were sold to SanTi.
Consideration was $660,000 in cash and 21,400 shares of SanTi common
stock. Contingent consideration of 13,600 shares of SanTi common stock is
receivable within 90 days of the first anniversary of the date of purchase,
net of offsets for losses, as defined in the sale agreement.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
CASH AND CASH EQUIVALENTS
The Company considers all highly liquid investments with maturities of three
months or less at the date of purchase to be cash equivalents.
CONCENTRATION OF CREDIT RISK
Financial instruments which subject the Company to concentrations of credit
risk consist principally of trade receivables. The Company's customers are
concentrated in one geographic region. No single customer accounted for a
significant amount of the Company's sales, and there are no significant
accounts receivable from a single customer. The Company reviews a customer's
credit history before extending credit. The Company establishes an allowance
for doubtful accounts based on factors surrounding the credit risk of
specific customers, historical trends, and other information.
F-29
<PAGE> 70
REVENUE RECOGNITION
The Company recognizes revenues as services are provided.
PROPERTY AND EQUIPMENT
Property and equipment are recorded at cost. Depreciation is provided over
the estimated useful lives of the assets using the straight-line method. The
estimated useful lives for machinery and equipment and office equipment range
from 5 to 7 years. The building is depreciated over an estimated useful life
of 40 years.
At December 31, 1996, property and equipment consisted of the following:
<TABLE>
<S> <C>
Machinery and equipment $ 1,040,874
Office equipment 29,385
Building 162,686
Land 2,000
-----------
1,234,945
Less accumulated depreciation (404,843)
-----------
$ 830,102
===========
</TABLE>
The Company periodically reviews the values assigned to property and
equipment to determine whether any impairments are other than temporary.
Management believes that property and equipment in the accompanying balance
sheets are appropriately stated.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
UNAUDITED INTERIM FINANCIAL INFORMATION
The accompanying financial statements for the three-month period ended March
31, 1997 are unaudited. In the opinion of the management of Andrews, these
financial statements reflect all adjustments, consisting only of normal
recurring adjustments, necessary for a fair presentation of the financial
statements.
F-30
<PAGE> 71
3. LONG-TERM DEBT
At December 31, 1996, long-term debt consisted of the following:
<TABLE>
<S> <C>
Equipment loans, interest at varying rates between 8.5%
and 16.3%, interest and principal due in monthly
installments through 2002, secured by related equipment $ 453,094
Line of credit 83,789
Loan from stockholder (Note 4) 2,976
---------
539,859
Less current portion (229,638)
---------
$ 310,221
=========
</TABLE>
At December 31, 1996, the Company had a $100,000 revolving line of credit
(the "Revolver"). The Revolver has an interest rate of prime plus 2% (10.25%
at December 31, 1996). At December 31, 1996, $83,789 was outstanding and
$16,211 was available for future borrowings. The Revolver matures July 15,
1998, is renewable for successive one-year periods, is personally guaranteed
by the Company's majority stockholder, and is secured by substantially all
assets of the Company.
On December 21, 1997, in conjunction with the sale of the Company's remaining
assets (Note 1), the Revolver and all equipment loans were paid in full.
4. RELATED-PARTY TRANSACTIONS
The Company's majority stockholder advances monies to the Company from time
to time to maintain certain working capital levels, as needed. At December
31, 1996, the Company was indebted to the majority stockholder for $2,976,
which is included in current portion of long-term debt in the accompanying
balance sheet.
During 1997, the Company had repairs and maintenance performed on its trucks
by an entity owned by the Company's majority stockholder. For the period from
January 1, 1997 to December 21, 1997, the Company incurred $32,371 of expense
for these services, which is included in cost of operations in the
accompanying statement of operations.
The Company advances monies from time to time to an entity owned by the
Company's majority stockholder to enable that entity to maintain certain
levels of working capital. At December 31, 1996, the related entity owed the
Company $51,202, which is included in the accompanying balance sheet as due
from related party.
The Company performs services from time to time for an entity owned by a
stockholder of the Company. Revenues from this entity totaled $11,111,
$7,683, and $0 for the years ended December 31, 1995 and 1996 and for the
period from January 1, 1997 to December 21, 1997, respectively.
F-31
<PAGE> 72
5. INCOME TAXES
The accompanying financial statements reflect the provision (benefit) for
income taxes computed in accordance with the provisions of Statement of
Financial Accounting Standards No. 109, "Accounting for Income Taxes." The
following summarizes the components of the income tax provision (benefit) for
the years ended December 31, 1995 and 1996 and for the period from January 1,
1997 to December 21, 1997:
<TABLE>
<CAPTION>
1995 1996 1997
-------- -------- --------
<S> <C> <C> <C>
Current taxes $ 0 $ 10,148 $ 28,165
Deferred taxes (3,304) 28,946 (29,905)
-------- -------- --------
Provision (benefit) for income taxes $ (3,304) $ 39,094 $ (1,740)
======== ======== ========
</TABLE>
Reconciliation from the federal statutory rate to the actual provision
(benefit) for the years ended December 31, 1995 and 1996 and for the period
from January 1, 1997 to December 21, 1997 is as follows:
<TABLE>
<CAPTION>
1995 1996 1997
-------- -------- --------
<S> <C> <C> <C>
Statutory federal tax rate (34.0)% 34% 34.0%
State income taxes, net of federal tax benefit (4.0) 4 4.0
Other 19.7 2 27.1
-------- -------- --------
(18.3)% 40% 65.1%
======== ======== ========
</TABLE>
The components of the net deferred tax liability as of December 31, 1996 are
as follows:
<TABLE>
<S> <C>
Deferred tax assets:
Allowance for doubtful accounts $ 3,530
Other 45
---------
Total deferred tax asset 3,575
Deferred tax liability:
Depreciation (118,752)
---------
Net deferred tax liability $(115,177)
=========
</TABLE>
6. ENVIRONMENTAL REGULATIONS
The Company is subject to extensive and evolving federal, state, and local
environmental laws and regulations that have been enacted in response to
technological advances and the public's increased concern over environmental
issues. The majority of the expenditures necessary to comply with the
environmental laws and regulations are made in the normal course of business.
The Company, to the best of its knowledge, is in compliance, in all material
respects, with the laws and regulations affecting its operations.
F-32
<PAGE> 73
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Ferrero Wastewater Management, Inc.:
We have audited the accompanying balance sheets of FERRERO WASTEWATER
MANAGEMENT, INC. (a Pennsylvania corporation) as of December 31, 1996 and 1997
and the related statements of operations, stockholders' equity, and cash flows
for each of the three years in the period ended December 31, 1997. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Ferrero Wastewater Management,
Inc. as of December 31, 1996 and 1997 and the results of its operations and its
cash flows for each of the three years in the period ended December 31, 1997 in
conformity with generally accepted accounting principles.
ARTHUR ANDERSEN LLP
Atlanta, Georgia
March 20, 1998
F-33
<PAGE> 74
FERRERO WASTEWATER MANAGEMENT, INC.
BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31
--------------------
ASSETS 1996 1997
- ------------------------------------------------ ---- ----
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 7,383 $ 40,201
Accounts receivable, net of allowance for
doubtful accounts of $50,000 in 1996 and 1997 308,187 379,852
Prepaid expenses and other 68,280 22,034
---------- ----------
Total current assets 383,850 442,087
PROPERTY AND EQUIPMENT, NET 698,934 903,774
OTHER ASSETS 11,740 26,477
---------- ----------
$1,094,524 $1,372,338
========== ==========
<CAPTION>
DECEMBER 31
LIABILITIES AND --------------------
STOCKHOLDERS' EQUITY 1996 1997
- ------------------------------------------------ ---- ----
<S> <C> <C>
CURRENT LIABILITIES:
Accounts payable $ 350,879 $ 185,551
Accrued expenses 35,288 48,304
Due to stockholder 43,716 81,580
Current portion of long-term debt 109,802 128,454
---------- ----------
Total current liabilities 539,685 443,889
---------- ----------
LONG-TERM DEBT, NET OF CURRENT PORTION 244,566 607,743
---------- ----------
COMMITMENTS (NOTE 6)
STOCKHOLDERS' EQUITY:
Common stock, $100 par value; 250 shares
authorized, 50 shares issued and
outstanding 5,000 5,000
Retained earnings 305,273 315,706
---------- ----------
Total stockholders' equity 310,273 320,706
---------- ----------
$1,094,524 $1,372,338
========== ==========
</TABLE>
The accompanying notes are an integral part of these balance sheets.
F-34
<PAGE> 75
FERRERO WASTEWATER MANAGEMENT, INC.
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31, THREE MONTH PERIOD FROM
--------------------------------------- PERIOD ENDED JANUARY 1, 1998 TO
1995 1996 1997 MARCH 31, 1997 JANUARY 22, 1998
---------- ----------- ----------- -------------- ------------------
(unaudited)
<S> <C> <C> <C> <C> <C>
REVENUES $2,864,459 $ 2,866,758 $ 4,122,100 $ 930,894 $ 257,982
---------- ----------- ----------- --------- ---------
EXPENSES:
Cost of operations 1,693,181 1,913,700 2,797,821 621,400 175,443
General and administrative 722,523 773,286 1,045,315 244,032 73,399
Depreciation and amortization 253,874 287,742 220,432 61,000 23,334
---------- ----------- ----------- --------- ---------
Total expenses 2,669,578 2,974,728 4,063,568 926,432 272,176
---------- ----------- ----------- --------- ---------
INCOME (LOSS) FROM OPERATIONS 194,881 (107,970) 58,532 4,462 (14,194)
---------- ----------- ----------- --------- ---------
OTHER EXPENSE (INCOME):
Interest expense 51,226 48,024 50,920 10,086 5,913
Other, net 11,402 (22,404) (2,821) (269) (33)
---------- ----------- ----------- --------- ---------
62,628 25,620 48,099 9,817 5,880
---------- ----------- ----------- --------- ---------
NET INCOME (LOSS) $ 132,253 $ (133,590) $ 10,433 $ (5,355) $ (20,074)
========== =========== =========== ========= =========
</TABLE>
The accompanying notes are an integral part of these statements.
F-35
<PAGE> 76
FERRERO WASTEWATER MANAGEMENT, INC.
STATEMENTS OF STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
COMMON RETAINED
STOCK EARNINGS TOTAL
------ ---------- -----
<S> <C> <C> <C>
BALANCE, JANUARY 1, 1995 $5,000 $ 362,610 $ 367,610
Distribution to stockholder 0 (56,000) (56,000)
Net income 0 132,253 132,253
BALANCE, DECEMBER 31, 1995 5,000 438,863 443,863
------ --------- ---------
Net (loss) 0 (133,590) (133,590)
------ --------- ---------
BALANCE, DECEMBER 31, 1996 5,000 305,273 310,273
Net income 0 10,433 10,433
------ --------- ---------
BALANCE, DECEMBER 31, 1997 5,000 315,706 320,706
Net (loss) 0 (20,074) (20,074)
------ --------- ---------
BALANCE, JANUARY 22, 1998 (UNAUDITED) $5,000 $ 295,632 $ 300,632
====== ========= =========
</TABLE>
The accompanying notes are an integral part of these statements.
F-36
<PAGE> 77
FERRERO WASTEWATER MANAGEMENT, INC.
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31, THREE-MONTH PERIOD FROM
----------------------------------- PERIOD ENDED JANUARY 1, 1998 TO
1995 1996 1997 MARCH 31, 1997 JANUARY 22, 1998
--------- --------- --------- -------------- ------------------
(unaudited)
<S> <C> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ 132,253 $(133,590) $ 10,433 $ (5,355) $(20,074)
--------- --------- --------- --------- --------
Adjustments to reconcile net income (loss) to net
cash provided by operating
activities:
Depreciation and amortization 253,874 287,742 220,432 61,000 23,334
Loss (gain) on sale of fixed assets 8,402 (17,019) 0 0 0
Changes in assets and liabilities:
Accounts receivable 7,721 5,928 (71,665) (47,473) (10,844)
Prepaid expenses and other (9,850) (56,030) 46,246 (5,000) 0
Other assets 62,096 10,553 (14,737) (7,859) 12,977
Accounts payable 70,390 93,525 (165,328) 39,887 33,571
Accrued expenses 21,580 (21,295) 13,016 (3,539) 2,670
--------- --------- -------- --------- --------
Total adjustments 414,213 303,404 27,964 37,016 61,708
--------- --------- -------- --------- --------
Net cash provided by operating activities 546,466 169,814 38,397 31,661 41,634
--------- --------- -------- --------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sale of fixed assets 0 20,949 0 0 0
Capital expenditures (532,674) (158,843) (425,272) (178,950) 0
--------- --------- -------- --------- --------
Net cash used in investing activities (532,674) (137,894) (425,272) (178,950) 0
--------- --------- -------- --------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Borrowings of long-term debt 163,327 74,830 728,568 130,981 0
Payments of long-term debt (192,491) (157,972) (346,739) (46,666) (3,635)
Net borrowings from stockholder 15,500 28,216 37,864 58,976 (67,603)
Distribution to stockholder (56,000) 0 0 0 0
--------- --------- --------- --------- --------
Net cash (used in) provided by financing
activities (69,664) (54,926) 419,693 143,291 (71,238)
--------- --------- --------- --------- --------
NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS (55,872) (23,006) 32,818 (3,998) (29,604)
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 86,261 30,389 7,383 7,383 40,201
--------- --------- --------- --------- --------
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 30,389 $ 7,383 $ 40,201 $ 3,385 $ 10,597
========= ========= ========= ========= ========
SUPPLEMENTAL CASH FLOW INFORMATION:
Cash paid for interest $ 28,210 $ 43,389 $ 50,920 $ 10,086 $ 3,530
========= ========= ========= ========= ========
NONCASH INVESTING AND FINANCING ACTIVITIES:
Equipment traded in for capital expenditures $ 0 $ 0 $ 41,464 $ 0 $ 0
========= ========= ========= ========= ========
</TABLE>
The accompanying notes are an integral part of these statements.
F-37
<PAGE> 78
FERRERO WASTEWATER MANAGEMENT, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1996 AND 1997
1. ORGANIZATION AND BASIS OF PRESENTATION
Ferrero Wastewater Management, Inc. (the "Company") designs, constructs,
repairs, maintains, and operates on-site sewage disposal systems, primarily
in metropolitan Philadelphia, Pennsylvania.
Nutrecon, Inc. disposed of the waste collected by the Company. On January
1, 1997, the net assets of Nutrecon, Inc. were transferred to the Company.
Since the companies were under common ownership from their respective dates
of inception, the accompanying financial statements of the Company include
the accounts of Nutrecon, Inc. for all periods presented. All material
intercompany balances and transactions have been eliminated.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
CASH AND CASH EQUIVALENTS
The Company considers all highly liquid investments with maturities of
three months or less at the date of purchase as cash equivalents.
CONCENTRATION OF CREDIT RISK
Financial instruments which subject the Company to concentrations of credit
risk consist principally of trade receivables. The Company's customers are
concentrated in one geographic region and in one line of business. No
single customer accounted for a significant amount of the Company's sales,
and there are no significant accounts receivable from a single customer.
The Company reviews a customer's credit history before extending credit.
The Company establishes an allowance for doubtful accounts based on factors
surrounding the credit risk of specific customers, historical trends, and
other information.
REVENUE RECOGNITION
The Company recognizes revenues as services are provided.
PROPERTY AND EQUIPMENT
Property and equipment are recorded at cost. Depreciation is provided over
the estimated useful lives of the assets using the straight-line method.
The estimated useful lives for
F-38
<PAGE> 79
machinery and equipment and office equipment range from five to seven
years. Buildings are depreciated over 20 years.
At December 31, 1996 and 1997, property and equipment consisted of the
following:
<TABLE>
<CAPTION>
1996 1997
---- ----
<S> <C> <C>
Machinery and equipment $ 1,803,675 $ 2,175,946
Buildings and improvements 308,071 349,941
Office equipment 78,236 82,445
----------- -----------
2,189,982 2,608,332
Less accumulated depreciation (1,491,048) (1,704,558)
----------- -----------
$ 698,934 $ 903,774
=========== ===========
</TABLE>
The Company periodically reviews the values assigned to property and
equipment to determine whether any impairments are other than temporary.
Management believes that property and equipment in the accompanying
balance sheets are appropriately stated.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those
estimates.
UNAUDITED INTERIM FINANCIAL INFORMATION
The accompanying financial statements for the three-month period ended
March 31, 1997, and for the period from January 1, 1998 through January
22, 1998 are unaudited. In the opinion of management, these financial
statements reflect all adjustments, consisting only of normal recurring
adjustments, necessary for a fair presentation of the financial
statements. The results of operations for the period from January 1, 1998
through January 22, 1998 are not necessarily indicative of future results
of the Company.
INCOME TAXES
The Company has elected, for federal and state income tax purposes, S
corporation tax status whereby income is taxed at the stockholder level.
Therefore, no deferred tax assets, liabilities, or provision for income
taxes is recorded.
F-39
<PAGE> 80
3. LONG-TERM DEBT
At December 31, 1996 and 1997, long-term debt consisted of the following:
<TABLE>
<CAPTION>
1996 1997
---- ----
<S> <C> <C>
Loans from banks, interest at 9.25%, interest and principal due
in monthly payments through 2003; secured by substantially all
assets of the Company $ 184,251 $348,035
Equipment loans, interest at varying rates between
7.25% and 12.5%, interest and principal due in monthly
installments through 2003, secured by related equipment 170,117 388,162
--------- --------
354,368 736,197
Less current portion 109,802 128,454
--------- --------
$ 244,566 $607,743
========= ========
</TABLE>
Future aggregate annual maturities of long-term debt are as follows as of
December 31, 1997:
<TABLE>
<S> <C>
1998 $ 128,454
1999 122,456
2000 115,386
2001 103,520
2002 and thereafter 266,381
---------
$ 736,197
=========
</TABLE>
In February 1998, in conjunction with the sale of the business (Note 7),
all related long-term debt was paid in full.
4. RELATED-PARTY TRANSACTION
The Company's majority stockholder makes advances to the Company from time
to time to better manage cash flows and maintain adequate working capital.
At December 31, 1996 and 1997, the amounts owed to the majority stockholder
were $43,716 and $81,580, respectively. In February 1998, the amount owed
to the majority stockholder was paid in full (Note 7).
5. BENEFIT PLAN
Employees of the Company are eligible to participate in a
company-maintained salary reduction simplified employee pension plan (the
"Plan"). The Company has the option to contribute a profit-sharing portion
to the Plan each year. During the years ended December 31, 1995, 1996, and
1997, no such contributions were made.
F-40
<PAGE> 81
6. LEASES
The Company leases its facility under a noncancelable operating lease.
Rental expense during 1995, 1996, and 1997 was $84,943, $67,734, and
$72,000, respectively. Future minimum lease payments under the current
lease agreement are $72,000 per year through December 31, 1999.
7. SUBSEQUENT EVENT
On January 22, 1998, substantially all property and equipment and the
ongoing business of the Company were sold to SanTi Group, Inc.
("SanTi") for $2,240,100 in cash and 90,000 shares of SanTi common
stock. Contingent consideration of $248,900 in cash and 10,000 shares of
SanTi common stock are receivable 270 days after the date of purchase,
net of offset for losses, as defined in the purchase agreement. Prior to
the closing, all related long-term debt was paid in full to convey the
assets to SanTi free and clear of all encumbrances and liens.
F-41
<PAGE> 82
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To A Rapid Rooter Sewer & Drain Service, Inc.:
We have audited the accompanying balance sheets of A RAPID ROOTER SEWER & DRAIN
SERVICE, INC. (a Florida corporation) as of December 31, 1996 and 1997 and the
related statements of operations, stockholders' equity, and cash flows for each
of the three years in the period ended December 31, 1997. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of A Rapid Rooter Sewer & Drain
Service, Inc. as of December 31, 1996 and 1997 and the results of its operations
and its cash flows for each of the three years in the period ended December 31,
1997 in conformity with generally accepted accounting principles.
ARTHUR ANDERSEN LLP
Atlanta, Georgia
May 8, 1998
F-42
<PAGE> 83
A RAPID ROOTER SEWER & DRAIN SERVICE, INC.
BALANCE SHEETS
ASSETS
<TABLE>
<CAPTION>
DECEMBER 31
--------------------------
1996 1997
---------- ----------
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 134,110 $ 303,291
Accounts receivable, net of allowance for doubtful accounts of
$10,000 in 1996 and 1997 313,426 259,860
Loans to stockholders 76,787 134,257
Notes receivable 58,503 0
Prepaid expenses 16,090 16,090
---------- ----------
Total current assets 598,916 713,498
PROPERTY AND EQUIPMENT, NET 903,299 922,582
---------- ----------
$1,502,215 $1,636,080
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $ 99,935 $ 161,337
Accrued expenses 56,783 59,759
Current portion of long-term debt 251,695 269,278
---------- ----------
Total current liabilities 408,413 490,374
---------- ----------
LONG-TERM DEBT, NET OF CURRENT PORTION 551,542 590,380
---------- ----------
COMMITMENTS (NOTES 4 AND 5)
STOCKHOLDERS' EQUITY:
Common stock, $1 par value; 7,500 shares authorized, 100 shares
issued and outstanding 100 100
Additional paid-in capital 3,249 3,249
Retained earnings 538,911 551,977
---------- ----------
Total stockholders' equity 542,260 555,326
---------- ----------
$1,502,215 $1,636,080
========== ==========
</TABLE>
The accompanying notes are an integral part of these balance sheets.
F-43
<PAGE> 84
A RAPID ROOTER SEWER & DRAIN SERVICE, INC.
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31 THREE-MONTH PERIOD FROM
---------------------------------------------- PERIOD ENDED JANUARY 1, 1998 TO
1995 1996 1997 MARCH 31, 1997 FEBRUARY 13, 1998
----------- ----------- ---------- -------------- ------------------
(unaudited)
<S> <C> <C> <C> <C> <C>
REVENUES $ 4,201,989 $ 4,820,398 $4,629,655 $ 1,157,104 $ 680,870
----------- ----------- ---------- ----------- ---------
EXPENSES:
Cost of operations 2,139,783 2,270,988 2,364,794 622,406 338,971
General and administrative 1,564,497 1,702,588 1,730,394 381,527 244,591
Depreciation and amortization 233,730 291,293 319,001 74,514 41,476
----------- ----------- ---------- ----------- ---------
Total expenses 3,938,010 4,264,869 4,414,189 1,078,447 625,038
----------- ----------- ---------- ----------- ---------
INCOME FROM OPERATIONS 263,979 555,529 215,466 78,657 55,832
----------- ----------- ---------- ----------- ---------
OTHER EXPENSE (INCOME):
Interest expense 64,116 85,789 86,367 18,858 11,148
Other, net (33,597) (97,058) 27,413 (446) (476)
----------- ----------- ---------- ----------- ---------
30,519 (11,269) 113,780 18,412 10,672
----------- ----------- ---------- ----------- ---------
NET INCOME $ 233,460 $ 566,798 $ 101,686 $ 60,245 $ 45,160
=========== =========== ========== =========== =========
</TABLE>
The accompanying notes are an integral part of these statements.
F-44
<PAGE> 85
A RAPID ROOTER SEWER & DRAIN SERVICE, INC.
STATEMENTS OF STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
ADDITIONAL
COMMON PAID-IN RETAINED
STOCK CAPITAL EARNINGS TOTAL
------ ---------- --------- ---------
<S> <C> <C> <C> <C>
BALANCE, JANUARY 1, 1995 $ 100 $ 3,249 $ 312,757 $ 316,106
Distributions to stockholders 0 0 (267,500) (267,500)
Net income 0 0 233,460 233,460
------ ---------- --------- ---------
BALANCE, DECEMBER 31, 1995 100 3,249 278,717 282,066
Distributions to stockholders 0 0 (306,604) (306,604)
Net income 0 0 566,798 566,798
------ ---------- --------- ---------
BALANCE, DECEMBER 31, 1996 100 3,249 538,911 542,260
Distributions to stockholders 0 0 (88,620) (88,620)
Net income 0 0 101,686 101,686
------ ---------- --------- ---------
BALANCE, DECEMBER 31, 1997 100 3,249 551,977 555,326
Distributions to stockholders 0 0 0 0
Net income 0 0 45,160 45,160
------ ---------- --------- ---------
BALANCE, FEBRUARY 13, 1998 (UNAUDITED) $ 100 $ 3,249 $ 597,137 $ 600,486
====== ========== ========= =========
</TABLE>
The accompanying notes are an integral part of these statements.
F-45
<PAGE> 86
A RAPID ROOTER SEWER & DRAIN SERVICE, INC.
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31 THREE-MONTH PERIOD FROM
--------------------------------- PERIOD ENDED JANUARY 1, 1998 TO
1995 1996 1997 MARCH 31, 1997 FEBRUARY 13, 1998
--------- --------- --------- -------------- ------------------
(unaudited)
<S> <C> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 233,460 $ 566,798 $ 101,686 $ 60,245 $ 45,160
--------- --------- --------- --------- ---------
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 233,730 291,293 319,001 74,514 41,476
Gain on sale of fixed assets (21,727) (74,606) (15,665) 0 0
Changes in assets and liabilities:
Accounts receivable 22,784 (89,315) 53,566 113,436 8,968
Notes receivable 0 (58,503) 58,503 0 0
Prepaid expenses and other 9,000 300 0 13,881 (1,573)
Accounts payable 8,486 (7,380) 61,402 (34,079) (37,949)
Accrued expenses 1,538 6,914 2,976 4,136 2,965
--------- --------- --------- --------- ---------
Total adjustments 253,811 68,703 479,783 171,888 13,887
--------- --------- --------- --------- ---------
Net cash provided by operating activities 487,271 635,501 581,469 232,133 59,047
--------- --------- --------- --------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sales of fixed assets 97,652 83,658 54,766 0 0
Capital expenditures (788,903) (184,510) (341,859) (9,700) (291)
--------- --------- --------- --------- ---------
Net cash used in investing activities (691,251) (100,852) (287,093) (9,700) (291)
--------- --------- --------- --------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Borrowings of long-term debt 729,528 169,407 306,333 0 0
Payments of long-term debt (315,906) (288,568) (285,438) (59,889) (30,160)
Net borrowings of stockholders 11,824 (66,061) (57,470) (29,011) (56,366)
Distributions to stockholders (267,500) (306,604) (88,620) 0 0
--------- --------- --------- --------- ---------
Net cash provided by (used in) financing activities 157,946 (491,826) (125,195) (88,900) (86,526)
--------- --------- --------- --------- ---------
NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS (46,034) 42,823 169,181 133,533 (27,770)
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 137,321 91,287 134,110 134,110 303,291
--------- --------- --------- --------- ---------
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 91,287 $ 134,110 $ 303,291 $ 267,643 $ 275,521
========= ========= ========= ========= =========
SUPPLEMENTAL CASH FLOW INFORMATION:
Cash paid for interest $ 64,116 $ 85,789 $ 86,367 $ 18,858 $ 11,148
========= ========= ========= ========= =========
</TABLE>
The accompanying notes are an integral part of these statements.
F-46
<PAGE> 87
A RAPID ROOTER SEWER & DRAIN SERVICE, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1996 AND 1997
1. ORGANIZATION AND BASIS OF PRESENTATION
A Rapid Rooter Sewer & Drain Service, Inc. (the "Company") designs,
constructs, repairs, maintains, and operates on-site sewage disposal systems,
primarily in and around Pompano Beach, Florida.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
CASH AND CASH EQUIVALENTS
The Company considers all highly liquid investments with maturities of three
months or less at the date of purchase as cash equivalents.
CONCENTRATION OF CREDIT RISK
Financial instruments which subject the Company to concentrations of credit
risk consist principally of trade receivables. The Company's customers are
concentrated in one geographic region and in one line of business. No single
customer accounted for a significant amount of the Company's sales, and there
are no significant accounts receivable from a single customer. The Company
reviews a customer's credit history before extending credit. The Company
establishes an allowance for doubtful accounts based on factors surrounding
the credit risk of specific customers, historical trends, and other
information.
REVENUE RECOGNITION
The Company recognizes revenues as services are provided.
PROPERTY AND EQUIPMENT
Property and equipment are recorded at cost. Depreciation is provided over
the estimated useful lives of the assets using the straight-line method. The
estimated useful lives for machinery and equipment and office equipment range
from five to seven years. Leasehold improvements are depreciated over the
shorter of the term of the lease or the useful life of the improvements.
F-47
<PAGE> 88
At December 31, 1996 and 1997, property and equipment consisted of the
following:
<TABLE>
<CAPTION>
1996 1997
----------- -----------
<S> <C> <C>
Machinery and equipment $ 1,840,443 $ 1,984,504
Office equipment 65,406 67,782
Leasehold improvements 19,473 19,473
----------- -----------
1,925,322 2,071,759
Less accumulated depreciation (1,022,023) (1,149,177)
----------- -----------
$ 903,299 $ 922,582
=========== ===========
</TABLE>
The Company periodically reviews the values assigned to property and
equipment to determine whether any impairments are other than temporary.
Management believes that property and equipment in the accompanying balance
sheets are appropriately stated.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
UNAUDITED INTERIM FINANCIAL INFORMATION
The accompanying financial statements as of February 13, 1998, for the
three-month period ended March 31, 1997, and for the period from January 1,
1998 through February 13, 1998 are unaudited. In the opinion of management,
these financial statements reflect all adjustments, consisting only of normal
recurring adjustments, necessary for a fair presentation of the financial
statements. The results of operations for the period from January 1, 1998
through February 13, 1998 are not necessarily indicative of future results of
the Company.
INCOME TAXES
For federal and state income tax purposes, the Company has elected S
corporation tax status whereby income is taxed at the stockholder level.
Therefore, no deferred tax assets, liabilities, or provision for income taxes
is recorded. Amounts are distributed to stockholders for making applicable
tax payments, and are included in distributions to stockholders in the
accompanying statements of stockholders' equity.
F-48
<PAGE> 89
3. LONG-TERM DEBT
At December 31, 1996 and 1997, long-term debt consisted of the following:
<TABLE>
<CAPTION>
1996 1997
----------- -----------
<S> <C> <C>
Equipment loans, interest at varying rates
between 7.25% and 12.5%, interest and
principal due in monthly installments
through 2003, secured by related equipment $ 803,237 $ 859,658
Less current portion 251,695 269,278
----------- -----------
$ 551,542 $ 590,380
=========== ===========
</TABLE>
Future aggregate annual maturities of long-term debt are as follows as of
December 31, 1997:
<TABLE>
<S> <C>
1998 $269,278
1999 240,547
2000 181,433
2001 89,506
2002 and thereafter 78,894
--------
$859,658
========
</TABLE>
In February 1998, in conjunction with the sale of the business (Note 6), all
long-term debt was paid in full.
4. BENEFIT PLAN
The Company maintains a 401(k) plan for employees. The Company matches 25% of
employee contributions to the plan up to 5% of employee compensation. Company
contributions for the years ended December 31, 1995, 1996, and 1997 were
$7,581, $7,720, and $9,792, respectively.
5. RELATED-PARTY TRANSACTIONS
The Company's stockholders borrow from the Company from time to time to make
estimated tax payments on income taxed at the stockholder level. In addition,
the Company makes advances to stockholders from time to time to cover certain
expenses. At December 31, 1996 and 1997, the amounts owed to the Company from
stockholders were $76,767 and $134,257, respectively. In February 1998, the
outstanding balance was paid in full by the stockholders.
The Company leases its Pompano Beach facility from a related party. Rental
expense during 1995, 1996, and 1997 was $35,400, $36,000, and $39,614,
respectively. Future minimum lease payments under the current lease agreement
are $48,000 per year through August 31, 2000.
F-49
<PAGE> 90
6. SUBSEQUENT EVENT
On February 13, 1998, substantially all property and equipment and the
ongoing business of the Company were sold to SanTi Group, Inc. ("SanTi") for
$3,990,120 in cash and 100,000 shares of SanTi common stock. Prior to the
closing, all related long-term debt was paid in full to convey the assets to
SanTi free and clear of all encumbrances and liens.
F-50
<PAGE> 91
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Seagraves, Inc. and Grease-Tec, Inc.:
We have audited the accompanying combined balance sheets of SEAGRAVES, INC. (a
Florida corporation d.b.a. Brownie Environmental Services) AND GREASE-TEC, INC.
(a Florida corporation) as of December 31, 1997 and 1996 and the related
combined statements of operations, stockholders' equity, and cash flows for each
of the three years in the period ended December 31, 1997. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Seagraves, Inc. (d.b.a.
Brownie Environmental Services) and Grease-Tec, Inc. as of December 31, 1997
and 1996 and the results of their operations and their cash flows for each of
the three years in the period ended December 31, 1997 in conformity with
generally accepted accounting principles.
ARTHUR ANDERSEN LLP
Atlanta, Georgia
May 14, 1998
F-51
<PAGE> 92
SEAGRAVES, INC.
(d.b.a. BROWNIE ENVIRONMENTAL SERVICES)
AND GREASE-TEC, INC.
COMBINED BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31
-------------------------
ASSETS 1996 1997
=============================================== ========== ==========
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 145,724 $ 111,799
Accounts receivable, net of allowance for doubtful
accounts of $10,000 in 1996 and 1997 388,056 395,977
Prepaid expenses and other 53,899 77,028
---------- ----------
Total current assets 587,679 584,804
PROPERTY AND EQUIPMENT, NET 917,596 928,251
OTHER ASSETS 3,487 4,598
---------- ----------
$1,508,762 $1,517,653
========== ==========
<CAPTION>
DECEMBER 31
-------------------------
LIABILITIES AND STOCKHOLDERS' EQUITY 1996 1997
=============================================== ========== ==========
<S> <C> <C>
CURRENT LIABILITIES:
Accounts payable $ 370,683 $ 360,289
Accrued expenses 228,449 206,191
Current portion of long-term debt 278,794 293,132
---------- ----------
Total current liabilities 877,926 859,612
---------- ----------
LONG-TERM DEBT:
Long-term debt, net of current portion 219,854 183,214
Related-party notes payable, net of current portion 15,902 94,658
---------- ----------
235,756 277,872
---------- ----------
COMMITMENTS AND CONTINGENCIES (NOTE 4)
STOCKHOLDERS' EQUITY:
Common stock of Seagraves, Inc., $1 par value; 500
shares authorized, 100 shares issued and outstanding 100 100
Common stock of Grease-Tec, Inc., no par value; 10,000
shares authorized, 10,000 shares issued and outstanding 0 0
Retained earnings 394,980 380,069
---------- ----------
Total stockholders' equity 395,080 380,169
---------- ----------
$1,508,762 $1,517,653
========== ==========
</TABLE>
The accompanying notes are an integral part of these combined balance sheets.
F-52
<PAGE> 93
SEAGRAVES, INC.
(d.b.a. BROWNIE ENVIRONMENTAL SERVICES)
AND GREASE-TEC, INC.
COMBINED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31 THREE-MONTH PERIOD FROM
------------------------------------- PERIOD ENDED JANUARY 1, 1998
1995 1996 1997 MARCH 31, 1997 TO MARCH 6, 1998
========== ========== ========== =============== =================
(unaudited)
<S> <C> <C> <C> <C> <C>
REVENUES $5,500,041 $6,491,346 $6,924,493 $1,770,224 $1,342,431
---------- ---------- ---------- ---------- ----------
EXPENSES:
Cost of operations 3,873,919 4,626,757 4,868,591 1,103,504 930,687
Sales, general, and administrative 1,166,270 1,360,725 1,636,989 452,971 350,137
Depreciation and amortization 256,770 236,777 248,938 18,005 32,886
---------- ---------- ---------- ---------- ----------
Total expenses 5,296,959 6,224,259 6,754,518 1,574,480 1,313,710
---------- ---------- ---------- ---------- ----------
INCOME FROM OPERATIONS 203,082 267,087 169,975 195,744 28,721
---------- ---------- ---------- ---------- ----------
OTHER EXPENSE (INCOME):
Interest expense 69,853 61,242 36,425 16,901 8,659
Other, net 23,219 (22,634) (75,529) (5,740) (105,984)
---------- ---------- ---------- ---------- ----------
93,072 38,608 (39,104) 11,161 (97,325)
---------- ---------- ---------- ---------- ----------
NET INCOME $ 110,010 $ 228,479 $ 209,079 $ 184,583 $ 126,046
========== ========== ========== ========== ==========
</TABLE>
The accompanying notes are an integral part of these combined statements.
F-53
<PAGE> 94
SEAGRAVES, INC.
(d.b.a. BROWNIE ENVIRONMENTAL SERVICES)
AND GREASE-TEC, INC.
COMBINED STATEMENTS OF STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
GREASE-TEC, INC. SEAGRAVES, INC.
COMMON STOCK COMMON STOCK
--------------- -------------- RETAINED
SHARES AMOUNT SHARES AMOUNT EARNINGS TOTAL
------ ------ ------ ------ -------- ---------
<S> <C> <C> <C> <C> <C> <C>
BALANCE, JANUARY 1, 1995 10,000 $0 100 $100 $ 168,167 $ 168,267
Distributions to stockholders 0 0 0 0 (17,000) (17,000)
Net income 0 0 0 0 110,010 110,010
------ -- --- ---- --------- ---------
BALANCE, DECEMBER 31, 1995 10,000 0 100 100 261,177 261,277
Distributions to stockholders 0 0 0 0 (94,676) (94,676)
Net income 0 0 0 0 228,479 228,479
------ -- --- ---- --------- ---------
BALANCE, DECEMBER 31, 1996 10,000 0 100 100 394,980 395,080
Distributions to stockholders 0 0 0 0 (223,990) (223,990)
Net income 0 0 0 0 209,079 209,079
------ -- --- ---- --------- ---------
BALANCE, DECEMBER 31, 1997 10,000 0 100 100 380,069 380,169
Distributions to stockholders 0 0 0 0 (32,000) (32,000)
Net income 0 0 0 0 126,046 126,046
------ -- --- ---- --------- ---------
BALANCE, MARCH 6, 1998 (UNAUDITED) 10,000 $0 100 $100 $ 474,115 $ 474,215
====== == === ==== ========= =========
</TABLE>
The accompanying notes are an integral part of these combined statements.
F-54
<PAGE> 95
SEAGRAVES, INC.
(d.b.a. BROWNIE ENVIRONMENTAL SERVICES)
AND GREASE-TEC, INC.
COMBINED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31 THREE-MONTH PERIOD FROM
------------------------------------- PERIOD ENDED JANUARY 1, 1998
1995 1996 1997 MARCH 31, 1997 TO MARCH 6, 1998
========= ========= ========== ============== ================
(unaudited)
<S> <C> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 110,010 $ 228,479 $ 209,079 $ 184,583 $ 126,046
--------- --------- --------- --------- ---------
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 256,770 236,777 248,938 18,005 32,886
(Gain) loss on sale of fixed assets (1,949) 21,805 (70,254) 0 (97,641)
Changes in assets and liabilities:
Accounts receivable 33,665 (97,202) (7,921) (99,222) (58,166)
Prepaid expenses and other (3,593) (4,838) (23,129) 51,529 54,520
Other assets 5,909 (2,010) (1,221) 734 0
Accounts payable (34,634) 191,375 (10,394) (135,662) (67,605)
Accrued expenses 12,022 57,896 (22,258) 29,004 54,363
--------- --------- --------- --------- ---------
Total adjustments 268,190 403,803 113,761 (135,612) (81,643)
--------- --------- --------- --------- ---------
Net cash provided by operating activities 378,200 632,282 322,840 48,971 44,403
--------- --------- --------- --------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sale of fixed assets 4,210 66,592 100,928 0 100,000
Capital expenditures (293,516) (509,292) (290,157) (54,551) (148,121)
--------- --------- --------- --------- ---------
Net cash used in investing activities (289,306) (442,700) (189,229) (54,551) (48,121)
--------- --------- --------- --------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Borrowings of long-term debt 175,861 234,672 316,932 128,637 59,425
Payments of long-term debt (259,055) (329,545) (266,287) (39,219) (33,635)
Net borrowings from related party 99,459 17,947 5,809 (15,902) (94,658)
Distributions to stockholders (17,000) (94,676) (223,990) (24,000) (32,000)
--------- --------- --------- --------- ---------
Net cash (used in) provided by financing activities (735) (171,602) (167,536) 49,516 (100,868)
--------- --------- --------- --------- ---------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 88,159 17,980 (33,925) 43,936 (104,586)
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 39,585 127,744 145,724 145,724 111,799
--------- --------- --------- --------- ---------
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 127,744 $ 145,724 $ 111,799 $ 189,660 $ 7,213
========= ========= ========= ========= =========
SUPPLEMENTAL CASH FLOW INFORMATION:
Cash paid for interest $ 72,074 $ 63,327 $ 37,838 $ 16,901 $ 7,095
========= ========= ========= ========= =========
</TABLE>
The accompanying notes are an integral part of these combined statements.
F-55
<PAGE> 96
SEAGRAVES, INC.
(d.b.a. BROWNIE ENVIRONMENTAL SERVICES)
AND GREASE-TEC, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS
DECEMBER 31, 1996 AND 1997
1. ORGANIZATION AND BASIS OF PRESENTATION
Seagraves, Inc. and Grease-Tec, Inc. (collectively, the "Company") design,
construct, repair, maintain, and operate on-site sewage disposal systems,
primarily in metropolitan Orlando, Florida. Seagraves, Inc. and
Grease-Tec, Inc. are under common ownership.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLES OF COMBINATION
The accompanying combined financial statements include the accounts of
Seagraves, Inc. and Grease-Tec, Inc. All significant intercompany accounts
have been eliminated.
CASH AND CASH EQUIVALENTS
The Company considers all highly liquid investments with maturities of
three months or less at the date of purchase to be cash equivalents.
CONCENTRATION OF CREDIT RISK
Financial instruments which subject the Company to concentrations of
credit risk consist principally of trade receivables. The Company's
customers are concentrated in one geographic region. No single customer
accounted for a significant amount of the Company's sales, and there are
no significant accounts receivable from a single customer. The Company
reviews a customer's credit history before extending credit. The Company
establishes an allowance for doubtful accounts based on factors
surrounding the credit risk of specific customers, historical trends, and
other information.
REVENUE RECOGNITION
The Company recognizes revenues as services are provided.
F-56
<PAGE> 97
PROPERTY AND EQUIPMENT
Property and equipment are recorded at cost. Depreciation is provided on
the straight-line basis using useful lives of 5 to 7 years for machinery
and equipment and office equipment and 20 years for building and
improvements.
At December 31, 1996 and 1997, property and equipment consisted of the
following:
<TABLE>
<CAPTION>
1996 1997
========== ==========
<S> <C> <C>
Machinery and equipment $1,705,843 $1,866,519
Buildings and improvements 361,183 391,780
Office equipment 89,153 101,715
---------- ----------
2,156,179 2,360,014
Less accumulated depreciation (1,238,583) (1,431,763)
---------- ----------
$ 917,596 $ 928,251
========== ==========
</TABLE>
The Company periodically reviews the values assigned to property and
equipment to determine whether any impairments are other than temporary.
Management believes that property and equipment in the accompanying
balance sheets are appropriately stated.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those
estimates.
UNAUDITED INTERIM FINANCIAL INFORMATION
The accompanying financial statements for the three-month period ended
March 31, 1997 and for the period from January 1, 1998 through March 6,
1998 are unaudited. In the opinion of management, these financial
statements reflect all adjustments, consisting only of normal and
recurring adjustments, necessary for a fair presentation of the financial
statements. The results of operations for the period from January 1, 1998
through March 6, 1998 are not necessarily indicative of future results of
the Company.
INCOME TAXES
The Company has elected for federal and state income tax purposes S
corporation tax status, whereby income is taxed at the stockholder level.
Therefore, no deferred tax assets, liabilities, or provisions for income
taxes are recorded. Amounts are distributed to the stockholders for making
applicable tax payments.
F-57
<PAGE> 98
3. LONG-TERM DEBT
At December 31, 1996 and 1997, long-term debt consisted of the following:
<TABLE>
<CAPTION>
1996 1997
========== ==========
<S> <C> <C>
Equipment loans, interest at varying rates between 8.5% and 11%,
interest and principal due in monthly installments through 2000,
secured by related equipment $351,278 $401,923
Related-party notes payable, interest at varying rates between
10% and 12%, interest and principal due in monthly
installments through 1999, unsecured 163,272 169,081
-------- --------
514,550 571,004
278,794 293,132
Less current portion -------- --------
$235,756 $277,872
======== ========
</TABLE>
Future aggregate annual maturities of long-term debt are as follows as of
December 31, 1997:
<TABLE>
<S> <C>
1998 $293,132
1999 192,387
2000 67,548
2001 13,418
2002 and thereafter 4,519
--------
$571,004
========
</TABLE>
In March 1998, in conjunction with the sale of the business (Note 5), all
long-term debt was paid in full.
4. RELATED-PARTY TRANSACTIONS
The Company's stockholders make loans to the Company from time to time to
purchase equipment. At December 31, 1996 and 1997, the amounts owed to
stockholders were $163,272 and $169,081, respectively. During fiscal years
1995, 1996, and 1997, the Company paid interest of $12,244, $13,031, and
$6,421, respectively, to stockholders. Subsequent to December 31, 1997,
the amounts owed to stockholders were paid in full.
The Company rents land and buildings from certain stockholders. Rent paid
to stockholders was $15,600, $20,000, and $48,336 in 1997, 1996, and 1995,
respectively.
F-58
<PAGE> 99
5. SUBSEQUENT EVENT
On March 6, 1998, substantially all property and equipment and the ongoing
business of the Company were sold to SanTi Group, Inc. ("SanTi") for
$3,250,000 in cash, a $2,000,000 note receivable, and 60,000 shares of
SanTi common stock. Prior to the closing, all related long-term debt
was paid in full to convey assets to SanTi free and clear of all
encumbrances and liens.
F-59
<PAGE> 100
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To RGM Liquid Waste Removal Corporation
and Affiliates:
We have audited the accompanying combined balance sheets of RGM LIQUID WASTE
REMOVAL CORPORATION AND AFFILIATES as of October 31, 1996 and 1997 and the
related combined statements of operations, stockholders' equity, and cash flows
for the years then ended. These financial statements are the responsibility of
the Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of RGM Liquid Waste Removal
Corporation and Affiliates as of October 31, 1996 and 1997 and the results of
their operations and their cash flows for the years then ended in conformity
with generally accepted accounting principles.
ARTHUR ANDERSEN LLP
Atlanta, Georgia
July 10, 1998
F-60
<PAGE> 101
RGM LIQUID WASTE REMOVAL CORPORATION
AND AFFILIATES
COMBINED BALANCE SHEETS
<TABLE>
<CAPTION>
October 31
----------------------------- JANUARY 31,
ASSETS 1996 1997 1998
- -------------------------------------- ----------- ----------- -----------
(UNAUDITED)
<S> <C> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 581,017 $ 1,280,106 $ 845,874
Marketable equity securities 490,318 580,017 596,591
Accounts receivable, net of
allowance for doubtful accounts
of $70,000, $49,000, and $80,000
in 1996, 1997, and 1998,
respectively 2,065,540 1,179,148 1,707,489
Note receivable 813,462 579,481 355,606
Prepaid expenses and other 37,032 41,342 43,014
----------- ----------- -----------
Total current assets 3,987,369 3,660,094 3,548,574
PROPERTY AND EQUIPMENT, NET 1,394,204 1,032,921 933,560
NOTE RECEIVABLE 579,482 0 0
OTHER ASSETS 81,585 124,579 123,849
----------- ----------- -----------
$ 6,042,640 $ 4,817,594 $ 4,605,983
=========== =========== ===========
<CAPTION>
October 31
LIABILITIES AND ----------------------------- JANUARY 31,
STOCKHOLDERS' EQUITY 1996 1997 1998
- -------------------------------------- ----------- ----------- -----------
(UNAUDITED)
<S> <C> <C> <C>
CURRENT LIABILITIES:
Accounts payable $ 1,274,689 $ 374,827 $ 285,816
Accrued expenses 240,159 211,577 262,170
Due to related parties 484,263 506,713 512,326
Income taxes payable, net 324,496 281,566 50,491
Deferred income taxes 132,529 16,360 16,360
Current portion of long-term debt 281,264 133,741 117,265
----------- ----------- -----------
Total current liabilities 2,737,400 1,524,784 1,244,428
----------- ----------- -----------
LONG-TERM DEBT, NET OF CURRENT PORTION 353,724 82,827 53,844
----------- ----------- -----------
DUE TO STOCKHOLDERS 18,688 131,637 124,593
----------- ----------- -----------
DEFERRED INCOME TAXES 100,989 59,057 59,057
----------- ----------- -----------
COMMITMENTS AND
CONTINGENCIES (NOTE 4)
STOCKHOLDERS' EQUITY:
Common stock (Note 2) 11,000 11,000 11,000
Unrealized depreciation of
investments (9,682) 0 0
Retained earnings 2,830,521 3,008,289 3,113,061
----------- ----------- -----------
Total stockholders' equity 2,831,839 3,019,289 3,124,061
----------- ----------- -----------
$ 6,042,640 $ 4,817,594 $ 4,605,983
=========== =========== ===========
</TABLE>
The accompanying notes are an integral part of these combined balance sheets.
F-61
<PAGE> 102
RGM LIQUID WASTE REMOVAL CORPORATION
AND AFFILIATES
COMBINED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Years Ended October 31 THREE-MONTH THREE-MONTH
------------------------------- PERIOD ENDED PERIOD ENDED
1996 1997 JANUARY 31, 1997 JANUARY 31, 1998
------------ ------------ ---------------- ----------------
(Unaudited)
<S> <C> <C> <C> <C>
REVENUES $ 10,104,213 $ 7,459,143 $ 1,799,055 $ 1,842,449
------------ ------------ ------------ ------------
EXPENSES:
Cost of operations 6,929,729 4,485,210 1,159,705 1,083,204
General and administrative 2,627,519 2,407,013 521,027 502,748
Depreciation and amortization 417,476 394,420 99,171 99,643
------------ ------------ ------------ ------------
Total expenses 9,974,724 7,286,643 1,779,903 1,685,595
------------ ------------ ------------ ------------
INCOME FROM OPERATIONS 129,489 172,500 19,152 156,854
------------ ------------ ------------ ------------
OTHER EXPENSE (INCOME):
Interest expense (income), net 65,497 (88,518) (27,897) (14,903)
Other, net 804,489 (73,276) 0 0
------------ ------------ ------------ ------------
869,986 (161,794) (27,897) (14,903)
------------ ------------ ------------ ------------
(LOSS) INCOME BEFORE INCOME
TAXES
(740,497) 334,294 47,049 171,757
(BENEFIT) PROVISION FOR
INCOME TAXES (425,210) 156,526 23,524 66,985
------------ ------------ ------------ ------------
NET (LOSS) INCOME $ (315,287) $ 177,768 $ 23,525 $ 104,772
============ ============ ============ ============
</TABLE>
The accompanying notes are an integral part of these combined statements.
F-62
<PAGE> 103
RGM LIQUID WASTE REMOVAL CORPORATION
AND AFFILIATES
COMBINED STATEMENTS OF STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
UNREALIZED
LOSSES ON
SECURITIES
COMMON AVAILABLE RETAINED
STOCK FOR SALE EARNINGS TOTAL
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
BALANCE, NOVEMBER 1, 1995 $ 11,000 $ 0 $ 3,145,808 $ 3,156,808
Unrealized depreciation on
securities available for sale 0 (9,682) 0 (9,682)
Net loss 0 0 (315,287) (315,287)
----------- ----------- ----------- -----------
BALANCE, OCTOBER 31, 1996 11,000 (9,682) 2,830,521 2,831,839
Change in unrealized depreciation
on securities available for sale 0 9,682 0 9,682
Net income 0 0 177,768 177,768
----------- ----------- ----------- -----------
BALANCE, OCTOBER 31, 1997 11,000 0 3,008,289 3,019,289
Net income 0 0 104,772 104,772
----------- ----------- ----------- -----------
BALANCE, JANUARY 31, 1998 (UNAUDITED) $ 11,000 $ 0 $ 3,113,061 $ 3,124,061
=========== =========== =========== ===========
</TABLE>
The accompanying notes are an integral part of these combined statements.
F-63
<PAGE> 104
RGM LIQUID WASTE REMOVAL CORPORATION
AND AFFILIATES
COMBINED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
YEARS ENDED OCTOBER 31 THREE-MONTH THREE-MONTH
------------------------- PERIOD ENDED PERIOD ENDED
1996 1997 JANUARY 31, 1997 JANUARY 31, 1998
----------- ----------- ---------------- --------------
(Unaudited)
<S> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net (loss) income $ (315,287) $ 177,768 $ 23,525 $ 104,772
----------- ----------- ----------- -----------
Adjustments to reconcile net income (loss)
to net cash provided by
operating activities:
Depreciation and amortization 417,476 394,420 99,171 99,643
Loss on sale of fixed assets 26,956 48 0 0
Changes in assets and liabilities:
Accounts receivable, net 508,139 886,392 563,263 (528,341)
Prepaid expenses and other (1,746) (4,310) (4,617) (1,672)
Other assets 109,680 (42,994) (652) 730
Accounts payable (965,735) (899,862) (300,844) (89,011)
Accrued expenses 9,260 (28,582) 13,504 50,593
Income tax payable 311,670 (42,931) (269,949) (231,075)
Deferred taxes (893,777) (158,101) 0 0
----------- ----------- ----------- -----------
Total adjustments (478,077) 104,080 99,876 (699,133)
----------- ----------- ----------- -----------
Net cash provided
by operating activities (793,364) 281,848 123,401 (594,361)
----------- ----------- ----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Investment in Merco $ 3,603,192 $ 0 $ 0 $ 0
Note receivable from Merco (1,392,944) 813,463 197,326 223,875
Marketable securities (500,000) (80,017) (12,993) (16,574)
Capital expenditures (114,175) (33,184) 0 (282)
----------- ----------- ----------- -----------
Net cash provided by investing activities 1,596,073 700,262 184,333 207,019
----------- ----------- ----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Borrowings of long-term debt 27,364 0 0 0
Repayments of long-term debt (695,504) (418,420) (104,778) (45,459)
Net borrowing from related party 80,806 22,450 5,613 5,613
Net borrowing from stockholder 16,860 112,949 0 (7,044)
----------- ----------- ----------- -----------
Net cash used in financing activities (570,474) (283,021) (99,165) (46,890)
----------- ----------- ----------- -----------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 232,235 699,089 208,569 (434,232)
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 348,782 581,017 581,017 1,280,106
----------- ----------- ----------- -----------
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 581,017 $ 1,280,106 $ 789,586 $ 845,874
=========== =========== =========== ===========
SUPPLEMENTAL CASH FLOW INFORMATION:
Cash paid for interest $ 112,328 $ 57,140 $ 12,124 $ 7,546
=========== =========== =========== ===========
Cash paid for income taxes $ 193,421 $ 368,767 $ 323,178 $ 303,362
=========== =========== =========== ===========
NONCASH INVESTING ACTIVITY:
Unrealized loss (gain) on securities
available for sale $ 9,682 $ (9,682) $ (9,682) $ 0
=========== =========== =========== ===========
</TABLE>
The accompanying notes are an integral part of these combined statements.
F-64
<PAGE> 105
RGM LIQUID WASTE REMOVAL CORPORATION
AND AFFILIATES
NOTES TO COMBINED FINANCIAL STATEMENTS
OCTOBER 31, 1996 AND 1997
1. ORGANIZATION AND BASIS OF PRESENTATION
RGM Liquid Waste Removal Corporation ("RGM") and affiliates (collectively,
the "Company") is engaged in the removal of various waste materials. As
part of its normal operations, the Company enters into long-term contracts
with governmental, institutional, and commercial entities. These contracts
specify that the Company will remove various waste materials at per unit
prices over specified periods of time, which typically range from six
months to four years.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLES OF COMBINATION
The accompanying combined financial statements include the accounts of
Devito Environmental Corporation ("Devito"), Advanced Transfer Technology,
Inc. ("ATT"), and Envirotech Leasing & Rental Corporation ("Envirotech")
(collectively, the "Affiliates") since they have been under the same
ownership of RGM since their respective dates of inception. All material
intercompany accounts have been eliminated.
CASH AND CASH EQUIVALENTS
The Company considers all highly liquid investments with maturities of
three months or less at the date of purchase to be cash equivalents.
The carrying amounts of short-term investments approximate fair value.
Short-term investments consist of marketable equity securities and money
market funds. In accordance with the criteria specified by Statement of
Financial Accounting Standards ("SFAS") No. 115, "Accounting for Certain
Investments in Debt and Equity Securities," these investments were
classified as available for sale.
CONCENTRATION OF CREDIT RISK
Financial instruments which subject the Company to concentrations of
credit risk consist principally of trade receivables. The Company's
customers are concentrated in one geographic region. No single customer
accounted for a significant amount of the Company's sales, and there are
no significant accounts receivable from a single customer. The Company
reviews a customer's credit history before extending credit. The Company
F-65
<PAGE> 106
establishes an allowance for doubtful accounts based on factors
surrounding the credit risk of specific customers, historical trends, and
other information.
REVENUE RECOGNITION
The Company recognizes revenues as services are provided.
PROPERTY AND EQUIPMENT
Property and equipment are recorded at cost. Depreciation is provided
using useful lives of five to ten years for machinery and equipment and
office equipment. Leasehold improvements are depreciated over the shorter
of the term of the lease or the useful life of the improvements.
At October 31, 1996 and 1997, property and equipment consisted of the
following:
<TABLE>
<CAPTION>
1996 1997
---------- ----------
<S> <C> <C>
Machinery and equipment $4,528,286 $4,478,562
Office equipment 25,955 42,140
Leasehold improvements 105,646 129,005
---------- ----------
4,659,887 4,649,707
Less accumulated depreciation (3,265,683) (3,616,786)
---------- ----------
$1,394,204 $1,032,921
========== ==========
</TABLE>
The Company periodically reviews the values assigned to property and
equipment to determine whether any impairments are other than temporary.
Management believes that property and equipment in the accompanying
balance sheets are appropriately stated.
COMMON STOCK
No par value common stock of RGM and affiliates consists of the following
as of October 31, 1996 and 1997 and January 31, 1998:
<TABLE>
<CAPTION>
ISSUED AND
AUTHORIZED OUTSTANDING
---------- -----------
<S> <C> <C>
RGM 200 10
Devito 200 100
ATT 200 10
Envirotech 200 100
</TABLE>
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities
F-66
<PAGE> 107
at the date of the financial statements and the reported amounts of
revenues and expenses during the reporting period. Actual results could
differ from those estimates.
UNAUDITED INTERIM FINANCIAL INFORMATION
The accompanying financial statements as of January 31, 1998 and for the
three-month periods ended January 31, 1997 and 1998 are unaudited. In the
opinion of management, these financial statements reflect all adjustments,
consisting only of normal recurring adjustments, necessary for a fair
presentation of the financial statements. The results of operations for
the three-month period ended January 31, 1998 are not necessarily
indicative of future results of the Company.
INCOME TAXES
For federal and state income tax purposes, two of the affiliates (the "S
corporations") have elected S corporation tax status whereby income is
taxed at the shareholder level. Therefore, no deferred tax assets,
liabilities, or provisions for income taxes is recorded. See Note 7 for
income tax information for the two affiliates which are C corporations
(the "C corporations").
3. NOTE RECEIVABLE
From July 1992 to June 1996, the Company participated in the Merco Joint
Venture ("Merco"). Merco contracts with the city of New York to receive,
transport, and dispose of dewatered sewage sludge. The Company's ownership
interest in Merco was 33 1/3%. At May 31, 1996, the Company's investment
in Merco was $2,439,761. On June 1, 1996, pursuant to a settlement
agreement between the Company and Merco, the joint venture agreed to pay
$1,650,000 for the Company's interest in Merco. In 1996, the Company
recognized a loss on the sale of the investment in the amount of $789,761,
which is included in other, net, in the accompanying statements of
operations. The settlement was in the form of a note receivable which is
payable in monthly installments of $74,625 through June 1998 and bears
interest at 8% per annum.
F-67
<PAGE> 108
4. LONG-TERM DEBT
At October 31, 1996 and 1997, long-term debt consisted of the following:
<TABLE>
<CAPTION>
1996 1997
-------- --------
<S> <C> <C>
Equipment loans, interest at varying rates
between 7.75% and 12.38%, interest and
principal due in monthly installments
through August 2001, secured by related
equipment $595,272 $207,665
Capital lease obligations and other 39,716 8,903
-------- --------
634,988 216,568
Less current portion (281,264) (133,741)
-------- --------
$353,724 $ 82,827
======== ========
</TABLE>
Future aggregate annual maturities of long-term debt are as follows as of
October 31, 1997:
<TABLE>
<S> <C>
1998 $133,741
1999 71,468
2000 5,983
2001 5,376
--------
$216,568
========
</TABLE>
In May 1998, the Company repaid all long-term debt in full in conjunction
with the sale of the business (Note 9).
5. RELATED-PARTY TRANSACTIONS
The Company's stockholders make loans to the Company from time to time to
meet working capital needs and to purchase equipment. At December 31, 1996
and 1997, the amounts owed to stockholders were $18,688 and $131,637,
respectively. In May 1998, all amounts owed to stockholders were paid in
full in conjunction with the sale of the business (Note 9).
The Company is a guarantor of a loan entered by the stockholder in the
amount of $118,000. The loan was paid in full in May 1998 in conjunction
with the sale of the business (Note 9).
The Company leases its office facilities from related parties under
noncancelable operating leases on a month-to-month basis. Rent expense for
the years ended October 31, 1996 and 1997 was $406,558 and $396,991,
respectively, and is included in general and administrative expenses in
the accompanying statements of operations. Amounts owed to these related
parties for back rents at October 31, 1996 and 1997 were $456,475 and
$506,713, respectively.
F-68
<PAGE> 109
The Company is a partner in a joint venture with two other waste removal
companies, which bill, collect, and disburse monies to the partners for
waste removal services provided by the partners to a local municipality.
Revenue recorded in the accompanying statements of operations from the
joint venture totaled $56,307 and $57,750 in 1996 and 1997, respectively.
Amounts due from the joint venture at October 31, 1996 and 1997 were
$12,273 and $0, respectively, and are included in due to related parties
in the accompanying balance sheets.
The Company performs waste removal services for an entity under the
control of one of the Company's stockholders. The related party also
provided waste treatment services to the Company. During 1996 and 1997,
revenue from the related party was $55,280 and $74,016, respectively.
Waste treatment services performed by the related party for RGM during
1996 and 1997 were $7,765 and $2,600, respectively. Net amounts due to the
related party at October 31, 1996 and 1997 were $40,061 and $0 and are
included in due to related parties in the accompanying balance sheets.
6. COMMITMENTS AND CONTINGENCIES
The Company has a defined contribution 401(k) plan (the "Plan") covering
substantially all of its full-time employees. The Company has the option
to contribute a profit-sharing portion to the Plan each year. During the
years ended October 31, 1996 and 1997, no such contributions were made.
Under the terms of a bargaining agreement with its union employees, one
of the affiliates is required to make contributions based on hours worked
to a union annuity fund. Contributions to this fund for the years ended
October 31, 1996 and 1997 were $18,336 and $64,323, respectively, and are
included in general and administrative expenses in the accompanying
statements of operations.
7. INCOME TAXES
The accompanying financial statements include income tax provisions
related to the C corporations computed in accordance with SFAS No. 109,
"Accounting for Income Taxes." The components of the income tax (benefit)
provision for the years ended October 31, 1996 and 1997 are summarized as
follows:
<TABLE>
<CAPTION>
1996 1997
--------- ---------
<S> <C> <C>
Current provision $ 468,567 $ 314,627
Deferred taxes (893,777) (158,101)
--------- ---------
Income tax (benefit) provision $(425,210) $ 156,526
========= =========
</TABLE>
F-69
<PAGE> 110
Reconciliation from the federal statutory rate to the actual income tax
benefit is as follows:
<TABLE>
<CAPTION>
1996 1997
----- ----
<S> <C> <C>
Statutory federal tax rate (34.0)% 34.0%
State and city income taxes, net of
federal tax benefit (8.0) 7.0
(Income) loss from the S corporations (9.2) 3.8
Other (6.2) 2.0
----- ----
(57.4)% 46.8%
===== ====
</TABLE>
The sources of differences between the financial accounting and tax bases
of the Company's assets and liabilities which give rise to the deferred
tax assets and liabilities and the tax effects of each are as follows as
of October 31, 1996 and 1997:
<TABLE>
<CAPTION>
1996 1997
--------- --------
<S> <C> <C>
Deferred tax assets:
Allowance for doubtful accounts $ 29,120 $ 20,384
Capital loss carryforward 59,805 38,206
--------- --------
Total deferred tax assets 88,925 58,590
--------- --------
Deferred tax liabilities:
Depreciation (121,027) (94,240)
Joint venture income (121,881) 0
Cash to accrual (79,535) (39,767)
--------- --------
Total deferred tax liabilities (322,443) (134,007)
--------- --------
Net deferred tax liability $(233,518) $(75,417)
========= ========
</TABLE>
8. ENVIRONMENTAL REGULATIONS
The Company is subject to extensive and evolving federal, state, and local
environmental laws and regulations that have been enacted in response to
technological advances and the public's increased concern over
environmental issues. The majority of the expenditures necessary to comply
with the environmental laws and regulations is made in the normal course
of business. The Company, to the best of its knowledge, is in compliance,
in all material respects, with the laws and regulations affecting its
operations.
9. SUBSEQUENT EVENT
On May 1, 1998, the Company sold substantially all property and equipment
and the ongoing business to SanTi Group, Inc. ("SanTi") for $4,500,000 in
cash and 105,000 shares of SanTi common stock. Contingent consideration of
$1,000,000 in cash and 55,000 shares of SanTi common stock is receivable
365 days after the date of purchase, net of offsets for losses, as defined
in the purchase agreement. Prior to the closing, all equipment
F-70
<PAGE> 111
loans and related-party payables were paid in full to convey assets to SanTi
free and clear of all encumbrances and liens.
F-71
<PAGE> 112
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Eldredge Wastewater Management, Inc.:
We have audited the accompanying balance sheets of ELDREDGE WASTEWATER
MANAGEMENT, INC. (a Pennsylvania corporation) as of December 31, 1996 and 1997
and the related statements of operations, stockholder's equity, and cash flows
for each of the three years in the period ended December 31, 1997. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Eldredge Wastewater Management,
Inc. as of December 31, 1996 and 1997 and the results of its operations and its
cash flows for each of the three years in the period ended December 31, 1997 in
conformity with generally accepted accounting principles.
ARTHUR ANDERSEN LLP
Atlanta, Georgia
June 19, 1998
F-72
<PAGE> 113
ELDREDGE WASTEWATER MANAGEMENT, INC.
BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31
----------------------- MARCH 31,
ASSETS 1996 1997 1998
- ------------------------------------------ ---------- -------- ----------
(unaudited)
<S> <C> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 79,129 $ 20,975 $ 4,627
Accounts receivable, net of allowance
for doubtful accounts of $19,300 in
1996, 1997, and 1998 309,488 313,464 321,431
Related-party receivable 332,028 363,264 243,334
Prepaid expenses and other 13,363 13,774 14,212
---------- ---------- --------
Total current assets 734,008 711,477 583,604
PROPERTY AND EQUIPMENT, NET 285,799 425,626 388,731
---------- ---------- --------
$1,019,807 $1,137,103 $972,335
========== ========== ========
<CAPTION>
DECEMBER 31
LIABILITIES AND ----------------------- MARCH 31,
STOCKHOLDER'S EQUITY 1996 1997 1998
- ----------------------------------------- ---- ---- -----------
(unaudited)
<S> <C> <C> <C>
CURRENT LIABILITIES:
Accounts payable $ 324,716 $ 353,165 $271,148
Accrued expenses 35,630 41,010 47,904
Current portion of long-term debt 179,023 119,461 122,877
---------- ---------- --------
Total current liabilities 539,369 513,636 441,929
---------- ---------- --------
LONG-TERM DEBT, NET OF CURRENT PORTION 115,141 322,347 290,883
---------- ---------- --------
DEFERRED INCOME TAXES 22,873 9,926 7,426
---------- ---------- --------
COMMITMENTS AND CONTINGENCIES (NOTES 5
AND 6)
STOCKHOLDER'S EQUITY:
Common stock, no par value; 10,000
shares authorized, 4,000 shares
issued and outstanding in 1996,
1997, and 1998 1,000 1,000 1,000
Retained earnings 341,424 290,194 231,097
---------- ---------- --------
Total stockholder's equity 342,424 291,194 232,097
---------- ---------- --------
$1,019,807 $1,137,103 $972,335
========== ========== ========
</TABLE>
F-73
<PAGE> 114
ELDREDGE WASTEWATER MANAGEMENT, INC.
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
THREE MONTH-PERIOD
YEARS ENDED DECEMBER 31 ENDED MARCH 31
----------------------------------------- ------------------------
1995 1996 1997 1997 1998
----------- ----------- ----------- --------- -----------
(unaudited)
<S> <C> <C> <C> <C> <C>
REVENUES $ 3,800,950 $ 4,206,779 $ 4,074,248 $ 908,332 $ 1,000,365
----------- ----------- ----------- --------- -----------
EXPENSES:
Cost of operations 2,641,298 3,094,579 2,841,432 647,864 741,425
General and administrative 1,033,326 999,328 1,081,150 236,546 276,702
Depreciation and amortization 177,427 176,250 192,534 37,818 49,742
----------- ----------- ----------- --------- -----------
Total expenses 3,852,051 4,270,157 4,115,116 922,228 1,067,869
----------- ----------- ----------- --------- -----------
LOSS FROM OPERATIONS (51,101) (63,378) (40,868) (13,896) (67,504)
----------- ----------- ----------- --------- -----------
OTHER INCOME (EXPENSE):
Interest expense, net (9,204) (35,505) (34,828) (14,686) (9,670)
Other 18,244 10,873 6,509 4,061 (76)
----------- ----------- ----------- --------- -----------
9,040 (24,632) (28,319) (10,625) (9,746)
----------- ----------- ----------- --------- -----------
LOSS BEFORE BENEFIT FROM INCOME TAXES (42,061) (88,010) (69,187) (24,521) (77,250)
INCOME TAX BENEFIT (10,056) (17,968) (17,957) (5,762) (18,153)
----------- ----------- ----------- --------- -----------
NET LOSS $ (32,005) $ (70,042) $ (51,230) $ (18,759) $ (59,097)
=========== =========== =========== ========= ===========
</TABLE>
The accompanying notes are an integral part of these statements.
F-74
<PAGE> 115
ELDREDGE WASTEWATER MANAGEMENT, INC.
STATEMENTS OF STOCKHOLDER'S EQUITY
<TABLE>
<CAPTION>
COMMON RETAINED
STOCK EARNINGS TOTAL
------ -------- -----
<S> <C> <C> <C>
BALANCE, JANUARY 1, 1995 $1,000 $443,471 $444,471
Net loss 0 (32,005) (32,005)
------ -------- --------
BALANCE, DECEMBER 31, 1995 1,000 411,466 412,466
Net loss 0 (70,042) (70,042)
------ -------- --------
BALANCE, DECEMBER 31, 1996 1,000 341,424 342,424
Net loss 0 (51,230) (51,230)
------ -------- --------
BALANCE, DECEMBER 31, 1997 1,000 290,194 291,194
Net loss 0 (59,097) (59,097)
------ -------- --------
BALANCE, MARCH 31, 1998 (UNAUDITED) $1,000 $231,097 $232,097
====== ======== ========
</TABLE>
The accompanying notes are an integral part of these statements.
F-75
<PAGE> 116
ELDREDGE WASTEWATER MANAGEMENT, INC.
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
THREE-MONTH PERIOD
YEARS ENDED DECEMBER 31 ENDED MARCH 31
-------------------------------------- -----------------------
1995 1996 1997 1997 1998
--------- --------- --------- --------- ---------
(unaudited)
<S> <C> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (32,005) $ (70,042) $ (51,230) $ (18,759) $ (59,097)
--------- --------- --------- --------- ---------
Adjustments to reconcile net loss to net cash
provided by (used in) operating activities:
Depreciation and amortization 177,427 176,250 192,534 37,818 49,742
Deferred income taxes (11,539) (17,234) (12,947) (2,500) (2,500)
Changes in assets and liabilities:
Accounts receivable 23,302 (39,202) (3,976) (13,893) (7,967)
Related-party receivable (401,156) 227,250 (31,236) 90,096 119,930
Prepaid expenses and other (4,971) 25,550 (411) (491) (438)
Accounts payable (127,814) (43,273) 28,449 (110,578) (82,017)
Accrued expenses 6,126 20,444 5,380 (3,064) 6,894
--------- --------- --------- --------- ---------
Total adjustments (338,625) 349,785 177,793 (2,612) 83,644
--------- --------- --------- --------- ---------
Net cash (used in) provided by
operating activities (370,630) 279,743 126,563 (21,371) 24,547
--------- --------- --------- --------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (49,806) (72,516) (297,361) (76,008) (12,847)
--------- --------- --------- --------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Issuance of long-term debt 414,522 0 197,901 109,000 0
Repayments of long-term debt (91,397) (156,754) (85,257) (22,381) (28,048)
--------- --------- --------- --------- ---------
Net cash provided by (used in)
financing activities 323,125 (156,754) 112,644 86,619 (28,048)
--------- --------- --------- --------- ---------
NET CHANGE IN CASH AND CASH
EQUIVALENTS (97,311) 50,473 (58,154) (10,760) (16,348)
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 125,967 28,656 79,129 79,129 20,975
--------- --------- --------- --------- ---------
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 28,656 $ 79,129 $ 20,975 $ 68,369 $ 4,627
========= ========= ========= ========= =========
SUPPLEMENTAL CASH FLOW INFORMATION:
Cash paid for interest $ 10,562 $ 33,466 $ 37,146 $ 10,884 $ 9,781
========= ========= ========= ========= =========
NONCASH INVESTING AND FINANCING ACTIVITIES:
Equipment financed under capital lease
obligation $ 0 $ 0 $ 35,000 $ 0 $ 0
========= ========= ========= ========= =========
</TABLE>
The accompanying notes are an integral part of these statements.
F-76
<PAGE> 117
ELDREDGE WASTEWATER MANAGEMENT, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1996 AND 1997
1. ORGANIZATION AND BASIS OF PRESENTATION
Eldredge Wastewater Management, Inc. (the "Company"), a Pennsylvania
corporation, is engaged in the design, construction, repair, and
maintenance of on-site sewage disposal systems. The Company's services are
sold to customers located primarily in the Delaware Valley of Southeastern
Pennsylvania. The Company is a wholly owned subsidiary of The Eldredge
Companies, Inc. ("The Eldredge Companies").
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
CASH AND CASH EQUIVALENTS
The Company considers all highly liquid investments with purchased
maturities of three months or less at the date of purchase to be cash
equivalents.
PROPERTY AND EQUIPMENT
Property and equipment are recorded at cost. Depreciation is provided over
estimated useful lives of five to ten years using the straight-line
method.
At December 31, 1996 and 1997, property and equipment consisted of the
following:
<TABLE>
<CAPTION>
1996 1997
----------- -----------
<S> <C> <C>
Property and equipment $ 1,925,838 $ 2,258,199
Less accumulated depreciation (1,640,039) (1,832,573)
----------- -----------
$ 285,799 $ 425,626
=========== ===========
</TABLE>
The Company periodically reviews the values assigned to property and
equipment to determine whether any impairments are other than temporary.
Management believes that property and equipment in the accompanying
balance sheets are appropriately stated.
REVENUE RECOGNITION
The Company recognizes revenues as services are provided.
F-77
<PAGE> 118
-2-
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities as of the date of the
financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those
estimates.
UNAUDITED INTERIM FINANCIAL INFORMATION
The accompanying financial statements as of March 31, 1998 and for the
three-month periods ended March 31, 1997 and 1998 are unaudited. In the
opinion of the management of the Company, these financial statements
reflect all adjustments, consisting only of normal recurring adjustments,
necessary for a fair presentation of the financial statements. The results
of operations for the three-month period ended March 31, 1998, are not
necessarily indicative of the results that may be expected for the full
year.
3. INCOME TAXES
The benefit from income taxes is summarized as follows for the years ended
December 31, 1995, 1996, and 1997:
<TABLE>
<CAPTION>
1995 1996 1997
-------- -------- --------
<S> <C> <C> <C>
Current $ 1,483 $ (734) $ (5,010)
Deferred (11,539) (17,234) (12,947)
-------- -------- --------
$(10,056) $(17,968) $(17,957)
======== ======== ========
</TABLE>
Significant components of the Company's deferred income tax liability as
of December 31, 1996 and 1997 are summarized as follows:
<TABLE>
<CAPTION>
1996 1997
------- -------
<S> <C> <C>
Deferred income tax liability:
Property and equipment $18,361 $ 5,391
Other 4,512 4,535
------- -------
$22,873 $ 9,926
======= =======
</TABLE>
The operations of the Company are included in the consolidated federal
income tax return of The Eldredge Companies. All tax amounts above as well
as tax amounts included in the accompanying financial statements have been
reflected as if the Company filed separate state and federal tax returns.
F-78
<PAGE> 119
4. LONG-TERM DEBT
At December 31, 1996 and 1997, long-term debt consisted of the following:
<TABLE>
<CAPTION>
1996 1997
--------- ---------
<S> <C> <C>
Note payable to bank, interest at 9.75%, principal and interest
payable in monthly installments through September 1, 2001;
secured by substantially all property and equipment acquired
prior to April 1995 $ 258,499 $ 235,609
Equipment loans and capital lease obligation, interest at
varying rates between 7.75% and 10.75%, interest and principal
due in monthly installments through 2000; secured by related
equipment 35,665 173,948
Note payable to officer, interest at 12.5%, principal
and interest payable in monthly installments through
March 1, 2000; unsecured 0 32,251
--------- ---------
294,164 441,808
Less current portion (179,023) (119,461)
--------- ---------
$ 115,141 $ 322,347
========= =========
</TABLE>
Future aggregate annual maturities of long-term debt are as follows as of
December 31, 1997:
<TABLE>
<S> <C> <C>
1998 $119,461
1999 131,187
2000 127,197
2001 61,394
2001 2,569
--------
$441,808
========
</TABLE>
In May 1998, in conjunction with the sale of the business (Note 7), all
related long-term debt was paid in full.
F-79
<PAGE> 120
5. COMMITMENTS AND CONTINGENCIES
BENEFIT PLAN
The Company maintains a 401(k) plan for employees. The Company makes a
discretionary profit-sharing contribution to the plan based on estimated
company profitability. Company contributions for the years ended December
31, 1995, 1996, and 1997 were $0, $10,000, and $6,000, respectively.
ENVIRONMENTAL AND LEGAL MATTERS
The Company is subject to various claims and legal actions which arise in
the ordinary course of business. In the opinion of management, the
ultimate resolution of any such matters should not have a material adverse
effect on the Company's financial position or results of operations.
6. RELATED-PARTY TRANSACTIONS
The Company makes periodic cash transfers to (from) The Eldredge Companies
and its subsidiaries based on available cash. Additionally, the Company
receives certain administration services from its parent company, The
Eldredge Companies. Allocations of parent company direct costs related to
these services, totaled $189,188, $207,727, and $158,929 for the years
ended December 31, 1995, 1996, and 1997, respectively. These allocations
are included in general and administrative expense in the accompanying
statements of operations. The Company also receives certain management
services from other wholly owned subsidiaries of The Eldredge Companies.
Management fees, which are reflected in general and administrative expense
in the accompanying statements of operations, totaled $296,100, $247,392,
and $220,913 for the years ended December 31, 1995, 1996, and 1997,
respectively. The stockholders of The Eldredge Companies also served as
key officers of the Company during 1995, 1996, and 1997. Compensation paid
to one of these officers totaled $108,109, $104,067, and $103,879 for
1995, 1996, and 1997, respectively, and is included in general and
administrative expense in the accompanying statements of operations.
The Company leases its office space and equipment storage facilities from
a partnership owned by the stockholders of The Eldredge Companies. Rental
expense during the years ended December 31, 1995, 1996, and 1997 was
$21,400, $22,740, and $22,320, respectively.
The Company purchases certain equipment improvements from a wholly owned
subsidiary of The Eldredge Companies. These improvements relate primarily
to the Company's fleet of septic waste tanker trucks. For the years ended
December 31, 1995, 1996, and 1997, these equipment purchases totaled
$30,760, $4,174, and $123,218, respectively. In addition, this sister
company performs substantially all of the repair and maintenance services
on the company vehicles. For the years ended December 31, 1995, 1996, and
1997, these services totaled $159,273, $176,247, and $192,034,
respectively, and are reflected in cost of operations in the accompanying
statements of operations.
F-80
<PAGE> 121
7. SUBSEQUENT EVENT
On May 8, 1998, substantially all property and equipment and the ongoing
business of the Company was sold to SanTi Group, Inc. ("SanTi") for
$2,040,000 in cash and 85,000 shares of Santi common stock. Contingent
consideration of $360,000 in cash and 15,000 shares of SanTi common
stock is receivable 13 months after the date of purchase, net of offsets
for losses, as defined in the purchase agreement. Prior to the closing,
all outstanding long-term debt was paid in full to convey the assets free
and clear of all encumbrances and liens.
F-81
<PAGE> 122
<TABLE>
<CAPTION>
- ---------------------------------------------------- --------------------------------------------
<S> <C> <C>
NO DEALER, SALESPERSON OR OTHER PERSON HAS SANTI GROUP, INC.
BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO
MAKE ANY REPRESENTATION NOT CONTAINED IN THIS
PROSPECTUS AND, IF GIVEN OR MADE, SUCH
INFORMATION OR REPRESENTATION MUST NOT BE RELIED
UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY
OR ANY UNDERWRITER. THIS PROSPECTUS DOES NOT
CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN
OFFER TO BUY ANY OF THE SECURITIES OFFERED HEREBY IN
ANY JURISDICTION TO ANY PERSON TO WHOM IT IS
UNLAWFUL TO MAKE SUCH OFFER IN SUCH JURISDICTION.
NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY 8,113,379 SHARES
SALE MADE HEREUNDER SHALL, UNDER ANY COMMON STOCK
CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THE ($.0001 PAR VALUE)
INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY
TIME SUBSEQUENT TO THE DATE HEREOF OR THAT THERE
HAS BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY
SINCE SUCH DATE.
-----------------
TABLE OF CONTENTS
PAGE
----
PROSPECTUS SUMMARY...................................................
RISK FACTORS.........................................................
USE OF PROCEEDS......................................................
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATION.......................
BUSINESS............................................................. PROSPECTUS
MANAGEMENT...........................................................
CERTAIN TRANSACTIONS.................................................
PRINCIPAL AND SELLING STOCKHOLDERS...................................
DESCRIPTION OF SECURITIES ...........................................
PLAN OF DISTRIBUTION ................................................
LEGAL MATTERS........................................................
EXPERTS..............................................................
ADDITIONAL INFORMATION...............................................
---------------
------------------------------------------------------------- --------------------------------------------
</TABLE>
<PAGE> 123
[ALTERNATE COVER PAGE FOR SHELF PROSPECTUS]
SUBJECT TO COMPLETION, DATED AUGUST 3, 1998
5,000,000
SANTI GROUP, INC.
COMMON STOCK
(PAR VALUE $0.0001 PER SHARE)
---------------------
The 5,000,000 shares of common stock, $.0001 par value per share
(the "Common Stock"), covered by this Prospectus (the "Shares") may be issued by
SanTi Group, Inc. (the "Company") from time to time in payment (or partial
payment) of the purchase price for one or more acquisitions of companies,
business or assets complementary to the Company's existing business. As of the
date of this Prospectus, the Company has not definitively identified any
acquisition in which it may issue shares of Common Stock covered by this
Prospectus. At such time as the Company identifies a specific acquisition in
which such Shares will be issued, the Company will amend or supplement this
Prospectus and the Registration Statement of which this Prospectus is a part to
add information about the acquisition and the company, business or assets being
acquired if and to the extent required by applicable rules and policies of the
Securities and Exchange Commission (the "Commission").
This Prospectus also relates to the offer for sale or other
distribution of the Shares by persons (the "Selling Stockholders") who will
acquire such Shares in the acquisitions of such companies, businesses or assets.
Such Shares may be sold or distributed from time to time by or for the account
of the Selling Stockholders through underwriters or dealers, through brokers or
other agents, or directly to one or more purchasers, at market prices prevailing
at the time of sale or at prices otherwise negotiated. This Prospectus also may
be used, with the Company's prior consent, by donees of the Selling
Stockholders, or by other persons acquiring Shares and who wish to offer and
sell such Shares under circumstances requiring or making desirable its use. The
Company will receive no portion of the proceeds from the sale of the Shares
offered hereby and will bear certain expenses incident to their registration.
See "Selling Stockholders" and "Plan of Distribution."
It is expected that the terms of the acquisitions involving the
issuance of securities covered by this Prospectus will be determined by direct
negotiations with the owners or controlling persons of the businesses or assets
to be merged with or acquired by the Company. No underwriting discounts or
commissions will be paid, although finder's fees may be paid from time to time
with respect to specific mergers or acquisitions. Any person receiving any such
fees may be deemed to be an underwriter within the meaning of the Securities Act
of 1933, as amended (the "Securities Act").
Application will be made to have the Common Stock approved for
quotation on the Nasdaq National Market System under the symbol "SNTI". At July
29, 1998, the Company had 9,498,313 shares of Common Stock outstanding. On July
29, 1998, the last reported sale price of the 1,384,934 shares of Common Stock
subject to trading on the Nasdaq OTC Bulletin Board (of which 9,800 shares
traded) was $20.75 per share.
---------------------
SEE "RISK FACTORS" BEGINNING ON PAGE 7 FOR CERTAIN FACTORS RELATING TO AN
INVESTMENT IN THE COMMON STOCK.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
A-1
<PAGE> 124
[ALTERNATE PAGE FOR SHELF PROSPECTUS]
PRINCIPAL STOCKHOLDERS
The following table sets forth information concerning the beneficial
ownership of the Common Stock as of July 29, 1998 by (i) each named executive
officer, (ii) each of the Company's directors, (iii) all executive officers and
directors as a group, and (iv) each person who beneficially owns more than 5% of
the Common Stock:
<TABLE>
<CAPTION>
Shares Beneficially Owned(1)
----------------------------
Name Number Percent
- ---- ------ -------
<S> <C> <C>
Raymond M. Cash (2) 3,642,500 38%
Cash Family Limited Partnership (3) 1,658,750 18%
Donald F. Moorehead, Jr. (4) 998,000 11%
Terry W. Patrick (5) 300,000 3%
Kenneth Peak 0 *
Elroy "Gene" Roelke (6) 25,000 *
William P. Hulligan 100,000 1%
All directors and executive officers as 5,065,500 53%
a group (6 persons)
</TABLE>
* Less than one percent.
(1) Includes shares of Common Stock that may be acquired upon the exercise of
stock options exercisable within 60 days. Each person named above has sole
voting and dispositive power with respect to the all shares listed opposite such
person's name, unless indicated otherwise. Unless otherwise indicated, each
stockholder's address is 14901 Quorum Drive, Suite 200, Dallas, Texas 75240.
(2) These shares are held in a voting trust of which Mr. Cash is trustee and has
sole voting power. Includes 1,251,534 shares held by Mr. Cash and 1,658,750
shares held by the Cash Family Limited Partnership which is controlled by an
entity controlled by Mr. Cash. Does not include 139,050 shares held by Mr.
Cash's wife, for which shares Mr. Cash disclaims beneficial ownership.
(3) Does not include 1,251,534 shares held by Mr. Cash or 732,216 shares held
in a voting trust of which Mr. Cash is trustee and has sole voting power.
(4) Includes 200,000 shares held by Moorehead Property Company Ltd., a company
controlled by Mr. Moorehead.
(5) Includes 300,000 shares held by Beacon Holdings Limited, a family limited
partnership of which Mr. Patrick is a general partner.
(6) Includes warrants to acquire 25,000 shares of Common Stock which are
exercisable within 60 days.
A-2
<PAGE> 125
[ALTERNATE PAGE FOR SHELF PROSPECTUS]
SELLING SHAREHOLDERS
This Prospectus relates to an aggregate of 5,000,000 shares of
Common Stock which may be offered for sale by the Company from time to time to
acquire one or more companies, businesses or assets in negotiated transactions
not involving any public offering. This Prospectus will be supplemented to
furnish the information necessary for the particular negotiated transaction and
the Registration Statement of which this Prospectus is a part will be amended,
where appropriate, to supply information concerning an acquisition if required
by Commission rules and policies. This Prospectus also relates to the offer for
sale or other distribution of Shares by persons who will acquire such shares in
connection with the acquisitions of businesses. Such Selling Stockholders will
be identified from time to time by filing supplements to this Prospectus.
A-3
<PAGE> 126
[ALTERNATE PAGE FOR SHELF PROSPECTUS]
PLAN OF DISTRIBUTION
Issuance of Shares by the Company
The Shares covered by this Prospectus may be issued by the Company
from time to time in payment of all or a portion the purchase price for one or
more acquisitions of companies, businesses or assets complementary to the
Company's existing business. The Company expects that the terms of acquisitions
in which the Shares will be issued by the Company will be determined by
negotiations between the Company and the owners of the companies, businesses or
assets to be acquired. It is anticipated that the Shares issued in any such
acquisition will be valued for purposes of such acquisition at a price
reasonably related to the market value of the Common Stock either at the time of
the execution of the definitive acquisition agreement or at the time of the
consummation of the acquisition.
As of the date of this Prospectus, the Company has not
definitively identified any acquisition in which it may issues Shares. At such
time as the Company identifies a specific acquisition in which Shares will be
issued, the Company will amend or supplement this Prospectus to add information
about the acquisition and the companies, businesses or assets being acquired if
and to the extent required by the applicable rules and policies of the
Commission.
No underwriting discounts or commissions will be paid in
connection with any acquisition contemplated hereby, although finder's fees may
be paid from time to time with respect to specific mergers or acquisitions. Any
persons receiving such fees may be deemed to be an underwriter within the
meaning of the Securities Act.
RESALE OF SHARES BY SELLING STOCKHOLDERS
This Prospectus also relates to the offer for sale or other
distribution of Shares by the Selling Stockholders who will acquire such shares
in the acquisitions of such companies, businesses or assets. The Selling
Stockholders may sell or distribute some or all of the Shares from time to time
through underwriters or dealers or brokers or other agents or directly to one or
more purchasers in transactions on any exchange on which such Shares are listed
for trading, in privately negotiated transactions, or in the over-the-counter
market, or in brokerage transactions, or in a combination of such transactions.
Such transactions may be effected by the Selling Stockholders at market prices,
at negotiated prices, or at fixed prices, which may be changed. Brokers,
dealers, agents or underwriters participating in such transactions as agent may
receive compensation in the form of discounts, concessions from the Selling
Stockholders (and, if they act as agent for the purchaser of such shares, from
such purchaser). Such discounts, concessions or commissions as to a particular
broker, dealer, agent or underwriter might be in excess of those customary in
the type of transaction involved. This Prospectus also may be used, with the
Company's consent, by donees of the Selling Stockholder, or by other persons
acquiring Shares and who wish to offer and sell such Shares under circumstances
requiring or making desirable its use. To the extent required, the Company will
file, during any period in which offers or sales are being made, one or more
supplements to this Prospectus to set forth the names of Selling Stockholders
and any other material information with respect to the plan of distribution not
previously disclosed.
The Selling Stockholders and any such underwriters, brokers,
dealers or agents that participate in such distribution may be deemed to be
"underwriters" within the meaning of the Securities Act, and any discounts,
commissions or concessions received by any such underwriters, brokers, dealers
or agents might be deemed to be underwriting discounts and commissions under the
Securities Act.
A-4
<PAGE> 127
<TABLE>
<CAPTION>
[Alternate Page For Shelf Prospectus]
- ---------------------------------------------------- --------------------------------------------
<S> <C> <C>
NO DEALER, SALESPERSON OR OTHER PERSON HAS SANTI GROUP, INC.
BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO
MAKE ANY REPRESENTATION NOT CONTAINED IN THIS
PROSPECTUS AND, IF GIVEN OR MADE, SUCH
INFORMATION OR REPRESENTATION MUST NOT BE RELIED
UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY
OR ANY UNDERWRITER. THIS PROSPECTUS DOES NOT
CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN
OFFER TO BUY ANY OF THE SECURITIES OFFERED HEREBY IN
ANY JURISDICTION TO ANY PERSON TO WHOM IT IS
UNLAWFUL TO MAKE SUCH OFFER IN SUCH JURISDICTION.
NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY 5,000,000 SHARES
SALE MADE HEREUNDER SHALL, UNDER ANY COMMON STOCK
CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THE ($.0001 PAR VALUE)
INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY
TIME SUBSEQUENT TO THE DATE HEREOF OR THAT THERE
HAS BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY
SINCE SUCH DATE.
-----------------
TABLE OF CONTENTS
PAGE
----
PROSPECTUS SUMMARY...................................................
RISK FACTORS.........................................................
USE OF PROCEEDS......................................................
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATION.......................
BUSINESS............................................................. PROSPECTUS
MANAGEMENT...........................................................
CERTAIN TRANSACTIONS.................................................
PRINCIPAL AND SELLING STOCKHOLDERS...................................
DESCRIPTION OF SECURITIES ...........................................
PLAN OF DISTRIBUTION ................................................
LEGAL MATTERS........................................................
EXPERTS..............................................................
ADDITIONAL INFORMATION...............................................
---------------
------------------------------------------------------------- --------------------------------------------
</TABLE>
<PAGE> 128
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 13. Other Expenses of Issuance and Distribution
The following table sets forth an itemized statement of certain estimated
expenses incurred in connection with the issuance and distribution of the
securities being registered, other than underwriting discounts and commissions:
<TABLE>
<S> <C>
Securities and Exchange Commission registration fee............................................. $82,204.49
NASD filing fee.................................................................................
Nasdaq National Market listing fee.............................................................. *
Blue Sky fees and expenses (including counsel fees)............................................. *
Printing and engraving expenses................................................................. *
Legal fees and expenses......................................................................... *
Accounting fees and expenses.................................................................... *
Registrar and Transfer Agent's fees and expenses................................................ *
Miscellaneous................................................................................... *
Total............................................. $
==========
</TABLE>
- ----------
* To be provided by Amendment.
All amounts except the Securities and Exchange Commission registration
fee, the NASD filing fee and Nasdaq National Market listing fee are estimated.
The Company intends to pay all expenses of registration with respect to shares
being sold by the Selling Stockholders hereunder, with the exception of
underwriting discounts and commissions.
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS
The Company's Certificate of Incorporation provides that no director of the
corporation shall be personally liable to SanTi or its stockholders for monetary
damages for breach of fiduciary duty as a director except for liability: (i) for
any breach of the director's duty of loyalty to SanTi or its stockholders, (ii)
for acts or omissions not in good faith or which involve intentional misconduct
or a knowing violation of law, (iii) under Section 174 of the General
Corporation Law of the State of Delaware (or the corresponding provision of any
successor law or act), and (iv) for any transaction from which the director
derived an improper personal benefit.
SanTi must indemnify, and upon request will advance expenses to any officer
or director who was or is a party to, or is threatened to be made a party to,
any threatened, pending or completed action, suit or proceeding, including
civil, criminal, administrative, investigative or otherwise, by reason of the
fact that such person is or was a director or officer of SanTi, or is or was
acting at the request of SanTi as a director, officer, partner, trustee,
employee or agent of another corporation, partnership, joint venture, trust,
employee benefit plan or other enterprise. This indemnification will not apply
if the indemnitee is adjudged liable to SanTi, unless and only if the court in
which the action is brought determines the indemnitee is fairly and reasonably
entitled to indemnification by SanTi.
SanTi may also purchase and maintain insurance on the behalf of its
directors and officers against any such liability that may be asserted as a
result of the director's or officer's service in such a capacity.
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES
On March 19, 1997, Raymond Cash and Joyce Bone purchased a total of 16,250
shares of Common Stock (reflecting the Bone-Dry exchange and the Stock Dividend)
for $10,000. The proceeds from this sale were used to fund working capital.
On August 19, 1997, Raymond Cash purchased 1,625,000 of Common Stock for
$130,000. The proceeds from this purchase were used to acquire new service
providers and fund working capital needs of the Company.
II-1
<PAGE> 129
On December 1, 1997, the Cash Family Limited Partnership purchased
1,608,750 shares of Common Stock (reflecting the Bone-Dry exchange and the Stock
Dividend) for $650,000. The Cash Family Limited Partnership is controlled by an
entity controlled by Raymond Cash. The proceeds from this sale were used to
acquire new service providers.
On December 22, 1997, 14,479 shares of Common Stock were issued to Andrews
in exchange for the settlement of a note payable in the amount of $263,663.
On December 22, 1997, 21,400 shares were issued as consideration for
$17,120 of the acquisition price of Andrews.
On January 12, 1998, the Company sold 1,250,000 shares of Common Stock for
$1,000,000. The proceeds were used to acquire new service providers and fund
working capital needs of the Company.
On January 22, 1998, 90,000 shares of Common Stock were issued as
consideration for $72,000 of the acquisition price of Ferrero.
On February 13, 1998, 100,000 shares of Common Stock were issued as
consideration for $100,000 of the acquisition price of A Rapid.
On March 6, 1998, 60,000 shares of Common Stock were issued as
consideration for $60,000 of the acquisition price of Seagraves.
On April 2, 1998, SanTi sold 2,000,000 shares of Common Stock for
$11,600,000. The proceeds raised by this private offering was used to acquire
new service providers and fund working capital needs of the Company.
On May 1, 1998, 105,000 shares of Common Stock were issued as consideration
for $609,000 of the acquisition price of RGM.
On May 4, 1998, the Company sold 500,000 shares of Common Stock for
$2,900,000. The proceeds raised by this private offering were used to acquire
new service providers and fund working capital needs of the Company.
On May 8, 1998, 85,000 shares of Common Stock were issued as consideration
for $493,000 of the acquisition price of Eldredge.
All of these shares of Common Stock were issued pursuant to Section 4(2) of
the Securities Act of 1933, as amended (the "Securities Act"). These shares are
subject to restrictions on transferability and resale except as permitted under
the Securities Act and applicable state securities laws.
II-2
<PAGE> 130
ITEM 16. Exhibits and Financial Statement Schedules
(a) Exhibits (see Exhibit Index immediately preceding the exhibits for the
page number where each exhibit can be found):
<TABLE>
<CAPTION>
Exhibit
Number Description of Exhibits
- ------ -----------------------
<S> <C>
2.0 Merger Agreement by and between Microlytics, Inc. and SanTi Group, Inc., dated March 6, 1998
3.1 Certificate of Incorporation of the Company dated May 13, 1998
3.2 Bylaws of the Company.
4.1 Article IV of Registrant's Certificate of Incorporation
4.2 Article VI of Registrant's Certificate of Incorporation
5.1 Form of Opinion of King & Spalding
9.1 Voting Trust Agreement
10.1 Credit Agreement dated June 26, 1998 between SanTi Group, Inc., various financial institutions and
Bank of America National Trust Association as Agent
10.2 Company Pledge Agreement dated as of June 26, 1998, between SanTi Group, Inc., and Bank of
America National Trust Association as Agent
10.3 Security Agreement dated as of June 26, 1998, among SanTi, Inc., each subsidiary of SanTi Group,
Inc. and Bank of America National Trust Association as Agent
10.4 Asset Purchase Agreement dated as of January 22, 1998 by and between SanTi Group of
Pennsylvania, Ferrero Wastewater Management, Inc., A. Thomas Ferrero, Jr. and A. Thomas Ferrero,
III
10.5 Asset Purchase Agreement dated as of December 22, 1997 by and between Bone-Dry Enterprises,
Inc. Andrews Environmental Services, Inc. and W. Ronald Andrews
10.6 Asset Purchase Agreement dated as of February 13, 1998 by and between SanTi Group of Florida,
Inc., A Rapid Rooter Sewer & Drain Service, Inc., William E. Rice, Joan E. Rice, Alfonse J.
Grunskis, Diane Rice Grunskis, Donald E. Rice and Ruth Ann Rice
10.7 Asset Purchase Agreement dated as of February 17, 1998 by and between Bone-Dry Enterprises, Inc.,
Quality Plumbing & Septic, Ronda R. McMichael and Forney L. McMichael
10.8 Asset Purchase Agreement dated as of March 6, 1998 by and between SanTi Group of Florida, Inc.
Seagraves, Inc., William D. Seagraves, Seaburn Seagraves and Angelina Seagraves
10.9 Asset Purchase Agreement dated as of March 6, 1998 by and between SanTi Group of Florida, Inc.,
Grease-Tec, Inc., William D. Seagraves, Seaburn Seagraves and Angelina Seagraves
10.10 Asset Purchase Agreement dated as of April 30, 1998 by and between SanTi Group of New York,
Inc., RGM Liquid Waste Removal Corporation, and Ralph G. Macchio
10.11 Asset Purchase Agreement dated as of April 30, 1998 by and between SanTi Group of New York,
Inc., Devito Environmental Corporation, and Rosalie Macchio
10.12 Asset Purchase Agreement dated as of April 30, 1998 by and between SanTi Group of New York,
Inc., Advanced Transfer Technology, Inc., and Steve Macchio
</TABLE>
II-3
<PAGE> 131
<TABLE>
<S> <C>
10.13 Asset Purchase Agreement dated as of April 30, 1998 by and between SanTi Group of New York,
Inc., Envirotec Leasing and Rental Corporation, and Steve Macchio
10.14 Asset Purchase Agreement dated as of May 8, 1998 by and between SanTi Group of Pennsylvania,
Inc., Eldredge Wastewater Management, Inc., Robert Eldredge, Curtis Eldredge, and John
Eldredge.
10.15 Contract for Purchase and Sale of Certain Assets of Andrews Environmental Services, Inc. dated
March 20, 1997 among and between Bone-Dry Enterprises, Inc. and Andrews Environmental
Services, Inc.
10.16 Employment Agreement between SanTi Group, Inc. and Terry Patrick dated June 1, 1998.
10.17 Form of Lock-Up Agreement
10.18 Form of Stock Option Plan*
21.0 Subsidiaries of SanTi Group, Inc.
23.1 Consent of King & Spalding (included in the opinion at Exhibit 5.1)
23.2 Consent of Arthur Andersen LLP
27.1 Financial Data Schedule (for SEC use only)
27.2 Financial Data Schedule (for SEC use only)
</TABLE>
- ----------
* To be provided by Amendment.
ITEM 17. Undertakings
The undersigned Registrant hereby undertakes to provide to the
underwriters at the closing specified in the underwriting agreement,
certificates in such denominations and registered in such names as required by
the underwriters to permit prompt delivery to each purchaser.
Insofar as indemnification by the Registrant for liabilities arising
under the Securities Act may be permitted to directors, officers and controlling
persons of the Registrant pursuant to the foregoing provisions, or otherwise,
the Registrant has been advised that in the opinion of the Commission such
indemnification is against public policy as expressed in the Securities Act and
is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the Registrant of expenses
incurred or paid by a director, officer, or controlling person of the Registrant
in the successful defense of any action, suit or proceeding) is asserted by such
director, officer, or controlling person in connection with the securities being
registered hereunder, the Registrant will, unless in the opinion of its counsel
the matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Securities Act and will be governed by
the final adjudication of such issue.
The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this registration statement:
(i) To include any prospectus required by Section 10(a) (3) of the
Securities Act;
(ii) To reflect in the prospectus any facts or events arising after
the effective date of the registration statement (or the most recent
post-effective amendment thereof) which, individually or in the aggregate,
represent a fundamental change in the information set forth in the registration
statement. Notwithstanding the foregoing, any increase or decrease in volume of
securities offered (if the total dollar value of securities offered would not
exceed that which was registered) and any deviation from the low or high end of
the estimated maximum offering range may be reflected in the form of prospectus
filed with the
II-4
<PAGE> 132
Commission pursuant to Rule 424(b) if, in the aggregate, the changes in volume
and price represent no more than a 20% change in the maximum aggregate offering
price set forth in the "Calculation of Registration Fee" table in the effective
registration statement; and
(iii) To include any material information with respect to the plan
of distribution not previously disclosed in the registration statement or any
material change to such information in the registration statement.
(2) That, for the purpose of determining any liability under the
Securities Act, each such post-effective amendment shall be deemed to be a new
registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
(3) To remove from registration by means of a post-effective
amendment any of the securities being registered which remain unsold at the
termination of the offering.
The Registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities
Act, the information omitted from the form of prospectus filed as part of this
Registration Statement in reliance upon Rule 430A and contained in a form of
prospectus filed by the Registrant pursuant to Rule 424(b)(1) or (4) or 497(h)
under the Securities Act shall be deemed to be part of this Registration
Statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the
Securities Act, each post-effective amendment that contains a form of prospectus
shall be deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.
II-5
<PAGE> 133
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
Registrant has duly caused this Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Dallas,
State of Texas, on July 30, 1998.
SANTI GROUP, INC.
By:/s/ Donald F. Moorehead, Jr.
---------------------------------
Chairman and Chief Executive Officer
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature
appears below constitutes and appoints Donald F. Moorehead, Jr. and Kenneth
Peak, and each of them, his true and lawful attorney-in-fact and agents, with
full power of substitution and resubstitution, from such person and in each
person's name, place and stead, in any and all capacities, to sign any and all
amendments (including post-effective amendments) to the Registration Statement,
and to file the same, with all exhibits thereto and other documents in
connection therewith, with the Securities and Exchange Commission and to sign
and file any other registration statement for the same offering that is to be
effective upon filing pursuant to Rule 462(b) under the Securities Act of 1933,
as amended, granting unto said attorneys-in-fact and agents, full power and
authority to do and perform each and every act and thing requisite and necessary
to be done as fully to all intents and purposes as he or she might or could do
in person, hereby ratifying and confirming all that said attorneys-in-fact and
agents, or any of them, may lawfully do or cause to be done by virtue thereof.
Pursuant to the requirements of the Securities Act, this
Registration Statement has been signed by the following persons in the
capacities and on the date indicated.
<TABLE>
<CAPTION>
Signature Title Date
<S> <C> <C>
/s/ Donald F. Moorehead, Jr. Chairman, Chief Executive Officer
- ---------------------------------- (Principal Executive Officer) and July 30, 1998
Donald F. Moorehead, Jr. Director
/s/ Raymond M. Cash Vice Chairman and Director July 30, 1998
- ----------------------------------
Raymond M. Cash
/s/ Terry W. Patrick President, Chief Operating Officer and July 30, 1998
- ---------------------------------- Director
Terry W. Patrick
Vice President and Chief Financial
/s/ Kenneth Peak Officer July 30, 1998
- ---------------------------------- (Principal Financial and Principal
Kenneth Peak Accounting Officer)
/s/ William P. Hulligan Director July 30, 1998
- ----------------------------------
William P. Hulligan
/s/ Elroy Roelke Director July 30, 1998
- ----------------------------------
Elroy Roelke
</TABLE>
II-6
<PAGE> 134
<TABLE>
<CAPTION>
Exhibit
Number Description of Exhibits
- ------ -----------------------
<S> <C>
2.0 Merger Agreement by and between Microlytics, Inc. and SanTi Group, Inc., dated March 6, 1998
3.1 Certificate of Incorporation of the Company dated May 13, 1998
3.2 Bylaws of the Company.
4.1 Article IV of Registrant's Certificate of Incorporation
4.2 Article VI of Registrant's Certificate of Incorporation
5.1 Form of Opinion of King & Spalding
9.1 Voting Trust Agreement
10.1 Credit Agreement dated June 26, 1998 between SanTi Group, Inc., various financial institutions
and Bank of America National Trust Association as Agent
10.2 Company Pledge Agreement dated as of June 26, 1998, between SanTi Group, Inc., and Bank of
America National Trust Association as Agent
10.3 Security Agreement dated as of June 26, 1998, among SanTi, Inc., each subsidiary of SanTi
Group, Inc. and Bank of America National Trust Association as Agent
10.4 Asset Purchase Agreement dated as of January 22, 1998 by and between SanTi Group of
Pennsylvania, Ferrero Wastewater Management, Inc., A. Thomas Ferrero, Jr. and A. Thomas
Ferrero, III
10.5 Asset Purchase Agreement dated as of December 22, 1997 by and between Bone-Dry Enterprises,
Inc. Andrews Environmental Services, Inc. and W. Ronald Andrews
10.6 Asset Purchase Agreement dated as of February 13, 1998 by and between SanTi Group of
Florida, Inc., A Rapid Rooter Sewer & Drain Service, Inc., William E. Rice, Joan E. Rice,
Alfonse J. Grunskis, Diane Rice Grunskis, Donald E. Rice and Ruth Ann Rice
10.7 Asset Purchase Agreement dated as of February 17, 1998 by and between Bone-Dry Enterprises,
Inc., Quality Plumbing & Septic, Ronda R. McMichael and Forney L. McMichael
10.8 Asset Purchase Agreement dated as of March 6, 1998 by and between SanTi Group of Florida,
Inc. Seagraves, Inc., William D. Seagraves, Seaburn Seagraves and Angelina Seagraves
10.9 Asset Purchase Agreement dated as of March 6, 1998 by and between SanTi Group of Florida,
Inc., Grease-Tec, Inc., William D. Seagraves, Seaburn Seagraves and Angelina Seagraves
10.10 Asset Purchase Agreement dated as of April 30, 1998 by and between SanTi Group of New York,
Inc., RGM Liquid Waste Removal Corporation, and Ralph G. Macchio
10.11 Asset Purchase Agreement dated as of April 30, 1998 by and between SanTi Group of New York,
Inc., Devito Environmental Corporation, and Rosalie Macchio
10.12 Asset Purchase Agreement dated as of April 30, 1998 by and between SanTi Group of New York,
Inc., Advanced Transfer Technology, Inc., and Steve Macchio
10.13 Asset Purchase Agreement dated as of April 30, 1998 by and between SanTi Group of New York,
Inc., Envirotec Leasing and Rental Corporation, and Steve Macchio
</TABLE>
II-7
<PAGE> 135
<TABLE>
<S> <C>
10.14 Asset Purchase Agreement dated as of May 8, 1998 by and between SanTi Group of
Pennsylvania, Inc., Eldredge Wastewater Management, Inc., Robert Eldredge, Curtis Eldredge,
and John Eldredge.
10.15 Contract for Purchase and Sale of Certain Assets of Andrews Environmental Services, Inc. dated
March 20, 1997 among and between Bone-Dry Enterprises, Inc. and Andrews Environmental
Services, Inc.
10.16 Employment Agreement between SanTi Group, Inc. and Terry Patrick dated June 1, 1998.
10.17 Form of Lock-Up Agreement
10.18 Form of Stock Option Plan*
21.0 Subsidiaries of SanTi Group, Inc.
23.1 Consent of King & Spalding (included in the opinion at Exhibit 5.1)
23.2 Consent of Arthur Andersen LLP
27.1 Financial Data Schedule (for SEC use only)
27.2 Financial Data Schedule (for SEC use only)
</TABLE>
*To be filed by amendment
II-8
<PAGE> 1
This Merger Agreement (the "Agreement") is entered into this 6th day of
March, 1998, by and between MICROLYTICS, INC., a Delaware corporation
("Microlytics"), and SANTI GROUP, INC., a Delaware corporation ("SanTi").
WITNESSETH:
WHEREAS, the parties hereto desire to merge SanTi with and into Microlytics
(the "Merger") in accordance with the General Corporation Law of the State of
Delaware and pursuant to Microlytics' Plan of Reorganization in the United
States Bankruptcy Court, Western District of New York ("Bankruptcy Court");
NOW, THEREFORE, in consideration of the premises, covenants,
representations, warranties and agreements herein contained, the parties agree
as follows:
ARTICLE I
THE MERGER
1.1 THE MERGER. On the Effective Date, SanTi and its wholly-owned
subsidiaries, shall be merged with and into Microlytics, the separate existence
of SanTi shall thereupon cease and all of the rights, privileges, powers,
franchises, properties and assets of SanTi shall be vested in Microlytics. All
wholly-owned subsidiaries of SanTi shall become wholly-owned subsidiaries of
Microlytics. The identity, existence, rights, privileges, powers, franchises,
properties and assets of Microlytics shall continue unaffected and unimpaired by
the Merger.
1.2 EFFECTIVE DATE OF THE MERGER. The Merger shall become effective on the
date of filing of an executed counterpart of this Agreement, together with a
duly executed Certificate pursuant to Section 251 of the Delaware General
Corporation Law, with the Secretary of State of Delaware and upon Confirmation
of the Plan of Reorganization by the Bankruptcy Court ("Effective Date").
1.3 FURTHER ASSURANCES. If at any time after the Effective Date but as a
result of actions taken by Microlytics or SanTi arising out of matters occurring
prior to the Effective Date of the Merger, Microlytics shall consider or be
advised that any deeds, bills of sale, assignments, assurances or any other
actions or things are necessary or desirable to vest, perfect or confirm of
record or otherwise in Microlytics its right, title or interest in, to or under
any of the rights, properties or assets of SanTi acquired or to be acquired by
Microlytics as a result of, or in connection with, the Merger or otherwise to
effectuate this Agreement, the officers and directors of Microlytics shall and
will be authorized to execute and deliver, in the name and on behalf of SanTi or
otherwise, all such deeds, bills of sale, assignments and assurances and to take
and do,
1
<PAGE> 2
in the name and on behalf of SanTi or otherwise, all such other actions and
things as may be necessary or desirable to vest, perfect or confirm any and all
right, title and interest in, to and under such rights, properties or assets in
Microlytics or otherwise to effectuate this Agreement.
ARTICLE II
ARTICLES OF INCORPORATION, DIRECTORS AND OFFICERS
OF THE SURVIVING CORPORATION
2.1 ARTICLES OF INCORPORATION; DIRECTORS AND OFFICERS. The Articles of
Incorporation of Microlytics in effect as of the Effective Date shall remain the
Articles of Incorporation of Microlytics, unless and until the same are altered,
amended or repealed. It is anticipated that restated Articles of Incorporation
for Microlytics be made a part of the Plan of Reorganization and the content of
said restated Articles be determined solely by Santi. The directors of
Microlytics immediately after the Effective Date shall be: Raymond Cash,
Chairman, Rock Payne, Joyce Bone, Donald F. Moorehead, Jr. and Elroy G. Roelke.
The board shall elect officers at the first board meeting following the
Effective Date. On the Effective Date, the corporate name shall be changed to
SanTi Group, Inc.
ARTICLE III
TERMS OF THE MERGER
3.1 CONVERSION OF MICROLYTICS STOCK. As of the Effective Date, by virtue of
the Merger, in accordance with the election of the SanTi shareholders but
without any other action on the part of any SanTi shareholder, each outstanding
share of Common Stock, $.0001 par value per share, of SanTi (the "SanTi Stock")
shall be converted into the right to receive 1 share of Common Stock, $.01 par
value per share, of Microlytics ("Microlytics Stock"). (These exchange ratios
are after a 400 to 1 reverse split of Microlytics Stock pursuant to the Plan or
Reorganization).
(a) All SanTi Common Shares that are held by SanTi as treasury shares
shall be cancelled and no shares of SanTi shall be delivered in exchange
therefor under this Agreement.
(b) Each outstanding SanTi common share shall be exchanged for 1 common
share of Microlytics, for an aggregate of approximately 5,125,879 Microlytics
Shares representing approximately 84.3% of the Microlytics Shares issued and
outstanding on the Effective Date. A pro forma capitalization schedule is
attached hereto as Exhibit A.
(c) All SanTi options and warrants existing on the Effective Date shall
by virtue of the Merger in accordance with the election of each SanTi
Optionholder (collectively the "SanTi Optionholders") be converted into an
option to receive Microlytics shares pursuant to the ratio specified in Section
3.1(b) above.
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3.2 SURRENDER OF SANTI COMMON SHARES. On the date hereof, each shareholder
of SanTi whose SanTi Stock is to be exchanged for Microlytics Stock pursuant to
Section 3.1(b), will surrender to Founders Equity Group, Inc. (the "Exchange
Agent") one or more certificates for such SanTi Stock for cancellation on the
Effective Date of the Merger, and upon such cancellation, each shareholder of
SanTi will receive from Microlytics or its transfer agent certificates
representing the number of shares of Microlytics Stock to be issued in respect
of the aggregate number of shares of SanTi Stock previously represented by the
share certificates surrendered. No dividends which might thereafter be declared
will be paid to persons entitled to receive certificates for Microlytics Stock
unless and until such persons surrender their certificates for SanTi Stock. In
no event shall the persons entitled to receive such dividends be entitled to
receive interest on such dividends. Notwithstanding the foregoing, neither the
Exchange Agent nor any party hereto shall be liable to a shareholder of SanTi
for any Microlytics Stock or dividend thereon delivered to a public official
pursuant to any applicable abandoned property, escheat or similar law.
3.3 MICROLYTICS STOCK. Each share of Microlytics Common Stock which is
outstanding immediately prior to the Merger shall continue to remain outstanding
subject to the provisions of Section 3.1 above.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF MICROLYTICS
Microlytics hereby represents and warrants to Microlytics and SanTi as
follows:
4.1 ORGANIZATION AND QUALIFICATION. Microlytics is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware. Microlytics has all requisite corporate power and authority to carry
on its business as it is now being conducted and to own or lease its properties
and assets. Microlytics is duly qualified or licensed to do business as a
foreign corporation in good standing in every jurisdiction where the failure to
be so qualified or licensed would have a material adverse effect on Microlytics
taken as a whole. Microlytics has heretofore delivered to SanTi complete and
correct copies of its Certificate of Incorporation each as amended and currently
in effect.
4.2 CAPITALIZATION. The authorized capital stock of Microlytics consists of
125,000,000 shares of Common Stock, $.01 par value per share. As of the date
hereof and after the 400 to 1 reverse split completed in the Plan or
Reorganization, 933,690 shares of Microlytics Stock are issued and outstanding.
No shares of Common Stock are held as treasury shares and other than 500,000
three year warrants exercisable at $2.50 issued pursuant to the Plan of
Reorganization, there are no options, warrants, derivative securities, rights or
calls related capital stock of Microlytics. The issued and outstanding shares of
Common Stock are validly issued, fully paid and non-assessable. Microlytics has
previously delivered to SanTi true, correct and complete
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copies of its stock record books, which stock record books accurately reflect
the record and beneficial ownership of the issued and outstanding shares of
Microlytics Stock.
4.3 AUTHORIZATION. Microlytics has all requisite corporate power to enter
into this Agreement and to carry out its obligations hereunder. Subject to the
approval by the Bankruptcy Court of this Agreement and the transactions
contemplated hereby, (a) the execution and delivery of this Agreement and the
due consummation by Microlytics of the transactions contemplated hereby, have
been duly and validly authorized by all necessary corporate action on the part
of Microlytics, and (b) this Agreement constitutes (and each other document and
instrument contemplated by this Agreement, when executed and delivered in
accordance with the provisions hereof, will constitute) a valid and legally
binding agreement of Microlytics enforceable in accordance with its terms.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF SANTI
SanTi hereby represents and warrants to Microlytics as follows:
5.1 ORGANIZATION AND QUALIFICATION. SanTi is a corporation duly organized,
validly existing and in good standing under the laws of the State of Delaware.
SanTi has all requisite corporate power and authority to carry on its business
as it is now being conducted and to own or lease its properties and assets.
SanTi is duly qualified or licensed to do business as a foreign corporation in
good standing in every jurisdiction where the failure to be so qualified or
licensed would have a material adverse effect on SanTi taken as a whole. SanTi
has heretofore delivered to Microlytics complete and correct copies of its
Certificate of Incorporation and By-Laws, each as amended and currently in
effect.
5.2 CAPITALIZATION. The authorized capital stock of SanTi consists of
100,000,000 shares of Common Stock, $.0001 par value per share. As of the date
hereof, approximately 5,125,000 shares of SanTi Stock are issued and
outstanding. No shares of SanTi Stock are held as treasury shares. The issued
and outstanding shares of SanTi Stock are validly issued, fully paid and
non-assessable. SanTi has previously delivered to Microlytics true, correct and
complete copies of its stock record books, which stock record books accurately
reflect the record and beneficial ownership of the issued and outstanding shares
of SanTi Stock. Except as set forth on Schedule B attached hereto, there is no
outstanding option, warrant, right, call, subscription or other agreement or
commitment which (a) calls for the issuance, sale, pledge or other disposition
of any shares of capital stock of SanTi or any securities convertible or
exchangeable into, or other rights to acquire, any shares of capital stock of
SanTi, (b) obligates SanTi to grant, offer or enter into any of the foregoing,
or (c) relates to the voting, transfer or control of such capital stock,
securities or rights.
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5.3 AUTHORIZATION. SanTi has all requisite corporate power to enter into
this Agreement and to carry out its obligations hereunder. Subject to the
approval by the SanTi Shareholders of this Agreement and the transactions
contemplated hereby, (a) the execution and delivery of this Agreement and the
due consummation by SanTi of the transactions contemplated hereby have been duly
and validly authorized by all necessary corporate action on the part of SanTi,
and (b) this Agreement constitutes (and each other document and instrument
contemplated by this Agreement, when executed and delivered in accordance with
the provisions hereof, will constitute) a valid and legally binding agreement of
SanTi enforceable in accordance with its terms, except (i) as such enforcement
may be limited by bankruptcy, reorganization, insolvency or other laws and court
decisions relating to or affecting the enforcement of creditors' rights
generally (including but not limited to statutory or other law regarding
fraudulent transfers), and (ii) as to the availability of specific performance
or other equitable remedies.
5.4 NO CONFLICTS. The execution, delivery and performance of this Agreement
by SanTi, and the consummation of the transactions contemplated hereby:
(a) will not constitute a conflict with, breach or violation of or
default (or an event which with notice or lapse of time or both would become a
default) under: (i) SanTi's Certificate of Incorporation or By-Laws, each as
amended to date, or (ii) any agreement, instrument, license, franchise or permit
to which SanTi is subject or by which SanTi is bound, (iii) any order, writ,
injunction or decree to which SanTi is subject or by which SanTi is bound; or
(iv) to the best of SanTi's knowledge, any law, rule or regulation to which
SanTi is subject;
(b) will not result in or give rise to an adverse claim against any
shares of SanTi Stock; and
(c) will not result in the creation of any lien, claim, charge or
encumbrance on the properties or assets of SanTi (other than resulting from this
Agreement);
5.5 APPROVAL OF SHAREHOLDERS. SanTi shall cause a meeting of its
shareholders to be duly called and held as soon as practicable following the
execution of this Agreement for the purpose of approving the Merger, this
Agreement and all actions contemplated hereby which require the approval of the
shareholders of SanTi. SanTi's Board of Directors will recommend to its
shareholders, consistent with its fiduciary duties, approval of the transactions
contemplated by this Agreement.
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ARTICLE VI
MISCELLANEOUS MERGER ITEMS
6.1 EXPENSES. Except as provided below, without regard to whether the
Merger is consummated, all costs and expenses incurred in connection with this
Agreement and the transactions contemplated hereby shall be paid by the party
incurring such expenses.
6.2 ADDITIONAL AGREEMENTS. Subject to the terms and conditions herein
provided, each of the parties hereto agrees to use its best efforts to take, or
cause to be taken, all action, and to do, or cause to be done, all things
necessary, proper or advisable under applicable laws and regulations to
consummate and make effective the transactions contemplated by the Merger and
this Agreement, including but not limited to, using its best efforts to obtain
all necessary waivers, consents, authorizations and approvals of or exemptions
by any governmental authority, self-regulatory authority or third party, and
effecting all necessary registrations and filings. In case any time after the
Effective Date any further action is necessary or desirable to carry out the
purposes of this Agreement, the proper officers and directors of Microlytics or
SanTi, as the case may be, shall take all necessary action.
ARTICLE VII
CONDITIONS
7.1 CONDITIONS TO OBLIGATIONS OF MICROLYTICS. Notwithstanding any other
provision of this Agreement, each of the following shall be a condition to the
obligation of Microlytics to consummate the Merger:
(a) All of the representations and warranties made by Microlytics
herein shall have been true as of the date of this Agreement and shall be true
as of the Effective Date as though made on and as of the Effective Date, it
being understood that all representations and warranties made by Microlytics
herein, if specifically stated to be as of the date hereof, shall also be deemed
to be made as of the Effective Date;
(b) Microlytics shall have received the following documents from SanTi,
all of which shall be in a form and substance reasonably acceptable to
Microlytics and its counsel:
(i) a certified copy of the resolutions adopted by SanTi's Board
of Directors approving this Agreement and the transactions contemplated hereby
and thereby;
(ii) a certified copy of the resolutions adopted by the SanTi
Shareholder approving the transactions contemplated hereby;
(iii) a certificate of incumbency executed by the Secretary of
SanTi indicating the current officers and directors of SanTi;
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(iv) certificate of good standing of SanTi from the Secretary of
State of Delaware, dated not more than ten (10) days prior to the Effective
Date; and
(vi) such other certificates, documents or instruments as
Microlytics or its counsel may reasonably require'and
(c) Microlytics shall have received such other certificates, documents
and instruments as it shall have reasonably required.
7.2 CONDITIONS TO OBLIGATIONS OF SANTI. Notwithstanding any other
provisions of this Agreement, each of the following shall be a condition to the
obligation of SanTi to consummate the Merger:
(a) All of the representations and warranties made by Microlytics
herein shall have been true as of the date of this Agreement and shall be true
as of the Effective Date as though made on and as of the Effective Date, it
being understood that all representations and warranties made by Microlytics
herein, if specifically stated to be as of the date hereof, shall also be deemed
to be made as of the Effective Date;
(b) Microlytics shall have performed every obligation and complied with
each agreement, covenant or condition required by this Agreement to be performed
or complied with by them prior to or at the Effective Date;
(c) SanTi shall have received the following documents from, all of
which shall be in a form and substance acceptable to SanTi and its counsel:
(i) a certified copy of the resolutions adopted by the Board of
Directors of Microlytics approving this Agreement and the transactions
contemplated hereby and thereby;
(ii) certified copies of the order of the Bankruptcy approving the
transactions contemplated hereby;
(iii) certificate of good standing for Microlytics from the
Secretary of State of Delaware, dated not more than ten (10) days prior to the
Effective Date; and
(iv) such other certificates, documents or instruments as SanTi or
its counsel may reasonably require.
7.3 MUTUAL CONDITIONS. Each of the following shall be a condition to the
obligations of each of the parties to consummate the Merger:
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(a) No preliminary or permanent injunction or other order by any
federal or state court or other agency or body which prevents the consummation
of the Merger shall have been issued and remain in effect, and there shall not
have been instituted to be pending any action or proceeding by any United States
federal or state government or governmental agency or instrumentality or court
or any other person or entity (i) challenging or seeking to restrain or prohibit
the consummation of the Merger or seeking material damages in connection with
the Merger; (ii) seeking to prohibit Microlytics's ownership or operation of all
or a material portion of Microlytics's business or assets, or (iii) seeking to
compel Microlytics to dispose of or hold separate all or a material portion of
Microlytics's business or assets as a result of the Merger or otherwise;
(b) There shall not have been any taken, or any statute, rule,
regulation or order enacted, promulgated or issued or deemed applicable to the
Merger by any United States federal or state government or governmental agency
or instrumentality or court which would (i) prohibit Microlytics's ownership or
operation of all or a material portion of Microlytics's business or assets, (ii)
compel Microlytics to dispose of or hold separate all or a material portion of
Microlytics's business or assets, as a result of the Merger or otherwise, (iii)
render any party unable to consummate the Merger, or (iv) make such consummation
illegal.
(c) The Merger and this Agreement shall have been validly approved by
the requisite vote of the shareholders of SanTi and the Bankruptcy Court.
ARTICLE VIII
TERMINATION, AMENDMENT AND WAIVER
8.1 TERMINATION. This Agreement may be terminated at any time prior to the
Effective Date, whether before or after approval of the shareholders of SanTi
and the Bankruptcy Court;
(a) by Microlytics by notice to SanTi if any of the conditions set
forth in Section 7.1 or 7.3 have not been fulfilled at or prior to the Closing;
or
(b) by SanTi by notice to Microlytics if any of the conditions set
forth in Sections 7.2 or 7.3 have not been fulfilled at or prior to the Closing.
8.2 EFFECT OF TERMINATION. In the event of termination of this Agreement by
either Microlytics or SanTi as provided above, this Agreement shall forthwith
become void and, except for a willful breach, fraud or a breach of the
provisions of Section 8.2 hereof, there shall be no liability hereunder on the
part of Microlytics or SanTi or their respective officers or directors.
Notwithstanding anything to the contrary set forth herein, the agreements with
respect to expenses contained in Section 6.1 hereof shall survive the
termination hereof.
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8.3 AMENDMENT. This Agreement may be amended by the parties hereto at any
time before or after approval of the shareholders of SanTi and the Bankruptcy
Court. This Agreement may not be amended except by an instrument in writing
signed on behalf of each of the parties hereto.
8.4 WAIVER. At any time prior to the Effective Date, the parties hereto,
by action taken by their respective Board of Directors, may (a) extend the time
for the performance of any of the obligations or other acts of the other parties
hereto, (b) waive any inaccuracies in the representations and warranties of the
other parties contained herein or in any document delivered pursuant hereto, and
(c) waive compliance with any of the agreements of the other parties or
satisfaction of any of the conditions to its obligations contained herein. Any
agreement on the part of a party hereto to any such extension or waiver shall be
valid if set forth in an instrument in writing signed on behalf of such party.
Notwithstanding anything to the contrary set forth herein, the following
conditions precedent to the consummation of the Merger may not be waived by
either party hereto: (i) the approval of the Merger and this Agreement by the
Bankruptcy Court; and (ii) the execution by all necessary parties of this
Agreement and the Certificates attendant thereto.
ARTICLE IX
SURVIVAL OF REPRESENTATIONS AND WARRANTIES
9.1 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. Except as set forth in the
last sentence of this Section 9.1, the parties agree that the representations
and warranties in this Agreement or in any exhibit, disclosure schedule,
certificate or other instrument delivered pursuant to this Agreement shall not
survive the consummation of the Merger on the Effective Date. In the event that
a fact or matter is discovered which the discovering party determines to be a
breach of a representation or warranty, it shall promptly notify the other
parties hereto in writing.
ARTICLE X
GENERAL PROVISIONS
10.1 NOTICES. All notices and other communications hereunder shall be in
writing and shall be deemed given when delivered personally or when mailed by
registered or certified mail (return receipt requested and postage prepaid) to
the following addresses (or at such other address for a party as shall be
specified by like notice):
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(a) if to Microlytics, to: Elroy G. Roelke, Esq.
Microlytics, Inc.
P. O. Box 2827
Sherman, TX 75091
with a copy to: James M. Jenkins, Esq.
Harter, Secrest & Emery LLP
700 Midtown Tower
Rochester, New York 14604
(b) if to SanTi, to: Raymond Cash
SanTi Group, Inc.
4696 Oakdale Road
Smyrna, GA 30080
with a copy to: Thomas J. Spackman, Jr., Esq.
Founders Equity Group, Inc.
2602 McKinney Avenue, Suite 220
Dallas, TX 75204
10.2 GOVERNING LAW. This Agreement shall be governed by the laws of the
State of Delaware for agreements to be made and entered into in such State.
10.3 HEADINGS. The headings contained in this Agreement are for reference
purposes only and shall not affect in any way the meaning or interpretation of
this Agreement.
10.4 SEVERABILITY. If any term, provision, covenant or restriction of this
Agreement is held by a court of competent jurisdiction or other authority to be
invalid, void, unenforceable or against its regulatory policy, the remainder of
the terms, provisions, covenants and restrictions of this Agreement shall remain
in full force and effect to the maximum extent permitted by law and shall in no
way be affected, impaired or invalidated.
10.5 MISCELLANEOUS. This Agreement (including the documents and instruments
referred to herein) (a) constitutes the entire agreement and supersedes all
prior agreements and understanding, both written and oral, among the parties, or
any of them, with respect to the subject matter hereof; (b) is not intended to
confer upon any third parties any rights or remedies hereunder; (c) shall not be
assigned by operation of law or otherwise; and (d) shall be governed in all
respects, including validity, interpretation and effect, by the laws of the
State of Delaware; and (e) may be executed in counterparts which together shall
constitute a single agreement.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
signed by their respective officers thereunto duly authorized all as of the date
first-above written.
MICROLYTICS, INC.
By: /s/ Elroy G. Roelke
--------------------------------
Elroy G. Roelke, Chairman
SANTI GROUP, INC.
By: /s/ Raymond Cash
--------------------------------
Raymond Cash, Chairman
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CERTIFICATE OF INCORPORATION
OF
SANTI GROUP, INC.
ARTICLE I
NAME
The name of the corporation is SanTi Group, Inc. (the "Corporation").
ARTICLE II
REGISTERED OFFICE AND AGENT
The address of the registered office of the Corporation in the State of
Delaware is 1209 Orange Street, in the City of Wilmington, County of New Castle,
Delaware 19801. The name of the registered agent of the Corporation in the State
of Delaware at the registered office is The Corporation Trust Company.
ARTICLE III
PURPOSES
The nature of the business or purposes to be conducted or promoted by
the Corporation is to engage in any and all lawful act or activity for which
corporations may be organized under the General Corporation Law of the State of
Delaware as now or hereinafter in force. The Corporation shall possess and
exercise all of the powers and privileges granted by the General Corporation Law
of the State of Delaware, by any other law or by this Certificate, together with
all such powers and privileges incidental thereto as may be necessary or
convenient to the conduct, promotion or attainment of the purposes of the
Corporation.
ARTICLE IV
CAPITALIZATION
The Corporation shall have authority, acting by the Board of Directors
of the Corporation (the "Board of Directors), to issue not more than one hundred
million (100,000,000) shares of capital stock divided into classes as follows:
(a) Seventy million (70,000,000) shares of common stock, $.0001 par
value per share (the "Common Stock"), such shares entitled to one (1) vote per
share on any matter on which stockholders of the Corporation are entitled to
vote and such shares being entitled to participation in dividends and to receive
the remaining net assets of the Corporation upon dissolution, subject to the
rights of any holders of any shares of Preferred Stock having a liquidation
preference over the Common Stock.
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(b) Thirty million (30,000,000) shares of preferred stock, $.0001 par
value per share (the "Preferred Stock"), which may be issued from time to time
in one or more series and entitled to such preferences to the Common Stock as to
dividends and distribution of assets of the Corporation on dissolution and shall
have such distinctive designations as determined by the Board of Directors, with
full power and authority to fix the number of shares constituting such series
and to fix the relative rights and preferences of the shares of the series so
established to the full extent allowable by law, with respect to dividends,
redemptions, payment on liquidation, sinking fund provisions, conversion
privileges and voting rights. All shares of the Preferred Stock shall be of
equal rank and shall be identical, except in respect to the particulars that may
be fixed by the Board of Directors as hereinabove provided and which may vary
among the series. Different series of the Preferred Stock shall not be construed
to constitute different classes of stock for the purpose of voting by classes,
except when such voting by classes is expressly required by law. Notwithstanding
the foregoing with respect to the power of the Board of Directors to determine
the relative rights and preferences of the shares of each series of the
Preferred Stock with respect to dividends, redemptions, payment on liquidation,
sinking fund provisions, conversion privileges and voting rights, the Board of
Directors shall not designate any such series of the Preferred Stock as
nonvoting, and in the event that any series of the Preferred Stock has a
preference over another series of the Preferred Stock or the Common Stock with
respect to dividends, the Board of Directors shall also include in its
designation of such series of Preferred Stock with such dividend preference an
adequate provision for the election of directors of the Corporation representing
such series of Preferred Stock in the event of any default by the Corporation in
the payment of such dividends.
(c) The number of authorized shares of any class may be increased or
decreased (but not below the number of such shares then outstanding) by the
affirmative vote of the holders of a majority of all classes of stock of the
Corporation entitled to vote.
Shares of capital stock of the Corporation may be issued for such consideration,
not less than the par value thereof, as shall be fixed from time to time by the
Board of Directors, and shares issued for such consideration shall be fully paid
and nonassessable.
ARTICLE V
BOARD OF DIRECTORS
(a) The business and affairs of the Corporation shall be managed by or
under the direction of the Board of Directors, which shall exercise all powers
conferred under the laws of the State of Delaware, including, without
limitation, the power to make, alter and repeal Bylaws of the Corporation,
subject to the reserved power of the stockholders to make, alter and repeal
Bylaws of the Corporation.
(b) The Board of Directors shall consist of not less than three (3) nor
more than fifteen (15) directors, the exact number to be fixed and determined
from time to time by resolution of a majority of the Board of Directors. The
Board of Directors shall be divided into three (3) classes, designated Class I,
Class II and Class III, as nearly equal in number as the then total number of
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directors constituting the whole Board of Directors permits, as designated by
the Board of Directors. Upon the filing of this Certificate with the Secretary
of State of the State of Delaware and until expiration of the terms indicated
herein below, the initial members of the Board of Directors and the Class in
which each such member will serve shall be as follows: Raymond M. Cash (Class
III and Chairman), Rock Payne (Class II), Joyce Bone (Class II), Donald F.
Moorehead, Jr. (Class III) and Elroy G. Roelke (Class I). Directors of Class I
shall hold office for a term expiring at the next succeeding annual meeting of
the stockholders, directors of Class II shall hold office for a term expiring at
the second succeeding annual meeting of the stockholders, and directors of Class
III shall hold office for a term expiring at the third succeeding annual meeting
of the stockholders. Subject to the foregoing, at each annual meeting of the
stockholders, the successors to the class of directors of the Corporation whose
term shall then expire shall be elected to hold office for a term expiring at
the third succeeding annual meeting of the stockholders, and each director so
elected shall hold office until such director's successor is elected and
qualified, or until such director's earlier resignation or removal. If the
number of directors of the Corporation is changed, any increase or decrease in
the number of directors shall be apportioned by action of the Board of Directors
among the classes so as to maintain the number of directors in each class as
nearly equal as possible, and the Board of Directors shall decide which class
shall contain an unequal number of directors. Any additional director of any
class elected to fill a vacancy resulting from an increase in such class shall
hold office for a term that coincides with the remaining term of that class. In
no case will a decrease in the number of directors of the Corporation shorten
the term of any incumbent director.
(c) The election of directors of the Corporation may, but need not, be
by ballot.
(d) Unless a greater vote requirement in any matter is provided in this
Certificate, the affirmative vote of a majority of the directors of the
Corporation present and acting at a duly constituted meeting at which a majority
of the entire Board of Directors is present and acting, is sufficient for all
action of the Board of Directors.
(e) Any action required or permitted to be taken by the Board of
Directors may be taken without a meeting if all members of the Board of
Directors consent in writing to the adoption of resolutions authorizing the
action.
(f) Directors of the Corporation need not be stockholders of the
Corporation.
(g) The Board of Directors may hold its meetings and have an office or
offices outside of the State of Delaware.
ARTICLE VI
LIMITATION ON PERSONAL LIABILITY OF DIRECTORS
No director of the Corporation shall be personally liable to the
Corporation or its stockholders for monetary damages for breach of fiduciary
duty as a director except for liability: (i)
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for any breach of the director's duty of loyalty to the Corporation or its
stockholders, (ii) for acts or omissions not in good faith or which involve
intentional misconduct or a knowing violation of law, (iii) under Section 174 of
the General Corporation Law of the State of Delaware (or the corresponding
provision of any successor act or law), and (iv) for any transaction from which
the director derived an improper personal benefit. If the law of the State of
Delaware is amended after the filing of this Certificate to authorize corporate
action further limiting or eliminating the personal liability of directors of
the Corporation, then the liability of directors to the Corporation or its
stockholders shall be limited or eliminated to the fullest extent permitted by
law of the State of Delaware as so amended from time to time. Any repeal or
modification of the provisions of this Article VI, either directly or by the
adoption of an inconsistent provision of this Certificate, shall be prospective
only and shall not adversely affect any right or protection set forth herein
existing in favor of a particular individual at the time of such repeal or
modification.
ARTICLE VII
INDEMNIFICATION
(a) The Corporation shall indemnify, and upon request shall advance
expenses (including attorneys' fees) to, in the manner and to the fullest extent
permitted by law, any officer or director (or the estate of any such person) who
was or is a party to, or is threatened to be made a party to, any threatened,
pending or completed action, suit or proceeding, whether civil, criminal,
administrative, investigative or otherwise, by reason of the fact that such
person is or was a director or officer of the Corporation, or is or was serving
at the request of the Corporation as a director, officer, partner, trustee,
employee or agent of another corporation, partnership, joint venture, trust,
other enterprise or employee benefit plan (an "indemnitee"). To the fullest
extent permitted by law, the indemnification and advances provided for herein
shall include expenses (including attorneys' fees), judgments, penalties, fines
and amounts paid in settlement. The indemnification provided herein shall not be
deemed to limit the right of the Corporation to indemnify any other person for
any such expenses (including attorneys' fees), judgments, fines and amounts paid
in settlement to the fullest extent permitted by law, both as to action in such
person's official capacity and as to action in another capacity while holding
such office.
(b) Notwithstanding the foregoing, the Corporation shall not indemnify
any such indemnitee who was or is a party to, or is threatened to be made a
party to, any threatened, pending or completed action or suit by or in the right
of the Corporation to procure a judgment in its favor against such indemnitee
with respect to any claim, issue or matter as to which the indemnitee shall have
been adjudged to be liable to the Corporation, unless and only to the extent
that, the Court of Chancery or the court in which such action or suit was
brought shall determine upon application that, despite the adjudication of
liability but in view of all the circumstances of the case, such indemnitee is
fairly and reasonably entitled to indemnity for such expenses which the Court of
Chancery or such other court shall deem proper.
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(c) Notwithstanding any provision of this Article VII to the contrary,
the Corporation shall indemnify any indemnitee in connection with a proceeding
(or part thereof) initiated by such indemnitee only if such proceeding (or part
thereof) was authorized by the Board of Directors.
(d) The rights to indemnification and advancement of expenses set forth
in this Article VII are intended to be greater than those which are otherwise
provided for in the General Corporation Law of the State of Delaware, are
contractual between the Corporation and the person being indemnified, such
person's heirs, executors and administrators, and, with respect to this Article
VII, are mandatory, notwithstanding a person's failure to meet the standard of
conduct required for permissive indemnification under the General Corporation
Law of the State of Delaware, as amended from time to time. The rights to
indemnification and advancement of expenses set forth in this Article VII are
nonexclusive of other similar rights which may be granted by law, this
Certificate, the Bylaws, a resolution of the Board of Directors or stockholders
or an agreement with the Corporation, which means of indemnification and
advancement of expenses are hereby specifically authorized.
(e) The Corporation may, to the fullest extent permitted by law,
purchase and maintain insurance on behalf of any person who is or was a
director, officer, employee or agent of the Corporation, or is or was serving at
the request of the Corporation as a director, officer, partner, trustee,
employee or agent of another corporation, partnership, joint venture, trust,
other enterprise or employee benefit plan against any liability which may be
asserted against such person.
(f) The Corporation may, to the extent authorized from time to time by
the Board of Directors, grant rights to indemnification, and to the advancement
of expenses to any employee or agent of the Corporation to the fullest extent of
the provisions of this Article VII with respect to the indemnification and
advancement of expenses of directors and officers of the Corporation.
(g) Any repeal or modification of the provisions of this Article VII,
either directly or by the adoption of an inconsistent provision of this
Certificate, shall be prospective only and shall not adversely affect any right
or protection set forth herein existing in favor of a particular individual at
the time of such repeal or modification. In addition, if an amendment to the
General Corporation Law of the State of Delaware limits or restricts in any way
the indemnification rights permitted by law as of the date hereof, such
amendment shall apply only to the extent mandated by law and only to activities
of persons subject to indemnification under this Article VII which occur
subsequent to the effective date of such amendment.
ARTICLE VIII
REMOVAL OF DIRECTORS
Any director of the Corporation may be removed only for cause by the
affirmative vote of holders of a majority of the issued and outstanding capital
stock of the Corporation entitled to vote
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on such matters. Cause shall mean the director's willful dishonesty toward,
fraud upon, or deliberate injury or attempted injury to, the Corporation.
ARTICLE IX
COMPROMISE OR ARRANGEMENT WITH CREDITORS
Whenever a compromise or arrangement is proposed between the
Corporation and its creditors or any class of them and/or between the
Corporation and its stockholders or any class of them, any court of equitable
jurisdiction within the State of Delaware may, on the application in a summary
way of the Corporation or of any creditor or stockholder thereof or on the
application of any receiver or receivers appointed for the Corporation under
Section 291 of Title 8 of the General Corporation Law of the State of Delaware,
or on the application of trustees in dissolution or of any receiver or receivers
appointed for the Corporation under Section 279 of Title 8 of the General
Corporation Law of the State of Delaware, order a meeting of the creditors or
class of creditors, and/or of the stockholders or class of stockholders of the
Corporation, as the case may be, to be summoned in such manner as the said court
directs. If a majority in number representing three fourths in value of the
creditors or class of creditors, and/or of the stockholders or class of
stockholders of the Corporation, as the case may be, agree to any compromise or
arrangement and to any reorganization of the Corporation as consequence of such
compromise or arrangement, the said compromise or arrangement and the said
reorganization shall, if sanctioned by the court to which the said application
has been made, be binding on all the creditors or class of creditors, and/or on
all the stockholders or class of stockholders, of the Corporation, as the case
may be, and also on the Corporation.
ARTICLE X
AMENDMENTS
(a) Notwithstanding any of the provisions of this Certificate or the
Bylaws of the Corporation (and notwithstanding the fact that a lesser percentage
may be specified by law, this Certificate or the Bylaws of the Corporation), the
affirmative vote of the holders of at least two-thirds (2/3) of the voting power
of the Corporation shall be required to repeal, or amend or adopt any provision
inconsistent with, Articles V, VI, VII, VIII or X hereof.
(b) The Board of Directors reserves the right from time to time to
amend, alter, change or repeal any provision contained in this Certificate in
the manner now or hereinafter prescribed by statute, and all rights conferred
upon stockholders herein are granted subject to this reservation.
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IN WITNESS WHEREOF, the Corporation has caused this Certificate of
Incorporation to be signed by Elroy G. Roelke, its Sole Director, as of the ____
day of ______________, 1998.
MICROLYTICS, INC.
By: /s/ Elroy G. Roelke
-------------------------------------
Elroy G. Roelke, Sole Director
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BYLAWS
OF
SANTI GROUP, INC.
ARTICLE I
OFFICES
SECTION 1.1. PRINCIPAL OFFICE. The principal office of the Corporation
shall be 7200 Bishop Road, Austell, Georgia 30168 or such other place within or
without the State of Delaware as the Board of Directors may from time to time
determine or as the business of the Corporation may require.
SECTION 1.2. OTHER OFFICES. The Corporation may also have offices at
such other places within or without the State of Delaware as the Board of
Directors may from time to time determine or as the business of the Corporation
may require.
ARTICLE II
MEETINGS OF THE STOCKHOLDERS
SECTION 2.1. PLACE OF MEETINGS. Meetings of the stockholders shall be
held at such place within or without the State of Delaware as shall be specified
in the notice of the meeting or in a waiver thereof.
SECTION 2.2. ANNUAL MEETING. An annual meeting of the stockholders,
commencing in the year 1998, shall be held on a date and time designated by the
Board of Directors and as set forth in the notice of the meeting, for the
purpose of electing directors and transacting such other business as may
properly be brought before the meeting.
SECTION 2.3. SPECIAL MEETINGS. Special meetings of the stockholders may
be called by: (i) the Chairman of the Board, (ii) the President, (iii) the Board
of Directors, (iv) any two or more members of the Board of Directors, (v) the
holders of at least twenty-five percent (25%) of the issued and outstanding
voting capital stock of the Corporation, or (vi) such person or persons as may
be authorized by the Certificate of Incorporation or by these Bylaws, in each
case by signing, dating and delivering to the Secretary one or more written
requests for the meeting. A request for a special meeting shall state the
purpose of the meeting and the matters proposed to be acted on at it.
SECTION 2.4. NOTICE. Not less than ten (10) nor more than sixty (60)
days before each meeting of the stockholders, the Secretary shall give written
notice of the meeting to each stockholder of record entitled to vote at the
meeting. The notice shall state the date, hour and place of the meeting and the
purpose of the meeting, if the meeting is a special meeting or notice of the
purpose is required by the General Corporation Law of the State of Delaware.
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SECTION 2.5. QUORUM. The holders of shares entitled to vote as a
separate voting group may take action on a matter at a meeting only if a quorum
exists with respect to that matter. The presence in person or by proxy of
stockholders entitled to cast a majority of all the votes entitled to be cast on
a matter by a voting group shall constitute a quorum at meetings of stockholders
except as otherwise provided by statute or by the Certificate of Incorporation.
Once a share is represented for any purpose at a meeting, the holder is deemed
present for quorum purposes for the remainder of the meeting and for any
adjournment of that meeting, unless a new record date is or must be set for that
adjourned meeting.
SECTION 2.6. ADJOURNMENT. If a quorum shall not be present or
represented at any meeting of the stockholders, the stockholders present in
person, or represented by proxy, shall have the power to adjourn the meeting
from time to time, without further notice, to a date not more than thirty (30)
days after the original record date if the time and place thereof are announced
at the meeting at which adjournment is taken, unless after the adjournment a new
record date is fixed for the adjourned meeting. At such adjourned meeting at
which a quorum shall be present or represented, any business may be transacted
which might have been transacted at the original meeting.
SECTION 2.7. MAJORITY RULE. A majority of all the votes cast at a
meeting of stockholders at which a quorum is present is sufficient to approve
any matter which properly comes before the meeting, unless the vote of a greater
number is required by the General Corporation Law of the State of Delaware, the
Certificate of Incorporation or these Bylaws.
SECTION 2.8. ELECTION OF DIRECTORS. Directors shall be elected by a
plurality of all the votes cast at a meeting of stockholders at which a quorum
is present.
SECTION 2.9. VOTING. Each outstanding share of stock, regardless of
class, is entitled to one (1) vote on each matter submitted to a vote at a
meeting of stockholders, unless otherwise provided by the General Corporation
Law of the State of Delaware, the Certificate of Incorporation or these Bylaws.
SECTION 2.10. PROXIES. Each stockholder entitled to vote at a meeting
of the stockholders or to express consent or dissent to corporate action in
writing without a meeting may authorize another person or persons to act for
such stockholder by proxy by signing an appointment form, either personally or
by such stockholder's attorney-in-fact, but no such proxy shall be voted or
acted upon after three years from its date, unless the proxy provides for a
longer period. A duly executed proxy shall be irrevocable if it conspicuously
states that it is irrevocable and if, and only as long as, it is coupled with an
interest sufficient in law to support an irrevocable power. A proxy may be
irrevocable regardless of whether the interest with which it is coupled is an
interest in the stock itself or an interest in the Corporation generally.
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SECTION 2.11. LIST OF STOCKHOLDERS. The officer who has charge of the
stock ledger books of the Corporation shall prepare and make, at least ten (10)
days before each meeting of the stockholders, a complete list of the
stockholders entitled to vote at such meeting, arranged in alphabetical order,
showing the address of each stockholder and the number of shares registered in
the name of each stockholder. Such list shall be open to the examination of any
stockholder, for any purpose germane to the meeting, during ordinary business
hours for a period of at least ten (10) days prior to the meeting, either at a
place within the city where the meeting is to be held, which place shall be
specified in the notice of the meeting, or, if not so specified, at the place
where the meeting is to be held. Such list shall also be produced and kept at
the time and place of the meeting during the whole time thereof, and may be
inspected by any stockholder who is present. The stock ledger shall be the only
evidence as to who are the stockholders entitled to examine the stock ledger, to
be included in the list required by this Section 2.11 or to vote in person or by
proxy at any meeting of stockholders.
SECTION 2.12. INSPECTORS. The Board of Directors shall, in advance of
any meeting of the stockholders, appoint one or more inspectors to act at such
meeting or any adjournment thereof. If the inspectors shall not be so appointed
or if any of them shall fail to appear or act, the chairman of the meeting shall
appoint inspectors. Each inspector, before entering upon the discharge of such
inspector's duties, shall take and sign an oath to execute faithfully the duties
of inspector at such meeting with strict impartiality and according to the best
of such inspector's ability. The inspectors shall determine the number of shares
represented at the meeting, the existence of a quorum, the validity and effect
of proxies, and shall receive votes, ballots or consents, hear and determine all
challenges and questions arising in connection with the right to vote, count and
tabulate all votes, ballots or consents, determine the result, and do such acts
as are proper to conduct the election or vote with fairness to all stockholders.
On request of the chairman of the meeting or any stockholder entitled to vote
thereat, the inspectors shall make a report in writing of any challenge, request
or matter determined by them and shall execute a certificate of any fact found
by them. No director or candidate for the office of director shall act as
inspector of an election of directors. Inspectors need not be stockholders.
SECTION 2.13. ORGANIZATION. At every meeting of the stockholders, the
Chairman of the Board, or in the case of a vacancy in the office or absence of
the Chairman of the Board, one of the following persons present in the order
stated: the President, the Vice Presidents in their order of rank, a chairman
designated by the Board of Directors, or a chairman chosen by the stockholders
entitled to cast a majority of the votes which all stockholders present in
person or by proxy are entitled to cast, shall act as chairman of the meeting,
and the Secretary, or, in such person's absence, an Assistant Secretary, if any,
or any person appointed by the chairman of the meeting, shall act as secretary
of the meeting.
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ARTICLE III
DIRECTORS
SECTION 3.1. NUMBER. Except as otherwise provided in the Certificate of
Incorporation, the Board of Directors shall consist of not less than three (3)
nor more than fifteen (15) directors, the exact number to be fixed and
determined from time to time by resolution of a majority of the Board of
Directors. The Board of Directors shall be divided into three (3) classes,
designated Class I, Class II and Class III, as nearly equal in number as the
then total number of directors constituting the whole Board of Directors
permits, as designated by the Board of Directors. Upon the filing of the
Certificate of Incorporation with the Secretary of State of the State of
Delaware and until expiration of the terms indicated herein below, the initial
members of the Board of Directors and the Class in which each such member will
serve shall be as follows: Raymond M. Cash (Class III and Chairman), Rock Payne
(Class II), Joyce Bone (Class II), Donald F. Moorehead, Jr. (Class III) and
Elroy G. Roelke (Class I). Directors of Class I shall hold office for a term
expiring at the next succeeding annual meeting of the stockholders, directors of
Class II shall hold office for a term expiring at the second succeeding annual
meeting of the stockholders, and directors of Class III shall hold office for a
term expiring at the third succeeding annual meeting of the stockholders.
Subject to the foregoing, at each annual meeting of the stockholders, the
successors to the class of directors of the Corporation whose term shall then
expire shall be elected to hold office for a term expiring at the third
succeeding annual meeting of the stockholders, and each director so elected
shall hold office until such director's successor is elected and qualified, or
until such director's earlier resignation or removal. If the number of directors
of the Corporation is changed, any increase or decrease in the number of
directors shall be apportioned by action of the Board of Directors among the
classes so as to maintain the number of directors in each class as nearly equal
as possible, and the Board of Directors shall decide which class shall contain
an unequal number of directors. Any additional director of any class elected to
fill a vacancy resulting from an increase in such class shall hold office for a
term that coincides with the remaining term of that class. In no case will a
decrease in the number of directors of the Corporation shorten the term of any
incumbent director.
SECTION 3.2. ELECTION AND TENURE. Until the first annual meeting of
stockholders and until successors are elected and qualified, the Board of
Directors shall consist of the individuals named as initial directors in the
Certificate of Incorporation. Unless the Certificate of Incorporation or these
Bylaws provide otherwise, directors are elected by a plurality of all votes cast
at a meeting of stockholders at which a quorum is present and each director
elected shall hold office until the end of such director's term as provided
herein and until such director's successor is elected and qualified or until
such director's earlier resignation or removal. Each share of stock may be voted
for as many individuals as there are directors to be elected and for whose
election the share is entitled to be voted. Stockholders shall not have any
cumulative voting rights.
SECTION 3.3. QUALIFICATIONS. Each director of the Corporation shall
have the qualifications required by the Certificate of Incorporation or these
Bylaws. Directors need not be residents of the State of Delaware or stockholders
in the Corporation.
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SECTION 3.4. REMOVAL. Any director may be removed only for cause by
vote of the holders of a majority of the shares of the Corporation entitled to
vote. Cause shall mean the director's willful dishonesty toward, fraud upon, or
deliberate injury or attempted injury to the Corporation.
SECTION 3.5. VACANCIES. Any vacancy and newly created directorship
occurring in the Board of Directors which results from an increase in the
authorized number of directors elected by all of the stockholders having the
right to vote may be filled by the affirmative vote of a majority of the
remaining directors or director, whether or not sufficient to constitute a
quorum. When one or more directors shall resign from the Board of Directors,
effective at a future date, a majority of the directors then in office,
including those who have resigned, shall have the power to fill such vacancy or
vacancies, the vote thereon to take effect when such resignation or resignations
shall become effective.
SECTION 3.6. LACK OF DIRECTORS. If at any time, by reason of death or
resignation or other cause, the Corporation should have no directors in office,
then any officer may call a special meeting of stockholders in accordance with
the provisions of the Certificate of Incorporation or these Bylaws, and an
election of directors may be held in the manner provided by the Certificate of
Incorporation, these Bylaws or applicable law.
SECTION 3.7. RESIGNATION. A director may resign at any time by
delivering written notice to the Corporation, the Board of Directors, the
Chairman of the Board or the President. A resignation is effective when notice
is delivered, unless the notice specifies a later effective date.
SECTION 3.8. POWERS. The business and affairs of the Corporation shall
be managed under the direction of its Board of Directors which may exercise all
such powers of the Corporation and do all such lawful acts and things as are not
by applicable law, the Certificate of Incorporation or by these Bylaws conferred
on or reserved to the stockholders.
SECTION 3.9. QUORUM. A majority of the entire Board of Directors shall
constitute a quorum for the transaction of business. If a quorum shall not be
present at any meeting of the Board of Directors, the directors present thereat
may adjourn the meeting from time to time, without notice other than
announcement at the meeting, until a quorum shall be present.
SECTION 3.10. ANNUAL MEETING. The annual meeting of the Board of
Directors for the purpose of electing officers and transacting such other
business as may be brought before the meeting shall be held each year
immediately following the annual meeting of stockholders.
SECTION 3.11. REGULAR MEETINGS. Regular meetings of the Board of
Directors may be held without notice at such places, within or without the State
of Delaware, on such dates and at such times as may from time to time be
determined by the Board.
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SECTION 3.12. SPECIAL MEETINGS. Special meetings of the Board of
Directors may be called by the Chairman of the Board or the President and shall
be called by the Secretary on the written request of two directors. Written
notice of special meetings of the Board of Directors shall be given to each
director at least 24 hours before the meeting. Neither the business to be
transacted at, nor the purpose of, any regular or special meeting of the Board
of Directors need be specified in the notice or waiver of notice of such
meeting. Such meetings shall be held at such places, within or without the State
of Delaware, on such dates and at such times as may be stated in the notice.
SECTION 3.13. ACTION WITHOUT MEETING. Any action required or permitted
to be taken at a meeting of the Board of Directors or of a committee of the
Board of Directors may be taken without a meeting if a written consent which
sets forth the action is: (i) signed by all members of the Board of Directors or
committee, and (ii) filed with the minutes of proceedings of the Board of
Directors or committee. Action taken by written consent is effective when the
last director signs the consent unless the consent specifies a different
effective date.
SECTION 3.14. MEETINGS BY TELEPHONE. Members of the Board of Directors
or any committee may participate in a meeting by means of a telephone conference
or similar communications equipment provided all persons participating in the
meeting can hear each other at the same time. A director participating in such a
meeting is deemed to be present in person at the meeting.
SECTION 3.15. MAJORITY RULE. The action of a majority of the directors
present at a meeting at which a quorum is present is the action of the Board of
Directors unless the Certificate of Incorporation or these Bylaws shall require
a greater proportion.
SECTION 3.16. INTERESTED DIRECTOR TRANSACTIONS. No contract or
transaction between the Corporation and any of its directors, or between the
Corporation and any other corporation, firm or entity in which any of its
directors is a director, or has a material financial interest, shall be void or
voidable solely for this reason, or solely because the director is present at
the meeting of the Board of Directors or committee which authorizes, approves or
ratifies the contract or transaction, or solely because such director's or their
votes are counted for such purpose, if such interested director complies with
statutory disclosure requirements or the contract or transaction is fair and
reasonable to the Corporation. Common or interested directors or the stock owned
by them or by an interested corporation, firm or other entity may be counted in
determining the presence of a quorum at a meeting of the Board of Directors or
of a committee or at a meeting of stockholders, as the case may be, which
authorizes, approves or ratifies the contract or transaction.
SECTION 3.17. COMPENSATION. The Board of Directors or a committee
thereof shall have the authority to fix the compensation of directors. Directors
shall be entitled to reimbursement for any reasonable expenses incurred in
attending meetings and otherwise carrying out their duties.
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SECTION 3.18. ORGANIZATION. At every meeting of the Board of Directors,
the Chairman of the Board, or in the case of a vacancy in the office or absence
of the Chairman of the Board, one of the following officers present in the order
stated: the President, the Vice Presidents in their order of rank, or a chairman
chosen by a majority of the directors present, shall act as chairman of the
meeting, and the Secretary, or, in the absence of the Secretary, an Assistant
Secretary, if any, or any other person appointed by the chairman of the meeting,
shall act as secretary of the meeting.
ARTICLE IV
COMMITTEES
SECTION 4.1. APPOINTMENTS AND POWERS. The Board of Directors may, by
resolution or resolutions passed by a majority of the whole Board of Directors,
designate an Executive Committee, an Audit Committee, a Compensation Committee
and one or more other committees, each consisting of three or more directors.
The Board of Directors may designate one or more directors as alternative
members of a committee who may replace any absent or disqualified member at any
meeting of the committee. Such alternate members shall not be counted for
purposes of determining a quorum unless acting for an absent or disqualified
member, in which case they shall be counted in the place of the absent or
disqualified member. The committee, to the extent provided in said resolution or
resolutions or in these Bylaws, shall have and may exercise the powers of the
Board of Directors in the management of the business and affairs of the
Corporation and may have power to authorize the seal of the Corporation to be
affixed to all papers which may require it, except that a committee may not: (i)
amend the Certificate of Incorporation, (ii) adopt an agreement of merger, share
exchange or consolidation, (iii) recommend to the stockholders of the
Corporation the sale, lease or exchange of all or substantially all of the
Corporation's property or assets, (iv) recommend to the stockholders of the
Corporation a dissolution of the Corporation or revocation of a dissolution, (v)
amend these Bylaws, (vi) declare a dividend, (vii) issue stock, or (viii) adopt
a certificate of ownership and merger. Such committee or committees shall have
such name or names as may be stated in these Bylaws or as may be determined from
time to time by resolution adopted by the Board of Directors. Sections 3.11
through 3.15 applicable to the Board of Directors shall also apply to all
committees.
SECTION 4.2. MINUTES. Committees shall keep regular minutes of their
proceedings and report the same to the Board of Directors when required.
ARTICLE V
NOTICES
SECTION 5.1. NOTICE. Notices to directors and stockholders shall be in
writing, shall specify the date, time and place of the meeting and shall be
delivered personally, left at such director's or stockholder's residence or
usual place of business, or mailed to the directors or
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stockholders at their addresses appearing on the records of the Corporation.
Notice by mail shall be deemed to be given at the time when deposited in the
United States mail, postage prepaid, and directed to the directors or
stockholders at their addresses appearing on the records of the Corporation.
Notice to directors may also be given by telegram, facsimile or overnight
courier, and shall be deemed to be given upon receipt at their addresses
appearing on the records of the Corporation.
SECTION 5.2. WAIVER OF NOTICE. Whenever any notice of the time, place
or purpose of a meeting is required to be given to any stockholder or director
under the General Corporation Law of the State of Delaware or the Certificate of
Incorporation or these Bylaws, a written waiver, signed by the person entitled
to notice and delivered to the Corporation and filed with the Corporation's
minutes or records, whether before or after the time stated therein, shall be
deemed equivalent to notice. Neither the business to be transacted at, nor the
purpose of, any regular or special meeting of the stockholders, Board of
Directors or members of a committee of the Board of Directors need be specified
in any written waiver of notice unless required by the Certificate of
Incorporation or these Bylaws.
SECTION 5.3. ATTENDANCE CONSTITUTES WAIVER. Attendance of a person at a
meeting in person or by proxy shall constitute a waiver of notice of such
meeting, except when the person attends a meeting for the express purpose of
objecting at the beginning of the meeting to the transaction of any business
because the meeting is not lawfully called or convened.
ARTICLE VI
OFFICERS
SECTION 6.1. OFFICERS. The officers of the Corporation shall consist of
a President and a Secretary, and may include a Chairman of the Board, Vice
Chairman of the Board and one or more Vice Presidents (any one or more of which
may be designated as a senior or executive vice president), Chief Financial
Officer and one or more assistant vice presidents, assistant treasurers,
assistant financial officers and assistant secretaries, each of whom shall be
elected by the Board of Directors. Any number of offices may be held by the same
person.
SECTION 6.2. REMOVAL. If the Board of Directors in its judgment finds
that the best interests of the Corporation will be served, it may remove any
officer or agent of the Corporation at any time with or without cause. The
removal of an officer or agent does not prejudice any of such officer's or
agent's contract rights, if any.
SECTION 6.3. TERM OF OFFICE; RESIGNATION. An officer of the Corporation
shall serve for the term provided within any applicable contract for employment,
or absent such contract shall serve for such term as determined by the Board of
Directors and until such officer's successor is elected and qualified or until
such officer's earlier resignation or removal. Any officer may resign at any
time upon written notice to the Corporation. A resignation is effective when the
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notice is delivered, unless the notice specifies a later effective date. If a
resignation is made effective at a later date and the Corporation accepts such
later date, the Board of Directors may fill the pending vacancy before the
effective date if it provides that the successor does not take office until the
effective date. An officer's resignation does not affect the Corporation's
contract rights, if any, with the officer. Any vacancy occurring in any office
of the Corporation by death, resignation, removal or otherwise shall be filled
by the Board of Directors or by such officer or agent of the Corporation to whom
the Board of Directors may expressly delegate such authority.
SECTION 6.4. PRESIDENT. The President shall have general powers and
duties of supervision and management usually vested in the office of president
of a corporation, including the authority to make contracts on behalf of the
Corporation in the ordinary course of the Corporation's business. The President
shall have general supervision, direction and control of the business of the
Corporation, and shall see that all orders and resolutions of the Board of
Directors are carried into effect. In the absence of the Chairman of the Board,
the President shall preside at all meetings of the stockholders and the Board of
Directors. The President shall execute bonds, mortgages and other contracts,
except where required or permitted by law to be otherwise signed and executed,
and except where the signing and execution thereof shall be expressly delegated
by the Board of Directors to some other officer or agent of the Corporation. The
President shall have the power to appoint, remove and suspend subordinate
officers, agents and factors upon such terms and conditions as the President
deems reasonable and appropriate. The President shall have such powers and
duties as usually pertain to such office, except as the same may be modified by
the Board of Directors.
SECTION 6.5. VICE PRESIDENTS. The Vice Presidents, in the order of
their seniority, unless otherwise determined by the Board of Directors, shall,
in the absence or disability of the President, perform the duties and exercise
the powers of the President. They shall perform such other duties and have such
other powers as the Board of Directors may from time to time prescribe or as the
President may from time to time delegate.
SECTION 6.6. SECRETARY. The Secretary shall attend meetings of the
Board of Directors and stockholders, and record all the proceedings of such
meetings in a book to be kept for that purpose. The Secretary shall give, or
cause to be given, notice of all meetings of the stockholders and special
meetings of the Board of Directors, and shall perform such other duties as may
be prescribed by the Board of Directors or President, under whose supervision
the Secretary shall be.
SECTION 6.7. ASSISTANT SECRETARIES. The Assistant Secretaries, in the
order of their seniority, unless otherwise determined by the Board of Directors,
shall, in the absence or disability of the Secretary, perform the duties and
exercise the power of the Secretary. They shall perform such other duties and
have such other powers as the Board of Directors may from time to time prescribe
or as the President may from time to time delegate.
-9-
<PAGE> 10
SECTION 6.8. TREASURER. The Treasurer shall have custody of the
corporate funds and securities, and shall keep full and accurate accounts of
receipts and disbursements in books belonging to the Corporation, and shall
deposit all moneys and other valuable effects in the name and to the credit of
the Corporation in such depositories as may be designated by the Board of
Directors. The Treasurer shall disburse the funds of the Corporation as may be
ordered by the Board of Directors, taking proper vouchers for such
disbursements, and shall render to the President and the Board of Directors at
its regular meetings, or when the Board of Directors so requires, an account of
all the Treasurer's transactions as Treasurer and of the financial condition of
the Corporation. The Treasurer shall perform such other duties and have such
other authority and powers as the Board of Directors may from time to time
prescribe or as the President may from time to time delegate.
SECTION 6.9. ASSISTANT TREASURERS. The Assistant Treasurers, in the
order of their seniority, unless otherwise determined by the Board of Directors,
shall, in the absence or disability of the Treasurer, perform the duties and
exercise the powers of the Treasurer. They shall perform such other duties and
have such other powers as the Board of Directors may from time to time prescribe
or the President may from time to time delegate.
SECTION 6.10. CHIEF FINANCIAL OFFICER. The Chief Financial Officer
shall be the chief accounting officer of the Corporation with general
supervision over the accounting books and records of the Corporation and shall
be responsible for maintaining proper internal controls over the assets of the
Corporation and preparing accurate financial statements. The Chief Financial
Officer shall perform such other duties and have such other authority and powers
as the Board of Directors may from time to time prescribe or as the President
may from time to time delegate.
SECTION 6.11. OTHER OFFICERS. The duties of other officers elected by
the Board of Directors shall be such as are customary to the respective offices
as shall be given to them by the President.
ARTICLE VII
CERTIFICATES REPRESENTING SHARES
SECTION 7.1. CERTIFICATES FOR SHARES. The shares of the Corporation
shall be represented by certificates which shall be in a form approved by the
Board of Directors and contain such information as may be required by the
General Corporation Law of the State of Delaware or any securities exchanges on
which any shares of the Corporation may be listed.
SECTION 7.2. FACSIMILE SIGNATURES. Any or all the signatures on the
certificate may be a facsimile. In case any officer who has signed or whose
facsimile signature has been placed upon a certificate shall have ceased to be
such officer before such certificate is issued, it may be issued by the
Corporation with the same effect as if he were such officer at the date of
issue.
-10-
<PAGE> 11
SECTION 7.3. LOST CERTIFICATES. The Board of Directors may determine
the conditions for issuing a new stock certificate in place of any certificate
issued by it, alleged to have been lost, stolen or destroyed. The Board of
Directors may require the owner of the lost, stolen or destroyed certificate to
give to the Corporation a bond with sufficient surety to indemnify the
Corporation against any loss or claim arising as a result of the issuance of a
new certificate. The issuance of a new certificate under this Section 7.3 does
not constitute an overissue of the shares it represents.
SECTION 7.4. TRANSFER OF SHARES. Upon surrender to the Corporation or
the transfer agent of the Corporation of a certificate for shares duly endorsed
or accompanied by proper evidence of succession, assignment or authority to
transfer, it shall be the duty of the Corporation to issue a new certificate to
the person entitled thereto, cancel the old certificate and record the
transaction upon its books.
SECTION 7.5. RECORD DATE FOR NOTICE AND VOTING. For the purpose of
determining stockholders entitled to notice of or to vote at any meeting of
stockholders or any adjournment thereof, the Board of Directors may set a record
date or direct that the stock transfer books be closed for a stated period for
the purpose of making any proper determination with respect to stockholders. The
record date shall be not more than sixty (60) days nor less than ten (10) days
before the date on which the action requiring the determination will be taken.
If no record date is fixed by the Board of Directors, the record date for
determining stockholders entitled to notice of or to vote at a meeting of
stockholders shall be the close of business on the day next preceding the day on
which notice of the meeting is given, or, if notice is waived, at the close of
business on the day next preceding the day on which the meeting is held. A
determination of stockholders of record entitled to notice of or to vote at a
meeting of stockholders shall apply to any adjournment of the meeting;
providing, however, that the Board of Directors may fix a new record date for
the adjourned meeting.
SECTION 7.6. RECORD DATE FOR DIVIDENDS. For the purpose of determining
stockholders entitled to receive payment of any dividend or an allotment of any
rights, the record date is the close of business on the day on which the Board
of Directors adopts the resolution declaring the dividend or allotment of
rights. The payment or allotment may not be made more than sixty (60) days after
the date on which the resolution is adopted.
SECTION 7.7. STOCKHOLDERS OF RECORD. The Corporation shall be entitled
to recognize the exclusive rights of a person registered on its books as the
owner of shares to receive dividends, and to vote as such owner, and shall not
be bound to recognize any equitable or other claim to or interest in such share
or shares on the part of any other person, whether or not it shall have express
or other notice thereof, except as otherwise provided by the laws of the State
of Delaware.
-11-
<PAGE> 12
ARTICLE VIII
GENERAL PROVISIONS
SECTION 8.1. DIVIDENDS. Subject to the provisions of the Certificate of
Incorporation and the General Corporation Law of the State of Delaware, the
Board of Directors may, at any regular or special meeting, declare dividends
upon the capital stock of the Corporation as and when the Board of Directors may
deem expedient.
SECTION 8.2. CHECKS; DRAFTS. All checks or demands for money and notes
of the Corporation shall be signed by such officer or officers or such other
person or persons as the Board of Directors may from time to time designate.
SECTION 8.3. FISCAL YEAR. The fiscal year of the Corporation shall be
the calendar year, unless otherwise fixed by the Board of Directors.
SECTION 8.4. ANNUAL STATEMENT OF AFFAIRS. The President, or any other
officer of the Corporation designated by the Board of Directors, shall prepare
annually a full and correct statement of the affairs of the Corporation, to
include a balance sheet and a financial statement of operations for the
preceding fiscal year.
ARTICLE IX
AMENDMENTS
Notwithstanding any of the provisions of these Bylaws (and
notwithstanding the fact that a lesser percentage may be specified by law, or
these Bylaws) the affirmative vote of the holders of at least two-thirds (2/3)
of the Common Stock shall be required to repeal or amend any provision of these
Bylaws. The Board of Directors may amend or repeal these Bylaws unless the
Certificate of Incorporation or the General Corporation Law of the State of
Delaware reserves this power exclusively to the stockholders.
ARTICLE X
EMERGENCY BYLAW
In the event that a quorum of directors cannot be readily assembled
because of a catastrophic event, the Board of Directors may take action by the
affirmative vote of a majority of those directors present at a meeting and may
exercise any emergency power granted to a board of directors under the General
Corporation Law of the State of Delaware not inconsistent with these Bylaws.
Special meetings of the Board of Directors may be called in an emergency by the
director or, if no director is present at the Corporation's principal offices,
by the officer present having the greatest seniority as an officer. The director
or directors in attendance at the meeting shall constitute a quorum. If less
than three (3) regularly elected directors are present, the director present
having the greatest seniority
-12-
<PAGE> 13
as a director may appoint one (1) or more persons (not to exceed the number most
recently fixed by the Board pursuant to Section 3.1) from among the officers or
other executive employees of the Corporation to serve as substitute directors.
If no regularly elected director is present, the officer present having the
greatest seniority as an officer shall serve as a substitute director and shall
appoint up to four (4) additional persons from among the officers or other
executive employees of the Corporation to serve as substitute directors. The
Board of Directors, either before or during any such emergency, may provide, and
from time to time modify, lines of succession in the event that during such
emergency any or all officers or agents of the Corporation shall for any reason
be rendered incapable of discharging their duties. The Board of Directors,
either before or during such emergency, may, effective during the emergency,
change the principal office of the Corporation or designate several alternative
principal or regional offices or authorize the officers to do so. No officer or
employee acting in accordance with the Emergency Bylaw shall be liable except
for willful misconduct. To the extent not inconsistent with the Emergency Bylaw,
the Bylaws of the Corporation shall remain in effect during any emergency, and
upon termination of the emergency, the Emergency Bylaw shall cease to be
operative. Notice of any meeting of the Board of Directors during such emergency
may be given only to such of the directors as it may be feasible to reach at the
time and by such means as may be feasible at the time, including publication or
radio.
-13-
<PAGE> 1
EXHIBIT 5.1
[KING & SPALDING LETTERHEAD]
191 PEACHTREE STREET
ATLANTA, GEORGIA 30303-1763
TELEPHONE: 404/572-4600
FACSIMILE: 404/572-5100
DIRECT FAX: DIRECT DIAL:
404/572-4600 404/572-5100
August__, 1998
SanTi Group, Inc.
14901 Quorum Drive
Suite 200
Dallas, Texas 75240
Ladies and Gentlemen:
We have acted as counsel to SanTi Group (the "Company") in connection with
the filing of a Registration Statement on Form S-1 (Registration No.
333-_______) under the Securities Act of 1933, as amended, covering the offering
of up to 13,113,379 shares of the Company's Common Stock, $.0001 par value per
share (the "Shares"). In connection therewith, we have examined such corporate
records, certificates of public officials and other documents and records as we
have considered necessary or proper for the purpose of this opinion.
This opinion is limited by and is in accordance with, the January 1, 1992,
edition of the Interpretative Standards applicable to Legal Opinions to Third
Parties in Corporate Transactions adopted by the Legal Opinion Committee of the
Corporate and Banking Law Section of the State Bar of Georgia.
Based on the foregoing, and having regard to legal considerations which we
deem relevant, we are of the opinion that the Shares, when issued and delivered
as described in the Registration Statement, will be legally issued, fully paid
and nonassessable.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement and to the reference to our firm under the caption "Legal
Matters" in the Prospectus contained in the Registration Statement.
Very truly yours,
/s/ King & Spalding
-----------------------------------------
<PAGE> 1
EXHIBIT 9.1
VOTING TRUST AGREEMENT
The Voting Trust Agreement (this "Agreement") is made on December 4,
1997, between the following stockholders of SanTi Group, Inc., ("SanTi"), a
corporation organized under the laws of the State of Delaware, and having its
principal office in Smyrna, State of Georgia, Raymond M. Cash, Joyce Bone, and
The Cash Family Limited Partnership, a Georgia limited partnership, herein
collectively called the "Stockholders", and Raymond M. Cash, herein called the
"Trustee".
RECITALS
A. The Stockholders believe it to be essential for the success of SanTi and for
the best interests of all the stockholders thereof that SanTi shall be managed
and directed during the next ten (10) years of its existence under a definite
and fixed policy to secure a union of all the interests in order to develop
properly the business opportunities of SanTi.
B. Each of the stockholders represents that he is the owner of the number of
shares of capital stock of SanTi set opposite his name on the signature page
(collectively, the "Shares").
C. The Stockholders believe this Agreement, through the Trustee, will provide
continuity of management and policy for SanTi and believe this Agreement was not
created for an unlawful purpose.
D. The Stockholders believe that their object can thus be accomplished by acting
together jointly and severally in a manner hereinafter set forth, the agreement
of each constituting one of the considerations for the agreement of the others,
and in particular by giving to the Trustee as their agent and attorney in fact
an irrevocable right to vote the shares upon the terms and conditions
hereinafter set forth.
E. The Stockholders have requested the Trustee to take and hold for the period
hereinafter stated the legal title to the Shares, the same to be held by him
upon an active trust, and to act under the terms of this Agreement, and the
Trustee has agreed to do so.
F. The Shareholders have executed a Shareholders' Agreement in conjunction with
the executing the Agreement herein.
For the reasons recited above, the Stockholders in consideration of
their mutual promises do agree to and with each other and with the Trustee and
the Trustee does agree with the Stockholders, as follows:
<PAGE> 2
SECTION ONE
TRANSFER OF STOCK TO TRUSTEE
Each Stockholder holding a portion of the Shares, to the number of
which is set opposite his, her, or its name hereunto subscribed, respectively,
shall deposit the same and the stock certificates therefor, with sufficient
transfers thereof, in favor of the Trustee, with the Trustee, and receive in
exchange therefor voting trust certificates hereinafter referred to. Upon the
making of such deposit, all Shares represented by the stock certificates so
deposited shall be transferred upon the books of SanTi, to the name of the
Trustee, who is hereby fully authorized and empowered to cause such transfers to
be made, and also to cause any further transfers of the Shares to be made which
may become necessary due to the occurrence of any change of the persons holding
the office of trustee as hereinafter provided.
SECTION TWO
TRUSTEE'S CONTROL OVER STOCK
During the period this Agreement shall be in force, the Trustee shall
possess the legal title to Shares and be entitled to exercise all rights of
every name and nature, including, but not limited to, the right to vote in
person or by proxy in respect to any and all such Shares; it being understood,
however, that the holders of the voting trust certificates to be issued by the
Trustee, pursuant to Section Three hereof, shall be entitled to receive payments
equal to the dividends, if any, collected by the Trustee upon the Shares
standing in their respective names.
SECTION THREE
VOTING TRUST CERTIFICATE
The Trustee does hereby promise and agree with the Stockholders and
with every holder of voting trust certificates issued that from, time to time
upon request, he will cause to be issued to the several Stockholders in respect
of all Stock deposited by them, voting trust certificates (the "Trust
Certificate") in an aggregate amount equal to the amount of all Stock so
deposited, and which Voting Trust Certificates shall be in substantially the
following form:
2
<PAGE> 3
VOTING TRUST CERTIFICATE
RESOURCE RECOVERY TRANSFER & TRANSPORTATION, INC.
NO._________ __________SHARES
This certifies that _________________________ has deposited ___________
shares of the voting capital stock of the above-named corporation of the par
value of __________ Dollars ($_______) each with the Trustee under an agreement
between Raymond M. Cash, Trustee, and certain stockholders of the corporation,
which agreement was entered into on ____________, 1997. This certificate and the
interest represented thereby is transferable only on the books of the Trustee
upon the presentation and surrender thereof. The holder of this certificate
takes it subject to all the terms and conditions of the aforesaid agreement
between the Trustee and certain stockholders of the corporation, and becomes a
party to the agreement, and is entitled to the benefits thereof.
This certificate is transferable only with the written consent of the
Trustee and then only on the books of the Trustee by the registered holders
hereof in person or by an attorney duly authorized. Until so transferred, the
Trustee may treat the registered holder as owner hereof for all purposes
whatsoever.
In Witness Whereof, the Trustee has caused this certificate to be
signed on _________, 1997.
--------------------------------
(Signature of Trustee)
SECTION FOUR
ADDITIONAL STOCK
From time to time after this Agreement shall have taken effect, the
Trustee may receive additional full paid shares of the capital stock of SanTi
upon the terms and the conditions of this Agreement, and in respect of all such
shares so received, the Trustee will issue and deliver Voting Trust Certificates
similar to those above-mentioned, entitling the holder to all the rights above
specified. The term "Shares" as herein used, shall apply to any and all such
additional shares received by the Trustee as well as the original Shares
deposited with the Trustee hereunder.
3
<PAGE> 4
SECTION FIVE
DIVIDENDS
All dividends that may accrue upon the Shares shall be distributed pro
rata among the holders of the Voting Trust certificates in the proportion in
which they shall severally be entitled in accordance with this Agreement.
SECTION SIX
TERMINATION OF AGREEMENT
In case of a failure to sell the Shares ten (10) years from the date of
the Agreement, the Shares shall be delivered by the Trustee to the holders of
the Voting Trust Certificates in the proportion of their respective holdings,
upon the surrender of the Certificates to the Trustee, and this Agreement shall
be terminated. This Agreement may also be terminated by written consent of all
the parties to this Agreement.
SECTION SEVEN
TRUSTEE INDEMNIFICATION
The Trustee shall not be entitled to any compensation for his services
as such Trustee, however, the Trustee shall be indemnified against and saved
harmless from the holders of Voting Trust Certificates, all liabilities properly
incurred in the exercise of any power conferred upon him by this Agreement and
the applicable law.
SECTION EIGHT
TRUSTEE'S DEATH OR DISABILITY
In the case of the Trustee's death, this Agreement shall terminate
ninety (90) days after the Trustee's death. In the event of the Trustee's
disability, the vacancy so occurring shall be filled by the appointment of a
successor(s) and said successor(s) shall be filled by the members of the Board
of Directors of SanTi at the time of the Trustee's vacancy(s). The term
"Trustee" as herein used, shall apply to the successor trustees as well as the
original trustee. All acts and instruments shall be done and executed which
shall be necessarily or reasonably requested for the purpose of effecting such
succession and of making the successor trustee as upon such appointment the
owner of record of the Shares deposited with the Trustee under this Agreement.
The term "disabled" as herein used, shall mean a condition resulting from injury
or illness to the Trustee, while he is acting as the Trustee, which absolutely
prevents him from exercising his duties for one hundred eighty (180) consecutive
days.
4
<PAGE> 5
SECTION NINE
TRUSTEE'S VOTING RIGHTS
All questions arising between the trustees, if there are, at any time,
more than one trustee, shall from time to time be determined by decision of the
greater number of those then acting as trustee either at a meeting or by
writing, with or without meeting, and in like manner they may establish their
rules of action, the decision or act or the majority of the trustees shall for
the exercise of the voting power and for all purposes of the Agreement, be
deemed the decision or act of all the trustees.
SECTION TEN
VOTING TRUST CERTIFICATE HOLDERS SURRENDERING
STOCKHOLDERS; RIGHT TO TRUSTEE
It is expressly understood and agreed that the holders of Trust
Certificates shall not have any right by or under the Trust Certificates, or
under this Agreement, or any agreement expressed or implied, or otherwise, with
respect to any shares held by the Trustee, to vote such Shares, or to take part
in, or consent to, any stockholders' action of SanTi, or to do or perform any
other act or thing which Stockholders of SanTi are now or may hereafter become
entitled to do or perform.
SECTION ELEVEN
NOTICE TO CERTIFICATE HOLDERS
Any notice to be given to the holders of Trust Certificates hereunder
shall be sufficiently given if mailed to such of the registered holders of Trust
Certificates at the addresses furnished respectively by such holders to the
Trustee or his agent.
SECTION TWELVE
ADOPTION OF RULES
The Trustee may adopt his own rules of procedure regarding all matters,
including but not limited to, the exercise of the voting power conveyed upon the
trustee pursuant to this Agreement.
SECTION THIRTEEN
TRUSTEE ACTING AS DIRECTOR OR OFFICER
The Trustee may act as a director or an officer of SanTi or of any
corporation affiliated with SanTi and may vote for himself as such and may be
interested in the stock of, or otherwise
5
<PAGE> 6
interested in, or any affiliated corporation and may be the holder of, or
interested in, SanTi Trust Certificates issued hereunder.
SECTION FOURTEEN
TRUSTEE'S DEALING WITH CORPORATION
The Trustee shall not be disqualified by his office from dealing or
contracting with SanTi, either as vendor, purchaser, or otherwise, nor shall any
transaction or contract of SanTi be void or voidable by reason of the fact that
the Trustee or any firm of which the Trustee is a member, is in any way
interested in such transaction or contract; nor shall the Trustee be liable to
account to SanTi or to any stockholder thereof for any profits realized by,
from, or through any such transaction or contract by reason of the fact that he,
or any firm of which he is a member or any corporation of which he is a
stockholder or director, was interested in such transaction or contract.
SECTION FIFTEEN
AMENDMENT OF VOTING TRUST
This Agreement may be amended at any time by an instrument in writing
duly executed and acknowledged by all their owners and holders of the Voting
Trust Certificates.
SECTION SIXTEEN
SUCCESSOR TRUSTEE'S RIGHTS AND DUTIES
Every successor trustee shall from the time of appointment be deemed a
trustee and shall have all the estate, title, rights, and powers of a
predecessor, trustee, and all acts and instruments shall be done or executed as
shall be necessary for the purpose of effecting such succession and of making
the successor trustee the owner of record of the Shares previously delivered to
the predecessor trustee.
SECTION SEVENTEEN
LOST TRUST CERTIFICATES
In case any Voting Trust Certificate issued under this Agreement should
become mutilated, destroyed, stolen or lost, the Trustee, in his discretion, may
authorize the issue of a new Voting Trust Certificate, and thereupon the agent
of the Trustee shall issue a new Voting Trust Certificate in substitution
therefore for a correct number of Shares and bearing a like serial number. The
applicant for such substituted Voting Trust Certificate shall furnish to the
Trustee and to his agent evidence to their satisfaction, respectively, of the
mutilation, destruction, theft,
6
<PAGE> 7
or loss of such Voting Trust Certificate together with such indemnity of the
Trustee and/or his agent respectively, as, in their discretion, they may
require.
SECTION EIGHTEEN
EXECUTION OF VOTING TRUST AGREEMENT
This Agreement shall bind and benefit the executors, administrators,
assigns, and successors of the respective parties hereto and may be
simultaneously executed in any number of counterparts, each of which, when so
executed, shall be deemed to be an original, and in such counterparts together
shall constitute one instrument. An original of this Agreement shall be place
with the agent of the Trustee, and a duplicate thereof shall be filed with SanTi
in its principle office in the State of Georgia.
SECTION NINETEEN
TRUSTEE'S LIABILITY
In voting the Shares stock held by her/him, the Trustee will express
his/her best judgment from time to time to select suitable directors to the end
that the affairs of SanTi shall be properly managed and in voting on other
matters which may come before him/her at any stockholders' meeting, will
exercise like judgment; but it is understood that the Trustee shall not incur
any responsibility by reason of any error or law or of any matter or thing done
or admitted under this Agreement except for his/her own fraudulent misconduct.
7
<PAGE> 8
IN WITNESS WHEREOF, THE SEVERAL PARTIES HERETO HAVE HEREUNTO
SET THEIR HANDS, AND THE TRUSTEE HAS HEREUNTO SET HIS HAND IN TOKEN
OF HIS ACCEPTANCE OF THE TRUST HEREBY CREATED.
<TABLE>
<CAPTION>
Hand Stockholders' Residence Number of Shares
<S> <C> <C>
/s/Raymond M. Cash 1,309,685
- ------------------------------------ ------------------------- ----------
Raymond M. Cash 3086 Farmington Lane
Atlanta, Georgia 30339
/s/Joyce Bone 3,315
- ------------------------------------ ------------------------- ----------
Joyce Bone 2139 Summerchase Drive
Woodstock, Georgia 30189
The Cash Family Limited Partnership
By Its General Partner
CASH Resources, Inc.
By: /s/Fredna Woodall 1,287,000
- ------------------------------------ ------------------------- ----------
Fredna C. Woodall, 4696 Oakdale Road
Authorized Agent Smyrna, Georgia 30080
</TABLE>
8
<PAGE> 1
================================================================================
CREDIT AGREEMENT
dated as of June 26, 1998
among
SANTI GROUP, INC.,
VARIOUS FINANCIAL INSTITUTIONS
and
BANK OF AMERICA NATIONAL TRUST
AND SAVINGS ASSOCIATION,
as Agent
================================================================================
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C> <C>
SECTION 1 DEFINITIONS...........................................................1
1.1 Definitions....................................................1
1.2 Other Interpretive Provisions.................................12
SECTION 2 COMMITMENTS OF THE BANKS; BORROWING, CONVERSION AND
LETTER OF CREDIT PROCEDURES...................................13
2.1 Commitments...................................................13
2.1.1 Revolving Loan Commitment..............................13
2.1.2 L/C Commitment.........................................13
2.2 Revolving Loan Procedures.....................................14
2.2.1 Various Types of Revolving Loans.......................14
2.2.2 Borrowing Procedures...................................14
2.2.3 Conversion and Continuation Procedures.................15
2.3 Letter of Credit Procedures...................................16
2.3.1 L/C Applications.......................................16
2.3.2 Participations in Letters of Credit....................16
2.3.3 Reimbursement Obligations..............................17
2.3.4 Limitation on Obligations of Issuing Banks.............17
2.3.5 Funding by Banks to Issuing Banks......................17
2.4 Commitments Several...........................................18
2.5 Certain Conditions............................................18
SECTION 3 NOTES EVIDENCING LOANS...............................................19
3.1 Notes.........................................................19
3.2 Recordkeeping.................................................19
SECTION 4 INTEREST.............................................................19
4.1 Interest Rates................................................19
4.2 Interest Payment Dates........................................19
4.3 Setting and Notice of Eurodollar Rates........................20
4.4 Computation of Interest.......................................20
SECTION 5 FEES.................................................................20
5.1 Non-Use Fee...................................................20
5.2 Letter of Credit Fees.........................................20
5.3 Agent's Fees..................................................21
</TABLE>
i
<PAGE> 3
<TABLE>
<S> <C> <C>
SECTION 6 REDUCTION AND TERMINATION OF THE COMMITMENTS;
PREPAYMENTS...................................................21
6.1 Reduction or Termination of the Commitments...................21
6.2 Prepayments...................................................21
SECTION 7 MAKING AND PRORATION OF PAYMENTS; SETOFF; TAXES......................22
7.1 Making of Payments............................................22
7.2 Application of Certain Payments...............................22
7.3 Due Date Extension............................................22
7.4 Setoff........................................................22
7.5 Proration of Payments.........................................23
7.6 Taxes.........................................................23
SECTION 8 INCREASED COSTS; SPECIAL PROVISIONS FOR EURODOLLAR LOANS.............25
8.1 Increased Costs...............................................25
8.2 Basis for Determining Interest Rate Inadequate or Unfair......27
8.3 Changes in Law Rendering Eurodollar Loans
Unlawful......................................................27
8.4 Funding Losses................................................28
8.5 Right of Banks to Fund through Other Offices..................28
8.6 Discretion of Banks as to Manner of Funding...................28
8.7 Mitigation of Circumstances; Replacement of Affected Bank.....29
8.8 Conclusiveness of Statements; Survival of
Provisions....................................................29
SECTION 9 WARRANTIES...........................................................30
9.1 Organization, etc.............................................30
9.2 Authorization; No Conflict....................................30
9.3 Validity and Binding Nature...................................30
9.4 Financial Condition...........................................31
9.5 No Material Adverse Change....................................31
9.6 Litigation and Contingent Liabilities.........................31
9.7 Ownership of Properties; Liens................................31
9.8 Subsidiaries..................................................32
9.9 Pension and Welfare Plans.....................................32
9.10 Investment Company Act........................................32
9.11 Public Utility Holding Company Act............................32
9.12 Regulation U..................................................33
9.13 Taxes.........................................................33
9.14 Solvency, etc.................................................33
9.15 Environmental Matters.........................................33
</TABLE>
ii
<PAGE> 4
<TABLE>
<S> <C> <C> <C>
9.16 Year 2000 Problem.............................................35
9.17 Information...................................................35
SECTION 10 COVENANTS...........................................................36
10.1 Reports, Certificates and Other Information...................36
10.1.1 Audit Report..........................................36
10.1.2 Quarterly Reports.....................................36
10.1.3 Monthly Reports.......................................37
10.1.4 Compliance Certificates...............................37
10.1.5 Reports to SEC and to Shareholders....................37
10.1.6 Notice of Default, Litigation and ERISA
Matters...........................................37
10.1.7 Subsidiaries..........................................38
10.1.8 Management Reports....................................39
10.1.9 Projections...........................................39
10.1.11 Other Information.....................................39
10.2 Books, Records and Inspections................................39
10.3 Insurance.....................................................40
10.4 Compliance with Laws; Payment of Taxes and
Liabilities...................................................40
10.5 Maintenance of Existence, etc.................................40
10.6 Financial Covenants...........................................40
10.6.1 Minimum Net Worth.....................................40
10.6.2 Minimum Interest Coverage.............................41
10.6.3 Funded Debt to EBITDA Ratio...........................41
10.6.5 Capital Expenditures..................................41
10.7 Limitations on Debt...........................................42
10.8 Liens.........................................................42
10.9 Operating Leases..............................................43
10.10 Restricted Payments...........................................43
10.11 Mergers, Consolidations, Sales................................43
10.12 Use of Proceeds...............................................44
10.13 Further Assurances............................................44
10.14 Transactions with Affiliates..................................45
10.15 Employee Benefit Plans........................................45
10.16 Environmental Laws............................................45
10.17 Unconditional Purchase Obligations............................45
10.18 Inconsistent Agreements.......................................46
10.19 Business Activities...........................................46
10.20 Advances and Other Investments................................46
</TABLE>
iii
<PAGE> 5
<TABLE>
<S> <C> <C>
SECTION 11 EFFECTIVENESS; CONDITIONS OF LENDING, ETC...........................47
11.1 Effectiveness.................................................47
11.1.1 Notes.................................................48
11.1.2 Resolutions...........................................48
11.1.3 Consents, etc.........................................48
11.1.4 Incumbency and Signature Certificates.................48
11.1.5 Guaranty..............................................48
11.1.6 Security Agreement....................................48
11.1.7 Pledge Agreements.....................................48
11.1.8 Opinion of Counsel for the Company and the
Guarantors........................................48
11.1.9 Other.................................................49
11.2 Conditions....................................................49
11.2.1 Compliance with Warranties, No
Default, etc......................................49
11.2.2 Confirmatory Certificate..............................50
SECTION 12 EVENTS OF DEFAULT AND THEIR EFFECT..................................50
12.1 Events of Default.............................................50
12.1.1 Non-Payment of the Loans, etc.........................50
12.1.2 Non-Payment of Other Debt.............................50
12.1.3 Other Material Obligations............................50
12.1.4 Bankruptcy, Insolvency, etc...........................51
12.1.5 Non-Compliance with Provisions of This
Agreement.........................................51
12.1.6 Warranties............................................51
12.1.7 Pension Plans.........................................52
12.1.8 Judgments.............................................52
12.1.9 Invalidity of Guaranty, etc...........................52
12.1.10 Invalidity of Collateral Documents, etc..............52
12.1.11 Change in Control....................................52
12.2 Effect of Event of Default....................................53
SECTION 13 THE AGENT...........................................................54
13.1 Appointment and Authorization.................................54
13.2 Delegation of Duties..........................................54
13.3 Liability of Agent............................................54
13.4 Reliance by Agent.............................................55
13.5 Notice of Default.............................................55
13.6 Credit Decision...............................................56
13.7 Indemnification...............................................56
</TABLE>
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<PAGE> 6
<TABLE>
<S> <C> <C>
13.8 Agent in Individual Capacity..................................58
13.9 Successor Agent...............................................58
13.10 Withholding Tax...............................................59
13.11 Collateral Matters............................................61
SECTION 14 GENERAL.............................................................61
14.1 Waiver; Amendments............................................61
14.2 Confirmations.................................................62
14.3 Notices.......................................................62
14.4 Computations..................................................62
14.5 Regulation U..................................................63
14.6 Costs, Expenses and Taxes.....................................63
14.7 Subsidiary References.........................................63
14.8 Captions......................................................64
14.9 Assignments; Participations...................................64
14.9.1 Assignments...........................................64
14.9.2 Participations........................................65
14.10 Governing Law...................................................66
14.11 Counterparts....................................................66
14.12 Successors and Assigns..........................................67
14.13 Indemnification by the Company..................................67
14.14 Forum Selection and Consent to Jurisdiction.....................68
14.15 Waiver of Jury Trial............................................68
</TABLE>
SCHEDULE 1.1 Pricing Schedule
SCHEDULE 2.1 Banks and Percentages
SCHEDULE 9.6 Litigation and Contingent Liabilities
SCHEDULE 9.8 Subsidiaries
SCHEDULE 9.15 Environmental Matters
SCHEDULE 10.7 Existing Debt
SCHEDULE 10.8 Existing Liens
SCHEDULE 12.1.11 Key Executives
SCHEDULE 14.3 Addresses for Notices
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<PAGE> 7
EXHIBIT A Form of Note
(Section 3.1)
EXHIBIT B Form of Compliance Certificate
(Section 10.1.3)
EXHIBIT C Form of Guaranty
(Section 1)
EXHIBIT D Form of Security Agreement
(Section 1)
EXHIBIT E Form of Company Pledge Agreement
(Section 1)
EXHIBIT F Form of Subsidiary Pledge Agreement
(Section 11.1.7)
EXHIBIT G Form of Assignment Agreement
(Section 14.9)
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<PAGE> 8
CREDIT AGREEMENT
This CREDIT AGREEMENT, dated as of June 26, 1998 (this "Agreement"), is
entered into among SANTI GROUP, INC., a Delaware corporation (the "Company"),
the financial institutions that are or may from time to time become parties
hereto (together with their respective successors and assigns, the "Banks"), and
BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION (in its individual
capacity, "BofA"), as agent for the Banks.
WHEREAS, the Banks have agreed to extend a revolving credit facility
(with letter of credit subfacility) to the Company;
NOW, THEREFORE, in consideration of the mutual agreements, provisions
and covenants contained herein, the parties hereto agree as follows:
SECTION 1 DEFINITIONS.
1.1 Definitions. When used herein the following terms shall have
the following meanings:
Affected Bank means any Bank that has given notice to the Company
(which has not been rescinded) of (i) any obligation by the Company to pay any
amount pursuant to Section 7.6 or 8.1 or (ii) the occurrence of any
circumstances of the nature described in Section 8.2 or 8.3.
Affiliate of any Person means (i) any other Person which, directly or
indirectly, controls or is controlled by or is under common control with such
Person and (ii) any officer or director of such Person.
Agent means BofA in its capacity as agent for the Banks hereunder and
any successor thereto in such capacity.
Agent-Related Persons means BofA and any successor agent arising under
Section 13.9, together with their respective Affiliates (including, in the case
of BofA, the Arranger), and the officers, directors, employees, agents and
attorneys-in-fact of such Persons and Affiliates.
Agreement - see the Preamble.
Assignee - see Section 14.9.1.
Assignment Agreement - see Section 14.9.1.
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<PAGE> 9
Bank - see the Preamble. References to the "Banks" shall include the
Issuing Bank; for purposes of clarification only, to the extent that BofA (or
any successor Issuing Bank) may have any rights or obligations in addition to
those of the other Banks due to its status as Issuing Bank, its status as such
will be specifically referenced.
Base Rate means at any time the greater of (a) the Federal Funds Rate
plus 0.5% and (b) the Reference Rate.
BofA - see the Preamble.
Business Day means any day on which BofA is open for commercial banking
business in Chicago, New York and San Francisco and, in the case of a Business
Day which relates to a Eurodollar Loan, on which dealings are carried on in the
interbank eurodollar market.
Capital Expenditures means all expenditures which, in accordance with
GAAP, would be required to be capitalized and shown on the consolidated balance
sheet of the Company, but excluding expenditures made in connection with the
replacement, substitution or restoration of assets to the extent financed (i)
from insurance proceeds (or other similar recoveries) paid on account of the
loss of or damage to the assets being replaced or restored or (ii) with awards
of compensation arising from the taking by eminent domain or condemnation of the
assets being replaced.
Capital Lease means, with respect to any Person, any lease of (or other
agreement conveying the right to use) any real or personal property by such
Person that, in conformity with GAAP, is accounted for as a capital lease on the
balance sheet of such Person.
Cash Equivalent Investment means, at any time, (a) any evidence of
Debt, maturing not more than one year after such time, issued or guaranteed by
the United States Government or any agency thereof, (b) commercial paper,
maturing not more than one year from the date of issue, or corporate demand
notes, in each case (unless issued by a Bank or its holding company) rated at
least A-l by Standard & Poor's Ratings Group or P-l by Moody's Investors
Service, Inc., (c) any certificate of deposit (or time deposits represented by
such certificates of deposit) or bankers acceptance, maturing not more than one
year after such time, or overnight Federal Funds transactions that are issued or
sold by a commercial banking institution that is a member of the Federal Reserve
System and has a combined capital and surplus and undivided profits of not less
than $500,000,000, (d) any repurchase agreement entered into with any Bank (or
other commercial banking institution of the stature referred to in clause (c))
which (i) is secured by a fully perfected security interest in any obligation of
the type described in any of clauses (a) through (c) and (ii) has a market value
at the time such repurchase agreement is entered into of not less than 100% of
the repurchase obligation of such Bank (or other commercial banking institution)
thereunder and (e) investments in short-term asset management accounts offered
by any Bank for the purpose of investing in loans to any corporation (other than
the Company or an
2
<PAGE> 10
Affiliate of the Company), state or municipality, in each case organized under
the laws of any state of the United States or of the District of Columbia.
CERCLA - see Section 9.15.
Code means the Internal Revenue Code of 1986.
Collateral Documents means the Company Pledge Agreement, each
Subsidiary Pledge Agreement, the Security Agreement and any other agreement
pursuant to which the Company or any Guarantor grants collateral to the Agent
for the benefit of the Banks.
Commitment Amount means $40,000,000 as reduced from time to time
pursuant to Section 6.1.
Commitment means, as to any Bank, such Bank's commitment to make Loans,
and to issue or participate in Letters of Credit, under this Agreement.
Company - see the Preamble.
Company Pledge Agreement means a pledge agreement between the Company
and the Agent, substantially in the form of Exhibit E.
Computation Period means each of the following periods: (a) the Fiscal
Quarter ending June 30, 1998; (b) the period of two consecutive Fiscal Quarters
ending September 30, 1998; (c) the period of three consecutive Fiscal Quarters
ending December 31, 1998; and (d) each period of four consecutive Fiscal
Quarters ending on the last day of a Fiscal Quarter on or after March 31, 1999.
Consolidated Net Income means, with respect to the Company and its
Subsidiaries for any period, the net income (or loss) of the Company and its
Subsidiaries for such period, excluding any extraordinary gains during such
period.
Consolidated Net Worth means, at any date, consolidated stockholders'
equity (excluding any equity attributed to any mandatorily redeemable preferred
stock) of the Company and its Subsidiaries as at such date.
Controlled Group means all members of a controlled group of
corporations and all members of a controlled group of trades or businesses
(whether or not incorporated) under common control which, together with the
Company, are treated as a single employer under Section 414 of the Code or
Section 4001 of ERISA.
3
<PAGE> 11
Debt of any Person means, without duplication, (a) all indebtedness of
such Person for borrowed money, whether or not evidenced by bonds, debentures,
notes or similar instruments, (b) all obligations of such Person as lessee under
Capital Leases which have been or should be recorded as liabilities on a balance
sheet of such Person, (c) all obligations of such Person to pay the deferred
purchase price of property or services (excluding trade accounts payable in the
ordinary course of business), (d) all indebtedness secured by a Lien on the
property of such Person, whether or not such indebtedness shall have been
assumed by such Person (it being understood that if such Person has not assumed
or otherwise become personally liable for any such indebtedness, the amount of
the Debt of such Person in connection therewith shall be limited to the lesser
of the face amount of such indebtedness or the fair market value of all property
of such Person securing such indebtedness), (e) all obligations, contingent or
otherwise, with respect to the face amount of all letters of credit (whether or
not drawn) and banker's acceptances issued for the account of such Person
(including the Letters of Credit), (f) net liabilities of such Person under all
Hedging Obligations and (g) all Suretyship Liabilities of such Person.
Disposal - see the definition of "Release".
Dollar and the sign "$" mean lawful money of the United States of
America.
EBITDA means, for any period, Consolidated Net Income for such period
plus, to the extent deducted in determining such Consolidated Net Income,
Interest Expense, income tax expense, depreciation and amortization for such
period; provided that for purposes of calculating EBITDA for any period, the
consolidated net income of any Person acquired by the Company or any Subsidiary
during such period (plus, to the extent deducted in determining such
consolidated net income, interest expense, income tax expense, depreciation and
amortization of such Person) shall be included on a pro forma basis for such
period (assuming the consummation of each such acquisition and the incurrence or
assumption of any Debt in connection therewith occurred on the first day of such
period) if (i) the audited consolidated balance sheet of such acquired Person
and its consolidated Subsidiaries as at the end of the fiscal year of such
Person preceding the acquisition of such Person and the related audited
consolidated statements of income, stockholders' equity and cash flows for the
such fiscal year have been provided to the Agent and the Banks and (ii) any
subsequent unaudited financial statements for such Person for the period prior
to the acquisition of such Person were prepared on a basis consistent with such
audited financial statements.
Effective Date - see Section 11.1.
Environmental Claims means all claims, however asserted, by any
governmental, regulatory or judicial authority or other Person alleging
potential liability or responsibility for violation of any Environmental Law, or
for release or injury to the environment.
4
<PAGE> 12
Environmental Laws means all federal, state or local laws, statutes,
common law duties, rules, regulations, ordinances and codes, together with all
administrative orders, directed duties, requests, licenses, authorizations and
permits of, and agreements with, any governmental authority, in each case
relating to environmental matters.
ERISA means the Employee Retirement Income Security Act of 1974.
Eurocurrency Reserve Percentage means, with respect to any Eurodollar
Loan for any Interest Period, a percentage (expressed as a decimal) equal to the
daily average during such Interest Period of the percentage in effect on each
day of such Interest Period, as prescribed by the Board of Governors of the
Federal Reserve System (or any successor), for determining the aggregate maximum
reserve requirements applicable to "Eurocurrency Liabilities" pursuant to
Regulation D or any other then applicable regulation of such Board of Governors
which prescribes reserve requirements applicable to "Eurocurrency Liabilities"
as presently defined in Regulation D.
Eurodollar Loan means any Revolving Loan which bears interest at a rate
determined by reference to the Eurodollar Rate (Reserve Adjusted).
Eurodollar Margin - see Schedule 1.1.
Eurodollar Office means with respect to any Bank the office or offices
of such Bank which shall be making or maintaining the Eurodollar Loans of such
Bank hereunder or such other office or offices through which such Bank
determines its Eurodollar Rate. A Eurodollar Office of any Bank may be, at the
option of such Bank, either a domestic or foreign office.
Eurodollar Rate means, with respect to any Eurodollar Loan for any
Interest Period, the rate per annum at which Dollar deposits in immediately
available funds are offered to the Eurodollar Office of BofA two Business Days
prior to the beginning of such Interest Period by major banks in the interbank
eurodollar market as at or about 10:00 A.M., Chicago time, for delivery on the
first day of such Interest Period, for the number of days comprised therein and
in an amount equal or comparable to the amount of the Eurodollar Loan of BofA
for such Interest Period.
Eurodollar Rate (Reserve Adjusted) means, with respect to any
Eurodollar Loan for any Interest Period, a rate per annum (rounded upwards, if
necessary, to the nearest 1/100 of 1%) determined pursuant to the following
formula:
Eurodollar Rate = Eurodollar Rate
---------------
(Reserve Adjusted) 1-Eurocurrency
Reserve Percentage
5
<PAGE> 13
Event of Default means any of the events described in Section 12.1.
Exemption Representation - See Section 7.6.
Federal Funds Rate means, for any day, the rate set forth in the weekly
statistical release designated as H.15(519), or any successor publication,
published by the Federal Reserve Bank of New York (including any such successor
publication, "H.15(519)") on the preceding Business Day opposite the caption
"Federal Funds (Effective)"; or, if for any relevant day such rate is not so
published on any such preceding Business Day, the rate for such day will be the
arithmetic mean as determined by the Agent of the rates for the last transaction
in overnight Federal funds arranged prior to 9:00 a.m. (New York City time) on
that day by each of three leading brokers of Federal funds transactions in New
York City selected by the Agent.
Financial Letter of Credit means any Letter of Credit determined by the
applicable Issuing Bank to be a "financial guaranty-type Standby Letter of
Credit" as defined in footnote 13 to Appendix A to the Risk Based Capital
Guidelines issued by the Comptroller of the Currency (or in any successor
regulation, guideline or ruling by any applicable banking regulatory authority).
Fiscal Quarter means a fiscal quarter of a Fiscal Year.
Fiscal Year means the fiscal year of the Company and its Subsidiaries,
which period shall be the 12-month period ending on December 31 of each year.
References to a Fiscal Year with a number corresponding to any calendar year
(e.g., "Fiscal Year 1997") refer to the Fiscal Year ending on December 31 of
such calendar year.
Floating Rate Loan means any Loan which bears interest at or by
reference to the Base Rate.
Floating Rate Margin - see Schedule 1.1.
Funded Debt means all Debt of the Company and its Subsidiaries,
excluding (i) contingent obligations in respect of undrawn letters of credit and
Suretyship Liabilities (except, in each case, to the extent constituting
Suretyship Liabilities in respect of Debt of a Person other than the Company or
any Subsidiary), (ii) Hedging Obligations and (iii) Debt of the Company to
Subsidiaries and Debt of Subsidiaries to the Company or to other Subsidiaries.
Funded Debt to EBITDA Ratio means, for any Computation Period, the
ratio of (i) Funded Debt as of the last day of such Computation Period to (ii)
EBITDA for such Computation Period; provided that for the Computation Periods
ending June 30, 1998, September 30, 1998 and December 31, 1998, EBITDA shall be
multiplied by 4, 2 and 1.33, respectively.
6
<PAGE> 14
GAAP means generally accepted accounting principles set forth from time
to time in the opinions and pronouncements of the Accounting Principles Board
and the American Institute of Certified Public Accountants and statements and
pronouncements of the Financial Accounting Standards Board (or agencies with
similar functions of comparable stature and authority within the U.S. accounting
profession), which are applicable to the circumstances as of the date of
determination.
Group - see Section 2.2.1.
Guarantor means, on any day, each Subsidiary that has executed a
counterpart of the Guaranty on or prior to that day (or is required to execute a
counterpart of the Guaranty on that date).
Guaranty means a guaranty substantially in the form of Exhibit C.
Hazardous Substances - see Section 9.15.
Interest Coverage Ratio means, for any Computation Period, the ratio of
(a) Consolidated Net Income before deducting Interest Expense and income tax
expense for such Computation Period to (b) Interest Expense for such Computation
Period.
Interest Expense means, for any Computation Period, the consolidated
interest expense of the Company and its Subsidiaries for such Computation Period
(including all imputed interest on Capital Leases and before giving effect to
any capitalization of interest but excluding amortization of deferred financing
costs).
Interest Period means, as to any Eurodollar Loan, the period commencing
on the date such Loan is borrowed or continued as, or converted into, a
Eurodollar Loan and ending on the date one, two, three or six months thereafter,
as selected by the Company pursuant to Section 2.2.3; provided that:
(i) if any Interest Period would otherwise end on a day that
is not a Business Day, such Interest Period shall be extended to the
following Business Day unless the result of such extension would be to
carry such Interest Period into another calendar month, in which event
such Interest Period shall end on the preceding Business Day;
(ii) any Interest Period for a Eurodollar Loan that begins on
a day for which there is no numerically corresponding day in the
calendar month at the end of such Interest Period shall end on the last
Business Day of the calendar month at the end of such Interest Period;
and
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<PAGE> 15
(iii) the Company may not select any Interest Period for any
Loan which would extend beyond the scheduled Termination Date.
Investment means, relative to any Person, (a) any loan or advance made
by such Person to any other Person (excluding any commission, travel or similar
advances made to directors, officers and employees of the Company or any of its
Subsidiaries), (b) any Suretyship Liability of such Person, (c) any ownership or
similar interest held by such Person in any other Person and (d) deposits and
the like relating to prospective acquisitions of businesses.
Issuing Bank means BofA in its capacity as an issuer of Letters of
Credit hereunder and any other Bank which, with the written consent of the
Company and the Agent, is the issuer of one or more Letters of Credit hereunder.
L/C Application means, with respect to any request for the issuance of
a Letter of Credit, a letter of credit application in the form being used by the
applicable Issuing Bank at the time of such request for the type of letter of
credit requested.
Letter of Credit - see Section 2.1.2.
Lien means, with respect to any Person, any interest granted by such
Person in any real or personal property, asset or other right owned or being
purchased or acquired by such Person which secures payment or performance of any
obligation and shall include any mortgage, lien, encumbrance, charge or other
security interest of any kind, whether arising by contract, as a matter of law,
by judicial process or otherwise.
Loan Documents means this Agreement, the Notes, the Guaranty, the L/C
Applications and the Collateral Documents.
Loans means Revolving Loans.
Margin Stock means any "margin stock" as defined in Regulation U of the
Board of Governors of the Federal Reserve System.
Material Adverse Effect means (a) a material adverse change in, or a
material adverse effect upon, the financial condition, operations, assets,
business, properties or prospects of the Company and its Subsidiaries taken as a
whole, or (b) a material adverse effect upon any substantial portion of the
collateral under the Collateral Documents or upon the legality, validity,
binding effect or enforceability against the Company or any Guarantor of any
Loan Document.
Multiemployer Pension Plan means a multiemployer plan, as such term is
defined in Section 4001(a)(3) of ERISA, and to which the Company or any member
of the Controlled Group may have any liability.
8
<PAGE> 16
Net Worth means the Company's consolidated stockholders' equity
(including preferred stock accounts).
Non-Financial Letter of Credit means any Letter of Credit other than a
Financial Letter of Credit.
Note - see Section 3.1.
Operating Lease means any lease of (or other agreement conveying the
right to use) any real or personal property by the Company or any Subsidiary, as
lessee, other than any Capital Lease.
PBGC means the Pension Benefit Guaranty Corporation and any entity
succeeding to any or all of its functions under ERISA.
Pension Plan means a "pension plan", as such term is defined in Section
3(2) of ERISA, which is subject to Title IV of ERISA (other than a Multiemployer
Pension Plan), and to which the Company or any member of the Controlled Group
may have any liability, including any liability by reason of having been a
substantial employer within the meaning of Section 4063 of ERISA at any time
during the preceding five years, or by reason of being deemed to be a
contributing sponsor under Section 4069 of ERISA.
Percentage means, with respect to any Bank, the percentage specified
opposite such Bank's name on Schedule 2.1 hereto, reduced (or increased) by
subsequent assignments pursuant to Section 14.9.1.
Person means any natural person, corporation, partnership, trust,
limited liability company, association, governmental authority or unit, or any
other entity, whether acting in an individual, fiduciary or other capacity.
RCRA - see Section 9.15.
Release has the meaning specified in CERCLA and the term "Disposal" (or
"Disposed") has the meaning specified in RCRA; provided that in the event either
CERCLA or RCRA is amended so as to broaden the meaning of any term defined
thereby, such broader meaning shall apply as of the effective date of such
amendment; and provided, further, that to the extent that the laws of a state
wherein any affected property lies establish a meaning for "Release" or
"Disposal" which is broader than is specified in either CERCLA or RCRA, such
broader meaning shall apply.
Reference Rate means, for any day, the rate of interest in effect for
such day as publicly announced from time to time by BofA in San Francisco,
California, as its "reference rate." (The
9
<PAGE> 17
"reference rate" is a rate set by BofA based upon various factors, including
BofA's costs and desired return, general economic conditions and other factors,
and is used as a reference point for pricing some loans, which may be priced at,
above, or below such announced rate.) Any change in the reference rate announced
by BofA shall take effect at the opening of business on the day specified in the
public announcement of such change.
Required Banks means Banks having Percentages aggregating 66-2/3% or
more; provided that at any time there are less than three Banks, "Required
Banks" shall mean all Banks.
Revolving Loan - see Section 2.1.1.
SEC means the Securities and Exchange Commission.
Security Agreement means a Security Agreement substantially in the form
of Exhibit D.
Stated Amount means, with respect to any Letter of Credit at any date
of determination, the maximum aggregate amount available for drawing thereunder
at any time during the then ensuing term of such Letter of Credit under any and
all circumstances, plus the aggregate amount of all unreimbursed payments and
disbursements under such Letter of Credit.
Subsidiary means, with respect to any Person, a corporation of which
such Person and/or its other Subsidiaries own, directly or indirectly, such
number of outstanding shares as have more than 50% of the ordinary voting power
for the election of directors. Unless the context otherwise requires, each
reference to Subsidiaries herein shall be a reference to Subsidiaries of the
Company.
Subsidiary Pledge Agreement means each pledge agreement substantially
in the form of Exhibit F issued by any Subsidiary, whether pursuant to Section
11.1.7 or Section 10.13.
Suretyship Liability means any agreement, undertaking or arrangement by
which any Person guarantees, endorses or otherwise becomes or is contingently
liable upon (by direct or indirect agreement, contingent or otherwise, to
provide funds for payment, to supply funds to or otherwise to invest in a
debtor, or otherwise to assure a creditor against loss) any indebtedness,
obligation or other liability of any other Person (other than by endorsements of
instruments in the course of collection), or guarantees the payment of dividends
or other distributions upon the shares of any other Person. The amount of any
Person's obligation in respect of any Suretyship Liability shall (subject to any
limitation set forth therein) be deemed to be the principal amount of the debt,
obligation or other liability supported thereby.
Termination Date means the earlier to occur of (a) June 26, 2001 or (b)
such other date on which the Commitments shall terminate pursuant to Section 6
or 12.
10
<PAGE> 18
Total Outstandings means at any time the sum of (a) the aggregate
principal amount of all outstanding Loans plus (b) the Stated Amount of all
Letters of Credit.
Type of Revolving Loan or Borrowing - see Section 2.2.1. The types of
Revolving Loans or borrowings under this Agreement are as follows: Floating Rate
Loans or borrowings and Eurodollar Loans or borrowings.
Unmatured Event of Default means any event that, if it continues
uncured, will, with lapse of time or notice or both, constitute an Event of
Default.
Welfare Plan means a "welfare plan", as such term is defined in Section
3(1) of ERISA.
1.2 Other Interpretive Provisions. (a) The meanings of defined
terms are equally applicable to the singular and plural forms of the defined
terms.
(b) Section, Schedule and Exhibit references are to this
Agreement unless otherwise specified.
(c) (i) The term "including" is not limiting and means
"including without limitation."
(ii) In the computation of periods of time from a
specified date to a later specified date, the word "from" means "from
and including"; the words "to" and "until" each mean "to but
excluding", and the word "through" means "to and including."
(d) Unless otherwise expressly provided herein, (i)
references to agreements (including this Agreement) and other contractual
instruments shall be deemed to include all subsequent amendments and other
modifications thereto, but only to the extent such amendments and other
modifications are not prohibited by the terms of any Loan Document, and (ii)
references to any statute or regulation are to be construed as including all
statutory and regulatory provisions consolidating, amending, replacing,
supplementing or interpreting such statute or regulation.
(e) This Agreement and the other Loan Documents may use
several different limitations, tests or measurements to regulate the same or
similar matters. All such limitations, tests and measurements are cumulative and
shall each be performed in accordance with their terms.
(f) This Agreement and the other Loan Documents are the
result of negotiations among and have been reviewed by counsel to the Agent, the
Company, the Banks and the other parties thereto and are the products of all
parties. Accordingly, they shall not be
11
<PAGE> 19
construed against the Agent or the Banks merely because of the Agent's or Banks'
involvement in their preparation.
SECTION 2 COMMITMENTS OF THE BANKS; BORROWING, CONVERSION
AND LETTER OF CREDIT PROCEDURES.
2.1 Commitments. On and subject to the terms and conditions of
this Agreement, each of the Banks, severally and for itself alone, agrees to
make loans to, and to issue or participate in the issuance of letters of credit
for the account of, the Company as follows:
2.1.1 Revolving Loan Commitment. Each Bank will make loans on a
revolving basis ("Revolving Loans") from time to time before the Termination
Date in such Bank's Percentage of such aggregate amounts as the Company may from
time to time request from all Banks; provided that the Total Outstandings will
not at any time exceed the Commitment Amount; provided further that the Total
Outstandings shall not exceed $15,000,000 at any time prior to the delivery of
the Company's audited consolidated financial statements pursuant to Section 10.
2.1.2 L/C Commitment. (a) The Issuing Banks will issue standby
letters of credit, in each case containing such terms and conditions as are
permitted by this Agreement and are reasonably satisfactory to the applicable
Issuing Bank and the Company (each, a "Letter of Credit"), at the request of and
for the account of the Company or any Subsidiary from time to time before the
Termination Date and (b) as more fully set forth in Section 2.3.5, each Bank
agrees to purchase a participation in each such Letter of Credit; provided that
the aggregate Stated Amount of all Letters of Credit shall not at any time
exceed the lesser of (i) $5,000,000 and (ii) the excess, if any, of the
Commitment Amount over the aggregate principal amount of all outstanding Loans.
2.2 Revolving Loan Procedures.
2.2.1 Various Types of Revolving Loans. Each Revolving Loan shall be
either a Floating Rate Loan or a Eurodollar Loan (each a "type" of Revolving
Loan), as the Company shall specify in the related notice of borrowing or
conversion pursuant to Section 2.2.2 or 2.2.3. Eurodollar Loans having the same
Interest Period are sometimes called a "Group" or collectively "Groups".
Floating Rate Loans and Eurodollar Loans may be outstanding at the same time,
provided that (i) not more than eight different Groups of Eurodollar Loans shall
be outstanding at any one time, (ii) the aggregate principal amount of each
Group of Eurodollar Loans shall at all times be at least $500,000 and an
integral multiple of $100,000 and (iii) during the 90 days immediately following
the Effective Date, the Company may not select any Interest Period for any Group
of Eurodollar Loans which would end after the date specified by the Agent in
writing on the Effective Date as the date on which the Agent plans to complete
the primary syndication of the credit facility established hereunder. All
borrowings, conversions and repayments of
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Revolving Loans shall be effected so that each Bank will have a pro rata share
(according to its Percentage) of all types and Groups of Revolving Loans.
2.2.2 Borrowing Procedures. The Company shall give written notice or
telephonic notice (followed promptly by written confirmation thereof) to the
Agent of each proposed borrowing not later than (a) in the case of a Floating
Rate borrowing, 11:00 A.M., Chicago time, on the proposed date of such
borrowing, and (b) in the case of a Eurodollar borrowing, 9:00 A.M., Chicago
time, at least two Business Days prior to the proposed date of such borrowing.
Each such notice shall be effective upon receipt by the Agent, shall be
irrevocable, and shall specify the date, amount and type of borrowing and, in
the case of a Eurodollar borrowing, the initial Interest Period therefor.
Promptly upon receipt of such notice, the Agent shall advise each Bank thereof.
Not later than 1:00 p.m., Chicago time, on the date of a proposed borrowing,
each Bank shall provide the Agent at the office specified by the Agent with
immediately available funds covering such Bank's Percentage of such borrowing
and, so long as the Agent has not received written notice that the conditions
precedent set forth in Section 11 with respect to such borrowing have not been
satisfied, the Agent shall pay over the requested amount to the Company on the
requested borrowing date. Each borrowing shall be on a Business Day. Each
borrowing shall be in an aggregate amount of at least $500,000 and an integral
multiple of $100,000.
2.2.3 Conversion and Continuation Procedures. (a) Subject to the
provisions of Section 2.2.1, the Company may, upon irrevocable written notice to
the Agent in accordance with clause (b) below:
(i) elect, as of any Business Day, to convert any
outstanding Loan into a Loan of a different type; or
(ii) elect, as of the last day of the applicable
Interest Period, to continue any Group of Eurodollar Loans
having an Interest Period expiring on such day (or any part
thereof in an aggregate amount not less than $500,000 or a
higher integral multiple of $100,000) for a new Interest
Period.
(b) The Company shall give written or telephonic (followed
promptly by written confirmation thereof) notice to the Agent of each proposed
conversion or continuation not later than (i) in the case of conversion into
Floating Rate Loans, 10:00 a.m., Chicago time, on the proposed date of such
conversion; and (ii) in the case of a conversion into or continuation of
Eurodollar Loans, 10:00 a.m., Chicago time, at least three Business Days prior
to the proposed date of such conversion or continuation, specifying in each
case:
(1) the proposed date of conversion or continuation;
(2) the aggregate amount of Loans to be converted or
continued;
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(3) the type of Loans resulting from the proposed
conversion or continuation; and
(4) in the case of conversion into, or continuation
of, Eurodollar Loans, the duration of the requested Interest
Period therefor.
(c) If upon expiration of any Interest Period applicable to Eurodollar
Loans, the Company has failed to select timely a new Interest Period to be
applicable to such Eurodollar Loans, the Company shall be deemed to have elected
to convert such Eurodollar Loans into Floating Rate Loans effective on the last
day of such Interest Period.
(d) The Agent will promptly notify each Bank of its receipt of a notice
of conversion or continuation pursuant to this Section 2.4 or, if no timely
notice is provided by the Company, of the details of any automatic conversion.
(e) Unless the Required Banks otherwise consent, during the existence
of any Event of Default or Unmatured Event of Default, the Company may not elect
to have a Floating Rate Loan converted into or continued as a Eurodollar Loan.
2.3 Letter of Credit Procedures.
2.3.1 L/C Applications. The Company shall give notice to the Agent
and the applicable Issuing Bank of the proposed issuance of each Letter of
Credit on a Business Day which is at least three Business Days (or such lesser
number of days as the Agent and such Issuing Bank shall agree in any particular
instance) prior to the proposed date of issuance of such Letter of Credit. Each
such notice shall be accompanied by an L/C Application, duly executed by the
Company (together with any Subsidiary for the account of which the related
Letter of Credit is to be issued) and in all respects satisfactory to the Agent
and the applicable Issuing Bank, together with such other documentation as the
Agent or such Issuing Bank may reasonably request in support thereof, it being
understood that each L/C Application shall specify, among other things, the date
on which the proposed Letter of Credit is to be issued, the expiration date of
such Letter of Credit (which shall not be later than the Termination Date) and
whether such Letter of Credit is to be transferable in whole or in part. So long
as the applicable Issuing Bank has not received written notice that the
conditions precedent set forth in Section 11 with respect to the issuance of
such Letter of Credit have not been satisfied, such Issuing Bank shall issue
such Letter of Credit on the requested issuance date. Each Issuing Bank shall
promptly advise the Agent of the issuance of each Letter of Credit by such
Issuing Bank and of any amendment thereto, extension thereof or event or
circumstance changing the amount available for drawing thereunder.
2.3.2 Participations in Letters of Credit. Concurrently with the
issuance of each Letter of Credit, the applicable Issuing Bank shall be deemed
to have sold and transferred to each other Bank, and each other Bank shall be
deemed irrevocably and unconditionally to have purchased
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and received from such Issuing Bank, without recourse or warranty, an undivided
interest and participation, to the extent of such other Bank's Percentage, in
such Letter of Credit and the Company's reimbursement obligations with respect
thereto. For the purposes of this Agreement, the unparticipated portion of each
Letter of Credit shall be deemed to be the applicable Issuing Bank's
"participation" therein. Each Issuing Bank hereby agrees, upon request of the
Agent or any Bank, to deliver to such Bank a list of all outstanding Letters of
Credit issued by such Issuing Bank, together with such information related
thereto as such Bank may reasonably request.
2.3.3 Reimbursement Obligations. The Company hereby unconditionally
and irrevocably agrees to reimburse the applicable Issuing Bank for each payment
or disbursement made by such Issuing Bank under any Letter of Credit honoring
any demand for payment made by the beneficiary thereunder, in each case on the
date that such payment or disbursement is made. Any amount not reimbursed on the
date of such payment or disbursement shall bear interest from the date of such
payment or disbursement to the date that such Issuing Bank is reimbursed by the
Company therefor, payable on demand, at a rate per annum equal to the Base Rate
from time to time in effect plus the Floating Rate Margin from time to time in
effect plus, beginning on the third Business Day after receipt of notice from
the Issuing Bank of such payment or disbursement, 2%. The applicable Issuing
Bank shall notify the Company and the Agent whenever any demand for payment is
made under any Letter of Credit by the beneficiary thereunder; provided,
however, that the failure of such Issuing Bank to so notify the Company shall
not affect the rights of such Issuing Bank or the Banks in any manner
whatsoever.
2.3.4 Limitation on Obligations of Issuing Banks. In determining
whether to pay under any Letter of Credit, no Issuing Bank shall have any
obligation to the Company or any Bank other than to confirm that any documents
required to be delivered under such Letter of Credit appear to have been
delivered and appear to comply on their face with the requirements of such
Letter of Credit. Any action taken or omitted to be taken by an Issuing Bank
under or in connection with any Letter of Credit, if taken or omitted in the
absence of gross negligence and willful misconduct, shall not impose upon such
Issuing Bank any liability to the Company or any Bank and shall not reduce or
impair the Company's reimbursement obligations set forth in Section 2.3.3 or the
obligations of the Banks pursuant to Section 2.3.5.
2.3.5 Funding by Banks to Issuing Banks. If an Issuing Bank makes
any payment or disbursement under any Letter of Credit and the Company has not
reimbursed such Issuing Bank in full for such payment or disbursement by 11:00
A.M., Chicago time, on the date of such payment or disbursement, or if any
reimbursement received by such Issuing Bank from the Company is or must be
returned or rescinded upon or during any bankruptcy or reorganization of the
Company or otherwise, each other Bank shall be obligated to pay to the Agent for
the account of such Issuing Bank, in full or partial payment of the purchase
price of its participation in such Letter of Credit, its pro rata share
(according to its Percentage) of such payment or disbursement (but no such
payment shall diminish the obligations of the Company under Section 2.3.3), and
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upon notice from the applicable Issuing Bank, the Agent shall promptly notify
each other Bank thereof. Each other Bank irrevocably and unconditionally agrees
to so pay to the Agent in immediately available funds for the applicable Issuing
Bank's account the amount of such other Bank's Percentage of such payment or
disbursement. If and to the extent any Bank shall not have made such amount
available to the Agent by 2:00 P.M., Chicago time, on the Business Day on which
such Bank receives notice from the Agent of such payment or disbursement (it
being understood that any such notice received after noon, Chicago time, on any
Business Day shall be deemed to have been received on the next following
Business Day), such Bank agrees to pay interest on such amount to the Agent for
the applicable Issuing Bank's account forthwith on demand for each day from the
date such amount was to have been delivered to the Agent to the date such amount
is paid, at a rate per annum equal to (a) for the first three days after demand,
the Federal Funds Rate from time to time in effect and (b) thereafter, the Base
Rate from time to time in effect. Any Bank's failure to make available to the
Agent its Percentage of any such payment or disbursement shall not relieve any
other Bank of its obligation hereunder to make available to the Agent such other
Bank's Percentage of such payment, but no Bank shall be responsible for the
failure of any other Bank to make available to the Agent such other Bank's
Percentage of any such payment or disbursement.
2.4 Commitments Several. The failure of any Bank to make a
requested Loan on any date shall not relieve any other Bank of its obligation
(if any) to make a Loan on such date, but no Bank shall be responsible for the
failure of any other Bank to make any Loan to be made by such other Bank.
2.5 Certain Conditions. Notwithstanding any other provision of
this Agreement, no Bank shall have an obligation to make any Loan, or to permit
the continuation of or any conversion into any Eurodollar Loan, and no Issuing
Bank shall have any obligation to issue any Letter of Credit, if an Event of
Default or Unmatured Event of Default exists.
SECTION 3 NOTES EVIDENCING LOANS.
3.1 Notes. The Loans of each Bank shall be evidenced by a
promissory note (each a "Note") substantially in the form set forth in Exhibit
A, with appropriate insertions, payable to the order of such Bank in a face
principal amount equal to such Bank's Percentage of the Commitment Amount.
3.2 Recordkeeping. Each Bank shall record in its records, or at
its option on the schedule attached to its Note, the date and amount of each
Loan made by such Bank, each repayment or conversion thereof and, in the case of
each Eurodollar Loan, the dates on which each Interest Period for such Loan
shall begin and end. The aggregate unpaid principal amount so recorded shall be
rebuttable presumptive evidence of the principal amount owing and unpaid on such
Note. The failure to so record any such amount or any error in so recording any
such amount shall not, however, limit or otherwise affect the obligations of the
Company hereunder or under
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any Note to repay the principal amount of the Loans evidenced by such Note
together with all interest accruing thereon.
SECTION 4 INTEREST.
4.1 Interest Rates. The Company promises to pay interest on the
unpaid principal amount of each Loan for the period commencing on the date of
such Loan until such Loan is paid in full as follows:
(a) at all times while such Loan is a Floating Rate Loan,
at a rate per annum equal to the sum of the Base Rate from time to time
in effect plus the Floating Rate Margin from time to time in effect;
and
(b) at all times while such Loan is a Eurodollar Loan, at
a rate per annum equal to the sum of the Eurodollar Rate (Reserve
Adjusted) applicable to each Interest Period for such Loan plus the
Eurodollar Margin from time to time in effect;
provided, however, that at any time an Event of Default exists, the interest
rate applicable to each Loan shall be increased by 2%.
4.2 Interest Payment Dates. Accrued interest on each Floating Rate
Loan shall be payable in arrears on the last Business Day of each calendar month
and at maturity. Accrued interest on each Eurodollar Loan shall be payable on
the last day of each Interest Period relating to such Loan (and, in the case of
a Eurodollar Loan with a six-month Interest Period, on the three-month
anniversary of the first day of such Interest Period) and at maturity. After
maturity, accrued interest on all Loans shall be payable on demand.
4.3 Setting and Notice of Eurodollar Rates. The applicable
Eurodollar Rate for each Interest Period shall be determined by the Agent, and
notice thereof shall be given by the Agent promptly to the Company and each
Bank. Each determination of the applicable Eurodollar Rate by the Agent shall be
conclusive and binding upon the parties hereto, in the absence of demonstrable
error. The Agent shall, upon written request of the Company or any Bank, deliver
to the Company or such Bank a statement showing the computations used by the
Agent in determining any applicable Eurodollar Rate hereunder.
4.4 Computation of Interest. All determinations of interest for
Floating Rate Loans when the Base Rate is determined by the Reference Rate shall
be made on the basis of a year of 365 or 366 days, as the case may be, and the
actual number of days elapsed. All other computations of interest shall be
computed for the actual number of days elapsed on the basis of a year of 360
days. The applicable interest rate for each Floating Rate Loan shall change
simultaneously with each change in the Base Rate.
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SECTION 5 FEES.
5.1 Non-Use Fee. The Company agrees to pay to the Agent for the
account of each Bank a non-use fee, for the period from June 29, 1998 to the
Termination Date, at the rate per annum in effect from time to time pursuant to
Schedule 1.1 of the daily average of the unused amount of such Bank's Percentage
of the Commitment Amount. For purposes of calculating usage under this Section,
the Commitment Amount shall be deemed used to the extent of the aggregate
principal amount of all outstanding Loans plus the Stated Amount of all Letters
of Credit. Such non-use fee shall be payable in arrears on the last Business Day
of each calendar quarter and on the Termination Date for any period then ending
for which such non-use fee shall not have theretofore been paid. The non-use fee
shall be computed for the actual number of days elapsed on the basis of a year
of 360 days.
5.2 Letter of Credit Fees. (a) The Company agrees to pay to the
Agent for the account of the Banks pro rata according to their respective
Percentages a letter of credit fee for each Letter of Credit in an amount equal
to the rate per annum in effect from time to time pursuant to Schedule 1.1 of
the undrawn amount of such Letter of Credit (computed for the actual number of
days elapsed on the basis of a year of 360 days); provided that the rate
applicable to each Letter of Credit shall be increased by 2% at any time that an
Event of Default exists. Such letter of credit fee shall be payable in arrears
on the last Business Day of each calendar quarter and on the Termination Date
for the period from the date of the issuance of each Letter of Credit to the
date such payment is due or, if earlier, the date on which such Letter of Credit
expired or was terminated.
(b) The Company agrees to pay each Issuing Bank a fronting fee for
each Letter of Credit issued by such Issuing Bank in the amount separately
agreed to between the Company and such Issuing Bank.
(c) In addition, with respect to each Letter of Credit, the
Company agrees to pay to the applicable Issuing Bank, for its own account, such
fees and expenses as such Issuing Bank customarily requires in connection with
the issuance, negotiation, processing and/or administration of letters of credit
in similar situations.
5.3 Agent's Fees. The Company agrees to pay to the Agent such
agent's fees as are mutually agreed to from time to time by the Company and the
Agent.
SECTION 6 REDUCTION AND TERMINATION OF THE COMMITMENTS;
PREPAYMENTS.
6.1 Reduction or Termination of the Commitments. The Company may
from time to time on at least five Business Days' prior written notice received
by the Agent (which shall promptly advise each Bank thereof) permanently reduce
the Commitment Amount to an amount
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not less than the Total Outstandings. Any such reduction shall be in an amount
not less than $5,000,000 or a higher integral multiple of $1,000,000. The
Company may at any time on like notice terminate the Commitments upon payment in
full of all Loans and all other obligations of the Company hereunder and cash
collateralization in full, pursuant to documentation in form and substance
reasonably satisfactory to the Banks, of all obligations arising with respect to
the Letters of Credit. All reductions of the Commitment Amount shall reduce the
Commitments pro rata among the Banks according to their respective Percentages.
6.2 Prepayments. The Company may from time to time prepay the
Loans in whole or in part, provided that the Company shall give the Agent (which
shall promptly advise each Bank) notice thereof not later than 10:00 A.M.,
Chicago time, on the day of such prepayment (which shall be a Business Day),
specifying the Loans to be prepaid and the date and amount of prepayment. Each
partial prepayment shall be in a principal amount of $100,000 or a higher
integral multiple thereof. Any prepayment of a Eurodollar Loan on a day other
than the last day of an Interest Period therefor shall include interest on the
principal amount being repaid and shall be subject to Section 8.4.
SECTION 7 MAKING AND PRORATION OF PAYMENTS; SETOFF; TAXES.
7.1 Making of Payments. All payments of principal of or interest
on the Notes, and of all non-use fees and Letter of Credit fees, shall be made
by the Company to the Agent in immediately available funds at the office
specified by the Agent not later than noon, Chicago time, on the date due; and
funds received after that hour shall be deemed to have been received by the
Agent on the next following Business Day. The Agent shall promptly remit to each
Bank or other holder of a Note its share of all such payments received in
collected funds by the Agent for the account of such Bank or holder.
All payments under Section 8.1 shall be made by the Company directly to
the Bank entitled thereto.
7.2 Application of Certain Payments. Each payment of principal
shall be applied to such Loans as the Company shall direct by notice to be
received by the Agent on or before the date of such payment or, in the absence
of such notice, as the Agent shall determine in its discretion. Concurrently
with each remittance to any Bank of its share of any such payment, the Agent
shall advise such Bank as to the application of such payment.
7.3 Due Date Extension. If any payment of principal or interest
with respect to any of the Notes, or of non-use fees or Letter of Credit fees,
falls due on a day which is not a Business Day, then such due date shall be
extended to the immediately following Business Day (unless, in the case of a
Eurodollar Loan, such immediately following Business Day is the first Business
Day of a calendar month, in which case such date shall be the immediately
preceding Business
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Day) and, in the case of principal, additional interest shall accrue and be
payable for the period of any such extension.
7.4 Setoff. The Company agrees that the Agent and each Bank have
all rights of set-off and bankers' lien provided by applicable law, and in
addition thereto, the Company agrees that at any time any Event of Default
exists, the Agent and each Bank may apply to the payment of any obligations of
the Company hereunder, whether or not then due, any and all balances, credits,
deposits, accounts or moneys of the Company then or thereafter with the Agent or
such Bank.
7.5 Proration of Payments. If any Bank shall obtain any payment or
other recovery (whether voluntary, involuntary, by application of offset or
otherwise, but excluding any payment pursuant to Section 8.7 or 14.9) on account
of principal of or interest on any Note (or on account of its participation in
any Letter of Credit) in excess of its pro rata share of payments and other
recoveries obtained by all Banks on account of principal of and interest on
Notes (or such participation) then held by them, such Bank shall purchase from
the other Banks such participation in the Notes (or sub-participation in Letters
of Credit) held by them as shall be necessary to cause such purchasing Bank to
share the excess payment or other recovery ratably with each of them; provided,
however, that if all or any portion of the excess payment or other recovery is
thereafter recovered from such purchasing Bank, the purchase shall be rescinded
and the purchase price restored to the extent of such recovery.
7.6 Taxes. (a) All payments of principal of, and interest on, the
Loans and all other amounts payable hereunder shall be made free and clear of
and without deduction for any present or future income, excise, stamp or
franchise taxes and other taxes, fees, duties, withholdings or other charges of
any nature whatsoever imposed by any taxing authority, but excluding franchise
taxes and taxes imposed on or measured by any Bank's net income or receipts (all
non-excluded items being called "Taxes"). If any withholding or deduction from
any payment to be made by the Company hereunder is required in respect of any
Taxes pursuant to any applicable law, rule or regulation, then the Company will:
(i) pay directly to the relevant authority the full
amount required to be so withheld or deducted;
(ii) promptly forward to the Agent an official receipt or
other documentation satisfactory to the Agent evidencing such payment
to such authority; and
(iii) (except to the extent such withholding or deduction
would not be required if such Bank's Exemption Representation were
true) pay to the Agent for the account of the Banks such additional
amount or amounts as is necessary to ensure that the net amount
actually received by each Bank will equal the full amount such Bank
would have received had no such withholding or deduction been required.
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Moreover, if any Taxes are directly asserted against the Agent or any Bank with
respect to any payment received by the Agent or such Bank hereunder, the Agent
or such Bank may pay such Taxes and the Company will (except to the extent such
Taxes are payable by a Bank and would not have been payable if such Bank's
Exemption Representation were true) promptly pay such additional amounts
(including any penalty, interest and expense) as is necessary in order that the
net amount received by such Person after the payment of such Taxes (including
any Taxes on such additional amount) shall equal the amount such Person would
have received had such Taxes not been asserted.
(b) If the Company fails to pay any Taxes when due to the
appropriate taxing authority or fails to remit to the Agent, for the account of
the respective Banks, the required receipts or other required documentary
evidence, the Company shall indemnify the Banks for any incremental Taxes,
interest or penalties that may become payable by any Bank as a result of any
such failure. For purposes of this Section 7.6, a distribution hereunder by the
Agent or any Bank to or for the account of any Bank shall be deemed a payment by
the Company.
(c) Each Bank represents and warrants (such Bank's "Exemption
Representation") to the Company and the Agent that, as of the date of this
Agreement (or, in the case of an Assignee, the date it becomes a party hereto),
it is entitled to receive payments hereunder without any deduction or
withholding for or on account of any Taxes imposed by the United States of
America or any political subdivision or taxing authority thereof.
(d) Upon the request from time to time of the Company or the
Agent, each Bank that is organized under the laws of a jurisdiction other than
the United States of America shall execute and deliver to the Company and the
Agent one or more (as the Company or the Agent may reasonably request) United
States Internal Revenue Service Forms 4224 or Forms 1001 or such other forms or
documents, appropriately completed, as may be applicable to establish the
extent, if any, to which a payment to such Bank is exempt from withholding or
deduction of Taxes.
(e) If, and to the extent that, any Bank shall obtain a credit,
relief or remission for, or repayment of, any Taxes indemnified or paid by the
Company pursuant to this Section 7.6, such Bank agrees to promptly notify the
Company thereof and thereupon enter into negotiations in good faith with the
Company to determine the basis on which an equitable reimbursement of such Taxes
can be made to the Company.
SECTION 8 INCREASED COSTS; SPECIAL PROVISIONS FOR EURODOLLAR
LOANS.
8.1 Increased Costs. (a) If, after the date hereof, the adoption
of any applicable law, rule or regulation, or any change therein, or any change
in the interpretation or administration thereof by any governmental authority,
central bank or comparable agency charged with the
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interpretation or administration thereof, or compliance by any Bank (or any
Eurodollar Office of such Bank) with any request or directive (whether or not
having the force of law) of any such authority, central bank or comparable
agency
(A) shall subject any Bank (or any Eurodollar Office of
such Bank) to any tax, duty or other charge with respect to its
Eurodollar Loans, its Note or its obligation to make Eurodollar Loans,
or shall change the basis of taxation of payments to any Bank of the
principal of or interest on its Eurodollar Loans or any other amounts
due under this Agreement in respect of its Eurodollar Loans or its
obligation to make Eurodollar Loans (except for changes in the rate of
tax on the overall net income of such Bank or its Eurodollar Office
imposed by the jurisdiction in which such Bank's principal executive
office or Eurodollar Office is located); or
(B) shall impose, modify or deem applicable any reserve
(including any reserve imposed by the Board of Governors of the Federal
Reserve System, but excluding any reserve included in the determination
of interest rates pursuant to Section 4), special deposit or similar
requirement against assets of, deposits with or for the account of, or
credit extended by any Bank (or any Eurodollar Office of such Bank); or
(C) shall impose on any Bank (or its Eurodollar Office)
any other condition affecting its Eurodollar Loans, its Note or its
obligation to make Eurodollar Loans;
and the result of any of the foregoing is to increase the cost to (or in the
case of Regulation D of the Board of Governors of the Federal Reserve System, to
impose a cost on) such Bank (or any Eurodollar Office of such Bank) of making or
maintaining any Eurodollar Loan, or to reduce the amount of any sum received or
receivable by such Bank (or its Eurodollar Office) under this Agreement or under
its Note with respect thereto, then within 10 days after demand by such Bank
(which demand shall be accompanied by a statement setting forth the basis for
such demand and a calculation of the amount thereof in reasonable detail, a copy
of which shall be furnished to the Agent), the Company shall pay directly to
such Bank such additional amount as will compensate such Bank for such increased
cost or such reduction.
(b) If any Bank shall reasonably determine that the adoption or
phase-in of any applicable law, rule or regulation regarding capital adequacy,
or any change therein, or any change in the interpretation or administration
thereof by any governmental authority, central bank or comparable agency charged
with the interpretation or administration thereof, or compliance by any Bank or
any Person controlling such Bank with any request or directive regarding capital
adequacy (whether or not having the force of law) of any such authority, central
bank or comparable agency, has or would have the effect of reducing the rate of
return on such Bank's or such controlling Person's capital as a consequence of
such Bank's obligations hereunder or under any Letter of Credit to a level below
that which such Bank or such controlling Person could have achieved but for such
adoption, change or compliance (taking into
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consideration such Bank's or such controlling Person's policies with respect to
capital adequacy) by an amount deemed by such Bank or such controlling Person to
be material, then from time to time, within 10 days after demand by such Bank
(which demand shall be accompanied by a statement setting forth the basis for
such demand and a calculation of the amount thereof in reasonable detail, a copy
of which shall be furnished to the Agent), the Company shall pay to such Bank
such additional amount or amounts as will compensate such Bank or such
controlling Person for such reduction.
(c) Notwithstanding the foregoing provisions of this Section 8.1,
(i) if any Bank fails to notify the Company of any event or circumstance which
will entitle the Bank to compensation pursuant to this Section 8.1 within 120
days after such Bank obtains knowledge of such event or circumstance, then such
Bank shall not be entitled to compensation from the Company for any amount
arising prior to the date which is 120 days before the date on which such Bank
notifies the Company of such event or circumstance; and (ii) no Bank shall not
make a claim for compensation under this Section 8.1 unless such Bank is then
making a claim against a substantial portion of the other borrowers from such
Bank which have language in the applicable borrowing agreement similar to that
found in the foregoing provisions of this Section 8.1.
8.2 Basis for Determining Interest Rate Inadequate or Unfair. If
with respect to any Interest Period:
(a) deposits in Dollars (in the applicable amounts) are
not being offered to the Agent in the interbank eurodollar market for
such Interest Period, or the Agent otherwise reasonably determines
(which determination, if made in good faith, shall be binding and
conclusive on the Company) that by reason of circumstances affecting
the interbank eurodollar market adequate and reasonable means do not
exist for ascertaining the applicable Eurodollar Rate; or
(b) Banks having an aggregate Percentage of 40% or more
advise the Agent that the Eurodollar Rate (Reserve Adjusted) as
determined by the Agent will not adequately and fairly reflect the cost
to such Banks of maintaining or funding such Eurodollar Loans for such
Interest Period (taking into account any amount to which such Banks may
be entitled under Section 8.1) or that the making or funding of
Eurodollar Loans has become impracticable as a result of an event
occurring after the date of this Agreement which in the opinion of such
Banks materially affects such Loans;
then the Agent shall promptly notify the other parties thereof and, so long as
such circumstances shall continue, (i) no Bank shall be under any obligation to
make or convert into Eurodollar Loans and (ii) on the last day of the current
Interest Period for each Eurodollar Loan, such Loan shall, unless then repaid in
full, automatically convert to a Floating Rate Loan.
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8.3 Changes in Law Rendering Eurodollar Loans Unlawful. In the
event that any change in (including the adoption of any new) applicable laws or
regulations, or any change in the interpretation of applicable laws or
regulations by any governmental or other regulatory body charged with the
administration thereof, should make it (or in the good faith judgment of any
Bank cause a substantial question as to whether it is) unlawful for any Bank to
make, maintain or fund Eurodollar Loans, then such Bank shall promptly notify
each of the other parties hereto and, so long as such circumstances shall
continue, (a) such Bank shall have no obligation to make or convert into
Eurodollar Loans (but shall make Floating Rate Loans concurrently with the
making of or conversion into Eurodollar Loans by the Banks which are not so
affected, in each case in an amount equal to such Bank's pro rata share of all
Eurodollar Loans which would be made or converted into at such time in the
absence of such circumstances) and (b) on the last day of the current Interest
Period for each Eurodollar Loan of such Bank (or, in any event, on such earlier
date as may be required by the relevant law, regulation or interpretation), such
Eurodollar Loan shall, unless then repaid in full, automatically convert to a
Floating Rate Loan. Each Floating Rate Loan made by a Bank which, but for the
circumstances described in the foregoing sentence, would be a Eurodollar Loan
(an "Affected Loan") shall remain outstanding for the same period as the Group
of Eurodollar Loans of which such Affected Loan would be a part absent such
circumstances.
8.4 Funding Losses. The Company hereby agrees that upon demand by
any Bank (which demand shall be accompanied by a statement setting forth the
basis for the amount being claimed, a copy of which shall be furnished to the
Agent), the Company will indemnify such Bank against any net loss or expense
which such Bank may sustain or incur (including any net loss or expense incurred
by reason of the liquidation or reemployment of deposits or other funds acquired
by such Bank to fund or maintain any Eurodollar Loan), as reasonably determined
by such Bank, as a result of (a) any payment, prepayment or conversion of any
Eurodollar Loan of such Bank on a date other than the last day of an Interest
Period for such Loan (including any conversion pursuant to Section 8.3) or (b)
any failure of the Company to borrow or convert any Loan on a date specified
therefor in a notice of borrowing or conversion pursuant to this Agreement. For
this purpose, all notices to the Agent pursuant to this Agreement shall be
deemed to be irrevocable.
8.5 Right of Banks to Fund through Other Offices. Each Bank may,
if it so elects, fulfill its commitment as to any Eurodollar Loan by causing a
foreign branch or affiliate of such Bank to make such Loan, provided that in
such event for the purposes of this Agreement such Loan shall be deemed to have
been made by such Bank and the obligation of the Company to repay such Loan
shall nevertheless be to such Bank and shall be deemed held by it, to the extent
of such Loan, for the account of such branch or affiliate.
8.6 Discretion of Banks as to Manner of Funding. Notwithstanding
any provision of this Agreement to the contrary, each Bank shall be entitled to
fund and maintain its funding of all or any part of its Loans in any manner it
sees fit, it being understood, however, that for the purposes
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of this Agreement all determinations hereunder shall be made as if such Bank had
actually funded and maintained each Eurodollar Loan during each Interest Period
for such Loan through the purchase of deposits having a maturity corresponding
to such Interest Period and bearing an interest rate equal to the Eurodollar
Rate for such Interest Period.
8.7 Mitigation of Circumstances; Replacement of Affected Bank. (a)
Each Bank shall promptly notify the Company and the Agent of any event of which
it has knowledge which will result in, and will use reasonable commercial
efforts available to it (and not, in such Bank's good faith judgment, otherwise
disadvantageous to such Bank) to mitigate or avoid, (i) any obligation by the
Company to pay any amount pursuant to Section 7.6 or 8.1 or (ii) the occurrence
of any circumstances of the nature described in Section 8.2 or 8.3 (and, if any
Bank has given notice of any such event described in clause (i) or (ii) above
and thereafter such event ceases to exist, such Bank shall promptly so notify
the Company and the Agent). Without limiting the foregoing, each Bank will
designate a different funding office if such designation will avoid (or reduce
the cost to the Company of) any event described in clause (i) or (ii) of the
preceding sentence and such designation will not, in such Bank's sole good faith
judgment, be otherwise disadvantageous to such Bank.
(b) At any time any Bank is an Affected Bank, the Company may
replace such Affected Bank as a party to this Agreement with one or more other
bank(s) or financial institution(s) reasonably satisfactory to the Agent (and
upon notice from the Company such Affected Bank shall assign pursuant to an
Assignment Agreement, and without recourse or warranty, its Commitment, its
Loans, its Note, its participation in Letters of Credit, and all of its other
rights and obligations hereunder to such replacement bank(s) or other financial
institution(s) for a purchase price equal to the sum of the principal amount of
the Loans so assigned, all accrued and unpaid interest thereon, its ratable
share of all accrued and unpaid non-use fees and Letter of Credit fees, any
amounts payable under Section 8.4 as a result of such Bank receiving payment of
any Eurodollar Loan prior to the end of an Interest Period therefor and all
other obligations owed to such Affected Bank hereunder).
8.8 Conclusiveness of Statements; Survival of Provisions.
Determinations and statements of any Bank pursuant to Section 8.1, 8.2, 8.3 or
8.4 shall be conclusive absent demonstrable error. Banks may use reasonable
averaging and attribution methods in determining compensation under Sections 8.1
and 8.4, and the provisions of such Sections shall survive repayment of the
Loans, cancellation of the Notes, cancellation or expiration of the Letters of
Credit and any termination of this Agreement.
SECTION 9 WARRANTIES.
To induce the Agent and the Banks to enter into this Agreement and to
induce the Banks to make Loans and issue or purchase participations in Letters
of Credit hereunder, the Company warrants to the Agent and the Banks that:
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9.1 Organization, etc. The Company is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware; each Subsidiary is a corporation duly organized, validly existing and
in good standing under the laws of the state of its incorporation; and the
Company and each Subsidiary is duly qualified to do business in each
jurisdiction where the nature of its business makes such qualification necessary
(except in those instances in which the failure to be qualified or in good
standing does not have a Material Adverse Effect) and has full power and
authority to own its property and conduct its business as presently conducted by
it.
9.2 Authorization; No Conflict. The execution and delivery by the
Company of this Agreement and each other Loan Document to which it is a party,
the borrowings hereunder, the execution and delivery by each Guarantor of each
Loan Document to which it is a party and the performance by each of the Company
and each Guarantor of its obligations under each Loan Document to which it is a
party are within the corporate powers of the Company and each Guarantor, have
been duly authorized by all necessary corporate action on the part of the
Company and each Guarantor (including any necessary shareholder action), have
received all necessary governmental approval (if any shall be required), and do
not and will not (a) violate any provision of law or any order, decree or
judgment of any court or other government agency which is binding on the Company
or any Guarantor, (b) contravene or conflict with, or result in a breach of, any
provision of the Certificate of Incorporation, By-Laws or other organizational
documents of the Company or any Guarantor or of any agreement, indenture,
instrument or other document which is binding on the Company, any Guarantor or
any other Subsidiary or (c) result in, or require, the creation or imposition of
any Lien on any property of the Company, any Guarantor or any other Subsidiary
(other than Liens arising under the Loan Documents).
9.3 Validity and Binding Nature. Each of this Agreement and each
other Loan Document to which the Company is a party is the legal, valid and
binding obligation of the Company, enforceable against the Company in accordance
with its terms, subject to bankruptcy, insolvency and similar laws affecting the
enforceability of creditors' rights generally and to general principles of
equity; and each Loan Document to which any Guarantor is a party is, or upon the
execution and delivery thereof by such Guarantor will be, the legal, valid and
binding obligation of such Guarantor, enforceable against such Guarantor in
accordance with its terms, subject to bankruptcy, insolvency and similar laws
affecting the enforceability of creditors' rights generally and to general
principles of equity.
9.4 Financial Condition. The unaudited consolidated financial
statements of the Company and its Subsidiaries dated December 31, 1997, copies
of which have been furnished prior to the Effective Date to each Bank which is a
party hereto on the Effective Date:
(i) were prepared in accordance with GAAP
consistently applied throughout the periods covered thereby, except as
otherwise expressly noted therein; and
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(ii) fairly present in all material respects the
financial condition of the Company and its Subsidiaries as of the date
thereof and the results of operations for the period covered thereby.
9.5 No Material Adverse Change. Since December 31, 1997, there has
been no material adverse change in the financial condition, operations, assets,
business, properties or prospects of the Company and its Subsidiaries taken as a
whole.
9.6 Litigation and Contingent Liabilities. No litigation
(including derivative actions), arbitration proceeding, labor controversy or
governmental investigation or proceeding is pending or, to the Company's
knowledge, threatened against the Company or any Subsidiary which might
reasonably be expected to have a Material Adverse Effect, except as set forth in
Schedule 9.6. Other than any liability incident to such litigation or
proceedings, neither the Company nor any Subsidiary has any material contingent
liabilities not listed in such Schedule 9.6.
9.7 Ownership of Properties; Liens. Each of the Company and each
Subsidiary owns good and, in the case of real property, marketable title to all
of its properties and assets, real and personal, tangible and intangible, of any
nature whatsoever (including patents, trademarks, trade names, service marks and
copyrights), free and clear of all Liens, charges and material claims (including
material infringement claims with respect to patents, trademarks, copyrights and
the like) except as permitted pursuant to Section 10.8.
9.8 Subsidiaries. The Company has no Subsidiaries except those
listed in Schedule 9.8.
9.9 Pension and Welfare Plans. (a) During the
twelve-consecutive-month period prior to the date of the execution and delivery
of this Agreement or the making of any Loan hereunder, (i) no steps have been
taken to terminate any Pension Plan and (ii) no contribution failure has
occurred with respect to any Pension Plan sufficient to give rise to a lien
under Section 302(f) of ERISA. No condition exists or event or transaction has
occurred with respect to any Pension Plan which could result in the incurrence
by the Company of any material liability, fine or penalty. The Company has no
contingent liability with respect to any post-retirement benefit under a Welfare
Plan, other than liability for continuation coverage described in Part 6 of
Subtitle B of Title I of ERISA.
(b) All contributions (if any) have been made to any Multiemployer
Pension Plan that are required to be made by the Company or any other member of
the Controlled Group under the terms of the plan or of any collective bargaining
agreement or by applicable law; neither the Company nor any member of the
Controlled Group has withdrawn or partially withdrawn from any Multiemployer
Pension Plan, incurred any withdrawal liability with respect to any such plan,
received notice of any claim or demand for withdrawal liability or partial
withdrawal liability from any such plan, and no condition has occurred which, if
continued, might result in a
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withdrawal or partial withdrawal from any such plan; and neither the Company nor
any member of the Controlled Group has received any notice that any
Multiemployer Pension Plan is in reorganization, that increased contributions
may be required to avoid a reduction in plan benefits or the imposition of any
excise tax, that any such plan is or has been funded at a rate less than that
required under Section 412 of the Code, that any such plan is or may be
terminated, or that any such plan is or may become insolvent.
9.10 Investment Company Act. Neither the Company nor any Subsidiary
is an "investment company" or a company "controlled" by an "investment company",
within the meaning of the Investment Company Act of 1940.
9.11 Public Utility Holding Company Act. Neither the Company nor
any Subsidiary is a "holding company", or a "subsidiary company" of a "holding
company", or an "affiliate" of a "holding company" or of a "subsidiary company"
of a "holding company", within the meaning of the Public Utility Holding Company
Act of 1935.
9.12 Regulation U. The Company is not engaged principally, or as
one of its important activities, in the business of extending credit for the
purpose of purchasing or carrying Margin Stock.
9.13 Taxes. Each of the Company and each Subsidiary has filed all
tax returns and reports required by law to have been filed by it and has paid
all taxes and governmental charges thereby shown to be owing, except any such
taxes or charges which are being diligently contested in good faith by
appropriate proceedings and for which adequate reserves in accordance with GAAP
shall have been set aside on its books.
9.14 Solvency, etc. On the Effective Date (or, in the case of any
Person which becomes a Guarantor after the Effective Date, on the date such
Person becomes a Guarantor), and immediately prior to and after giving effect to
the issuance of each Letter of Credit and each borrowing hereunder and the use
of the proceeds thereof, (a) each of the Company's and each Guarantor's assets
will exceed its liabilities and (b) each of the Company and each Guarantor will
be solvent, will be able to pay its debts as they mature, will own property with
fair saleable value greater than the amount required to pay its debts and will
have capital sufficient to carry on its business as then constituted.
9.15 Environmental Matters.
(a) No Violations. Except as set forth on Schedule 9.15,
neither the Company nor any Subsidiary, nor any operator of the Company's or any
Subsidiary's properties, is in violation, or alleged violation, of any judgment,
decree, order, law, permit, license, rule or regulation pertaining to
environmental matters, including those arising under the Resource Conservation
and Recovery Act ("RCRA"), the Comprehensive Environmental Response,
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Compensation and Liability Act of 1980 ("CERCLA"), the Superfund Amendments and
Reauthorization Act of 1986 or any other Environmental Law which (i) in any
single case, requires expenditures in any three-year period of $500,000 or more
by the Company and its Subsidiaries in penalties and/or for investigative,
removal or remedial actions or (ii) individually or in the aggregate otherwise
might reasonably be expected to have a Material Adverse Effect.
(b) Notices. Except as set forth on Schedule 9.15,
neither the Company nor any Subsidiary has received notice from any third party,
including any Federal, state or local governmental authority: (a) that any one
of them has been identified by the U.S. Environmental Protection Agency as a
potentially responsible party under CERCLA with respect to a site listed on the
National Priorities List, 40 C.F.R. Part 300 Appendix B; (b) that any hazardous
waste, as defined by 42 U.S.C. ss.6903(5), any hazardous substance as defined by
42 U.S.C. ss.9601(14), any pollutant or contaminant as defined by 42 U.S.C.
ss.9601(33) or any toxic substance, oil or hazardous material or other chemical
or substance regulated by any Environmental Law, excluding household hazardous
waste (all of the foregoing, "Hazardous Substances"), which any one of them has
generated, transported or disposed of has been found at any site at which a
Federal, state or local agency or other third party has conducted a remedial
investigation, removal or other response action pursuant to any Environmental
Law; (c) that the Company or any Subsidiary must conduct a remedial
investigation, removal, response action or other activity pursuant to any
Environmental Law; or (d) of any Environmental Claim.
(c) Handling of Hazardous Substances. Except as set forth
on Schedule 9.15, (i) no portion of the real property or other assets of the
Company or any Subsidiary has been used for the handling, processing, storage or
disposal of Hazardous Substances except in accordance in all material respects
with applicable Environmental Laws; and no underground tank or other underground
storage receptacle for Hazardous Substances is located on such properties; (ii)
in the course of any activities conducted by the Company, any Subsidiary or the
operators of any real property of the Company or any Subsidiary, no Hazardous
Substances have been generated or are being used on such properties except in
accordance in all material respects with applicable Environmental Laws; (iii)
there have been no Releases or threatened Releases of Hazardous Substances on,
upon, into or from any real property or other assets of the Company or any
Subsidiary, which Releases singly or in the aggregate might reasonably be
expected to have a material adverse effect on the value of such real property or
assets; (iv) to the Company's actual knowledge, there have been no Releases on,
upon, from or into any real property in the vicinity of the real property or
other assets of the Company or any Subsidiary which, through soil or groundwater
contamination, may have come to be located on, and which might reasonably be
expected to have a material adverse effect on the value of, the real property or
other assets of the Company or any Subsidiary; and (v) any Hazardous Substances
generated by the Company and its Subsidiaries have been transported offsite only
by properly licensed carriers and delivered only to treatment or disposal
facilities maintaining valid permits as required under applicable Environmental
Laws, which transporters and facilities have been and are, to the best of the
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Company's knowledge, operating in compliance with such permits and applicable
Environmental Laws.
(d) Investigations. Except as set forth on Schedule 9.15,
the Company and its Subsidiaries have taken reasonable steps to investigate the
past and present condition and usage of the real property of the Company and its
Subsidiaries and the operations conducted by the Company and its Subsidiaries
with regard to environmental matters.
9.16 Year 2000 Problem. The Company and its Subsidiaries have
reviewed the areas within their business and operations which could be adversely
affected by, and have developed or are developing a program to address on a
timely basis, the "Year 2000 Problem" (that is, the risk that computer
applications used by the Company and its Subsidiaries may be unable to recognize
and perform properly date-sensitive functions involving certain dates prior to
and any date after December 31, 1999). Based on such review and program, the
Company reasonably believes that the "Year 2000 Problem" will not have a
Material Adverse Effect.
9.17 Information. All information heretofore or contemporaneously
herewith furnished in writing by the Company or any Subsidiary to any Bank for
purposes of or in connection with this Agreement and the transactions
contemplated hereby is, and all written information hereafter furnished by or on
behalf of the Company or any Subsidiary to any Bank pursuant hereto or in
connection herewith will be, true and accurate in every material respect on the
date as of which such information is dated or certified, and none of such
information is or will be incomplete by omitting to state any material fact
necessary to make such information not misleading in light of the circumstances
under which made (it being recognized by the Agent and the Banks that (a) any
projections and forecasts provided by the Company are based on good faith
estimates and assumptions believed by the Company to be reasonable as of the
date of the applicable projections or assumptions and that actual results during
the period or periods covered by any such projections and forecasts will likely
differ from projected or forecasted results and (b) any information provided by
the Company or any Subsidiary with respect to any Person or assets acquired or
to be acquired by the Company or any Subsidiary shall, for all periods prior to
the date of such acquisition, be limited to the knowledge of the Company or the
acquiring Subsidiary after reasonable inquiry).
SECTION 10 COVENANTS.
Until the expiration or termination of the Commitments and thereafter
until all obligations of the Company hereunder and under the other Loan
Documents are paid in full and all Letters of Credit have been terminated, the
Company agrees that, unless at any time the Required Banks shall otherwise
expressly consent in writing, it will:
10.1 Reports, Certificates and Other Information. Furnish to the
Agent (with sufficient copies to provide one to each Bank):
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10.1.1 Audit Report. Promptly when available and in any event within
90 days after the close of each Fiscal Year: (a) a copy of the annual audit
report of the Company and its Subsidiaries for such Fiscal Year, including
therein consolidated balance sheets of the Company and its Subsidiaries as of
the end of such Fiscal Year and consolidated statements of earnings and cash
flow of the Company and its Subsidiaries for such Fiscal Year certified without
qualification by Arthur Andersen or other independent auditors of recognized
standing selected by the Company and reasonably acceptable to the Required
Banks, together with a written statement from such accountants to the effect
that in making the examination necessary for the signing of such annual audit
report by such accountants, they have not become aware of any Event of Default
or Unmatured Event of Default that has occurred and is continuing or, if they
have become aware of any such event, describing it in reasonable detail and (b)
consolidating balance sheets of the Company and its Subsidiaries as of the end
of such Fiscal Year and consolidating statements of earnings for the Company and
its Subsidiaries for such Fiscal Year, certified by the chief financial officer,
chief accounting officer, controller, treasurer or Vice President, Finance of
the Company.
10.1.2 Quarterly Reports. Promptly when available and in any event
within 45 days after the end of each Fiscal Quarter (except the last Fiscal
Quarter) of each Fiscal Year, consolidated and consolidating balance sheets of
the Company and its Subsidiaries as of the end of such Fiscal Quarter, together
with consolidated and consolidating statements of earnings and consolidated
statements of cash flow for such Fiscal Quarter and for the period beginning
with the first day of such Fiscal Year and ending on the last day of such Fiscal
Quarter, certified by the chief financial officer, chief accounting officer,
controller, treasurer or Vice President, Finance of the Company.
10.1.3 Monthly Reports. Promptly when available and in any event
within 30 days after the end of each of the first two months of each Fiscal
Quarter, consolidated and consolidating balance sheets of the Company and its
Subsidiaries as of the end of such month, together with consolidated and
consolidating statements of earnings for such month and for the period beginning
with the first day of the Fiscal Year and ending on the last day of such month,
certified by the chief financial officer, chief accounting officer, controller,
treasurer or Vice President, Finance of the Company.
10.1.4 Compliance Certificates. Contemporaneously with the furnishing
of a copy of each annual audit report pursuant to Section 10.1.1 and of each set
of quarterly statements pursuant to Section 10.1.2, (a) a duly completed
compliance certificate in the form of Exhibit B, with appropriate insertions,
dated the date of such annual report or such quarterly statements and signed by
the chief financial officer, chief accounting officer, controller, treasurer or
Vice President, Finance of the Company, containing a computation of each of the
financial ratios and restrictions set forth in Section 10.6 and to the effect
that such officer has not become aware of any Event of Default or Unmatured
Event of Default that has occurred and is continuing or, if there is any such
event, describing it and the steps, if any, being taken to cure it; and (b) an
updated organizational chart listing all Subsidiaries and the locations of their
businesses.
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10.1.5 Reports to SEC and to Shareholders. Promptly upon the filing
or sending thereof, copies of all regular, periodic or special reports of the
Company or any Subsidiary filed with the SEC (excluding exhibits thereto,
provided that the Company shall promptly deliver any such exhibit to the Agent
or any Bank upon request therefor); copies of all registration statements of the
Company or any Subsidiary filed with the SEC (other than on Form S-8); and
copies of all proxy statements or other communications made to security holders
generally concerning material developments in the business of the Company or any
Subsidiary.
10.1.6 Notice of Default, Litigation and ERISA Matters. Promptly upon
becoming aware of any of the following, written notice describing the same and
the steps being taken by the Company or the Subsidiary affected thereby with
respect thereto:
(a) the occurrence of an Event of Default or an Unmatured
Event of Default;
(b) any litigation, arbitration or governmental
investigation or proceeding not previously disclosed by the Company to
the Banks which has been instituted or, to the knowledge of the
Company, is threatened against the Company or any Subsidiary or to
which any of the properties of any thereof is subject which, if
adversely determined, might reasonably be expected to have a Material
Adverse Effect;
(c) the institution of any steps by any member of the
Controlled Group or any other Person to terminate any Pension Plan, or
the failure of any member of the Controlled Group to make a required
contribution to any Pension Plan (if such failure is sufficient to give
rise to a lien under Section 302(f) of ERISA) or to any Multiemployer
Pension Plan, or the taking of any action with respect to a Pension
Plan which could result in the requirement that the Company furnish a
bond or other security to the PBGC or such Pension Plan, or the
occurrence of any event with respect to any Pension Plan or
Multiemployer Pension Plan which could result in the incurrence by any
member of the Controlled Group of any material liability, fine or
penalty (including any claim or demand for withdrawal liability or
partial withdrawal from any Multiemployer Pension Plan), or any
material increase in the contingent liability of the Company with
respect to any post-retirement Welfare Plan benefit, or any notice that
any Multiemployer Pension Plan is in reorganization, that increased
contributions may be required to avoid a reduction in plan benefits or
the imposition of an excise tax, that any such plan is or has been
funded at a rate less than that required under Section 412 of the Code,
that any such plan is or may be terminated, or that any such plan is or
may become insolvent;
(d) any cancellation (without replacement) or material
change in any insurance maintained by the Company or any Subsidiary;
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(e) any event (including any violation of any
Environmental Law or the assertion of any Environmental Claim) which
might reasonably be expected to have a Material Adverse Effect; or
(f) any setoff, claims (including any Environmental
Claim), withholding or other defense to which any of the collateral
granted under any Collateral Document, or the Banks' rights with
respect to any such collateral, are subject.
10.1.7 Subsidiaries. Promptly upon any change in the list of its
Subsidiaries from that set forth on Schedule 9.8 (or in the most recent notice
pursuant to this Section), notification of such change.
10.1.8 Management Reports. Promptly upon the request of the Agent or
any Bank (acting through the Agent), copies of all detailed financial and
management reports submitted to the Company by independent auditors in
connection with each annual or interim audit made by such auditors of the books
of the Company.
10.1.9 Projections. As soon as practicable and in any event within 60
days after the commencement of each Fiscal Year, financial projections for the
Company and its Subsidiaries for such Fiscal Year prepared in a manner
consistent with those projections delivered by the Company to the Agent prior to
the Effective Date.
10.1.10 1997 Audited Financials. Not later than July 15, 1998, copies
of the Company's audited financial statements for the Fiscal Year ended December
31, 1997 (which audited statements shall not differ in any material respect from
the unaudited statements referred to in Section 9.4).
10.1.11 Other Information. From time to time such other information
concerning the Company and its Subsidiaries as the Agent or any Bank (acting
through the Agent) may reasonably request.
10.2 Books, Records and Inspections. Keep, and cause each
Subsidiary to keep, its books and records in accordance with sound business
practices sufficient to allow the preparation of financial statements in
accordance with GAAP; permit, and cause each Subsidiary to permit, any Bank or
the Agent or any representative thereof upon reasonable prior notice to inspect
the properties and operations of the Company and of such Subsidiary; and permit,
and cause each Subsidiary to permit, at any reasonable time and with reasonable
notice (or at any time without notice if an Event of Default exists), any Bank
or the Agent or any representative thereof to visit any or all of its offices,
to discuss its financial matters with its officers and its independent auditors
(and the Company hereby authorizes such independent auditors to discuss such
financial matters with any Bank or the Agent or any representative thereof
whether or not any representative of the Company or any Subsidiary is present),
and to examine (and, at the expense
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of the Company or the applicable Subsidiary, photocopy extracts from) any of its
books or other corporate records.
10.3 Insurance. Maintain, and cause each Subsidiary to maintain,
with responsible insurance companies, such insurance as may be required by any
law or governmental regulation or court decree or order applicable to it and
such other insurance, to such extent and against such hazards and liabilities,
as is customarily maintained by companies similarly situated; and, upon request
of the Agent (or any Bank acting through the Agent), furnish to the Agent or
such Bank a certificate setting forth in reasonable detail the nature and extent
of all insurance maintained by the Company and its Subsidiaries.
10.4 Compliance with Laws; Payment of Taxes and Liabilities. (a)
Comply, and cause each Subsidiary to comply, in all material respects with all
applicable laws (including Environmental Laws), rules, regulations, decrees,
orders, judgments, licenses and permits; and (b) pay, and cause each Subsidiary
to pay, prior to delinquency, all taxes and other governmental charges against
it or any of its property, as well as claims of any kind which, if unpaid, might
become a Lien on any of its property; provided that the foregoing shall not
require the Company or any Subsidiary to pay any such tax or charge so long as
it shall contest the validity thereof in good faith by appropriate proceedings
and shall set aside on its books adequate reserves with respect thereto in
accordance with GAAP.
10.5 Maintenance of Existence, etc. Maintain and preserve, and
(subject to Section 10.11) cause each Subsidiary to maintain and preserve, (a)
its existence and good standing in the jurisdiction of its incorporation and (b)
its qualification and good standing as a foreign corporation in each
jurisdiction where the nature of its business makes such qualification necessary
(except in those instances in which the failure to be qualified or in good
standing does not have a Material Adverse Effect).
10.6 Financial Covenants.
10.6.1 Minimum Net Worth. Not permit its Net Worth at any time to be
less than the sum of (a) $18,000,000 plus (b) 75% of the sum of Consolidated Net
Income for each Fiscal Quarter, beginning with the Fiscal Quarter ending
September 30, 1998 and ending with the most recently-ended Fiscal Quarter for
which the Company has delivered financial statements (provided that, if
Consolidated Net Income is less than zero for any Fiscal Quarter, for purposes
of this Section 10.6.1 Consolidated Net Income will be deemed to be zero for
such quarter) plus (c) 100% of the net proceeds of any equity issued by the
Company or any of its Subsidiaries (on a consolidated basis) after the Effective
Date.
10.6.2 Minimum Interest Coverage. Not permit the Interest Coverage
Ratio for any Computation Period to be less than the applicable ratio set forth
below:
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<PAGE> 42
<TABLE>
<CAPTION>
COMPUTATION INTEREST
PERIOD ENDING: COVERAGE RATIO
-------------- --------------
<S> <C>
Effective Date through 12/31/98 2.00 to 1.0
1/1/99 through 12/31/99 2.25 to 1.0
1/1/00 and thereafter 2.50 to 1.0.
</TABLE>
10.6.3 Funded Debt to EBITDA Ratio. Not permit the Funded Debt to
EBITDA Ratio as of the last day of any Computation Period to exceed the
applicable ratio set forth below:
<TABLE>
<CAPTION>
COMPUTATION FUNDED DEBT TO
PERIOD ENDING: EBITDA RATIO
-------------- ------------
<S> <C> <C>
Effective Date through 12/31/98 4.00 to 1.0
3/31/99 through 12/31/99 3.75 to 1.0 3/31/00 and thereafter
3.50 to 1.0.
</TABLE>
10.6.4 Debt to Capitalization Ratio. Not permit the ratio of (a)
Funded Debt to (b) the sum of Funded Debt plus Consolidated Net Worth at any
time to exceed the applicable percentage set forth below during any period set
forth below:
<TABLE>
<CAPTION>
DEBT TO
CAPITALIZATION
PERIOD: PERCENTAGE
------- ----------
<S> <C> <C>
Effective Date through 3/30/99 65%
3/31/99 through 3/30/00 60% 3/31/00 and thereafter
55%.
</TABLE>
10.6.5 Capital Expenditures. The Company will not permit the
aggregate amount of all Capital Expenditures (excluding amounts, if any, paid to
consummate acquisitions permitted by Section 10.11(c) which constitute Capital
Expenditures) made by the Company and its Subsidiaries in any Fiscal Year to
exceed the product of 1.5 multiplied by the depreciation and amortization of the
Company and its Subsidiaries during the prior Fiscal Year (calculated on a pro
forma basis giving effect to acquisitions and sales and other dispositions made
subsequent to such prior Fiscal Year).
10.7 Limitations on Debt. Not, and not permit any Subsidiary to,
create, incur, assume or suffer to exist any Debt, except:
(a) obligations in respect of the Loans, the L/C Applications and the
Letters of Credit;
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<PAGE> 43
(b) unsecured Debt of the Company which represents all or part of the
purchase price payable in connection with a transaction permitted by
Section 10.11(c); provided that the aggregate principal amount of all
such unsecured Debt shall not at any time exceed $5,000,000;
(c) Debt secured by Liens permitted by subsection 10.8(c) or (d), and
refinancings of any such Debt so long as the terms applicable to such
refinanced Debt are no less favorable to the Company or the applicable
Subsidiary than the terms in effect immediately prior to such
refinancing, provided that the aggregate amount of all such Debt at any
time outstanding shall not exceed $2,000,000;
(d) Debt arising under Capital Leases in an aggregate amount not at any
time exceeding $1,000,000;
(e) Debt of Subsidiaries owed to the Company; and
(f) unsecured Debt of the Company to Subsidiaries.
10.8 Liens. Not, and not permit any Subsidiary to, create or permit
to exist any Lien on any of its real or personal properties, assets or rights of
whatsoever nature (whether now owned or hereafter acquired), except:
(a) Liens for taxes or other governmental charges not at the time
delinquent or thereafter payable without penalty or being contested in
good faith by appropriate proceedings and, in each case, for which it
maintains adequate reserves;
(b) Liens arising in the ordinary course of business (such as (i) Liens
of carriers, warehousemen, mechanics and materialmen and other similar
Liens imposed by law and (ii) Liens incurred in connection with
worker's compensation, unemployment compensation and other types of
social security (excluding Liens arising under ERISA) or in connection
with surety bonds, bids, performance bonds and similar obligations) for
sums not overdue or being contested in good faith by appropriate
proceedings and not involving any deposits or advances or borrowed
money or the deferred purchase price of property or services, and, in
each case, for which it maintains adequate reserves;
(c) Liens identified in Schedule 10.8;
(d) subject to the limitation set forth in Section 10.7(c),(i) Liens
existing on property at the time of the acquisition thereof by the
Company or any Subsidiary (and not created in contemplation of such
acquisition) and (ii) Liens that constitute purchase money security
interests on any property securing debt incurred for the purpose of
financing all or any part of the cost of acquiring such property,
provided that any such Lien attaches to
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<PAGE> 44
such property within 60 days of the acquisition thereof and such Lien
attaches solely to the property so acquired;
(e) attachments, appeal bonds, judgments and other similar Liens, for
sums not exceeding $250,000 arising in connection with court
proceedings, provided the execution or other enforcement of such Liens
is effectively stayed and the claims secured thereby are being actively
contested in good faith and by appropriate proceedings;
(f) easements, rights of way, restrictions, minor defects or
irregularities in title and other similar Liens not interfering in any
material respect with the ordinary conduct of the business of the
Company or any Subsidiary; and
(g) Liens in favor of the Agent for the benefit of the Banks arising
under the Loan Documents.
10.9 Operating Leases. Not permit the aggregate amount of all
rental payments made (or scheduled to be made) under Operating Leases by the
Company and its Subsidiaries (on a consolidated basis) in any Fiscal Year to
exceed $1,000,000.
10.10 Restricted Payments. Not, and not permit any Subsidiary to,
(a) declare or pay any dividends on any of its capital stock (other than stock
dividends), (b) purchase or redeem any such stock or any warrants, units,
options or other rights in respect of such stock, (c) make any other
distribution to shareholders or (d) set aside funds for any of the foregoing;
provided that any Subsidiary may declare and pay dividends to the Company or to
any other wholly-owned Subsidiary.
10.11 Mergers, Consolidations, Sales. Not, and not permit any
Subsidiary to, be a party to any merger or consolidation, or purchase or
otherwise acquire all or substantially all of the assets or any stock of any
class of, or any partnership or joint venture interest in, any other Person, or
sell, transfer, convey or lease all or any substantial part of its assets, or
sell or assign with or without recourse any receivables, except for (a) any such
merger or consolidation, sale, transfer, conveyance, lease or assignment of or
by any wholly-owned Subsidiary into the Company or into, with or to any other
wholly-owned Subsidiary; (b) any such purchase or other acquisition by the
Company or any wholly-owned Subsidiary of the assets or stock of any
wholly-owned Subsidiary; (c) any such purchase or other acquisition by the
Company or any wholly-owned Subsidiary of the assets or stock of any other
Person where (1) such assets (in the case of an asset purchase) are for use, or
such Person (in the case of a stock purchase) is engaged in the processing,
collection, handling and disposal of non-hazardous liquid or solid waste or
similar non-hazardous waste-related business activities; (2) immediately before
or after giving effect to such purchase or acquisition, no Event of Default or
Unmatured Event of Default shall have occurred and be continuing; (3) either (i)
(x) the aggregate consideration to be paid by the Company and its Subsidiaries
(including any Debt assumed or issued in connection therewith,
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<PAGE> 45
the amount thereof to be calculated in accordance with GAAP) in connection with
such purchase or other acquisition (or any series of related acquisitions) is
not greater than $10,000,000 and (y) the aggregate consideration to be paid in
cash or by the assumption or issuance of Debt by the Company and its
Subsidiaries in connection with such purchase or acquisition (or any series of
related acquisitions) is not greater than $7,000,000 or (ii) the Required Banks
have consented to such purchase or acquisition; and (4) the Company is in pro
forma compliance with all the financial ratios and restrictions set forth in
Section 10.6; and (d) sales and dispositions of assets (including the stock of
Subsidiaries) so long as the net book value of all assets sold or otherwise
disposed of in any Fiscal Year does not exceed $750,000.
10.12 Use of Proceeds. Use the proceeds of the Loans solely to
finance the Company's working capital, for acquisitions permitted by Section
10.11, for capital expenditures and for other general corporate purposes; and
not use or permit any proceeds of any Loan to be used, either directly or
indirectly, for the purpose, whether immediate, incidental or ultimate, of
"purchasing or carrying" any Margin Stock.
10.13 Further Assurances. Take, and cause each Subsidiary to take,
such actions as are necessary, or as the Agent (or the Required Banks acting
through the Agent) may reasonably request, from time to time (including the
execution and delivery of guaranties, security agreements, pledge agreements,
financing statements and other documents, the filing or recording of any of the
foregoing, and the delivery of stock certificates and other collateral with
respect to which perfection is obtained by possession) to ensure that (i) the
obligations of the Company hereunder and under the other Loan Documents are
secured by substantially all of the assets (other than real property and, unless
the Required Banks (acting through the Agent) otherwise request in writing, any
motor vehicle subject to a statute requiring notation on a certificate of title
to perfect a security interest in such vehicle) of the Company and guaranteed by
all of the Subsidiaries (including, promptly upon the acquisition or creation
thereof, any Subsidiary acquired or created after the date hereof) by execution
of a counterpart of the Guaranty and (ii) the obligations of each Guarantor
under the Guaranty are secured by substantially all of the assets (other than
real property and, unless the Required Banks (acting through the Agent)
otherwise request in writing, any motor vehicle subject to a statute requiring
notation on a certificate of title to perfect a security interest in such
vehicle) of such Guarantor.
10.14 Transactions with Affiliates. Not, and not permit any
Subsidiary to, enter into, or cause, suffer or permit to exist any transaction,
arrangement or contract with any of its other Affiliates (other than the Company
and its Subsidiaries) which is on terms which are less favorable than are
obtainable from any Person which is not one of its Affiliates.
10.15 Employee Benefit Plans. Maintain, and cause each Subsidiary to
maintain, each Pension Plan in substantial compliance with all applicable
requirements of law and regulations.
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<PAGE> 46
10.16 Environmental Laws. Conduct, and cause each Subsidiary to
conduct, its operations and keep and maintain its property in material
compliance with all Environmental Laws (other than Immaterial Laws).
10.17 Unconditional Purchase Obligations. Not, and not permit any
Subsidiary to, enter into or be a party to any contract for the purchase of
materials, supplies or other property or services, if such contract requires
that payment be made by it regardless of whether or not delivery is ever made of
such materials, supplies or other property or services; provided that the
foregoing shall not prohibit the Company or any Subsidiary from entering into
options for the purchase of particular assets or businesses.
10.18 Inconsistent Agreements. Not, and not permit any Subsidiary
to, enter into any agreement containing any provision which (a) would be
violated or breached by any borrowing, or the obtaining of any Letter of Credit,
by the Company hereunder or by the performance by the Company or any Subsidiary
of any of its obligations hereunder or under any other Loan Document or (b)
would prohibit the Company or any Subsidiary from granting to the Agent, for the
benefit of the Banks, a Lien on any of its assets.
10.19 Business Activities. Not, and not permit any Subsidiary to,
engage in any line of business other than the processing, collection, handling
and disposal of non-hazardous liquid or solid waste or similar non-hazardous
waste-related business activities.
10.20 Advances and Other Investments. Not, and not permit any
Subsidiary to, make, incur, assume or suffer to exist any Investment in any
other Person, except (without duplication) the following:
(a) equity Investments existing on the Effective Date in wholly-owned
Subsidiaries identified in Schedule 9.8;
(b) equity Investments in Subsidiaries acquired after the Effective
Date in transactions permitted as acquisitions of stock or assets
pursuant to Section 10.11;
(c) in the ordinary course of business, contributions by the Company to
the capital of any of its Subsidiaries, or by any such Subsidiary to
the capital of any of its Subsidiaries;
(d) in the ordinary course of business, Investments by the Company in
any Subsidiary or by any of the Subsidiaries in the Company, by way of
intercompany loans, advances or guaranties, all to the extent permitted
by Section 10.7;
(e) Suretyship Liabilities permitted by Section 10.7;
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<PAGE> 47
(f) good faith deposits made in connection with prospective
acquisitions of stock or assets permitted by Section 10.11;
(g) loans to officers and employees not exceeding (i) $100,000 in the
aggregate to any single individual or (ii) $250,000 in the aggregate
for all such individuals;
(h) Cash Equivalent Investments; and
(i) bank deposits in the ordinary course of business; provided that the
aggregate amount of all such deposits (excluding (x) amounts in payroll
accounts or for accounts payable, in each case to the extent that
checks have been issued to third parties, and (y) amounts maintained
(in the ordinary course of business consistent with past practice) in
accounts of any Person which is acquired by the Company or a Subsidiary
in accordance with the terms hereof during the 45 days following the
date of such acquisition) which are maintained with any bank other than
a Bank shall not at any time after September 25, 1998 exceed (x) in the
case of such deposits with any single bank, $100,000 for three
consecutive Business Days and (y) in the case of all such deposits,
$500,000 for three consecutive Business Days;
provided, however, that no Investment otherwise permitted by clause (b), (c),
(d), (e), (f) or (g) shall be permitted to be made if, immediately before or
after giving effect thereto, any Event of Default or Unmatured Event of Default
shall have occurred and be continuing.
SECTION 11 EFFECTIVENESS; CONDITIONS OF LENDING, ETC.
The obligation of each Bank to make its Loans and of any Issuing Bank
to issue Letters of Credit is subject to the following conditions precedent:
11.1 Effectiveness. The obligation of each Bank to make its initial
Loan and of any Issuing Bank to issue any Letter of Credit, whichever first
occurs, is, in addition to the conditions precedent specified in Section 11.2,
subject to the conditions precedent (and the date on which all such conditions
precedent have been satisfied or waived in writing by the Banks is called the
"Effective Date") that the Agent shall have received (a) all amounts which are
then due and payable pursuant to Section 5 and (to the extent billed) Section
14.6; (b) evidence satisfactory to the Agent that all Debt under the note from
the Company to NationsBank dated August 20, 1997 in the original principal
amount of $6,600,000; and loans by Raymond M. Cash, Chairman of the Board of
Directors of the Company, totaling $1,796,344.04 as of June 26, 1998 has been
(or concurrently with the initial credit extension hereunder will be) paid in
full and that all Liens securing such Debt have been (or concurrently with the
initial credit extension hereunder will be) terminated and (c) all of the
following, each duly executed and dated the Effective Date (or such earlier date
as shall be satisfactory to the Agent), in form and substance satisfactory to
the Agent,
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<PAGE> 48
and each (except for the Notes, of which only the originals shall be signed) in
sufficient number of signed counterparts to provide one for each Bank:
11.1.1 Notes. The Notes.
11.1.2 Resolutions. Certified copies of resolutions of the Board of
Directors of the Company authorizing or ratifying the execution, delivery and
performance by the Company of this Agreement, the Notes and the other Loan
Documents to which the Company is a party; and certified copies of resolutions
of the Board of Directors of each Subsidiary (if any) which is to execute and
deliver any document pursuant to Section 11.1.5, 11.1.6 or 11.1.7 authorizing or
ratifying the execution, delivery and performance by such Subsidiary of each
Loan Document to which such Subsidiary is a party.
11.1.3 Consents, etc. Certified copies of all documents evidencing
any necessary corporate action, consents and governmental approvals (if any)
required for the execution, delivery and performance by the Company and each
Subsidiary of the documents referred to in this Section 11.
11.1.4 Incumbency and Signature Certificates. A certificate of the
Secretary or an Assistant Secretary of the Company and each Subsidiary of the
Company as of the Effective Date certifying the names of the officer or officers
of such entity authorized to sign the Loan Documents to which such entity is a
party, together with a sample of the true signature of each such officer (it
being understood that the Agent and each Bank may conclusively rely on each such
certificate until formally advised by a like certificate of any changes
therein).
11.1.5 Guaranty. The Guaranty executed by each Subsidiary (if any) as
of the Effective Date.
11.1.6 Security Agreement. The Security Agreement executed by the
Company and each Subsidiary as of the Effective Date, together with evidence,
satisfactory to the Agent, that all filings necessary to perfect the Agent's
Lien on any collateral granted under the Security Agreement have been duly made
and are in full force and effect.
11.1.7 Pledge Agreements. The Company Pledge Agreement and, with
respect to any Subsidiary that as of the Effective Date has one or more
Subsidiaries, a Subsidiary Pledge Agreement, in each case together with all
stock certificates, stock powers and other items required to be delivered in
connection therewith.
11.1.8 Opinion of Counsel for the Company and the Guarantors. The
opinion of Chorey Taylor & Feil, counsel to the Company and the Guarantors.
11.1.9 Other. Such other documents as the Agent or any Bank may
reasonably request.
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<PAGE> 49
11.2 Conditions. The obligation (a) of each Bank to make each Loan
and (b) of each Issuing Bank to issue each Letter of Credit is subject to the
following further conditions precedent that:
11.2.1 Compliance with Warranties, No Default, etc. Both before and
after giving effect to any borrowing and the issuance of any Letter of Credit
(but, if any Event of Default of the nature referred to in Section 12.1.2 shall
have occurred with respect to any other Debt, without giving effect to the
application, directly or indirectly, of the proceeds thereof) the following
statements shall be true and correct:
(a) the representations and warranties of the Company and
the Guarantors set forth in this Agreement (excluding Sections 9.6, 9.8
and 9.15) and the other Loan Documents shall be true and correct in all
material respects with the same effect as if then made (except to the
extent stated to relate to an earlier date, in which case such
representations and warranties shall be true and correct in all
material respects as of such earlier date);
(b) except as disclosed by the Company to the Agent and
the Banks pursuant to Section 9.6,
(i) no litigation (including derivative actions),
arbitration proceeding, labor controversy or governmental
investigation or proceeding shall be pending or, to the
knowledge of the Company, threatened against the Company or
any of its Subsidiaries which might reasonably be expected to
have a Material Adverse Effect or which purports to affect the
legality, validity or enforceability of this Agreement, the
Notes or any other Loan Document; and
(ii) no development shall have occurred in any
litigation (including derivative actions), arbitration
proceeding, labor controversy or governmental investigation or
proceeding disclosed pursuant to Section 9.6 which might
reasonably be expected to have a Material Adverse Effect; and
(c) no Event of Default or Unmatured Event of Default
shall have then occurred and be continuing, and neither the Company nor
any of its Subsidiaries shall be in violation of any law or
governmental regulation or court order or decree where such violation
or violations singly or in the aggregate might reasonably be expected
to have a Material Adverse Effect.
11.2.2 Confirmatory Certificate. If requested by the Agent or any
Bank (acting through the Agent), the Agent shall have received (in sufficient
counterparts to provide one to each Bank) a certificate dated the date of such
requested Loan or Letter of Credit and signed by a duly authorized
representative of the Company as to the matters set out in Section 11.2.1 (it
being
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understood that each request by the Company for the making of a Loan or the
issuance of a Letter of Credit shall be deemed to constitute a warranty by the
Company that the conditions precedent set forth in Section 11.2.1 will be
satisfied at the time of the making of such Loan or the issuance of such Letter
of Credit), together with such other documents as the Agent or any Bank (acting
through the Agent) may reasonably request in support thereof.
SECTION 12 EVENTS OF DEFAULT AND THEIR EFFECT.
12.1 Events of Default. Each of the following shall constitute an
Event of Default under this Agreement:
12.1.1 Non-Payment of the Loans, etc. Default in the payment when due
of the principal of any Loan; default and continuance thereof for five days
after notice from the Agent, in the payment when due of any reimbursement
obligation with respect to any Letter of Credit; or default, and continuance
thereof for five days, in the payment when due of any interest, fee or other
amount payable by the Company hereunder or under any other Loan Document.
12.1.2 Non-Payment of Other Debt. Any default shall occur under the
terms applicable to any Debt of the Company or any Subsidiary in an aggregate
amount (for all such Debt so affected) exceeding $100,000 and such default shall
(a) consist of the failure to pay such Debt when due (subject to any applicable
grace period), whether by acceleration or otherwise, or (b) accelerate the
maturity of such Debt or permit the holder or holders thereof, or any trustee or
agent for such holder or holders, to cause such Debt to become due and payable
prior to its expressed maturity.
12.1.3 Other Material Obligations. Default in the payment when due,
or in the performance or observance of, any material obligation of, or condition
agreed to by, the Company or any Subsidiary with respect to any material
purchase or lease of goods or services where such default, singly or in the
aggregate with other such defaults might reasonably be expected to have a
Material Adverse Effect (except only to the extent that the existence of any
such default is being contested by the Company or such Subsidiary in good faith
and by appropriate proceedings and appropriate reserves have been made in
respect of such default).
12.1.4 Bankruptcy, Insolvency, etc. The Company or any Subsidiary
becomes insolvent or generally fails to pay, or admits in writing its inability
or refusal to pay, debts as they become due; or the Company or any Subsidiary
applies for, consents to, or acquiesces in the appointment of a trustee,
receiver or other custodian for the Company or such Subsidiary or any property
thereof, or makes a general assignment for the benefit of creditors; or, in the
absence of such application, consent or acquiescence, a trustee, receiver or
other custodian is appointed for the Company or any Subsidiary or for a
substantial part of the property of any thereof and is not discharged within 60
days; or any bankruptcy, reorganization, debt arrangement, or other case or
proceeding under any bankruptcy or insolvency law, or any dissolution or
liquidation proceeding
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<PAGE> 51
(except the voluntary dissolution, not under any bankruptcy or insolvency law,
of a Subsidiary), is commenced in respect of the Company or any Subsidiary, and
if such case or proceeding is not commenced by the Company or such Subsidiary,
it is consented to or acquiesced in by the Company or such Subsidiary, or
remains for 60 days undismissed; or the Company or any Subsidiary takes any
corporate action to authorize, or in furtherance of, any of the foregoing.
12.1.5 Non-Compliance with Provisions of This Agreement. (a) Failure
by the Company to comply with or to perform any covenant set forth in Sections
10.5 through 10.15; or (b) failure by the Company to comply with or to perform
any other provision of this Agreement (and not constituting an Event of Default
under any of the other provisions of this Section 12) and continuance of such
failure for 30 days after notice thereof to the Company from the Agent or any
Bank.
12.1.6 Warranties. Any warranty made by the Company herein is
breached or is false or misleading in any material respect, or any schedule,
certificate, financial statement, report, notice or other writing furnished by
the Company to the Agent or any Bank in connection herewith is false or
misleading in any material respect on the date as of which the facts therein set
forth are stated or certified.
12.1.7 Pension Plans. (i) Institution of any steps by the Company or
any other Person to terminate a Pension Plan if as a result of such termination
the Company could be required to make a contribution to such Pension Plan, or
could incur a liability or obligation to such Pension Plan, in excess of
$250,000; (ii) a contribution failure occurs with respect to any Pension Plan
sufficient to give rise to a Lien under section 302(f) of ERISA; or (iii) there
shall occur any withdrawal or partial withdrawal from a Multiemployer Pension
Plan and the withdrawal liability (without unaccrued interest) to Multiemployer
Pension Plans as a result of such withdrawal (including any outstanding
withdrawal liability that the Company and the Controlled Group have incurred on
the date of such withdrawal) exceeds $250,000.
12.1.8 Judgments. Final judgments which exceed an aggregate of
$250,000 shall be rendered against the Company, or any Subsidiary and shall not
have been paid, discharged or vacated or had execution thereof stayed pending
appeal within 30 days after entry or filing of such judgments.
12.1.9 Invalidity of Guaranty, etc. The Guaranty shall cease to be in
full force and effect with respect to any Guarantor, any Guarantor shall fail
(subject to any applicable grace period) to comply with or to perform any
applicable provision of the Guaranty, or any Guarantor (or any Person by,
through or on behalf of such Guarantor) shall contest in any manner the
validity, binding nature or enforceability of the Guaranty with respect to such
Guarantor.
12.1.10 Invalidity of Collateral Documents, etc. Any Collateral
Document shall cease to be in full force and effect with respect to the Company
or any Guarantor, the Company or any
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<PAGE> 52
Guarantor shall fail (subject to any applicable grace period) to comply with or
to perform any applicable provision of any Collateral Document to which such
entity is a party, or the Company or any Guarantor (or any Person by, through or
on behalf of the Company or such Guarantor) shall contest in any manner the
validity, binding nature or enforceability of any Collateral Document.
12.1.11 Change in Control. (a) Any Person or group of Persons (within
the meaning of Section 13 or 14 of the Securities Exchange Act of 1934, but
excluding the executive managers of the Company as of the Effective Date) shall
acquire beneficial ownership (within the meaning of Rule 13d-3 promulgated under
such Act) of 20% or more of the outstanding shares of common stock of the
Company; (b) during any 24-month period, individuals who at the beginning of
such period constituted the Company's Board of Directors (together with any new
directors whose election by the Company's Board of Directors or whose nomination
for election by the Company's shareholders was approved by a vote of at least
two-thirds of the directors who either were directors at beginning of such
period or whose election or nomination was previously so approved) cease for any
reason to constitute a majority of the Board of Directors of the Company; or (c)
a period of 60 consecutive days shall have elapsed during which any of the
individuals named in Schedule 12.1.11 shall have ceased to hold executive
offices with the Company at least equal in seniority to such individual's
present offices, as set out in such Schedule 12.1.11, excluding any such
individual who has been replaced by another individual or individuals reasonably
satisfactory to the Required Banks (it being understood that any such
replacement individual shall be deemed added to Schedule 12.1.11 on the date of
approval thereof by the Required Banks).
12.2 Effect of Event of Default. If any Event of Default described
in Section 12.1.4 shall occur, the Commitments (if they have not theretofore
terminated) shall immediately terminate and the Notes and all other obligations
hereunder shall become immediately due and payable and the Company shall become
immediately obligated to deliver to the Agent cash collateral in an amount equal
to the outstanding face amount of all Letters of Credit, all without
presentment, demand, protest or notice of any kind; and, if any other Event of
Default shall occur and be continuing, the Agent (upon written request of the
Required Banks) shall declare the Commitments (if they have not theretofore
terminated) to be terminated and/or declare all Notes and all other obligations
hereunder to be due and payable and/or demand that the Company immediately
deliver to the Agent cash collateral in amount equal to the outstanding face
amount of all Letters of Credit, whereupon the Commitments (if they have not
theretofore terminated) shall immediately terminate and/or all Notes and all
other obligations hereunder shall become immediately due and payable and/or the
Company shall immediately become obligated to deliver to the Agent cash
collateral in an amount equal to the face amount of all Letters of Credit, all
without presentment, demand, protest or notice of any kind. The Agent shall
promptly advise the Company of any such declaration, but failure to do so shall
not impair the effect of such declaration. Notwithstanding the foregoing, the
effect as an Event of Default of any event described in Section 12.1.1 or
Section 12.1.4 may be waived by the written concurrence of all of
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the Banks, and the effect as an Event of Default of any other event described in
this Section 12 may be waived by the written concurrence of the Required Banks.
Any cash collateral delivered hereunder shall be held by the Agent (without
liability for interest thereon) and applied to obligations arising in connection
with any drawing under a Letter of Credit. After the expiration or termination
of all Letters of Credit, such cash collateral shall be applied by the Agent to
any remaining obligations hereunder and any excess shall be delivered to the
Company or as a court of competent jurisdiction may elect.
SECTION 13 THE AGENT.
13.1 Appointment and Authorization. (a) Each Bank hereby
irrevocably (subject to Section 13.9) appoints, designates and authorizes the
Agent to take such action on its behalf under the provisions of this Agreement
and each other Loan Document and to exercise such powers and perform such duties
as are expressly delegated to it by the terms of this Agreement or any other
Loan Document, together with such powers as are reasonably incidental thereto.
Notwithstanding any provision to the contrary contained elsewhere in this
Agreement or in any other Loan Document, the Agent shall not have any duties or
responsibilities except those expressly set forth herein, nor shall the Agent
have or be deemed to have any fiduciary relationship with any Bank, and no
implied covenants, functions, responsibilities, duties, obligations or
liabilities shall be read into this Agreement or any other Loan Document or
otherwise exist against the Agent.
(b) Each Issuing Bank shall act on behalf of the Banks with
respect to any Letters of Credit issued by it and the documents associated
therewith. Each Issuing Bank shall have all of the benefits and immunities (i)
provided to the Agent in this Section 13 with respect to any acts taken or
omissions suffered by such Issuing Bank in connection with Letters of Credit
issued by it or proposed to be issued by it and the applications and agreements
for letters of credit pertaining to such Letters of Credit as fully as if the
term "Agent", as used in this Section 13, included such Issuing Bank with
respect to such acts or omissions and (ii) as additionally provided in this
Agreement with respect to the Issuing Banks.
13.2 Delegation of Duties. The Agent may execute any of its duties
under this Agreement or any other Loan Document by or through agents, employees
or attorneys-in-fact and shall be entitled to advice of counsel concerning all
matters pertaining to such duties. The Agent shall not be responsible for the
negligence or misconduct of any agent or attorney-in-fact that it selects with
reasonable care.
13.3 Liability of Agent. None of the Agent-Related Persons shall
(i) be liable for any action taken or omitted to be taken by any of them under
or in connection with this Agreement or any other Loan Document or the
transactions contemplated hereby (except for its own gross negligence or willful
misconduct), or (ii) be responsible in any manner to any of the Banks for any
recital, statement, representation or warranty made by the Company or any
Subsidiary or
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Affiliate of the Company, or any officer thereof, contained in this Agreement or
in any other Loan Document, or in any certificate, report, statement or other
document referred to or provided for in, or received by the Agent under or in
connection with, this Agreement or any other Loan Document, or the validity,
effectiveness, genuineness, enforceability or sufficiency of this Agreement or
any other Loan Document, or for any failure of the Company or any other party to
any Loan Document to perform its obligations hereunder or thereunder. No
Agent-Related Person shall be under any obligation to any Bank to ascertain or
to inquire as to the observance or performance of any of the agreements
contained in, or conditions of, this Agreement or any other Loan Document, or to
inspect the properties, books or records of the Company or any of the Company's
Subsidiaries or Affiliates.
13.4 Reliance by Agent. The Agent shall be entitled to rely, and
shall be fully protected in relying, upon any writing, resolution, notice,
consent, certificate, affidavit, letter, telegram, facsimile, telex or telephone
message, statement or other document or conversation believed by it to be
genuine and correct and to have been signed, sent or made by the proper Person
or Persons, and upon advice and statements of legal counsel (including counsel
to the Company), independent accountants and other experts selected by the
Agent. The Agent shall be fully justified in failing or refusing to take any
action under this Agreement or any other Loan Document unless it shall first
receive such advice or concurrence of the Required Banks as it deems appropriate
and, if it so requests, confirmation from the Banks of their obligation to
indemnify the Agent against any and all liability and expense which may be
incurred by it by reason of taking or continuing to take any such action. The
Agent shall in all cases be fully protected in acting, or in refraining from
acting, under this Agreement or any other Loan Document in accordance with a
request or consent of the Required Banks and such request and any action taken
or failure to act pursuant thereto shall be binding upon all of the Banks.
13.5 Notice of Default. The Agent shall not be deemed to have
knowledge or notice of the occurrence of any Event of Default or Unmatured Event
of Default except with respect to defaults in the payment of principal, interest
and fees required to be paid to the Agent for the account of the Banks, unless
the Agent shall have received written notice from a Bank or the Company
referring to this Agreement, describing such Event of Default or Unmatured Event
of Default and stating that such notice is a "notice of default". The Agent will
notify the Banks of its receipt of any such notice. The Agent shall take such
action with respect to such Event of Default or Unmatured Event of Default as
may be requested by the Required Banks in accordance with Section 12; provided,
however, that unless and until the Agent has received any such request, the
Agent may (but shall not be obligated to) take such action, or refrain from
taking such action, with respect to such Event of Default or Unmatured Event of
Default as it shall deem advisable or in the best interest of the Banks.
13.6 Credit Decision. Each Bank acknowledges that none of the
Agent-Related Persons has made any representation or warranty to it, and that no
act by the Agent hereafter taken, including any review of the affairs of the
Company and its Subsidiaries, shall be deemed to
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constitute any representation or warranty by any Agent-Related Person to any
Bank. Each Bank represents to the Agent that it has, independently and without
reliance upon any Agent-Related Person and based on such documents and
information as it has deemed appropriate, made its own appraisal of and
investigation into the business, prospects, operations, property, financial and
other condition and creditworthiness of the Company and its Subsidiaries, and
all applicable bank regulatory laws relating to the transactions contemplated
hereby, and made its own decision to enter into this Agreement and to extend
credit to the Company hereunder. Each Bank also represents that it will,
independently and without reliance upon any Agent-Related Person and based on
such documents and information as it shall deem appropriate at the time,
continue to make its own credit analysis, appraisals and decisions in taking or
not taking action under this Agreement and the other Loan Documents, and to make
such investigations as it deems necessary to inform itself as to the business,
prospects, operations, property, financial and other condition and
creditworthiness of the Company. Except for notices, reports and other documents
expressly herein required to be furnished to the Banks by the Agent, the Agent
shall not have any duty or responsibility to provide any Bank with any credit or
other information concerning the business, prospects, operations, property,
financial or other condition or creditworthiness of the Company which may come
into the possession of any of the Agent-Related Persons.
13.7 Indemnification. Whether or not the transactions contemplated
hereby are consummated, the Banks shall indemnify upon demand the Agent-Related
Persons (to the extent not reimbursed by or on behalf of the Company and without
limiting the obligation of the Company to do so), pro rata, from and against any
and all Indemnified Liabilities; provided, however, that no Bank shall be liable
for any payment to the Agent-Related Person of any portion of the Indemnified
Liabilities resulting solely from such Person's gross negligence or willful
misconduct. Without limitation of the foregoing, each Bank shall reimburse the
Agent upon demand for its ratable share of any costs or out-of-pocket expenses
(including reasonable fees of attorneys for the Agent (including the allocable
costs of internal legal services and all disbursements of internal counsel))
incurred by the Agent in connection with the preparation, execution, delivery,
administration, modification, amendment or enforcement (whether through
negotiations, legal proceedings or otherwise) of, or legal advice in respect of
rights or responsibilities under, this Agreement, any other Loan Document, or
any document contemplated by or referred to herein, to the extent that the Agent
is not reimbursed for such expenses by or on behalf of the Company. The
undertaking in this Section shall survive repayment of the Loans, cancellation
of the Notes, any foreclosure under, or any modification, release or discharge
of, any or all of the Collateral Documents, any termination of this Agreement
and the resignation or replacement of the Agent.
For the purposes of this Section 13.7, "Indemnified Liabilities" shall
mean: any and all liabilities, obligations, losses, damages, penalties, actions,
judgments, suits, costs, charges, expenses and disbursements (including
reasonable fees of attorneys for the Agent (including the allocable costs of
internal legal services and all disbursements of internal counsel)) of any kind
or nature whatsoever which may at any time (including at any time following
repayment of the
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Loans and the termination, resignation or replacement of the Agent or the
replacement of any Bank) be imposed on, incurred by or asserted against any
Agent-Related Person in any way relating to or arising out of this Agreement or
any document contemplated by or referred to herein, or the transactions
contemplated hereby, or any action taken or omitted by any such Person under or
in connection with any of the foregoing, including with respect to any
investigation, litigation or proceeding (including (a) any case, action or
proceeding before any court or other governmental authority relating to
bankruptcy, reorganization, insolvency, liquidation, receivership, dissolution,
winding-up or relief of debtors, or (b) any general assignment for the benefit
of creditors, composition, marshalling of assets for creditors, or other,
similar arrangement in respect of its creditors generally or any substantial
portion of its creditors; undertaken under U.S. Federal, state or foreign law,
including the Bankruptcy Code, and including any appellate proceeding) related
to or arising out of this Agreement or the Commitments or the use of the
proceeds thereof, whether or not any Agent-Related Person, any Bank or any of
their respective officers, directors, employees, counsel, agents or
attorneys-in-fact is a party thereto.
13.8 Agent in Individual Capacity. BofA and its Affiliates may make
loans to, issue letters of credit for the account of, accept deposits from,
acquire equity interests in and generally engage in any kind of banking, trust,
financial advisory, underwriting or other business with the Company and its
Subsidiaries and Affiliates as though BofA were not the Agent, the Issuing Bank
hereunder and without notice to or consent of the Banks. The Banks acknowledge
that, pursuant to such activities, BofA or its Affiliates may receive
information regarding the Company or its Affiliates (including information that
may be subject to confidentiality obligations in favor of the Company or such
Subsidiary) and acknowledge that the Agent shall be under no obligation to
provide such information to them. With respect to their Loans, BofA and its
Affiliates shall have the same rights and powers under this Agreement as any
other Bank and may exercise the same as though BofA were not the Agent and the
Issuing Bank, and the terms "Bank" and "Banks" include BofA and its Affiliates,
to the extent applicable, in their individual capacities.
13.9 Successor Agent. The Agent may, and at the request of the
Required Banks shall, resign as Agent upon 30 days' notice to the Banks. If the
Agent resigns under this Agreement, the Required Banks shall, with (so long as
no Event of Default exists) the consent of the Company (which shall not be
unreasonably withheld or delayed), appoint from among the Banks a successor
agent for the Banks. If no successor agent is appointed prior to the effective
date of the resignation of the Agent, the Agent may appoint, after consulting
with the Banks and the Company, a successor agent from among the Banks. Upon the
acceptance of its appointment as successor agent hereunder, such successor agent
shall succeed to all the rights, powers and duties of the retiring Agent and the
term "Agent" shall mean such successor agent, and the retiring Agent's
appointment, powers and duties as Agent shall be terminated. After any retiring
Agent's resignation hereunder as Agent, the provisions of this Section 13 and
Sections 14.6 and 14.13 shall inure to its benefit as to any actions taken or
omitted to be taken by it while it was Agent under this Agreement. If no
successor agent has accepted appointment as Agent by the date
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which is 30 days following a retiring Agent's notice of resignation, the
retiring Agent's resignation shall nevertheless thereupon become effective and
the Banks shall perform all of the duties of the Agent hereunder until such
time, if any, as the Required Banks appoint a successor agent as provided for
above. Notwithstanding the foregoing, however, BofA may not be removed as the
Agent at the request of the Required Banks unless BofA shall also simultaneously
be replaced as an "Issuing Bank" hereunder pursuant to documentation in form and
substance reasonably satisfactory to BofA.
13.10 Withholding Tax.
(a) If any Bank is a "foreign corporation, partnership or
trust" within the meaning of the Code and such Bank claims exemption
from, or a reduction of, U.S. withholding tax under Sections 1441 or
1442 of the Code, such Bank agrees to deliver to the Agent:
(i) if such Bank claims an exemption from, or a
reduction of, withholding tax under a United States tax
treaty, properly completed Internal Revenue Service ("IRS")
Forms 1001 and W-8 before the payment of any interest in the
first calendar year and before the payment of any interest in
each third succeeding calendar year during which interest may
be paid under this Agreement;
(ii) if such Bank claims that interest paid under
this Agreement is exempt from United States withholding tax
because it is effectively connected with a United States trade
or business of such Bank, two properly completed and executed
copies of IRS Form 4224 before the payment of any interest is
due in the first taxable year of such Bank and in each
succeeding taxable year of such Bank during which interest may
be paid under this Agreement, and IRS Form W-9; and
(iii) such other form or forms as may be required
under the Code or other laws of the United States as a
condition to exemption from, or reduction of, United States
withholding tax.
Such Bank agrees to promptly notify the Agent of any change in
circumstances which would modify or render invalid any claimed
exemption or reduction.
(b) If any Bank claims exemption from, or reduction of,
withholding tax under a United States tax treaty by providing IRS Form
1001 and such Bank sells, assigns, grants a participation in, or
otherwise transfers all or part of the obligations of the Company to
such Bank, such Bank agrees to notify the Agent of the percentage
amount in which it is no longer the beneficial owner of such
obligations of the Company hereunder. To the extent of such percentage
amount, the Agent will treat such Bank's IRS Form 1001 as no longer
valid.
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(c) If any Bank claiming exemption from United States
withholding tax by filing IRS Form 4224 with the Agent sells, assigns,
grants a participation in, or otherwise transfers all or part of the
obligations of the Company to such Bank hereunder, such Bank agrees to
undertake sole responsibility for complying with the withholding tax
requirements imposed by Sections 1441 and 1442 of the Code.
(d) If any Bank is entitled to a reduction in the
applicable withholding tax, the Agent may withhold from any interest
payment to such Bank an amount equivalent to the applicable withholding
tax after taking into account such reduction. If the forms or other
documentation required by subsection (a) of this Section are not
delivered to the Agent, then the Agent may withhold from any interest
payment to such Bank not providing such forms or other documentation an
amount equivalent to the applicable withholding tax.
(e) If the IRS or any other governmental authority of the
United States or any other jurisdiction asserts a claim that the Agent
did not properly withhold tax from amounts paid to or for the account
of any Bank (because the appropriate form was not delivered or was not
properly executed, or because such Bank failed to notify the Agent of a
change in circumstances which rendered the exemption from, or reduction
of, withholding tax ineffective, or for any other reason) such Bank
shall indemnify the Agent fully for all amounts paid, directly or
indirectly, by the Agent as tax or otherwise, including penalties and
interest, and including any taxes imposed by any jurisdiction on the
amounts payable to the Agent under this Section, together with all
costs and expenses (including reasonable fees of attorneys for the
Agent (including the allocable costs of internal legal services and all
disbursements of internal counsel)). The obligation of the Banks under
this subsection shall survive the repayment of the Loans, cancellation
of the Notes, any termination of this Agreement and the resignation or
replacement of the Agent.
13.11 Collateral Matters. The Banks irrevocably authorize the Agent,
at its option and in its discretion, to release any Lien granted to or held by
the Agent under any Collateral Document (i) upon termination of the Commitments
and payment in full of all Loans and all other obligations of the Company
hereunder and the expiration or termination of all Letters of Credit; (ii)
constituting property sold or to be sold or disposed of as part of or in
connection with any disposition permitted hereunder; or (iii) subject to Section
14.1, if approved, authorized or ratified in writing by the Required Banks. Upon
request by the Agent at any time, the Banks will confirm in writing the Agent's
authority to release particular types or items of collateral pursuant to this
Section 13.11.
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SECTION 14 GENERAL.
14.1 Waiver; Amendments. No delay on the part of the Agent, any
Bank or any other holder of a Note in the exercise of any right, power or remedy
shall operate as a waiver thereof, nor shall any single or partial exercise by
any of them of any right, power or remedy preclude other or further exercise
thereof, or the exercise of any other right, power or remedy. No amendment,
modification or waiver of, or consent with respect to, any provision of this
Agreement or the Notes shall in any event be effective unless the same shall be
in writing and signed and delivered by Banks having an aggregate Percentage of
not less than the aggregate Percentage expressly designated herein with respect
thereto or, in the absence of such designation as to any provision of this
Agreement or the Notes, by the Required Banks, and then any such amendment,
modification, waiver or consent shall be effective only in the specific instance
and for the specific purpose for which given. No amendment, modification, waiver
or consent shall change the Percentage of any Bank without the consent of such
Bank. No amendment, modification, waiver or consent shall (i) extend or increase
the amount of the Commitments, (ii) extend the date for payment of any principal
of or interest on the Loans or any fees payable hereunder, (iii) reduce the
principal amount of any Loan, the rate of interest thereon or any fees payable
hereunder, (iv) release the Guaranty (other than with respect to a Guarantor
which ceases to be a Subsidiary as a result of a transaction permitted
hereunder) or all or substantially all of the collateral granted under the
Collateral Document or (v) reduce the aggregate Percentage required to effect an
amendment, modification, waiver or consent without, in each case, the consent of
all Banks. No provisions of Section 13 or other provision of this Agreement
affecting the Agent in its capacity as such shall be amended, modified or waived
without the consent of the Agent. No provision of this Agreement relating to the
rights or duties of an Issuing Bank in its capacity as such shall be amended,
modified or waived without the consent of such Issuing Bank.
14.2 Confirmations. The Company and each holder of a Note agree
from time to time, upon written request received by it from the other, to
confirm to the other in writing (with a copy of each such confirmation to the
Agent) the aggregate unpaid principal amount of the Loans then outstanding under
such Note.
14.3 Notices. Except as otherwise provided in Sections 2.2, 2.4 and
4.3, all notices hereunder shall be in writing (including facsimile
transmission) and shall be sent to the applicable party at its address shown on
Schedule 14.3 or at such other address as such party may, by written notice
received by the other parties, have designated as its address for such purpose.
Notices sent by facsimile transmission shall be deemed to have been given when
sent; notices sent by mail shall be deemed to have been given three Business
Days after the date when sent by registered or certified mail, postage prepaid;
and notices sent by hand delivery or overnight courier service shall be deemed
to have been given when received. For purposes of Sections 2.2, 2.4 and 4.3, the
Agent shall be entitled to rely on telephonic instructions from any person that
the Agent in good faith believes is an authorized officer or employee of the
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Company, and the Company shall hold the Agent and each other Bank harmless from
any loss, cost or expense resulting from any such reliance.
14.4 Computations. Where the character or amount of any asset or
liability or item of income or expense is required to be determined, or any
consolidation or other accounting computation is required to be made, for the
purpose of this Agreement, such determination or calculation shall, to the
extent applicable and except as otherwise specified in this Agreement, be made
in accordance with GAAP, consistently applied; provided that if the Company
notifies the Agent that the Company wishes to amend any covenant in Section 10
to eliminate or to take into account the effect of any change in GAAP on the
operation of such covenant (or if the Agent notifies the Company that the
Required Banks wish to amend Section 10 for such purpose), then the Company's
compliance with such covenant shall be determined on the basis of GAAP in effect
immediately before the relevant change in GAAP became effective, until either
such notice is withdrawn or such covenant is amended in a manner satisfactory to
the Company and the Required Banks.
14.5 Regulation U. Each Bank represents that it in good faith is
not relying, either directly or indirectly, upon any Margin Stock as collateral
security for the extension or maintenance by it of any credit provided for in
this Agreement.
14.6 Costs, Expenses and Taxes. The Company agrees to pay on demand
all reasonable out-of-pocket costs and expenses of the Agent (including the
reasonable fees and charges of counsel for the Agent and of local counsel, if
any, who may be retained by said counsel) in connection with the preparation,
execution, delivery and administration of this Agreement, the other Loan
Documents and all other documents provided for herein or delivered or to be
delivered hereunder or in connection herewith (including any amendments,
supplements or waivers to any Loan Documents), and all reasonable out-of-pocket
costs and expenses (including reasonable attorneys' fees, court costs and other
legal expenses and allocated costs of staff counsel) incurred by the Agent and
each Bank after an Event of Default in connection with the enforcement of this
Agreement, the other Loan Documents or any such other documents. Each Bank
agrees to reimburse the Agent for such Bank's pro rata share (based on its
respective Percentage) of any such costs and expenses of the Agent not paid by
the Company. In addition, the Company agrees to pay, and to save the Agent and
the Banks harmless from all liability for, (a) any stamp or other taxes
(excluding income taxes and franchise taxes based on net income) which may be
payable in connection with the execution and delivery of this Agreement, the
borrowings hereunder, the issuance of the Notes or the execution and delivery of
any other Loan Document or any other document provided for herein or delivered
or to be delivered hereunder or in connection herewith and (b) any fees of the
Company's auditors in connection with any reasonable exercise by the Agent and
the Banks of their rights pursuant to Section 10.2. All obligations provided for
in this Section 14.6 shall survive repayment of the Loans, cancellation of the
Notes and any termination of this Agreement.
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14.7 Subsidiary References. The provisions of this Agreement
relating to Subsidiaries shall apply only during such times as the Company has
one or more Subsidiaries.
14.8 Captions. Section captions used in this Agreement are for
convenience only and shall not affect the construction of this Agreement.
14.9 Assignments; Participations.
14.9.1 Assignments. Any Bank may, with the prior written consents of
the Company and the Agent (which consents shall not be unreasonably delayed or
withheld), at any time assign and delegate to one or more commercial banks or
other Persons (any Person to whom such an assignment and delegation is to be
made being herein called an "Assignee"), all or any fraction of such Bank's
Revolving Loans and Commitment (which assignment and delegation shall be of a
constant, and not a varying, percentage of all the assigning Bank's Revolving
Loans and Commitment) in a minimum aggregate amount equal to the lesser of (i)
the amount of the assigning Bank's remaining Commitment and (ii) $5,000,000;
provided, however, that (a) no assignment and delegation may be made to any
Person if, at the time of such assignment and delegation, the Company would be
obligated to pay any greater amount under Section 7.6 or Section 8 to the
Assignee than the Company is then obligated to pay to the assigning Bank under
such Sections (and if any assignment is made in violation of the foregoing, the
Company will not be required to pay the incremental amounts) and (b) the Company
and the Agent shall be entitled to continue to deal solely and directly with
such Bank in connection with the interests so assigned and delegated to an
Assignee until the date when all of the following conditions shall have been
met:
(x) five Business Days (or such lesser period of time as the
Agent and the assigning Bank shall agree) shall have passed after
written notice of such assignment and delegation, together with payment
instructions, addresses and related information with respect to such
Assignee, shall have been given to the Company and the Agent by such
assigning Bank and the Assignee,
(y) the assigning Bank and the Assignee shall have executed
and delivered to the Company and the Agent an assignment agreement
substantially in the form of Exhibit G (an "Assignment Agreement"),
together with any documents required to be delivered thereunder, which
Assignment Agreement shall have been accepted by the Agent, and
(z) the assigning Bank or the Assignee shall have paid the
Agent a processing fee of $3,500.
From and after the date on which the conditions described above have been met,
(x) such Assignee shall be deemed automatically to have become a party hereto
and, to the extent that rights and obligations hereunder have been assigned and
delegated to such Assignee pursuant to
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such Assignment Agreement, shall have the rights and obligations of a Bank
hereunder, and (y) the assigning Bank, to the extent that rights and obligations
hereunder have been assigned and delegated by it pursuant to such Assignment
Agreement, shall be released from its obligations hereunder. Within five
Business Days after effectiveness of any assignment and delegation, the Company
shall execute and deliver to the Agent (for delivery to the Assignee and the
Assignor, as applicable) a new Note in the principal amount of the Assignee's
Percentage of the Commitment Amount and, if the assigning Bank has retained a
Commitment hereunder, a replacement Note in the principal amount of the
Percentage of the Commitment Amount retained by the assigning Bank (such Note to
be in exchange for, but not in payment of, the predecessor Note held by such
assigning Bank). Each such Note shall be dated the effective date of such
assignment. The assigning Bank shall mark the predecessor Note "exchanged" and
deliver it to the Company. Accrued interest on that part of the predecessor Note
being assigned shall be paid as provided in the Assignment Agreement. Accrued
interest and fees on that part of the predecessor Note not being assigned shall
be paid to the assigning Bank. Accrued interest and accrued fees shall be paid
at the same time or times provided in the predecessor Note and in this
Agreement. Any attempted assignment and delegation not made in accordance with
this Section 14.9.1 shall be null and void.
Notwithstanding the foregoing provisions of this Section 14.9.1 or any
other provision of this Agreement, any Bank may at any time assign all or any
portion of its Loans and its Note to a Federal Reserve Bank (but no such
assignment shall release any Bank from any of its obligations hereunder).
14.9.2 Participations. Any Bank may at any time sell to one or more
commercial banks or other Persons participating interests in any Loan owing to
such Bank, the Note held by such Bank, the Commitment of such Bank, the direct
or participation interest of such Bank in any Letter of Credit or any other
interest of such Bank hereunder (any Person purchasing any such participating
interest being herein called a "Participant"); provided that any Bank selling
any such participating interest shall give notice thereof to the Company. In the
event of a sale by a Bank of a participating interest to a Participant, (x) such
Bank shall remain the holder of its Note for all purposes of this Agreement, (y)
the Company and the Agent shall continue to deal solely and directly with such
Bank in connection with such Bank's rights and obligations hereunder and (z) all
amounts payable by the Company shall be determined as if such Bank had not sold
such participation and shall be paid directly to such Bank. No Participant shall
have any direct or indirect voting rights hereunder except with respect to any
of the events (excluding the events described in clause (v) thereof) described
in the fourth sentence of Section 14.1. Each Bank agrees to incorporate the
requirements of the preceding sentence into each participation agreement which
such Bank enters into with any Participant. The Company agrees that if amounts
outstanding under this Agreement and the Notes are due and payable (as a result
of acceleration or otherwise), each Participant shall be deemed to have the
right of setoff in respect of its participating interest in amounts owing under
this Agreement, any Note and with respect to any Letter of Credit to the same
extent as if the amount of its participating interest were owing directly to it
as a Bank under this Agreement or such Note; provided that such right of setoff
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shall be subject to the obligation of each Participant to share with the Banks,
and the Banks agree to share with each Participant, as provided in Section 7.5.
The Company also agrees that each Participant shall be entitled to the benefits
of Section 7.6 and Section 8 as if it were a Bank (provided that no Participant
shall receive any greater compensation pursuant to Section 7.6 or Section 8 than
would have been paid to the participating Bank if no participation had been
sold).
14.10 Governing Law. This Agreement and each Note shall be a
contract made under and governed by the internal laws of the State of Illinois.
Whenever possible each provision of this Agreement shall be interpreted in such
manner as to be effective and valid under applicable law, but if any provision
of this Agreement shall be prohibited by or invalid under applicable law, such
provision shall be ineffective to the extent of such prohibition or invalidity,
without invalidating the remainder of such provision or the remaining provisions
of this Agreement. All obligations of the Company and rights of the Agent, the
Banks and any other holder of a Note expressed herein or in any other Loan
Document shall be in addition to and not in limitation of those provided by
applicable law.
14.11 Counterparts. This Agreement may be executed in any number of
counterparts and by the different parties hereto on separate counterparts and
each such counterpart shall be deemed to be an original, but all such
counterparts shall together constitute but one and the same Agreement.
14.12 Successors and Assigns. This Agreement shall be binding upon
the Company, the Banks and the Agent and their respective successors and
assigns, and shall inure to the benefit of the Company, the Banks and the Agent
and the successors and assigns of the Banks and the Agent.
14.13 Indemnification by the Company.
(a) In consideration of the execution and delivery of this
Agreement by the Agent and the Banks and the agreement to extend the Commitments
provided hereunder, the Company hereby agrees to indemnify, exonerate and hold
the Agent, each Bank and each of the officers, directors, employees, Affiliates
and agents of the Agent and each Bank (each a "Bank Party") free and harmless
from and against any and all actions, causes of action, suits, losses,
liabilities, damages and expenses, including reasonable attorneys' fees and
charges and, without duplication, allocated costs of staff counsel
(collectively, for purposes of this Section 14.13, called the "Indemnified
Liabilities"), incurred by the Bank Parties or any of them as a result of, or
arising out of, or relating to (i) any tender offer, merger, purchase of stock,
purchase of assets or other similar transaction financed or proposed to be
financed in whole or in part, directly or indirectly, with the proceeds of any
of the Loans, (ii) the use, handling, release, emission, discharge,
transportation, storage, treatment or disposal of any hazardous substance at any
property owned or leased by the Company or any Subsidiary, (iii) any violation
of any Environmental Laws with respect to conditions at any property owned or
leased by the Company or any Subsidiary or the operations conducted thereon,
(iv) the investigation, cleanup or
56
<PAGE> 64
remediation of offsite locations at which the Company or any Subsidiary or their
respective predecessors are alleged to have directly or indirectly disposed of
hazardous substances or (v) the execution, delivery, performance or enforcement
of this Agreement or any other Loan Document by any of the Bank Parties, except
for any such Indemnified Liabilities arising on account of any such Bank Party's
gross negligence or willful misconduct. If and to the extent that the foregoing
undertaking may be unenforceable for any reason, the Company hereby agrees to
make the maximum contribution to the payment and satisfaction of each of the
Indemnified Liabilities which is permissible under applicable law. Nothing set
forth above shall be construed to relieve any Bank Party from any obligation it
may have under this Agreement.
(b) All obligations provided for in this Section 14.13 shall
survive repayment of the Loans, cancellation of the Notes, any foreclosure
under, or any modification, release or discharge of any or all of the Collateral
Documents and any termination of this Agreement.
14.14 FORUM SELECTION AND CONSENT TO JURISDICTION. ANY LITIGATION
BASED HEREON, OR ARISING OUT OF, UNDER, OR IN CONNECTION WITH THIS AGREEMENT OR
ANY OTHER LOAN DOCUMENT, SHALL BE BROUGHT AND MAINTAINED EXCLUSIVELY IN THE
COURTS OF THE STATE OF ILLINOIS OR IN THE UNITED STATES DISTRICT COURT FOR THE
NORTHERN DISTRICT OF ILLINOIS; PROVIDED, HOWEVER, THAT ANY SUIT SEEKING
ENFORCEMENT AGAINST ANY COLLATERAL OR OTHER PROPERTY MAY BE BROUGHT, AT THE
AGENT'S OPTION, IN THE COURTS OF ANY JURISDICTION WHERE SUCH COLLATERAL OR OTHER
PROPERTY MAY BE FOUND. THE COMPANY HEREBY EXPRESSLY AND IRREVOCABLY SUBMITS TO
THE JURISDICTION OF THE COURTS OF THE STATE OF ILLINOIS AND OF THE UNITED STATES
DISTRICT COURT FOR THE NORTHERN DISTRICT OF ILLINOIS FOR THE PURPOSE OF ANY SUCH
LITIGATION AS SET FORTH ABOVE. THE COMPANY FURTHER IRREVOCABLY CONSENTS TO THE
SERVICE OF PROCESS BY REGISTERED MAIL, POSTAGE PREPAID, OR BY PERSONAL SERVICE
WITHIN OR WITHOUT THE STATE OF ILLINOIS. THE COMPANY HEREBY EXPRESSLY AND
IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW, ANY OBJECTION WHICH
IT MAY NOW OR HEREAFTER HAVE TO THE LAYING OF VENUE OF ANY SUCH LITIGATION
BROUGHT IN ANY SUCH COURT REFERRED TO ABOVE AND ANY CLAIM THAT ANY SUCH
LITIGATION HAS BEEN BROUGHT IN AN INCONVENIENT FORUM. TO THE EXTENT THAT THE
COMPANY HAS OR HEREAFTER MAY ACQUIRE ANY IMMUNITY FROM JURISDICTION OF ANY COURT
OR FROM ANY LEGAL PROCESS (WHETHER THROUGH SERVICE OR NOTICE, ATTACHMENT PRIOR
TO JUDGMENT, ATTACHMENT IN AID OF EXECUTION OR OTHERWISE) WITH RESPECT TO ITSELF
OR ITS PROPERTY, THE COMPANY HEREBY IRREVOCABLY WAIVES SUCH IMMUNITY IN RESPECT
OF ITS OBLIGATIONS UNDER THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS.
57
<PAGE> 65
14.15 WAIVER OF JURY TRIAL. EACH OF THE COMPANY, THE AGENT AND EACH
BANK HEREBY WAIVES ANY RIGHT TO A TRIAL BY JURY IN ANY ACTION OR PROCEEDING TO
ENFORCE OR DEFEND ANY RIGHTS UNDER THIS AGREEMENT, ANY NOTE, ANY OTHER LOAN
DOCUMENT AND ANY AMENDMENT, INSTRUMENT, DOCUMENT OR AGREEMENT DELIVERED OR WHICH
MAY IN THE FUTURE BE DELIVERED IN CONNECTION HEREWITH OR THEREWITH OR ARISING
FROM ANY BANKING RELATIONSHIP EXISTING IN CONNECTION WITH ANY OF THE FOREGOING,
AND AGREES THAT ANY SUCH ACTION OR PROCEEDING SHALL BE TRIED BEFORE A COURT AND
NOT BEFORE A JURY.
58
<PAGE> 66
Delivered at Chicago, Illinois, as of the day and year first above written.
SANTI GROUP, INC.
By /s/ Rock Payne
----------------------------------------
Title President
------------------------------------
BANK OF AMERICA NATIONAL TRUST AND
SAVINGS ASSOCIATION, as Agent
By /s/ Jay McKeown
---------------------------------------
Title Assistant Vice President
----------------------------------
BANK OF AMERICA NATIONAL TRUST AND
SAVING ASSOCIATION, as Issuing Bank and
as a Bank
By /s/ Robert Raysmalski
----------------------------------------
Title Managing Director
-------------------------------------
S-1
<PAGE> 67
SCHEDULE 1.1
PRICING SCHEDULE
The Floating Rate Margin, the Eurodollar Margin, the rate per annum
applicable for non-use fees and the rate per annum applicable for letter of
credit fees for Financial Letters of Credit and Non-Financial Letters of Credit,
respectively, shall be determined in accordance with the table below and the
other provisions of this Schedule 1.1.
<TABLE>
<CAPTION>
LEVEL I Level II Level III Level IV Level V LEVEL
VI
<S> <C> <C> <C> <C> <C> <C>
Rate for
Non-Use Fee 0.250% 0.300% 0.350% 0.350% 0.400% 0.450%
Eurodollar Margin 1.000% 1.250% 1.500% 1.750% 2.000% 2.250%
Floating Rate Margin
0 0 0.250% 0.500% 0.750% 0.750%
Rate for
Non-Financial LC Fee 0.500% 0.625% 0.750% 0.875% 1.000% 1.000%
Rate for
Financial LC Fee 1.000% 1.250% 1.500% 1.750% 2.000% 2.000%
</TABLE>
Level I applies when the Funded Debt to EBITDA Ratio is less than 1.50
to 1.0.
Level II applies when the Funded Debt to EBITDA Ratio is equal to or
greater than 1.50 to 1.0 but less than 2.00 to 1.0.
Level III applies when the Funded Debt to EBITDA Ratio is equal to or
greater than 2.00 to 1.0 but less than 2.50 to 1.0.
Level IV applies when the Funded Debt to EBITDA Ratio is equal to or
greater than 2.50 to 1.0 but less than 3.00 to 1.0.
Level V applies when the Funded Debt to EBITDA Ratio is equal to or
greater than 3.00 to 1.0 but less than 3.50 to 1.0.
Level VI applies when the Funded Debt to EBITDA Ratio is equal to or
greater than 3.50 to 1.0.
Initially, the applicable Level shall be Level IV. The applicable Level
shall be adjusted, to the extent applicable, 45 days (or, in the case of the
last Fiscal Quarter of any Fiscal Year, 90 days) after the
1
<PAGE> 68
end of each Fiscal Quarter based on the Funded Debt to EBITDA Ratio as of the
last day of such Fiscal Quarter; provided that if the Company fails to deliver
the financial statements required by Section 10.1.1 or 10.1.2, as applicable,
and the related certificate required by Section 10.1.3 by the 45th day (or, if
applicable, the 90th day) after any Fiscal Quarter, Level VI shall apply until
such financial statements are delivered.
2
<PAGE> 69
SCHEDULE 2.1
BANKS AND PERCENTAGES
<TABLE>
<CAPTION>
Amount of
Bank Commitment Percentage
- ---- ---------- ----------
<S> <C> <C>
Bank of America National $40,000,000 100%
Trust and Savings Association
TOTALS $40,000,000 100%
</TABLE>
1
<PAGE> 70
SCHEDULE 9.6
LITIGATION AND CONTINGENT LIABILITIES
None
1
<PAGE> 71
SCHEDULE 9.8
SUBSIDIARIES
Bone Dry Enterprises, Inc.
SanTi Group of Florida, Inc.
SanTi Group of New York, Inc.
SanTi Group of Pennsylvania, Inc.
1
<PAGE> 72
SCHEDULE 9.15
1. Facility located at 25 NE 5th Street, Pompano Beach, Florida. This
property is leased by SanTi Group of Florida, Inc. ("SanTi FL"). An
underground storage tank currently or at one time existed on property
adjacent to this facility. A monitoring well has been placed on the
property lased by SanTi FL. No current knowledge of any problems
associated with this property.
2. Facility located at 1804 Nashville Avenue, Orlando, Florida. SanTi FL
leases this property. An abandoned underground gasoline storage tank
exists on this property; it appeas that this tank has not been used in
approximately 15 years.
3. Facility located at S. Main Street & Randolph, Ambler, Pennsylvania.
This property is leased by SanTi Group of Pennsylvania, Inc. ("SanTi
PA"). A 3,000-gallon diesel fuel underground storage tank exists on
this property. This tank is scheduled for removal on or before December
31, 1998. An asbestos plant was located on this property until
approximately 1980. Asbestos waste was buried on site to assist in
leveling the area.
4. Facility located at 898 Fern Hill Road, West Chester, Pennsylvania.
SanTi PA leases this property. The adjacent property is used for
operation of a waste oil processing facility and the transportation of
hazardous waste.
5. Facility located at 2470 Weaver Way, Doraville, Georgia. Bone Dry
Enterprises, Inc leases this property. The prior operator of this
facility transported hazardous waste, with such waste remaining on site
for more than 10 days.
1
<PAGE> 73
SCHEDULE 10.7
EXISTING DEBT
Term Promissory Note dated March 6, 1998 in the principal amount of $2,000,000
from SanTi Group of Florida, Inc. to Seagraves, Inc.
1
<PAGE> 74
SCHEDULE 10.8
EXISTING LIENS
Lien created pursuant to that certain Purchase Money Security Agreement dated
March 6, 1998 between SanTi Group of Florida, Inc. to Seagraves, Inc.
1
<PAGE> 75
SCHEDULE 12.1.11
KEY EXECUTIVES
<TABLE>
<CAPTION>
Name Current Office(s)
- ---- -----------------
<S> <C>
Raymond M. Cash Chairman, Chief Executive Officer
Donald F. Moorehead, Jr. Vice Chairman
Rock Payne President, Chief Operating Officer,
Director
Joyce Bone Senior Vice- President, Secretary,
Director
James McClure Vice President-Controller
Terry White Vice President-Marketing
Sharon Hurlburt Vice President - Sales
Howell (Rusty) Waldrup Vice President - Operations
Daryl R. Griswold Vice President - Legal
Within five (5) days of Closing, all officers will resign and the following
officers elected:
Donald F. Moorehead, Jr. Chairman, Chief Executive Officer
Raymond M. Cash Vice Chairman
Terry Patrick President, Chief Operating Officer
Kenneth Peak Chief Financial Officer, Secretary
</TABLE>
1
<PAGE> 76
SCHEDULE 14.3
ADDRESSES FOR NOTICES
SANTI GROUP, INC.
7200 Bishop Road
Austell, Georgia 30168
Attention: President
Telephone: 770-449-8844
Facsimile: 770-745-0225
BANK OF AMERICA NATIONAL TRUST
AND SAVINGS ASSOCIATION, as Agent
Agency Management Services
231 South LaSalle Street
Chicago, Illinois 60697
Attention: Jay McKeown
Telephone: (312) 828-7299
Facsimile: (312) 974-9102
BANK OF AMERICA NATIONAL TRUST
AND SAVINGS ASSOCIATION, as a Bank
231 South LaSalle Street
Chicago, Illinois 60697
Attention: Helen Perry
Telephone: (312) 828-0940
Facsimile: (312) 828-1974
<PAGE> 77
EXHIBIT A
FORM OF NOTE
---------, ----
Chicago, Illinois
FOR VALUE RECEIVED, the undersigned, SANTI GROUP, INC. (the "Company"),
hereby promises to pay to the order of (the "Bank") the aggregate unpaid
principal amount of all Loans made by the Bank to the Company pursuant to the
Credit Agreement dated as of June __, 1998 (as amended or otherwise modified
from time to time, the "Credit Agreement") among the Company, various financial
institutions and Bank of America National Trust and Savings Association, as
Agent, on the dates and in the amounts provided in the Credit Agreement. The
Company further promises to pay interest on the unpaid principal amount of the
Loans evidenced hereby from time to time at the rates, on the dates, and
otherwise as provided in the Credit Agreement.
The Bank is authorized to endorse the amount and the date on which each
Loan is made and each payment of principal with respect thereto on the schedules
annexed hereto and made a part hereof or on continuations thereof which shall be
attached hereto and made a part hereof; provided that any failure to endorse
such information on such schedule or continuation thereof shall not in any
manner affect any obligation of the Company under the Credit Agreement or this
Note.
This Note is one of the Notes referred to in, and is entitled to the
benefits of, the Credit Agreement, which contains, among other things,
provisions for acceleration of the maturity hereof upon the happening of certain
stated events.
Terms defined in the Credit Agreement are used herein with their defined
meanings therein unless otherwise defined herein. This Note shall be governed
by, and construed and interpreted in accordance with, the laws of the State of
Illinois applicable to contracts made and to be performed entirely within such
State.
<PAGE> 78
IN WITNESS WHEREOF, the Company has caused this Note to be duly
executed and delivered as of the day and year first above written.
SANTI GROUP, INC.
By:
----------------------------
Name Printed:
------------------
Title:
-------------------------
<PAGE> 79
Schedule Attached to Note dated _______, ____ of SANTI GROUP, INC. payable to
the order of _________________________.
<TABLE>
<CAPTION>
Amount of Amount Notation
Date Loan Maturity Date Repaid Made By
===============================================================================
<S> <C> <C> <C> <C>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
================================================================================
</TABLE>
<PAGE> 80
EXHIBIT B
SANTI GROUP, INC.
FINANCIAL COMPLIANCE CERTIFICATE
FOR PERIOD ENDED _____________ (the "Computation Date")
To: Bank of America National Trust
and Savings Association, as Agent
Reference is made to Section 10.1.4 of the Credit Agreement dated as of
June __, 1998 (as amended or otherwise modified from time to time, the "Credit
Agreement") among SanTi Group, Inc. (the "Company"), various financial
institutions and Bank of America National Trust and Savings Association, as
Agent for the Banks. Capitalized terms used but not otherwise defined herein are
used as defined in the Credit Agreement.
The Company hereby certifies and warrants to you that the following are
true and correct computations of the financial ratios and restrictions set forth
in Section 10.6 of the Credit Agreement:
<TABLE>
<S> <C>
10.6.1 Minimum Net Worth
Initial minimum: $____________
Plus: 75% of the sum of
Consolidated Net
Income for each Fiscal Quarter
(excluding any Fiscal Quarter
in which there is a loss) from and
after September 30, 1998 to the
Computation Date
Plus: 100% of net proceeds of any equity
issued by the Company or any of its $___________
Subsidiaries after June __, 1998
$___________
Total (Minimum Required) $__________
</TABLE>
<PAGE> 81
<TABLE>
<S> <C> <C>
Actual Net Worth $___________
10.6.2 Minimum Interest Coverage
Consolidated Net Income $___________
Plus: Interest Expense $___________
taxes $___________
Earnings before interest and taxes $_________(x)
Interest Expense __________(y)
Ratio of (x) to (y) ____ to ____
Minimum Required
__/__/98 thru 12/31/98: 2.00 to 1.0
1/1/99 thru 12/31/99: 2.25 to 1.0
1/1/2000 and thereafter: 2.50 to 1.0
</TABLE>
2
<PAGE> 82
10.6.3 Funded Debt to EBITDA Ratio
<TABLE>
<S> <C> <C>
Funded Debt $_________(x)
Consolidated Net Income $___________
Plus: Interest Expense $___________
Income tax expense $___________
Depreciation and
amortization $___________
Total $_________(y)
Ratio of (x) to (y) ____ to ____
</TABLE>
3
<PAGE> 83
Maximum allowed
<TABLE>
<S> <C> <C>
__/__/98 thru 12/31/98: 4.00 to 1.0
3/31/99 thru 12/31/99: 3.75 to 1.0
3/31/00 and thereafter: 3.50 to 1.0
10.6.4 Debt to Capitalization Ratio
Funded Debt $_________(x)
Sum of (x) plus Consolidated Net Worth
$_________(y)
Ratio of (x) to (y) ____ to ____
Maximum allowed
__/__/98 thru 12/31/98: 65%
3/31/99 thru 12/31/99: 60%
3/31/00 and thereafter: 55%
10.6.5 Capital Expenditures
Aggregate amount of all Capital
Expenditures made by the Company and its
Subsidiaries in the preceding Fiscal Year
$__________(x)
Depreciation and amortization of the
Company and its Subsidiaries in the
preceding Fiscal Year
$_________(a)
Product of (a) times 1.5 $__________(y)
Sum of (y) minus (x) (must be equal to or
greater than zero) $__________
</TABLE>
The Company further certifies to you that no Event of Default or
Unmatured Event of Default has occurred and is continuing.
4
<PAGE> 84
IN WITNESS WHEREOF, the Company has caused this Certificate to be
executed and delivered by its duly authorized officer this ____ day of
_________, ____.
SANTI GROUP, INC.
By
--------------------------
Title
-----------------------
5
<PAGE> 85
EXHIBIT C
FORM OF GUARANTY
THIS GUARANTY dated as of June __, 1998 is executed in favor of BANK OF
AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION ("BofA"), individually and as
Agent (as defined below), and the Banks (as defined below).
WITNESSETH:
WHEREAS, SanTi Group, Inc. (the "Company"), various financial
institutions (the "Banks") and BofA, as agent for the Banks (in such capacity,
the "Agent"), have entered into a Credit Agreement dated as of June __, 1998 (as
amended, restated or otherwise modified from time to time, the "Credit
Agreement"); and
WHEREAS, each of the undersigned will benefit from the making of loans
and the issuance of letters of credit pursuant to the Credit Agreement and is
willing to guaranty the Liabilities (as defined below) as hereinafter set forth;
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, each of the undersigned hereto
agrees as follows:
1. Definitions. Capitalized terms used herein but not defined
herein have the meanings assigned to such terms in the Credit Agreement.
2. Guaranty. Each of the undersigned hereby jointly and severally
unconditionally, as primary obligor and not merely as surety, guarantees the
full and prompt payment when due, whether by acceleration or otherwise, and at
all times thereafter, of all obligations of the Company howsoever created,
arising or evidenced, whether direct or indirect, absolute or contingent, now or
hereafter existing, or due or to become due, which arise out of or in connection
with any of the Credit Agreement or any other Loan Document, as the same may be
amended, modified, extended or renewed from time to time, and all Hedging
Obligations of the Company to any Bank (all such obligations being herein
collectively called the "Liabilities"); provided, however, that the liability of
each of the undersigned hereunder shall be limited to the maximum amount of the
Liabilities which such undersigned may guaranty without violating any fraudulent
conveyance or fraudulent transfer law (plus all costs and expenses paid or
incurred by the Agent or any Bank in enforcing this Guaranty or any other
applicable Loan Document against such undersigned).
-7-
<PAGE> 86
Each of the undersigned agrees that, in the event of the occurrence of
any Event of Default under Section 12.1.4 of the Credit Agreement, and if such
event shall occur at a time when any of the Liabilities may not then be due and
payable, such undersigned will pay to the Agent for the account of the Banks
forthwith the full amount which would be payable hereunder by such undersigned
if all Liabilities were then due and payable.
To secure all obligations of each of the undersigned hereunder, the
Agent and each Bank shall have a lien on and security interest in (and may,
without demand or notice of any kind, at any time and from time to time when any
amount shall be due and payable by such undersigned hereunder, appropriate and
apply toward the payment of such amount, in such order of application as the
Agent or the Banks may elect, in accordance with the Credit Agreement, if then
in effect) any and all balances, credits, deposits, accounts or moneys of or in
the name of such undersigned now or hereafter with the Agent or such Bank and
any and all property of every kind or description of or in the name of such
undersigned now or hereafter, for any reason or purpose whatsoever, in the
possession or control of, or in transit to, the Agent or such Bank or any agent
or bailee for the Agent or such Bank.
This Guaranty shall in all respects be a continuing, irrevocable,
absolute and unconditional guaranty of payment and performance and not only
collectibility, and shall remain in full force and effect (notwithstanding,
without limitation, the dissolution of any of the undersigned, that at any time
or from time to time no Liabilities are outstanding or any other circumstance)
until all Commitments have terminated and all Liabilities have been paid in
full.
The undersigned further agree that if at any time all or any part of
any payment theretofore applied by the Agent or any Bank to any of the
Liabilities is or must be rescinded or returned by the Agent or such Bank for
any reason whatsoever (including, without limitation, the insolvency, bankruptcy
or reorganization of the Company or any of the undersigned), such Liabilities
shall, for the purposes of this Guaranty, to the extent that such payment is or
must be rescinded or returned, be deemed to have continued in existence,
notwithstanding such application by the Agent or such Bank, and this Guaranty
shall continue to be effective or be reinstated, as the case may be, as to such
Liabilities, all as though such application by the Agent or such Bank had not
been made.
The Agent or any Bank may, from time to time, at its sole discretion
and without notice to the undersigned (or any of them), take any or all of the
following actions: (a) retain or obtain a security interest in any property to
secure any of the Liabilities or any obligation hereunder, (b) retain or obtain
the primary or secondary obligation of any obligor or obligors, in addition to
the undersigned, with respect to any of the Liabilities, (c) extend or renew any
of the Liabilities for one or more periods (whether or not longer than the
original period), alter or exchange any of the Liabilities, or release or
compromise any obligation of any of the undersigned hereunder or any obligation
of any nature of any other obligor with respect to any of the Liabilities, (d)
release its
2
<PAGE> 87
security interest in, or surrender, release or permit any substitution or
exchange for, all or any part of any property securing any of the Liabilities or
any obligation hereunder, or extend or renew for one or more periods (whether or
not longer than the original period) or release, compromise, alter or exchange
any obligations of any nature of any obligor with respect to any such property,
and (e) resort to the undersigned (or any of them) for payment of any of the
Liabilities when due, whether or not the Agent or such Bank shall have resorted
to any property securing any of the Liabilities or any obligation hereunder or
shall have proceeded against any other of the undersigned or any other obligor
primarily or secondarily obligated with respect to any of the Liabilities.
Any amounts received by the Agent or any Bank from whatever source on
account of the Liabilities may be applied by it toward the payment of the
Liabilities in accordance with the Credit Agreement; and, notwithstanding any
payments made by or for the account of any of the undersigned pursuant to this
Guaranty, the undersigned shall not be subrogated to any rights of the Agent or
any Bank until such time as this Guaranty shall have been discontinued as to all
of the undersigned and the Agent and the Banks shall have received payment of
the full amount of all Liabilities.
The undersigned hereby expressly waive: (a) notice of the acceptance by
the Agent or any Bank of this Guaranty, (b) notice of the existence or creation
or non-payment of all or any of the Liabilities, (c) presentment, demand, notice
of dishonor, protest, and all other notices whatsoever, and (d) all diligence in
collection or protection of or realization upon any Liabilities or any security
for or guaranty of any Liabilities.
Each of the undersigned further agrees to pay all expenses (including
reasonable attorneys' fees and legal expenses) paid or incurred by the Agent or
any Bank in endeavoring to collect the Liabilities of such undersigned, or any
part thereof, and in enforcing this Guaranty against such undersigned.
The creation or existence from time to time of additional Liabilities
to the Agent or any Bank or any of them is hereby authorized, without notice to
the undersigned (or any of them), and shall in no way affect or impair the
rights of the Agent or any Bank or the obligations of the undersigned under this
Guaranty.
The Agent and any Bank may from time to time, without notice to the
undersigned (or any of them), assign or transfer any or all of the Liabilities
or any interest therein; and, notwithstanding any such assignment or transfer or
any subsequent assignment or transfer thereof, such Liabilities shall be and
remain Liabilities for the purposes of this Guaranty, and each and every
immediate and successive assignee or transferee of any of the Liabilities or of
any interest therein shall, to the extent of the interest of such assignee or
transferee in the Liabilities, be entitled to the benefits of this Guaranty to
the same extent as if such assignee or transferee were a Bank.
3
<PAGE> 88
No delay on the part of the Agent or any Bank in the exercise of any
right or remedy shall operate as a waiver thereof, and no single or partial
exercise by the Agent or any Bank of any right or remedy shall preclude other or
further exercise thereof or the exercise of any other right or remedy; nor shall
any modification or waiver of any provision of this Guaranty be binding upon the
Agent or any Bank except as expressly set forth in a writing duly signed and
delivered on behalf of the Agent (or, if at any time there is no Agent, the
Required Banks or, if required pursuant to Section 14.1 of the Credit Agreement,
all Banks). No action of the Agent or any Bank permitted hereunder shall in any
way affect or impair the rights of the Agent or any Bank or the obligations of
the undersigned under this Guaranty. For purposes of this Guaranty, Liabilities
shall include all obligations of the Company to the Agent or any Bank arising
under or in connection with any Loan Document, notwithstanding any right or
power of the Company or anyone else to assert any claim or defense as to the
invalidity or unenforceability of any obligation, and no such claim or defense
shall affect or impair the obligations of the undersigned hereunder.
Pursuant to the Credit Agreement, (a) this Guaranty has been delivered
to the Agent and (b) the Agent has been authorized to enforce this Guaranty on
behalf of itself and each of the other Banks. All payments by the undersigned
pursuant to this Guaranty shall be made to the Agent for application as set
forth in the Credit Agreement or, if there is no Agent, to the Banks for their
ratable benefit.
This Guaranty shall be binding upon the undersigned and the successors
and assigns of the undersigned; and to the extent that the Company or any of the
undersigned is either a partnership or a corporation, all references herein to
the Company and to the undersigned, respectively, shall be deemed to include any
successor or successors, whether immediate or remote, to such partnership or
corporation. The term "undersigned" as used herein shall mean all parties
executing this Guaranty and each of them, and all such parties shall be jointly
and severally obligated hereunder.
This Guaranty has been delivered at Chicago, Illinois, and shall be
construed in accordance with and governed by the internal laws of the State of
Illinois. Wherever possible each provision of this Guaranty shall be interpreted
in such manner as to be effective and valid under applicable law, but if any
provision of this Guaranty shall be prohibited by or invalid under such law,
such provision shall be ineffective to the extent of such prohibition or
invalidity, without invalidating the remainder of such provision or the
remaining provisions of this Guaranty.
This Guaranty may be executed in any number of counterparts and by the
different parties hereto on separate counterparts, and each such counterpart
shall be deemed to be an original but all such counterparts shall together
constitute one and the same Guaranty. At any time after the date of this
Guaranty, one or more additional persons or entities may become parties hereto
by executing and delivering to the Agent a counterpart of this Guaranty.
Immediately upon such
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<PAGE> 89
execution and delivery (and without any further action), each such additional
person or entity will become a party to, and will be bound by all of the terms
of, this Guaranty.
This Guaranty is secured pursuant to a Security Agreement dated as of
even date herewith (as amended or otherwise modified from time to time) and may
be secured by one or more other agreements (including, without limitation, one
or more pledge agreements, mortgages, deeds of trust or other similar
documents).
ANY LITIGATION BASED HEREON, OR ARISING OUT OF, UNDER OR IN CONNECTION
WITH THIS GUARANTY OR ANY OTHER LOAN DOCUMENT, SHALL BE BROUGHT AND MAINTAINED
EXCLUSIVELY IN THE COURTS OF THE STATE OF ILLINOIS OR IN THE UNITED STATES
DISTRICT COURT FOR THE NORTHERN DISTRICT OF ILLINOIS; PROVIDED, HOWEVER, THAT
ANY SUIT SEEKING ENFORCEMENT AGAINST ANY COLLATERAL OR OTHER PROPERTY MAY BE
BROUGHT, AT THE AGENT'S OPTION, IN THE COURTS OF ANY JURISDICTION WHERE SUCH
COLLATERAL OR OTHER PROPERTY MAY BE FOUND. EACH OF THE UNDERSIGNED HEREBY
EXPRESSLY AND IRREVOCABLY SUBMITS TO THE JURISDICTION OF THE COURTS OF THE STATE
OF ILLINOIS AND OF THE UNITED STATES DISTRICT COURT FOR THE NORTHERN DISTRICT OF
ILLINOIS FOR THE PURPOSE OF ANY SUCH LITIGATION AS SET FORTH ABOVE. EACH OF THE
UNDERSIGNED FURTHER IRREVOCABLY CONSENTS TO THE SERVICE OF PROCESS BY REGISTERED
MAIL, POSTAGE PREPAID, TO THE ADDRESS SET FORTH UNDER ITS NAME IN SCHEDULE I
HERETO (OR SUCH OTHER ADDRESS AS IT SHALL HAVE SPECIFIED IN WRITING TO THE AGENT
AS ITS ADDRESS FOR NOTICES HEREUNDER) OR BY PERSONAL SERVICE WITHIN OR WITHOUT
THE STATE OF ILLINOIS. EACH OF THE UNDERSIGNED HEREBY EXPRESSLY AND IRREVOCABLY
WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW, ANY OBJECTION WHICH IT MAY NOW
OR HEREAFTER HAVE TO THE LAYING OF VENUE OF ANY SUCH LITIGATION BROUGHT IN ANY
SUCH COURT REFERRED TO ABOVE AND ANY CLAIM THAT ANY SUCH LITIGATION HAS BEEN
BROUGHT IN AN INCONVENIENT FORUM.
EACH OF THE UNDERSIGNED, AND (BY ACCEPTING THE BENEFITS HEREOF) EACH OF THE
AGENT AND EACH BANK, HEREBY WAIVES ANY RIGHT TO A TRIAL BY JURY IN ANY ACTION OR
PROCEEDING TO ENFORCE OR DEFEND ANY RIGHTS UNDER THIS GUARANTY, OR ANY OTHER
LOAN DOCUMENT AND ANY AMENDMENT, INSTRUMENT, DOCUMENT OR AGREEMENT DELIVERED OR
WHICH MAY IN THE FUTURE BE DELIVERED IN CONNECTION HEREWITH OR THEREWITH OR
ARISING FROM ANY FINANCING RELATIONSHIP EXISTING IN CONNECTION WITH ANY OF THE
FOREGOING, AND AGREES THAT ANY SUCH ACTION OR PROCEEDING SHALL BE TRIED BEFORE A
COURT AND NOT BEFORE A JURY.
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<PAGE> 90
IN WITNESS WHEREOF, this Guaranty has been duly executed and delivered
as of the day and year first above written.
BONE DRY ENTERPRISES, INC.
By:
---------------------------
Name Printed:
-----------------
Title:
------------------------
SANTI GROUP OF FLORIDA, INC.
By:
---------------------------
Name Printed:
-----------------
Title:
------------------------
SANTI GROUP OF PENNSYLVANIA, INC.
By:
---------------------------
Name Printed:
-----------------
Title:
------------------------
SANTI GROUP OF NEW YORK, INC.
By:
---------------------------
Name Printed:
-----------------
Title:
------------------------
6
<PAGE> 91
Signature page for the Guaranty dated as of
June __, 1998 issued by various subsidiaries
of SanTi Group, Inc. (the "Company") in
favor of Bank of America National Trust and
Savings Association, as Agent under the
Credit Agreement dated as of June __, 1998
with the Company and various other parties,
and the Banks referred to in such Guaranty.
The undersigned is executing a counterpart
hereof for purposes of becoming a party
hereto:
[SUBSIDIARY OF SANTI GROUP, INC.]
By:
--------------------------------
Name Printed:
----------------------
Title:
-----------------------------
7
<PAGE> 92
SCHEDULE I
TO GUARANTY
ADDRESSES
BONE DRY ENTERPRISES, INC.
7200 Bishop Road
Austell, Georgia 30168
SANTI GROUP OF FLORIDA, INC.
7200 Bishop Road
Austell, Georgia 30168
SANTI GROUP OF PENNSYLVANIA, INC.
7200 Bishop Road
Austell, Georgia 30168
SANTI GROUP OF NEW YORK, INC.
7200 Bishop Road
Austell, Georgia 30168
<PAGE> 93
EXHIBIT D
FORM OF SECURITY AGREEMENT
THIS SECURITY AGREEMENT (this "Agreement") dated as of June __, 1998 is
among SANTI GROUP, INC. (the "Company"), each subsidiary of the Company listed
on the signature pages hereof, each other person or entity which from time to
time becomes a party hereto (collectively, including the Company, the "Debtors"
and individually each a "Debtor") and BANK OF AMERICA NATIONAL TRUST AND SAVINGS
ASSOCIATION ("BofA"), in its capacity as Agent (as defined below) for the Banks
(as defined below).
WITNESSETH:
WHEREAS, the Company, various financial institutions (the "Banks") and
BofA, as agent for the Banks (in such capacity, the "Agent"), have entered into
a Credit Agreement dated as of June __, 1998 (as amended, restated or otherwise
modified from time to time, the "Credit Agreement");
WHEREAS, each of the Debtors other than the Company has executed and
delivered a guaranty (the "Guaranty") of the obligations of the Company in
respect of the Loan Documents; and
WHEREAS, the obligations of the Company in respect of the Loan Documents
and the obligations of each other Debtor under the Guaranty are to be secured
pursuant to this Agreement;
NOW, THEREFORE, for and in consideration of the premises, and for other
good and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
1. Definitions. When used herein, (a) the terms Certificated
Security, Chattel Paper, Deposit Account, Document, Equipment, Fixture, Goods,
Inventory, Instrument, Security and Uncertificated Security shall have the
respective meanings assigned to such terms in the Uniform Commercial Code (as
defined below), (b) the terms Commodity Account, Commodity Contract, Investment
Property, Security Entitlement and Securities Account shall have the respective
meanings assigned thereto in the 1994 Amendments to Articles 8 and 9 of the
Uniform Commercial Code promulgated by the American Law Institute and the
National Conference of Commissioners for Uniform State Laws, (c) capitalized
terms used but not defined have the meanings assigned to such terms in the
Credit Agreement and (d) the following terms have the following meanings (such
definitions to be applicable to both the singular and plural forms of such
terms):
<PAGE> 94
Account Debtor means, with respect to any Debtor, any party who is
obligated on or under any Account Receivable, Contract Right or General
Intangible of such Debtor.
Account Receivable means, with respect to any Debtor, any right of such
Debtor to payment for goods sold or leased or for services rendered.
Agent - see the recitals.
Agreement - see the introductory paragraph.
Assignee Deposit Account - see Section 4.
BofA - see the introductory paragraph.
Banks - see the recitals.
Business Day means any day on which BofA is open for commercial banking
business in Chicago, New York and San Francisco.
Collateral means, with respect to any Debtor, all property and rights of
such Debtor in which a security interest is granted hereunder.
Company - see the introductory paragraph.
Computer Hardware and Software means, with respect to any Debtor, (i) all
computer and other electronic data processing hardware, whether now or hereafter
owned, licensed or leased by such Debtor, including, without limitation, all
integrated computer systems, central processing units, memory units, display
terminals, printers, features, computer elements, card readers, tape drives,
hard and soft disk drives, cables, electrical supply hardware, generators, power
equalizers, accessories and all peripheral devices and other related computer
hardware; (ii) all software programs, whether now or hereafter owned, licensed
or leased by such Debtor, designed for use on the computers and electronic data
processing hardware described in clause (i) above, including, without
limitation, all operating system software, utilities and application programs in
whatsoever form (source code and object code in magnetic tape, disk or hard copy
format or any other listings whatsoever); (iii) all firmware associated
therewith, whether now or hereafter owned, licensed or leased by such Debtor;
and (iv) all documentation for such hardware, software and firmware described in
the preceding clauses (i), (ii) and (iii), whether now or hereafter owned,
licensed or leased by such Debtor, including, without limitation, flow charts,
logic diagrams, manuals, specifications, training materials, charts and pseudo
codes.
Contract Right means, with respect to any Debtor, any right of such Debtor
to payment under a contract for the sale or lease of goods or the rendering of
services, which right is at the time not yet earned by performance.
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Credit Agreement - see the recitals.
Debtor - see the introductory paragraph.
Default means the occurrence of any of the following events: (i) any
Unmatured Event of Default under Section 12.1.4 of the Credit Agreement with
respect to the Company, (ii) any Event of Default or (iii) any warranty of any
Debtor herein is untrue or misleading in any material respect and, as a result
thereof, the Agent's security interest in any material portion of the Collateral
(of all Debtors taken as a whole) is not perfected or the Agent's rights and
remedies with respect to any material portion of the Collateral of all Debtors
(taken as a whole) is materially impaired or otherwise materially adversely
affected.
General Intangibles means, with respect to any Debtor, all of such Debtor's
"general intangibles" as defined in the Uniform Commercial Code and, in any
event, includes (without limitation) all of such Debtor's trademarks, trade
names, patents, copyrights, trade secrets, customer lists, inventions, designs,
software programs, mask works, goodwill, registrations, licenses, franchises,
tax refund claims, guarantee claims, security interests and rights to
indemnification.
Guaranty - see the recitals.
Intellectual Property means all past, present and future: trade secrets
and other proprietary information; trademarks, service marks, business names,
designs, logos, indicia, and/or other source and/or business identifiers and the
goodwill of the business relating thereto and all registrations or applications
for registrations which have heretofore been or may hereafter be issued thereon
throughout the world; copyrights (including, without limitation, copyrights for
computer programs) and copyright registrations or applications for registrations
which have heretofore been or may hereafter be issued throughout the world and
all tangible property embodying the copyrights; unpatented inventions (whether
or not patentable); patent applications and patents; industrial designs,
industrial design applications and registered industrial designs; license
agreements related to any of the foregoing set forth in this definition and
income therefrom; books, records, writings, computer tapes or disks, flow
diagrams, speci fication sheets, source codes, object codes and other physical
manifestations, embodiments or incorporations of any of the foregoing set forth
in this definition; the right to sue for all past, present and future
infringements of any of the foregoing set forth in this definition; and all
common law and other rights throughout the world in and to all of the foregoing
set forth in this definition.
Liabilities means (a) as to the Company, all obligations of the Company to
the Agent or any Banks, howsoever created, arising or evidenced, whether direct
or indirect, absolute or contingent, now or hereafter existing, or due or to
become due, which arise out of or in connection with any of the Loan Documents
(including, without limitation, with respect to Letters of Credit), as the same
may be amended, modified, extended or renewed from time to
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<PAGE> 96
time, and all Hedging Obligations of the Company to any Bank, and (b) with
respect to each Debtor other than the Company, all obligations of such Debtor
under the Guaranty or any other Collateral Document.
Non-Tangible Collateral means, with respect to any Debtor, collectively,
such Debtor's Accounts Receivable, Contract Rights and General Intangibles.
Permitted Liens - see Section 3.
Uniform Commercial Code means the Uniform Commercial Code as in effect in
the State of Illinois on the date of this Agreement; provided, however, as used
in Section 8 hereof and in the definitions of "Commodity Account", "Commodity
Contract", "Investment Property", "Security Entitlement" and "Securities
Account", "Uniform Commercial Code" shall mean the Uniform Commercial Code as in
effect from time to time in the applicable jurisdiction.
2. Grant of Security Interest. As security for the payment of all
Liabilities, each Debtor hereby assigns to the Agent for the benefit of the
Banks, and grants to the Agent for the benefit of the Banks a continuing
security interest in, the following, whether now or hereafter existing or
acquired:
All of such Debtor's:
(i) Accounts Receivable;
(ii) Certificated Securities;
(iii) Chattel Paper;
(iv) Computer Hardware and Software and all rights with
respect thereto, including, without limitation, any
and all licenses, options, warranties, service
contracts, program services, test rights, maintenance
rights, support rights, improvement rights, renewal
rights and indemnifications, and any substitutions,
replacements, additions or model conversions of any
of the foregoing;
(v) Contract Rights;
(vi) Deposit Accounts;
(vii) Documents;
(viii) General Intangibles;
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(ix) Goods (including, without limitation, all its
Equipment, Fixtures and Inventory), together with all
accessions, additions, attachments, improvements,
substitutions and replacements thereto and therefor;
(x) Instruments;
(xi) Intellectual Property;
(xii) money (of every jurisdiction whatsoever);
(xiii) Commodity Accounts, Commodity Contracts, Investment
Property, Security Entitlements and Securities
Accounts;
(xiv) Uncertificated Securities;
(xv) to the extent not included in the foregoing, maps,
surveys and similar items used or useful in such
Debtor's business; and
(xvi) to the extent not included in the foregoing, other
personal property of any kind or description;
together with all books, records, writings, data bases, information and
other property relating to, used or useful in connection with,
evidencing, embodying, incorporating or referring to any of the
foregoing, and all proceeds, products, offspring, rents, issues,
profits and returns of and from any of the foregoing.
3. Warranties. Each Debtor warrants that: (i) no financing
statement (other than any which may have been filed on behalf of the Agent or in
connection with Permitted Liens (as defined below)) covering any of the
Collateral is on file in any public office; (ii) such Debtor is and will be the
lawful owner of all Collateral, free of all liens and claims whatsoever, other
than the security interest hereunder and liens and claims expressly permitted by
the Credit Agreement ("Permitted Liens"), with full power and authority to
execute this Agreement and perform such Debtor's obligations hereunder, and to
subject the Collateral to the security interest hereunder; (iii) all information
with respect to Collateral and Account Debtors set forth in any schedule,
certificate or other writing at any time heretofore or hereafter furnished by
such Debtor to the Agent or any Bank and all other written information
heretofore or hereafter furnished by such Debtor to the Agent or any Bank in
connection with the Credit Agreement will be true and correct in all material
respects as of the date furnished; (iv) such Debtor's chief executive office and
principal place of business are as set forth on Schedule I hereto (and such
Debtor has not maintained its chief executive office and principal place of
business at any other location at any time after February 1, 1998); (v) each
other location where such Debtor maintains a place of business is set forth on
Schedule II hereto; (vi) except as disclosed on Schedule III, such Debtor
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<PAGE> 98
is not now known and during the five years preceding the date hereof has not
previously been known by any trade name; (vii) except as disclosed on Schedule
III, during the five years preceding the date hereof such Debtor has not been
known by any legal name different from the one set forth on the signature page
of this Agreement nor has such Debtor been the subject of any merger or other
corporate reorganization; (viii) Schedule IV hereto contains a complete listing
of all of such Debtor's Intellectual Property which has been registered under
any registration statute; (ix) such Debtor is a corporation duly organized,
validly existing and in good standing under the laws of the state of its
incorporation; (x) the execution and delivery of this Agreement and the
performance by such Debtor of its obligations hereunder are within such Debtor's
corporate powers, have been duly authorized by all necessary corporate action,
have received all necessary governmental approval (if any shall be required),
and do not and will not contravene or conflict with any provision of law or of
the charter or by-laws of such Debtor or of any material agreement, indenture,
instrument or other document, or any material judgment, order or decree, which
is binding upon such Debtor; (xi) this Agreement is a legal, valid and binding
obligation of such Debtor, enforceable in accordance with its terms, except that
the enforceability of this Agreement may be limited by bankruptcy, insolvency,
fraudulent conveyance, fraudulent transfer, reorganization, moratorium or other
similar laws now or hereafter in effect relating to creditors' rights generally
and by general principles of equity (regardless of whether enforcement is sought
in a proceeding in equity or at law); and (xii) such Debtor is in compliance
with the requirements of all applicable laws (including, without limitation, the
provisions of the Fair Labor Standards Act), rules, regulations and orders of
every governmental authority, the non-compliance with which would materially
adversely affect the business, properties, assets, operations or condition
(financial or otherwise) of the Company and its Subsidiaries taken as a whole or
the value of the Collateral or the worth of the Collateral as collateral
security.
4. Collections, etc. Until such time during the existence of a
Default as the Agent shall notify such Debtor of the revocation of such power
and authority, each Debtor (a) may, in the ordinary course of its business, at
its own expense, sell, lease or furnish under contracts of service any of the
Inventory normally held by such Debtor for such purpose, use and consume, in the
ordinary course of its business, any raw materials, work in process or materials
normally held by such Debtor for such purpose, and use, in the ordinary course
of its business (but subject to the terms of the Credit Agreement), the cash
proceeds of Collateral and other money which constitutes Collateral, (b) will,
at its own expense, endeavor to collect, as and when due, all amounts due under
any of the Non-Tangible Collateral, including the taking of such action with
respect to such collection as the Agent may reasonably request or, in the
absence of such request, as such Debtor may deem advisable, and (c) may grant,
in the ordinary course of business, to any party obligated on any of the
Non-Tangible Collateral, any rebate, refund or allowance to which such party may
be lawfully entitled, and may accept, in connection therewith, the return of
Goods, the sale or lease of which shall have given rise to such Non-Tangible
Collateral. The Agent, however, may, at any time that a Default exists, whether
before or after any revocation of such power and authority or the maturity of
any of the Liabilities, notify any parties obligated on any of the Non-Tangible
Collateral to make payment to the Agent of any amounts due or to
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<PAGE> 99
become due thereunder and enforce collection of any of the Non-Tangible
Collateral by suit or otherwise and surrender, release or exchange all or any
part thereof, or compromise or extend or renew for any period (whether or not
longer than the original period) any indebtedness thereunder or evidenced
thereby. Upon request of the Agent during the existence of a Default, each
Debtor will, at its own expense, notify any parties obligated on any of the
Non-Tangible Collateral to make payment to the Agent of any amounts due or to
become due thereunder.
Upon request by the Agent during the existence of a Default, each Debtor
will forthwith, upon receipt, transmit and deliver to the Agent, in the form
received, all cash, checks, drafts and other instruments or writings for the
payment of money (properly endorsed, where required, so that such items may be
collected by the Agent) which may be received by such Debtor at any time in full
or partial payment or otherwise as proceeds of any of the Collateral. Except as
the Agent may otherwise consent in writing, any such items which may be so
received by any Debtor during the existence of a Default will not be commingled
with any other of its funds or property, but will be held separate and apart
from its own funds or property and upon express trust for the Agent until
delivery is made to the Agent. Each Debtor will comply with the terms and
conditions of any consent given by the Agent pursuant to the foregoing sentence.
During the existence of a Default, all items or amounts which are delivered
by any Debtor to the Agent on account of partial or full payment or otherwise as
proceeds of any of the Collateral shall be deposited to the credit of a deposit
account (each an "Assignee Deposit Account") of such Debtor with the Agent, as
security for payment of the Liabilities. No Debtor shall have any right to
withdraw any funds deposited in the applicable Assignee Deposit Account. The
Agent may, from time to time, in its discretion, and shall upon request of the
applicable Debtor made not more than once in any week, apply all or any of the
then balance, representing collected funds, in the Assignee Deposit Account,
toward payment of the Liabilities, whether or not then due, in such order of
application as the Agent may determine, and the Agent may, from time to time, in
its discretion, release all or any of such balance to the applicable Debtor.
During the existence of a Default, the Agent is authorized to endorse, in
the name of the applicable Debtor, any item, howsoever received by the Agent,
representing any payment on or other proceeds of any of the Collateral.
5. Certificates, Schedules and Reports. Each Debtor will from time to
time deliver to the Agent such schedules, certificates and reports respecting
all or any of the Collateral at the time subject to the security interest
hereunder, and the items or amounts received by such Debtor in full or partial
payment of any of the Collateral, as the Agent may reasonably request. Any such
schedule, certificate or report shall be executed by a duly authorized officer
of such Debtor and shall be in such form and detail as the Agent may specify.
Each Debtor shall immediately notify the Agent of the occurrence of any event
causing any loss or depreciation in the value of its Inventory or other Goods
which is material to the Company and its Subsidiaries taken as a whole, and such
notice shall specify the amount of such loss or depreciation.
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<PAGE> 100
6. Agreements of the Debtors. Each Debtor (a) will, upon request
of the Agent, execute such financing statements and other documents (and pay the
cost of filing or recording the same in all public offices reasonably deemed
appropriate by the Agent) and do such other acts and things (including, without
limitation, delivery to the Agent of any Instruments or Certificated Securities
which constitute Collateral), all as the Agent may from time to time reasonably
request, to establish and maintain a valid security interest in the Collateral
(free of all other liens, claims and rights of third parties whatsoever, other
than Permitted Liens) to secure the payment of the Liabilities; (b) will keep
all its Inventory at, and will not maintain any place of business at any
location other than, its address(es) shown on Schedules I and II hereto or at
such other addresses of which such Debtor shall have given the Agent not less
than 10 days' prior written notice; (c) will keep its records concerning the
Non-Tangible Collateral in such a manner as will enable the Agent or its
designees to determine at any time the status of the Non-Tangible Collateral;
(d) will furnish the Agent such information concerning such Debtor, the
Collateral and the Account Debtors as the Agent may from time to time reasonably
request; (e) will permit the Agent and its designees, from time to time, on
reasonable notice and at reasonable times and intervals during normal business
hours (or at any time without notice during the existence of a Default) to
inspect such Debtor's Inventory and other Goods, and to inspect, audit and make
copies of and extracts from all records and all other papers in the possession
of such Debtor pertaining to the Collateral and the Account Debtors, and will,
upon request of the Agent during the existence of a Default, deliver to the
Agent all of such records and papers; (f) will, upon request of the Agent, stamp
on its records concerning the Collateral and add on all Chattel Paper
constituting a portion of the Collateral, a notation, in form satisfactory to
the Agent, of the security interest of the Agent hereunder; (g) except as
permitted by the Credit Agreement, will not sell, lease, assign or create or
permit to exist any lien on or security interest in any Collateral other than
Permitted Liens and liens and security interests in favor of the Agent; (h) will
at all times keep all its Inventory and other Goods insured under policies
maintained with reputable, financially sound insurance companies against loss,
damage, theft and other risks to such extent as is customarily maintained by
companies similarly situated, and cause all such policies to provide that loss
thereunder shall be payable to the Agent as its interest may appear (it being
understood that (A) so long as no Default shall be existing, the Agent shall
deliver any proceeds of such insurance which may be received by it to such
Debtor and (B) whenever a Default shall be existing, the Agent may apply any
proceeds of such insurance which may be received by it toward payment of the
Liabilities, whether or not due, in such order of application as the Agent may
determine) and such policies or certificates thereof shall, if the Agent so
requests, be deposited with or furnished to the Agent; (i) will take such
actions as are reasonably necessary to keep its Inventory in good repair and
condition, ordinary wear and tear excepted; (j) will take such actions as are
reasonably necessary to keep its Equipment (other than obsolete Equipment) in
good repair and condition and in good working or running order, ordinary wear
and tear excepted; (k) will promptly pay when due all license fees, registration
fees, taxes, assessments and other charges which may be levied upon or assessed
against the ownership, operation, possession, maintenance or use of its
Equipment and other Goods (as applicable); provided,
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however, that such Debtor shall not be required to pay any such fee, tax,
assessment or other charge if the validity thereof is being contested by such
Debtor in good faith by appropriate proceedings, so long as forfeiture of any
substantial part of its Equipment or other Goods will not result from the
failure of such Debtor to pay any such fee, tax, assessment or other charge
during the period of such contest; (l) will, upon request of the Agent, (i)
cause to be noted on the applicable certificate, in the event any of its
Equipment is covered by a certificate of title, the security interest of the
Agent in the Equipment covered thereby and (ii) deliver all such certificates to
the Agent or its designees; (m) will take all steps reasonably necessary to
protect, preserve and maintain all of its rights in the Collateral; (n) will
keep all of the tangible Collateral in the continental United States; and (o)
will reimburse the Agent for all expenses, including reasonable attorneys' fees
and legal expenses, incurred by the Agent in seeking to collect or enforce any
rights in respect of such Debtor's Collateral.
Any expenses incurred in protecting, preserving and maintaining any
Collateral shall be borne by the applicable Debtor. Whenever a Default shall be
existing, the Agent shall have the right to bring suit to enforce any or all of
the Intellectual Property or licenses thereunder, in which event the applicable
Debtor shall at the request of the Agent do any and all lawful acts and execute
any and all proper documents required by the Agent in aid of such enforcement
and such Debtor shall promptly, upon demand, reimburse and indemnify the Agent
for all reasonable costs and expenses incurred by the Agent in the exercise of
its rights under this Section 6, except to the extent any of the foregoing
result from the gross negligence or willful misconduct of the Agent.
Notwithstanding the foregoing, the Agent shall have no obligations or
liabilities regarding the Collateral or any thereof by reason of, or arising out
of, this Agreement.
7. Default. Whenever a Default shall be existing, the Agent may
exercise from time to time any rights and remedies available to it under
applicable law. Each Debtor agrees, in case of Default, (i) to assemble, at its
expense, all its Inventory and other Goods (other than Fixtures) at a convenient
place or places acceptable to the Agent, and (ii) at the Agent's request, to
execute all such documents and do all such other things which may be necessary
or desirable in order to enable the Agent or its nominee to be registered as
owner of the Intellectual Property with any competent registration authority.
Any notification of intended disposition of any of the Collateral required by
law shall be deemed reasonably and properly given if given at least five days
before such disposition. Any proceeds of any disposition by the Agent of any of
the Collateral may be applied by the Agent to payment of expenses in connection
with the Collateral, including reasonable attorneys' fees and legal expenses,
and any balance of such proceeds may be applied by the Agent toward the payment
of such of the Liabilities, and in such order of application, as the Agent may
from time to time elect.
8. General. The Agent shall be deemed to have exercised
reasonable care in the custody and preservation of any of the Collateral in its
possession if it takes such action for that purpose as any applicable Debtor
requests in writing, but failure of the
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Agent to comply with any such request shall not of itself be deemed a failure to
exercise reasonable care, and no failure of the Agent to preserve or protect any
rights with respect to such Collateral against prior parties, or to do any act
with respect to the preservation of such Collateral not so requested by any
Debtor, shall be deemed a failure to exercise reasonable care in the custody or
preservation of such Collateral.
All notices and requests hereunder shall be in writing (including
facsimile transmission) and shall be sent (i) if to the Agent, to its address
shown on Schedule 14.3 to the Credit Agreement or such other address as it may,
by written notice to the Company, have designated as its address for such
purpose, and (ii) if to any Debtor, to its address shown on Schedule I hereto or
to such other address as such Debtor may, by written notice to the Agent, have
designated as its address for such purpose. Notices sent by facsimile
transmission shall be deemed to have been given when sent; notices sent by mail
shall be deemed to have been given five Business Days after the date when sent
by registered or certified mail, postage prepaid; and notices sent by hand
delivery or overnight courier shall be deemed to have been given when received.
Each of the Debtors agrees to pay all expenses (including reasonable
attorney's fees and legal expenses) paid or incurred by the Agent or any Bank in
endeavoring to collect the Liabilities of such Debtor, or any part thereof, and
in enforcing this Agreement against such Debtor, and such obligations will
themselves be Liabilities.
No delay on the part of the Agent in the exercise of any right or remedy
shall operate as a waiver thereof, and no single or partial exercise by the
Agent of any right or remedy shall preclude other or further exercise thereof or
the exercise of any other right or remedy.
This Security Agreement shall remain in full force and effect until all
Liabilities have been paid in full and all Commitments have terminated. If at
any time all or any part of any payment theretofore applied by the Agent or any
Bank to any of the Liabilities is or must be rescinded or returned by the Agent
or such Bank for any reason whatsoever (including, without limitation, the
insolvency, bankruptcy or reorganization of any Debtor), such Liabilities shall,
for the purposes of this Agreement, to the extent that such payment is or must
be rescinded or returned, be deemed to have continued in existence,
notwithstanding such application by the Agent or such Bank, and this Agreement
shall continue to be effective or be reinstated, as the case may be, as to such
Liabilities, all as though such application by the Agent or such Bank had not
been made.
This Agreement has been delivered at Chicago, Illinois, and shall be
construed in accordance with and governed by the internal laws of the State of
Illinois, subject, however, to the applicability of the Uniform Commercial Code
of any jurisdiction in which any Goods of any Debtor may be located at any given
time. Whenever possible, each provision of this Agreement shall be interpreted
in such manner as to be effective and valid under applicable law, but if any
provision of this Agreement shall be prohibited by or invalid under applicable
law, such provision shall be ineffective to the extent of such prohibition or
invalidity, without invalidating the remainder of such provision or the
remaining provisions of this Agreement.
10
<PAGE> 103
The rights and privileges of the Agent hereunder shall inure to the benefit
of its successors and assigns.
This Agreement may be executed in any number of counterparts and by the
different parties hereto on separate counterparts, and each such counterpart
shall be deemed to be an original, but all such counterparts shall together
constitute one and the same Agreement. At any time after the date of this
Agreement, one or more additional persons or entities may become parties hereto
by executing and delivering to the Agent a counterpart of this Agreement
(including supplements to the Schedules hereto). Immediately upon such execution
and delivery (and without any further action), each such additional person or
entity will become a party to, and will be bound by all the terms of, this
Agreement.
ANY LITIGATION BASED HEREON, OR ARISING OUT OF, UNDER OR IN CONNECTION WITH
THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT, SHALL BE BROUGHT AND MAINTAINED
EXCLUSIVELY IN THE COURTS OF THE STATE OF ILLINOIS OR IN THE UNITED STATES
DISTRICT COURT FOR THE NORTHERN DISTRICT OF ILLINOIS; PROVIDED, HOWEVER, THAT
ANY SUIT SEEKING ENFORCEMENT AGAINST ANY COLLATERAL OR OTHER PROPERTY MAY BE
BROUGHT, AT THE AGENT'S OPTION, IN THE COURTS OF ANY JURISDICTION WHERE SUCH
COLLATERAL OR OTHER PROPERTY MAY BE FOUND. EACH DEBTOR HEREBY EXPRESSLY AND
IRREVOCABLY SUBMITS TO THE JURISDICTION OF THE COURTS OF THE STATE OF ILLINOIS
AND OF THE UNITED STATES DISTRICT COURT FOR THE NORTHERN DISTRICT OF ILLINOIS
FOR THE PURPOSE OF ANY SUCH LITIGATION AS SET FORTH ABOVE. EACH DEBTOR FURTHER
IRREVOCABLY CONSENTS TO THE SERVICE OF PROCESS BY REGISTERED MAIL, POSTAGE
PREPAID, TO THE ADDRESS SET FORTH ON SCHEDULE I HERETO (OR SUCH OTHER ADDRESS AS
IT SHALL HAVE SPECIFIED IN WRITING TO THE AGENT AS ITS ADDRESS FOR NOTICES
HEREUNDER) OR BY PERSONAL SERVICE WITHIN OR WITHOUT THE STATE OF ILLINOIS. EACH
DEBTOR HEREBY EXPRESSLY AND IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED
BY LAW, ANY OBJECTION WHICH IT MAY NOW OR HEREAFTER HAVE TO THE LAYING OF VENUE
OF ANY SUCH LITIGATION BROUGHT IN ANY SUCH COURT REFERRED TO ABOVE AND ANY CLAIM
THAT ANY SUCH LITIGATION HAS BEEN BROUGHT IN AN INCONVENIENT FORUM.
EACH OF EACH DEBTOR, THE AGENT AND (BY ACCEPTING THE BENEFITS HEREOF) EACH
BANK HEREBY WAIVES ANY RIGHT TO A TRIAL BY JURY IN ANY ACTION OR PROCEEDING TO
ENFORCE OR DEFEND ANY RIGHTS UNDER THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT AND
ANY AMENDMENT, INSTRUMENT, DOCUMENT OR AGREEMENT DELIVERED OR WHICH MAY IN THE
FUTURE BE DELIVERED IN CONNECTION HEREWITH OR THEREWITH OR ARISING FROM ANY
FINANCING RELATIONSHIP EXISTING IN CONNECTION WITH ANY OF THE FOREGOING, AND
AGREES THAT ANY SUCH ACTION OR PROCEEDING SHALL BE TRIED BEFORE A COURT AND NOT
BEFORE A JURY.
11
<PAGE> 104
IN WITNESS WHEREOF, this Agreement has been duly executed as of the day and
year first above written.
SANTI GROUP, INC.
By:
------------------------------
Name Printed:
---------------------
Title:
----------------------------
BONE DRY ENTERPRISES, INC.
By:
------------------------------
Name Printed:
---------------------
Title:
----------------------------
SANTI GROUP OF FLORIDA, INC.
By:
------------------------------
Name Printed:
---------------------
Title:
----------------------------
SANTI GROUP OF PENNSYLVANIA, INC.
By:
------------------------------
Name Printed:
---------------------
Title:
----------------------------
12
<PAGE> 105
SANTI GROUP OF NEW YORK, INC.
By:
------------------------------
Name Printed:
---------------------
Title:
----------------------------
BANK OF AMERICA NATIONAL TRUST AND
SAVINGS ASSOCIATION, as Agent for
the Banks
By:
------------------------------
Name Printed:
---------------------
Title:
----------------------------
13
<PAGE> 106
Signature page for the Security Agreement dated as of June __, 1998
among SanTi Group, Inc. (the "Company"), various subsidiaries of the
Company and Bank of America National Trust and Savings Association, as
Agent (as defined in the Credit Agreement dated as of June __, 1998
with the Company and various other parties).
The undersigned is executing a counterpart hereof for purposes
of becoming a party hereto:
[SANTI GROUP, INC.]
By:
------------------------------
Name Printed:
--------------------
Title:
---------------------------
<PAGE> 107
SCHEDULE I
TO SECURITY AGREEMENT
CHIEF EXECUTIVE OFFICES
Chief Executive Office of All Debtors
7200 Bishop Road
Austell, Georgia 30168
Principal Place of Business
SanTi Group, Inc. 7200 Bishop Road
Austell, Georgia 30168
Bone Dry Enterprises, Inc. 7200 Bishop Road
Austell, Georgia 30168
2470 Weaver Way
Doraville, Georgia 30340
7851 Lee Road
Lithia Springs, Georgia 30057
SanTi Group of Florida, Inc. 7200 Bishop Road
Austell, Georgia 30168
1804 Nashville Avenue
Orlando, Florida 32805
25 NE 5th Street
Pompano Beach, Florida 33060
SanTi Group of Pennsylvania, Inc. 7200 Bishop Road
Austell, Georgia 30168
S. Main Street & Randolph
P.O. Box 442
Ambler, Pennsylvania 19380
898 Fern Hill Road
West Chester, Pennsylvania 19380
SanTi Group of New York, Inc. 7200 Bishop Road
Austell, Georgia 30168
972 Nicolls Road
Deer Park, New York 11729
<PAGE> 108
SCHEDULE II
TO SECURITY AGREEMENT
ADDRESSES OF OTHER LOCATIONS
None.
<PAGE> 109
SCHEDULE III
TO SECURITY AGREEMENT
TRADE NAMES
SanTi Group, Inc.
None
Bone Dry Enterprises, Inc.
None
SanTi Group of Florida, Inc.
Brownie Septic Tank Contractors
Brownie Environmental Services
Brownie Sewer & Drain Service
Grease-Tec
A Rapid Rooter Sewer & Drain
A Rapid Rooter
SanTi Group of Pennsylvania, Inc.
Eldredge Wastewater Management
Ferrero Wastewater Management
SanTi Group of New York, Inc.
Advanced Transfer Technology
Envirotec Leasing and Rental
Devito Environmental
RGM Liquid Waste Removal
<PAGE> 110
SCHEDULE IV
TO SECURITY AGREEMENT
LIST OF INTELLECTUAL PROPERTY
None.
<PAGE> 111
EXHIBIT E
FORM OF COMPANY PLEDGE AGREEMENT
THIS PLEDGE AGREEMENT (this "Agreement") dated as of
June __, 1998, is between SANTI GROUP, INC., a Delaware corporation (the
"Company"), and BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION ("BofA"),
as Agent (as defined below) for the Banks (as defined below).
WITNESSETH:
WHEREAS, the Company, various financial institutions (the "Banks") and
BofA, as agent for the Banks (in such capacity, the "Agent"), have entered into
a Credit Agreement dated as of June __, 1998 (as amended, restated or otherwise
modified from time to time, the "Credit Agreement"); and
WHEREAS, the obligations of the Company in respect of the Credit
Agreement and the other Loan Documents (as defined in the Credit Agreement) are
to be secured pursuant to this Agreement;
NOW, THEREFORE, for and in consideration of the premises and for other
good and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
1. Definitions. When used herein, (a) the capitalized terms used but
not defined have the meanings assigned to such terms in the Credit Agreement and
(b) the following terms have the following meanings (such meanings to be
applicable to both the singular and plural forms of such terms):
Agent - see the recitals.
Agreement - see the introductory paragraph.
BofA - see the introductory paragraph.
Banks - see the recitals.
Collateral - see Section 2.
Company - see the introductory paragraph.
Credit Agreement - see the recitals.
Default means the occurrence of any of the following events:
(i) any Unmatured Event of Default with respect to the Company under
Section 12.1.4 of the Credit Agreement, (ii) any Event of Default or
(iii) any warranty of the Company herein is untrue or misleading in any
material respect and, as a result thereof, the Agent's security
interest in any material portion of the Collateral is not perfected or
the Agent's rights and remedies with respect to any material portion of
the Collateral are materially impaired or otherwise materially
adversely affected.
Guarantor means, on any day, each Subsidiary that has executed
a counterpart of the Guaranty on or prior to that day (or is required
to execute a counterpart of the Guaranty on that date).
<PAGE> 112
Issuer means the issuer of any of the shares of stock or other
securities representing all or any of the Collateral.
Liabilities means all obligations of the Company howsoever
created, arising or evidenced, whether direct or indirect, absolute or
contingent, now or hereafter existing, or due or to become due, which
arise out of or in connection with any of the Loan Documents
(including, without limitation, with respect to Letters of Credit), as
the same may be amended, modified, extended or renewed from time to
time, and all Hedging Obligations of the Company to any Bank.
2. Pledge. As security for the payment of all Liabilities, the
Company hereby pledges to the Agent for the benefit of the Banks, and grants to
the Agent for the benefit of the Banks a continuing security interest in, all of
the following:
A. All of the shares of stock and other securities
described in Schedule I hereto, all of the certificates and/or
instruments representing such shares of stock and other securities, and
all cash, securities, dividends, rights and other property at any time
and from time to time received, receivable or otherwise distributed in
respect of or in exchange for any or all of such shares or other
securities;
B. All additional shares of stock of any of the Issuers
listed in Schedule I hereto at any time and from time to time acquired
by the Company in any manner, all of the certificates representing such
additional shares, and all cash, securities, dividends, rights and
other property at any time and from time to time received, receivable
or otherwise distributed in respect of or in exchange for any or all of
such shares;
C. All other property hereafter delivered to the Agent
in substitution for or in addition to any of the foregoing, all
certificates and instruments representing or evidencing such property,
and all cash, securities, interest, dividends, rights and other
property at any time and from time to time received, receivable or
otherwise distributed in respect of or in exchange for any or all
thereof; and
D. All products and proceeds of all of the foregoing.
All of the foregoing are herein collectively called the "Collateral".
The Company agrees to deliver to the Agent, promptly upon receipt and
in due form for transfer (i.e., endorsed in blank or accompanied by stock or
bond powers executed in blank), any Collateral (other than dividends which the
Company is entitled to receive and retain pursuant to Section 5 hereof) which
may at any time or from time to time be in or come into the possession or
control of the Company; and prior to the delivery thereof to the Agent, such
Collateral shall be held by the Company separate and apart from its other
property and in express trust for the Agent.
2
<PAGE> 113
3. Warranties; Further Assurances. The Company warrants to the
Agent for the benefit of each Bank that: (a) the Company is (or at the time of
any future delivery, pledge, assignment or transfer thereof will be) the legal
and equitable owner of the Collateral free and clear of all liens, security
interests and encumbrances of every description whatsoever other than the
security interest created hereunder; (b) the pledge and delivery of the
Collateral pursuant to this Agreement will create a valid perfected security
interest in the Collateral in favor of the Agent; (c) all shares of stock
referred to in Schedule I hereto are duly authorized, validly issued, fully paid
and non-assessable; (d) as to each Issuer whose name appears in Schedule I
hereto, the Collateral represents on the date hereof not less than the
applicable percent (as shown in Schedule I hereto) of the total shares of
capital stock issued and outstanding of such Issuer; and (e) the information
contained in Schedule I hereto is true and accurate in all respects.
So long as any of the Liabilities shall be outstanding or any
commitment shall exist on the part of any Bank with respect to the creation of
any Liabilities, the Company (i) shall not, except as permitted by the Credit
Agreement or with the express prior written consent of the Agent, sell, assign,
exchange, pledge or otherwise transfer, encumber, or grant any option, warrant
or other right to purchase the stock of any Issuer which is pledged hereunder,
or otherwise diminish or impair any of its rights in, to or under any of the
Collateral; (ii) shall execute such Uniform Commercial Code financing statements
and other documents (and pay the costs of filing and recording or re-filing and
re-recording the same in all public offices reasonably deemed necessary or
appropriate by the Agent) and do such other acts and things, all as the Agent
may from time to time reasonably request, to establish and maintain a valid,
perfected security interest in the Collateral (free of all other liens, claims
and rights of third parties whatsoever) to secure the performance and payment of
the Liabilities; (iii) will execute and deliver to the Agent such stock powers
and similar documents relating to the Collateral, satisfactory in form and
substance to the Agent, as the Agent may reasonably request; and (iv) will
furnish the Agent or any Bank such information concerning the Collateral as the
Agent or such Bank may from time to time reasonably request, and will permit the
Agent or any Bank or any designee of the Agent or such Bank, from time to time
at reasonable times and on reasonable notice (or at any time without notice
during the existence of a Default), to inspect, audit and make copies of and
extracts from all records and all other papers in the possession of the Company
which pertain to the Collateral, and will, upon request of the Agent at any time
when a Default has occurred and is continuing, deliver to the Agent all of such
records and papers.
4. Holding in Name of Agent, etc. The Agent may from time to time
after the occurrence and during the continuance of a Default, without notice to
the Company, take all or any of the following actions: (a) transfer all or any
part of the Collateral into the name of the Agent or any nominee or sub-agent
for the Agent, with or without disclosing that such Collateral is subject to the
lien and security interest hereunder, (b) appoint one or more sub-agents or
nominees for the purpose of retaining physical possession of the Collateral, (c)
notify the parties obligated on any of the Collateral to make payment to the
Agent of any amounts due or to
3
<PAGE> 114
become due thereunder, (d) endorse any checks, drafts or other writings in the
name of the Company to allow collection of the Collateral, (e) enforce
collection of any of the Collateral by suit or otherwise, and surrender, release
or exchange all or any part thereof, or compromise or renew for any period
(whether or not longer than the original period) any obligations of any nature
of any party with respect thereto, and (f) take control of any proceeds of the
Collateral.
5. Voting Rights, Dividends, etc. (a) Notwithstanding certain
provisions of Section 4 hereof, so long as the Agent has not given the notice
referred to in paragraph (b) below:
A. The Company shall be entitled to exercise any and all
voting or consensual rights and powers and stock purchase or
subscription rights (but any such exercise by the Company of stock
purchase or subscription rights may be made only from funds of the
Company not comprising part of the Collateral) relating or pertaining
to the Collateral or any part thereof for any purpose; provided,
however, that the Company agrees that it will not exercise any such
right or power in any manner which would have a material adverse effect
on the value of the Collateral or any part thereof.
B. The Company shall be entitled to receive and retain any and
all lawful dividends payable in respect of the Collateral which are
paid in cash by any Issuer if such dividends are permitted by the
Credit Agreement, but all dividends and distributions in respect of the
Collateral or any part thereof made in shares of stock or securities or
other property or representing any return of capital, whether resulting
from a subdivision, combination or reclassification of Collateral or
any part thereof or received in exchange for Collateral or any part
thereof or as a result of any merger, consolidation, acquisition or
other exchange of assets to which any Issuer may be a party or
otherwise or as a result of any exercise of any stock purchase or
subscription right, shall be and become part of the Collateral
hereunder and, if received by the Company, shall be forthwith delivered
to the Agent in due form for transfer (i.e., endorsed in blank or
accompanied by stock or bond powers executed in blank) to be held for
the purposes of this Agreement.
C. The Agent shall execute and deliver, or cause to be
executed and delivered, to the Company, all such proxies, powers of
attorney, dividend orders and other instruments as the Company may
request for the purpose of enabling the Company to exercise the rights
and powers which it is entitled to exercise pursuant to clause (A)
above and to receive the dividends which it is authorized to retain
pursuant to clause (B) above.
(b) Upon notice from the Agent during the existence of a Default, and
so long as the same shall be continuing, all rights and powers which the Company
is entitled to exercise pursuant to Section 5(a)(A) hereof, and all rights of
the Company to receive and retain dividends pursuant to Section 5(a)(B) hereof,
shall forthwith cease, and all such rights and powers shall thereupon become
vested in the Agent which shall have, during the continuance of such Default,
the sole and exclusive authority to exercise such rights and powers and to
receive such dividends.
4
<PAGE> 115
Any and all money and other property paid over to or received by the Agent
pursuant to this paragraph (b) shall be retained by the Agent as additional
Collateral hereunder and applied in accordance with the provisions hereof.
6. Remedies. Whenever a Default shall exist, the Agent may exercise
from time to time any rights and remedies available to it under the Uniform
Commercial Code as in effect in Illinois or otherwise available to it. Without
limiting the foregoing, whenever a Default shall exist the Agent (a) may, to the
fullest extent permitted by applicable law, without notice, advertisement,
hearing or process of law of any kind, (i) sell any or all of the Collateral,
free of all rights and claims of the Company therein and thereto, at any public
or private sale or brokers' board and (ii) bid for and purchase any or all of
the Collateral at any such public sale and (b) shall have the right, for and in
the name, place and stead of the Company, to execute endorsements, assignments,
stock powers and other instruments of conveyance or transfer with respect to all
or any of the Collateral. The Company hereby expressly waives, to the fullest
extent permitted by applicable law, any and all notices, advertisements,
hearings or process of law in connection with the exercise by the Agent of any
of its rights and remedies during the continuance of a Default. Any notification
of intended disposition of any of the Collateral shall be deemed reasonably and
properly given if given at least ten (10) days before such disposition. Any
proceeds of any of the Collateral may be applied by the Agent to the payment of
expenses in connection with the Collateral, including, without limitation,
reasonable attorneys' fees and legal expenses, and any balance of such proceeds
may be applied by the Agent toward the payment of such of the Liabilities, and
in such order of application, as the Agent may from time to time elect (and,
after payment in full of all Liabilities, any excess shall be delivered to the
Company or as a court of competent jurisdiction shall direct).
The Agent is hereby authorized to comply with any limitation or
restriction in connection with any sale of Collateral as it may be advised by
counsel is necessary in order to (a) avoid any violation of applicable law
(including, without limitation, compliance with such procedures as may restrict
the number of prospective bidders and purchasers and/or further restrict such
prospective bidders or purchasers to persons or entities who will represent and
agree that they are purchasing for their own account for investment and not with
a view to the distribution or resale of such Collateral) or (b) obtain any
required approval of the sale or of the purchase by any governmental regulatory
authority or official, and the Company agrees that such compliance shall not
result in such sale being considered or deemed not to have been made in a
commercially reasonable manner and that the Agent shall not be liable or
accountable to the Company for any discount allowed by reason of the fact that
such Collateral is sold in compliance with any such limitation or restriction.
7. General. The Agent shall be deemed to have exercised reasonable care
in the custody and preservation of the Collateral if it takes such action for
that purpose as the Company shall request in writing, but failure of the Agent
to comply with any such request shall not of itself be deemed a failure to
exercise reasonable care, and no failure of the Agent to preserve or protect
5
<PAGE> 116
any rights with respect to the Collateral against prior parties, or to do any
act with respect to preservation of the Collateral not so requested by the
Company, shall be deemed a failure to exercise reasonable care in the custody or
preservation of any Collateral.
No delay on the part of the Agent in exercising any right, power or
remedy shall operate as a waiver thereof, and no single or partial exercise of
any such right, power or remedy shall preclude any other or further exercise
thereof, or the exercise of any other right, power or remedy. No amendment,
modification or waiver of, or consent with respect to, any provision of this
Agreement shall be effective unless the same shall be in writing and signed and
delivered by the Agent, and then such amendment, modification, waiver or consent
shall be effective only in the specific instance and for the specific purpose
for which given.
All obligations of the Company and all rights, powers and remedies of
the Agent and the Banks expressed herein are in addition to all other rights,
powers and remedies possessed by them, including, without limitation, those
provided by applicable law or in any other written instrument or agreement
relating to any of the Liabilities or any security therefor.
This Agreement has been delivered at Chicago, Illinois, and shall be
construed in accordance with and governed by the internal laws of the State of
Illinois. Wherever possible each provision of this Agreement shall be
interpreted in such manner as to be effective and valid under applicable law,
but if any provision of this Agreement shall be prohibited by or invalid under
such law, such provision shall be ineffective to the extent of such prohibition
or invalidity, without invalidating the remainder of such provision or the
remaining provisions of this Agreement.
All notices hereunder shall be in writing (including facsimile
transmission) and shall be sent to the applicable party at its address shown
opposite its signature hereto or at such other address as such party may, by
written notice to the other party, have designated as its address for such
purpose. Notices sent by facsimile transmission shall be deemed to have been
given when sent with confirmation of receipt; notices sent by mail shall be
deemed to have been given five Business Days after the date when sent by
registered or certified mail, postage prepaid; and notices sent by hand delivery
or overnight courier shall be deemed to have been given when received .
This Agreement shall be binding upon the Company and the Agent and
their respective successors and assigns, and shall inure to the benefit of the
Company and the Agent and the successors and assigns of the Agent.
This Agreement may be executed in any number of counterparts and by the
different parties hereto on separate counterparts, and each such counterpart
shall be deemed an original but all such counterparts shall together constitute
but one and the same Agreement.
6
<PAGE> 117
ANY LITIGATION BASED HEREON, OR ARISING OUT OF, UNDER OR IN CONNECTION
WITH THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT, SHALL BE BROUGHT AND MAINTAINED
EXCLUSIVELY IN THE COURTS OF THE STATE OF ILLINOIS OR IN THE UNITED STATES
DISTRICT COURT FOR THE NORTHERN DISTRICT OF ILLINOIS; PROVIDED, HOWEVER, THAT
ANY SUIT SEEKING ENFORCEMENT AGAINST ANY COLLATERAL OR OTHER PROPERTY MAY BE
BROUGHT, AT THE AGENT'S OPTION, IN THE COURTS OF ANY JURISDICTION WHERE SUCH
COLLATERAL OR OTHER PROPERTY MAY BE FOUND. THE COMPANY HEREBY EXPRESSLY AND
IRREVOCABLY SUBMITS TO THE JURISDICTION OF THE COURTS OF THE STATE OF ILLINOIS
AND OF THE UNITED STATES DISTRICT COURT FOR THE NORTHERN DISTRICT OF ILLINOIS
FOR THE PURPOSE OF ANY SUCH LITIGATION AS SET FORTH ABOVE. THE COMPANY FURTHER
IRREVOCABLY CONSENTS TO THE SERVICE OF PROCESS BY REGISTERED MAIL, POSTAGE
PREPAID, TO THE ADDRESS OF THE COMPANY SPECIFIED IN, OR PURSUANT TO, THE CREDIT
AGREEMENT, OR BY PERSONAL SERVICE WITHIN OR WITHOUT THE STATE OF ILLINOIS. THE
COMPANY HEREBY EXPRESSLY AND IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED
BY LAW, ANY OBJECTION WHICH IT MAY NOW OR HEREAFTER HAVE TO THE LAYING OF VENUE
OF ANY SUCH LITIGATION BROUGHT IN ANY SUCH COURT REFERRED TO ABOVE AND ANY CLAIM
THAT ANY SUCH LITIGATION HAS BEEN BROUGHT IN AN INCONVENIENT FORUM.
EACH OF THE COMPANY, THE AGENT AND (BY ACCEPTING THE BENEFITS HEREOF)
EACH BANK HEREBY WAIVES ANY RIGHT TO A TRIAL BY JURY IN ANY ACTION OR PROCEEDING
TO ENFORCE OR DEFEND ANY RIGHTS UNDER THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT
AND ANY AMENDMENT, INSTRUMENT, DOCUMENT OR AGREEMENT DELIVERED OR WHICH MAY IN
THE FUTURE BE DELIVERED IN CONNECTION HEREWITH OR THEREWITH OR ARISING FROM ANY
FINANCING RELATIONSHIP EXISTING IN CONNECTION WITH ANY OF THE FOREGOING, AND
AGREES THAT ANY SUCH ACTION OR PROCEEDING SHALL BE TRIED BEFORE A COURT AND NOT
BEFORE A JURY.
7
<PAGE> 118
IN WITNESS WHEREOF, this Agreement has been duly executed and delivered
as of the day and year first written above.
SANTI GROUP, INC.
Address:
By:
-----------------------------------
Name Printed:
--------------------------
Title:
BANK OF AMERICA NATIONAL TRUST AND
SAVINGS ASSOCIATION, as Agent
Address:
231
South LaSalle Street By:
Chicago, IL 60697 ------------------------------------
Attention: Name Printed:
----------------- --------------------------
Facsimile: Title:
-----------------
8
<PAGE> 119
SCHEDULE I
TO PLEDGE AGREEMENT
STOCK
<TABLE>
<CAPTION>
Pledged Shares
No. of as % of Total Total Shares
Certificate Pledged Shares Issued of Issuer
Issuer No. Shares and Outstanding Outstanding
- ------ ----------- -------- --------------- -------------
<S> <C> <C> <C> <C>
Bone-Dry 8 1,000,000 100% 1,000,000
Enterprises, Inc.
SanTi Group of 1 500 100% 500
Pennsylvania, Inc.
SanTi Group of 1 500 100% 500
Florida, Inc.
SanTi Group of 1 500 100% 500
New York, Inc.
</TABLE>
<PAGE> 120
EXHIBIT F
FORM OF SUBSIDIARY PLEDGE AGREEMENT
THIS PLEDGE AGREEMENT (this "Agreement") dated as of
June __, 1998, is between _________________ (the "Pledgor"), a Subsidiary of
SANTI GROUP, INC. (the "Company"), and BANK OF AMERICA NATIONAL TRUST AND
SAVINGS ASSOCIATION ("BofA"), as Agent (as defined below) for the Banks (as
defined below).
WITNESSETH:
WHEREAS, the Company, various financial institutions (the "Banks") and
BofA, as agent for the Banks (in such capacity, the "Agent"), have entered into
a Credit Agreement dated as of June __, 1998 (as amended, restated or otherwise
modified from time to time, the "Credit Agreement");
WHEREAS, the Pledgor has guaranteed all of the obligations of the
Company under or in connection with the Credit Agreement pursuant to a Guaranty
dated June __, 1998 (the "Guaranty");
WHEREAS, the Pledgor will benefit from the making of loans and the
issuance of letters of credit pursuant to the Credit Agreement; and
WHEREAS, the obligations of the Pledgor under the Guaranty and the
other Loan Documents (as defined in the Credit Agreement) are to be secured
pursuant to this Agreement;
NOW, THEREFORE, for and in consideration of the premises and for other
good and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
1. Definitions. When used herein, (a) the capitalized terms used but
not defined have the meanings assigned to such terms in the Credit Agreement and
(b) the following terms have the following meanings (such meanings to be
applicable to both the singular and plural forms of such terms):
Agent - see the recitals.
Agreement - see the introductory paragraph.
BofA - see the introductory paragraph.
Banks - see the recitals.
Collateral - see Section 2.
Company - see the introductory paragraph.
Credit Agreement - see the recitals.
Default means the occurrence of any of the following events:
(i) any Unmatured Event of Default with respect to the Company under
Section 12.1.4 of the Credit Agreement, (ii) any Event of Default or
(iii) any warranty of the Pledgor herein is untrue or misleading in any
material respect and, as a result thereof, the Agent's security
interest in any material portion of the Collateral is not perfected or
the Agent's rights and
<PAGE> 121
remedies with respect to any material portion of the Collateral are
materially impaired or otherwise materially adversely affected.
Guaranty - see the recitals.
Issuer means the issuer of any of the shares of stock or other
securities representing all or any of the Collateral.
Liabilities means all obligations of the Pledgor under or in
connection with the Guaranty or any other Loan Document (including this
Agreement), as the same may be amended, modified, extended or renewed
from time to time.
Pledgor - see the introductory paragraph.
2. Pledge. As security for the payment of all Liabilities, the
Pledgor hereby pledges to the Agent for the benefit of the Banks, and grants to
the Agent for the benefit of the Banks a continuing security interest in, all of
the following:
A. All of the shares of stock and other securities
described in Schedule I hereto, all of the certificates and/or
instruments representing such shares of stock and other securities, and
all cash, securities, dividends, rights and other property at any time
and from time to time received, receivable or otherwise distributed in
respect of or in exchange for any or all of such shares or other
securities;
B. All additional shares of stock of any of the Issuers
listed in Schedule I hereto at any time and from time to time acquired
by the Pledgor in any manner, all of the certificates representing such
additional shares, and all cash, securities, dividends, rights and
other property at any time and from time to time received, receivable
or otherwise distributed in respect of or in exchange for any or all of
such shares;
C. All other property hereafter delivered to the Agent
in substitution for or in addition to any of the foregoing, all
certificates and instruments representing or evidencing such property,
and all cash, securities, interest, dividends, rights and other
property at any time and from time to time received, receivable or
otherwise distributed in respect of or in exchange for any or all
thereof; and
D. All products and proceeds of all of the foregoing.
All of the foregoing are herein collectively called the "Collateral".
The Pledgor agrees to deliver to the Agent, promptly upon receipt and
in due form for transfer (i.e., endorsed in blank or accompanied by stock or
bond powers executed in blank), any Collateral (other than dividends which the
Pledgor is entitled to receive and retain pursuant to Section 5 hereof) which
may at any time or from time to time be in or come into the possession
2
<PAGE> 122
or control of the Pledgor; and prior to the delivery thereof to the Agent, such
Collateral shall be held by the Pledgor separate and apart from its other
property and in express trust for the Agent.
3. Warranties; Further Assurances. The Pledgor warrants to the
Agent for the benefit of each Bank that: (a) the Pledgor is (or at the time of
any future delivery, pledge, assignment or transfer thereof will be) the legal
and equitable owner of the Collateral free and clear of all liens, security
interests and encumbrances of every description whatsoever other than the
security interest created hereunder; (b) the pledge and delivery of the
Collateral pursuant to this Agreement will create a valid perfected security
interest in the Collateral in favor of the Agent; (c) all shares of stock
referred to in Schedule I hereto are duly authorized, validly issued, fully paid
and non-assessable; (d) as to each Issuer whose name appears in Schedule I
hereto, the Collateral represents on the date hereof not less than the
applicable percent (as shown in Schedule I hereto) of the total shares of
capital stock issued and outstanding of such Issuer; and (e) the information
contained in Schedule I hereto is true and accurate in all respects.
So long as any of the Liabilities shall be outstanding or any
commitment shall exist on the part of any Bank with respect to the creation of
any Liabilities, the Pledgor (i) shall not, except as permitted by the Credit
Agreement or with the express prior written consent of the Agent, sell, assign,
exchange, pledge or otherwise transfer, encumber, or grant any option, warrant
or other right to purchase the stock of any Issuer which is pledged hereunder,
or otherwise diminish or impair any of its rights in, to or under any of the
Collateral; (ii) shall execute such Uniform Commercial Code financing statements
and other documents (and pay the costs of filing and recording or re-filing and
re-recording the same in all public offices reasonably deemed necessary or
appropriate by the Agent) and do such other acts and things, all as the Agent
may from time to time reasonably request, to establish and maintain a valid,
perfected security interest in the Collateral (free of all other liens, claims
and rights of third parties whatsoever) to secure the performance and payment of
the Liabilities; (iii) will execute and deliver to the Agent such stock powers
and similar documents relating to the Collateral, satisfactory in form and
substance to the Agent, as the Agent may reasonably request; and (iv) will
furnish the Agent or any Bank such information concerning the Collateral as the
Agent or such Bank may from time to time reasonably request, and will permit the
Agent or any Bank or any designee of the Agent or such Bank, from time to time
at reasonable times and on reasonable notice (or at any time without notice
during the existence of a Default), to inspect, audit and make copies of and
extracts from all records and all other papers in the possession of the Pledgor
which pertain to the Collateral, and will, upon request of the Agent at any time
when a Default has occurred and is continuing, deliver to the Agent all of such
records and papers.
4. Holding in Name of Agent, etc. The Agent may from time to time
after the occurrence and during the continuance of a Default, without notice to
the Pledgor, take all or any of the following actions: (a) transfer all or any
part of the Collateral into the name of the Agent or any nominee or sub-agent
for the Agent, with or without disclosing that such Collateral is subject to the
lien and security interest hereunder, (b) appoint one or more sub-agents or
3
<PAGE> 123
nominees for the purpose of retaining physical possession of the Collateral, (c)
notify the parties obligated on any of the Collateral to make payment to the
Agent of any amounts due or to become due thereunder, (d) endorse any checks,
drafts or other writings in the name of the Pledgor to allow collection of the
Collateral, (e) enforce collection of any of the Collateral by suit or
otherwise, and surrender, release or exchange all or any part thereof, or
compromise or renew for any period (whether or not longer than the original
period) any obligations of any nature of any party with respect thereto, and (f)
take control of any proceeds of the Collateral.
5. Voting Rights, Dividends, etc. (a) Notwithstanding certain
provisions of Section 4 hereof, so long as the Agent has not given the notice
referred to in paragraph (b) below:
A. The Pledgor shall be entitled to exercise any and all
voting or consensual rights and powers and stock purchase or
subscription rights (but any such exercise by the Pledgor of stock
purchase or subscription rights may be made only from funds of the
Pledgor not comprising part of the Collateral) relating or pertaining
to the Collateral or any part thereof for any purpose; provided,
however, that the Pledgor agrees that it will not exercise any such
right or power in any manner which would have a material adverse effect
on the value of the Collateral or any part thereof.
B. The Pledgor shall be entitled to receive and retain any and
all lawful dividends payable in respect of the Collateral which are
paid in cash by any Issuer if such dividends are permitted by the
Credit Agreement, but all dividends and distributions in respect of the
Collateral or any part thereof made in shares of stock or securities or
other property or representing any return of capital, whether resulting
from a subdivision, combination or reclassification of Collateral or
any part thereof or received in exchange for Collateral or any part
thereof or as a result of any merger, consolidation, acquisition or
other exchange of assets to which any Issuer may be a party or
otherwise or as a result of any exercise of any stock purchase or
subscription right, shall be and become part of the Collateral
hereunder and, if received by the Pledgor, shall be forthwith delivered
to the Agent in due form for transfer (i.e., endorsed in blank or
accompanied by stock or bond powers executed in blank) to be held for
the purposes of this Agreement.
C. The Agent shall execute and deliver, or cause to be
executed and delivered, to the Pledgor, all such proxies, powers of
attorney, dividend orders and other instruments as the Pledgor may
request for the purpose of enabling the Pledgor to exercise the rights
and powers which it is entitled to exercise pursuant to clause (A)
above and to receive the dividends which it is authorized to retain
pursuant to clause (B) above.
(b) Upon notice from the Agent during the existence of a Default, and
so long as the same shall be continuing, all rights and powers which the Pledgor
is entitled to exercise pursuant to Section 5(a)(A) hereof, and all rights of
the Pledgor to receive and retain dividends pursuant to Section 5(a)(B) hereof,
shall forthwith cease, and all such rights and powers shall thereupon
4
<PAGE> 124
become vested in the Agent which shall have, during the continuance of such
Default, the sole and exclusive authority to exercise such rights and powers and
to receive such dividends. Any and all money and other property paid over to or
received by the Agent pursuant to this paragraph (b) shall be retained by the
Agent as additional Collateral hereunder and applied in accordance with the
provisions hereof.
6. Remedies. Whenever a Default shall exist, the Agent may exercise
from time to time any rights and remedies available to it under the Uniform
Commercial Code as in effect in Illinois or otherwise available to it. Without
limiting the foregoing, whenever a Default shall exist the Agent (a) may, to the
fullest extent permitted by applicable law, without notice, advertisement,
hearing or process of law of any kind, (i) sell any or all of the Collateral,
free of all rights and claims of the Pledgor therein and thereto, at any public
or private sale or brokers' board and (ii) bid for and purchase any or all of
the Collateral at any such public sale and (b) shall have the right, for and in
the name, place and stead of the Pledgor, to execute endorsements, assignments,
stock powers and other instruments of conveyance or transfer with respect to all
or any of the Collateral. The Pledgor hereby expressly waives, to the fullest
extent permitted by applicable law, any and all notices, advertisements,
hearings or process of law in connection with the exercise by the Agent of any
of its rights and remedies during the continuance of a Default. Any notification
of intended disposition of any of the Collateral shall be deemed reasonably and
properly given if given at least ten (10) days before such disposition. Any
proceeds of any of the Collateral may be applied by the Agent to the payment of
expenses in connection with the Collateral, including, without limitation,
reasonable attorneys' fees and legal expenses, and any balance of such proceeds
may be applied by the Agent toward the payment of such of the Liabilities, and
in such order of application, as the Agent may from time to time elect (and,
after payment in full of all Liabilities, any excess shall be delivered to the
Pledgor or as a court of competent jurisdiction shall direct).
The Agent is hereby authorized to comply with any limitation or
restriction in connection with any sale of Collateral as it may be advised by
counsel is necessary in order to (a) avoid any violation of applicable law
(including, without limitation, compliance with such procedures as may restrict
the number of prospective bidders and purchasers and/or further restrict such
prospective bidders or purchasers to persons or entities who will represent and
agree that they are purchasing for their own account for investment and not with
a view to the distribution or resale of such Collateral) or (b) obtain any
required approval of the sale or of the purchase by any governmental regulatory
authority or official, and the Pledgor agrees that such compliance shall not
result in such sale being considered or deemed not to have been made in a
commercially reasonable manner and that the Agent shall not be liable or
accountable to the Pledgor for any discount allowed by reason of the fact that
such Collateral is sold in compliance with any such limitation or restriction.
7. General. The Agent shall be deemed to have exercised reasonable care
in the custody and preservation of the Collateral if it takes such action for
that purpose as the Pledgor shall
5
<PAGE> 125
request in writing, but failure of the Agent to comply with any such request
shall not of itself be deemed a failure to exercise reasonable care, and no
failure of the Agent to preserve or protect any rights with respect to the
Collateral against prior parties, or to do any act with respect to preservation
of the Collateral not so requested by the Pledgor, shall be deemed a failure to
exercise reasonable care in the custody or preservation of any Collateral.
No delay on the part of the Agent in exercising any right, power or
remedy shall operate as a waiver thereof, and no single or partial exercise of
any such right, power or remedy shall preclude any other or further exercise
thereof, or the exercise of any other right, power or remedy. No amendment,
modification or waiver of, or consent with respect to, any provision of this
Agreement shall be effective unless the same shall be in writing and signed and
delivered by the Agent, and then such amendment, modification, waiver or consent
shall be effective only in the specific instance and for the specific purpose
for which given.
All obligations of the Pledgor and all rights, powers and remedies of
the Agent and the Banks expressed herein are in addition to all other rights,
powers and remedies possessed by them, including, without limitation, those
provided by applicable law or in any other written instrument or agreement
relating to any of the Liabilities or any security therefor.
This Agreement has been delivered at Chicago, Illinois, and shall be
construed in accordance with and governed by the internal laws of the State of
Illinois. Wherever possible each provision of this Agreement shall be
interpreted in such manner as to be effective and valid under applicable law,
but if any provision of this Agreement shall be prohibited by or invalid under
such law, such provision shall be ineffective to the extent of such prohibition
or invalidity, without invalidating the remainder of such provision or the
remaining provisions of this Agreement.
All notices hereunder shall be in writing (including facsimile
transmission) and shall be sent to the applicable party at its address shown
opposite its signature hereto or at such other address as such party may, by
written notice to the other party, have designated as its address for such
purpose. Notices sent by facsimile transmission shall be deemed to have been
given when sent with confirmation of receipt; notices sent by mail shall be
deemed to have been given five Business Days after the date when sent by
registered or certified mail, postage prepaid; and notices sent by hand delivery
or overnight courier shall be deemed to have been given when received.
This Agreement shall be binding upon the Pledgor and the Agent and
their respective successors and assigns, and shall inure to the benefit of the
Pledgor and the Agent and the successors and assigns of the Agent.
6
<PAGE> 126
This Agreement may be executed in any number of counterparts and by the
different parties hereto on separate counterparts, and each such counterpart
shall be deemed an original but all such counterparts shall together constitute
but one and the same Agreement.
ANY LITIGATION BASED HEREON, OR ARISING OUT OF, UNDER OR IN CONNECTION
WITH THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT, SHALL BE BROUGHT AND MAINTAINED
EXCLUSIVELY IN THE COURTS OF THE STATE OF ILLINOIS OR IN THE UNITED STATES
DISTRICT COURT FOR THE NORTHERN DISTRICT OF ILLINOIS; PROVIDED, HOWEVER, THAT
ANY SUIT SEEKING ENFORCEMENT AGAINST ANY COLLATERAL OR OTHER PROPERTY MAY BE
BROUGHT, AT THE AGENT'S OPTION, IN THE COURTS OF ANY JURISDICTION WHERE SUCH
COLLATERAL OR OTHER PROPERTY MAY BE FOUND. THE PLEDGOR HEREBY EXPRESSLY AND
IRREVOCABLY SUBMITS TO THE JURISDICTION OF THE COURTS OF THE STATE OF ILLINOIS
AND OF THE UNITED STATES DISTRICT COURT FOR THE NORTHERN DISTRICT OF ILLINOIS
FOR THE PURPOSE OF ANY SUCH LITIGATION AS SET FORTH ABOVE. THE PLEDGOR FURTHER
IRREVOCABLY CONSENTS TO THE SERVICE OF PROCESS BY REGISTERED MAIL, POSTAGE
PREPAID, TO THE ADDRESS OF THE PLEDGOR SPECIFIED IN, OR PURSUANT TO, THE THIRD
PRECEDING PARAGRAPH, OR BY PERSONAL SERVICE WITHIN OR WITHOUT THE STATE OF
ILLINOIS. THE PLEDGOR HEREBY EXPRESSLY AND IRREVOCABLY WAIVES, TO THE FULLEST
EXTENT PERMITTED BY LAW, ANY OBJECTION WHICH IT MAY NOW OR HEREAFTER HAVE TO THE
LAYING OF VENUE OF ANY SUCH LITIGATION BROUGHT IN ANY SUCH COURT REFERRED TO
ABOVE AND ANY CLAIM THAT ANY SUCH LITIGATION HAS BEEN BROUGHT IN AN INCONVENIENT
FORUM. TO THE EXTENT THAT THE PLEDGOR HAS OR HEREAFTER MAY ACQUIRE ANY IMMUNITY
FROM JURISDICTION OF ANY COURT OR FROM ANY LEGAL PROCESS (WHETHER THROUGH
SERVICE OR NOTICE, ATTACHMENT PRIOR TO JUDGMENT, ATTACHMENT IN AID OF EXECUTION
OR OTHERWISE) WITH RESPECT TO ITSELF OR ITS PROPERTY, THE PLEDGOR HEREBY
IRREVOCABLY WAIVES SUCH IMMUNITY IN RESPECT OF ITS OBLIGATIONS UNDER THIS
AGREEMENT AND THE OTHER LOAN DOCUMENTS.
EACH OF THE PLEDGOR, THE AGENT AND (BY ACCEPTING THE BENEFITS HEREOF)
EACH BANK HEREBY WAIVES ANY RIGHT TO A TRIAL BY JURY IN ANY ACTION OR PROCEEDING
TO ENFORCE OR DEFEND ANY RIGHTS UNDER THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT
AND ANY AMENDMENT, INSTRUMENT, DOCUMENT OR AGREEMENT DELIVERED OR WHICH MAY IN
THE FUTURE BE DELIVERED IN CONNECTION HEREWITH OR THEREWITH OR ARISING FROM ANY
FINANCING RELATIONSHIP EXISTING IN CONNECTION WITH ANY OF THE FOREGOING, AND
AGREES THAT ANY SUCH ACTION OR PROCEEDING SHALL BE TRIED BEFORE A COURT AND NOT
BEFORE A JURY.
7
<PAGE> 127
IN WITNESS WHEREOF, this Agreement has been duly executed and delivered
as of the day and year first written above.
[SUBSIDIARY OF SANTI GROUP, INC.]
Address:
By:
------------------------------
Name Printed:
--------------------
Title:
BANK OF AMERICA NATIONAL TRUST AND SAVINGS
ASSOCIATION, as Agent
Address:
231 South LaSalle Street By:
Chicago, Illinois 60697 -----------------------------
Attention: Name Printed:
----------------- -------------------
Facsimile: Title:
-----------------
8
<PAGE> 128
SCHEDULE I
TO PLEDGE AGREEMENT
STOCK
<TABLE>
<CAPTION>
Pledged Shares
No. of as % of Total Total Shares
Certificate Pledged Shares Issued of Issuer
Issuer No. Shares and Outstanding Outstanding
- ------ ----------- ------- ---------------- ------------
<S> <C> <C> <C> <C>
</TABLE>
<PAGE> 129
EXHIBIT G
FORM OF
ASSIGNMENT AGREEMENT
Reference is made to Section 14.9.1 of the Credit Agreement dated as of
June __, 1998 (as amended or otherwise modified, the "Credit Agreement"), among
SanTi Group, Inc., various financial institutions and Bank of America National
Trust and Savings Association, as agent (the "Agent"). Unless otherwise defined
herein or the context otherwise requires, terms used herein have the meanings
provided in the Credit Agreement.
_____________________________________ (the "Assignor") and
__________________________________________ (the "Assignee") hereby agree as
follows:
The Assignor hereby sells and assigns to the Assignee, and the Assignee
hereby purchases and assumes from the Assignor, that interest in and to the
Assignor's rights and obligations under the Credit Agreement as of the date
hereof equal to _____% of all of the Loans, the Letters of Credit and the
Commitments, such purchase and assignment to be effective as of the effective
date set forth herein. After giving effect to such assignment and delegation,
the Assignor's and Assignee's Percentages and portions of Commitment Amount for
the purposes of the Credit Agreement will be as set forth opposite each such
Person's name on the signature pages hereof.
The effective date of this Agreement shall be the date when the consent
of the Agent and the Company to this Agreement has been received and the
conditions set forth in clauses (x), (y) and (z) of the proviso to the first
paragraph of Section 14.9.1 of the Credit Agreement shall be either met or
waived. The Assignor hereby instructs the Agent to make all payments after the
effective date hereof in respect of the interest assigned hereby directly to the
Assignee. The Assignor and the Assignee agree that all interest and fees accrued
up to, but not including, the effective date of the assignment and delegation
being made hereby are the property of the Assignor, and not the Assignee. The
Assignee agrees that, upon receipt of any such interest or fees, the Assignee
will promptly remit the same to the Assignor.
The Assignee hereby confirms that it has received a copy of the Credit
Agreement and the exhibits related thereto, together with copies of the
documents which were required to be delivered under the Credit Agreement as a
condition to the making of the Loans thereunder. The Assignee acknowledges and
agrees that it (i) has made and will continue to make such inquiries and has
taken and will take such care on its own behalf as would have been the case had
its Commitments been granted, the Letters of Credit been issued and its Loans
been made directly by such Assignee to or for the benefit of the Company without
the intervention of the Agent, the Assignor or any other Bank and (ii) has made
and will continue to make, independently and without reliance upon the Agent,
the Assignor or any other Bank and based on such documents
<PAGE> 130
and information as it deems appropriate, its own credit analysis and decisions
relating to the Credit Agreement. The Assignee further acknowledges and agrees
that the Agent makes no representations or warranties about the creditworthiness
of the Company or any other party to the Credit Agreement or any other Loan
Document or with respect to the legality, validity, sufficiency or
enforceability of the Credit Agreement or any other Loan Document or the value
of any security therefor.
The Assignor represents and warrants that it is the legal and
beneficial owner of the interest being assigned by it hereunder and that such
interest is free and clear of any adverse claim.
The Assignee represents and warrants to the Agent and the Company that,
as of the date hereof, the Company will not be obligated to pay any greater
amount under Section 7.6 or Section 8 of the Credit Agreement than the Company
is obligated to pay to the Assignor under such Sections.
Except as otherwise provided in the Credit Agreement, effective as of
the date of acceptance hereof by the Agent:
(a) the Assignee (i) shall be deemed automatically to have become
a party to the Credit Agreement and have all the rights and
obligations of a "Bank" under the Credit Agreement as if it
were an original signatory thereto to the extent specified in
the second paragraph hereof; and (ii) agrees to be bound by
the terms and conditions set forth in the Credit Agreement as
if it were an original signatory thereto; and
(b) the Assignor shall be released from its obligations under the
Credit Agreement to the extent specified in the second
paragraph hereof.
The Assignor and the Assignee hereby agree that the [Assignor/Assignee]
will pay the Agent the processing fee referred to in Section 14.9.1 of the
Credit Agreement.
2
<PAGE> 131
The Assignee hereby advises each of you of the following administrative
details with respect to the assigned Loans and Commitments:
(A) Address for Notices:
Institution Name:
-----------------------------
Address:
--------------------------------------
Attention:
-----------------------------------
Telephone:
-----------------------------------
Facsimile:
-----------------------------------
(B) Payment Instructions:
-----------------------------
-----------------------------
-----------------------------
-----------------------------
-----------------------------
-----------------------------
[The Assignee has delivered to the Company and the Agent, or is
delivering to the Company and the Agent concurrently herewith, the tax forms
referred to in Section 7.6 of the Credit Agreement.] [INSERT THIS PARAGRAPH IF
ASSIGNEE IS ORGANIZED UNDER THE LAW OF A JURISDICTION OUTSIDE THE UNITED
STATES.]
IN WITNESS WHEREOF, the undersigned have caused this Agreement to be
executed this _____day of ___________, ____.
Percentage = ______% [NAME OF ASSIGNEE]
Amount of
Commitment = $ _________
By:
----------------------------
Name Printed:
------------------
Title:
-------------------------
Adjusted Percentage = ______% [NAME OF ASSIGNOR]
Amount of
Commitment = $ _________
By:
----------------------------
Name Printed:
------------------
Title:
-------------------------
3
<PAGE> 132
ACCEPTED AND CONSENTED TO
this ____ day of _______, ____
BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION,
as Agent
By:
------------------------------
Name Printed:
---------------------
Title:
---------------------------
CONSENTED TO
this day of ,
---- ------- ---
SANTI GROUP, INC.
By:
------------------------------
Name Printed:
---------------------
Title:
---------------------------
4
<PAGE> 1
COMPANY PLEDGE AGREEMENT
THIS PLEDGE AGREEMENT (this "Agreement") dated as of June 26, 1998, is
between SANTI GROUP, INC., a Delaware corporation (the "Company"), and BANK OF
AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION ("BofA"), as Agent (as defined
below) for the Banks (as defined below).
W I T N E S S E T H:
WHEREAS, the Company, various financial institutions (the "Banks") and
BofA, as agent for the Banks (in such capacity, the "Agent"), have entered into
a Credit Agreement dated as of June __, 1998 (as amended, restated or otherwise
modified from time to time, the "Credit Agreement"); and
WHEREAS, the obligations of the Company in respect of the Credit
Agreement and the other Loan Documents (as defined in the Credit Agreement) are
to be secured pursuant to this Agreement;
NOW, THEREFORE, for and in consideration of the premises and for other
good and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
1. Definitions. When used herein, (a) the capitalized terms used but
not defined have the meanings assigned to such terms in the Credit Agreement and
(b) the following terms have the following meanings (such meanings to be
applicable to both the singular and plural forms of such terms):
Agent - see the recitals.
Agreement - see the introductory paragraph.
BofA - see the introductory paragraph.
Banks - see the recitals.
Collateral - see Section 2.
Company - see the introductory paragraph.
Credit Agreement - see the recitals.
Default means the occurrence of any of the following events:
(i) any Unmatured Event of Default with respect to the Company under
Section 12.1.4 of the Credit Agreement, (ii) any Event of Default or
(iii) any warranty of the Company herein is untrue or misleading in any
material respect and, as a result thereof, the Agent's security
interest in any material portion of the Collateral is not perfected or
the Agent's rights and remedies with respect to any material portion of
the Collateral are materially impaired or otherwise materially
adversely affected.
Guarantor means, on any day, each Subsidiary that has executed
a counterpart of the Guaranty on or prior to that day (or is required
to execute a counterpart of the Guaranty on that date).
Issuer means the issuer of any of the shares of stock or other
securities representing all or any of the Collateral.
<PAGE> 2
Liabilities means all obligations of the Company howsoever
created, arising or evidenced, whether direct or indirect, absolute or
contingent, now or hereafter existing, or due or to become due, which
arise out of or in connection with any of the Loan Documents
(including, without limitation, with respect to Letters of Credit), as
the same may be amended, modified, extended or renewed from time to
time, and all Hedging Obligations of the Company to any Bank.
2. Pledge. As security for the payment of all Liabilities, the
Company hereby pledges to the Agent for the benefit of the Banks, and grants to
the Agent for the benefit of the Banks a continuing security interest in, all of
the following:
A. All of the shares of stock and other securities described
in Schedule I hereto, all of the certificates and/or instruments
representing such shares of stock and other securities, and all cash,
securities, dividends, rights and other property at any time and from
time to time received, receivable or otherwise distributed in respect
of or in exchange for any or all of such shares or other securities;
B. All additional shares of stock of any of the Issuers listed
in Schedule I hereto at any time and from time to time acquired by the
Company in any manner, all of the certificates representing such
additional shares, and all cash, securities, dividends, rights and
other property at any time and from time to time received, receivable
or otherwise distributed in respect of or in exchange for any or all of
such shares;
C. All other property hereafter delivered to the Agent in
substitution for or in addition to any of the foregoing, all
certificates and instruments representing or evidencing such property,
and all cash, securities, interest, dividends, rights and other
property at any time and from time to time received, receivable or
otherwise distributed in respect of or in exchange for any or all
thereof; and
D. All products and proceeds of all of the foregoing.
All of the foregoing are herein collectively called the "Collateral".
The Company agrees to deliver to the Agent, promptly upon receipt and
in due form for transfer (i.e., endorsed in blank or accompanied by stock or
bond powers executed in blank), any Collateral (other than dividends which the
Company is entitled to receive and retain pursuant to Section 5 hereof) which
may at any time or from time to time be in or come into the possession or
control of the Company; and prior to the delivery thereof to the Agent, such
Collateral shall be held by the Company separate and apart from its other
property and in express trust for the Agent.
2
<PAGE> 3
3. Warranties; Further Assurances. The Company warrants to the Agent
for the benefit of each Bank that: (a) the Company is (or at the time of any
future delivery, pledge, assignment or transfer thereof will be) the legal and
equitable owner of the Collateral free and clear of all liens, security
interests and encumbrances of every description whatsoever other than the
security interest created hereunder; (b) the pledge and delivery of the
Collateral pursuant to this Agreement will create a valid perfected security
interest in the Collateral in favor of the Agent; (c) all shares of stock
referred to in Schedule I hereto are duly authorized, validly issued, fully paid
and non-assessable; (d) as to each Issuer whose name appears in Schedule I
hereto, the Collateral represents on the date hereof not less than the
applicable percent (as shown in Schedule I hereto) of the total shares of
capital stock issued and outstanding of such Issuer; and (e) the information
contained in Schedule I hereto is true and accurate in all respects.
So long as any of the Liabilities shall be outstanding or any
commitment shall exist on the part of any Bank with respect to the creation of
any Liabilities, the Company (i) shall not, except as permitted by the Credit
Agreement or with the express prior written consent of the Agent, sell, assign,
exchange, pledge or otherwise transfer, encumber, or grant any option, warrant
or other right to purchase the stock of any Issuer which is pledged hereunder,
or otherwise diminish or impair any of its rights in, to or under any of the
Collateral; (ii) shall execute such Uniform Commercial Code financing statements
and other documents (and pay the costs of filing and recording or re-filing and
re-recording the same in all public offices reasonably deemed necessary or
appropriate by the Agent) and do such other acts and things, all as the Agent
may from time to time reasonably request, to establish and maintain a valid,
perfected security interest in the Collateral (free of all other liens, claims
and rights of third parties whatsoever) to secure the performance and payment of
the Liabilities; (iii) will execute and deliver to the Agent such stock powers
and similar documents relating to the Collateral, satisfactory in form and
substance to the Agent, as the Agent may reasonably request; and (iv) will
furnish the Agent or any Bank such information concerning the Collateral as the
Agent or such Bank may from time to time reasonably request, and will permit the
Agent or any Bank or any designee of the Agent or such Bank, from time to time
at reasonable times and on reasonable notice (or at any time without notice
during the existence of a Default), to inspect, audit and make copies of and
extracts from all records and all other papers in the possession of the Company
which pertain to the Collateral, and will, upon request of the Agent at any time
when a Default has occurred and is continuing, deliver to the Agent all of such
records and papers.
4. Holding in Name of Agent, etc. The Agent may from time to time after
the occurrence and during the continuance of a Default, without notice to the
Company, take all or any of the following actions: (a) transfer all or any part
of the Collateral into the name of the Agent or any nominee or sub-agent for the
Agent, with or without disclosing that such Collateral is subject to the lien
and security interest hereunder, (b) appoint one or more sub-agents or nominees
for the purpose of retaining physical possession of the Collateral, (c) notify
the parties obligated on any of the Collateral to make payment to the Agent of
any amounts due or to become due thereunder, (d) endorse any checks, drafts or
other writings in the name of the Company to allow collection of the Collateral,
(e) enforce collection of any of the Collateral by
3
<PAGE> 4
suit or otherwise, and surrender, release or exchange all or any part thereof,
or compromise or renew for any period (whether or not longer than the original
period) any obligations of any nature of any party with respect thereto, and (f)
take control of any proceeds of the Collateral.
5. Voting Rights, Dividends, etc. (a) Notwithstanding certain
provisions of Section 4 hereof, so long as the Agent has not given the notice
referred to in paragraph (b) below:
A. The Company shall be entitled to exercise any and all
voting or consensual rights and powers and stock purchase or
subscription rights (but any such exercise by the Company of stock
purchase or subscription rights may be made only from funds of the
Company not comprising part of the Collateral) relating or pertaining
to the Collateral or any part thereof for any purpose; provided,
however, that the Company agrees that it will not exercise any such
right or power in any manner which would have a material adverse effect
on the value of the Collateral or any part thereof.
B. The Company shall be entitled to receive and retain any and
all lawful dividends payable in respect of the Collateral which are
paid in cash by any Issuer if such dividends are permitted by the
Credit Agreement, but all dividends and distributions in respect of the
Collateral or any part thereof made in shares of stock or securities or
other property or representing any return of capital, whether resulting
from a subdivision, combination or reclassification of Collateral or
any part thereof or received in exchange for Collateral or any part
thereof or as a result of any merger, consolidation, acquisition or
other exchange of assets to which any Issuer may be a party or
otherwise or as a result of any exercise of any stock purchase or
subscription right, shall be and become part of the Collateral
hereunder and, if received by the Company, shall be forthwith delivered
to the Agent in due form for transfer (i.e., endorsed in blank or
accompanied by stock or bond powers executed in blank) to be held for
the purposes of this Agreement.
C. The Agent shall execute and deliver, or cause to be
executed and delivered, to the Company, all such proxies, powers of
attorney, dividend orders and other instruments as the Company may
request for the purpose of enabling the Company to exercise the rights
and powers which it is entitled to exercise pursuant to clause (A)
above and to receive the dividends which it is authorized to retain
pursuant to clause (B) above.
(b) Upon notice from the Agent during the existence of a Default, and
so long as the same shall be continuing, all rights and powers which the Company
is entitled to exercise pursuant to Section 5(a)(A) hereof, and all rights of
the Company to receive and retain dividends pursuant to Section 5(a)(B) hereof,
shall forthwith cease, and all such rights and powers shall thereupon become
vested in the Agent which shall have, during the continuance of such Default,
the sole and exclusive authority to exercise such rights and powers and to
receive such dividends. Any and all money and other property paid over to or
received by the Agent pursuant to this paragraph (b) shall be retained by the
Agent as additional Collateral hereunder and applied in accordance with the
provisions hereof.
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<PAGE> 5
6. Remedies. Whenever a Default shall exist, the Agent may exercise
from time to time any rights and remedies available to it under the Uniform
Commercial Code as in effect in Illinois or otherwise available to it. Without
limiting the foregoing, whenever a Default shall exist the Agent (a) may, to the
fullest extent permitted by applicable law, without notice, advertisement,
hearing or process of law of any kind, (i) sell any or all of the Collateral,
free of all rights and claims of the Company therein and thereto, at any public
or private sale or brokers' board and (ii) bid for and purchase any or all of
the Collateral at any such public sale and (b) shall have the right, for and in
the name, place and stead of the Company, to execute endorsements, assignments,
stock powers and other instruments of conveyance or transfer with respect to all
or any of the Collateral. The Company hereby expressly waives, to the fullest
extent permitted by applicable law, any and all notices, advertisements,
hearings or process of law in connection with the exercise by the Agent of any
of its rights and remedies during the continuance of a Default. Any notification
of intended disposition of any of the Collateral shall be deemed reasonably and
properly given if given at least ten (10) days before such disposition. Any
proceeds of any of the Collateral may be applied by the Agent to the payment of
expenses in connection with the Collateral, including, without limitation,
reasonable attorneys' fees and legal expenses, and any balance of such proceeds
may be applied by the Agent toward the payment of such of the Liabilities, and
in such order of application, as the Agent may from time to time elect (and,
after payment in full of all Liabilities, any excess shall be delivered to the
Company or as a court of competent jurisdiction shall direct).
The Agent is hereby authorized to comply with any limitation or
restriction in connection with any sale of Collateral as it may be advised by
counsel is necessary in order to (a) avoid any violation of applicable law
(including, without limitation, compliance with such procedures as may restrict
the number of prospective bidders and purchasers and/or further restrict such
prospective bidders or purchasers to persons or entities who will represent and
agree that they are purchasing for their own account for investment and not with
a view to the distribution or resale of such Collateral) or (b) obtain any
required approval of the sale or of the purchase by any governmental regulatory
authority or official, and the Company agrees that such compliance shall not
result in such sale being considered or deemed not to have been made in a
commercially reasonable manner and that the Agent shall not be liable or
accountable to the Company for any discount allowed by reason of the fact that
such Collateral is sold in compliance with any such limitation or restriction.
7. General. The Agent shall be deemed to have exercised reasonable care
in the custody and preservation of the Collateral if it takes such action for
that purpose as the Company shall request in writing, but failure of the Agent
to comply with any such request shall not of itself be deemed a failure to
exercise reasonable care, and no failure of the Agent to preserve or protect any
rights with respect to the Collateral against prior parties, or to do any act
with respect to preservation of the Collateral not so requested by the Company,
shall be deemed a failure to exercise reasonable care in the custody or
preservation of any Collateral.
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<PAGE> 6
No delay on the part of the Agent in exercising any right, power or
remedy shall operate as a waiver thereof, and no single or partial exercise of
any such right, power or remedy shall preclude any other or further exercise
thereof, or the exercise of any other right, power or remedy. No amendment,
modification or waiver of, or consent with respect to, any provision of this
Agreement shall be effective unless the same shall be in writing and signed and
delivered by the Agent, and then such amendment, modification, waiver or consent
shall be effective only in the specific instance and for the specific purpose
for which given.
All obligations of the Company and all rights, powers and remedies of
the Agent and the Banks expressed herein are in addition to all other rights,
powers and remedies possessed by them, including, without limitation, those
provided by applicable law or in any other written instrument or agreement
relating to any of the Liabilities or any security therefor.
This Agreement has been delivered at Chicago, Illinois, and shall be
construed in accordance with and governed by the internal laws of the State of
Illinois. Wherever possible each provision of this Agreement shall be
interpreted in such manner as to be effective and valid under applicable law,
but if any provision of this Agreement shall be prohibited by or invalid under
such law, such provision shall be ineffective to the extent of such prohibition
or invalidity, without invalidating the remainder of such provision or the
remaining provisions of this Agreement.
All notices hereunder shall be in writing (including facsimile
transmission) and shall be sent to the applicable party at its address shown
opposite its signature hereto or at such other address as such party may, by
written notice to the other party, have designated as its address for such
purpose. Notices sent by facsimile transmission shall be deemed to have been
given when sent with confirmation of receipt; notices sent by mail shall be
deemed to have been given five Business Days after the date when sent by
registered or certified mail, postage prepaid; and notices sent by hand delivery
or overnight courier shall be deemed to have been given when received .
This Agreement shall be binding upon the Company and the Agent and
their respective successors and assigns, and shall inure to the benefit of the
Company and the Agent and the successors and assigns of the Agent.
This Agreement may be executed in any number of counterparts and by the
different parties hereto on separate counterparts, and each such counterpart
shall be deemed an original but all such counterparts shall together constitute
but one and the same Agreement.
ANY LITIGATION BASED HEREON, OR ARISING OUT OF, UNDER OR IN CONNECTION
WITH THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT, SHALL BE BROUGHT AND MAINTAINED
EXCLUSIVELY IN THE COURTS OF THE STATE OF ILLINOIS OR IN THE UNITED STATES
DISTRICT COURT FOR THE NORTHERN DISTRICT OF ILLINOIS; PROVIDED, HOWEVER, THAT
ANY
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<PAGE> 7
SUIT SEEKING ENFORCEMENT AGAINST ANY COLLATERAL OR OTHER PROPERTY MAY BE
BROUGHT, AT THE AGENT'S OPTION, IN THE COURTS OF ANY JURISDICTION WHERE SUCH
COLLATERAL OR OTHER PROPERTY MAY BE FOUND. THE COMPANY HEREBY EXPRESSLY AND
IRREVOCABLY SUBMITS TO THE JURISDICTION OF THE COURTS OF THE STATE OF ILLINOIS
AND OF THE UNITED STATES DISTRICT COURT FOR THE NORTHERN DISTRICT OF ILLINOIS
FOR THE PURPOSE OF ANY SUCH LITIGATION AS SET FORTH ABOVE. THE COMPANY FURTHER
IRREVOCABLY CONSENTS TO THE SERVICE OF PROCESS BY REGISTERED MAIL, POSTAGE
PREPAID, TO THE ADDRESS OF THE COMPANY SPECIFIED IN, OR PURSUANT TO, THE CREDIT
AGREEMENT, OR BY PERSONAL SERVICE WITHIN OR WITHOUT THE STATE OF ILLINOIS. THE
COMPANY HEREBY EXPRESSLY AND IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED
BY LAW, ANY OBJECTION WHICH IT MAY NOW OR HEREAFTER HAVE TO THE LAYING OF VENUE
OF ANY SUCH LITIGATION BROUGHT IN ANY SUCH COURT REFERRED TO ABOVE AND ANY CLAIM
THAT ANY SUCH LITIGATION HAS BEEN BROUGHT IN AN INCONVENIENT FORUM.
EACH OF THE COMPANY, THE AGENT AND (BY ACCEPTING THE BENEFITS HEREOF)
EACH BANK HEREBY WAIVES ANY RIGHT TO A TRIAL BY JURY IN ANY ACTION OR PROCEEDING
TO ENFORCE OR DEFEND ANY RIGHTS UNDER THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT
AND ANY AMENDMENT, INSTRUMENT, DOCUMENT OR AGREEMENT DELIVERED OR WHICH MAY IN
THE FUTURE BE DELIVERED IN CONNECTION HEREWITH OR THEREWITH OR ARISING FROM ANY
FINANCING RELATIONSHIP EXISTING IN CONNECTION WITH ANY OF THE FOREGOING, AND
AGREES THAT ANY SUCH ACTION OR PROCEEDING SHALL BE TRIED BEFORE A COURT AND NOT
BEFORE A JURY.
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<PAGE> 8
IN WITNESS WHEREOF, this Agreement has been duly executed and delivered
as of the day and year first written above.
SANTI GROUP, INC.
Address:
By: /s/ Rock Payne
-------------------------------
Name Printed:
---------------------
Title:
----------------------------
BANK OF AMERICA NATIONAL TRUST AND
SAVINGS ASSOCIATION, as Agent
Address:
231
South LaSalle Street By: /s/ Jay McKeown
Chicago, IL 60697 -----------------------
Name Printed:
Attention:----------------------- --------------
Facsimile:----------------------- Title:
8
<PAGE> 1
SECURITY AGREEMENT
THIS SECURITY AGREEMENT (this "Agreement") dated as of June 26, 1998 is
among SANTI GROUP, INC. (the "Company"), each subsidiary of the Company listed
on the signature pages hereof, each other person or entity which from time to
time becomes a party hereto (collectively, including the Company, the "Debtors"
and individually each a "Debtor") and BANK OF AMERICA NATIONAL TRUST AND SAVINGS
ASSOCIATION ("BofA"), in its capacity as Agent (as defined below) for the Banks
(as defined below).
W I T N E S S E T H:
WHEREAS, the Company, various financial institutions (the "Banks") and
BofA, as agent for the Banks (in such capacity, the "Agent"), have entered into
a Credit Agreement dated as of June __, 1998 (as amended, restated or otherwise
modified from time to time, the "Credit Agreement");
WHEREAS, each of the Debtors other than the Company has executed and
delivered a guaranty (the "Guaranty") of the obligations of the Company in
respect of the Loan Documents; and
WHEREAS, the obligations of the Company in respect of the Loan Documents
and the obligations of each other Debtor under the Guaranty are to be secured
pursuant to this Agreement;
NOW, THEREFORE, for and in consideration of the premises, and for other
good and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
1. Definitions. When used herein, (a) the terms Certificated Security,
Chattel Paper, Deposit Account, Document, Equipment, Fixture, Goods, Inventory,
Instrument, Security and Uncertificated Security shall have the respective
meanings assigned to such terms in the Uniform Commercial Code (as defined
below), (b) the terms Commodity Account, Commodity Contract, Investment
Property, Security Entitlement and Securities Account shall have the respective
meanings assigned thereto in the 1994 Amendments to Articles 8 and 9 of the
Uniform Commercial Code promulgated by the American Law Institute and the
National Conference of Commissioners for Uniform State Laws, (c) capitalized
terms used but not defined have the meanings assigned to such terms in the
Credit Agreement and (d) the following terms have the following meanings (such
definitions to be applicable to both the singular and plural forms of such
terms):
Account Debtor means, with respect to any Debtor, any party who is
obligated on or under any Account Receivable, Contract Right or General
Intangible of such Debtor.
Account Receivable means, with respect to any Debtor, any right of such
Debtor to payment for goods sold or leased or for services rendered.
<PAGE> 2
Agent - see the recitals.
Agreement - see the introductory paragraph.
Assignee Deposit Account - see Section 4.
BofA - see the introductory paragraph.
Banks - see the recitals.
Business Day means any day on which BofA is open for commercial banking
business in Chicago, New York and San Francisco.
Collateral means, with respect to any Debtor, all property and rights of
such Debtor in which a security interest is granted hereunder.
Company - see the introductory paragraph.
Computer Hardware and Software means, with respect to any Debtor, (i) all
computer and other electronic data processing hardware, whether now or hereafter
owned, licensed or leased by such Debtor, including, without limitation, all
integrated computer systems, central processing units, memory units, display
terminals, printers, features, computer elements, card readers, tape drives,
hard and soft disk drives, cables, electrical supply hardware, generators, power
equalizers, accessories and all peripheral devices and other related computer
hardware; (ii) all software programs, whether now or hereafter owned, licensed
or leased by such Debtor, designed for use on the computers and electronic data
processing hardware described in clause (i) above, including, without
limitation, all operating system software, utilities and application programs in
whatsoever form (source code and object code in magnetic tape, disk or hard copy
format or any other listings whatsoever); (iii) all firmware associated
therewith, whether now or hereafter owned, licensed or leased by such Debtor;
and (iv) all documentation for such hardware, software and firmware described in
the preceding clauses (i), (ii) and (iii), whether now or hereafter owned,
licensed or leased by such Debtor, including, without limitation, flow charts,
logic diagrams, manuals, specifications, training materials, charts and pseudo
codes.
Contract Right means, with respect to any Debtor, any right of such Debtor
to payment under a contract for the sale or lease of goods or the rendering of
services, which right is at the time not yet earned by performance.
Credit Agreement - see the recitals.
Debtor - see the introductory paragraph.
<PAGE> 3
Default means the occurrence of any of the following events: (i) any
Unmatured Event of Default under Section 12.1.4 of the Credit Agreement with
respect to the Company, (ii) any Event of Default or (iii) any warranty of any
Debtor herein is untrue or misleading in any material respect and, as a result
thereof, the Agent's security interest in any material portion of the Collateral
(of all Debtors taken as a whole) is not perfected or the Agent's rights and
remedies with respect to any material portion of the Collateral of all Debtors
(taken as a whole) is materially impaired or otherwise materially adversely
affected.
General Intangibles means, with respect to any Debtor, all of such Debtor's
"general intangibles" as defined in the Uniform Commercial Code and, in any
event, includes (without limitation) all of such Debtor's trademarks, trade
names, patents, copyrights, trade secrets, customer lists, inventions, designs,
software programs, mask works, goodwill, registrations, licenses, franchises,
tax refund claims, guarantee claims, security interests and rights to
indemnification.
Guaranty - see the recitals.
Intellectual Property means all past, present and future: trade secrets
and other proprietary information; trademarks, service marks, business names,
designs, logos, indicia, and/or other source and/or business identifiers and the
goodwill of the business relating thereto and all registrations or applications
for registrations which have heretofore been or may hereafter be issued thereon
throughout the world; copyrights (including, without limitation, copyrights for
computer programs) and copyright registrations or applications for registrations
which have heretofore been or may hereafter be issued throughout the world and
all tangible property embodying the copyrights; unpatented inventions (whether
or not patentable); patent applications and patents; industrial designs,
industrial design applications and registered industrial designs; license
agreements related to any of the foregoing set forth in this definition and
income therefrom; books, records, writings, computer tapes or disks, flow
diagrams, specification sheets, source codes, object codes and other physical
manifestations, embodiments or incorporations of any of the foregoing set forth
in this definition; the right to sue for all past, present and future
infringements of any of the foregoing set forth in this definition; and all
common law and other rights throughout the world in and to all of the foregoing
set forth in this definition.
Liabilities means (a) as to the Company, all obligations of the Company to
the Agent or any Banks, howsoever created, arising or evidenced, whether direct
or indirect, absolute or contingent, now or hereafter existing, or due or to
become due, which arise out of or in connection with any of the Loan Documents
(including, without limitation, with respect to Letters of Credit), as the same
may be amended, modified, extended or renewed from time to time, and all Hedging
Obligations of the Company to any Bank, and (b) with respect to each Debtor
other than the Company, all obligations of such Debtor under the Guaranty or any
other Collateral Document.
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<PAGE> 4
Non-Tangible Collateral means, with respect to any Debtor, collectively,
such Debtor's Accounts Receivable, Contract Rights and General Intangibles.
Permitted Liens - see Section 3.
Uniform Commercial Code means the Uniform Commercial Code as in effect in
the State of Illinois on the date of this Agreement; provided, however, as used
in Section 8 hereof and in the definitions of "Commodity Account", "Commodity
Contract", "Investment Property", "Security Entitlement" and "Securities
Account", "Uniform Commercial Code" shall mean the Uniform Commercial Code as in
effect from time to time in the applicable jurisdiction.
2. Grant of Security Interest. As security for the payment of all
Liabilities, each Debtor hereby assigns to the Agent for the benefit of the
Banks, and grants to the Agent for the benefit of the Banks a continuing
security interest in, the following, whether now or hereafter existing or
acquired:
All of such Debtor's:
(i) Accounts Receivable;
(ii) Certificated Securities;
(iii) Chattel Paper;
(iv) Computer Hardware and Software and all rights with
respect thereto, including, without limitation, any
and all licenses, options, warranties, service
contracts, program services, test rights, maintenance
rights, support rights, improvement rights, renewal
rights and indemnifications, and any substitutions,
replacements, additions or model conversions of any
of the foregoing;
(v) Contract Rights;
(vi) Deposit Accounts;
(vii) Documents;
(viii) General Intangibles;
(ix) Goods (including, without limitation, all its
Equipment, Fixtures and Inventory), together with all
accessions, additions, attachments, improvements,
substitutions and replacements thereto and therefor;
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<PAGE> 5
(x) Instruments;
(xi) Intellectual Property;
(xii) money (of every jurisdiction whatsoever);
(xiii) Commodity Accounts, Commodity Contracts, Investment
Property, Security Entitlements and Securities
Accounts;
(xiv) Uncertificated Securities;
(xv) to the extent not included in the foregoing, maps,
surveys and similar items used or useful in such
Debtor's business; and
(xvi) to the extent not included in the foregoing, other
personal property of any kind or description;
together with all books, records, writings, data bases, information and
other property relating to, used or useful in connection with,
evidencing, embodying, incorporating or referring to any of the
foregoing, and all proceeds, products, offspring, rents, issues,
profits and returns of and from any of the foregoing.
3. Warranties. Each Debtor warrants that: (i) no financing statement
(other than any which may have been filed on behalf of the Agent or in
connection with Permitted Liens (as defined below)) covering any of the
Collateral is on file in any public office; (ii) such Debtor is and will be the
lawful owner of all Collateral, free of all liens and claims whatsoever, other
than the security interest hereunder and liens and claims expressly permitted by
the Credit Agreement ("Permitted Liens"), with full power and authority to
execute this Agreement and perform such Debtor's obligations hereunder, and to
subject the Collateral to the security interest hereunder; (iii) all information
with respect to Collateral and Account Debtors set forth in any schedule,
certificate or other writing at any time heretofore or hereafter furnished by
such Debtor to the Agent or any Bank and all other written information
heretofore or hereafter furnished by such Debtor to the Agent or any Bank in
connection with the Credit Agreement will be true and correct in all material
respects as of the date furnished; (iv) such Debtor's chief executive office and
principal place of business are as set forth on Schedule I hereto (and such
Debtor has not maintained its chief executive office and principal place of
business at any other location at any time after February 1, 1998); (v) each
other location where such Debtor maintains a place of business is set forth on
Schedule II hereto; (vi) except as disclosed on Schedule III, such Debtor is not
now known and during the five years preceding the date hereof has not previously
been known by any trade name; (vii) except as disclosed on Schedule III, during
the five years preceding the date hereof such Debtor has not been known by any
legal name different from the one set forth on the signature page of this
Agreement nor has such Debtor been the subject of any merger or other corporate
reorganization; (viii) Schedule IV hereto contains a complete listing of
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<PAGE> 6
all of such Debtor's Intellectual Property which has been registered under any
registration statute; (ix) such Debtor is a corporation duly organized, validly
existing and in good standing under the laws of the state of its incorporation;
(x) the execution and delivery of this Agreement and the performance by such
Debtor of its obligations hereunder are within such Debtor's corporate powers,
have been duly authorized by all necessary corporate action, have received all
necessary governmental approval (if any shall be required), and do not and will
not contravene or conflict with any provision of law or of the charter or
by-laws of such Debtor or of any material agreement, indenture, instrument or
other document, or any material judgment, order or decree, which is binding upon
such Debtor; (xi) this Agreement is a legal, valid and binding obligation of
such Debtor, enforceable in accordance with its terms, except that the
enforceability of this Agreement may be limited by bankruptcy, insolvency,
fraudulent conveyance, fraudulent transfer, reorganization, moratorium or other
similar laws now or hereafter in effect relating to creditors' rights generally
and by general principles of equity (regardless of whether enforcement is sought
in a proceeding in equity or at law); and (xii) such Debtor is in compliance
with the requirements of all applicable laws (including, without limitation, the
provisions of the Fair Labor Standards Act), rules, regulations and orders of
every governmental authority, the non-compliance with which would materially
adversely affect the business, properties, assets, operations or condition
(financial or otherwise) of the Company and its Subsidiaries taken as a whole or
the value of the Collateral or the worth of the Collateral as collateral
security.
4. Collections, etc. Until such time during the existence of a Default
as the Agent shall notify such Debtor of the revocation of such power and
authority, each Debtor (a) may, in the ordinary course of its business, at its
own expense, sell, lease or furnish under contracts of service any of the
Inventory normally held by such Debtor for such purpose, use and consume, in the
ordinary course of its business, any raw materials, work in process or materials
normally held by such Debtor for such purpose, and use, in the ordinary course
of its business (but subject to the terms of the Credit Agreement), the cash
proceeds of Collateral and other money which constitutes Collateral, (b) will,
at its own expense, endeavor to collect, as and when due, all amounts due under
any of the Non-Tangible Collateral, including the taking of such action with
respect to such collection as the Agent may reasonably request or, in the
absence of such request, as such Debtor may deem advisable, and (c) may grant,
in the ordinary course of business, to any party obligated on any of the
Non-Tangible Collateral, any rebate, refund or allowance to which such party may
be lawfully entitled, and may accept, in connection therewith, the return of
Goods, the sale or lease of which shall have given rise to such Non-Tangible
Collateral. The Agent, however, may, at any time that a Default exists, whether
before or after any revocation of such power and authority or the maturity of
any of the Liabilities, notify any parties obligated on any of the Non-Tangible
Collateral to make payment to the Agent of any amounts due or to become due
thereunder and enforce collection of any of the Non-Tangible Collateral by suit
or otherwise and surrender, release or exchange all or any part thereof, or
compromise or extend or renew for any period (whether or not longer than the
original period) any indebtedness thereunder or evidenced thereby. Upon request
of the Agent during the existence of a Default, each Debtor will, at its own
expense, notify any parties obligated on any of the Non-Tangible Collateral to
make payment to the Agent of any amounts due or to become due thereunder.
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<PAGE> 7
Upon request by the Agent during the existence of a Default, each Debtor
will forthwith, upon receipt, transmit and deliver to the Agent, in the form
received, all cash, checks, drafts and other instruments or writings for the
payment of money (properly endorsed, where required, so that such items may be
collected by the Agent) which may be received by such Debtor at any time in full
or partial payment or otherwise as proceeds of any of the Collateral. Except as
the Agent may otherwise consent in writing, any such items which may be so
received by any Debtor during the existence of a Default will not be commingled
with any other of its funds or property, but will be held separate and apart
from its own funds or property and upon express trust for the Agent until
delivery is made to the Agent. Each Debtor will comply with the terms and
conditions of any consent given by the Agent pursuant to the foregoing sentence.
During the existence of a Default, all items or amounts which are delivered
by any Debtor to the Agent on account of partial or full payment or otherwise as
proceeds of any of the Collateral shall be deposited to the credit of a deposit
account (each an "Assignee Deposit Account") of such Debtor with the Agent, as
security for payment of the Liabilities. No Debtor shall have any right to
withdraw any funds deposited in the applicable Assignee Deposit Account. The
Agent may, from time to time, in its discretion, and shall upon request of the
applicable Debtor made not more than once in any week, apply all or any of the
then balance, representing collected funds, in the Assignee Deposit Account,
toward payment of the Liabilities, whether or not then due, in such order of
application as the Agent may determine, and the Agent may, from time to time, in
its discretion, release all or any of such balance to the applicable Debtor.
During the existence of a Default, the Agent is authorized to endorse, in
the name of the applicable Debtor, any item, howsoever received by the Agent,
representing any payment on or other proceeds of any of the Collateral.
5. Certificates, Schedules and Reports. Each Debtor will from time to
time deliver to the Agent such schedules, certificates and reports respecting
all or any of the Collateral at the time subject to the security interest
hereunder, and the items or amounts received by such Debtor in full or partial
payment of any of the Collateral, as the Agent may reasonably request. Any such
schedule, certificate or report shall be executed by a duly authorized officer
of such Debtor and shall be in such form and detail as the Agent may specify.
Each Debtor shall immediately notify the Agent of the occurrence of any event
causing any loss or depreciation in the value of its Inventory or other Goods
which is material to the Company and its Subsidiaries taken as a whole, and such
notice shall specify the amount of such loss or depreciation.
6. Agreements of the Debtors. Each Debtor (a) will, upon request of the
Agent, execute such financing statements and other documents (and pay the cost
of filing or recording the same in all public offices reasonably deemed
appropriate by the Agent) and do such other acts and things (including, without
limitation, delivery to the Agent of any Instruments or Certificated Securities
which constitute Collateral), all as the Agent may from time to time reasonably
request, to establish and maintain a valid security interest in the Collateral
(free of all
5
<PAGE> 8
other liens, claims and rights of third parties whatsoever, other than Permitted
Liens) to secure the payment of the Liabilities; (b) will keep all its Inventory
at, and will not maintain any place of business at any location other than, its
address(es) shown on Schedules I and II hereto or at such other addresses of
which such Debtor shall have given the Agent not less than 10 days' prior
written notice; (c) will keep its records concerning the Non-Tangible Collateral
in such a manner as will enable the Agent or its designees to determine at any
time the status of the Non-Tangible Collateral; (d) will furnish the Agent such
information concerning such Debtor, the Collateral and the Account Debtors as
the Agent may from time to time reasonably request; (e) will permit the Agent
and its designees, from time to time, on reasonable notice and at reasonable
times and intervals during normal business hours (or at any time without notice
during the existence of a Default) to inspect such Debtor's Inventory and other
Goods, and to inspect, audit and make copies of and extracts from all records
and all other papers in the possession of such Debtor pertaining to the
Collateral and the Account Debtors, and will, upon request of the Agent during
the existence of a Default, deliver to the Agent all of such records and papers;
(f) will, upon request of the Agent, stamp on its records concerning the
Collateral and add on all Chattel Paper constituting a portion of the
Collateral, a notation, in form satisfactory to the Agent, of the security
interest of the Agent hereunder; (g) except as permitted by the Credit
Agreement, will not sell, lease, assign or create or permit to exist any lien on
or security interest in any Collateral other than Permitted Liens and liens and
security interests in favor of the Agent; (h) will at all times keep all its
Inventory and other Goods insured under policies maintained with reputable,
financially sound insurance companies against loss, damage, theft and other
risks to such extent as is customarily maintained by companies similarly
situated, and cause all such policies to provide that loss thereunder shall be
payable to the Agent as its interest may appear (it being understood that (A) so
long as no Default shall be existing, the Agent shall deliver any proceeds of
such insurance which may be received by it to such Debtor and (B) whenever a
Default shall be existing, the Agent may apply any proceeds of such insurance
which may be received by it toward payment of the Liabilities, whether or not
due, in such order of application as the Agent may determine) and such policies
or certificates thereof shall, if the Agent so requests, be deposited with or
furnished to the Agent; (i) will take such actions as are reasonably necessary
to keep its Inventory in good repair and condition, ordinary wear and tear
excepted; (j) will take such actions as are reasonably necessary to keep its
Equipment (other than obsolete Equipment) in good repair and condition and in
good working or running order, ordinary wear and tear excepted; (k) will
promptly pay when due all license fees, registration fees, taxes, assessments
and other charges which may be levied upon or assessed against the ownership,
operation, possession, maintenance or use of its Equipment and other Goods (as
applicable); provided, however, that such Debtor shall not be required to pay
any such fee, tax, assessment or other charge if the validity thereof is being
contested by such Debtor in good faith by appropriate proceedings, so long as
forfeiture of any substantial part of its Equipment or other Goods will not
result from the failure of such Debtor to pay any such fee, tax, assessment or
other charge during the period of such contest; (l) will, upon request of the
Agent, (i) cause to be noted on the applicable certificate, in the event any of
its Equipment is covered by a certificate of title, the security interest of the
Agent in the Equipment covered thereby and (ii) deliver all such certificates to
the Agent or its designees; (m) will take all steps reasonably necessary to
protect,
6
<PAGE> 9
preserve and maintain all of its rights in the Collateral; (n) will keep all of
the tangible Collateral in the continental United States; and (o) will reimburse
the Agent for all expenses, including reasonable attorneys' fees and legal
expenses, incurred by the Agent in seeking to collect or enforce any rights in
respect of such Debtor's Collateral.
Any expenses incurred in protecting, preserving and maintaining any
Collateral shall be borne by the applicable Debtor. Whenever a Default shall be
existing, the Agent shall have the right to bring suit to enforce any or all of
the Intellectual Property or licenses thereunder, in which event the applicable
Debtor shall at the request of the Agent do any and all lawful acts and execute
any and all proper documents required by the Agent in aid of such enforcement
and such Debtor shall promptly, upon demand, reimburse and indemnify the Agent
for all reasonable costs and expenses incurred by the Agent in the exercise of
its rights under this Section 6, except to the extent any of the foregoing
result from the gross negligence or willful misconduct of the Agent.
Notwithstanding the foregoing, the Agent shall have no obligations or
liabilities regarding the Collateral or any thereof by reason of, or arising out
of, this Agreement.
7. Default. Whenever a Default shall be existing, the Agent may
exercise from time to time any rights and remedies available to it under
applicable law. Each Debtor agrees, in case of Default, (i) to assemble, at its
expense, all its Inventory and other Goods (other than Fixtures) at a convenient
place or places acceptable to the Agent, and (ii) at the Agent's request, to
execute all such documents and do all such other things which may be necessary
or desirable in order to enable the Agent or its nominee to be registered as
owner of the Intellectual Property with any competent registration authority.
Any notification of intended disposition of any of the Collateral required by
law shall be deemed reasonably and properly given if given at least five days
before such disposition. Any proceeds of any disposition by the Agent of any of
the Collateral may be applied by the Agent to payment of expenses in connection
with the Collateral, including reasonable attorneys' fees and legal expenses,
and any balance of such proceeds may be applied by the Agent toward the payment
of such of the Liabilities, and in such order of application, as the Agent may
from time to time elect.
8. General. The Agent shall be deemed to have exercised reasonable care
in the custody and preservation of any of the Collateral in its possession if it
takes such action for that purpose as any applicable Debtor requests in writing,
but failure of the Agent to comply with any such request shall not of itself be
deemed a failure to exercise reasonable care, and no failure of the Agent to
preserve or protect any rights with respect to such Collateral against prior
parties, or to do any act with respect to the preservation of such Collateral
not so requested by any Debtor, shall be deemed a failure to exercise reasonable
care in the custody or preservation of such Collateral.
All notices and requests hereunder shall be in writing (including
facsimile transmission) and shall be sent (i) if to the Agent, to its address
shown on Schedule 14.3 to the Credit Agreement or such other address as it may,
by written notice to the Company, have designated as its address for such
purpose, and (ii) if to any Debtor, to its address shown on Schedule I hereto
7
<PAGE> 10
or to such other address as such Debtor may, by written notice to the Agent,
have designated as its address for such purpose. Notices sent by facsimile
transmission shall be deemed to have been given when sent; notices sent by mail
shall be deemed to have been given five Business Days after the date when sent
by registered or certified mail, postage prepaid; and notices sent by hand
delivery or overnight courier shall be deemed to have been given when received.
Each of the Debtors agrees to pay all expenses (including reasonable
attorney's fees and legal expenses) paid or incurred by the Agent or any Bank in
endeavoring to collect the Liabilities of such Debtor, or any part thereof, and
in enforcing this Agreement against such Debtor, and such obligations will
themselves be Liabilities.
No delay on the part of the Agent in the exercise of any right or remedy
shall operate as a waiver thereof, and no single or partial exercise by the
Agent of any right or remedy shall preclude other or further exercise thereof or
the exercise of any other right or remedy.
This Security Agreement shall remain in full force and effect until all
Liabilities have been paid in full and all Commitments have terminated. If at
any time all or any part of any payment theretofore applied by the Agent or any
Bank to any of the Liabilities is or must be rescinded or returned by the Agent
or such Bank for any reason whatsoever (including, without limitation, the
insolvency, bankruptcy or reorganization of any Debtor), such Liabilities shall,
for the purposes of this Agreement, to the extent that such payment is or must
be rescinded or returned, be deemed to have continued in existence,
notwithstanding such application by the Agent or such Bank, and this Agreement
shall continue to be effective or be reinstated, as the case may be, as to such
Liabilities, all as though such application by the Agent or such Bank had not
been made.
This Agreement has been delivered at Chicago, Illinois, and shall be
construed in accordance with and governed by the internal laws of the State of
Illinois, subject, however, to the applicability of the Uniform Commercial Code
of any jurisdiction in which any Goods of any Debtor may be located at any given
time. Whenever possible, each provision of this Agreement shall be interpreted
in such manner as to be effective and valid under applicable law, but if any
provision of this Agreement shall be prohibited by or invalid under applicable
law, such provision shall be ineffective to the extent of such prohibition or
invalidity, without invalidating the remainder of such provision or the
remaining provisions of this Agreement.
The rights and privileges of the Agent hereunder shall inure to the benefit
of its successors and assigns.
This Agreement may be executed in any number of counterparts and by the
different parties hereto on separate counterparts, and each such counterpart
shall be deemed to be an original, but all such counterparts shall together
constitute one and the same Agreement. At any time after the date of this
Agreement, one or more additional persons or entities may become parties hereto
by executing and delivering to the Agent a counterpart of this Agreement
(including supplements to the Schedules hereto). Immediately upon such execution
and delivery (and without any further
8
<PAGE> 11
action), each such additional person or entity will become a party to, and will
be bound by all the terms of, this Agreement.
ANY LITIGATION BASED HEREON, OR ARISING OUT OF, UNDER OR IN CONNECTION WITH
THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT, SHALL BE BROUGHT AND MAINTAINED
EXCLUSIVELY IN THE COURTS OF THE STATE OF ILLINOIS OR IN THE UNITED STATES
DISTRICT COURT FOR THE NORTHERN DISTRICT OF ILLINOIS; PROVIDED, HOWEVER, THAT
ANY SUIT SEEKING ENFORCEMENT AGAINST ANY COLLATERAL OR OTHER PROPERTY MAY BE
BROUGHT, AT THE AGENT'S OPTION, IN THE COURTS OF ANY JURISDICTION WHERE SUCH
COLLATERAL OR OTHER PROPERTY MAY BE FOUND. EACH DEBTOR HEREBY EXPRESSLY AND
IRREVOCABLY SUBMITS TO THE JURISDICTION OF THE COURTS OF THE STATE OF ILLINOIS
AND OF THE UNITED STATES DISTRICT COURT FOR THE NORTHERN DISTRICT OF ILLINOIS
FOR THE PURPOSE OF ANY SUCH LITIGATION AS SET FORTH ABOVE. EACH DEBTOR FURTHER
IRREVOCABLY CONSENTS TO THE SERVICE OF PROCESS BY REGISTERED MAIL, POSTAGE
PREPAID, TO THE ADDRESS SET FORTH ON SCHEDULE I HERETO (OR SUCH OTHER ADDRESS AS
IT SHALL HAVE SPECIFIED IN WRITING TO THE AGENT AS ITS ADDRESS FOR NOTICES
HEREUNDER) OR BY PERSONAL SERVICE WITHIN OR WITHOUT THE STATE OF ILLINOIS. EACH
DEBTOR HEREBY EXPRESSLY AND IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED
BY LAW, ANY OBJECTION WHICH IT MAY NOW OR HEREAFTER HAVE TO THE LAYING OF VENUE
OF ANY SUCH LITIGATION BROUGHT IN ANY SUCH COURT REFERRED TO ABOVE AND ANY CLAIM
THAT ANY SUCH LITIGATION HAS BEEN BROUGHT IN AN INCONVENIENT FORUM.
EACH OF EACH DEBTOR, THE AGENT AND (BY ACCEPTING THE BENEFITS HEREOF) EACH
BANK HEREBY WAIVES ANY RIGHT TO A TRIAL BY JURY IN ANY ACTION OR PROCEEDING TO
ENFORCE OR DEFEND ANY RIGHTS UNDER THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT AND
ANY AMENDMENT, INSTRUMENT, DOCUMENT OR AGREEMENT DELIVERED OR WHICH MAY IN THE
FUTURE BE DELIVERED IN CONNECTION HEREWITH OR THEREWITH OR ARISING FROM ANY
FINANCING RELATIONSHIP EXISTING IN CONNECTION WITH ANY OF THE FOREGOING, AND
AGREES THAT ANY SUCH ACTION OR PROCEEDING SHALL BE TRIED BEFORE A COURT AND NOT
BEFORE A JURY.
9
<PAGE> 12
IN WITNESS WHEREOF, this Agreement has been duly executed as of the day and
year first above written.
SANTI GROUP, INC.
By: /s/ Rock Payne
----------------------------------
Name Printed:
------------------------
Title:
-------------------------------
BONE DRY ENTERPRISES, INC.
By: /s/ Rock Payne
----------------------------------
Name Printed:
------------------------
Title:
-------------------------------
SANTI GROUP OF FLORIDA, INC.
By: /s/ Rock Payne
----------------------------------
Name Printed:
------------------------
Title:
-------------------------------
SANTI GROUP OF PENNSYLVANIA, INC.
By: /s/ Rock Payne
----------------------------------
Name Printed:
------------------------
Title:
-------------------------------
10
<PAGE> 13
SANTI GROUP OF NEW YORK, INC.
By: /s/ Rock Payne
----------------------------------
Name Printed:
------------------------
Title:
-------------------------------
BANK OF AMERICA NATIONAL TRUST AND
SAVINGS ASSOCIATION, as Agent for
the Banks
By: /s/ Jay McKeown
----------------------------------
Name Printed:
------------------------
Title:
-------------------------------
11
<PAGE> 14
SCHEDULE I
TO SECURITY AGREEMENT
CHIEF EXECUTIVE OFFICES
<TABLE>
<CAPTION>
Chief Executive Office of All Debtors
<S> <C>
7200 Bishop Road
Austell, Georgia 30168
Principal Place of Business
SanTi Group, Inc. 7200 Bishop Road
Austell, Georgia 30168
Bone Dry Enterprises, Inc. 7200 Bishop Road
Austell, Georgia 30168
2470 Weaver Way
Doraville, Georgia 30340
7851 Lee Road
Lithia Springs, Georgia 30057
SanTi Group of Florida, Inc. 7200 Bishop Road
Austell, Georgia 30168
1804 Nashville Avenue
Orlando, Florida 32805
25 NE 5th Street
Pompano Beach, Florida 33060
SanTi Group of Pennsylvania, Inc. 7200 Bishop Road
Austell, Georgia 30168
S. Main Street & Randolph
P.O. Box 442
Ambler, Pennsylvania 19380
898 Fern Hill Road
West Chester, Pennsylvania 19380
</TABLE>
<PAGE> 15
<TABLE>
<S> <C>
SanTi Group of New York, Inc. 7200 Bishop Road
Austell, Georgia 30168
972 Nicolls Road
Deer Park, New York 11729
</TABLE>
SCHEDULE II
TO SECURITY AGREEMENT
ADDRESSES OF OTHER LOCATIONS
None.
<PAGE> 16
SCHEDULE III
TO SECURITY AGREEMENT
TRADE NAMES
SanTi Group, Inc.
None
Bone Dry Enterprises, Inc.
None
SanTi Group of Florida, Inc.
Brownie Septic Tank Contractors
Brownie Environmental Services
Brownie Sewer & Drain Service
Grease-Tec
A Rapid Rooter Sewer & Drain
A Rapid Rooter
SanTi Group of Pennsylvania, Inc.
Eldredge Wastewater Management
Ferrero Wastewater Management
SanTi Group of New York, Inc.
Advanced Transfer Technology
Envirotec Leasing and Rental
Devito Environmental
RGM Liquid Waste Removal
<PAGE> 17
SCHEDULE IV
TO SECURITY AGREEMENT
LIST OF INTELLECTUAL PROPERTY
-----------------------------
None.
<PAGE> 1
EXHIBIT 10.4
ASSET PURCHASE AGREEMENT
THIS ASSET PURCHASE AGREEMENT (the "Agreement") is made and entered
into as of January 22, 1998, by and between SANTI GROUP OF PENNSYLVANIA, INC., a
Georgia corporation (the "Buyer"); FERRERO WASTEWATER MANAGEMENT, INC., a
Pennsylvania corporation (the "Seller"); and A. THOMAS FERRERO, JR and A. THOMAS
FERRERO, III (the "Seller Stockholders"). The Buyer, the Seller and the Seller
Stockholders are referred to collectively herein as the "Parties."
WHEREAS, the Seller owns certain contract rights, customer accounts,
trucks and containers and is engaged in the non-hazardous liquid waste and
septic waste collection, transportation, management and disposal business in the
Service Area (the "Business"); and
WHEREAS, this Agreement contemplates a transaction in which the Buyer
will purchase all of the assets of the Seller used in the Business and assume
certain of the liabilities of the Seller in return for cash and the SanTi Stock.
NOW, THEREFORE, in consideration of the premises and the mutual
promises herein made, the Parties agree as follows.
ARTICLE 1. DEFINITIONS
"ACCOUNTS" means (a) all customer accounts, names, lists, purchase
orders, service agreements and contracts (including implied or quantum meruit
contractual rights) or other rights of the Seller to provide liquid waste
removal, collection, transportation and storage services to customers of the
Seller, and all rights to and in connection with any activities commonly
associated with such services, customer service agreements, and contract rights
(including implied or quantum meruit contractual rights) with customers, and (b)
all files, correspondence, records (including billing and service records for
the preceding twelve (12) months) and related proprietary information and
material and other intellectual property which is necessary, helpful or related
to providing such services described above; excluding, however, (x) all customer
accounts, rights or contracts which deal in hazardous chemical toxic or
low-level radioactive waste or Hazardous Materials or Extremely Hazardous
Substances which the Buyer determines it does not wish to purchase, and (y) all
small business set aside contracts which the Buyer determines it does not wish
to purchase. All of the customer accounts, contracts and other rights which are
not being purchased, including those ac counts described in subparagraphs (x)
and (y) of this paragraph, shall be set forth on Schedule 1 and are hereinafter
referred to collectively as the "Excluded Accounts".
"ACCREDITED INVESTOR" has the meaning set forth in Regulation D
promulgated under the Securities Act.
<PAGE> 2
"ACQUIRED ASSETS" means all right, title and interest in and to all of
the assets of the Seller used or useful in the Business, and shall include, but
not be limited to, all of the Seller's: (a) Accounts, (b) real property,
leaseholds and subleaseholds therein, improvements, fixtures, and fittings
thereon, and easements, rights-of-way, and other appurtenants thereto (such as
appurtenant rights in and to public streets), (c) tangible personal property
(such as containers, reservoirs, compactors, carts, repair parts, machinery,
equipment, inventories of raw materials and supplies, manufactured and purchased
parts, goods in process and finished goods, furniture, automobiles, trucks,
tractors, trailers, tankers, tools, pumps, stabilizers, jigs, and dies), (d)
intellectual property (including but not limited to the names "Ferrero
Wastewater Management" and "Nutrecon"), goodwill associated therewith, licenses
and sublicenses granted and obtained with respect thereto, and rights
thereunder, remedies against infringements thereof, and rights to protection of
interests therein under the laws of all jurisdictions, (e) leases, subleases,
and rights thereunder, (f) agreements (such as equipment rental agreements and
service agreements), contracts, customer agreements, disposal agreements,
service agreements, indentures, mortgages, instruments, Security Interests,
guaranties, other similar arrangements, and rights thereunder, (g) notes
receivable and other receivables, other than accounts receivable, (h)
securities, (i) claims, causes of action, choses in action, rights of recovery,
rights of set off, and rights of recoupment, (j) franchises, approvals, permits,
licenses (including but not limited to radio transmitter licenses), orders,
registrations, certificates, variances, and similar rights obtained from
governments and governmental agencies, service marks, trademarks, logos, (k)
telephone numbers, yellow page advertising, books, records, ledgers, files,
documents, correspondence, lists, plats, architectural plans, drawings and
specifications, creative materials, advertising and promotional materials,
operational, billing and payable information, studies, reports, and other
printed or written materials, computer hardware and software, and (k) rights in
and with respect to the assets associated with its Employee Benefit Plans;
provided, however, that the Acquired Assets shall not include the Excluded
Assets.
"AFFILIATE" has the meaning set forth in Rule 12b-2 of the regulations
promulgated under the Securities Exchange Act.
"APPLICABLE RATE" means the rate of interest publicly announced in
Atlanta, Georgia from time to time by NationsBank of Georgia, N.A. as its prime
rate, plus two percent (2%) per annum.
"ASSUMED LIABILITIES" means all obligations of the Seller directly
associated with or under the agreements, contracts, leases, licenses, and other
arrangements referred to in the definition of Accounts either (i) to furnish
goods, services, and other non-Cash benefits to customers after the Closing, or
(ii) to pay for goods, services, and other non-Cash benefits that another Person
will furnish to it after the Closing. Under no circumstances shall the term
"Assumed Liabilities" include any Liabilities of Seller or its Subsidiaries
other than those set forth above. All Liabilities other than Assumed Liabilities
shall remain those of Seller and its Subsidiaries exclusively.
"BASIS" means any past or present fact, situation, circumstance,
status, condition, activity, practice, plan, occurrence, event, incident,
action, failure to act, or transaction that forms or could form the basis for
any specified consequence.
2
<PAGE> 3
"CASH" means cash and cash equivalents (including marketable securities
and short term investments) calculated in accordance with GAAP applied on a
basis consistent with the preparation of the Financial Statements.
"CLOSING" has the meaning set forth in Section 2.4 below.
"CLOSING DATE" has the meaning set forth in Section 2.4 below.
"CODE" means the Internal Revenue Code of 1986, as amended.
"DISCLOSURE SCHEDULE" has the meaning set forth in Article 3 below.
"EMPLOYEE BENEFIT PLAN" means any (a) nonqualified deferred
compensation or retirement plan or arrangement, (b) qualified defined
contribution retirement plan or arrangement which is an Employee Pension Benefit
Plan, (c) qualified defined benefit retirement plan or arrangement which is an
Employee Pension Benefit Plan (including any Multiemployer Plan), or (d)
Employee Welfare Benefit Plan or material fringe benefit or other retirement,
bonus, or incentive plan or program.
"EMPLOYMENT AGREEMENT" has the meaning set forth in Section 2.6 below.
"ENVIRONMENTAL, HEALTH, AND SAFETY REQUIREMENTS" shall mean all
federal, state, local and other applicable statutes, regulations, ordinances and
other provisions having the force or effect of law, all judicial and
administrative orders and determinations, all contractual obligations and all
common law concerning public health and safety, worker health and safety, and
pollution or protection of the environment, including without limitation all
those relating to the presence, use, production, generation, handling,
transportation, treatment, storage, disposal, distribution, labeling, testing,
processing, discharge, release, threatened release, control, or cleanup of any
Hazardous Materials, substances or wastes, chemical substances or mixtures,
pesticides, pollutants, contaminants, toxic chemicals, petroleum products or
byproducts, asbestos, polychlorinated biphenyls, noise or radiation, each as
amended and as now or hereafter in effect.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"EXCLUDED ASSETS" means (i) the corporate charter, qualifications to
conduct business as a foreign corporation, arrangements with registered agents
relating to foreign qualifications, taxpayer and other identification numbers,
seals, minute books, stock transfer books, blank stock certificates, and other
documents relating to the organization, maintenance, and existence of the Seller
as a corporation, (ii) any of the rights of the Seller under this Agreement,
(iii) the Excluded Accounts, (iv) all tax refunds related to the operation of
the Business prior to Closing; and (v) the assets set forth on Schedule 2.
"EXTREMELY HAZARDOUS SUBSTANCES" has the meaning set forth in ss.302 of
the Emergency Planning and Community Right-to-Know Act of 1986, as amended.
3
<PAGE> 4
"FINANCIAL STATEMENT" has the meaning set forth in Section 3.2.7 below.
"GAAP" means United States generally accepted accounting principles as
in effect from time to time.
"HAZARDOUS MATERIALS" means any substance that has been designated by
any governmental authority whose requirements are applicable to the Seller to be
radioactive, toxic, hazardous, or otherwise pose potential danger to health or
the environment, including, but not limited to, volatile organic compounds and
all substances listed pursuant to the federal Comprehensive Environmental
Response, Compensation and Liability Act, the federal Resource Conservation
Recovery Act, the federal Clean Air Act, the federal Water Pollution Control
Act, the Toxic Substance Control Act and the Occupational Safety and Health Act,
as such acts are amended to the Closing Date, and the regulations and
publications promulgated to the Closing Date pursuant to said acts.
"KNOWLEDGE" means to the best of the subject party's actual knowledge
after reasonable investigation, and includes constructive knowledge.
"LIABILITY" means any liability (whether known or unknown, whether
asserted or unasserted, whether absolute or contingent, whether accrued or
unaccrued, whether liquidated or unliquidated, and whether due or to become
due), including any liability for Taxes.
"LITIGATION" means any legal action, administrative or other
proceeding, arbitration, cause of action, claim, complaint, criminal
prosecution, inquiry, hearing, investigation (governmental or otherwise), or
notice (written or oral) by any Person alleging potential liability or
requesting information relating to or affecting the Seller, the Business, the
Acquired Assets or the transactions contemplated by this Agreement.
"LOSSES" means any and all direct or indirect demands, claims,
payments, obligations, recoveries, deficiencies, fines, penalties, interests,
assessments, actions, causes of action, suits, losses, diminution in the value
of any of the Acquired Assets, compensatory, punitive, exemplary or
consequential damages (including, without limitation, lost income and profits
and interruptions of business), Liabilities, costs, expenses (including, without
limitation, (i) interest, penalties and reasonable attorneys' fees and expenses,
(ii) attorneys' fees and expenses necessary to enforce rights to indemnification
hereunder, and (iii) consultant's fees and other costs of defense or
investigation); and interest on any amount payable to a third party as a result
of the foregoing, whether accrued, absolute, contingent, known, unknown or
otherwise.
"MONTHLY GROSS CHARGES" means the monthly gross charges on all the
Accounts which are fulfilled by the Seller for the provision of nonhazardous
liquid waste management services. The term Monthly Gross Charges shall not
include (i) any revenues, charges or billings generated by extraordinary sales
which may take place or which may be included in the Accounts, (ii) any billings
made or revenues received by the Seller for services not actually rendered, or
(iii) any billing made or revenues received by the Seller on Excluded Accounts.
4
<PAGE> 5
"MOST RECENT BALANCE SHEET" means the balance sheet contained within
the Most Recent Financial Statements.
"MOST RECENT FINANCIAL STATEMENTS" has the meaning set forth in Section
3.2.7 below.
"MOST RECENT FISCAL MONTH END" has the meaning set forth in Section
3.2.7 below.
"MOST RECENT FISCAL YEAR END" has the meaning set forth in Section
3.2.7 below.
"NONCOMPETITION AGREEMENT" has the meaning set forth in Section 2.5
below.
"ORDINARY COURSE OF BUSINESS" means the ordinary course of business
consistent with past custom and practice (including with respect to quantity and
frequency).
"PARTY" has the meaning set forth in the preface above.
"PERSON" means an individual, a partnership, a corporation, an
association, a joint stock company, a trust, a joint venture, an unincorporated
organization, or a governmental entity (or any department, agency, or political
subdivision thereof).
"PURCHASE PRICE" has the meaning set forth in Section 2.3 below.
"RELEASE" has the meaning set forth in Section 2.7 below.
"SANTI STOCK" has the meaning set forth in Section 2.3 below.
"SECURITIES ACT" means the Securities Act of 1933, as amended.
"SECURITY INTEREST" means any mortgage, pledge, lien, encumbrance,
charge, or other security interest, other than (a) mechanic's, materialmen's,
and similar liens, (b) liens for Taxes not yet due and payable or for Taxes that
the taxpayer is contesting in good faith through appropriate proceedings, (c)
purchase money liens and liens securing rental payments under capital lease
arrangements, and (d) other liens arising in the Ordinary Course of Business and
not incurred in connection with the borrowing of money.
"SELLER SHARES" means the shares of issued and outstanding capital
stock of the Seller.
"SERVICE AREA" shall mean the circular area the outer boundary of which
is formed by a seventy (70) mile radius from South Main Street at Randolph
Avenue, Ambler, Pennsylvania.
"SUBSIDIARY" means any corporation with respect to which a specified
Person (or a Subsidiary thereof) owns a majority of the common stock or has the
power to vote or direct the voting of sufficient securities to elect a majority
of the directors.
5
<PAGE> 6
"TAX" means any federal, state, local, or foreign income, gross
receipts, license, payroll, employment, excise, severance, stamp, documentary,
occupation, premium, windfall profits, environmental (including taxes under Code
ss.59A), customs duties, capital stock, franchise, profits, withholding, social
security (or similar), unemployment, disability, real property, personal
property, sales, use, transfer, registration, value added, alternative or add-on
minimum, estimated, or other tax of any kind whatsoever, including any interest,
penalty, or addition thereto, whether disputed or not.
"TAX RETURN" means any return, declaration, report, claim for refund,
or information return or statement relating to Taxes, including any schedule or
attachment thereto, and including any amendment thereof.
ARTICLE 2. BASIC TRANSACTIONS
2.1 PURCHASE AND SALE OF ASSETS. On and subject to the terms and
conditions of this Agreement, the Buyer agrees to purchase from the Seller, and
the Seller agrees to sell, transfer, convey, and deliver to the Buyer, all of
the Acquired Assets at the Closing for the consideration specified below in this
Article 2.
2.2 ASSUMPTION OF LIABILITIES. On and subject to the terms and
conditions of this Agreement, the Buyer agrees to assume and become responsible
for all of the Assumed Liabilities at the Closing. Except for the Assumed
Liabilities, nothing in this Agreement or any other document which is a part
hereof shall in any way obligate the Buyer for any Liabilities, obligations or
charges of the Seller, any of its Subsidiaries or any of the Seller
Stockholders, including, but without limitation, any Liabilities attributable to
Environmental, Health and Safety Requirements, or Liabilities or charges for
Taxes or recording fees arising out of the sale or transfer of the Acquired
Assets. It is specifically understood and agreed by the Parties that the Buyer
does not assume any Liabilities, obligations or charges of the Seller, the
Seller's Subsidiaries or the Seller Stockholders except for the Assumed
Liabilities. THE SELLER WILL PAY OFF ALL DEBT AND OTHER ACCRUED THIRD PARTY
LIABILITIES RELATED TO THE ACQUIRED ASSETS PRIOR TO OR SIMULTANEOUSLY WITH THE
CLOSING.
2.3 PURCHASE PRICE. The Buyer agrees to pay, issue and deliver to the
Seller the following (collectively, the "Purchase Price"): (i) cash in the
amount of $2,489,000, payable by wire transfer or delivery of other immediately
available funds; and (ii) 80,000 shares (the "SanTi Stock") of the common stock
of SanTi Group, Inc., a Delaware corporation ("SanTi"); and (iii) documentation
effecting the assumption of the Assumed Liabilities. At the Closing, the Buyer
shall tender to the Seller $2,240,100 of the cash portion of the Purchase Price
and documentation effecting the conveyance of 72,000 shares of the SanTi Stock.
The Buyer shall retain the balance of the cash portion of the Purchase Price and
the balance of the SanTi Stock to hold as security to offset against any Losses
asserted against, imposed upon or incurred by the Buyer arising out of any of
the matters listed in items (i) through (vi) of Section 8.2 hereof, and the
Buyer shall deliver the remaining balance of said security to the Seller on that
date which is two hundred seventy (270) days after the Closing Date.
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2.4 THE CLOSING. The closing of the transactions contemplated by this
Agreement (the "Closing") shall take place at the offices of Chorey, Taylor &
Feil, A Professional Corporation, Suite 1700, The Lenox Building, 3399 Peachtree
Road, N.E., Atlanta, Georgia 30326 (or at such other place as the Parties may
mutually determine), on January 22, 1998, and the Closing shall be effective for
all purposes as of 11:59 p.m. on January 22, 1998 (the "Closing Date").
2.5 NONCOMPETITION AGREEMENTS. On or prior to the Closing Date, the
Seller and each Seller Stockholder shall enter into, execute, deliver to the
Buyer and perform an agreement, substantially in the form of Exhibit A attached
hereto (each a "Noncompetition Agreement"), restricting such Party's ability to
compete with the Buyer in the Business, and to solicit the customers, suppliers
and employees of the Business, the Seller or the Buyer, for a period of five (5)
years after the Closing Date.
2.6 EMPLOYMENT AND CONSULTING AGREEMENTS. On or prior to the Closing
Date, the Buyer and those Seller Stockholders and members of senior management
of the Seller listed on Schedule 3 shall enter into employment agreements and/or
consulting agreements substantially in the form of Exhibits B and C attached
hereto (as indicated on Schedule 3) (each an "Employment Agreement"),
collectively providing for the continued employment or engagement of such
Persons by the Buyer or one of its Affiliates.
2.7 RELEASES. At the Closing, the Parties hereto shall enter into,
execute, deliver and perform an agreement, substantially in the form of Exhibit
D attached hereto (each a "Release") effecting certain releases agreed upon
among said Parties.
2.8 DELIVERIES AT THE CLOSING. At the Closing, (i) the Seller will
deliver to the Buyer the various certificates, instruments, and documents
referred to in Section 6.1 below; (ii) the Buyer will deliver to the Seller the
various certificates, instruments, and documents referred to in Section 6.2
below; (iii) the Seller will execute, acknowledge (if appropriate), and deliver
to the Buyer (a) assignments (including real property transfer documents) in the
forms attached hereto as Exhibit E and (b) such other instruments of sale,
transfer, conveyance, and assignment as the Buyer and its counsel may request;
(iv) the Parties will deliver to each other the agreements and documents
referred to above in this Article 2; (v) the Buyer will deliver to the Seller
the portion of the Purchase Price to be paid hereunder at the Closing; and (vi)
the Seller will deliver to the Buyer the following information relating to the
Accounts on such forms as are acceptable to the Buyer: (1) a list of all
Accounts which will include all names, addresses, telephone numbers and names of
individuals to contact for each of the Accounts; (2) all collection information
concerning the frequency of collection, approximate volume of waste per
collection and a brief description of the types of waste involved with each
Account; (3) the complete service and accounting records of each of the Accounts
for the 12 month period ending on the last day of the month immediately
preceding the Closing Date; and (4) all other proprietary information necessary
or appropriate to enable the Buyer to service the Accounts properly.
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2.9 ALLOCATION. The Parties agree to allocate the Purchase Price (and
all other capitalizable costs) among the Acquired Assets for all purposes
(including financial accounting and tax purposes) consistent with the Code and
in accordance with the allocation schedule prepared by the Buyer; provided,
however, that the portion of the Purchase Price consisting of SanTi Stock shall
be allocated based on a valuation of the SanTi Stock at the time of the Closing,
said valuation to be undertaken by an appraiser commissioned by the Buyer.
2.10 PRORATIONS AS OF CLOSING. Any insurance deposits, prepaid Accounts
and similar items payable or paid by any Party and related to the Acquired
Assets shall be prorated as of the Closing Date. There shall be prorated between
the Buyer and the Seller as of the Closing Date all accrued or prepaid items
relating to (i) ad valorem and other Taxes (except sales taxes) with respect to
the Acquired Assets; (ii) rent (including percentage rent) and other payments
due under any lease or contract related to the Acquired Assets; (iii) deposits
with respect to the Acquired Assets; (iv) license fees relating to any of the
Acquired Assets, and (v) governmental assessments and charges for services to or
with respect to any of the Acquired Assets.
2.11 USE OF NAME. Following the Closing Date, the Seller shall not use
or give permission to any other Party to use the name "Ferrero Wastewater
Management," "Anthony Ferrero Company", "Nutrecon," or any similar name in
connection with the operation of a waste collection and disposal business.
2.12 CONFIDENTIALITY. The Parties recognize that the Buyer and/or its
Affiliates intend to acquire numerous liquid waste businesses throughout the
country, and the violation of this Section 2.12 will result in substantial
injury and damage to the Buyer and its Affiliates. The Seller and each Seller
Stockholder agree that for a period of five (5) years after the date of this
Agreement, none of them, nor their agents, employees or Affiliates, nor any
other person connected with them, except as required by applicable federal,
state or local statutes, regulations or judicial subpoena, shall at any time
divulge the existence and terms of the negotiations resulting in this Agreement,
the terms and conditions of this Agreement and the financing arrangements of the
Buyer and its Affiliates. In addition, the Parties agree to keep such
negotiations, terms and conditions confidential and to cause their agents,
employees and other persons connected with them to observe the terms of this
Section, subject to the exceptions set forth above in this Section 2.12.
2.13 TELEPHONE REFERRALS. From and after the Closing Date, the Seller
shall refer, and cause its agents to refer, all telephone calls to it or them
for liquid waste collection and disposal to the Buyer.
ARTICLE 3. REPRESENTATIONS AND WARRANTIES OF
THE SELLER AND THE SELLER STOCKHOLDERS
3.1 REPRESENTATIONS AND WARRANTIES OF THE SELLER STOCKHOLDERS. The
Seller Stockholders jointly and severally represent and warrant to the Buyer
that the statements contained in this Section 3.1 are correct and complete as of
the date of this Agreement and will be correct and complete as of the Closing
Date (as though made then and as though the Closing Date were
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substituted for the date of this Agreement throughout this Section 3.1) with
respect to himself, herself or itself, except as set forth in the disclosure
schedule accompanying this Agreement and initialed by the Parties (the
"Disclosure Schedule"). The Disclosure Schedule will be arranged in paragraphs
corresponding to the lettered and numbered paragraphs contained in this Article
3.
3.1.1 ORGANIZATION OF CERTAIN SELLER STOCKHOLDERS. If the
Seller Stockholder is a corporation, the Seller Stockholder is duly organized,
validly existing, and in good standing under the laws of the jurisdiction of its
incorporation.
3.1.2 AUTHORIZATION. The Seller Stockholder has full power and
authority (including, if the Seller Stockholder is a corporation, full corporate
power and authority) to execute and deliver this Agreement and to perform his,
her or its obligations hereunder. This Agreement constitutes the valid and
legally binding obligation of the Seller Stockholder, enforceable in accordance
with its terms and conditions.
3.1.3 NONCONTRAVENTION. Neither the execution and the delivery
of this Agreement by the Seller Stockholder, nor the performance by the Seller
Stockholder of his, her or its obligations hereunder, will (i) violate any
constitution, statute, regulation, rule, injunction, judgment, order, decree,
stipulation, ruling, charge, or other restriction of any government,
governmental agency, or court to which the Seller Stockholder is subject (or, if
the Seller Stockholder is a corporation, any provision of its charter or bylaws)
or (ii) conflict with, result in a breach of, constitute a default under, result
in the acceleration of, create in any Person the right to accelerate, terminate,
modify, or cancel, or require any notice under any agreement, contract, lease,
permit, license, instrument, or other arrangement to which the Seller
Stockholder is a party or by which he, she or it is bound or to which any of
his, her or its assets is subject.
3.1.4 SELLER SHARES. The Seller Stockholder holds of record
the number of Seller Shares set forth next to his, her or its name on Section
3.1.4 of the Disclosure Schedule.
3.2 REPRESENTATIONS AND WARRANTIES OF THE SELLER AND THE SELLER
STOCKHOLDERS. The Seller and each of the Seller Stockholders jointly and
severally represent and warrant to the Buyer that the statements contained in
this Section 3.2 are correct and complete as of the date of this Agreement and
will be correct and complete as of the Closing Date (as though made then and as
though the Closing Date were substituted for the date of this Agreement
throughout this Section 3.2), except as set forth in the Disclosure Schedule.
3.2.1 ORGANIZATION OF THE SELLER AND NUTRECON. The Seller and
Nutrecon, Inc. ("Nutrecon") are corporations duly organized, validly existing,
and in good standing under the laws of Pennsylvania. The Seller and Nutrecon are
duly authorized to conduct business and the Business and are in good standing
under the laws of each jurisdiction where such qualification is required.
3.2.2 AUTHORIZATION OF TRANSACTION. The Seller has full power
and authority (including full corporate power and authority) to execute and
deliver this Agreement and to perform
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its obligations hereunder. Without limiting the generality of the foregoing, the
board of directors of the Seller and the Seller Stockholders have duly
authorized the execution, delivery, and performance of this Agreement by the
Seller. This Agreement constitutes the valid and legally binding obligation of
the Seller, enforceable in accordance with its terms and conditions.
3.2.3 NONCONTRAVENTION. Neither the execution and the delivery
of this Agreement, nor the consummation of the transactions contemplated hereby
(including the assignments and assumptions referred to in Article 2 above), will
(i) violate any constitution, statute, regulation, rule, injunction, judgment,
order, decree, ruling, charge, or other restriction of any government,
governmental agency, or court to which any of the Seller and its Subsidiaries is
subject or any provision of the charter or bylaws of any of the Seller and its
Subsidiaries or (ii) conflict with, result in a breach of, constitute a default
under, result in the acceleration of, create in any Person the right to
accelerate, terminate, modify, or cancel, or require any notice under any
agreement, contract, lease, license, instrument, or other arrangement to which
any of the Seller and its Subsidiaries is a party or by which it is bound or to
which any of its assets is subject (or result in the imposition of any Security
Interest upon any of its assets). None of the Seller and its Subsidiaries needs
to give any notice to, make any filing with, or obtain any authorization,
consent, or approval of any government or governmental agency in order for the
Parties to consummate the transactions contemplated by this Agreement (including
the assignments and assumptions referred to in Article 2 above).
3.2.4 BROKERS' FEES. The Seller has no Liability or obligation
to pay any fees or commissions to any broker, finder, or agent with respect to
the transactions contemplated by this Agreement for which the Buyer could become
liable or obligated. None of the Subsidiaries of the Seller has any Liability or
obligation to pay any fees or commissions to any broker, finder, or agent with
respect to the transactions contemplated by this Agreement.
3.2.5 TITLE TO ASSETS. The Seller and its Subsidiaries have
good and marketable title to, or a valid leasehold interest in, all of the
Acquired Assets, free and clear of all Security Interests or restrictions on
transfer, except for properties and assets disposed of in the Ordinary Course of
Business since the date of the Most Recent Balance Sheet.
3.2.6 SUBSIDIARIES. Each Subsidiary of the Seller is listed on
Section 3.2.6 of the Disclosure Schedule, and is a corporation duly organized,
validly existing, and in good standing under the laws of the jurisdiction of its
incorporation. Each Subsidiary of the Seller is duly authorized to conduct
business and is in good standing under the laws of each jurisdiction where such
qualification is required. Each Subsidiary of the Seller has full corporate
power and authority and all licenses, permits, and authorizations necessary to
carry on the Business and the other businesses in which it is engaged and in
which it presently proposes to engage and to own and use the properties owned
and used by it. All of the issued and outstanding shares of capital stock of
each Subsidiary of the Seller have been duly authorized and are validly issued,
fully paid, and nonassessable. The Seller holds of record and owns beneficially
all of the outstanding shares of each Subsidiary of the Seller, free and clear
of any restrictions on transfer (other than restrictions under
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the Securities Act and state securities laws), Taxes, Security Interests,
options, warrants, purchase rights, contracts, commitments, equities, claims,
and demands. There are no outstanding or authorized options, warrants, purchase
rights, subscription rights, conversion rights, exchange rights, or other
contracts or commitments that could require any of the Seller and its
Subsidiaries to sell, transfer, or otherwise dispose of any capital stock of any
of its Subsidiaries or that could require any Subsidiary of the Seller to issue,
sell, or otherwise cause to become outstanding any of its own capital stock
(other than this Agreement). There are no voting trusts, proxies, or other
agreements or understandings with respect to the voting of any capital stock of
any Subsidiary of the Seller. The minute books (containing the records of
meetings of the stockholders, the board of directors, and any committees of the
board of directors), the stock certificate books, and the stock record books of
each Subsidiary of the Seller are correct and complete. None of the Subsidiaries
of the Seller is in default under or in violation of any provision of its
charter or bylaws. Except as set forth on Section 3.2.6 of the Disclosure
Schedule, none of the Seller and its Subsidiaries controls directly or
indirectly or has any direct or indirect equity participation in any
corporation, partnership, trust, or other business association which is not a
Subsidiary of the Seller. Nutrecon is a Subsidiary of the Seller.
3.2.7 FINANCIAL STATEMENTS. Attached hereto as Exhibit F are
the following financial statements (collectively, the "Financial Statements"):
unaudited consolidated and consolidating balance sheets and statements of
income, changes in stockholders' equity, and cash flow as of and for the fiscal
years ended December 31, 1995, December 31, 1996, and December 31, 1997 (the
"Most Recent Fiscal Year End") for the Seller and its Subsidiaries. The
Financial Statements (including the notes thereto) have been prepared in
accordance with GAAP applied on a consistent basis throughout the periods
covered thereby, present fairly the financial condition of the Seller and its
Subsidiaries as of such dates and the results of operations of the Seller and
its Subsidiaries for such periods, are correct and complete, and are consistent
with the books and records of the Seller and its Subsidiaries (which books and
records are correct and complete). For purposes of this Agreement, the Financial
Statements for the fiscal year ended December 31, 1997 shall be deemed the "Most
Recent Financial Statements," and December 31, 1997 shall be deemed the "Most
Recent Fiscal Month End." The net book value of the Acquired Assets calculated
in accordance with GAAP was not less than $900,000 as of June 30, 1997.
3.2.8 EVENTS SUBSEQUENT TO MOST RECENT FISCAL YEAR END. Since
the Most Recent Fiscal Year End, there has not been any adverse change in the
Business, other business, financial condition, operations, results of
operations, or future prospects of any of the Seller and its Subsidiaries.
Without limiting the generality of the foregoing, since that date:
(i) none of the Seller and its Subsidiaries has sold, leased,
transferred, pledged or assigned any of its assets, tangible or
intangible, other than for a fair consideration in the Ordinary Course
of Business;
(ii) none of the Seller and its Subsidiaries has entered into
(or issued), accelerated, terminated, modified, or canceled any
agreement, contract, lease, note, bond, debt security or license either
involving more than $5,000 or outside the Ordinary Course of Business;
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(iii) none of the Seller and its Subsidiaries has made any
capital expenditure (or series of related capital expenditures) either
involving more than $5,000 or outside the Ordinary Course of Business;
(iv) none of the Seller and its Subsidiaries has delayed or
postponed the payment of accounts payable and other Liabilities outside
the Ordinary Course of Business;
(v) none of the Seller and its Subsidiaries has canceled,
compromised, waived, or released any right or claim (or series of
related rights and claims) either involving more than $5,000 or outside
the Ordinary Course of Business;
(vi) none of the Seller and its Subsidiaries has issued,
sold, disposed of or granted any rights to purchase any of its capital
stock, or declared, set aside, or paid any dividend or made any
distribution with respect to its capital stock (whether in cash or in
kind), or redeemed, purchased, or otherwise acquired any of its capital
stock;
(vii) none of the Seller and its Subsidiaries has experienced
any damage, destruction, or loss (whether or not covered by insurance)
to its property;
(viii) none of the Seller and its Subsidiaries has made any
loan to, or entered into any other transaction with, any of its
directors, officers, and employees outside the Ordinary Course of
Business;
(ix) none of the Seller and its Subsidiaries has (a) entered
into any employment contract or collective bargaining agreement,
written or oral, or modified the terms of any existing such contract or
agreement; (b) granted any increase in the base compensation of any of
its directors, officers, and employees (or made any other change in
employment terms for such persons) outside the Ordinary Course of
Business; or (c) adopted, amended, modified, or terminated any Employee
Benefit Plan;
(x) there has not been any other occurrence, event,
incident, action, failure to act, or transaction outside the Ordinary
Course of Business involving any of the Seller and its Subsidiaries;
and
(xi) none of the Seller and its Subsidiaries has committed
to any of the foregoing.
3.2.9 UNDISCLOSED LIABILITIES. To the best of the Seller's and
the Seller Stockholders' knowledge, information and belief, and without any
independent investigation, none of the Seller and its Subsidiaries has any
Liability (and there is no Basis for any present or future action, suit,
proceeding, hearing, investigation, charge, complaint, claim, or demand against
any of them giving rise to any Liability), except for (i) Liabilities set forth
on the face of the Most Recent Balance Sheet (rather than in any notes thereto)
and (ii) Liabilities which have arisen after the Most Recent Fiscal Month End in
the Ordinary Course of Business (none of which results from, arises out
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of, relates to, is in the nature of, or was caused by any breach of contract,
breach of warranty, tort, infringement, or violation of law). Each Seller
Stockholder further represents and warrants that A. Thomas Ferrero, Jr. has been
a full time employee of the Seller for at least the past 35 years, that A.
Thomas Ferrero, III has been a full time employee of the Seller for at least the
past 9 years, and that throughout their periods of employment with Seller each
has been continuously, actively and fully involved in the day to day management
and operations of the Seller and its Subsidiaries.
3.2.10 LEGAL COMPLIANCE. To the best of the Seller's and the
Seller Stockholders' knowledge, information and belief, and without any
independent investigation, each of the Seller, its Subsidiaries, and their
respective predecessors and Affiliates has complied with all applicable laws
(including rules, statutes, regulations, codes, permits, plans, injunctions,
judgments, orders, decrees, rulings, and charges thereunder) of federal, state,
local and other applicable governments (and all agencies thereof), and no
action, suit, proceeding, hearing, investigation, charge, complaint, claim,
demand, or notice has been filed or commenced against any of them alleging any
failure so to comply.
3.2.11 TAX MATTERS. Each of the Seller and its Subsidiaries
has filed all Tax Returns that it was required to file. All such Tax Returns
were correct and complete in all respects. All Taxes owed by any of the Seller
and its Subsidiaries (whether or not shown on any Tax Return) have been paid. No
claim has ever been made by an authority in a jurisdiction where any of the
Seller and its Subsidiaries does not file Tax Returns that it is or may be
subject to taxation by that jurisdiction. Each of the Seller and its
Subsidiaries has withheld and paid all Taxes required to have been withheld and
paid in connection with amounts paid or owing to any employee, independent
contractor, creditor, stockholder, or other third party. No Seller Stockholder
or director or officer (or employee responsible for Tax matters) of any of the
Seller and its Subsidiaries expects any authority to assess any additional Taxes
for any period for which Tax Returns have been filed. There is no dispute or
claim concerning any Tax Liability of any of the Seller and its Subsidiaries
either (A) claimed or raised by any authority in writing or (B) as to which any
of the Seller Stockholders and the directors and officers (and employees
responsible for Tax matters) of the Seller and its Subsidiaries has Knowledge
based upon personal contact with any agent of such authority. Section 3.2.11 of
the Disclosure Schedule lists all federal, state, local, and other applicable
income Tax Returns filed with respect to any of the Seller and its Subsidiaries
for taxable periods ended on or after December 31, 1995, indicates those Tax
Returns that have been audited, and indicates those Tax Returns that currently
are the subject of audit. The Seller has delivered to the Buyer correct and
complete copies of all federal income Tax Returns, examination reports, and
statements of deficiencies assessed against or agreed to by any of the Seller
and its Subsidiaries since December 31, 1995. The unpaid Taxes of the Seller and
its Subsidiaries (A) did not, as of the Most Recent Fiscal Month End, exceed the
reserve for Tax Liability (rather than any reserve for deferred Taxes
established to reflect timing differences between book and Tax income) set forth
on the face of the Most Recent Balance Sheet (rather than in any notes thereto)
and (B) do not exceed that reserve as adjusted for the passage of time through
the Closing Date in accordance with the past custom and practice of the Seller
and its Subsidiaries in filing their Tax Returns.
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3.2.12 REAL PROPERTY.
(i) Section 3.2.12(i) of the Disclosure Schedule lists and
describes briefly all real property that any of the Seller and its
Subsidiaries owns. With respect to each such parcel of owned real
property:
(A) the identified owner has good and marketable
title to the parcel of real property, free and clear of any
Security Interest, easement, covenant, or other restriction,
except for installments of special assessments not yet
delinquent and recorded easements, covenants, and other
restrictions which do not impair the current use, occupancy,
or value, or the marketability of title, of the property
subject thereto;
(B) there are no pending or threatened condemnation
proceedings, lawsuits, or administrative actions relating to
the property or other matters affecting adversely the current
use, occupancy, or value thereof;
(C) the legal description for the parcel contained in
the deed thereof describes such parcel fully and adequately,
the buildings and improvements are located within the boundary
lines of the described parcels of land, are not in violation
of applicable setback requirements, zoning laws, and
ordinances (and none of the properties or buildings or
improvements thereon are subject to "permitted non-conforming
use" or "permitted non-conforming structure" classifications),
and do not encroach on any easement which may burden the land,
the land does not serve any adjoining property for any purpose
inconsistent with the use of the land, and the property is not
located within any flood plain or subject to any similar type
restriction for which any permits or licenses necessary to the
use thereof have not been obtained;
(D) all facilities have received all approvals of
governmental authorities (including licenses and permits)
required in connection with the ownership or operation thereof
and have been operated and maintained in accordance with
applicable laws, rules, and regulations;
(E) there are no leases, subleases, licenses,
concessions, or other agreements, written or oral, granting to
any Person or Persons the right of use or occupancy of any
portion of the parcel of real property;
(F) there are no outstanding options or rights of
first refusal to purchase the parcel of real property, or any
portion thereof or interest therein;
(G) there are no Persons (other than the Seller and
its Subsidiaries) in possession of the parcel of real
property, other than tenants under any leases disclosed in
Section 3.2.12(i) of the Disclosure Schedule who are in
possession of space to which they are entitled;
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(H) all facilities located on the parcel of real
property are supplied with utilities and other services
necessary for the operation of such facilities, including gas,
electricity, water, telephone, sanitary sewer, and storm
sewer, all of which services are adequate in accordance with
all applicable laws, ordinances, rules, and regulations and
are provided via public roads or via permanent, irrevocable,
appurtenant easements benefitting the parcel of real property;
(I) each parcel of real property abuts on and has
direct vehicular access to a public road, or has access to a
public road via a permanent, irrevocable, appurtenant easement
benefitting the parcel of real property, and access to the
property is provided by paved public right-of-way with
adequate curb cuts available;
(J) no Hazardous Material is present in, on or under
such real property at any time prior to the Closing Date,
including any land and the improvements, ground water and
surface water thereof, except in accordance with applicable
laws and regulations; and
(K) there are and have been no storage tanks located
on or under such property.
(ii) Section 3.2.12(ii) of the Disclosure Schedule lists and
describes briefly all real property leased or subleased to or not owned
but otherwise used by any of the Seller and its Subsidiaries. The
Seller has delivered to the Buyer correct and complete copies of the
leases and subleases listed in Section 3.2.12(ii) of the Disclosure
Schedule (as amended to date). With respect to each lease and sublease
listed in the Disclosure Schedule:
(A) the lease or sublease is legal, valid, binding,
enforceable, and in full force and effect;
(B) the lease or sublease will continue to be legal,
valid, binding, enforceable, and in full force and effect on
identical terms following the consummation of the transactions
contemplated hereby (including the assignments and assumptions
referred to in Article 2 above);
(C) no party to the lease or sublease is in breach or
default, and no event has occurred which, with notice or lapse
of time, would constitute a breach or default or permit
termination, modification, or acceleration thereunder;
(D) there are no disputes, oral agreements, or
forbearance programs in effect as to the lease or sublease;
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(E) with respect to each sublease, the
representations and warranties set forth in subsections (A)
through (D) above are true and correct with respect to the
underlying lease;
(F) none of the Seller and its Subsidiaries has
assigned, transferred, conveyed, mortgaged, deeded in trust,
or encumbered any interest in the leasehold or subleasehold;
(G) all facilities leased or subleased thereunder
have received all approvals of governmental authorities
(including licenses and permits) required in connection with
the operation thereof and have been operated and maintained in
accordance with applicable laws, rules, and regulations;
(H) all facilities leased or subleased thereunder are
supplied with utilities and other services necessary for the
operation of said facilities;
(I) no Hazardous Material is present in, on or under
such real property at any time prior to the Closing Date,
including any land and the improvements, ground water and
surface water thereof, except in accordance with applicable
laws and regulations; and
(J) there are and have been no storage tanks located
on or under such property.
With respect to each such property used by but not owned by, leased to
or subleased to any of the Seller or its Subsidiaries, Section 3.2.12
of the Disclosure Schedule states the nature and terms of the
relationship pursuant to which such property is used.
3.2.13 TANGIBLE ASSETS. The Seller and its Subsidiaries own or
lease all buildings, machinery, equipment, and other tangible assets necessary
for the conduct of the Business and their other businesses as presently
conducted and as presently proposed to be conducted. Each such tangible asset is
free from defects (patent and latent), has been maintained in accordance with
normal industry practice, is in good operating condition and repair (subject to
normal wear and tear), is suitable for the purposes for which it presently is
used and presently is proposed to be used, and is sufficient to use in the
Business as conducted during the preceding twelve (12) months. There are no
defects in the Acquired Assets which affect the plumbing, electrical, sewer,
ventilating or air conditioning systems thereof.
3.2.14 CONTRACTS. Section 3.2.14 of the Disclosure Schedule
lists all contracts and other agreements to which any of the Seller and its
Subsidiaries is a party, including, but not limited to:
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(i) any agreement or arrangement for free or discounted
liquid waste services;
(ii) any agreement which cannot be canceled by the Seller or
its Subsidiaries without penalty by giving no more than thirty (30)
days notice of cancellation; and
(iii) any agreement for the use by the Seller or its
Subsidiaries of any waste disposal site or facility, including the term
of such agreement and the consideration to be paid by the Seller or its
Subsidiaries for the use of such site or facility.
The Seller has delivered to the Buyer a correct and complete copy of each
written agreement listed in Section 3.2.14 of the Disclosure Schedule (as
amended to date) and a written summary setting forth the terms and conditions of
each oral agreement referred to in 3.2.14 of the Disclosure Schedule. With
respect to each such agreement: (A) the agreement is legal, valid, binding,
enforceable, and in full force and effect; (B) the agreement will continue to be
legal, valid, binding, enforceable, and in full force and effect on identical
terms following the consummation of the transactions contemplated hereby
(including the assignments and assumptions referred to in Article 2 above); (C)
no party thereto is in breach or default, and no event has occurred which with
notice or lapse of time would constitute a breach or default, or permit
termination, modification, or acceleration, under the agreement; and (D) no
party thereto has repudiated any provision of the agreement. Except as set forth
in Section 3.2.14 of the Disclosure Schedule, each of the Seller's agreements
which is a waste disposal agreement has a term which will not expire until at
least one (1) year after the Closing.
3.2.15 POWERS OF ATTORNEY. There are no outstanding powers of
attorney executed by or on behalf of any of the Seller and its Subsidiaries.
3.2.16 INSURANCE. Section 3.2.16 of the Disclosure Schedule
includes certificates of insurance with respect to each insurance policy
(including policies providing property, casualty, liability, and workers'
compensation coverage and bond and surety arrangements) to which any of the
Seller and its Subsidiaries has been a party, a named insured, or otherwise the
beneficiary of coverage at any time within the past 2 years. With respect to
each such insurance policy: (A) the policy is legal, valid, binding,
enforceable, and in full force and effect; (B) the policy will continue to be
legal, valid, binding, enforceable, and in full force and effect on identical
terms following the consummation of the transactions contemplated hereby
(including the assignments and assumptions referred to in Article 2 above); (C)
neither any of the Seller and its Subsidiaries nor any other party to the policy
is in breach or default (including with respect to the payment of premiums or
the giving of notices), and no event has occurred which, with notice or the
lapse of time, would constitute such a breach or default, or permit termination,
modification, or acceleration, under the policy; and (D) no party to the policy
has repudiated any provision thereof. Each of the Seller and its Subsidiaries
has been covered during the past 2 years by insurance in scope and amount
customary and reasonable for the Business and the other businesses in which it
has engaged during the aforementioned period. Section 3.2.16 of the Disclosure
Schedule describes any self-insurance arrangements affecting any of the Seller
and its Subsidiaries, as well as any pending claims with respect to insurance
coverage owned by the Seller or its Subsidiaries, including amounts held in
reserve by the Seller or its Subsidiaries in connection with any such claim.
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3.2.17 LITIGATION. Section 3.2.17 of the Disclosure Schedule
sets forth each instance in which any of the Seller and its Subsidiaries (i) is
subject to any outstanding injunction, judgment, order, decree, ruling, or
charge or (ii) is a party or is threatened to be made a party to any action,
suit, proceeding, hearing, or investigation of, in, or before any court or
quasi-judicial or administrative agency of any federal, state, local, or foreign
jurisdiction or before any arbitrator. None of the actions, suits, proceedings,
hearings, and investigations set forth in Section 3.2.17 of the Disclosure
Schedule could result in any adverse change in the Business, the other business,
financial condition, operations, results of operations, or future prospects of
any of the Seller and its Subsidiaries. None of the Seller Stockholders and the
directors and officers (and employees with responsibility for litigation
matters) of the Seller and its Subsidiaries has any reason to believe that any
such action, suit, proceeding, hearing, or investigation may be brought or
threatened against any of the Seller and its Subsidiaries.
3.2.18 SERVICE WARRANTY. Each service provided or delivered
by any of the Seller and its Subsidiaries has been in conformity with all
applicable contractual commitments and all express and implied warranties, and
none of the Seller and its Subsidiaries has any Liability (and there is no Basis
for any present or future action, suit, proceeding, hearing, investigation,
charge, complaint, claim, or demand against any of them giving rise to any
Liability) for damages in connection therewith, subject only to the reserve for
service warranty claims set forth on the face of the Most Recent Balance Sheet
(rather than in any notes thereto) as adjusted for the passage of time through
the Closing Date in accordance with the past custom and practice of the Seller
and its Subsidiaries. Provided, however, that with respect to five-year service
contract warrranties issued by the Seller for new systems installed by the
Seller, the Buyer shall accept responsibility for warranty claims thereunder but
only to the extent such warranty claims do not exceed (i) a total of $200 under
any particular service contract, or (ii) $2,000 in the aggregate, whichever
amount is lesser. No service provided or delivered by any of the Seller and its
Subsidiaries is subject to any guaranty, warranty, or other indemnity beyond the
applicable standard terms and conditions of sale. Section 3.2.18 of the
Disclosure Schedule includes copies of the standard terms and conditions of sale
for each of the Seller and its Subsidiaries (containing applicable guaranty,
warranty, and indemnity provisions).
3.2.19 SERVICE LIABILITY. To the best of the Seller's and the
Seller Stockholders' knowledge, information and belief, and without any
independent investigation, none of the Seller and its Subsidiaries has any
Liability (and there is no Basis for any present or future action, suit,
proceeding, hearing, investigation, charge, complaint, claim, or demand against
any of them giving rise to any Liability) arising out of any injury to
individuals or property as a result of the use of any service provided or
delivered by any of the Seller and its Subsidiaries.
3.2.20 EMPLOYEES AND CONTRACTORS. No executive, key employee,
group of employees, or independent contractor has any plans to terminate
employment with any of the Seller and its Subsidiaries or with the Buyer if the
Buyer has made known to the Seller its intention to employ or engage such person
or persons. None of the Seller and its Subsidiaries is a party to or bound by
any collective bargaining agreement, nor has any of them experienced any
strikes,
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grievances, claims of unfair labor practices, or other collective bargaining
disputes. None of the Seller and its Subsidiaries has committed any unfair labor
practice or taken an action which would give rise to a claim under any federal
or state law restricting discrimination in employment. None of the Seller
Stockholders and the directors and officers (and employees with responsibility
for employment matters) of the Seller and its Subsidiaries has any Knowledge of
any organizational effort presently being made or threatened by or on behalf of
any labor union with respect to employees of any of the Seller and its
Subsidiaries.
3.2.21 EMPLOYEE BENEFITS. Section 3.2.21 of the Disclosure
Schedule lists each Employee Benefit Plan that any of the Seller and its
Subsidiaries maintains or to which any of the Seller and its Subsidiaries
contributes or has any obligation to contribute. Each such Employee Benefit Plan
(and each related trust, insurance contract, or fund) complies in form and in
operation in all respects with the applicable requirements of ERISA, the Code
and other applicable laws.
3.2.22 GUARANTIES. None of the Seller and its Subsidiaries is
a guarantor or otherwise is liable or responsible for any Liability or
obligation (including indebtedness) of any other Person.
3.2.23 ENVIRONMENTAL, HEALTH, AND SAFETY MATTERS.
(i) To the best of the Seller's and the Seller Stockholders'
knowledge, information and belief, without any independent
investigation, the Seller, its Subsidiaries and their respective
predecessors and Affiliates have complied with all Environmental,
Health, and Safety Requirements. No action, suit, proceeding, hearing,
investigation, charge, complaint, claim, demand, or notice has been
filed or commenced against any of them alleging any failure so to
comply;
(ii) To the best of the Seller's and the Seller Stockholders'
knowledge, information and belief, without any independent
investigation, each of the Seller and each of its Subsidiaries has no
Liability (and none of their respective predecessors and Affiliates
have handled or disposed of any substance, arranged for the disposal of
any substance, exposed any employee or other individual to any
substance or condition, or owned or operated any property or facility
in any manner that could form the Basis for any present or future
action, suit, proceeding, hearing, investigation, charge, complaint,
claim, or demand against the Seller, giving rise to any Liability) for
damage to any site, location, or body of water (surface or subsurface),
for any illness of or personal injury to any employee or other
individual, or for any reason under any Environmental, Health and
Safety Requirements, except in compliance with all applicable
Environmental, Health and Safety Requirements;
(iii) All properties and equipment used in the Seller's
Business and its Subsidiaries' businesses, and their respective
predecessors' and Affiliates' businesses, have been free of Extremely
Hazardous Substances; and, except as set forth on Section 3.2.23(iii)
of the Disclosure Schedule, to the best of the Seller's and the Seller
Stockholders' knowledge,
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information and belief, without any independent investigation, all
properties and equipment used in the Seller's Business and its
Subsidiaries' businesses, and their respective predecessors' and
Affiliates' businesses, have been free of Hazardous Materials;
(iv) Section 3.2.23(iv) of the Disclosure Schedule sets forth
all licenses, permits, clearances and consents with respect to
environmental and waste management matters (hereinafter collectively
referred to as the "Environmental Permits") currently held by the
Seller and any of its Subsidiaries, and for each such Environmental
Permit, accurately describes the expiration and/or renewal date
thereof. Such Environmental Permits constitute the only permits
necessary for the continued conduct of the Seller's Business and its
Subsidiaries' businesses, and the waste management activities and other
businesses of the Seller and its Subsidiaries as such activities and
businesses are currently being conducted. To the best of the Seller's
and the Seller Stockholders' knowledge, information and belief, without
investigation, the Seller and its Subsidiaries have complied with all
applicable covenants and conditions of the Environmental Permits. There
is no action, proceeding, permit revocation, permit amendment, writ,
injunction, claim or investigation pending or, to the best of the
Seller's and the Seller Stockholders' knowledge, information and
belief, without investigation, threatened, concerning or relating to
the Environmental Permits or the Hazardous Materials activities of the
Seller or its Subsidiaries, including, but not limited to, the
treatment, storage or disposal of Hazardous Materials or liquid or
solid waste materials which have been handled by the Seller, its
Subsidiaries, or their respective predecessors or Affiliates;
(v) To the best of the Seller's and the Seller Stockholders'
knowledge, information and belief, without investigation, each of the
Seller and each of its Subsidiaries has not transported, stored,
treated or disposed, nor has it allowed or arranged for any third
person to transport, store, treat or dispose of, waste to or at any
location other than a site lawfully permitted to receive such waste for
such purposes. To the best of the Seller's and the Seller Stockholders'
knowledge, information and belief, without investigation, each of the
Seller and each of its Subsidiaries has not transported, stored,
treated or disposed of, nor has it allowed or arranged for any third
person to transport, store, treat or dispose of, (1) any Hazardous
Materials or Extremely Hazardous Substances, or (2) any other waste to
or at any location designated for remedial action pursuant to the
Comprehensive Environmental Response, Compensation and Liability Act,
as from time to time amended, or any similar federal or state statute
assigning responsibility for the cost of investigating or remediating
releases of contaminants into the environment;
(vi) Section 3.2.23(vi) of the Disclosure Schedule is a
complete and accurate list of (a) locations (identified by name,
address, owner/operator, type of facility and type of waste) to which
the Seller and/or any of its Subsidiaries has, at any time in the past
10 years, transported, or caused to be transported, allowed or arranged
for any third party to transport, any type of waste material, generated
by the Seller, the Subsidiaries, or customers of the Seller or any of
its Subsidiaries, for storage (other than at a customer's facility),
treatment,
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burning, recycling or disposal, and (b) storage (other than at a
customer's facility), treatment, burning, recycling or disposal
activities which the Seller and/or any of its Subsidiaries has
undertaken, at any time during the past 10 years, at locations then or
presently owned or occupied by the Seller and/or any of its
Subsidiaries (such list to include property address, nature of the
Seller's and/or Subsidiaries' interest in property, nature of the
activity conducted at such location, type and form or waste, estimated
volume of waste disposal on or in ground, and period of time the
activity was conducted);
(vii) Neither the Seller nor any of its Subsidiaries has
received notification (including requests for information directed to
the Seller, any of its Subsidiaries or any Seller Stockholder) from any
governmental agency or any other person asserting that any of the
Seller or any of its Subsidiaries is or may be a "potentially
responsible person" or otherwise liable with respect to a remediation
or the payment of response costs at a waste storage treatment or
disposal action facility, pursuant to the provisions of the
Comprehensive Environmental Response, Compensation and Liability Act,
as from time to time amended, or any similar federal or state statute
assigning responsibility for the costs of investigating or remediating
releases of contaminants into the environment.
3.2.24 CERTAIN BUSINESS RELATIONSHIPS WITH THE SELLER AND ITS
SUBSIDIARIES. Except as set forth on Section 3.2.24 of the Disclosure Schedule,
none of the Seller Stockholders and their Affiliates has been involved in any
business arrangement or relationship with any of the Seller and its Subsidiaries
within the past 12 months, and none of the Seller Stockholders and their
Affiliates owns or leases any asset, tangible or intangible, which is used in
the Business of the Seller and the business of its Subsidiaries. Except as set
forth on Section 3.2.24 of the Disclosure Schedule, neither the Seller nor any
Seller Stockholder owns or has any interest in a Person (other than the Seller
and its Subsidiaries) conducting a waste management business.
3.2.25 INVESTMENT. The Seller and each of the Seller
Stockholders (i) understands that the SanTi Stock has not been, and will not be,
registered under the Securities Act, or under any state securities laws, and is
being offered and sold in reliance upon federal and state exemptions for
transactions not involving any public offering, (ii) understands that the Seller
is acquiring the SanTi Stock solely for its own account for investment purposes,
and not with a view to the distribution thereof, (iii) is a sophisticated
investor with knowledge and experience in business and financial matters, (iv)
has received certain information concerning the Buyer and SanTi and has had the
opportunity to obtain additional information as desired in order to evaluate the
merits and the risks inherent in holding the SanTi Stock, (v) is able to bear
the economic risk and lack of liquidity inherent in holding the SanTi Stock, and
(vi) is an Accredited Investor for the reasons set forth on Section 3.2.25 of
the Disclosure Schedule.
3.2.26 OWNERSHIP AND ASSIGNABILITY OF ACCOUNTS. To the extent
that an ownership right can exist in the Accounts, the Seller is and will be at
the Closing Date, the lawful owner of all of the Accounts, and all such Accounts
will be at the Closing Date free and clear of all claims, liens, mortgages,
pledges, encumbrances and security interests of every kind, including, but not
limited
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to financing arrangements (including receivables financing). At the Closing Date
there will be no outstanding rights of any kind to acquire from either the
Seller or the Seller Stockholders, either separately or jointly, any interest
whatsoever, whether current or future, in the Accounts, held by any Person other
than Buyer. Except for those Accounts expressly set forth in Section 3.2.26 of
the Disclosure Schedule, all Accounts are or will be at the Closing Date freely
assignable by the Seller, and such assignment, transfer and delivery thereof to
the Buyer of all of the Accounts will not constitute or result in a breach,
violation or default of any agreements relating to such Accounts, and such
agreements and Accounts shall remain in full force and effect as if there had
been no assignment, transfer or delivery.
3.2.27 REVENUE AND MAJOR ACCOUNTS. The average Monthly Gross
Charges of the Seller for the Accounts for the calendar months of January
through November, 1997 derived solely from servicing the Accounts (determined on
an accrual basis with annual, semiannual, quarterly and bi-monthly payments
prorated on a monthly basis) are at least $311,000. Section 3.2.27 of the
Disclosure Schedule contains a listing of all of the Accounts, and the Gross
Monthly Charges of such Accounts for the calendar months of January through
November, 1997. Unless otherwise noted on Section 3.2.27 of the Disclosure
Schedule, all of such Accounts remain currently active, there has not been a
decline in the aggregate monthly billing level of such Accounts over the 12
calendar month period immediately preceding the date hereof, all such Accounts
are paid currently, and during the 12 calendar month period immediately
preceding the date hereof, the Seller has not lost any customer that generated
more than ten percent (10%) of the Seller's gross revenues in any of the
Seller's past fiscal periods. The Seller and the Seller Stockholders further
represent and warrant that during the 270 day period immediately following the
Closing, the average monthly gross charges for the Accounts shall not be less
than $290,000. To the extent that the average monthly gross charges for the
Accounts are less than $290,000, the Parties agree that the Buyer shall be
deemed to have suffered a Loss in an amount equal to the product of said
deficiency and the factor 12.38, and that the Buyer shall be entitled to
indemnity from the Seller in the amount of such Loss or to offset the amount of
said Loss against the portion of the Purchase Price withheld by the Buyer
pursuant to Section 2.3 hereof. Notwithstanding the above, (a) the total
indemnification liability of the Seller and the Seller Stockholders under this
Agreement for the breach of the representations and warranties contained in this
Section 3.2.27 shall be capped at and not exceed the portion of the Purchase
Price withheld by the Buyer pursuant to Section 2.3 hereof; and (b) all payments
by the Seller and/or the Seller Stockholders of their respective indemnification
obligations that may arise from the breach of the representations and warranties
contained in this Section 3.2.27 shall be paid equally in cash and SanTi Stock.
3.2.28 POSSESSION OF FRANCHISES, LICENSES, ETC. The Seller and
each of the Subsidiaries possesses all certificates, licenses, permits and other
authorizations from governmental political subdivisions or regulatory
authorities that are necessary for (a) the ownership, maintenance and operation
of the Business and the other businesses conducted by them, (b) the operation,
use and ownership of the Acquired Assets and (c) the servicing of the Accounts.
Neither the Seller nor any Subsidiary is in any way whatsoever in violation of
such franchises, certificates, licenses, permits and other authorizations.
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3.2.29 THIRD PARTY RELATIONSHIPS. Each of the Seller and the
Subsidiaries enjoys good working relationships in accordance with past practices
with all suppliers, subcontractors and other Persons necessary or appropriate
for the normal operation of the Business and the businesses of the Subsidiaries.
The consummation of the subject transaction will not result in any injury to or
disruption of such relationships, and the Buyer will not incur any costs or
expenses in order to continue such relationships as they had been maintained
previous to the Closing.
3.2.30 ACQUISITION QUESTIONNAIRE. All statements and
representations contained in that certain December 2, 1997 Acquisition
Questionnaire (by reference made an integral part hereof) initialed by the
Seller Stockholders and tendered by the Seller to the Buyer is true and correct
in all material respects.
3.2.31 DISCLOSURE. The representations and warranties
contained in this Article 3 do not contain any untrue statement of a material
fact or omit to state any material fact necessary in order to make the
statements and information contained in this Article 3 not misleading.
ARTICLE 4. REPRESENTATIONS AND WARRANTIES OF THE BUYER
The Buyer represents and warrants to the Seller that the statements
contained in this Article 4 are correct and complete as of the date of this
Agreement and will be correct and complete as of the Closing Date (as though
made then and as though the Closing Date were substituted for the date of this
Agreement throughout this Article 4), except as set forth in the Disclosure
Schedule. The Disclosure Schedule will be arranged in paragraphs corresponding
to the lettered and numbered paragraphs contained in this Article 4.
4.1 ORGANIZATION OF THE BUYER. The Buyer is a corporation duly
organized, validly existing, and in good standing under the laws of the
jurisdiction of its incorporation.
4.2 AUTHORIZATION OF TRANSACTION. The Buyer has full power and
authority (including full corporate power and authority) to execute and deliver
this Agreement and to perform its obligations hereunder. This Agreement
constitutes the valid and legally binding obligation of the Buyer, enforceable
in accordance with its terms and conditions, except as enforceability may be
limited by bankruptcy, insolvency, reorganization, moratorium or other laws
affecting creditors' rights generally, or by the exercise of judicial discretion
in accordance with general equitable principles.
4.3 NONCONTRAVENTION. Neither the execution and the delivery of this
Agreement, nor the consummation of the transactions contemplated hereby
(including the assignments and assumptions referred to in Article 2 above), will
(i) violate any constitution, statute, regulation, rule, injunction, judgment,
order, decree, ruling, charge, or other restriction of any government,
governmental agency, or court to which the Buyer is subject or any provision of
its charter or bylaws or (ii) conflict with, result in a breach of, constitute a
default under, result in the acceleration of, create in any Person the right to
accelerate, terminate, modify, or cancel, or require any notice under
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any agreement, contract, lease, license, instrument, or other arrangement to
which the Buyer is a party or by which it is bound or to which any of its assets
is subject. The Buyer does not need to give any notice to, make any filing with,
or obtain any authorization, consent, or approval of any government or
governmental agency in order for the Parties to consummate the transactions
contemplated by this Agreement (including the assignments and assumptions
referred to in Article 2 above).
4.4 BROKERS' FEES. The Buyer has no Liability or obligation to pay any
fees or commissions to any broker, finder, or agent with respect to the
transactions contemplated by this Agreement for which the Seller could become
liable or obligated.
ARTICLE 5. PRECLOSING COVENANTS
The Parties agree as follows with respect to the period between the
execution of this Agreement and the Closing.
5.1 GENERAL. Each of the Parties will use its best efforts to take all
actions and to do all things necessary, proper or advisable in order to
consummate and make effective the transactions contemplated by this Agreement
(including satisfaction, but not waiver, of the closing conditions set forth in
Article 6 below).
5.2 NOTICES AND CONSENTS. The Seller will give (and will cause each of
its Subsidiaries to give) any notices to third parties, and the Seller will
obtain (and will cause each of its Subsidiaries to obtain) any third party
consents, that the Buyer may request in connection with the matters referred to
in Section 3.2.3 above and the consummation of the transactions described
herein. Each of the Parties will (and the Seller will cause each of its
Subsidiaries to) give any notices to, make any filings with, and use its
reasonable best efforts to obtain any authorizations, consents, and approvals of
governments and governmental agencies in connection with the matters referred to
in Sections 3.2.3 and 4.3 above.
5.3 OPERATION OF BUSINESS. The Seller will not (and will not cause or
permit any of its Subsidiaries to) engage in any practice, take any action, or
enter into any transaction outside the Ordinary Course of Business. Without
limiting the generality of the foregoing, the Seller will not (and will not
cause or permit any of its Subsidiaries to) (i) declare, set aside, or pay any
dividend or make any distribution with respect to its capital stock or redeem,
purchase, or otherwise acquire any of its capital stock, or (ii) otherwise
engage in any practice, take any action, or enter into any transaction of the
sort described in Section 3.2.8 above.
5.4 PRESERVATION OF BUSINESS. The Seller will keep (and will cause each
of its Subsidiaries to keep) its Business and other businesses and properties
substantially intact, including its present operations, physical facilities,
working conditions, and relationships with lessors, licensors, suppliers,
customers, and employees.
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5.5 FULL ACCESS. Each of the Seller and the Buyer will permit (and will
cause each of its respective Subsidiaries to permit) representatives of the
Buyer and the Seller, as applicable, to have full access to all premises,
properties, personnel, books, records (including Tax records), contracts, and
documents of or pertaining to each of the Seller and Buyer, as applicable, and
its respective Subsidiaries.
5.6 NOTICE OF DEVELOPMENTS. Each Party will give prompt written notice
to the other Party of any material adverse development causing a breach of any
of its own representations and warranties in Articles 3 and 4 above. No
disclosure by any Party pursuant to this Section 5.6, however, shall be deemed
to amend or supplement the Disclosure Schedule or to prevent or cure any
misrepresentation, breach of warranty, or breach of covenant.
5.7 EXCLUSIVITY. The Seller will not (and the Seller will not cause or
permit any of its Subsidiaries to) (i) solicit, initiate, or encourage the
submission of any proposal or offer from any Person relating to the acquisition
of any capital stock or other voting securities, or any substantial portion of
the assets, of any of the Seller and its Subsidiaries (including any acquisition
structured as a merger, consolidation, or share exchange) or (ii) participate in
any discussions or negotiations regarding, furnish any information with respect
to, assist or participate in, or facilitate in any other manner any effort or
attempt by any Person to do or seek any of the foregoing. The Seller will notify
and inform the Buyer immediately if any Person makes any proposal, offer,
inquiry, or contact with respect to any of the foregoing.
ARTICLE 6. CONDITIONS TO OBLIGATIONS TO CLOSE
6.1 CONDITIONS TO OBLIGATION OF THE BUYER. The obligation of the Buyer
to consummate the transactions to be performed by it in connection with the
Closing is subject to satisfaction of the following conditions:
(i) the representations and warranties set forth in Article
3 above shall be true and correct in all material respects at and as of
the Closing Date;
(ii) the Seller shall have performed and complied with all of
its covenants hereunder in all material respects through the Closing,
including but not limited to those set forth in Articles 2 and 5 above;
(iii) the Seller and its Subsidiaries shall have procured all
of the third party consents specified in Section 5.2 above, and the
Buyer shall have approved of all of the matters reflected thereby;
(iv) no action, suit, or proceeding shall be pending or
threatened before any court or quasi-judicial or administrative agency
of any federal, state, local, or foreign jurisdiction or before any
arbitrator wherein an unfavorable injunction, judgment, order, decree,
ruling, or
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charge would (A) prevent consummation of any of the transactions
contemplated by this Agreement, (B) cause any of the transactions
contemplated by this Agreement to be rescinded following consummation,
(C) affect adversely the right of the Buyer to own the Acquired Assets,
to operate the Business , and to control the Seller's Subsidiaries, or
(D) affect adversely the right of any of the Seller's Subsidiaries to
own its assets and to operate its businesses (and no such injunction,
judgment, order, decree, ruling, or charge shall be in effect);
(v) the Seller shall have delivered to the Buyer a
certificate to the effect that each of the conditions specified above
in Section 6.1(i)-(iv) is satisfied in all respects;
(vi) the Seller, its Subsidiaries, and the Buyer shall have
received all authorizations, consents, and approvals of governments and
governmental agencies referred to in Articles 3 and 4 above;
(vii) the relevant Persons shall have entered into, executed
and delivered the Noncompetition Agreements, Employment Agreements,
Releases and the other agreements referred to in Article 2 above, and
the same shall be in full force and effect;
(viii) the Buyer shall have received from counsel to the
Seller an opinion in form and substance as set forth in Exhibit G
attached hereto, addressed to the Buyer, and dated as of the Closing
Date;
(ix) the Buyer shall have received copies, certified by the
duly qualified and acting Secretary or Assistant Secretary of the
Seller, of resolutions adopted by the board of directors of the Seller
and the shareholders of the Seller approving this Agreement and the
consummation of the transactions contemplated hereby.
(x) SanTi shall have entered into a Shareholders Agreement
with the Seller or the Seller's assignee who will be the registered
owner of the SanTi Stock, which Shareholders Agreement contains terms
and conditions satisfactory to SanTi;
(xi) the Buyer (which shall promptly apply for the transfer
of the permits and licenses described below) shall have received
documentation satisfactory to the Buyer effecting the transfer to the
Buyer of any and all permits and licenses used by the Seller or its
Subsidiaries in the operation of the Business and the businesses of the
Subsidiaries; provided, however, that if the Seller does not effect
such transfer to the Buyer at the Closing, the Seller shall effect such
transfer to the Buyer within 120 days after the Closing, and at the
Closing, the Seller shall execute and deliver to the Buyer
documentation necessary or appropriate in the opinion of the Buyer to
cause the Buyer to be the sole beneficiary of all rights under such
permits and licenses during said 120 day period, subject to the Buyer's
promptly making the required applications;
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(xii) the Seller shall have delivered to the Buyer
documentation satisfactory to the Buyer effecting a binder in favor of
the Buyer of the insurance coverage of the Seller described in Section
3.2.16 hereof, to be effective for at least thirty (30) days,
commencing at the time of the Closing;
(xiii) the Seller shall have delivered to the Buyer
documentation satisfactory to the Buyer effecting a transfer to the
buyer of all of the capital stock of Nutrecon; and
(xiv) all actions to be taken by the Seller in connection
with consummation of the transactions contemplated hereby and all
certificates, opinions, instruments, and other documents required to
effect the transactions contemplated hereby will be satisfactory in
form and substance to the Buyer.
The Buyer may waive any condition specified in this Section 6.1 if it executes a
writing so stating at or prior to the Closing.
6.2 CONDITIONS TO OBLIGATION OF THE SELLER. The obligation of the
Seller to consummate the transactions to be performed by it in connection with
the Closing is subject to satisfaction of the following conditions:
(i) the representations and warranties set forth in Article
4 above shall be true and correct in all material respects at and as of
the Closing Date;
(ii) the Buyer shall have performed and complied with all of
its covenants hereunder in all material respects through the Closing,
including but not limited to those set forth in Articles 2 and 5 above;
(iii) no action, suit, or proceeding shall be pending before
any court or quasi-judicial or administrative agency of any federal,
state, local, or foreign jurisdiction or before any arbitrator wherein
an unfavorable injunction, judgment, order, decree, ruling, or charge
would (A) prevent consummation of any of the transactions contemplated
by this Agreement or (B) cause any of the transactions contemplated by
this Agreement to be rescinded following consummation (and no such
injunction, judgment, order, decree, ruling, or charge shall be in
effect);
(iv) the Buyer shall have delivered to the Seller a
certificate to the effect that each of the conditions specified above
in Section 6.2(i)-(iii) is satisfied in all respects;
(v) the relevant Persons shall have entered into, executed
and delivered the Noncompetition Agreements, Employment Agreements,
Releases and the other agreements referred to in Article 2 above, and
the same shall be in full force and effect; and
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(vi) the Seller shall have received from counsel to the Buyer
an opinion in form and substance as set forth in Exhibit H attached
hereto, addressed to the Seller and dated as of the Closing Date;
The Seller may waive any condition specified in this Section 6.2 if it executes
a writing so stating at or prior to the Closing.
ARTICLE 7. TERMINATION
7.1 TERMINATION OF AGREEMENT. Certain of the Parties may terminate this
Agreement as provided below:
(i) the Buyer and the Seller may terminate this Agreement by
mutual written consent at any time prior to the Closing;
(ii) the Buyer may terminate this Agreement by giving written
notice to the Seller on or before the Closing Date if the Buyer is not
satisfied with the results of its continuing business, legal, and
accounting due diligence regarding the Seller and its Subsidiaries;
(iii) the Seller may terminate this Agreement by giving
written notice to the Buyer on or before the Closing Date if the Seller
is not satisfied with the results of its continuing business, legal,
and accounting due diligence regarding the Buyer and SanTi;
(iv) the Buyer may terminate this Agreement by giving written
notice to the Seller at any time prior to the Closing (A) in the event
the Seller or any Seller Stockholder has breached any representation,
warranty, or covenant contained in this Agreement in any material
respect, the Buyer has notified the Seller or the Seller Stockholder,
as the case may be, of the breach, and the breach has continued without
cure for a period of 10 days after the notice of breach or (B) if the
Closing shall not have occurred on or before January 31, 1998, by
reason of the failure of any condition precedent under Section 6.1
hereof (unless the failure results primarily from the Buyer itself
breaching any representation, warranty, or covenant contained in this
Agreement); and
(v) the Seller may terminate this Agreement by giving
written notice to the Buyer at any time prior to the Closing (A) in the
event the Buyer has breached any material representation, warranty, or
covenant contained in this Agreement in any material respect, the
Seller has notified the Buyer of the breach, and the breach has
continued without cure for a period of 10 days after the notice of
breach or (B) if the Closing shall not have occurred on or before
January 31, 1998, by reason of the failure of any condition precedent
under Section 6.2 hereof (unless the failure results primarily from the
Seller itself breaching any representation, warranty, or covenant
contained in this Agreement).
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7.2 EFFECT OF TERMINATION. If any Party terminates this Agreement
pursuant to Section 7.1 above, all rights and obligations of the Parties
hereunder shall terminate without any Liability of any Party to any other Party
(except for any Liability of any Party then in breach).
ARTICLE 8. SURVIVAL OF REPRESENTATIONS AND
WARRANTIES; INDEMNIFICATION
8.1 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. All representations,
warranties, agreements, covenants and obligations made or undertaken by the
Seller and each Seller Stockholder in this Agreement are, whether specified as
such or not, the joint and several representations, warranties, agreements,
covenants and obligations of all of the Seller and the Seller Stockholders,
unless otherwise specifically indicated to the contrary herein with respect to a
particular representation, warranty, agreement, covenant or obligation; are
material, have been relied upon by the Buyer, shall survive the Closing
hereunder, and shall not merge in the performance of any obligation by any
Party; and, as to the representations and warranties, shall terminate or expire
on the fifth (5th) anniversary of the Closing Date, provided that such
representations and warranties shall not terminate or expire, but shall
continue, during the pendency of any suit, action, claim or other proceeding
brought in respect of such representations and warranties prior to the
termination or expiration of such five (5) year period. Notwithstanding the
above, all representations and warranties made by the Seller and each Seller
Stockholder in this Agreement that in any manner relate to (1) Tax matters, (2)
environmental matters, and (3) title matters, or as to the terms and performance
of this Agreement (collectively, the "Special Matters"), or any of the
foregoing, shall terminate or expire only upon the termination or expiration of
all applicable statutes of limitation. All representations, warranties,
agreements, covenants and obligations made or undertaken by the Buyer in this
Agreement shall survive the Closing hereunder, and shall not merge in the
performance of any obligation by any Party; and, as to the representations and
warranties, shall terminate or expire on the fifth (5th) anniversary of the
Closing Date, provided that such representations and warranties shall not
terminate or expire, but shall continue, during the pendency of any suit,
action, claim or other proceeding brought in respect of such representations and
warranties prior to the termination or expiration of such five (5) year period.
8.2 OBLIGATION OF THE SELLER AND THE SELLER STOCKHOLDERS TO INDEMNIFY.
Subject to the limitations contained in this Article 8, the Seller and the
Seller Stockholders, jointly and severally, shall defend, indemnify and hold the
Buyer and its shareholders, officers, directors, employees, counsel, agents,
Affiliates and assigns (collectively, the "Buyer Indemnitees") harmless from and
against any and all Losses asserted against, imposed upon or incurred by the
Buyer Indemnitees, or any of them, by reason of or resulting from, arising out
of, based upon or otherwise in respect of:
(i) any inaccuracy in any representation or warranty made by
the Seller or any Seller Stockholder pursuant to this Agreement or the
Disclosure Schedule;
(ii) any breach of any covenant or agreement made or to be
performed by the Seller or any Seller Stockholder pursuant to this
Agreement;
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(iii) any claim by any broker, finder or other Person employed
or allegedly employed by the Seller or any Seller Stockholder in
connection with the transactions contemplated by this Agreement;
(iv) any Liability or Loss resulting from, arising out of,
based upon or otherwise in respect of any violation or alleged
violation of any Environmental, Health and Safety Requirements related
to the Acquired Assets, or the presence of any Hazardous Materials or
Extremely Hazardous Substances on the Acquired Assets, that occurred at
any time prior to Closing;
(v) the Parties' failure to comply with any of the bulk
sales laws and any other similar laws in any applicable jurisdiction in respect
of the transactions contemplated by this Agreement, and any action brought or
levy made as a result thereof; and/or
(vi) any Liability or obligation of the Seller or any of the
Seller Stockholders, or in any manner related to the Business, the
Acquired Assets or the Excluded Assets, other than the Assumed
Liabilities.
8.3 OBLIGATION OF THE BUYER TO INDEMNIFY. Subject to the limitations
contained in this Article 8, the Buyer shall defend, indemnify and hold the
Seller and its officers, directors, partners, employees, counsel, agents,
Affiliates and assigns (collectively, the "Seller Indemnitees") harmless from
and against any and all Losses asserted against, imposed upon or incurred by the
Seller Indemnitees, or any of them, by reason of or resulting from, arising out
of, based upon or otherwise in respect of:
(i) any inaccuracy in any representation or warranty made by
the Buyer pursuant to this Agreement or the Disclosure Schedule;
(ii) any breach of any covenant or agreement made or to be
performed by the Buyer pursuant this Agreement;
(iii) any claim by any broker, finder or other Person employed
or allegedly employed by the Buyer in connection with the transactions
contemplated by this Agreement; and/or
(iv) any Assumed Liability.
8.4 MATTERS INVOLVING THIRD PARTIES.
8.4.1 If any third party shall notify any Person that is
entitled to seek indemnification pursuant to Sections 8.2 or 8.3 hereof (the
"Indemnified Party") with respect to any matter (a "Third Party Claim") which
may give rise to a claim for indemnification against any other Person (the
"Indemnifying Party") under this Article 8, then the Indemnified Party shall
promptly notify the Indemnifying Party thereof in writing; provided, however,
that no delay on the part of the Indemnified Party in notifying the Indemnifying
Party shall relieve the Indemnifying Party from any obligation hereunder unless
(and then solely to the extent) the Indemnifying Party thereby is prejudiced.
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8.4.2 The Indemnifying Party will have the right to defend the
Indemnified Party against the Third Party Claim with counsel of its choice
reasonably satisfactory to the Indemnified Party so long as (a) the Indemnifying
Party notifies the Indemnified Party in writing within 15 days after the
Indemnified Party has given notice of the Third Party Claim that the
Indemnifying Party will indemnify the Indemnified Party from and against all
Losses the Indemnified Party may suffer resulting from, arising out of, relating
to, in the nature of or caused by the Third Party Claim, (b) the Indemnifying
Party provides the Indemnified Party with evidence reasonably acceptable to the
Indemnified Party that the Indemnifying Party will have the financial resources
to defend against the Third Party Claim and fulfill its indemnification
obligations hereunder, (c) the Third Party Claim involves only money damages and
does not seek an injunction or other equitable relief, (d) settlement of, or an
adverse judgment with respect to, the Third Party Claim is not, in the good
faith judgment of the Indemnified Party, likely to establish a precedential
custom or practice adverse to the continuing business interests of the
Indemnified Party, and (e) the Indemnifying Party conducts the defense of the
Third Party Claim actively and diligently.
8.4.3 So long as the Indemnifying Party is conducting the
defense of the Third Party Claim in accordance with Section 8.4.2 above, (a) the
Indemnified Party may retain separate co-counsel at its cost and expense and
participate in the defense of the Third Party Claim, (b) the Indemnified Party
will not consent to the entry of any judgment or enter into any settlement with
respect to the Third Party Claim without the prior written consent of the
Indemnifying Party (not to be withheld unreasonably), and (c) the Indemnifying
Party will not consent to the entry of any judgment or enter into any settlement
with respect to the Third Party Claim without the prior written consent of the
Indemnified Party (not to be withheld unreasonably).
8.4.4 In the event any of the conditions in Section 8.4.2
above is or becomes unsatisfied, however, (a) the Indemnified Party may defend
against, and consent to the entry of any judgment or enter into any settlement
with respect to, the Third Party Claim in any manner it reasonably may deem
appropriate (and the Indemnified Party need not consult with, or obtain any
consent from, the Indemnifying Party in connection therewith), (b) the
Indemnifying Party will reimburse the Indemnified Party promptly and
periodically for the costs of defending against the Third Party Claim (including
reasonable attorneys' fees and expenses), and (c) the Indemnifying Party will
remain responsible for any and all Losses the Indemnified Party may suffer
resulting from, arising out of, relating to, in the nature of or caused by the
Third Party Claim to the fullest extent provided in this Article 8.
8.5 LIMITATION ON INDEMNIFICATION. The determination of the amount of
any Loss for which indemnification may be claimed under this Article 8 shall
take into account and be offset by any tax benefit or benefit under any policy
of insurance derived, accrued or received by the Indemnified Party as a result
thereof. No Person otherwise entitled to indemnification under this Agreement
shall be indemnified pursuant to this Agreement to the extent that such Person's
Losses are increased or extended by the gross negligence, willful misconduct,
violation of law or bad faith of such Person.
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8.6 INDEMNIFICATION PAYMENTS. An Indemnifying Party shall pay to the
Indemnified Party the full amount of any and all Losses (other than Losses
resulting from a Third Party Claim) for which it is required to indemnify the
Indemnified Party under this Article 8 within ten (10) days after its receipt of
notice thereof from the Indemnified Party, and the full amount of any and all
Losses resulting from a Third Party Claim within ten (10) days after final
settlement or adjudication thereof; and in each case, thereafter the amount of
any such Loss shall bear interest at the Applicable Rate. After complying with
the provisions of Section 8.4 hereof with respect to any Loss that results from
a Third Party Claim (if applicable), the Buyer shall be entitled to offset from
any payments due the Seller or any of the Seller Stockholders as part of the
Purchase Price or otherwise (including but not limited to the SanTi Stock), the
full amount of any and all Losses (whether or not resulting from a Third Party
Claim) for which the Seller or any Seller Stockholder is required to indemnify
any Buyer Indemnitee pursuant to Section 8.2 hereof, and the Buyer shall not be
liable for any amounts so offset.
8.7 OTHER RIGHTS AND REMEDIES NOT AFFECTED. The indemnification rights
of the Parties and other Persons under this Article 8 are independent of and in
addition to such other rights and remedies that the Parties and such other
Persons may have at law or in equity or otherwise for any misrepresentation,
breach of warranty or failure to fulfill any agreement or covenant hereunder on
the part of any Party hereto, including, without limitation, the right to
offset, seek specific performance, rescission or restitution, none of which
rights or remedies shall be adversely affected or diminished hereby.
ARTICLE 9. MISCELLANEOUS
9.1 PRESS RELEASES AND PUBLIC ANNOUNCEMENTS. No Party shall issue any
press release or make any public announcement relating to the subject matter of
this Agreement prior to the Closing without the prior written approval of the
Parties.
9.2 COMPLIANCE WITH BULK SALES LAWS. The Parties hereby waive
compliance by the Buyer and the Seller with the bulk sales law and any other
similar laws in any applicable jurisdiction in respect of the transactions
contemplated by this Agreement.
9.3 TAXES. The Buyer shall pay all federal, state and local sales, use
and other transfer taxes (other than Seller's income taxes), if any, due as a
result of the purchase, sale or transfer of the Acquired Assets in accordance
herewith, whether such Taxes are imposed by law on the Seller or the Buyer. The
Seller shall pay all of its federal, state and local income taxes, if any, due
as a result of the purchase, sale or transfer of the Acquired Assets in
accordance herewith.
9.4 NOTICES. All notices, requests, demands and other communications
required or permitted hereunder shall be (i) delivered by hand, (ii) mailed by
United States registered or certified mail, return receipt requested, first
class postage prepaid and properly addressed, or (iii) sent by national
overnight courier service to the Parties or their assignees, addressed as
follows:
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To the Seller and/or any Seller Stockholder:
Mr. A. Thomas Ferrero, Jr.
c/o Ferrero Wastewater Management, Inc.
P.O. Box 442
Ambler, Pennsylvania 19002-0442
Mr. A. Thomas Ferrero, Jr.
336 Chestnut Lane
Ambler, Pennsylvania 19002
Mr. A. Thomas Ferrero, III
c/o Ferrero Wastewater Management, Inc.
P.O. Box 442
Ambler, Pennsylvania 19002-0442
Mr. A. Thomas Ferrero, III
21 Heritage Lane
New Britain, Pennsylvania 18901
with copies in each case to:
John P. Knox, Esquire
Timoney, Knox, Hasson & Weand, LLP
400 Maryland Drive
P.O. Box 7544
Fort Washington, Pennsylvania 19034-7544
To the Buyer:
Mr. Rock Payne, President
SanTi Group, Inc.
4696 Oakdale Road
Smyrna, Georgia 30080
with copies in each case to:
Thomas V. Chorey, Jr.
Chorey, Taylor & Feil, A Professional Corporation
Suite 1700, The Lenox Building
3399 Peachtree Road, N.E.
Atlanta, Georgia 30326
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All notices, requests, instructions or documents given to any Party in
accordance with this Section 9.4 shall be deemed to have been given (i) on the
date of receipt if delivered by hand or overnight courier service, or (ii) on
the date five (5) business days after depositing with the United States Postal
Service if mailed by United States registered or certified mail, return receipt
requested, first class postage prepaid and properly addressed. Any Party may
change its address specified for notices herein by designating a new address by
notice in accordance with this Section 9.4.
9.5 ENTIRE AGREEMENT. All Exhibits and Schedules (including the
Disclosure Schedule) referred to herein, and the agreements evidenced by
Exhibits, are intended to be, and hereby are, specifically incorporated into and
made a part of this Agreement. This Agreement constitutes the entire agreement
among the Parties relating to the subject matter hereof and supersedes all prior
and contemporaneous negotiations, writings and agreements relating to the
subject matter of this Agreement.
9.6 MODIFICATIONS, AMENDMENTS AND WAIVERS. The Parties may, by mutual
written agreement and in no other manner, modify or amend the terms of this
Agreement. The failure or delay of any Party at any time or times to require the
performance of any provision of this Agreement shall in no manner affect its
right to enforce that provision. No single or partial waiver by any Party of any
condition of this Agreement, or the breach of any term, agreement or covenant
of, or the inaccuracy of any representation or warranty in, this Agreement,
whether by conduct or otherwise, in any one or more instances shall be construed
or deemed to be a further or continuing waiver of any such condition, breach or
inaccuracy or a waiver of any other condition, breach or inaccuracy.
9.7 SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon and
shall inure to the benefit of and be enforceable by the Parties, and their
respective successors and permitted assigns. This Agreement may not be assigned
by any Party without the prior written consent of the other Parties, except that
the Buyer may assign this Agreement and its rights and obligations hereunder to
one or more of its Affiliates, or to any of its lenders as collateral security.
9.8 GOVERNING LAW. This Agreement shall be controlled, construed and
enforced in accordance with the substantive laws of the Commonwealth of
Pennsylvania, without regard to any laws related to choice or conflicts of laws.
9.9 SEVERABILITY. Should any one or more of the provisions of this
Agreement be determined to be invalid, illegal or unenforceable in any respect,
the validity, legality and enforceability of the remaining provisions hereof
shall not in any way be adversely affected or impaired thereby. The Parties
shall endeavor in good faith to replace the invalid, illegal or unenforceable
provisions with valid provisions the economic effect of which comes as close as
practicable to that of the invalid, illegal or unenforceable provisions.
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9.10 ATTORNEYS' FEES AND EXPENSES. In any Litigation arising out of,
under or in connection with this Agreement in which one Party prevails over
another Party, the reasonable attorneys' fees and expenses incurred by the
prevailing Party in connection with such Litigation shall be paid for or
reimbursed by the opposing Party or Parties in such Litigation.
9.11 COUNTERPARTS. This Agreement may be executed in any number of
counterparts, and any Party may execute any such counterpart, each of which when
executed and delivered shall be deemed to be an original and all of which
counterparts taken together shall constitute but one and the same instrument.
9.12 INTERPRETATIONS. No Party shall be considered the draftsman, and
no uncertainty or ambiguity herein shall be construed or resolved against any
Party because that Party is alleged to be the draftsman. On the contrary, this
Agreement has been reviewed, negotiated and accepted by all Parties and their
attorneys and shall be construed and interpreted according to the ordinary
meaning of the words used so as fairly to accomplish the purposes and intentions
of all Parties.
9.13 NO BENEFIT TO OTHERS. The representation, warranties, covenants
and agreements contained in this Agreement are for the sole benefit of the
Parties and, in the case of Article 8 hereof, the other Indemnified Parties, and
their respective heirs, executors, administrators, legal representatives,
successors and assigns, and they shall not be construed as conferring any rights
on any other Persons.
9.14 CONSTRUCTION. Nothing in any Schedule (including the Disclosure
Schedule) attached hereto shall be deemed adequate to disclose an exception to a
representation or warranty made herein unless the Schedule identifies the
exception with particularity and describes the relevant facts in detail (and in
terms of Liabilities, quantifies the amount thereof with specificity). Without
limiting the generality of the foregoing, the mere listing (or inclusion of a
copy) of a document or other item shall not be deemed adequate to disclose an
exception to a representation or warranty made herein, unless the representation
or warranty has to do with the existence of the document or other item itself.
The Parties intend that each representation, warranty and covenant contained
herein shall have independent significance. If any Party has breached any
representation, warranty or covenant contained herein in any respect, the fact
that there exists another representation, warranty or covenant relating to the
same subject matter (regardless of the relative levels of specificity) which the
Party has not breached shall not detract from or mitigate the fact that the
Party is in breach of the first representation, warranty or covenant.
9.15 EXPENSES. Except as otherwise provided herein, each of the Parties
and the Seller's Subsidiaries will bear his, her or its own costs and expenses
(including legal fees and expenses) incurred in connection with this Agreement
and the transactions contemplated hereby. The Seller agrees that neither the
Seller nor any of its Subsidiaries has paid or will pay any of the costs and
expenses prior to the Closing of the Seller, such Subsidiary or the Seller
Stockholders (including any of their legal fees and expenses) in connection with
this Agreement or any of the transactions
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contemplated hereby. The Seller also agrees that it has not paid any amount to
any third party, and will not pay any amount to any third party until after the
Closing, with respect to any of the costs and expenses of the Seller and the
Seller Stockholders (including any of their legal fees and expenses) in
connection with this Agreement or any of the transactions contemplated hereby.
9.16 FURTHER ASSURANCES. From time to time, at any Party's request and
without further consideration (unless the requesting Party is entitled to
indemnity therefor as provided herein), the other Parties will execute and
deliver to the requesting Party such documents and take such other action as
such Party may reasonably request in order to consummate more effectively the
transactions contemplated hereby.
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IN WITNESS WHEREOF, the Parties have executed this Agreement under seal
effective as of the date first above written.
SELLER:
FERRERO WASTEWATER MANAGEMENT, INC.
By: /s/ A Thomas Ferrero, Jr.
-------------------------------------
Name:
-----------------------------------
Title:
----------------------------------
[CORPORATE SEAL]
ELLER STOCKHOLDERS:
/s/ A. THOMAS FERRERO JR.
----------------------------------[SEAL]
Name : A. THOMAS FERRERO JR.
/s/ A. THOMAS FERRERO III
----------------------------------[SEAL]
Name: A. THOMAS FERRERO III
BUYER:
SANTI GROUP OF PENNSYLVANIA, INC.
By: /s/ James McClure
-------------------------------------
Name:
-----------------------------------
Title: Treasurer
----------------------------------
[CORPORATE SEAL]
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EXHIBIT A
NONCOMPETITION AGREEMENT
38
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EXHIBIT B
EMPLOYMENT AGREEMENT
39
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EXHIBIT C
EMPLOYMENT AGREEMENT
40
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EXHIBIT D
RELEASE
41
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EXHIBIT E
BILL OF SALE
42
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EXHIBIT F
FINANCIAL STATEMENTS
43
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EXHIBIT G
FORM OF LEGAL OPINION (SELLER'S COUNSEL)
Waived by all parties
44
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EXHIBIT H
FORM OF LEGAL OPINION (BUYER'S COUNSEL)
Waived by all parties
45
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SCHEDULE 1
EXCLUDED ACCOUNTS
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SCHEDULE 2
EXCLUDED ASSETS
All Cash of the Seller
All accounts receivable of the Seller
All assets of the Seller constituting, adversely affected by, or directly
related to the handling of Hazardous Materials or Extremely Hazardous Substances
1993 Jeep Station Wagon VIN 1J4G288Y6PC586610
1990 Jeep Limited VIN 1J4FJ78L7LL204239
1994 Jeep Grand Laredo VIN 1J4GZ58Y7RC302404
1993 Buick Station Wagon VIN 1G4BR82P9TR412890
1997 Jeep Wrangler VIN 1J4FY29P5VP405875
47
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SCHEDULE 3
PERSONS TO EXECUTE EMPLOYMENT AGREEMENTS
A. Thomas Ferrero, Jr.
A. Thomas Ferrero, III
48
<PAGE> 1
ASSET PURCHASE AGREEMENT
THIS AGREEMENT is dated as of December 22, 1997, between and among
BONE-DRY ENTERPRISES, INC., a Georgia corporation (the "Buyer"), ANDREWS
ENVIRONMENTAL SERVICES, INC. , a Georgia corporation, located at 2470 Weaver
Way, Doraville, Georgia 30340 (the "Seller"), and W. RONALD ANDREWS, a Georgia
resident ("Andrews").
RECITALS
WHEREAS, Seller owns certain contract rights, customer accounts, trucks
and containers and is engaged in the non-hazardous liquid waste and septic waste
collection, transportation, management and disposal business (the "Business");
and
WHEREAS, Seller desires to sell and Buyer desires to purchase
substantially all of assets of Seller, including the Business; and
WHEREAS, pursuant to the terms and conditions of this Agreement, Buyer
agrees to purchase from Seller, and Seller agrees to sell to Buyer,
substantially all of the assets of Seller, including the Business.
NOW, THEREFORE, for good and valuable consideration, the receipt and
legal sufficiency of which are hereby acknowledged by each of the parties to
this Agreement, the parties contract and agree as follows:
SECTION 1. PURCHASE AND SALE
Pursuant to the terms and conditions of this Agreement, Seller hereby
agrees to sell, convey, transfer and deliver to Buyer, and Buyer hereby agrees
to purchase from Seller at the Closing, the Business and all of the other assets
of Seller (other than the Excluded Assets), including but not limited to the
following assets (collectively, the "Assets"):
(a) All goodwill, if any, associated with, and all of Seller's right,
title and interest in and to, all customer accounts, names, lists, purchase
orders, service agreements and contracts (including implied or quantum meruit
contractual rights) or other rights of Seller to provide liquid waste removal,
collection, transportation and storage services to customers of Seller, and all
rights to and in connection with any activities commonly associated with such
services, customer service agreements and contract rights (including implied or
quantum meruit contractual rights) with customers; and all files,
correspondence, records (including billing and service records for the preceding
twelve (12) months) and related proprietary information and material and other
intellectual property which is necessary, helpful or related to providing such
services described above (collectively, the "Accounts"); excluding, however, (x)
all customer accounts, rights or contracts which deal in hazardous chemical,
toxic or low-level radioactive waste, Hazardous Materials or Extremely Hazardous
Substances which Buyer determines it does not wish to purchase, and (y) all
small business set aside contracts which Buyer determines it does not wish to
purchase. All of the customer accounts, contracts and other rights which are not
being purchased, including those
<PAGE> 2
accounts described in subparagraphs (x) and (y) of this paragraph, shall be set
forth on Schedule 1 and are hereinafter referred to collectively as the
"Excluded Accounts."
(b) All tangible personal property (such as containers, reservoirs,
compactors, carts, repair parts, machinery, equipment, inventories of raw
materials and supplies, manufactured and purchased parts, goods in process and
finished goods, furniture, automobiles, trucks, tractors, trailers, tankers,
tools, pumps, stabilizers, jigs, and dies), including, but not limited to, those
items set forth on Schedule 2.
(c) All intellectual property, goodwill associated therewith, licenses
and sublicenses granted and obtained with respect thereto, and rights
thereunder, remedies against infringements thereof, and rights to protection of
interests therein under the laws of all jurisdictions.
(d) All personal property leases, subleases and rights thereunder.
(e) All agreements (such as equipment rental agreements and service
agreements), contracts, customer agreements, disposal agreements, service
agreements, indentures, mortgages, instruments, security interests, guaranties,
other similar arrangements, and rights thereunder.
(f) All claims, deposits, prepayments, refunds, causes of action,
choses in action, rights of recovery, rights of set off, and rights of
recoupment (including any such item relating to the payment of taxes).
(g) All franchises, approvals, permits, licenses (including but not
limited to radio transmitter licenses), orders, registrations, certificates,
variances and similar rights obtained from governments and governmental
agencies, service marks, trademarks and logos.
(h) All securities, telephone numbers, yellow page advertising, books,
records, ledgers, files, documents, correspondence, lists, plats, architectural
plans, drawings and specifications, creative materials, advertising and
promotional materials, operational, billing and payable information, studies,
reports and other printed or written materials, computer hardware and software.
(i) All rights in and with respect to the assets associated with
Seller's employee benefit plans.
Notwithstanding the above, the Assets shall not include (1) any real
property, leaseholds and subleaseholds therein, improvements, fixtures and
fittings thereon, and easements, rights-of-way and other appurtenants thereto;
(2) the Excluded Accounts; (3) any accounts receivable, notes receivable or
other receivables of Seller; (4) any cash or cash equivalents of Seller; or (5)
those assets set forth on Schedule 3 (collectively, the "Excluded Assets").
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<PAGE> 3
SECTION 2. OTHER AGREEMENTS
(a) On and subject to the terms and conditions of this Agreement, and
in consideration for the sale, transfer, conveyance and deliverance of the
Assets by Seller, Buyer shall pay to Seller the following (the "Purchase
Price"), subject to the terms hereto and any adjustments thereto: (1) Six
Hundred Sixty Thousand Dollars ($660,000.00) in immediately available funds or
by wire transfer to Seller's designated account; and (2) Twenty-Eight Thousand
(28,000) shares (the "SanTi Stock") of the authorized but unissued common
capital stock of SanTi Group, Inc., a Delaware corporation ("SanTi"). At the
Closing, Buyer shall tender to Seller the cash portion of the Purchase Price,
and shall tender (A) 2,800 shares of the SanTi Stock to John D. Dawson (on
behalf of Seller), and (B) 14,320 shares of the SanTi Stock to Andrews (on
behalf of Seller). Buyer shall retain the balance of the SanTi Stock (10,880
shares) to hold as security to offset against any Losses asserted against,
imposed upon or incurred by Buyer arising out of any of the matters listed in
items (1) through (6) of Section 8(b) hereof, and Buyer shall deliver the
remaining balance of said SanTi Stock (after any such offset) to Andrews (on
behalf of Seller) on that date which is no later than ninety (90) days after the
first anniversary of the Closing Date.
(b) At the Closing, Buyer shall assume and agree to pay, discharge and
perform all liabilities and obligations of Seller that arise after the Closing
in connection with the operation of the Business by Buyer, including all
post-Closing Seller liabilities and obligations under the contracts and
agreements included in the Accounts and other Assets (the "Assumed
Liabilities"); provided, however, Buyer shall not be responsible for obligations
or liabilities: (1) in the nature of any taxes, including sales or transfer
taxes, arising out of the sale of the Assets; or (2) in which the event giving
rise thereto occurred prior to Closing. Except as otherwise stated herein, Buyer
does not assume, agree to perform or discharge, or otherwise have any
responsibility for, any liabilities, contingent or otherwise, or contractual or
other obligations of Seller or the Business.
(c) The closing of the transactions contemplated by this Agreement (the
"Closing") shall take place at the offices of Buyer on December 22, 1997, or
such other date or place as the parties may mutually determine (the "Closing
Date"); provided, however, the Closing Date shall be no later than December 31,
1997.
(d) On or prior to the Closing Date, Seller and Andrews shall enter
into, execute and deliver to Buyer an agreement, substantially in the form of
Exhibit "A" attached hereto (the "Noncompetition Agreement"), restricting each
such person's ability to compete with Buyer in the Business, and to solicit the
customers, suppliers and employees of the Business, Seller or Buyer for a period
of five (5) years after the Closing Date.
(e) On or prior to the Closing Date, Seller and Buyer will enter into,
execute and deliver a sublease substantially in the form of Exhibit "B" attached
hereto (the "Sublease") providing for the sublease by Seller to Buyer of certain
office, shop and storage space at Seller's current facility at 2470 Weaver Way,
Doraville, Georgia 30340. The Closing Date shall be the effective date of the
Sublease. The Sublease will have an initial term of one month, which term will
automatically renew
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<PAGE> 4
until either party provides the other with fifteen (15) days written notice of
termination. Seller will also cause KAB Enterprises, LLC ("KAB") to assign to
Buyer, on or before the Closing, its option (the "Option") to purchase the
entire facility located at 2470 Weaver Way, Doraville, Georgia 30340, from Early
Grady Price, which Option must be exercised no later than July 16, 1998, a copy
of which assignment is attached hereto as Exhibit "C" (the "Assignment"). The
price for the Assignment shall be $250,000, which shall be payable by Buyer to
KAB if and only if the Option is exercised by Buyer.
(f) On or prior to the Closing Date, Seller shall pay and discharge all
of its then current due and payable obligations to all third party creditors,
including but not limited to, those obligations set forth on Schedule 4. Buyer
reserves the right at Closing to make such payments directly to such creditors
out of the cash portion of the Purchase Price.
(g) On or prior to the Closing Date, Seller and Andrews shall enter
into, execute, deliver to Buyer an agreement, substantially in the form of
Exhibit "D" attached hereto (the "Release") fully releasing Buyer and its
shareholders, officers, directors, employees, counsel, agents, assigns, the
Business and the Assets (collectively, the "Releasees"), from and against any
and all claims any of such parties may have against the Releasees, or any of
them, other than the rights which accrue or will accrue to Seller and Andrews
under this Agreement.
(h) At the Closing, (1) Seller and Andrews will deliver to Buyer the
various certificates, instruments and documents referred to in Section 6(a)
below; (2) Buyer will deliver to Seller the various certificates, instruments
and documents referred to in Section 6(b) below; (3) Seller and Andrews will
execute, acknowledge (if appropriate) and deliver to Buyer such instruments of
sale, transfer, conveyance and assignment as Buyer and its counsel may request;
(4) the parties will deliver to each other the agreements and documents referred
to above in this Section 2; (5) Buyer will deliver to Seller the Purchase Price;
and (6) Seller and Andrews will deliver to Buyer the following information
relating to the Accounts on such forms as are acceptable to Buyer: (A) a list of
all Accounts, which will include all names, addresses, telephone numbers and
names of individuals to contact for each of the Accounts; (B) all collection
information concerning the frequency of collection, approximate volume of waste
per collection and a brief description of the types of waste involved with each
Account; (C) the complete service and accounting records of each of the Accounts
for the 12 month period ending on the last day of the month immediately
preceding the Closing Date; and (D) all other proprietary information necessary
or appropriate to enable Buyer to service the Accounts properly.
(i) The parties shall allocate the Purchase Price among the Assets for
all purposes (including financial accounting and tax purposes) consistent with
the Internal Revenue Code of 1986, as amended, and in accordance with the
allocation schedule prepared by Buyer; however, the portion of the Purchase
Price consisting of SanTi Stock shall be allocated based on a valuation of the
SanTi Stock at the time of the Closing, to be undertaken by an appraiser
commissioned by Buyer.
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<PAGE> 5
(j) Any insurance deposits, prepaid Accounts and similar items payable
or paid by any party and related to the Assets shall be prorated as of the
Closing Date. There shall be prorated between Buyer and Seller as of the Closing
Date all accrued or prepaid items relating to (1) ad valorem and other taxes
(except sales taxes) with respect to the Assets; (2) rent (including percentage
rent) and other payments due under any lease or contract related to the Assets;
(3) deposits with respect to the Assets; (4) license fees relating to any of the
Assets, and (5) governmental assessments and charges for services to or with
respect to any of the Assets.
(k) Following the Closing Date, Seller and Andrews shall not use or
give permission to any other party to use the name "Andrews Environmental
Services, Inc., or any substantially similar name in connection with the
operation of a liquid waste collection and disposal business.
(l) The parties recognize that Buyer and/or its affiliates intend to
acquire numerous liquid waste businesses throughout the country, and that the
violation of this Section 2(l) will result in substantial injury and damage to
Buyer and its affiliates. Seller and Andrews agree that for a period of five (5)
years from date of this Agreement, neither of them, nor their agents, employees
or affiliates, nor any other person connected with them, except as required by
applicable federal or local statutes, shall at any time divulge the existence
and terms of the negotiations resulting in this Agreement, the terms and
conditions of this Agreement and the financing arrangements of Buyer and its
affiliates. In addition, the parties agree to keep such negotiations, terms and
conditions confidential and to cause their agents, employees and other persons
connected with them to observe the terms of this Section 2(l).
(m) From and after the Closing Date, Seller and Andrews shall refer,
and cause their agents to refer, all telephone calls to any of them for liquid
waste collection and disposal to Buyer.
(n) The parties agree as follows with respect to the period between the
execution of this Agreement and the Closing:
(1) Each of the parties will use his or its best efforts
to take all actions and to do all things necessary,
proper or advisable in order to consummate and make
effective the transactions contemplated by this
Agreement (including the satisfaction, but not the
waiver, of the closing conditions set forth in
Section 6 below).
(2) Seller will give all notices to third parties, and
Seller will obtain all third party consents, that
Buyer may request in connection with the consummation
of the transactions described herein. Each of the
parties will give any necessary notices to, make any
necessary filings with, and use its reasonable best
efforts to obtain any necessary authorizations,
consents, and approvals of, governments and
governmental agencies in connection with the
consummation of the transactions described herein.
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<PAGE> 6
(3) In the operation of the Business, Seller will not
engage in any practice, take any action, or enter
into any transaction outside the ordinary course of
business. Without limiting the generality of the
foregoing, Seller will not (A) declare, set aside, or
pay any dividend or make any distribution with
respect to its capital stock or redeem, purchase or
otherwise acquire any of its capital stock, (B) pay
any amount to any third party with respect to any
liability or obligation (including any costs and
expenses Seller has incurred or may incur in
connection with this Agreement and the transactions
contemplated hereby) which would not constitute an
Assumed Liability if in existence as of the Closing,
(C) pay any compensation to its employees,
independent contractors or affiliates (i) that is in
excess of the rates and/or amounts of compensation
currently paid to such persons, or (ii) at times
prior to the current normally scheduled payment
times, (D) otherwise operate the Business outside the
ordinary course of business.
(4) Seller will keep the Business substantially intact,
including its present operations, physical
facilities, working conditions and relationships with
lessors, licensors, suppliers, customers and
employees.
(5) Seller will permit representatives of Buyer to have
full access to all premises, properties, personnel,
books, records (including tax records), contracts and
documents of or pertaining to Seller and/or the
Business.
(6) Each party will give prompt written notice to the
other party of any material adverse development
causing a breach of any of its own representations
and warranties in this Agreement.
SECTION 3. EMPLOYEES
(a) At the Closing, Seller shall identify by name, address and social
security number eight (8) employees who currently perform sales, operations,
compliance, driving and supervisory services for Seller who will be available
for full time employment by Buyer (the "Employees") as set forth on Schedule 5.
Seller agrees to terminate said Employees prior to Closing, conditioned upon
Buyer's employment of them after Closing.
(b) Buyer shall not be responsible to Seller or to any current or
former employee of Seller for any employee benefits due with respect to their
employment while an employee of Seller. Buyer does not purchase, recognize,
assume or otherwise acquire any rights, obligations, assets or liabilities
under, arising from or resulting from any employment agreement in existence
between Seller and any employee, or any person employed to consult or perform
work by or for Seller, or otherwise.
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<PAGE> 7
SECTION 4. REPRESENTATIONS AND WARRANTIES OF
SELLER AND ANDREWS
Seller and Andrews jointly and severally represent and warrant to Buyer
the following (which representations and warranties will also be true and
correct at the Closing):
(a) Title to the Assets. Seller currently owns, and Seller shall
deliver at the Closing to Buyer, good and marketable title to all of the Assets,
free and clear of all claims, liens, encumbrances and security interests.
(1) Assignability of Accounts. All Accounts are now, and
will be at Closing, freely assignable by Seller, and
such assignment, transfer and delivery thereof to
Buyer of all or any portion of each of the Accounts
will not be or result in a breach, violation or
default of any agreements relating to such Accounts,
and such agreements and Accounts shall remain in full
force and effect as if there had been no assignment,
transfer or delivery.
(2) Credits, Refunds, Defaults. No customer of Seller has
any rights to any credit or refund pursuant to any
agreement, understanding or practice of Seller which,
singularly and in the aggregate, would have a
material adverse effect on the Business, or the
operation or use of the Assets. To the best of
Seller's and Andrews' knowledge, after due inquiry,
there is no material default by any party under any
of the Accounts, nor has any event occurred which,
with notice or the passage of time, or both, would
constitute a material default by any party under any
of the Accounts.
(b) Organization. Seller is a corporation duly organized, validly
existing and in good standing under the laws of the State of Georgia, and has
all necessary corporate power and authority to own its properties as such
properties are now owned and to conduct its business as and when its business is
conducted.
(c) Authority. Seller has full right, power, authority and
capacity to execute and deliver this Agreement and to perform its obligations
under this Agreement. The execution and delivery of this Agreement, the
consummation of the transactions contemplated hereby, and the performance and
fulfillment of the obligations and understandings hereunder, have been duly
authorized by all requisite corporate action of Seller.
(d) Financial Statements; Undisclosed Liabilities. Seller has
provided Buyer with certain financial information regarding Seller as prepared
by Seller's accountant concerning the Business, including the financial
information set forth in Exhibit "E" attached hereto (collectively, the
"Financial Data"). The Financial Data is true, correct and complete in all
material respects, was
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maintained on a basis consistent with prior years and presents fairly the
information set forth (including, without limitation, the gross revenues and
gross profits of Seller) as at the dates therefore and the results of operations
for the periods then ended. Seller has no liabilities, debts or obligations of
any nature whatsoever (and there is no basis for any present or future action,
suit, proceeding, hearing, investigation, charge, complaint, claim or demand
against Seller giving rise to any liability, debt or obligation), except for (1)
liabilities set forth on the face of the most recent balance sheet included in
the Financial Data and (2) liabilities which have arisen after the date of the
most recent balance sheet included in the Financial Data in the ordinary course
of business (none of which results from, arises out of, relates to, is in the
nature of, or was caused by any breach of contract, breach of warranty, tort,
infringement or violation of law).
(e) Taxes. Seller has properly and accurately prepared and filed all
federal, state, local and other tax returns and reports required to be filed by
all applicable statutes, laws and regulations on or before the due dates
thereof. Seller has paid all federal, state, local and other taxes, including
all interest, penalties and assessments, which are due and payable, and all such
taxes due and payable by Seller have been fully discharged.
(f) Employment Taxes. Proper and accurate amounts have been withheld by
Seller from its employees for all periods in full and complete compliance with
the tax withholding provisions of applicable federal, state and local laws.
Proper and accurate federal, state and local returns have been filed by Seller
for all periods for which returns were due with respect to employee income tax
withholding, social security and unemployment taxes, and the amounts shown
thereon to be due and payable have been paid in full.
(g) Authorizations. The execution and delivery of this Agreement, the
consummation of the transactions contemplated hereby, and the performance and
fulfillment of its obligations and undertakings hereunder by Seller, will not
(1) violate any provision of, result in the breach of, or accelerate or permit
the acceleration of any performance required by, the terms of (A) any applicable
law, ordinance, rule or regulation of any governmental body, (B) the Articles of
Incorporation or Bylaws of Seller, (C) any agreement or undertaking relating to
the Business to which Seller is a party, or by which Seller may be bound, or (D)
any judgment, decree, writ, injunction, order or award of any arbitration panel,
court or governmental authority applicable to Seller; (2) result in the creation
of any claim, lien, charge or encumbrance upon any of the Assets, or (3)
terminate or cancel, or result in the termination or cancellation of, any
Account.
(h) Contracts. Except for the written and oral agreements described on
Schedule 6, the Assets are not bound or affected by any agreements, written or
oral. Seller is not a party to any written or oral contract, agreement or
commitment of any kind containing covenants by Seller not to compete in the
Business. Seller has delivered to Buyer a correct and complete copy of each
written agreement listed in Schedule 6 (as amended to date) and a written
summary setting forth the terms and conditions of each oral agreement referred
to in Schedule 6. With respect to each such agreement: (1) the agreement is
legal, valid, binding, enforceable and in full force and effect; (2) the
agreement will continue to be legal, valid, binding, enforceable and in full
force and effect on
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<PAGE> 9
identical terms following the consummation of the transactions contemplated
hereby (including the assignments and assumptions referred to in Section 2
above); (3) no party is in breach or default, and no event has occurred which
with notice or lapse of time would constitute a breach or default, or permit
termination, modification or acceleration, under the agreement; and (4) no party
has repudiated any provision of the agreement.
(i) Litigation and Pending Proceedings. There are no claims of any
kind, or any actions, suits, proceedings, arbitrations or investigations pending
or, to the best of Seller's and Andrews' knowledge, threatened in any court or
before any governmental agency or instrumentality or arbitration panel or
otherwise against, by or affecting Seller's Business or business prospects or
condition (financial or otherwise) or any of the Assets, or of the kind
described in Section 6(a)(4) below.
(j) No Finder. No broker or finder has acted on Seller's behalf in
connection with this Agreement or the transactions contemplated herein.
(k) Working Relationships. To the best of Seller's and Andrews'
knowledge, Seller enjoys good working relationships under substantially all
Accounts or arrangements necessary to the normal operation of the Business, and
Seller has conducted the Business in substantially the same manner in which the
same has traditionally been conducted during the past six (6) weeks.
(l) Physical Assets. To the best of Seller's and Andrews' knowledge,
the tangible Assets are in good working order, condition and repair, subject to
normal wear and tear, and are suited for their present use, and are operated in
conformity with all applicable ordinances, laws and regulations.
(m) Environmental, Health and Safety Matters.
(1) Seller and its predecessors and affiliates have
complied with all Environmental, Health, and Safety
Requirements, and no action, suit, proceeding,
hearing, investigation, charge, complaint, claim,
demand, or notice has been filed or commenced against
any of them alleging any failure so to comply.
Without limiting the generality of the preceding
sentence, Seller and its predecessors and affiliates
have obtained and been in compliance with all of the
terms and conditions of all permits, licenses and
other authorizations which are required under, and
have complied with all other limitations,
restrictions, conditions, standards, prohibitions,
requirements, obligations, schedules and timetables
which are contained in, all Environmental, Health,
and Safety Requirements;
(2) Seller has not (and none of its respective
predecessors and affiliates have) handled or disposed
of any substance, arranged for the disposal of any
substance, exposed any employee or other individual
to any
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<PAGE> 10
substance or condition, or owned or operated any
property or facility in any manner that could form
the basis for any present or future action, suit,
proceeding, hearing, investigation, charge,
complaint, claim or demand against Seller that could
give rise to any liability for damage to any location
or body of water (surface or subsurface), for any
illness of or personal injury to any employee or
other individual, or for any reason under any
Environmental, Health and Safety Requirements, except
in compliance with all applicable Environmental,
Health and Safety Requirements;
(3) All tangible assets used in Seller's Business, and
its predecessors' and affiliates' businesses, have
been free of asbestos, PCBs, methylene chloride,
trichloroethylene, 1, 2-trans-dichloroethylene,
dioxins, dibenzofurans, and Extremely Hazardous
Substances;
(4) Schedule 7 sets forth all licenses, permits,
clearances and consents with respect to environmental
and waste management matters (collectively the
"Environmental Permits") currently held by Seller,
and for each such Environmental Permit accurately
describes the expiration and/or renewal date thereof.
Such Environmental Permits constitute the only
permits necessary for the continued conduct of the
Business and the waste management activities and
other businesses of Seller as such activities and
businesses are currently being conducted. Seller has
complied with all applicable covenants and conditions
of the Environmental Permits, including without
limitation that all facilities have been constructed
in accordance with applicable Environmental Permits,
as well as all applicable requirements under federal,
state and local laws, and the Environmental Permits
are in full force and effect. There is no action,
proceeding, permit revocation, permit amendment,
writ, injunction, claim or investigation pending or
threatened concerning or relating to the
Environmental Permits or the Hazardous Materials
activities of Seller, including, but not limited to,
the treatment, storage or disposal of Hazardous
Materials or liquid or solid waste materials which
have been handled by Seller or its predecessors or
affiliates;
(5) Seller has not transported, stored, treated or
disposed of, nor has it allowed or arranged for any
third person to transport, store, treat or dispose
of, waste to or at any location other than a site
lawfully permitted to receive such waste for such
purposes. Seller has not transported, stored, treated
or disposed of, nor has it allowed or arranged for
any third person to transport, store, treat or
dispose of, waste to or at any location designated
for remedial action pursuant to
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the Comprehensive Environmental Response,
Compensation and Liability Act, as from time to time
amended, or any similar federal or state statute
assigning responsibility for the cost of
investigating or remediating releases of contaminants
into the environment;
(6) Schedule 7 contains a complete and accurate list of
(A) locations (identified by name, address,
owner/operator, type of facility and type of waste)
to which Seller has ever transported, or ever caused
to be transported, or allowed or arranged for any
third party to transport, any type of waste material,
generated by Seller or customers of Seller for
storage (other than at a customer's facility),
treatment, burning, recycling or disposal, and (B)
storage (other than at a customer's facility),
treatment, burning, recycling or disposal activities
which Seller has undertaken, at any time, at
locations then or presently owned or occupied by
Seller (such list to include the property address,
the nature of Seller's interest in property, the
nature of the activity conducted at such location,
the type and form of waste, the estimated volume of
waste disposal on or in ground, and the period of
time the activity was conducted);
(7) Seller has never engaged in any manner or respect in
any application of oil or hazardous substances on
roads, or in any application of oil or hazardous
substances for dust control or paving purposes; and
(8) Seller has not received any notification (including
requests for information directed to Seller or
Andrews from any governmental agency or any other
person) asserting that Seller is or may be a
"potentially responsible person" or otherwise liable
with respect to a remedial action or the payment of
response costs at a waste storage treatment or
disposal facility, pursuant to the provisions of the
Comprehensive Environmental Response, Compensation
and Liability Act, as from time to time amended, or
any similar federal, state or local law assigning
responsibility for the costs of investigating or
remediating releases of contaminants into the
environment.
(9) For purposes of this Section 3(m), the following
terms shall have the following meanings:
(A) "Environmental, Health, and Safety Requirements"
shall mean all federal, state, local and foreign
statutes, regulations, ordinances and other
provisions having the force or effect of law, all
judicial and administrative orders and
determinations, all contractual obligations and all
common law
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concerning public health and safety, worker health
and safety, and pollution or protection of the
environment, including without limitation all those
relating to the presence, use, production,
generation, handling, transportation, treatment,
storage, disposal, distribution, labeling, testing,
processing, discharge, release, threatened release,
control or cleanup of any Hazardous Materials,
substances or wastes, chemical substances or
mixtures, pesticides, pollutants, contaminants, toxic
chemicals, petroleum products or byproducts,
asbestos, polychlorinated biphenyls, noise or
radiation, each as amended and as now or hereafter in
effect.
(B) "Extremely Hazardous Substance" has the meaning
set forth in Section 302 of the Emergency Planning
and Community Right-to-Know Act of 1986, as amended.
(C) "Hazardous Materials" means any substance that
has been designated by any governmental authority
whose requirements are applicable to Seller to be
radioactive, toxic, hazardous or otherwise pose
potential danger to health or the environment,
including, but not limited to, volatile organic
compounds and all substances listed pursuant to the
Comprehensive Environmental Response, Compensation
and Liability Act, the Resource Conservation Recovery
Act, the Clean Air Act, the Water Pollution Control
Act, the Toxic Substance Control Act and the
Occupational Safety and Health Act, as such acts are
amended prior to the Closing Date, and the
regulations and publications promulgated pursuant to
said acts.
(n) Schedule 8 sets forth the following information with respect
to each insurance policy (including policies providing property, casualty,
liability, and workers' compensation coverage and bond and surety arrangements)
to which Seller has been a party, a named insured, or otherwise the beneficiary
of coverage at any time within the past 5 years:
(1) the name, address, and telephone number of the agent;
(2) the name of the insurer, the name of the policyholder, and
the name of each covered insured;
(3) the policy number and the period of coverage;
(4) the scope (including an indication of whether the coverage
was on a claims made, occurrence, or other basis) and amount (including
a description of how deductibles and ceilings are calculated and
operate) of coverage; and
(5) a description of any retroactive premium adjustments or
other loss-sharing arrangements.
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With respect to each such insurance policy: (A) the policy is legal, valid,
binding, enforceable, and in full force and effect; (B) the policy will continue
to be legal, valid, binding, enforceable, and in full force and effect on
identical terms following the consummation of the transactions contemplated
hereby (including the assignments and assumptions referred to in Section 2
above); (C) Seller is not in breach or default thereof (including with respect
to the payment of premiums or the giving of notices), and no event has occurred
which, with notice or the lapse of time, would constitute such a breach or
default, or would permit termination, modification or acceleration, under the
policy; and (D) no party to the policy has repudiated any provision thereof.
Seller has been covered during the past 5 years by insurance in scope and amount
customary and reasonable for the Business and the other businesses in which it
has engaged during the aforementioned period.
(o) Investment. Each of Seller and Andrews (1) understands that the
SanTi common stock (the "SanTi Stock") has not been, and will not at Closing be,
registered under the Securities Act of 1933, or under any state securities laws,
and is being offered and sold in reliance upon federal and state exemptions for
transactions not involving any public offering, (2) understands that Seller or
Andrews, as the case may be, is acquiring the SanTi Stock solely for its or his
own account for investment purposes, and not with a view to the distribution
thereof, (3) is a sophisticated investor with knowledge and experience in
business and financial matters, (4) has received certain information concerning
Buyer and SanTi and has had the opportunity to obtain additional information as
desired in order to evaluate the merits and the risks inherent in holding the
SanTi Stock, (5) is able to bear the economic risk and lack of liquidity
inherent in holding the SanTi Stock, and (6) is an "accredited investor," as
that term is defined in Regulation D promulgated under the Securities Act of
1933.
(p) Annualized Gross Revenue. The annualized gross revenue of the
Business for fiscal year 1997 was at least $1,225,000.00. If during the 365-day
period immediately following the Closing, the annualized gross revenue of the
Business is less than $1,225,000.00, the parties agree that Buyer shall be
deemed to have suffered a Loss (as defined in Section 8) equal to $1.11 for each
$1.00 of such deficiency resulting from a breach of this Agreement by Seller,
and that Buyer shall be entitled, at Buyer's option, to (1) indemnity from
Seller in the full amount of such Loss pursuant to the terms of Section 8, or to
(2) offset the amount of said Loss against the portion of the SanTi Stock
withheld by the Buyer pursuant to Section 2(a) hereof. For the purposes of
exercising the rights described in the immediately preceding sentence of this
Section 4(p), and only for such purposes, the value of each share of SanTi Stock
shall be deemed to be $25.00.
(q) Containers. The collection containers included in the Assets are in
serviceable condition. All containers, including reservoirs, meet all
requirements of applicable laws.
(r) Permits, Etc. Seller possesses all franchises, certificates,
licenses, permits and other authorizations from governmental political
subdivisions or regulatory authorities, free from burdensome restrictions, that
are necessary for (1) the ownership, maintenance and operation of the Business,
(2) the operation, use and ownership of the Assets and (3) the servicing of the
Accounts. Seller is not in any way whatsoever in violation of such franchises,
certificates, licenses, permits and other authorizations.
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(s) Relationships. Seller enjoys good working relationships in
accordance with past practices with all suppliers, subcontractors and other
parties necessary or appropriate for the normal operation of the Business. The
consummation of the subject transaction will not result in any injury to or
disruption of such relationships, and Buyer will not incur any costs or expenses
in order to continue such relationships as they had been maintained previously.
(t) Completeness of Statements. No statement, Exhibit, Schedule, annex,
certificate, information, representation or warranty of Seller or Andrews
contained in this Agreement or furnished by or on behalf of Seller or Andrews to
Buyer or its agents pursuant hereto or in connection with the transactions
contemplated hereby contains or shall contain any untrue statement of a material
fact or omits to state a material fact necessary in order to make a statement
contained therein not misleading.
SECTION 5. REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer represents and warrants to Seller the following (which
representations and warranties shall also be true and correct at the Closing):
(a) Organization. Buyer is a corporation duly organized and validly
existing under the laws of the State of Georgia.
(b) Authority. Buyer has full right, power, authority and capacity to
execute and deliver this Agreement and to perform its obligations under this
Agreement.
(c) Authorizations. The execution and delivery of this Agreement, the
consummation of the transactions contemplated hereby and the performance and
fulfillment of its obligations and undertakings hereunder by Buyer will not (1)
violate any provision of, result in the breach of, or accelerate or permit the
acceleration of any performance required by the terms of, (A) any applicable
law, ordinance, rule or regulation of any governmental body, (B) the Articles of
Incorporation or Bylaws of Buyer, or (C) any agreement or undertaking relating
to Buyer to which Buyer is a party, or by which Buyer may be bound, or any
judgment, decree, writ, injunction, order or award of any arbitration panel,
court or governmental authority applicable to it.
(d) Broker. No broker or finder has acted on Buyer's behalf in
connection with this Agreement or the transactions contemplated herein.
(e) Completeness of Statements. No statement, Exhibit, Schedule, annex,
certificate, information, representation or warranty of Buyer contained in this
Agreement or furnished by or on behalf of Buyer to Seller or its agents pursuant
hereto or in connection with the transactions contemplated hereby contains or
shall contain any untrue statement of a material fact or omits to state a
material fact necessary in order to make a statement contained therein not
misleading.
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SECTION 6. CONDITIONS TO OBLIGATIONS TO CLOSE
(a) The obligation of Buyer to consummate the transactions to be
performed by it in connection with the Closing is subject to satisfaction of the
following conditions:
(1) The representations and warranties set forth in Section 4
above shall be true and correct in all material respects at and as of
the Closing Date.
(2) Each of Seller and Andrews shall have performed and
complied with all of its covenants hereunder in all material respects
through the Closing, including but not limited to those set forth in
Section 2 above.
(3) Seller shall have procured all of the third party consents
specified in this Agreement.
(4) No action, suit or proceeding shall be pending or
threatened before any court or quasi-judicial or administrative agency
of any federal, state, local or foreign jurisdiction or before any
arbitrator wherein an unfavorable injunction, judgment, order, decree,
ruling or charge would (A) prevent consummation of any of the
transactions contemplated by this Agreement, (B) cause any of the
transactions contemplated by this Agreement to be rescinded following
consummation or (C) affect adversely the right of Buyer to own the
Assets and to operate the Business.
(5) Seller shall have delivered to Buyer a certificate to the
effect that each of the conditions specified above in this Section
6(a)(1)-(4) is satisfied in all respects.
(6) The relevant parties shall have entered into, executed and
delivered the Noncompetition Agreement, Sublease, Release and the other
agreements referred to in Section 2 above, and the same shall be in
full force and effect.
(7) Buyer shall have received copies, certified by the
President of Seller, of resolutions adopted by the Board of Directors
of Seller and by Andrews approving this Agreement and the consummation
of the transactions contemplated hereby.
(8) SanTi shall have entered into a Shareholders' Agreement
with Andrews and with John D. Dawson as to the SanTi Stock, which
Shareholders' Agreement contains terms and conditions satisfactory to
SanTi.
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(9) Buyer shall have obtained on terms and conditions
satisfactory to it all of the financing it needs in order to consummate
the transactions contemplated hereby and to fund the working capital
requirements of the Business after the Closing.
(10) All actions to be taken by Seller and Andrews in
connection with consummation of the transactions contemplated hereby,
and all certificates, opinions, instruments and other documents
required to effect the transactions contemplated hereby, will be
satisfactory in form and substance to Buyer.
Buyer may waive any condition specified in this Section 6(a) if it executes a
writing so stating at or prior to the Closing.
(b) The obligation of Seller to consummate the transactions to be
performed by it in connection with the Closing is subject to satisfaction of the
following conditions:
(1) The representations and warranties set forth in Section 5
above shall be true and correct in all material respects at and as of
the Closing Date.
(2) Buyer shall have performed and complied with all of its
covenants hereunder in all material respects through the Closing,
including but not limited to those set forth in Section 2 above.
(3) No action, suit or proceeding shall be pending before any
court or quasi-judicial or administrative agency of any federal, state,
local or foreign jurisdiction or before any arbitrator wherein an
unfavorable injunction, judgment, order, decree, ruling or charge would
(A) prevent consummation of any of the transactions contemplated by
this Agreement or (B) cause any of the transactions contemplated by
this Agreement to be rescinded following consummation.
(4) The relevant parties shall have entered into, executed and
delivered the Noncompetition Agreement, Sublease, Release and the other
agreements referred to in Section 2 above, and the same shall be in
full force and effect.
Seller or Andrews may waive any condition specified in this Section 6(b) if it
executes a writing so stating at or prior to the Closing.
SECTION 7. TERMINATION
(a) Certain of the parties may terminate this Agreement as
provided below:
(1) Buyer and Seller may terminate this Agreement by mutual
written consent at any time prior to the Closing.
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(2) Buyer may terminate this Agreement by giving written
notice to Seller on or before the Closing Date if Buyer is not
satisfied with the results of its continuing business, legal and
accounting due diligence regarding Seller.
(3) Buyer may terminate this Agreement by giving written
notice to Seller at any time prior to the Closing (A) in the event
Seller or Andrews has breached any representation, warranty or covenant
contained in this Agreement in any material respect, Buyer has notified
Seller or Andrews of the breach, and the breach has continued without
cure for a period of 10 days after the notice of breach, or (B) if the
Closing shall not have occurred on or before December 31, 1997, by
reason of the failure of any condition precedent under Section 6(a)
hereof (unless the failure results primarily from Buyer itself
breaching any representation, warranty or covenant contained in this
Agreement); and
(4) Seller may terminate this Agreement by giving written
notice to Buyer at any time prior to the Closing (A) in the event Buyer
has breached any material representation, warranty or covenant
contained in this Agreement in any material respect, Seller has
notified Buyer of the breach, and the breach has continued without cure
for a period of 10 days after the notice of breach, or (B) if the
Closing shall not have occurred on or before December 31, 1997, by
reason of the failure of any condition precedent under Section 6(b)
hereof (unless the failure results primarily from Seller itself
breaching any representation, warranty or covenant contained in this
Agreement).
(b) If any party terminates this Agreement pursuant to Section
7(a) above, all rights and obligations of the parties hereunder shall terminate
without any liability of any party to any other party (except for any liability
of any party then in breach).
SECTION 8. SURVIVAL OF REPRESENTATIONS AND
WARRANTIES; INDEMNIFICATION
(a) All representations, warranties, agreements, covenants and
obligations made or undertaken by Seller and Andrews in this Agreement are,
whether specified as such or not, the joint and several representations,
warranties, agreements, covenants and obligations of Seller and Andrews, unless
otherwise specifically indicated to the contrary herein with respect to a
particular representation, warranty, agreement, covenant or obligation; are
material, have been relied upon by Buyer, shall survive the Closing hereunder,
and shall not merge in the performance of any obligation by any party hereto;
and, as to the representations and warranties, shall terminate or expire on the
fifth (5th) anniversary of the Closing Date, provided that such representations
and warranties shall not terminate or expire, but shall continue, during the
pendency of any suit, action, claim or other proceeding brought in respect of
such representations and warranties prior to the termination or expiration of
such five (5) year period. Notwithstanding the above, all representations and
warranties made by Seller and Andrews in this Agreement that in any manner
relate to (1) tax matters, (2) environmental matters, and (3) title matters, or
as to the terms and performance of this Agreement (collectively, the "Special
Matters"), or any of the foregoing, shall terminate or expire
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only upon the termination or expiration of all applicable statutes of
limitation. All representations, warranties, agreements, covenants and
obligations made or undertaken by Buyer in this Agreement shall survive the
Closing hereunder, and shall not merge in the performance of any obligation by
any party hereto; and, as to the representations and warranties, shall terminate
or expire on the fifth (Th) anniversary of the Closing Date, provided that such
representations and warranties shall not terminate or expire, but shall
continue, during the pendency of any suit, action, claim or other proceeding
brought in respect of such representations and warranties prior to the
termination or expiration of such five (5) year period.
(b) Subject to the limitations contained in this Section 8, Seller
and Andrews, jointly and severally, shall defend, indemnify and hold Buyer, its
shareholders, officers, directors, employees, counsel, agents, affiliates and
assigns (collectively, the "Buyer Indemnitees") harmless from and against, any
and all direct or indirect demands, claims, payments, obligations, recoveries,
deficiencies, fines, penalties, interests, assessments, actions, causes of
action, suits, losses, diminution in the value of Assets, damages, liabilities,
costs and expenses (collectively, the "Losses") asserted against, imposed upon
or incurred by the Buyer Indemnitees, or any of them, by reason of or resulting
from, arising out of, based upon or otherwise in respect of:
(1) any inaccuracy in any representation or warranty made by
Seller or Andrews pursuant to this Agreement or the Schedules;
(2) any breach of any covenant or agreement made or to be
performed by Seller or Andrews pursuant to this Agreement or evidenced
by the Exhibits;
(3) any claim by any broker, finder or other person employed
or engaged or allegedly employed or engaged by Seller or Andrews in
connection with the transactions contemplated by this Agreement;
(4) any violation or alleged violation of any Environmental,
Health and Safety Requirements or the presence of any Hazardous
Materials or Extremely Hazardous Substances on the Assets, that
occurred at any time prior to Closing;
(5) the parties' failure to comply with any of the bulk sales
laws and any other similar laws in any applicable jurisdiction in
respect of the transactions contemplated by this Agreement, and any
action brought or levy made as a result thereof; and
(6) any liability or obligation of Seller or Andrews in any
manner related to the Business, the Assets or the Excluded Assets,
other than the Assumed Liabilities.
(c) Subject to the limitations contained in this Section 8, Buyer
shall defend, indemnify and hold Seller and Andrews and their respective heirs,
beneficiaries, officers, directors, partners, employees, counsel, agents,
affiliates and assigns (collectively, the "Seller Indemnitees") harmless from
and against any and all Losses asserted against, imposed upon or incurred by the
Seller
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Indemnitees, or any of them, by reason of or resulting from, arising out of,
based upon or otherwise in respect of:
(1) any inaccuracy in any representation or warranty made by
Buyer pursuant to this Agreement;
(2) any breach of any covenant or agreement made or to be
performed by Buyer pursuant this Agreement;
(3) any claim by any broker, finder or other person employed
or allegedly employed by Buyer in connection with the transactions
contemplated by this Agreement; and
(4) any Assumed Liability.
(d) No later than sixty (60) days (or sooner, if the nature of the
Asserted Liability (defined below) so requires) after (1) actually becoming
aware of circumstances that have resulted in a Loss for which any person or
persons entitled to indemnification pursuant to Section 8(b) or (c) hereof (the
"Indemnified Party") intends to seek indemnification under such Section, or (2)
receipt by the Indemnified Party of written notice of any demand, claim or
circumstances which, with the lapse of time, the giving of notice or both, would
give rise to a claim or the commencement (or threatened commencement) of any
litigation or other legal proceeding that may result in a Loss (an "Asserted
Liability"), the Indemnified Party shall give notice thereof (the "Claims
Notice") to any other party (or parties) obligated to provide indemnification
pursuant to Section 8(b) or (c) hereof (the "Indemnifying Party"). The Claims
Notice shall describe the Loss or the Asserted Liability in reasonable detail,
and shall indicate the amount (estimated, if necessary) of the Loss that has
been or may be suffered by the Indemnified Party. The Claims Notice may be
amended on one or more occasions with respect to the amount of the Asserted
Liability or the Loss at any time prior to final resolution of the obligation to
indemnify relating to the Asserted Liability or the Loss.
(e) (1) Subject to the provisions of Section 8(f) hereof, if the
Indemnifying Party acknowledges and agrees that the Asserted Liability is one
for which the Indemnified Party is entitled to indemnification under Section
8(b) or (c) hereof, the Indemnifying Party may elect to compromise or contest,
at its own expense and with counsel reasonably acceptable to the Indemnified
Party, any such Asserted Liability, subject to the following conditions of this
Section 8(e). If the Indemnifying Party elects to compromise or contest such
Asserted Liability, it shall within thirty (30) days (or sooner, if the nature
of the Asserted Liability so requires) notify the Indemnified Party of its
intent to do so by sending a notice to the Indemnified Party (the "Contest
Notice"), and the Indemnified Party shall cooperate, at the expense of the
Indemnifying Party, in the compromise or contest of such Asserted Liability.
(2) If, after the Indemnifying Party has investigated the
merits of the Asserted Liability and has determined that it wishes to compromise
or settle the Asserted Liability pursuant to certain terms (the "Proposed
Terms"), it must within fifteen (15) days after such determination
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seek the consent of the Indemnified Party to such compromise or settlement on
the Proposed Terms by delivering a written request for such consent to the
Indemnified Party, which request will set forth in detail and with specificity
the particulars of the Asserted Liability and the Proposed Terms. If the
Indemnified Party delivers to the Indemnifying Party a consent in writing to the
compromise or settlement of the Asserted Liability on the Proposed Terms within
fifteen (15) days after its receipt of the written request from the Indemnifying
Party, the Indemnifying Party shall compromise and settle the Asserted Liability
on the Proposed Terms. If, however, the Indemnified Party does not deliver to
the Indemnifying Party a consent in writing to the compromise or settlement of
the Asserted Liability on the Proposed Terms within fifteen (15) days after its
receipt of the written request from the Indemnifying Party, the Indemnifying
Party shall not compromise or settle the Asserted Liability, and the Indemnified
Party shall thereafter have the sole right to contest or compromise the Asserted
Liability on behalf of and for the account and risk of the Indemnifying Party
and shall also have the rights set forth in Section 8(h) (without having to
again comply with this Section 8(e)); provided, however, if the dollar amount of
the actual Loss incurred that is ultimately and finally determined by
settlement, compromise or the judicial process exceeds the dollar amount of the
actual Loss that would have been incurred had the Indemnified Party consented to
the compromise or settlement on the Proposed Terms, the Indemnified Party shall
not be entitled to indemnification under this Agreement with respect to the
dollar amount of such excess Loss incurred.
(3) If, after the Indemnifying Party has investigated the
merits of the Asserted Liability and has determined that it does not wish to
compromise or settle the Asserted Liability, either because it reasonably
believes that there is no liability owed to the third party who has asserted the
Asserted Liability (the "Third Party"), or because the Indemnifying Party
reasonably believes that the compromise or settlement terms offered by the Third
Party are unacceptable, the Indemnifying Party shall contest the Asserted
Liability.
(4) If the Indemnifying Party elects not to compromise or
contest the Asserted Liability, fails to notify the Indemnified Party of its
election as herein provided or contests its obligation to indemnify the
Indemnified Party with respect to such Asserted Liability, the Indemnified Party
(upon further notice to the Indemnifying Party) shall have the right to pay,
compromise or contest such Asserted Liability on behalf of and for the account
and risk of the Indemnifying Party, and shall also have the rights set forth in
Section 8(h) (without having to again comply with this Section 8(e)).
(5) Anything in this Section 8(e) to the contrary
notwithstanding, the Indemnifying Party shall not, without the Indemnified
Party's written consent, settle or compromise any Asserted Liability or consent
to entry of any judgment which does not include an unconditional term releasing
the Indemnified Party from all Losses in respect of such Asserted Liability. In
any event, the Indemnified Party and the Indemnifying Party may participate, at
their own expense, in the contest of such Asserted Liability. Each party shall
cooperate fully with the others as to all Asserted Liabilities, shall make
available to the others as reasonably requested all information, records and
documents relating to all Asserted Liabilities and shall preserve all such
information, records and
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documents until the termination of any Asserted Liability. Each party also shall
make available to the others, as reasonably requested, its personnel, agents and
other representatives who are responsible for preparing or maintaining
information, records or other documents, or who may have particular knowledge
with respect to any Asserted Liability.
(f) The determination of the amount of any Loss for which
indemnification may be claimed under this Section 8 shall take into account and
be offset by any tax benefit or benefit under any policy of insurance derived,
accrued or received by the Indemnified Party as a result thereof. No party
otherwise entitled to indemnification under this Agreement shall be indemnified
pursuant to this Agreement to the extent that such party's Losses are increased
or extended by the gross negligence, willful misconduct, violation of law or bad
faith of such party.
(g) In the event that the Indemnifying Party shall be obligated to
indemnify the Indemnified Party pursuant to this Section 8, the Indemnifying
Party shall, upon payment of such Loss in full, be subrogated to all rights of
the Indemnified Party with respect to the Loss to which such indemnification
relates; provided, however, that the Indemnifying Party shall only be subrogated
to the extent of any amount paid by it pursuant to this Section 8 in connection
with such Loss.
(h) An Indemnifying Party shall pay to the Indemnified Party the full
amount of any and all Losses (other than Losses resulting from an Asserted
Liability) for which it is required to indemnify the Indemnified Party under
this Section 8 within ten (10) days after receipt of the Claims Notice thereof,
and the full amount of any and all Losses resulting from an Asserted Liability
within ten (10) days after the date such litigation is terminated or the date a
final order is rendered and no appeal is taken. After complying with the
provisions of Sections 8(d) and 8(e) hereof with respect to any Loss that
results from an Asserted Liability, Buyer shall be entitled to offset, from any
payments otherwise due Seller or Andrews, the full amount of any and all Losses
(whether or not resulting from an Asserted Liability) for which Seller or
Andrews is required to indemnify any Buyer Indemnitee pursuant to Section 8(b)
hereof, and Buyer shall not be liable for any amounts so offset.
(i) The indemnification rights of the parties under this Section 8 are
independent of and in addition to such other rights and remedies that the
parties may have at law or in equity or otherwise for any misrepresentation,
breach of warranty or failure to fulfill any agreement or covenant hereunder on
the part of any party hereto, including, without limitation, the right to
offset, seek specific performance, rescission or restitution, none of which
rights or remedies shall be adversely affected or diminished hereby.
SECTION 9. MISCELLANEOUS
(a) The invalidity or unenforceability of any particular provision in
this Agreement shall not affect the other provisions hereof, and this Agreement
shall be construed in all respects as if such invalid and unenforceable
provision was omitted.
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(b) This Agreement shall inure to the benefit of and shall be binding
upon the parties hereto and their heirs, beneficiaries, Successors and permitted
assigns. As used in this Agreement, the term "Successor" shall include any
person, firm, corporation or other business entity which at any time, whether by
merger, purchase or otherwise, acquires all or substantially all of the assets
or businesses of Seller or Buyer. This Agreement may not be assigned by any
party hereto without the prior written consent of the other parties hereto,
except that Buyer may assign this Agreement and its rights and obligations
hereunder to one or more of its affiliates, or to any of its lenders as
collateral security.
(c) This Agreement may be executed in two or more counterparts, each of
which shall be deemed to be an original, but all of which together shall
constitute one and the same instrument.
(d) This Agreement shall be interpreted, construed and enforced in
accordance with the laws of the State of Georgia. Titles of the sections and
subsections herein have been inserted as a matter of convenience of reference
only, and shall not affect the meaning or construction of any of the terms or
provisions herein.
(e) Any notice or other communication provided for or required by this
Agreement shall be in writing and shall be deemed to have been given and
received when delivered by hand or three (3) business days after having been
deposited in the United States Mail, certified or registered, return receipt
requested, postage prepaid, properly addressed to the person to whom such notice
or other communication is intended to be given, at such address as such person
has set forth herein, or if such person has subsequently furnished another
address in writing, at such new address.
(f) This Agreement may be amended or modified only by an instrument in
writing executed by the parties sought to be bound. No waiver by any party of
any right or remedy with respect to any breach or default by any other party
hereto shall be deemed to constitute a continuing waiver of any other breach or
default or of any other right or remedy. No failure, forbearance or delay by any
party in exercising any right or remedy available hereunder, or otherwise
available under law, shall constitute a waiver or modification of any such right
or remedy or of any obligation of the other party to perform strictly in
accordance with the terms hereof.
(g) All Exhibits and Schedules referred to herein, and the agreements
evidenced by the Exhibits, are incorporated into and made a part of this
Agreement. This Agreement is the sole and exclusive agreement among the parties
with respect to the subject matter hereof, superseding all prior negotiations,
writings and agreements relating to the subject matter of this Agreement.
(h) Time is of the essence of this agreement.
(i) The parties hereby waive compliance by Buyer and Seller with the
bulk sales law and any other similar laws in any applicable jurisdiction in
respect of the transactions contemplated by this Agreement.
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(j) Seller shall pay all federal, state and local income, sales, use,
other transfer, documentary, stamp and other taxes, if any, due as a result of
the purchase, sale or transfer of the Assets in accordance herewith, whether
such taxes are imposed by law on Seller or Buyer.
(k) As used in this Agreement, "knowledge" shall be deemed to include
actual knowledge, and any knowledge which a person or entity should, in the
exercise of reasonable care, have had or acquired.
BUYER:
BONE-DRY ENTERPRISES, INC.
By: /s/ Joyce Bone
----------------------------------------
Joyce Bone, President
SELLER:
ANDREWS ENVIRONMENTAL SERVICES, INC.
By: /s/ William R. Andrews
----------------------------------------
William R. Andrews, President
ANDREWS:
/s/ William R. Andrews
--------------------------------------------
William R. Andrews
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John D. Dawson, by signing below, hereby agrees to enter into the
Shareholders' Agreement described in Section 6(a)(8) of this Agreement at
Closing, and hereby makes the representations and warranties to Buyer set forth
in Section 4(o)(1)-(6) of this Agreement.
/s/ John D. Dawson
----------------------------------------
John D. Dawson
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EXHIBIT A
NONCOMPETITION AGREEMENT
25
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EXHIBIT B
SUBLEASE
26
<PAGE> 27
EXHIBIT C
ASSIGNMENT
27
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EXHIBIT D
RELEASE
28
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EXHIBIT E
FINANCIAL DATA
To be attached by clients.
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SCHEDULE 1
EXCLUDED ACCOUNTS
None
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SCHEDULE 2
CERTAIN PERSONAL PROPERTY
1998 Ford Louisville 9000; Keith Huber 3000 Gallon Vacuum Unit; 300 Gallon Fresh
Water; Vibrator Becker LC 44 Vacuum Pump; Cat Jet Pump - 3000 lb/ 18
Gallons/Minute
1995 Ford LTS 9000; Keith Huber 3000 Gallon Vacuum Unit; 300 Gallon Fresh Water;
Kaiser 1000 GPM Liquid Ring Pump; Meyers Jet Pump - 2000 lb/35 Gallons/Minute
1991 Ford LTS 8000; Keith Huber 3000 Gallon Vacuum Unit; 300 Gallon Fresh Water;
Becker LC 44 Vacuum Pump; Set Up for Jet
1988 LTA Ford Tractor; 3406 Catepillar 9 Speed - Air Ride
Safety Equipment, including Confined Space Entry Equipment, Oxygen-Mask Harness
Hoist
Tanker - 9000 Gallon
1991 Ford Drum Truck with Slide Rail; Lift Gate - 24' Van Box - CF8000
1 Dorsey 53' Van Trailer (this is leased, and Purchaser will assume the lease as
of 1/1/98)
1982 Ford L 7000 Dump Truck
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SCHEDULE 3
EXCLUDED ASSETS
1995 Ford LT 9000; 16 lb Accumulator; Guzzler Ace; 29" Mercur Vacuum at 3000
CFM; 5600 CFM Free Vacuum
The Hazardous Materials Certificate of Registration from the US Department of
Transportation
The Tennessee Permit to Transport Hazardous Wastes
The Hazardous Materials Registration Statement (US Department of Transportation)
All of the assets that Seller has the option to purchase from Grady Price
pursuant to that certain Asset Purchase Agreement between Seller and Mr. Price
dated on or about July 17, 1996. A copy of the list of these assets is attached.
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SCHEDULE 4
CERTAIN CREDITORS WHOSE DEBTS WILL BE PAID AT CLOSING
Browning Ferris Industries
Dekalb State Bank
Ford Motor Credit
Chorey, Taylor & Feil
USA Waste
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SCHEDULE 5
EMPLOYEES TO BE HIRED BY BUYER
See attached list. The employees are the ones not crossed out.
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SCHEDULE 6
LIST AND DESCRIPTION OF WRITTEN AND ORAL CONTRACTS
See Attached
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SCHEDULE 7
ENVIRONMENTAL PERMITS AND RELATED INFORMATION
See Attached
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SCHEDULE 8
INSURANCE INFORMATION
See Attached.
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EXHIBIT 10.6
ASSET PURCHASE AGREEMENT
THIS ASSET PURCHASE AGREEMENT (this "AGREEMENT") is made and entered
into, effective as of February 13, 1998 (the "CLOSING DATE"), between and among
SANTI GROUP OF FLORIDA, INC. , a Georgia corporation (the "BUYER"); A RAPID
ROOTER SEWER & DRAIN SERVICE, INC., a Florida corporation (the "SELLER"); and
WILLIAM E. RICE, a Florida resident ("W. RICE"), JOAN C. RICE, a Florida
resident ("J. RICE"), ALFONSE J. GRUNSKIS, a Florida resident ("A. GRUNSKIS"),
DIANE RICE GRUNSKIS, a Florida resident ("D. GRUNSKIS"), DONALD E. RICE, a
Florida resident ("D. RICE"), and RUTH ANN RICE, a Florida resident ("R. RICE"),
(W. Rice, J. Rice, A. Grunskis, D. Grunskis, D. Rice and R. Rice sometimes
collectively referred to herein as the "SELLER SHAREHOLDERS" and sometimes
individually referred to herein as a "SELLER SHAREHOLDER") (the Buyer, the
Seller and the Seller Shareholders are sometimes referred to collectively herein
as the "PARTIES" and sometimes referred to individually herein as a "PARTY").
WHEREAS, the Seller owns certain contract rights, customer accounts,
trucks, containers and other assets and is engaged in the non-hazardous liquid
waste collection and disposal business in the Miami/Dade, Broward and Palm Beach
Counties, Florida area, including, but not limited to, under the name "A Rapid
Rooter" (the "BUSINESS"); and
WHEREAS, this Agreement contemplates a transaction in which the Buyer
will purchase all of the assets of the Seller used in the Business and assume
certain of the liabilities of the Seller in return for cash and the SanTi Stock.
NOW, THEREFORE, in consideration of the premises and the mutual
promises herein made, the Parties agree as follows.
ARTICLE 1. KEY DEFINITIONS
"ACCOUNTS" means (i) all customer accounts, names, lists, purchase
orders, service agreements and contracts (including implied or quantum meruit
contractual rights) or other rights of the Seller to provide liquid waste
services to customers of the Seller, and all rights to and in connection with
any activities commonly associated with such services, customer service
agreements, and contract rights (including implied or quantum meruit contractual
rights) with customers, and (ii) all files, correspondence, records (including
billing and service records for the preceding twelve (12) months) and related
proprietary information and material and other intellectual property which is
necessary, helpful or related to providing such services described above;
excluding, however, (x) all customer accounts, rights or contracts which deal in
hazardous chemical toxic or low-level radioactive waste or any Hazardous
Materials which the Buyer determines it does not wish to purchase, and (y) all
small business set aside contracts which the Buyer determines it does not wish
to purchase. All of the customer accounts, contracts and other rights which are
not being purchased, including those accounts described in items (x) and (y) of
this definition, shall be set forth on Schedule 1 and are hereinafter referred
to collectively as the "EXCLUDED ACCOUNTS".
"ACQUIRED ASSETS" means all right, title and interest in and to all of
the assets of the Seller used or useful in the Business, and shall include, but
not be limited to, all of the Seller's: (a) Accounts, (b) leaseholds and
subleaseholds in real property, improvements, fixtures, and fittings thereon,
and easements, rights-of-way, and other appurtenants thereto (such as
appurtenant rights in and to public streets), (c) tangible personal property
(such as repair parts, machinery, equipment, inventories of raw materials and
supplies, manufactured and purchased parts, goods in process and finished goods,
furniture, certain automobiles, trucks, tractors, trailers, tankers, tools,
pumps, stabilizers, jigs, and dies), (d) intellectual property (including, but
not limited to, the name "A Rapid Rooter"), goodwill associated therewith,
licenses and sublicenses granted and obtained with respect thereto, and rights
thereunder, remedies against
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infringements thereof, and rights to protection of interests therein under the
laws of all applicable jurisdictions, (e) leases, subleases, and rights
thereunder, (f) agreements (such as equipment rental agreements and service
agreements), contracts, customer agreements, disposal agreements, service
agreements, indentures, mortgages, instruments, Security Interests, guaranties,
other similar arrangements, and rights thereunder, (g) notes receivable and
other receivables, other than accounts receivable, (h) securities (including,
but not limited to, the capital stock of its Subsidiaries), (i) claims,
deposits, prepayments, refunds, causes of action, choses in action, rights of
recovery, rights of set off, and rights of recoupment (including any such item
relating to the payment of Taxes), (j) franchises, approvals, permits (including
but not limited to disposal permits), licenses (including but not limited to
radio transmitter licenses), orders, registrations, certificates, variances, and
similar rights obtained from governments and governmental agencies,
servicemarks, trademarks, logos, and (k) telephone numbers, yellow page
advertising, books, records (excluding bank accounts), ledgers, files,
documents, correspondence, lists, plats, architectural plans, drawings and
specifications, creative materials, advertising and promotional materials,
operational, billing and payable information, studies, reports, and other
printed or written materials, computer hardware and software; provided, however,
that the Acquired Assets shall not include those assets of the Seller set forth
on Schedule 2 (collectively the "EXCLUDED ASSETS").
"EMPLOYEE BENEFIT PLAN" means any (i) nonqualified deferred
compensation or retirement plan or arrangement, (ii) qualified defined
contribution retirement plan or arrangement which is an Employee Pension Benefit
Plan, (iii) qualified defined benefit retirement plan or arrangement which is an
Employee Pension Benefit Plan (including any Multiemployer Plan), or (iv)
Employee Welfare Benefit Plan or material fringe benefit or other retirement,
bonus, or incentive plan or program.
"ENVIRONMENTAL, HEALTH, AND SAFETY REQUIREMENTS" shall mean all
federal, state, local and foreign statutes, regulations, ordinances and other
provisions having the force or effect of law, all judicial and administrative
orders and determinations, all contractual obligations and all common law
concerning public health and safety, worker health and safety, and pollution or
protection of the environment, each as amended and as now or hereafter in
effect.
"HAZARDOUS MATERIALS" means any substance that has been designated by
any governmental authority whose requirements are applicable to any of the
Seller and its Subsidiaries to be radioactive, toxic, hazardous, or otherwise
pose potential danger to health or the environment, including, but not limited
to, volatile organic compounds and all substances listed pursuant to the federal
Comprehensive Environmental Response, Compensation and Liability Act, the
federal Resource Conservation Recovery Act, the federal Clean Air Act, the
federal Water Pollution Control Act, the Toxic Substance Control Act and the
Occupational Safety and Health Act, as such acts are amended to the Closing
Date, and the regulations and publications promulgated to the Closing Date
pursuant to said acts, and "extremely hazardous substances" (as said term is
defined in ss.302 of the Emergency Planning and Community Right-to-Know Act of
1986, as amended).
"KNOWLEDGE" means actual knowledge after reasonable investigation and
includes constructive knowledge.
"LIABILITY" means any liability (whether known or unknown, whether
asserted or unasserted, whether absolute or contingent, whether accrued or
unaccrued, whether liquidated or unliquidated, and whether due or to become
due).
"LITIGATION" means any legal action, administrative or other
proceeding, arbitration, cause of action, claim, complaint, criminal
prosecution, inquiry, hearing, investigation (governmental or otherwise), or
notice (written or oral) by any Person alleging potential liability or
requesting information relating to or affecting the Seller, any of its
Subsidiaries, the Business, the Acquired Assets or the transactions contemplated
by this Agreement.
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"LOSSES" means any and all direct or indirect demands, claims,
payments, obligations, recoveries, deficiencies, fines, penalties, interests,
assessments, actions, causes of action, suits, losses, diminution in the value
of any of the Acquired Assets, compensatory, punitive, exemplary or
consequential damages (including, without limitation, lost income and profits
and interruptions of business), Liabilities, costs, expenses (including, without
limitation, (i) interest, penalties and reasonable attorneys' fees and expenses,
(ii) attorneys' fees and expenses necessary to enforce rights to indemnification
hereunder, and (iii) consultant's fees and other costs of defense or
investigation); and interest on any amount payable to a third party as a result
of the foregoing, whether accrued, absolute, contingent, known, unknown or
otherwise.
"MONTHLY GROSS REVENUES" means (i) prior to the Closing, the monthly
gross revenues of the Seller from the Business (but only from the following
lines of business: maintenance, repair and replacement of sanitary and storm
water sewers, sewer lines, septic tanks, drain fields, lift stations and other
storm water and flood control facilities; high pressure water blasting and
clean-up services; collecting, transporting and disposal of liquid waste and
yellow grease; plumbing services incidental to any of the foregoing) determined
on an accrual basis, and (ii) subsequent to the Closing, the monthly gross
revenues of the Buyer from the Business (but only from the following lines of
business: maintenance, repair and replacement of sanitary and storm water
sewers, sewer lines, septic tanks, drain fields, lift stations and other storm
water and flood control facilities; high pressure water blasting and clean-up
services; collecting, transporting and disposal of liquid waste and yellow
grease; plumbing services incidental to any of the foregoing) determined on an
accrual basis. In each of the situations described in items (i) and (ii) of this
definition, the term Monthly Gross Revenues shall not include (i) any revenues
of the Seller or the Buyer, as the case may be, from the Business with respect
to extraordinary sales which may take place or which may be included in the
Business, (ii) any revenues of the Seller or the Buyer, as the case may be, from
the Business for services not actually rendered, or (iii) any revenues of the
Seller or the Buyer, as the case may be, from the Excluded Accounts.
"ORDINARY COURSE OF BUSINESS" means the ordinary course of business
consistent with past custom and practice (including with respect to quantity and
frequency).
"PERSON" means an individual, a partnership, a corporation, an
association, a joint stock company, a trust, a joint venture, an unincorporated
organization, or a governmental entity (or any department, agency, or political
subdivision thereof).
"SECURITY INTEREST" means any mortgage, pledge, lien, encumbrance,
charge, or other security interest, other than (i) mechanic's, materialmen's,
and similar liens, (ii) liens for Taxes not yet due and payable or for Taxes
that the taxpayer is contesting in good faith through appropriate proceedings,
(iii) purchase money liens and liens securing rental payments under capital
lease arrangements, and (iv) other liens arising in the Ordinary Course of
Business and not incurred in connection with the borrowing of money.
"SUBSIDIARY" means any corporation with respect to which a specified
Person (or a Subsidiary thereof) owns a majority of the common stock or has the
power to vote or direct the voting of sufficient securities to elect a majority
of the directors.
"TAX" means any federal, state, local, or foreign income, gross
receipts, license, payroll, employment, excise, severance, stamp, documentary,
occupation, premium, windfall profits, environmental (including taxes under
ss.59A of the Internal Revenue Code of 1986, as amended (the "CODE")), customs
duties, capital stock, franchise, profits, withholding, social security (or
similar), unemployment, disability, real property, personal property, sales,
use, transfer, registration, value added, alternative or add-on
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minimum, estimated, or other tax of any kind whatsoever, including any interest,
penalty, or addition thereto, whether disputed or not.
"TAX RETURN" means any return, declaration, report, claim for refund,
or information return or statement relating to Taxes, including any schedule or
attachment thereto, and including any amendment thereof.
ARTICLE 2. BASIC TRANSACTIONS
2.1 PURCHASE AND SALE OF ASSETS. On and subject to the terms and
conditions of this Agreement, and effective as of 12:01 am on the Closing Date,
the Buyer hereby purchases from the Seller, and the Seller hereby sells,
transfers, conveys, and delivers to the Buyer, all of the Acquired Assets, for
the consideration specified below in this Article 2, free and clear of any and
all Security Interests, other than the Assumed Liabilities.
2.2 ASSUMPTION OF LIABILITIES. On and subject to the terms and
conditions of this Agreement, and effective as of the Closing, the Buyer hereby
assumes and becomes responsible for all of the liabilities of the Seller set
forth on Schedule 3 (collectively the "Assumed Liabilities"). Except for the
Assumed Liabilities, nothing in this Agreement or any other document entered
into on the Closing Date shall in any way obligate the Buyer for any
Liabilities, obligations or charges of the Seller, any of its Subsidiaries, or
any of the Seller Shareholders, including, but without limitation, any
Liabilities attributable to Environmental, Health and Safety Requirements, or
Liabilities or charges for Taxes or recording fees arising out of the sale or
transfer of the Acquired Assets. It is specifically understood and agreed by the
Parties that the Buyer does not assume any Liabilities, obligations or charges
of the Seller, any of its Subsidiaries, or the Seller Shareholders except for
the Assumed Liabilities. All Liabilities other than Assumed Liabilities shall
remain those of the Seller exclusively. In the event that the Buyer does not
payoff those Assumed Liabilities set forth in Item 1 of Schedule 3 at the
Closing or within five (5) business days thereafter, the Buyer covenants and
agrees to deliver to the Seller Shareholders, within thirty (30) days after the
date of the Closing, evidence of discharge of the Seller and the Seller
Shareholders from such Assumed Liabilities signed by the applicable creditor.
2.3 PURCHASE PRICE. The Buyer agrees to pay, issue and deliver to the
Seller at the Closing the following (collectively, the "PURCHASE PRICE"): (i)
cash in the amount of $3,300,000, payable by wire transfer or delivery of other
immediately available funds, (ii) 100,000 shares (the "SANTI STOCK") of the
common stock of SanTi Group, Inc., a Delaware corporation ("SANTI"), and (iii)
documentation effecting the assumption of the Assumed Liabilities. The Buyer is
contemporaneously at the Closing tendering to the Seller (i) all of the cash
portion of the Purchase Price, less the sum of the amount(s) set forth on
Schedule 4 which is required to be paid to the third parties set forth on
Schedule 4 at the Closing in order to remove those Security Interests set forth
on Schedule 4 which encumber certain of the Acquired Assets immediately prior to
the Closing, and (ii) documentation effecting the assumption of the Assumed
Liabilities. The Seller acknowledges and agrees that the Buyer is retaining the
SanTi Stock, pursuant to that certain Stock Pledge Agreement, of even date
herewith, between the Buyer and the Seller (the "STOCK PLEDGE"), to hold as
security to offset against any Losses asserted against, imposted upon or
incurred by the Buyer arising out of any of the matters listed in items (i)
through (v) of Section 5.2 hereof.
2.4 THE CLOSING. The closing of the transactions contemplated by this
Agreement (the "CLOSING") is contemporaneously taking place at the offices of
Hunt, Cook, Riggs, Mehr & Miller, P.A., Suite 401, 2200 Corporate Boulevard,
N.W., Boca Raton, Florida 33431, commencing at 7:30 a.m. local time on the
Closing Date.
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2.5 ALLOCATION. The Parties agree to allocate the Purchase Price (and
all other capitalizable costs) among the Acquired Assets for all purposes
(including financial accounting and tax purposes) consistent with the Code and
in accordance with the allocation schedule to be agreed upon by the Parties.
2.6 USE OF NAME. Following the Closing Date, the Seller shall not use
or give permission to any other Party to use the name "A Rapid Rooter" or any
substantially similar name in connection with the operation of a waste
collection and disposal business.
2.7 CONFIDENTIALITY. The Seller and each Seller Shareholder agree that
for a period of five (5) years after the Closing Date, none of them nor any
other person connected with any of them shall at any time divulge, and each of
them shall cause their respective agents, employees and "AFFILIATES" (as said
term is defined in Rule 12b-2 of the regulations promulgated under the
Securities Exchange Act of 1934, as amended) not to divulge, the existence and
terms of the negotiations resulting in this Agreement, the terms and conditions
of this Agreement and the financing arrangements of the Buyer and its
Affiliates, except as required by applicable federal, state or local statutes
pursuant to subpoena or court order.
2.8 TELEPHONE REFERRALS. From and after the Closing Date, the Seller
shall refer, and cause its agents to refer, all telephone calls to it or them
for liquid waste collection and disposal to the Buyer.
ARTICLE 3. REPRESENTATIONS AND WARRANTIES
OF THE SELLER AND THE SELLER SHAREHOLDERS
The Seller and each of the Seller Shareholders jointly and severally
represent and warrant to the Buyer that the statements contained in this Article
3 are correct and complete as of the Closing Date, except as set forth in the
disclosure schedule accompanying this Agreement and initialed by the Parties
(the "DISCLOSURE SCHEDULE"). The Disclosure Schedule will be arranged in
sections corresponding to the lettered and numbered sections contained in this
Article 3.
3.1 ORGANIZATION OF THE SELLER AND CERTAIN SELLER SHAREHOLDERS. The
Seller is a corporation duly organized, validly existing, and in good standing
under the laws of the jurisdiction of its incorporation. The Seller is duly
authorized to conduct business and the Business, and is in good standing, under
the laws of each jurisdiction where such qualification is required. If any
Seller Shareholder is an entity, such Seller Shareholder is duly organized,
validly existing, and in good standing under the laws of the jurisdiction of its
incorporation or other formation and organization.
3.2 AUTHORIZATIONS. The Seller has full power and authority (including
full corporate power and authority) to execute and deliver this Agreement and to
perform its obligations hereunder. Without limiting the generality of the
foregoing, the board of directors of the Seller and the Seller Shareholders have
duly authorized the execution, delivery, and performance of this Agreement by
the Seller. Each of the Seller Shareholders has full power and authority
(including, if any Seller Shareholder is a corporation or other entity, full
corporate or other entity power and authority) to execute and deliver this
Agreement and to perform such Seller Shareholders' obligations hereunder. This
Agreement constitutes the valid and legally binding obligation of the Seller and
each Seller Shareholder, enforceable in accordance with its terms and
conditions.
3.3 NONCONTRAVENTION. Neither the execution and the delivery of this
Agreement by the Seller and the Seller Shareholders, nor the consummation by the
Seller and the Seller Shareholders of the transactions contemplated hereby, will
(i) violate any constitution, statute, regulation, rule, injunction, judgment,
order, decree, stipulation, ruling, charge, or other restriction of any
government, governmental agency, or court to which the Seller, any of its
Subsidiaries or any Seller Shareholder is subject (or, if any Seller Shareholder
is a corporation or other entity, any provision of its charter or bylaws or
other governing
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documents) or any provision of the charter or bylaws of any of the Seller or any
of its Subsidiaries, or (ii) conflict with, result in a breach of, constitute a
default under, result in the acceleration of, create in any Person the right to
accelerate, terminate, modify, or cancel, or require any notice under any
agreement, contract, lease, license, permit, instrument, or other arrangement to
which the Seller, any of its Subsidiaries, or any Seller Shareholder is a party
or by which the Seller, any of its Subsidiaries, or any Seller Shareholder is
bound or to which any assets of the Seller, any of its Subsidiaries, or any
Seller Shareholder is subject (or result in the imposition of any Security
Interest upon any assets of the Seller, any of its Subsidiaries, or any Seller
Shareholder). Neither the Seller nor any of its Subsidiaries needs to give any
notice to, make any filing with, or obtain any authorization, consent, or
approval of any government or governmental agency in order for the Parties to
consummate the transactions contemplated by this Agreement.
3.4 SELLER SHARES; BROKERS' FEES. Each Seller Shareholder holds of
record the number of shares of issued and outstanding capital stock of the
Seller set forth next to such Seller Shareholder's name in Section 3.4 of the
Disclosure Schedule. Neither the Seller nor any of its Subsidiaries has any
Liability or obligation to pay any fees or commissions to any broker, finder, or
agent with respect to the transactions contemplated by this Agreement for which
the Buyer could become liable or obligated.
3.5 TITLE TO ASSETS. The Seller and its Subsidiaries have good and
marketable title to, or a valid leasehold interest in, the properties and assets
used by any of them, located on any of their respective premises, or shown on
the balance sheet contained within the Most Recent Financial Statements (the
"MOST RECENT BALANCE SHEET") or acquired after the date thereof, free and clear
of all Security Interests, other than the Assumed Liabilities, except for
properties and assets disposed of in the Ordinary Course of Business since the
date of the Most Recent Balance Sheet. Without limiting the generality of the
foregoing, the Seller has good and marketable title to all of the Acquired
Assets, free and clear of any Security Interest or restriction on transfer,
other than the Assumed Liabilities.
3.6 SUBSIDIARIES. Each Subsidiary of the Seller is listed in Section
3.6 of the Disclosure Schedule, and is a corporation duly organized, validly
existing, and in good standing under the laws of the jurisdiction of its
incorporation. Each Subsidiary of the Seller is duly authorized to conduct
business and is in good standing under the laws of each jurisdiction where such
qualification is required. Each Subsidiary of the Seller has full power and
authority (including full corporate power and authority) and all licenses,
permits, and authorizations necessary to carry on the Business and the other
businesses in which it is engaged and in which it presently proposes to engage
and to own and use the properties owned and used by it. All of the issued and
outstanding shares of capital stock of each Subsidiary of the Seller have been
duly authorized and are validly issued, fully paid, and nonassessable. The
Seller holds of record and owns beneficially all of the outstanding shares of
each Subsidiary of the Seller, free and clear of any restrictions on transfer
(other than restrictions under the Securities Act and state securities laws),
Taxes, Security Interests, options, warrants, purchase rights, contracts,
commitments, equities, claims, and demands. There are no outstanding or
authorized options, warrants, purchase rights, subscription rights, conversion
rights, exchange rights, or other contracts or commitments that could require
any of the Seller and its Subsidiaries to sell, transfer, or otherwise dispose
of any capital stock of any of its Subsidiaries or that could require any
Subsidiary of the Seller to issue, sell, or otherwise cause to become
outstanding any of its own capital stock (other than this Agreement). There are
no voting trusts, proxies, or other agreements or understandings with respect to
the voting of any capital stock of any Subsidiary of the Seller. The minute
books (containing the records of meetings of the stockholders, the board of
directors, and any committees of the board of directors), the stock certificate
books, and the stock record books of each Subsidiary of the Seller are correct
and complete. None of the Subsidiaries of the Seller is in default under or in
violation of any provision of its charter or bylaws. None of the Seller and its
Subsidiaries controls directly or indirectly or has any direct or indirect
equity participation in any corporation, partnership, trust, or other business
association which is not a Subsidiary of the Seller.
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3.7 FINANCIAL STATEMENTS. Attached hereto as Exhibit A are the
following financial statements (collectively, the "FINANCIAL STATEMENTS"): (i)
Financial Statements and Supplementary Information and Accountant's Compilation
Report, including a balance sheet, a statement of operations and retained
earnings, a schedule of operating expenses and a schedule of reconciliation of
beginning retained earnings as of and for the fiscal years ended December 31,
1995 and December 31, 1996 (the "MOST RECENT FISCAL YEAR END") for the Seller
and its Subsidiaries; and (ii) Financial Statements and Supplementary
Information and Accountant's Compilation Report, including a balance sheet, a
statement of operations and retained earnings, a schedule of operating expenses
and a schedule of reconciliation of beginning retained earnings (the "MOST
RECENT FINANCIAL STATEMENTS") as of and for the eight month period ended August
31, 1997 (the "MOST RECENT FISCAL MONTH END") for the Seller and its
Subsidiaries. The Financial Statements (including the notes thereto) present
fairly the financial condition of the Seller and its Subsidiaries as of such
dates and the results of operations of the Seller and its Subsidiaries for such
periods, are correct and complete, and are consistent with the books and records
of the Seller and its Subsidiaries (which books and records are correct and
complete). The net book value of the Acquired Assets is not less than
$550,000.00.
3.8 EVENTS SUBSEQUENT TO MOST RECENT FISCAL MONTH END. Since the Most
Recent Fiscal Month End, there has not been any adverse change in the Business
or the business, financial condition, operations, results of operations, or
future prospects of the Seller or any of its Subsidiaries. Without limiting the
generality of the foregoing, since that date: (i) neither the Seller nor any of
its Subsidiaries has sold, leased, transferred, pledged or assigned any of its
assets, tangible or intangible, other than for a fair consideration in the
Ordinary Course of Business; (ii) neither the Seller nor any of its Subsidiaries
has entered into (or issued), accelerated, terminated, modified, or canceled any
agreement, contract, lease, note, bond, debt security or license either
involving more than $5,000 or outside the Ordinary Course of Business; (iii)
neither the Seller nor its Subsidiaries has made any capital expenditure (or
series of related capital expenditures) either involving more than $10,000 or
outside the Ordinary Course of Business; (iv) neither the Seller nor any of its
Subsidiaries has delayed or postponed the payment of accounts payable and other
Liabilities outside the Ordinary Course of Business; (v) neither the Seller nor
any of its Subsidiaries has canceled, compromised, waived, or released any right
or claim (or series of related rights and claims) either involving more than
$5,000 or outside the Ordinary Course of Business; (vi) neither the Seller nor
any of its Subsidiaries has issued, sold, disposed of or granted any rights to
purchase any of its capital stock, or declared, set aside, or paid any dividend
or made any distribution with respect to its capital stock (whether in cash or
in kind), or redeemed, purchased, or otherwise acquired any of its capital
stock; (vii) neither the Seller nor any of its Subsidiaries has experienced any
damage, destruction, or loss (whether or not covered by insurance) to its
property; (viii) neither the Seller nor any of its Subsidiaries has made any
loan to, or entered into any other transaction with, any of its directors,
officers, or employees outside the Ordinary Course of Business; (ix) neither the
Seller nor any of its Subsidiaries has (a) entered into any employment contract
or collective bargaining agreement, written or oral, or modified the terms of
any existing such contract or agreement; (b) granted any increase in the base
compensation of any of its directors, officers, or employees (or made any other
change in employment terms for such persons) outside the Ordinary Course of
Business; or (c) adopted, amended, modified, or terminated any Employee Benefit
Plan; (x) there has not been any other occurrence, event, incident, action,
failure to act, or transaction outside the Ordinary Course of Business involving
the Seller or any of its Subsidiaries; and (xi) neither the Seller nor any of
its Subsidiaries has committed to any of the foregoing.
3.9 UNDISCLOSED LIABILITIES. Neither the Seller nor any of its
Subsidiaries has any Liability (and there is no basis for any present or future
action, suit, proceeding, hearing, investigation, charge, complaint, claim, or
demand against any of them giving rise to any Liability), except for (i)
Liabilities set forth on the face of the Most Recent Balance Sheet (rather than
in any notes thereto) and (ii) Liabilities which have arisen after the Most
Recent Fiscal Month End in the Ordinary Course of Business (none of which
results from, arises out of, relates to, is in the nature of, or was caused by
any breach of contract, breach of warranty, tort, infringement, or violation of
law).
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3.10 LEGAL COMPLIANCE. Each of the Seller, its Subsidiaries, and its
predecessors and Affiliates has complied with all applicable laws (including
rules, statutes, regulations, codes, permits, plans, injunctions, judgments,
orders, decrees, rulings, and charges thereunder) of federal, state, local, and
foreign governments (and all agencies thereof), and no action, suit, proceeding,
hearing, investigation, charge, complaint, claim, demand, or notice has been
filed or commenced against any of them alleging any failure so to comply. None
of the Seller Shareholders and the directors, officers and management employees
of the Seller has any Knowledge of any basis (existing prior to the Closing)
which could result in (i) any failure of the Buyer (based upon its acquisition
of the Business) to comply after the Closing with any and all applicable laws
(including rules, statutes, regulations, codes, permits, plans, injunctions,
judgments, orders, decrees, rulings, and charges thereunder) of federal, state,
local, and foreign governments (and all agencies thereof), or any action, suit,
proceeding, hearing, investigation, charge, complaint, claim, demand or notice
being filed or commenced after the Closing against the Buyer or any of its
Affiliates alleging any failure to so comply.
3.11 TAX MATTERS. Each of the Seller and its Subsidiaries has filed all
Tax Returns that it was required to file. All such Tax Returns were correct and
complete in all respects. All Taxes owed by any of the Seller and its
Subsidiaries (whether or not shown on any Tax Return) have been paid. No claim
has ever been made by an authority in a jurisdiction where any of the Seller and
its Subsidiaries does not file Tax Returns that it is or may be subject to
taxation by that jurisdiction. Each of the Seller and its Subsidiaries has
withheld and paid all Taxes required to have been withheld and paid in
connection with amounts paid or owing to any employee, independent contractor,
creditor, stockholder or other third party. No Seller Shareholder or director or
officer (or employee responsible for Tax matters) of any of the Seller and its
Subsidiaries expects any authority to assess any additional Taxes for any period
for which Tax Returns have been filed. There is no dispute or claim concerning
any Tax Liability of any of the Seller and its Subsidiaries either (i) claimed
or raised by any authority in writing or (ii) as to which any of the Seller
Shareholders and the directors and officers (and employees responsible for Tax
matters) of any of the Seller and its Subsidiaries has Knowledge based upon
personal contact with any agent of such authority. Section 3.11 of the
Disclosure Schedule lists all federal, state, local, and foreign income Tax
Returns filed with respect to any of the Seller and its Subsidiaries for taxable
periods ended on or after December 31, 1996, indicates those Tax Returns that
have been audited, and indicates those Tax Returns that currently are the
subject of audit. The Seller has delivered to the Buyer correct and complete
copies of all federal income Tax Returns, examination reports, and statements of
deficiencies assessed against or agreed to by any of the Seller and its
Subsidiaries since December 31, 1996. The unpaid Taxes of the Seller and its
Subsidiaries (i) did not, as of the Most Recent Fiscal Month End, exceed the
reserve for Tax Liability (rather than any reserve for deferred Taxes
established to reflect timing differences between book and Tax income) set forth
on the face of the Most Recent Balance Sheet (rather than in any notes thereto)
and (ii) do not exceed that reserve as adjusted for the passage of time through
the Closing Date in accordance with the past custom and practice of the Seller
and its Subsidiaries in filing their Tax Returns.
3.12 REAL PROPERTY.
(i) Section 3.12(i) of the Disclosure Schedule lists and
describes briefly all real property that any of the Seller and its Subsidiaries
owns. With respect to each such parcel of owned real property required to be
listed and described on Section 3.12(i) of the Disclosure Schedule: (A) the
identified owner has good and marketable title to the parcel of real property,
free and clear of any Security Interest, easement, covenant, or other
restriction, except for installments of special assessments not yet delinquent
and recorded easements, covenants, and other restrictions which do not impair
the current use, occupancy, or value, or the marketability of title, of the
property subject thereto; (B) there are no pending or threatened condemnation
proceedings, lawsuits, or administrative actions relating to the property or
other matters
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affecting adversely the current use, occupancy, or value thereof; (C) the legal
description for the parcel contained in the deed thereof describes such parcel
fully and adequately, the buildings and improvements are located within the
boundary lines of the described parcels of land, are not in violation of
applicable setback requirements, zoning laws, and ordinances (and none of the
properties or buildings or improvements thereon are subject to "permitted
non-conforming use" or "permitted non-conforming structure" classifications),
and do not encroach on any easement which may burden the land, the land does not
serve any adjoining property for any purpose inconsistent with the use of the
land, and the property is not located within any flood plain or subject to any
similar type restriction for which any permits or licenses necessary to the use
thereof have not been obtained; (D) all facilities have received all approvals
of governmental authorities (including licenses and permits) required in
connection with the ownership or operation thereof and have been operated and
maintained in accordance with applicable laws, rules, and regulations; (E) there
are no leases, subleases, licenses, concessions, or other agreements, written or
oral, granting to any Person or Persons the right of use or occupancy of any
portion of the parcel of real property; (F) there are no outstanding options or
rights of first refusal to purchase the parcel of real property, or any portion
thereof or interest therein; (G) there are no Persons (other than the Seller and
its Subsidiaries) in possession of the parcel of real property, other than
tenants under any leases disclosed in Section 3.2.12(i) of the Disclosure
Schedule who are in possession of space to which they are entitled; (H) all
facilities located on the parcel of real property are supplied with utilities
and other services necessary for the operation of such facilities, including
gas, electricity, water, telephone, sanitary sewer, and storm sewer, all of
which services are adequate in accordance with all applicable laws, ordinances,
rules, and regulations and are provided via public roads or via permanent,
irrevocable, appurtenant easements benefitting the parcel of real property; (I)
each parcel of real property abuts on and has direct vehicular access to a
public road, or has access to a public road via a permanent, irrevocable,
appurtenant easement benefitting the parcel of real property, and access to the
property is provided by paved public right-of-way with adequate curb cuts
available; (J) no Hazardous Material is present in, on or under such real
property at any time prior to the Closing Date, including any land and the
improvements, ground water and surface water thereof, except in accordance with
applicable laws and regulations; and (K) there are and have been no storage
tanks located on or under such property.
(ii) Section 3.12(ii) of the Disclosure Schedule lists and
describes briefly all real property leased or subleased to or not owned but
otherwise used by any of the Seller and its Subsidiaries. The Seller has
delivered to the Buyer correct and complete copies of the leases and subleases
(as amended to date) required to be listed in Section 3.12(ii) of the Disclosure
Schedule. With respect to each lease and sublease required to be listed in
Section 3.12(ii) of the Disclosure Schedule: (A) the lease or sublease is legal,
valid, binding, enforceable, and in full force and effect; (B) the lease or
sublease will continue to be legal, valid, binding, enforceable, and in full
force and effect on identical terms following the consummation of the
transactions contemplated hereby; (C) no party to the lease or sublease is in
breach or default, and no event has occurred which, with notice or lapse of
time, would constitute a breach or default or permit termination, modification,
or acceleration thereunder; (D) there are no disputes, oral agreements, or
forbearance programs in effect as to the lease or sublease and no party to the
lease or sublease has repudiated any provision thereof; (E) with respect to each
sublease, the representations and warranties set forth in subsections (A)
through (D) above are true and correct with respect to the underlying lease; (F)
the Seller has not assigned, transferred, conveyed, mortgaged, deeded in trust,
or encumbered any interest in the leasehold or subleasehold; (G) all facilities
leased or subleased thereunder have received all approvals of governmental
authorities (including licenses and permits) required in connection with the
operation thereof and have been operated and maintained in accordance with
applicable laws, rules, and regulations; (H) all facilities leased or subleased
thereunder are supplied with utilities and other services necessary for the
operation of said facilities; (I) no Hazardous Material is present in, on or
under such real property at any time prior to the Closing Date, including any
land and the improvements, ground water and surface water thereof, except in
accordance with applicable laws and regulations; and (J) there are and have been
no storage tanks located on or under such property. With respect to each such
property used by but not owned
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by, leased to or subleased to any of the Seller and its Subsidiaries, Section
3.12(ii) of the Disclosure Schedule states the nature and terms of the
relationship pursuant to which such property is used.
3.13 TANGIBLE ASSETS. The Seller and its Subsidiaries own, hold or
lease all buildings, machinery, equipment, other tangible assets, permits,
licenses and agreements necessary for the conduct of the Business as presently
conducted and as presently proposed to be conducted. Except as set forth on
Section 3.13 of the Disclosure Schedule, each such tangible asset is in good
operating condition and repair (subject to normal wear and tear). There are no
defects in the Acquired Assets which affect the plumbing, electrical, sewer,
ventilating or air conditioning systems thereof.
3.14 CONTRACTS. Section 3.14 of the Disclosure Schedule lists all
contracts and other agreements to which any of the Seller and its Subsidiaries
is a party. The Seller has delivered to the Buyer a correct and complete copy of
each written agreement (as amended to date) required to be listed in Section
3.14 of the Disclosure Schedule. With respect to each agreement required to be
listed in Section 3.14 of the Disclosure Schedule: (i) the agreement is legal,
valid, binding, enforceable, and in full force and effect; (ii) the agreement
will continue to be legal, valid, binding, enforceable, and in full force and
effect on identical terms following the consummation of the transactions
contemplated hereby; (iii) no party thereto is in breach or default, and no
event has occurred which with notice or lapse of time would constitute a breach
or default, or permit termination, modification, or acceleration, under the
agreement; and (iv) no party thereto has repudiated any provision of the
agreement.
3.15 POWERS OF ATTORNEY. There are no outstanding powers of attorney
executed by or on behalf of any of the Seller and its Subsidiaries.
3.16 INSURANCE. Section 3.16 of the Disclosure Schedule lists each
insurance policy (including policies providing property, casualty, liability,
and workers' compensation coverage and bond and surety arrangements) to which
any of the Seller and its Subsidiaries is a party, a named insured, or otherwise
the beneficiary of coverage. With respect to each insurance policy required to
be listed in Section 3.16 of the Disclosure Schedule: (i) the policy is legal,
valid, binding, enforceable, and in full force and effect; (ii) the policy will
continue to be legal, valid, binding, enforceable, and in full force and effect
on identical terms following the consummation of the transactions contemplated
hereby; (iii) neither the Seller and its Subsidiaries nor any other party to the
policy is in breach or default (including with respect to the payment of
premiums or the giving of notices), and no event has occurred which, with notice
or the lapse of time, would constitute such a breach or default, or permit
termination, modification, or acceleration, under the policy; and (iv) no party
to the policy has repudiated any provision thereof. Each of the Seller and its
Subsidiaries has been covered during the past 3 years by insurance in scope and
amount customary and reasonable for the Business and the other businesses in
which it has engaged during the aforementioned period. Section 3.16 of the
Disclosure Schedule describes any self-insurance arrangements affecting any of
the Seller and its Subsidiaries, as well as any pending claims with respect to
insurance coverage owned by the Seller or its Subsidiaries, including amounts
held in reserve by the Seller or its Subsidiaries in connection with any such
claim.
3.17 LITIGATION. Section 3.17 of the Disclosure Schedule sets forth
each instance in which any of the Seller and its Subsidiaries (i) is subject to
any outstanding injunction, judgment, order, decree, ruling, or charge or (ii)
is a party or is threatened to be made a party to any action, suit, proceeding,
hearing, or investigation of, in, or before any court or quasi-judicial or
administrative agency of any federal, state, local, or foreign jurisdiction or
before any arbitrator. None of the actions, suits, proceedings, hearings, and
investigations required to be set forth in Section 3.17 of the Disclosure
Schedule could result in any adverse change in the Business, the other business,
financial condition, operations, results of operations, or future prospects of
any of the Seller and its Subsidiaries. None of the Seller Shareholders and the
directors and officers (and employees with responsibility for litigation
matters) of the Seller and its Subsidiaries has any
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reason to believe that any such action, suit, proceeding, hearing, or
investigation may be brought or threatened against any of the Seller and its
Subsidiaries.
3.18 SERVICE WARRANTY AND LIABILITY. Each service provided or delivered
by any of the Seller and its Subsidiaries has been in conformity with all
applicable contractual commitments and all express and implied warranties, and
neither the Seller nor any of its Subsidiaries has any Liability (and there is
no basis for any present or future action, suit, proceeding, hearing,
investigation, charge, complaint, claim, or demand against any of the Seller and
its Subsidiaries giving rise to any Liability) (i) for damages in connection
therewith, or (ii) arising out of any injury to individuals or property as a
result of the use of any service provided or delivered by any of the Seller and
its Subsidiaries. No service provided or delivered by any of the Seller and its
Subsidiaries is subject to any guaranty, warranty, or other indemnity beyond the
applicable standard terms and conditions of sale. Section 3.18 of the Disclosure
Schedule includes copies of the standard terms and conditions of sale for each
of the Seller and its Subsidiaries (containing applicable guaranty, warranty,
and indemnity provisions).
3.19 [THIS SECTION INTENTIONALLY LEFT BLANK]
3.20 EMPLOYEES AND INDEPENDENT CONTRACTORS. Section 3.20 of the
Disclosure Schedule contains a complete list of all employees and independent
contractors of each of the Seller and its Subsidiaries engaged in the conduct of
the Business, and for each employee or independent contractor required to be
listed on Section 3.20 of the Disclosure Schedule, their address, social
security number, current annual base salary or hourly rate and years of
employment or engagement with any of the Seller and its Subsidiaries. No
executive, key employee, group of employees, key independent contractor or group
of independent contractors has any plans to terminate employment or engagement
with any of the Seller and its Subsidiaries or with the Buyer if the Buyer has
made known to the Seller its intention to employ or engage such person, persons,
entity or entities. Neither the Seller nor any of its Subsidiaries is a party to
or bound by any collective bargaining agreement, or experienced any strikes,
grievances, claims of unfair labor practices, or other collective bargaining
disputes. Neither the Seller nor any of its Subsidiaries has committed any
unfair labor practice or taken an action which would give rise to a claim under
any federal or state law restricting discrimination in employment. None of the
Seller Shareholders and the directors and officers (and employees with
responsibility for employment matters) of the Seller and its Subsidiaries has
any Knowledge of any organizational effort presently being made or threatened by
or on behalf of any labor union with respect to employees of any of the Seller
and its Subsidiaries.
3.21 EMPLOYEE BENEFITS. Section 3.21 of the Disclosure Schedule lists
each Employee Benefit Plan that any of the Seller and its Subsidiaries maintains
or to which any of the Seller and its Subsidiaries contributes or has any
obligation to contribute. Each Employee Benefit Plan (and each related trust,
insurance contract, or fund) required to be listed on Section 3.21 of the
Disclosure Schedule complies in form and in operation in all respects with the
applicable requirements of the Employee Retirement Income Security Act of 1974,
as amended ("ERISA"), the Code and other applicable laws.
3.22 GUARANTIES. Neither the Seller nor any of its Subsidiaries is a
guarantor or otherwise liable or responsible for any Liability or obligation
(including indebtedness) of any other Person.
3.23 ENVIRONMENTAL, HEALTH, AND SAFETY MATTERS.
(i) The Seller, its Subsidiaries, and its predecessors and
Affiliates have complied with all Environmental, Health, and Safety
Requirements, and no action, suit, proceeding, hearing, investigation, charge,
complaint, claim, demand, or notice has been filed or commenced against any of
them alleging any failure so to comply.
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(ii) Neither the Seller nor any of its Subsidiaries has any
Liability (and none of their respective predecessors and Affiliates have handled
or disposed of any substance, arranged for the disposal of any substance,
exposed any employee or other individual to any substance or condition, or owned
or operated any property or facility in any manner that could form the basis for
any present or future action, suit, proceeding, hearing, investigation, charge,
complaint, claim, or demand against the Seller, giving rise to any Liability)
for damage to any site, location, or body of water (surface or subsurface), for
any illness of or personal injury to any employee or other individual, or for
any reason under any Environmental, Health and Safety Requirements, except in
compliance with all applicable Environmental, Health and Safety Requirements.
(iii) All properties and equipment used in the Business, the
Seller's Subsidiaries' businesses, and their respective predecessors' and
Affiliates' businesses, have been free of asbestos, PCB's, methylene chloride,
trichloroethylene, 1, 2-trans-dichloroethylene, dioxins, dibenzofurans, and all
Hazardous Materials.
(iv) Neither the Seller nor any of its Subsidiaries has
transported, stored, treated or disposed, nor allowed or arranged for any third
person to transport, store, treat or dispose of, waste to or at any location
other than a site lawfully permitted to receive such waste for such purposes.
Neither the Seller nor any of its Subsidiaries has transported, stored, treated
or disposed of, nor allowed or arranged for any third person to transport,
store, treat or dispose of, (A) any Hazardous Materials, or (B) any other waste
to or at any location designated for remedial action pursuant to the
Comprehensive Environmental Response, Compensation and Liability Act, as from
time to time amended, or any similar federal or state statute assigning
responsibility for the cost of investigating or remediating releases of
contaminants into the environment.
(v) Section 3.23(v) of the Disclosure Schedule is a complete
and accurate list of (A) locations (identified by name, address, owner/operator,
type of facility and type of waste) to which any of the Seller and its
Subsidiaries has ever transported, or ever caused to be transported, allowed or
arranged for any third party to transport, any type of waste material, generated
by any of the Seller and its Subsidiaries, or customers of any of the Seller and
its Subsidiaries, for storage (other than at a customer's facility), treatment,
burning, recycling or disposal, and (B) storage (other than at a customer's
facility), treatment, burning, recycling or disposal activities which any of the
Seller and its Subsidiaries has undertaken, at any time, at locations then or
presently owned or occupied by any of the Seller and its Subsidiaries (such list
to include property address, nature of the interest of the Seller or its
Subsidiaries in property, nature of the activity conducted at such location,
type and form or waste, estimated volume of waste disposal on or in ground, and
period of time the activity was conducted).
(vi) Neither the Seller nor any of its Subsidiaries has
received any notification (including requests for information directed to any of
the Seller and its Subsidiaries or any Seller Shareholder) from any governmental
agency or any other person asserting that any of the Seller and its Subsidiaries
is or may be a "potentially responsible person" or otherwise liable with respect
to a remediation or the payment of response costs at a waste storage treatment
or disposal action facility, pursuant to the provisions of the Comprehensive
Environmental Response, Compensation and Liability Act, as from time to time
amended, or any similar federal or state statute assigning responsibility for
the costs of investigating or remediating releases of contaminants into the
environment.
3.24 CERTAIN BUSINESS RELATIONSHIPS WITH THE SELLER AND ITS AFFILIATES.
None of the Seller Shareholders nor any of their respective Affiliates has been
involved in any business arrangement or relationship with any of the Seller and
its Subsidiaries within the past 12 months which has caused or resulted in
increased gross revenues for the Seller from the Business and which, if not
continued subsequent to the Closing, will cause or result in decreased revenues
for the Buyer from the Business, and none of the
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Seller Shareholders nor any of their respective Affiliates owns or leases any
asset, tangible or intangible, which is used in the businesses of any of the
Seller and its Subsidiaries. Neither the Seller, any of its Subsidiaries nor any
Seller Shareholder owns or has any interest in a Person (other than the Seller
and its Subsidiaries) conducting a liquid waste management business.
3.25 INVESTMENT. The Seller and each of the Seller Shareholders (i)
understands that the SanTi Stock has not been, and will not be, registered under
the Securities Act of 1933, as amended (the "SECURITIES ACT"), or under any
state securities laws, and is being offered and sold in reliance upon federal
and state exemptions for transactions not involving any public offering, (ii)
understands that the Seller is acquiring the SanTi Stock solely for its own
account for investment purposes, and not with a view to the distribution
thereof, (iii) is a sophisticated investor with knowledge and experience in
business and financial matters, (iv) has received certain information concerning
the Buyer and SanTi and has had the opportunity to obtain additional information
as desired in order to evaluate the merits and the risks inherent in holding the
SanTi Stock, (v) is able to bear the economic risk and lack of liquidity
inherent in holding the SanTi Stock, and (vi) is an "ACCREDITED INVESTOR" (as
said term is defined in Regulation D promulgated under the Securities Act) for
the reasons set forth in Section 3.25 of the Disclosure Schedule.
3.26 OWNERSHIP AND ASSIGNABILITY OF ACCOUNTS. The Seller is the lawful
owner of all of the Accounts, and all such Accounts are free and clear of all
claims, liens, mortgages, pledges, encumbrances and security interests of every
kind, including, but not limited to financing arrangements (including
receivables financing). There are no outstanding rights of any kind to acquire
from either the Seller or the Seller Shareholders, either separately or jointly,
any interest whatsoever, whether current or future, in the Accounts, held by any
Person other than Buyer. Except for those Accounts expressly set forth in
Section 3.26 of the Disclosure Schedule, all Accounts are freely assignable by
the Seller, and such assignment, transfer and delivery thereof to the Buyer of
all of the Accounts will not constitute or result in a breach, violation or
default of any agreements relating to such Accounts, and such agreements and
Accounts shall remain in full force and effect as if there had been no
assignment, transfer or delivery.
3.27 REVENUE AND MAJOR ACCOUNTS. The average Monthly Gross Revenue of
the Seller for the calendar months of January through August, 1997 is at least
$371,416. Section 3.27 of the Disclosure Schedule contains a listing of the
Monthly Gross Revenues of the Seller for the calendar months of January through
August, 1997. Unless otherwise noted on Section 3.27 of the Disclosure Schedule,
during the 12 calendar month period immediately preceding the Closing Date, the
Seller has not lost any customer that generated more than ten percent (10%) of
the Seller's gross revenues in any of the Seller's past fiscal periods. The
Seller and the Seller Shareholders further represent and warrant that during the
360 day period immediately following the Closing, the average Monthly Gross
Revenues of the Buyer shall not be less than $360,000. To the extent that the
average Monthly Gross Revenues of the Buyer are less than $360,000, the Parties
agree that the Buyer shall be deemed to have suffered a Loss in an amount equal
to the product of said deficiency and the factor 16.11, and that the Buyer shall
be entitled to indemnity from the Seller in the amount of such Loss or to offset
the amount of said Loss against the SanTi Stock pursuant to the Stock Pledge.
3.28 [THIS SECTION INTENTIONALLY LEFT BLANK]
3.29 POSSESSION OF FRANCHISES, LICENSES, ETC. Except as set forth on
Section 3.29 of the Disclosure Schedule, each of the Seller and each of its
Subsidiaries possesses, free from any burdensome restriction, all franchises,
certificates, licenses, permits, clearances, consents and other authorizations
from governmental political subdivisions or regulatory authorities that are
necessary for (i) the continued ownership, maintenance and operation of the
Business and the other businesses conducted by any of the Seller and its
Subsidiaries, as currently being operated and conducted, (ii) the continued
operation, use and ownership of the Acquired Assets, as currently being operated
and used, and (iii) the servicing of the
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Accounts, as currently being serviced (collectively the "PERMITS"). Section 3.29
of the Disclosure Schedule sets forth all of the Permits and for each Permit,
accurately describes the expiration and/or renewal date thereof. Neither the
Seller nor any of its Subsidiaries is in any way whatsoever in violation of any
of the Permits, and each of the Seller and its Subsidiaries has complied with
all applicable covenants and conditions of each of the Permits. There is no
action, proceeding, permit revocation, permit amendment, writ, injunction, claim
or investigation pending or threatened, concerning or relating to any of the
Permits or the Hazardous Materials activities of any of the Seller and its
Subsidiaries, including, but not limited to, the treatment, storage or disposal
of Hazardous Materials or liquid or solid waste materials which have been
handled by the Seller, any of its Subsidiaries, or any of their respective
predecessors or Affiliates.
3.30 THIRD PARTY RELATIONSHIPS. Each of the Seller and its Subsidiaries
has good working relationships in accordance with past practices with all
suppliers, subcontractors, governmental regulators and other Persons necessary
or appropriate for the normal operation of the Business and the businesses of
the Seller's Subsidiaries. The consummation of the subject transaction will not
result in any injury to or disruption of such relationships, and none of the
Seller Shareholders and the directors and officers of the Seller and its
Subsidiaries has any Knowledge that the Buyer will incur any costs or expenses
in order to continue such relationships as they had been maintained previous to
the Closing.
3.31 ACQUISITION QUESTIONNAIRE. All statements and representations
contained in that certain February 13, 1998 Acquisition Questionnaire (by
reference made an integral part hereof) initialed by the Seller Shareholders and
tendered by the Seller to the Buyer is true and correct in all material
respects.
3.32 DISCLOSURE. The representations and warranties contained in this
Article 3 do not contain any untrue statement of a material fact or omit to
state any material fact necessary in order to make the statements and
information contained in this Article 3 not misleading.
ARTICLE 4. REPRESENTATIONS AND WARRANTIES OF THE BUYER
The Buyer represents and warrants to the Seller that the statements
contained in this Article 4 are correct and complete as of the Closing Date,
except as set forth in the Disclosure Schedule. The Disclosure Schedule will be
arranged in sections corresponding to the lettered and numbered sections
contained in this Article 4.
4.1 ORGANIZATION OF THE BUYER. The Buyer is a corporation duly
organized, validly existing, and in good standing under the laws of the
jurisdiction of its incorporation.
4.2 AUTHORIZATION OF TRANSACTION. The Buyer has full power and
authority (including full corporate power and authority) to execute and deliver
this Agreement and to perform its obligations hereunder. This Agreement
constitutes the valid and legally binding obligation of the Buyer, enforceable
in accordance with its terms and conditions, except as enforceability may be
limited by bankruptcy, insolvency, reorganization, moratorium or other laws
affecting creditors' rights generally, or by the exercise of judicial discretion
in accordance with general equitable principles.
4.3 NONCONTRAVENTION. Neither the execution and the delivery of this
Agreement by the Buyer, nor the consummation by the Buyer of the transactions
contemplated hereby, will (i) violate any constitution, statute, regulation,
rule, injunction, judgment, order, decree, ruling, charge, or other restriction
of any government, governmental agency, or court to which the Buyer is subject
or any provision of its charter or bylaws or (ii) conflict with, result in a
breach of, constitute a default under, result in the acceleration of, create in
any Person the right to accelerate, terminate, modify, or cancel, or require any
notice under any agreement, contract, lease, license, permit, instrument, or
other arrangement to which the Buyer is a party or by which it is bound or to
which any of its assets is subject. The Buyer does not need
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to give any notice to, make any filing with, or obtain any authorization,
consent, or approval of any government or governmental agency in order for the
Parties to consummate the transactions contemplated by this Agreement.
4.4 BROKERS' FEES. The Buyer has no Liability or obligation to pay any
fees or commissions to any broker, finder, or agent with respect to the
transactions contemplated by this Agreement for which the Seller could become
liable or obligated.
ARTICLE 5. SURVIVAL OF REPRESENTATIONS AND WARRANTIES; INDEMNIFICATION
5.1 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. All representations,
warranties, agreements, covenants and obligations made or undertaken by the
Seller and each Seller Shareholder in this Agreement are, whether specified as
such or not, the joint and several representations, warranties, agreements,
covenants and obligations of all of the Seller and the Seller Shareholders,
unless otherwise specifically indicated to the contrary herein with respect to a
particular representation, warranty, agreement, covenant or obligation; are
material, have been relied upon by the Buyer, shall survive the Closing
hereunder, and shall not merge in the performance of any obligation by any
Party; and, as to the representations and warranties, shall terminate or expire
on the fifth (5th) anniversary of the Closing Date, provided that such
representations and warranties shall not terminate or expire, but shall
continue, during the pendency of any suit, action, claim or other proceeding
brought in respect of such representations and warranties prior to the
termination or expiration of such five (5) year period. Notwithstanding the
above, all representations and warranties made by the Seller and each Seller
Shareholder in this Agreement that in any manner relate to (i) Tax matters, (ii)
environmental matters, and (iii) title matters, or as to the terms and
performance of this Agreement (collectively, the "SPECIAL MATTERS"), or any of
the foregoing, shall terminate or expire only upon the termination or expiration
of all applicable statutes of limitation. All representations, warranties,
agreements, covenants and obligations made or undertaken by the Buyer in this
Agreement shall survive the Closing hereunder, and shall not merge in the
performance of any obligation by any Party; and, as to the representations and
warranties, shall terminate or expire on the fifth (5th) anniversary of the
Closing Date, provided that such representations and warranties shall not
terminate or expire, but shall continue, during the pendency of any suit,
action, claim or other proceeding brought in respect of such representations and
warranties prior to the termination or expiration of such five (5) year period.
5.2 OBLIGATION OF THE SELLER AND THE SELLER SHAREHOLDERS TO INDEMNIFY.
Subject to the limitations contained in this Article 5, the Seller and the
Seller Shareholders, jointly and severally, shall defend, indemnify and hold the
Buyer and its shareholders, officers, directors, employees, counsel, agents,
Affiliates and assigns (collectively, the "BUYER INDEMNITEES") harmless from and
against any and all Losses asserted against, imposed upon or incurred by the
Buyer Indemnitees, or any of them, by reason of or resulting from, arising out
of, based upon or otherwise in respect of:
(i) any inaccuracy in any representation or warranty made by
the Seller or any Seller Shareholder pursuant to this Agreement or the
Disclosure Schedule;
(ii) any breach of any covenant or agreement made or to be
performed by the Seller or any Seller Shareholder pursuant to this Agreement;
(iii) any Liability or Loss resulting from, arising out of,
based upon or otherwise in respect of any violation or alleged violation of any
Environmental, Health and Safety Requirements the Acquired Assets, or the
presence of any Hazardous Materials on the Acquired Assets, that occurred at any
time prior to Closing;
15
<PAGE> 16
(iv) the Parties' failure to comply with any of the bulk sales
laws and any other similar laws in any applicable jurisdiction in respect of the
transactions contemplated by this Agreement, and any action brought or levy made
as a result thereof; and/or
(v) any Liability or obligation of the Seller, any of its
Subsidiaries (accruing prior to the Closing), or any of the Seller Shareholders,
or in any manner related to the Business (accruing prior to the Closing), the
Acquired Assets (accruing prior to the Closing) or the Excluded Assets, in each
of the foregoing cases, other than the Assumed Liabilities.
Notwithstanding the foregoing, neither the Seller nor any of the Seller
Shareholders shall have any obligation to indemnify the Buyer Indemnitees, or
any of them, for or with respect to any Losses resulting from, arising out of,
based upon or otherwise in respect of any of the matters listed in items (i)
through (v) of this Section until the Buyer Indemnitees, or any of them, has
suffered Losses by reason thereof in excess of a $10,000 aggregate threshold (at
which point the Seller and the Seller Shareholders will be jointly and severally
obligated to indemnify the Buyer Indemnitees, and each of them, for or with
respect to all such Losses in excess of such $10,000 aggregate threshold).
5.3 OBLIGATION OF THE BUYER TO INDEMNIFY. Subject to the limitations
contained in this Article 5, the Buyer shall defend, indemnify and hold the
Seller and its officers, directors, stockholders, employees, counsel, agents,
Affiliates and assigns (collectively, the "SELLER INDEMNITEES") harmless from
and against any and all Losses asserted against, imposed upon or incurred by the
Seller Indemnitees, or any of them, by reason of or resulting from, arising out
of, based upon or otherwise in respect of:
(i) any inaccuracy in any representation or warranty made by
the Buyer pursuant to this Agreement or the Disclosure Schedule;
(ii) any breach of any covenant or agreement made or to be
performed by the Buyer pursuant this Agreement; and/or
(iii) any Assumed Liability.
5.4 MATTERS INVOLVING THIRD PARTIES.
5.4.1 If any third party shall notify any Person that is
entitled to seek indemnification pursuant to Sections 5.2 or 5.3 hereof (the
"INDEMNIFIED PARTY") with respect to any matter (a "THIRD PARTY CLAIM") which
may give rise to a claim for indemnification against any other Person (the
"INDEMNIFYING PARTY") under this Article 5, then the Indemnified Party shall
promptly notify the Indemnifying Party thereof in writing; provided, however,
that no delay on the part of the Indemnified Party in notifying the Indemnifying
Party shall relieve the Indemnifying Party from any obligation hereunder unless
(and then solely to the extent) the Indemnifying Party thereby is prejudiced.
5.4.2 The Indemnifying Party will have the right to defend the
Indemnified Party against the Third Party Claim with counsel of its choice
reasonably satisfactory to the Indemnified Party so long as (i) the Indemnifying
Party notifies the Indemnified Party in writing within 15 days after the
Indemnified Party has given notice of the Third Party Claim that the
Indemnifying Party will indemnify the Indemnified Party from and against all
Losses the Indemnified Party may suffer resulting from, arising out of, relating
to, in the nature of or caused by the Third Party Claim, (ii) the Indemnifying
Party provides the Indemnified Party with evidence reasonably acceptable to the
Indemnified Party that the Indemnifying Party will have the financial resources
to defend against the Third Party Claim and fulfill its indemnification
obligations hereunder, (iii) the Third Party Claim involves only money damages
and does not seek an injunction or other equitable relief, (iv) settlement of,
or an adverse judgment with respect to, the Third Party Claim is
16
<PAGE> 17
not, in the good faith judgment of the Indemnified Party, likely to establish a
precedential custom or practice adverse to the continuing business interests of
the Indemnified Party, and (v) the Indemnifying Party conducts the defense of
the Third Party Claim actively and diligently.
5.4.3 So long as the Indemnifying Party is conducting the
defense of the Third Party Claim in accordance with Section 5.4.2 above, (i) the
Indemnified Party may retain separate co-counsel at its cost and expense and
participate in the defense of the Third Party Claim, (ii) the Indemnified Party
will not consent to the entry of any judgment or enter into any settlement with
respect to the Third Party Claim without the prior written consent of the
Indemnifying Party (not to be withheld unreasonably), and (iii) the Indemnifying
Party will not consent to the entry of any judgment or enter into any settlement
with respect to the Third Party Claim without the prior written consent of the
Indemnified Party (not to be withheld unreasonably).
5.4.4 In the event any of the conditions in Section 5.4.2
above is or becomes unsatisfied, however, (i) the Indemnified Party may defend
against, and consent to the entry of any judgment or enter into any settlement
with respect to, the Third Party Claim in any manner it reasonably may deem
appropriate (and the Indemnified Party need not consult with, or obtain any
consent from, the Indemnifying Party in connection therewith), (ii) the
Indemnifying Party will reimburse the Indemnified Party promptly and
periodically for the costs of defending against the Third Party Claim (including
reasonable attorneys' fees and expenses), and (iii) the Indemnifying Party will
remain responsible for any and all Losses the Indemnified Party may suffer
resulting from, arising out of, relating to, in the nature of or caused by the
Third Party Claim to the fullest extent provided in this Article 5.
5.5 INDEMNIFICATION PAYMENTS. An Indemnifying Party shall pay to the
Indemnified Party the full amount of any and all Losses (other than Losses
resulting from a Third Party Claim) for which it is required to indemnify the
Indemnified Party under this Article 5 within ten (10) days after its receipt of
notice thereof from the Indemnified Party, and the full amount of any and all
Losses resulting from a Third Party Claim within ten (10) days after final
settlement or adjudication thereof; and in each case, thereafter the amount of
any such Loss shall bear interest at the rate of interest publicly announced in
Atlanta, Georgia from time to time by NationsBank of Georgia, N.A. as its prime
rate, plus one percent (1%) per annum. After complying with the provisions of
Section 5.4 hereof with respect to any Loss that results from a Third Party
Claim (if applicable), the Buyer shall be entitled to offset from any payments
due the Seller or any of the Seller Shareholders as part of the Purchase Price
or otherwise (including but not limited to the SanTi Stock), the full amount of
any and all Losses (whether or not resulting from a Third Party Claim) for which
the Seller or any Seller Shareholder is required to indemnify any Buyer
Indemnitee pursuant to Section 5.2 hereof, and the Buyer shall not be liable for
any amounts so offset. Notwithstanding anything to the contrary set forth in
this Agreement, the Buyer agrees that, in satisfying its remedies under this
Agreement, it shall proceed against the following sources of recovery in the
order listed:
1. the SanTi Stock, but only for so long as the SanTi Stock is
pledged to the Buyer pursuant to the Stock Pledge;
2. any and all amounts currently due and payable, but unpaid, to
any of the Seller Shareholders under any and all employment
and/or consulting agreements entered into between the Buyer
and any of the Seller Shareholders on or about the Closing
Date; provided that the Buyer shall not be required to wait
until future amounts are due and payable thereunder prior to
proceeding against any of the sources described in item 3
immediately following; and
3. any and all of the assets of the Seller or any of the Seller
Shareholders.
17
<PAGE> 18
5.6 OTHER RIGHTS AND REMEDIES NOT AFFECTED. The indemnification rights
of the Parties and other Persons under this Article 5 are independent of and in
addition to such other rights and remedies that the Parties and such other
Persons may have at law or in equity or otherwise for any misrepresentation,
breach of warranty or failure to fulfill any agreement or covenant hereunder on
the part of any Party hereto, including, without limitation, the right to
offset, seek specific performance, rescission or restitution, none of which
rights or remedies shall be adversely affected or diminished hereby.
ARTICLE 6. MISCELLANEOUS
6.1 COMPLIANCE WITH BULK SALES LAWS. The Parties hereby waive
compliance by the Buyer and the Seller with the bulk sales law and any other
similar laws in any applicable jurisdiction in respect of the transactions
contemplated by this Agreement.
6.2 TAXES. The Seller shall pay all federal, state and local income,
sales, use, other transfer, documentary, stamp and other taxes, if any, due as a
result of the purchase, sale or transfer of the Acquired Assets in accordance
herewith, whether such Taxes are imposed by law on the Seller or the Buyer.
Notwithstanding the foregoing, each of the Seller and the Buyer shall pay
one-half of any and all sales taxes due as a result of transfer of the Acquired
Assets consisting of motor vehicles.
6.3 NOTICES. All notices, requests, demands and other communications
required or permitted hereunder shall be in writing and shall be (i) delivered
by hand, (ii) mailed by United States registered or certified mail, return
receipt requested, first class postage prepaid and properly addressed, or (iii)
sent by national overnight courier service to the Parties or their permitted
assignees at the addresses set forth opposite the Parties' signatures hereto.
All notices, requests, instructions or documents given to any Party in
accordance with this Section 6.3 shall be deemed to have been given (i) on the
date of receipt if delivered by hand or overnight courier service, or (ii) on
the date five (5) business days after depositing with the United States Postal
Service if mailed by United States registered or certified mail, return receipt
requested, first class postage prepaid and properly addressed. Any Party may
change its address specified for notices herein by designating a new address by
notice in accordance with this Section 6.3.
6.4 ENTIRE AGREEMENT. All Exhibits and Schedules (including the
Disclosure Schedule) referred to herein are intended to be, and hereby are,
specifically incorporated into and made a part of this Agreement. This Agreement
constitutes the entire agreement among the Parties relating to the subject
matter hereof and supersedes all prior and contemporaneous negotiations,
writings and agreements relating to the subject matter of this Agreement.
6.5 MODIFICATIONS, AMENDMENTS AND WAIVERS. The Parties may, by mutual
written agreement and in no other manner, modify or amend the terms of this
Agreement. The failure or delay of any Party at any time or times to require the
performance of any provision of this Agreement shall in no manner affect its
right to enforce that provision. No single or partial waiver by any Party of any
condition of this Agreement, or the breach of any term, agreement or covenant
of, or the inaccuracy of any representation or warranty in, this Agreement,
whether by conduct or otherwise, in any one or more instances shall be construed
or deemed to be a further or continuing waiver of any such condition, breach or
inaccuracy or a waiver of any other condition, breach or inaccuracy.
6.6 SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon and
shall inure to the benefit of and be enforceable by the Parties, and their
respective successors and permitted assigns. This Agreement may not be assigned
by any Party without the prior written consent of the other Parties, except that
the Buyer may assign this Agreement and its rights and obligations hereunder to
one or more of its Affiliates, or to any of its lenders as collateral security.
18
<PAGE> 19
6.7 GOVERNING LAW. This Agreement shall be controlled, construed and
enforced in accordance with the substantive laws of the State of Florida,
without regard to any laws related to choice or conflicts of laws.
6.8 SEVERABILITY. Should any one or more of the provisions of this
Agreement be determined to be invalid, illegal or unenforceable in any respect,
the validity, legality and enforceability of the remaining provisions hereof
shall not in any way be adversely affected or impaired thereby. The Parties
shall endeavor in good faith to replace the invalid, illegal or unenforceable
provisions with valid provisions the economic effect of which comes as close as
practicable to that of the invalid, illegal or unenforceable provisions.
6.9 ATTORNEYS' FEES AND EXPENSES. In any Litigation arising out of,
under or in connection with this Agreement in which one Party prevails over
another Party, the reasonable attorneys' fees and expenses incurred by the
prevailing Party in connection with such Litigation shall be paid for or
reimbursed by the opposing Party or Parties in such Litigation.
6.10 NO BENEFIT TO OTHERS. The representation, warranties, covenants
and agreements contained in this Agreement are for the sole benefit of the
Parties and, in the case of Article 5 hereof, the other Indemnified Parties, and
their respective heirs, executors, administrators, legal representatives,
successors and assigns, and they shall not be construed as conferring any rights
on any other Persons.
6.11 CONSTRUCTION. Nothing in any Schedule (including the Disclosure
Schedule) attached hereto shall be deemed adequate to disclose an exception to a
representation or warranty made herein unless the Schedule identifies the
exception with particularity and describes the relevant facts in detail (and in
terms of Liabilities, quantifies the amount thereof with specificity). Without
limiting the generality of the foregoing, the mere listing (or inclusion of a
copy) of a document or other item shall not be deemed adequate to disclose an
exception to a representation or warranty made herein, unless the representation
or warranty has to do with the existence of the document or other item itself.
The Parties intend that each representation, warranty and covenant contained
herein shall have independent significance. If any Party has breached any
representation, warranty or covenant contained herein in any respect, the fact
that there exists another representation, warranty or covenant relating to the
same subject matter (regardless of the relative levels of specificity) which the
Party has not breached shall not detract from or mitigate the fact that the
Party is in breach of the first representation, warranty or covenant.
6.12 EXPENSES. Except as otherwise provided herein, each of the Parties
will bear such Party's own costs and expenses (including legal fees and
expenses) incurred in connection with this Agreement and the transactions
contemplated hereby.
6.13 FURTHER ASSURANCES. From time to time, at any Party's request and
without further consideration (unless the requesting Party is entitled to
indemnity therefor as provided herein), the other Parties will execute and
deliver to the requesting Party such documents and take such other action as
such Party may reasonably request in order to consummate more effectively the
transactions contemplated hereby.
19
<PAGE> 20
IN WITNESS WHEREOF, the Parties have executed this Agreement under seal
effective as of the date first above written.
SELLER:
A RAPID ROOTER SEWER & DRAIN SERVICE,
INC.
Address: 25 N.E. 5th Street By:/s/William Rice [SEAL]
Pompano Beach, FL 33060 ----------------------------------
Name:
--------------------------------
Title:
-------------------------------
SELLER SHAREHOLDERS
Address: 3557 N.W. 61st Circle /s/ William E. Rice [SEAL]
Boca Raton, FL 33496 -------------------------------------
William E. Rice
Address: 3557 N.W. 61st Circle /s/ Joan C. Rice [SEAL]
Boca Raton, FL 33496 -------------------------------------
Joan C. Rice
Address: 6901 E. Cypress Head Drive/s/ Alfonse J. Grunskis [SEAL]
Parkland, FL 33067 -------------------------------------
Alfonse J. Grunskis
Address: 6901 E. Cypress Head Drive/s/ Diane Rice Grunskis [SEAL]
Parkland, FL 33067 -------------------------------------
Diane Rice Grunskis
Address: 21088 Madria Circle /s/ Donald E. Rice [SEAL]
Boca Raton, FL 33433 -------------------------------------
Donald E. Rice
Address: 21088 Madria Circle /s/ Ruth Ann Rice [SEAL]
Boca Raton, FL 33433 -------------------------------------
Ruth Ann Rice
BUYER:
SANTI GROUP OF FLORIDA, INC.
Address: 4696 Oakdale Road By:/s/ Joyce Bone [SEAL]
Smyrna, GA 30080 ----------------------------------
Name:
--------------------------------
Title:
-------------------------------
20
<PAGE> 21
EXHIBIT A
FINANCIAL STATEMENTS
[SEE ATTACHED]
21
<PAGE> 22
SCHEDULE 1
EXCLUDED ACCOUNTS
1. All customer accounts, rights or contracts which deal in hazardous chemical
toxic or low-level radioactive waste or any Hazardous Materials except for those
that the Buyer otherwise indicates in writing that it wishes to purchase.
2. Any and all accounts for the business of A Rapid Rooter Sewer & Drain Service
of Orlando, Inc.
22
<PAGE> 23
SCHEDULE 2
EXCLUDED ASSETS
1. The corporate charter, qualifications to conduct business as a foreign
corporation, arrangements with registered agents relating to foreign
qualifications, taxpayer and other identification numbers, seals, minute books,
stock transfer books, blank stock certificates, and other documents relating to
the organization, maintenance, and existence of the Seller as a corporation.
2. All of the Excluded Accounts.
3. All Accounts Receivable of the Seller.
4. Any asset related to Hazardous Materials.
5. Cash and cash equivalents of the Seller.
6. Securities owned by the Seller, other than any and all such securities
which represent an interest in any non-hazardous liquid waste business.
7. The following automobiles:
a. 1998 Mercedes VIN 156967
b. 1996 Cadillac VIN 274311
c. 1995 Chevrolet VIN 106033
d. 1998 Ford VIN A09122
e. 1998 Ford VIN 29849
f. 1994 Nissan VIN 323969
8. The Seller's 401-K Plan
9. Personal photographs, awards and mementos of any of the Seller
Stockholders located on the business premises of the Seller.
10. Bank accounts of the Seller and any and all records relating thereto.
11. The Seller's insurance coverage relating to those automobiles listed in
Item 7 above.
12. The following residential and cellular phone numbers of the Seller
Shareholders:
<TABLE>
<S> <C> <C> <C>
(954) 360-2201 (954) 360-5581 (954) 398-1669 (954) 980-6288
(954) 980-6993 (954) 562-3553 (954) 340-7695 (561) 989-0122
(561) 989-9066 (561) 488-0019 (561) 883-2332 (561) 883-3220
(305) 852-9491
</TABLE>
23
<PAGE> 24
SCHEDULE 3
ASSUMED LIABILITIES
1. That certain institutional indebtedness of the Seller in connection with
motor vehicles owned by the Seller and a part of the Acquired Assets in favor of
the banks set forth below in the amount of indebtedness set forth opposite such
banks:
First Union Bank $516,375.13
Barnett Bank $173,745.31
2. All obligations of the Seller directly associated with or under the
agreements, contracts, leases, licenses, and other arrangements referred to in
the definition of Accounts either (i) to furnish goods, services, and other
non-cash benefits to customers after the Closing, or (ii) to pay for goods,
services, and other non-cash benefits that another Person will furnish to it
after the Closing.
24
<PAGE> 25
SCHEDULE 4
CLOSING PAY-OFF INFORMATION
OTHER THAN WITH RESPECT TO ASSUMED LIABILITIES
NONE
25
<PAGE> 26
DISCLOSURE SCHEDULE TO ASSET PURCHASE AGREEMENT
[the Seller and the Seller Shareholders need to complete and provide information
required by Article 3, as well as set forth any other exceptions to the
representations and warranties of the Seller and the Seller Shareholders] [below
is list of Sections in Article 3 which require certain information] [other
Sections may be required]
Section 3.4 [Seller Shares]
Section 3.4 [Subsidiaries]
Section 3.11 [Tax Returns]
Section 3.12(i) [Owned Real Property]
Section 3.12(ii) [Leased Real Property]
Section 3.14 [Contracts/Agreements]
Section 3.16 [Insurance]
Section 3.17 [Litigation]
Section 3.18 [Service Warranty]
Section 3.20 [Employees]
Section 3.21 [Employee Benefits]
Section 3.23(v) [Disposal Sites]
Section 3.25 [Accredited Investor Qualifications]
Section 3.26 [Nonassignable Accounts]
Section 3.27 [Accounts]
Section 3.29 [Permits]
26
<PAGE> 1
ASSET PURCHASE AGREEMENT
THIS ASSET PURCHASE AGREEMENT (this "AGREEMENT") is made and entered
into, effective as of February 17, 1998 (the "CLOSING DATE"), between and among
BONE-DRY ENTERPRISES, INC. , a Georgia corporation (the "BUYER"); QUALITY
PLUMBING & SEPTIC, a Georgia general partnership (the "SELLER"); and RONDA R.
MCMICHAEL, a Georgia resident ("R. MCMICHAEL"), KEVIN J. SULLIVAN, a Georgia
resident ("SULLIVAN") (R. McMichael and Sullivan sometimes collectively referred
to herein as the "SELLER PARTNERS" and sometimes individually referred to herein
as a "SELLER PARTNER"), and FORNEY L. MCMICHAEL, a Georgia resident ("F.
MCMICHAEL") (the Seller Partners and F. McMichael sometimes collectively
referred to herein as the "SELLER PARTNER PARTIES" and sometimes individually
referred to herein as a "SELLER PARTNER PARTY") (the Buyer, the Seller and the
Seller Partner Parties are sometimes referred to collectively herein as the
"PARTIES" and sometimes referred to individually herein as a "PARTY").
WHEREAS, the Seller owns certain contract rights, customer accounts,
trucks, containers and other assets and is engaged in the non-hazardous liquid
waste collection and disposal business in the Lithia Springs, Georgia area,
including, but not limited to, under the names "Quality Plumbing & Septic" and
"Stan's Cans" (the "BUSINESS"); and
WHEREAS, this Agreement contemplates a transaction in which the Buyer
will purchase all of the assets of the Seller used in the Business and assume
certain of the liabilities of the Seller in return for cash and the SanTi Stock.
NOW, THEREFORE, in consideration of the premises and the mutual
promises herein made, the Parties agree as follows.
ARTICLE 1. KEY DEFINITIONS
"ACCOUNTS" means (i) all customer accounts, names, lists, purchase
orders, service agreements and contracts (including implied or quantum meruit
contractual rights) or other rights of the Seller to provide liquid waste
services to customers of the Seller, and all rights to and in connection with
any activities commonly associated with such services, customer service
agreements, and contract rights (including implied or quantum meruit contractual
rights) with customers, and (ii) all files, correspondence, records (including
billing and service records for the preceding twelve (12) months) and related
proprietary information and material and other intellectual property which is
necessary, helpful or related to providing such services described above;
excluding, however, (x) all customer accounts, rights or contracts which deal in
hazardous chemical toxic or low-level radioactive waste or any Hazardous
Materials which the Buyer determines it does not wish to purchase, and (y) all
small business set aside contracts which the Buyer determines it does not wish
to purchase. All of the customer accounts, contracts and other rights which are
not being purchased, including those accounts described in items (x) and (y) of
this definition, shall be set forth on Schedule 1 and are hereinafter referred
to collectively as the "EXCLUDED ACCOUNTS".
"ACQUIRED ASSETS" means all right, title and interest in and to all of
the assets of the Seller used or useful in the Business, and shall include, but
not be limited to, all of the Seller's: (a) Accounts, (b) real property,
leaseholds and subleaseholds therein, improvements, fixtures, and fittings
thereon, and easements, rights-of-way, and other appurtenants thereto (such as
appurtenant rights in and to public streets), (c) tangible personal property
(such as repair parts, machinery, equipment, inventories of raw materials and
supplies, manufactured and purchased parts, goods in process and finished goods,
furniture, automobiles, trucks, tractors, trailers, tankers, tools, pumps,
stabilizers, jigs, and dies), (d) intellectual property (including, but not
limited to, the names "Quality Plumbing & Septic" and "Stan's Cans"), goodwill
associated therewith, licenses and sublicenses granted and obtained with respect
thereto, and rights
<PAGE> 2
thereunder, remedies against infringements thereof, and rights to protection of
interests therein under the laws of all jurisdictions, (e) leases, subleases,
and rights thereunder, (f) agreements (such as equipment rental agreements and
service agreements), contracts, customer agreements, disposal agreements,
service agreements, indentures, mortgages, instruments, Security Interests,
guaranties, other similar arrangements, and rights thereunder, (g) notes
receivable and other receivables, other than accounts receivable, (h)
securities, (i) claims, deposits, prepayments, refunds, causes of action, choses
in action, rights of recovery, rights of set off, and rights of recoupment
(including any such item relating to the payment of Taxes), (j) franchises,
approvals, permits (including but not limited to disposal permits), licenses
(including but not limited to radio transmitter licenses), orders,
registrations, certificates, variances, and similar rights obtained from
governments and governmental agencies, servicemarks, trademarks, logos, (k)
telephone numbers, yellow page advertising, books, records, ledgers, files,
documents, correspondence, lists, plats, architectural plans, drawings and
specifications, creative materials, advertising and promotional materials,
operational, billing and payable information, studies, reports, and other
printed or written materials, computer hardware and software, and (l) rights in
and with respect to the assets associated with its Employee Benefit Plans;
provided, however, that the Acquired Assets shall not include those assets of
the Seller set forth on Schedule 2 (collectively the "EXCLUDED ASSETS").
"EMPLOYEE BENEFIT PLAN" means any (i) nonqualified deferred
compensation or retirement plan or arrangement, (ii) qualified defined
contribution retirement plan or arrangement which is an Employee Pension Benefit
Plan, (iii) qualified defined benefit retirement plan or arrangement which is an
Employee Pension Benefit Plan (including any Multiemployer Plan), or (iv)
Employee Welfare Benefit Plan or material fringe benefit or other retirement,
bonus, or incentive plan or program.
"ENVIRONMENTAL, HEALTH, AND SAFETY REQUIREMENTS" shall mean all
federal, state, local and foreign statutes, regulations, ordinances and other
provisions having the force or effect of law, all judicial and administrative
orders and determinations, all contractual obligations and all common law
concerning public health and safety, worker health and safety, and pollution or
protection of the environment, each as amended and as now or hereafter in
effect.
"HAZARDOUS MATERIALS" means any substance that has been designated by
any governmental authority whose requirements are applicable to the Seller to be
radioactive, toxic, hazardous, or otherwise pose potential danger to health or
the environment, including, but not limited to, volatile organic compounds and
all substances listed pursuant to the federal Comprehensive Environmental
Response, Compensation and Liability Act, the federal Resource Conservation
Recovery Act, the federal Clean Air Act, the federal Water Pollution Control
Act, the Toxic Substance Control Act and the Occupational Safety and Health Act,
as such acts are amended to the Closing Date, and the regulations and
publications promulgated to the Closing Date pursuant to said acts, and
"extremely hazardous substances" (as said term is defined in ss.302 of the
Emergency Planning and Community Right-to-Know Act of 1986, as amended).
"KNOWLEDGE" means actual knowledge after reasonable investigation and
includes constructive knowledge.
"LIABILITY" means any liability (whether known or unknown, whether
asserted or unasserted, whether absolute or contingent, whether accrued or
unaccrued, whether liquidated or unliquidated, and whether due or to become
due).
"LITIGATION" means any legal action, administrative or other
proceeding, arbitration, cause of action, claim, complaint, criminal
prosecution, inquiry, hearing, investigation (governmental or otherwise), or
notice (written or oral) by any Person alleging potential liability or
requesting information relating to or affecting the Seller, the Business, the
Acquired Assets or the transactions contemplated by this Agreement.
2
<PAGE> 3
"LOSSES" means any and all direct or indirect demands, claims,
payments, obligations, recoveries, deficiencies, fines, penalties, interests,
assessments, actions, causes of action, suits, losses, diminution in the value
of any of the Acquired Assets, compensatory, punitive, exemplary or
consequential damages (including, without limitation, lost income and profits
and interruptions of business), Liabilities, costs, expenses (including, without
limitation, (i) interest, penalties and reasonable attorneys' fees and expenses,
(ii) attorneys' fees and expenses necessary to enforce rights to indemnification
hereunder, and (iii) consultant's fees and other costs of defense or
investigation); and interest on any amount payable to a third party as a result
of the foregoing, whether accrued, absolute, contingent, known, unknown or
otherwise.
"MONTHLY GROSS REVENUES" means the monthly gross revenues received by
the Seller on all the Accounts which are fulfilled by the Seller for the
provision of nonhazardous liquid waste management services. The term Monthly
Gross Revenues shall not include (i) any revenues received by the Seller with
respect to extraordinary sales which may take place or which may be included in
the Accounts, (ii) any revenues received by the Seller for services not actually
rendered, or (iii) any revenues received by the Seller on Excluded Accounts.
"ORDINARY COURSE OF BUSINESS" means the ordinary course of business
consistent with past custom and practice (including with respect to quantity and
frequency).
"PERSON" means an individual, a partnership, a corporation, an
association, a joint stock company, a trust, a joint venture, an unincorporated
organization, or a governmental entity (or any department, agency, or political
subdivision thereof).
"SECURITY INTEREST" means any mortgage, pledge, lien, encumbrance,
charge, or other security interest, other than (i) mechanic's, materialmen's,
and similar liens, (ii) liens for Taxes not yet due and payable or for Taxes
that the taxpayer is contesting in good faith through appropriate proceedings,
(iii) purchase money liens and liens securing rental payments under capital
lease arrangements, and (iv) other liens arising in the Ordinary Course of
Business and not incurred in connection with the borrowing of money.
"TAX" means any federal, state, local, or foreign income, gross
receipts, license, payroll, employment, excise, severance, stamp, documentary,
occupation, premium, windfall profits, environmental (including taxes under
ss.59A of the Internal Revenue Code of 1986, as amended (the "CODE")), customs
duties, capital stock, franchise, profits, withholding, social security (or
similar), unemployment, disability, real property, personal property, sales,
use, transfer, registration, value added, alternative or add-on minimum,
estimated, or other tax of any kind whatsoever, including any interest, penalty,
or addition thereto, whether disputed or not.
"TAX RETURN" means any return, declaration, report, claim for refund,
or information return or statement relating to Taxes, including any schedule or
attachment thereto, and including any amendment thereof.
ARTICLE 2. BASIC TRANSACTIONS
2.1 PURCHASE AND SALE OF ASSETS. On and subject to the terms and
conditions of this Agreement, and effective as of 11:59 pm on the Closing Date,
the Buyer hereby purchases from the Seller, and the Seller hereby sells,
transfers, conveys, and delivers to the Buyer, all of the Acquired Assets, for
the consideration specified below in this Article 2, free and clear of any and
all Security Interests.
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2.2 ASSUMPTION OF LIABILITIES. On and subject to the terms and
conditions of this Agreement, and effective as of the Closing, the Buyer hereby
assumes and becomes responsible for those, and only those, liabilities of the
Seller specifically set forth on Schedule 3 (collectively the "Assumed
Liabilities"). Except for the Assumed Liabilities, nothing in this Agreement or
any other document entered into on or about the Closing Date shall in any way
obligate the Buyer for any Liabilities, obligations or charges of the Seller, or
any of the Seller Partner Parties (including, without limitation, any
Liabilities attributable to Environmental, Health and Safety Requirements, or
Liabilities or charges for Taxes or recording fees arising out of the sale or
transfer of the Acquired Assets), all of which shall remain those of the Seller
and/or the Seller Partner Parties, as the case may be, exclusively.
2.3 PURCHASE PRICE. The Buyer agrees to pay, issue and deliver to the
Seller the following (collectively, the "PURCHASE PRICE"): (i) cash in the
amount of $2,250,000, payable by wire transfer or delivery of other immediately
available funds, (ii) 10,000 shares (the "SANTI STOCK") of the common stock of
SanTi Group, Inc., a Delaware corporation ("SANTI"), and (iii) documentation
effecting the assumption of the Assumed Liabilities. The Buyer is
contemporaneously at the Closing tendering to the Seller (i) $2,000,000 of the
cash portion of the Purchase Price, less the sum of the amount(s) set forth on
Schedule 4 which is required to be paid to the third parties set forth on
Schedule 4 at the Closing in order to remove those Security Interests set forth
on Schedule 4 which encumber certain of the Acquired Assets immediately prior to
the Closing, and (ii) documentation effecting the assumption of the Assumed
Liabilities. The Seller acknowledges and agrees that the Buyer is retaining the
balance of the cash portion of the Purchase Price and all of the SanTi Stock to
hold as security to offset against any Losses asserted against, imposted upon or
incurred by the Buyer arising out of any of the matters listed in items (i)
through (v) of Section 5.2 hereof, and the Buyer shall deliver the remaining
balance of said security to the Seller on that date which is one hundred twenty
(120) days after the Closing Date.
2.4 THE CLOSING. The closing of the transactions contemplated by this
Agreement (the "CLOSING") is contemporaneously taking place at the offices of
Chorey, Taylor & Feil, A Professional Corporation, Suite 1700, The Lenox
Building, 3399 Peachtree Road, N.E., Atlanta, Georgia 30326, commencing at 9:00
a.m. local time on the Closing Date.
2.5 ALLOCATION. The Parties agree to allocate the Purchase Price (and
all other capitalizable costs) among the Acquired Assets for all purposes
(including financial accounting and tax purposes) consistent with the Code and
in accordance with the allocation schedule prepared by the Buyer; provided,
however, that the portion of the Purchase Price consisting of SanTi Stock shall
be allocated based on a valuation of the SanTi Stock at the time of the Closing,
said valuation to be undertaken by an appraiser commissioned by the Buyer.
2.6 USE OF NAME. Following the Closing Date, the Seller shall not use
or give permission to any other Party to use the name "Quality Plumbing &
Septic" or "Stan's Cans."
2.7 CONFIDENTIALITY. The Seller and each Seller Partner Party agree
that for a period of three (3) years after the Closing Date, none of them shall
at any time divulge the existence and terms of the negotiations resulting in
this Agreement, the terms and conditions of this Agreement and the financing
arrangements of the Buyer and its "AFFILIATES" (as said term is defined in Rule
12b-2 of the regulations promulgated under the Securities Exchange Act of 1934,
as amended), except as required by applicable federal, state or local statutes.
2.8 TELEPHONE REFERRALS. From and after the Closing Date, the Seller
shall refer, and cause its agents to refer, all telephone calls to it or them
for liquid waste collection and disposal to the Buyer.
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ARTICLE 3. REPRESENTATIONS AND WARRANTIES
OF THE SELLER AND THE SELLER PARTNER PARTIES
The Seller and each of the Seller Partner Parties jointly and severally
represent and warrant to the Buyer that the statements contained in this Article
3 are correct and complete as of the Closing Date, except as set forth in the
disclosure schedule accompanying this Agreement and initialed by the Parties
(the "DISCLOSURE SCHEDULE"). The Disclosure Schedule will be arranged in
sections corresponding to the lettered and numbered sections contained in this
Article 3.
3.1 ORGANIZATION OF THE SELLER AND CERTAIN SELLER PARTNER PARTIES. The
Seller is a partnership duly organized, validly existing, and in good standing
under the laws of Georgia. The Seller is duly authorized to conduct business and
the Business, and is in good standing, under the laws of each jurisdiction where
such qualification is required. If any Seller Partner Party is an entity, such
Seller Partner Party is duly organized, validly existing, and in good standing
under the laws of the jurisdiction of its incorporation or other formation and
organization.
3.2 AUTHORIZATIONS. The Seller has full power and authority to execute
and deliver this Agreement and to perform its obligations hereunder. Without
limiting the generality of the foregoing, the Seller Partners have duly
authorized the execution, delivery, and performance of this Agreement by the
Seller. Each of the Seller Partner Parties has full power and authority
(including, if any Seller Partner Party is a corporation or other entity, full
corporate or other entity power and authority) to execute and deliver this
Agreement and to perform such Seller Partner Parties' obligations hereunder.
This Agreement constitutes the valid and legally binding obligation of the
Seller and each Seller Partner Party, enforceable in accordance with its terms
and conditions, except as enforceability may be limited by bankruptcy,
insolvency, reorganization, moratorium or other laws affecting creditors' rights
generally, or by the exercise of judicial discretion in accordance with general
equitable principles.
3.3 NONCONTRAVENTION. Neither the execution and the delivery of this
Agreement by the Seller and the Seller Partner Parties, nor the consummation by
the Seller and the Seller Partner Parties of the transactions contemplated
hereby, will (i) violate any constitution, statute, regulation, rule,
injunction, judgment, order, decree, stipulation, ruling, charge, or other
restriction of any government, governmental agency, or court to which the Seller
or any Seller Partner Party is subject (or, if any Seller Partner Party is a
corporation or other entity, any provision of its charter or bylaws or other
governing documents) or any provision of the governing documents of the Seller,
or (ii) conflict with, result in a breach of, constitute a default under, result
in the acceleration of, create in any Person the right to accelerate, terminate,
modify, or cancel, or require any notice under any agreement, contract, lease,
license, permit, instrument, or other arrangement to which the Seller or any
Seller Partner Party is a party or by which the Seller or any Seller Partner
Party is bound or to which any assets of the Seller or any Seller Partner Party
is subject (or result in the imposition of any Security Interest upon any assets
of the Seller or any Seller Partner Party). The Seller does not need to give any
notice to, make any filing with, or obtain any authorization, consent, or
approval of any government or governmental agency in order for the Parties to
consummate the transactions contemplated by this Agreement.
3.4 SELLER EQUITY; BROKERS' FEES. Each Seller Partner holds of record
the outstanding equity held in the Seller set forth next to such Seller
Partner's name in Section 3.4 of the Disclosure Schedule. The Seller has no
Liability or obligation to pay any fees or commissions to any broker, finder, or
agent with respect to the transactions contemplated by this Agreement for which
the Buyer could become liable or obligated.
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3.5 TITLE TO ASSETS. The Seller has good and marketable title to, or a
valid leasehold interest in, the properties and assets used by it, located on
its premises, or shown on the balance sheet contained within the Most Recent
Financial Statements (the "MOST RECENT BALANCE SHEET") or acquired after the
date thereof, free and clear of all Security Interests, except for properties
and assets disposed of in the Ordinary Course of Business since the date of the
Most Recent Balance Sheet. Without limiting the generality of the foregoing, the
Seller has good and marketable title to all of the Acquired Assets, free and
clear of any Security Interest or restriction on transfer.
3.6 [THIS SECTION INTENTIONALLY LEFT BLANK]
3.7 FINANCIAL STATEMENTS. Attached hereto as Exhibit A are the
following financial statements (collectively, the "FINANCIAL STATEMENTS"): (i)
audited consolidated and unaudited consolidating balance sheets and statements
of income, changes in partners' equity, and cash flow as of and for the fiscal
years ended December 31, 1996 and December 31, 1997 (the "MOST RECENT FISCAL
YEAR END") for the Seller; and (ii) unaudited consolidated and consolidating
balance sheets and statements of income, changes in partners' equity, and cash
flow (the "MOST RECENT FINANCIAL STATEMENTS") as of and for the one (1) month
period ended January 31, 1998 (the "MOST RECENT FISCAL MONTH END") for the
Seller. The Financial Statements (including the notes thereto) have been
prepared in accordance with United States generally accepted accounting
principles as in effect from time to time ("GAAP") applied on a consistent basis
throughout the periods covered thereby, present fairly the financial condition
of the Seller as of such dates and the results of operations of the Seller for
such periods, are correct and complete, and are consistent with the books and
records of the Seller (which books and records are correct and complete). The
net book value of the Acquired Assets calculated in accordance with GAAP is not
less than $650,000.00.
3.8 EVENTS SUBSEQUENT TO MOST RECENT FISCAL YEAR END. Since the Most
Recent Fiscal Year End, there has not been any adverse change in the Business or
the business, financial condition, operations, results of operations, or future
prospects of the Seller. Without limiting the generality of the foregoing, since
that date: (i) the Seller has not sold, leased, transferred, pledged or assigned
any of its assets, tangible or intangible, other than for a fair consideration
in the Ordinary Course of Business; (ii) the Seller has not entered into (or
issued), accelerated, terminated, modified, or canceled any agreement, contract,
lease, note, bond, debt security or license either involving more than $5,000 or
outside the Ordinary Course of Business; (iii) the Seller has not made any
capital expenditure (or series of related capital expenditures) either involving
more than $5,000 or outside the Ordinary Course of Business; (iv) the Seller has
not delayed or postponed the payment of accounts payable and other Liabilities
outside the Ordinary Course of Business; (v) the Seller has not canceled,
compromised, waived, or released any right or claim (or series of related rights
and claims) either involving more than $5,000 or outside the Ordinary Course of
Business; (vi) the Seller has not issued, sold, disposed of or granted any
rights to purchase any of its equity, or declared, set aside, or paid any
dividend or made any distribution with respect to its equity (whether in cash or
in kind), or redeemed, purchased, or otherwise acquired any of its equity; (vii)
the Seller has not experienced any damage, destruction, or loss (whether or not
covered by insurance) to its property; (viii) the Seller has not made any loan
to, or entered into any other transaction with, any of its partners, officers,
or employees outside the Ordinary Course of Business; (ix) the Seller has not
(a) entered into any employment contract or collective bargaining agreement,
written or oral, or modified the terms of any existing such contract or
agreement; (b) granted any increase in the base compensation of any of its
partners, officers, or employees (or made any other change in employment terms
for such persons) outside the Ordinary Course of Business; or (c) adopted,
amended, modified, or terminated any Employee Benefit Plan; (x) there has not
been any other occurrence, event, incident, action, failure to act, or
transaction outside the Ordinary Course of Business involving the Seller; and
(xi) the Seller has not committed to any of the foregoing.
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3.9 UNDISCLOSED LIABILITIES. The Seller has no Liability (and there is
no basis for any present or future action, suit, proceeding, hearing,
investigation, charge, complaint, claim, or demand against any of them giving
rise to any Liability), except for (i) Liabilities set forth on the face of the
Most Recent Balance Sheet (rather than in any notes thereto) and (ii)
Liabilities which have arisen after the Most Recent Fiscal Month End in the
Ordinary Course of Business (none of which results from, arises out of, relates
to, is in the nature of, or was caused by any breach of contract, breach of
warranty, tort, infringement, or violation of law).
3.10 LEGAL COMPLIANCE. Each of the Seller and its predecessors and
Affiliates has complied with all applicable laws (including rules, statutes,
regulations, codes, permits, plans, injunctions, judgments, orders, decrees,
rulings, and charges thereunder) of federal, state, local, and foreign
governments (and all agencies thereof), and no action, suit, proceeding,
hearing, investigation, charge, complaint, claim, demand, or notice has been
filed or commenced against any of them alleging any failure so to comply. None
of the Seller Partner Parties and the officers and management employees of the
Seller has any Knowledge of any basis (existing prior to the Closing) which
could result in (i) any failure of the Buyer (based upon its acquisition of the
Business) to comply after the Closing with any and all applicable laws
(including rules, statutes, regulations, codes, permits, plans, injunctions,
judgments, orders, decrees, rulings, and charges thereunder) of federal, state,
local, and foreign governments (and all agencies thereof), or any action, suit,
proceeding, hearing, investigation, charge, complaint, claim, demand or notice
being filed or commenced after the Closing against the Buyer or any of its
Affiliates alleging any failure to so comply.
3.11 TAX MATTERS. The Seller has filed all Tax Returns that it was
required to file. All such Tax Returns were correct and complete in all
respects. All Taxes owed by the Seller (whether or not shown on any Tax Return)
have been paid. There is no dispute or claim concerning any Tax Liability of the
Seller either (i) claimed or raised by any authority in writing or (ii) as to
which any of the Seller Partner Parties and the officers (and employees
responsible for Tax matters) of the Seller has Knowledge based upon personal
contact with any agent of such authority. Section 3.11 of the Disclosure
Schedule lists all federal, state, local, and foreign income Tax Returns filed
with respect to the Seller for taxable periods ended on or after December 31,
1996, indicates those Tax Returns that have been audited, and indicates those
Tax Returns that currently are the subject of audit. The Seller has delivered to
the Buyer correct and complete copies of all federal income Tax Returns,
examination reports, and statements of deficiencies assessed against or agreed
to by the Seller since December 31, 1996. The unpaid Taxes of the Seller (i) did
not, as of the Most Recent Fiscal Month End, exceed the reserve for Tax
Liability (rather than any reserve for deferred Taxes established to reflect
timing differences between book and Tax income) set forth on the face of the
Most Recent Balance Sheet (rather than in any notes thereto) and (ii) do not
exceed that reserve as adjusted for the passage of time through the Closing Date
in accordance with the past custom and practice of the Seller in filing its Tax
Returns.
3.12 REAL PROPERTY.
(i) The Seller owns no real property.
(ii) Section 3.12(ii) of the Disclosure Schedule lists and
describes briefly all real property leased or subleased to or not owned but
otherwise used by the Seller. The Seller has delivered to the Buyer correct and
complete copies of the leases and subleases (as amended to date) required to be
listed in Section 3.12(ii) of the Disclosure Schedule. With respect to each
lease and sublease required to be listed in Section 3.12(ii) of the Disclosure
Schedule: (A) the lease or sublease is legal, valid, binding, enforceable, and
in full force and effect; (B) the lease or sublease will continue to be legal,
valid, binding, enforceable, and in full force and effect on identical terms
following the consummation of the transactions contemplated hereby; (C) no party
to the lease or sublease is in breach or default, and no event has occurred
which, with notice or lapse of time, would constitute a breach or default or
permit termination, modification, or
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acceleration thereunder; (D) there are no disputes, oral agreements, or
forbearance programs in effect as to the lease or sublease and no party to the
lease or sublease has repudiated any provision thereof; (E) with respect to each
sublease, the representations and warranties set forth in subsections (A)
through (D) above are true and correct with respect to the underlying lease; (F)
the Seller has not assigned, transferred, conveyed, mortgaged, deeded in trust,
or encumbered any interest in the leasehold or subleasehold; (G) all facilities
leased or subleased thereunder have received all approvals of governmental
authorities (including licenses and permits) required in connection with the
operation thereof and have been operated and maintained in accordance with
applicable laws, rules, and regulations; (H) all facilities leased or subleased
thereunder are supplied with utilities and other services necessary for the
operation of said facilities; (I) no Hazardous Material is present in, on or
under such real property at any time prior to the Closing Date, including any
land and the improvements, ground water and surface water thereof, except in
accordance with applicable laws and regulations; and (J) there are and have been
no storage tanks located on or under such property. With respect to each such
property used by but not owned by, leased to or subleased to the Seller, Section
3.12(ii) of the Disclosure Schedule states the nature and terms of the
relationship pursuant to which such property is used.
3.13 TANGIBLE ASSETS. The Seller owns or leases all buildings,
machinery, equipment, other tangible assets, permits, licenses and agreements
necessary for the conduct of the Business as presently conducted and as
presently proposed to be conducted. Each such tangible asset is free from
defects (patent and latent), has been maintained in accordance with normal
industry practice, is in good operating condition and repair (subject to normal
wear and tear), is suitable and valid for the purposes for which it presently is
used and presently is proposed to be used, and is sufficient to use in the
Business as conducted by the Seller during the twelve (12) months immediately
preceding the Closing and to be conducted by the Buyer during the twelve (12)
months subsequent to the Closing. None of the Seller Partner Parties and the
officers and management employees of the Seller has any Knowledge that there are
any defects in the Acquired Assets which affect the plumbing, electrical, sewer,
ventilating or air conditioning systems thereof.
3.14 CONTRACTS. Section 3.14 of the Disclosure Schedule lists all
contracts and other agreements to which the Seller is a party, and for each
waste disposal contract or agreement, the termination or expiration date
thereof, and for each vendor service contract or agreement, the termination or
expiration date thereof and the consideration or other amounts to be paid by the
Seller thereunder. The Seller has delivered to the Buyer a correct and complete
copy of each written agreement (as amended to date) required to be listed in
Section 3.14 of the Disclosure Schedule and a written summary setting forth the
terms and conditions of each oral agreement required to be referred to in
Section 3.14 of the Disclosure Schedule. With respect to each agreement required
to be listed or referred to in Section 3.14 of the Disclosure Schedule: (i) the
agreement is legal, valid, binding, enforceable, and in full force and effect;
(ii) the agreement will continue to be legal, valid, binding, enforceable, and
in full force and effect on identical terms following the consummation of the
transactions contemplated hereby; (iii) no party thereto is in breach or
default, and no event has occurred which with notice or lapse of time would
constitute a breach or default, or permit termination, modification, or
acceleration, under the agreement; and (iv) no party thereto has repudiated any
provision of the agreement. Each of the Seller's agreements which is a waste
disposal agreement has a term which will not expire until at least one (1) year
after the Closing.
3.15 POWERS OF ATTORNEY. There are no outstanding powers of attorney
executed by or on behalf of the Seller.
3.16 INSURANCE. Section 3.16 of the Disclosure Schedule includes
certificates of insurance with respect to each insurance policy (including
policies providing property, casualty, liability, and workers' compensation
coverage and bond and surety arrangements) to which the Seller has been a party,
a named insured, or otherwise the beneficiary of coverage at any time within the
past 3 years. With respect to each insurance policy for which a certificate of
insurance is required to be included in Section 3.16 of the
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Disclosure Schedule: (i) the policy is legal, valid, binding, enforceable, and
in full force and effect; (ii) the policy will continue to be legal, valid,
binding, enforceable, and in full force and effect on identical terms following
the consummation of the transactions contemplated hereby; (iii) neither the
Seller nor any other party to the policy is in breach or default (including with
respect to the payment of premiums or the giving of notices), and no event has
occurred which, with notice or the lapse of time, would constitute such a breach
or default, or permit termination, modification, or acceleration, under the
policy; and (iv) no party to the policy has repudiated any provision thereof.
The Seller has been covered during the past 3 years by insurance in scope and
amount customary and reasonable for the Business and the other businesses in
which it has engaged during the aforementioned period. Section 3.16 of the
Disclosure Schedule describes any self-insurance arrangements affecting the
Seller, as well as any pending claims with respect to insurance coverage owned
by the Seller, including amounts held in reserve by the Seller in connection
with any such claim.
3.17 LITIGATION. Section 3.17 of the Disclosure Schedule sets forth
each instance in which the Seller (i) is subject to any outstanding injunction,
judgment, order, decree, ruling, or charge or (ii) is a party or is threatened
to be made a party to any action, suit, proceeding, hearing, or investigation
of, in, or before any court or quasi-judicial or administrative agency of any
federal, state, local, or foreign jurisdiction or before any arbitrator. None of
the actions, suits, proceedings, hearings, and investigations required to be set
forth in Section 3.17 of the Disclosure Schedule could result in any "material"
(as defined in this Section 3.17) adverse change in the Business, the other
business, financial condition, operations, results of operations, or future
prospects of the Seller. None of the Seller Partner Parties and the officers
(and employees with responsibility for litigation matters) of the Seller has any
reason to believe that any such action, suit, proceeding, hearing, or
investigation may be brought or threatened against the Seller. For purposes of
this Section 3.17, "material" shall mean any Liability or Loss in excess of
$2,500 per occurrence or in excess of $10,000 in the aggregate.
3.18 SERVICE WARRANTY AND LIABILITY. Each service provided or delivered
by the Seller has been in conformity with all applicable contractual commitments
and all express and implied warranties, and the Seller has no Liability (and
there is no basis for any present or future action, suit, proceeding, hearing,
investigation, charge, complaint, claim, or demand against Seller giving rise to
any Liability) (i) for damages in connection therewith, subject only to the
reserve for service warranty claims set forth on the face of the Most Recent
Balance Sheet (rather than in any notes thereto) as adjusted for the passage of
time through the Closing Date in accordance with the past custom and practice of
the Seller, or (ii) arising out of any injury to individuals or property as a
result of the use of any service provided or delivered by the Seller. No service
provided or delivered by the Seller is subject to any guaranty, warranty, or
other indemnity beyond the applicable standard terms and conditions of sale.
Section 3.18 of the Disclosure Schedule includes copies of the standard terms
and conditions of sale for the Seller (containing applicable guaranty, warranty,
and indemnity provisions).
3.19 [THIS SECTION INTENTIONALLY LEFT BLANK]
3.20 EMPLOYEES AND INDEPENDENT CONTRACTORS. Section 3.20 of the
Disclosure Schedule contains a complete list of all employees and independent
contractors of the Seller engaged in the conduct of the Business, and for each
employee or independent contractor required to be listed on Section 3.20 of the
Disclosure Schedule, their address, social security number, current annual base
salary or hourly rate and years of employment or engagement with the Seller.
None of the Seller Partner Parties and the officers and management employees of
the Seller has any Knowledge that any executive, key employee, group of
employees, key independent contractor or group of independent contractors has
any plans to terminate employment or engagement with the Seller or with the
Buyer if the Buyer has made known to the Seller its intention to employ or
engage such person, persons, entity or entities, except that each of Stan Key
and Linda Sutphin have expressed an interest to work with F. McMichael in
another business of F. McMichael's,
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provided that neither Stan Key nor Linda Sutphin would do so until at least 90
days after the Closing. The Seller is not a party to or bound by any collective
bargaining agreement, nor has it experienced any strikes, grievances, claims of
unfair labor practices, or other collective bargaining disputes. The Seller has
committed no unfair labor practice or taken an action which would give rise to a
claim under any federal or state law restricting discrimination in employment.
None of the Seller Partner Parties and the officers (and employees with
responsibility for employment matters) of the Seller has any Knowledge of any
organizational effort presently being made or threatened by or on behalf of any
labor union with respect to employees of the Seller.
3.21 EMPLOYEE BENEFITS. Section 3.21 of the Disclosure Schedule lists
each Employee Benefit Plan that the Seller maintains or to which the Seller
contributes or has any obligation to contribute. Each Employee Benefit Plan (and
each related trust, insurance contract, or fund) required to be listed on
Section 3.21 of the Disclosure Schedule complies in form and in operation in all
respects with the applicable requirements of the Employee Retirement Income
Security Act of 1974, as amended ("ERISA"), the Code and other applicable laws.
3.22 GUARANTIES. The Seller is not a guarantor or otherwise liable or
responsible for any Liability or obligation (including indebtedness) of any
other Person.
3.23 ENVIRONMENTAL, HEALTH, AND SAFETY MATTERS.
(i) The Seller, and its predecessors and Affiliates have
complied with all Environmental, Health, and Safety Requirements, and no action,
suit, proceeding, hearing, investigation, charge, complaint, claim, demand, or
notice has been filed or commenced against any of them alleging any failure so
to comply;
(ii) The Seller has no Liability (and none of its predecessors
and Affiliates have handled or disposed of any substance, arranged for the
disposal of any substance, exposed any employee or other individual to any
substance or condition, or owned or operated any property or facility in any
manner that could form the basis for any present or future action, suit,
proceeding, hearing, investigation, charge, complaint, claim, or demand against
the Seller, giving rise to any Liability) for damage to any site, location, or
body of water (surface or subsurface), for any illness of or personal injury to
any employee or other individual, or for any reason under any Environmental,
Health and Safety Requirements, except in compliance with all applicable
Environmental, Health and Safety Requirements;
(iii) All properties and equipment used in the Seller's Business,
and its predecessors' and Affiliates' businesses, have been free of asbestos,
PCB's, methylene chloride, trichloroethylene, 1, 2-trans- dichloroethylene,
dioxins, dibenzofurans, and all Hazardous Materials;
(iv) The Seller has not transported, stored, treated or disposed,
nor has it allowed or arranged for any third person to transport, store, treat
or dispose of, waste to or at any location other than a site lawfully permitted
to receive such waste for such purposes. The Seller has not transported, stored,
treated or disposed of, nor has it allowed or arranged for any third person to
transport, store, treat or dispose of, (A) any Hazardous Materials, or (B) any
other waste to or at any location designated for remedial action pursuant to the
Comprehensive Environmental Response, Compensation and Liability Act, as from
time to time amended, or any similar federal or state statute assigning
responsibility for the cost of investigating or remediating releases of
contaminants into the environment;
(v) Section 3.23(v) of the Disclosure Schedule is a complete and
accurate list of (A) locations (identified by name, address, owner/operator,
type of facility and type of waste) to which the Seller has ever transported, or
ever caused to be transported, allowed or arranged for any third party to
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transport, any type of waste material, generated by the Seller, or customers of
the Seller, for storage (other than at a customer's facility), treatment,
burning, recycling or disposal, and (B) storage (other than at a customer's
facility), treatment, burning, recycling or disposal activities which the Seller
has undertaken, at any time, at locations then or presently owned or occupied by
the Seller (such list to include property address, nature of the Seller's
interest in property, nature of the activity conducted at such location, type
and form or waste, estimated volume of waste disposal on or in ground, and
period of time the activity was conducted);
(vi) The Seller has received no notification (including requests
for information directed to the Seller or any Seller Partner Party) from any
governmental agency or any other person asserting that the Seller is or may be a
"potentially responsible person" or otherwise liable with respect to a
remediation or the payment of response costs at a waste storage treatment or
disposal action facility, pursuant to the provisions of the Comprehensive
Environmental Response, Compensation and Liability Act, as from time to time
amended, or any similar federal or state statute assigning responsibility for
the costs of investigating or remediating releases of contaminants into the
environment.
3.24 CERTAIN BUSINESS RELATIONSHIPS WITH THE SELLER AND ITS AFFILIATES.
None of the Seller Partner Parties nor any of their respective Affiliates has
been involved in any business arrangement or relationship with the Seller within
the past 12 months other than in their capacity as general partners of the
Seller, and none of the Seller Partner Parties nor any of their respective
Affiliates owns or leases any asset, tangible or intangible, which is used in
the Business of the Seller. Neither the Seller nor any Seller Partner Party owns
or has any interest in a Person (other than the Seller) conducting a liquid
waste management business.
3.25 INVESTMENT. The Seller and each of the Seller Partner Parties (i)
understands that the SanTi Stock has not been, and will not be, registered under
the Securities Act of 1933, as amended (the "SECURITIES ACT"), or under any
state securities laws, and is being offered and sold in reliance upon federal
and state exemptions for transactions not involving any public offering, (ii)
understands that the Seller is acquiring the SanTi Stock solely for its own
account for investment purposes, and not with a view to the distribution
thereof, (iii) is a sophisticated investor with knowledge and experience in
business and financial matters, (iv) has received certain information concerning
the Buyer and SanTi and has had the opportunity to obtain additional information
as desired in order to evaluate the merits and the risks inherent in holding the
SanTi Stock, (v) is able to bear the economic risk and lack of liquidity
inherent in holding the SanTi Stock, and (vi) is an "ACCREDITED INVESTOR" (as
said term is defined in Regulation D promulgated under the Securities Act) for
the reasons set forth in Section 3.25 of the Disclosure Schedule.
3.26 OWNERSHIP AND ASSIGNABILITY OF ACCOUNTS. The Seller is the lawful
owner of all of the Accounts, and all such Accounts are free and clear of all
claims, liens, mortgages, pledges, encumbrances and security interests of every
kind, including, but not limited to financing arrangements (including
receivables financing). There are no outstanding rights of any kind to acquire
from either the Seller or the Seller Partner Parties, either separately or
jointly, any interest whatsoever, whether current or future, in the Accounts,
held by any Person other than Buyer. Except for those Accounts expressly set
forth in Section 3.26 of the Disclosure Schedule, all Accounts are freely
assignable by the Seller, and such assignment, transfer and delivery thereof to
the Buyer of all of the Accounts will not constitute or result in a breach,
violation or default of any agreements relating to such Accounts, and such
agreements and Accounts shall remain in full force and effect as if there had
been no assignment, transfer or delivery.
3.27 REVENUE AND MAJOR ACCOUNTS. The average Monthly Gross Revenue of
the Seller for the Accounts for the calendar months of January through November,
1997 derived solely from servicing the Accounts is $158,000.00. Section 3.27 of
the Disclosure Schedule contains a listing of all of the Accounts, and the Gross
Monthly Revenues of such Accounts for the calendar months of January through
November,
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1997. Unless otherwise noted on Section 3.27 of the Disclosure Schedule, all of
such Accounts remain currently active, there has not been a decline in the
aggregate monthly billing level of such Accounts over the 12 calendar month
period immediately preceding the Closing Date, all such Accounts are paid
currently, and during the 12 calendar month period immediately preceding the
Closing Date, the Seller has not lost any customer that generated more than ten
percent (10%) of the Seller's gross revenues in any of the Seller's past fiscal
periods. The Seller and the Seller Partner Parties further represent and warrant
that during the 90 day period immediately following the Closing, the average
monthly gross revenues received by the Buyer for the Accounts shall not be less
than $150,000.00, provided that the Buyer does not materially reduce the
aggregate amount of time that the Business is operated (in terms of number of
days a week and number of hours a day that the Business is operated) during such
90 day period. To the extent that the average monthly gross revenues during such
90 day period received by the Buyer for the Accounts are less than $150,000.00,
the Parties agree that the Buyer shall be deemed to have suffered a Loss in an
amount equal to the product of (i) the amount by which $150,000 exceeds the
average monthly gross revenues during such 90 day period received by the Buyer
for the Accounts, and (ii) the factor 14.87, and that the Buyer shall be
entitled to indemnity from the Seller in the amount of such Loss or to offset
the amount of said Loss against the portion of the Purchase Price withheld by
the Buyer pursuant to Section 2.3 hereof.
3.28 [THIS SECTION INTENTIONALLY LEFT BLANK]
3.29 POSSESSION OF FRANCHISES, LICENSES, ETC. The Seller possesses,
free from any burdensome restriction, all franchises, certificates, licenses,
permits, clearances, consents and other authorizations from governmental
political subdivisions or regulatory authorities that are necessary for (i) the
continued ownership, maintenance and operation of the Business and the other
businesses conducted by the Seller, as currently being operated and conducted,
(ii) the continued operation, use and ownership of the Acquired Assets, as
currently being operated and used, and (iii) the servicing of the Accounts, as
currently being serviced (collectively the "PERMITS"). Section 3.29 of the
Disclosure Schedule sets forth all of the Permits and for each Permit,
accurately describes the expiration and/or renewal date thereof. The Seller is
not in any way whatsoever in violation of any of the Permits and has complied
with all applicable covenants and conditions of each of the Permits. There is no
action, proceeding, permit revocation, permit amendment, writ, injunction, claim
or investigation pending or threatened, concerning or relating to any of the
Permits or the Hazardous Materials activities of the Seller, including, but not
limited to, the treatment, storage or disposal of Hazardous Materials or liquid
or solid waste materials which have been handled by the Seller or its
predecessors or Affiliates.
3.30 THIRD PARTY RELATIONSHIPS. None of the Seller Partner Parties and
the officers and management employees of the Seller has any Knowledge that the
Seller does not enjoy good working relationships in accordance with past
practices with all suppliers, subcontractors, governmental regulators and other
Persons necessary or appropriate for the normal operation of the Business. None
of the Seller Partner Parties and the officers and management employees of the
Seller has any Knowledge that the consummation of the subject transaction will
result in any injury to or disruption of such relationships, or that the Buyer
will incur any costs or expenses in order to continue such relationships as they
had been maintained previous to the Closing.
3.31 ACQUISITION QUESTIONNAIRE. All statements and representations
contained in that certain February 17, 1998 Acquisition Questionnaire (by
reference made an integral part hereof) initialed by the Seller Partner Parties
and tendered by the Seller to the Buyer is true and correct in all material
respects.
3.32 DISCLOSURE. The representations and warranties contained in this
Article 3 do not contain any untrue statement of a material fact or omit to
state any material fact necessary in order to make the statements and
information contained in this Article 3 not misleading.
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<PAGE> 13
ARTICLE 4. REPRESENTATIONS AND WARRANTIES OF THE BUYER
The Buyer represents and warrants to the Seller that the statements
contained in this Article 4 are correct and complete as of the Closing Date,
except as set forth in the Disclosure Schedule. The Disclosure Schedule will be
arranged in sections corresponding to the lettered and numbered sections
contained in this Article 4.
4.1 ORGANIZATION OF THE BUYER. The Buyer is a corporation duly
organized, validly existing, and in good standing under the laws of the
jurisdiction of its incorporation.
4.2 AUTHORIZATION OF TRANSACTION. The Buyer has full power and
authority (including full corporate power and authority) to execute and deliver
this Agreement and to perform its obligations hereunder. This Agreement
constitutes the valid and legally binding obligation of the Buyer, enforceable
in accordance with its terms and conditions, except as enforceability may be
limited by bankruptcy, insolvency, reorganization, moratorium or other laws
affecting creditors' rights generally, or by the exercise of judicial discretion
in accordance with general equitable principles.
4.3 NONCONTRAVENTION. Neither the execution and the delivery of this
Agreement by the Buyer, nor the consummation by the Buyer of the transactions
contemplated hereby, will (i) violate any constitution, statute, regulation,
rule, injunction, judgment, order, decree, ruling, charge, or other restriction
of any government, governmental agency, or court to which the Buyer is subject
or any provision of its charter or bylaws or (ii) conflict with, result in a
breach of, constitute a default under, result in the acceleration of, create in
any Person the right to accelerate, terminate, modify, or cancel, or require any
notice under any agreement, contract, lease, license, permit, instrument, or
other arrangement to which the Buyer is a party or by which it is bound or to
which any of its assets is subject. The Buyer does not need to give any notice
to, make any filing with, or obtain any authorization, consent, or approval of
any government or governmental agency in order for the Parties to consummate the
transactions contemplated by this Agreement.
4.4 BROKERS' FEES. The Buyer has no Liability or obligation to pay any
fees or commissions to any broker, finder, or agent with respect to the
transactions contemplated by this Agreement for which the Seller could become
liable or obligated.
ARTICLE 5. SURVIVAL OF REPRESENTATIONS AND WARRANTIES; INDEMNIFICATION
5.1 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. All representations,
warranties, agreements, covenants and obligations made or undertaken by the
Seller and each Seller Partner Party in this Agreement are, whether specified as
such or not, the joint and several representations, warranties, agreements,
covenants and obligations of all of the Seller and the Seller Partner Parties,
unless otherwise specifically indicated to the contrary herein with respect to a
particular representation, warranty, agreement, covenant or obligation; are
material, have been relied upon by the Buyer, shall survive the Closing
hereunder, and shall not merge in the performance of any obligation by any
Party; and, as to the representations and warranties, shall terminate or expire
on the fifth (5th) anniversary of the Closing Date, provided that such
representations and warranties shall not terminate or expire, but shall
continue, during the pendency of any suit, action, claim or other proceeding
brought in respect of such representations and warranties prior to the
termination or expiration of such five (5) year period. Notwithstanding the
above, all representations and warranties made by the Seller and each Seller
Partner Party in this Agreement that in any manner relate to (i) Tax matters,
(ii) environmental matters, and (iii) title matters, or as to the terms and
performance of this Agreement (collectively, the "SPECIAL MATTERS"), or any of
the foregoing, shall terminate or expire only upon the termination or expiration
of all applicable statutes of limitation. All representations, warranties,
agreements, covenants and obligations made or undertaken by the Buyer in this
Agreement shall survive
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<PAGE> 14
the Closing hereunder, and shall not merge in the performance of any obligation
by any Party; and, as to the representations and warranties, shall terminate or
expire on the fifth (5th) anniversary of the Closing Date, provided that such
representations and warranties shall not terminate or expire, but shall
continue, during the pendency of any suit, action, claim or other proceeding
brought in respect of such representations and warranties prior to the
termination or expiration of such five (5) year period.
5.2 OBLIGATION OF THE SELLER AND THE SELLER PARTNER PARTIES TO
INDEMNIFY. Subject to the limitations contained in this Article 5, the Seller
and the Seller Partner Parties, jointly and severally, shall defend, indemnify
and hold the Buyer and its shareholders, officers, directors, employees,
counsel, agents, Affiliates and assigns (collectively, the "BUYER INDEMNITEES")
harmless from and against any and all Losses asserted against, imposed upon or
incurred by the Buyer Indemnitees, or any of them, by reason of or resulting
from, arising out of, based upon or otherwise in respect of:
(i) any inaccuracy in any representation or warranty made by the
Seller or any Seller Partner Party pursuant to this Agreement or the Disclosure
Schedule;
(ii) any breach of any covenant or agreement made or to be
performed by the Seller or any Seller Partner Party pursuant to this Agreement;
(iii) any Liability or Loss resulting from, arising out of, based
upon or otherwise in respect of any violation or alleged violation of any
Environmental, Health and Safety Requirements the Acquired Assets, or the
presence of any Hazardous Materials on the Acquired Assets, that occurred at any
time prior to Closing;
(iv) the Parties' failure to comply with any of the bulk sales
laws and any other similar laws in any applicable jurisdiction in respect of the
transactions contemplated by this Agreement, and any action brought or levy made
as a result thereof; and/or
(v) any Liability or obligation of the Seller or any of the
Seller Partner Parties, or in any manner related to the Business, the Acquired
Assets or the Excluded Assets, other than the Assumed Liabilities.
5.3 OBLIGATION OF THE BUYER TO INDEMNIFY. Subject to the limitations
contained in this Article 5, the Buyer shall defend, indemnify and hold the
Seller and its officers, directors, partners, employees, counsel, agents,
Affiliates and assigns (collectively, the "SELLER INDEMNITEES") harmless from
and against any and all Losses asserted against, imposed upon or incurred by the
Seller Indemnitees, or any of them, by reason of or resulting from, arising out
of, based upon or otherwise in respect of:
(i) any inaccuracy in any representation or warranty made by the
Buyer pursuant to this Agreement or the Disclosure Schedule;
(ii) any breach of any covenant or agreement made or to be
performed by the Buyer pursuant this Agreement; and/or
(iii) any Assumed Liability.
5.4 MATTERS INVOLVING THIRD PARTIES.
5.4.1 If any third party shall notify any Person that is entitled
to seek indemnification pursuant to Sections 5.2 or 5.3 hereof (the "INDEMNIFIED
PARTY") with respect to any matter (a "THIRD PARTY CLAIM") which may give rise
to a claim for indemnification against any other Person (the
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<PAGE> 15
"INDEMNIFYING PARTY") under this Article 5, then the Indemnified Party shall
promptly notify the Indemnifying Party thereof in writing; provided, however,
that no delay on the part of the Indemnified Party in notifying the Indemnifying
Party shall relieve the Indemnifying Party from any obligation hereunder unless
(and then solely to the extent) the Indemnifying Party thereby is prejudiced.
5.4.2 The Indemnifying Party will have the right to defend the
Indemnified Party against the Third Party Claim with counsel of its choice
reasonably satisfactory to the Indemnified Party so long as (i) the Indemnifying
Party notifies the Indemnified Party in writing within 15 days after the
Indemnified Party has given notice of the Third Party Claim that the
Indemnifying Party will indemnify the Indemnified Party from and against all
Losses the Indemnified Party may suffer resulting from, arising out of, relating
to, in the nature of or caused by the Third Party Claim, (ii) the Indemnifying
Party provides the Indemnified Party with evidence reasonably acceptable to the
Indemnified Party that the Indemnifying Party will have the financial resources
to defend against the Third Party Claim and fulfill its indemnification
obligations hereunder, (iii) the Third Party Claim involves only money damages
and does not seek an injunction or other equitable relief, (iv) settlement of,
or an adverse judgment with respect to, the Third Party Claim is not, in the
good faith judgment of the Indemnified Party, likely to establish a precedential
custom or practice adverse to the continuing business interests of the
Indemnified Party, and (v) the Indemnifying Party conducts the defense of the
Third Party Claim actively and diligently.
5.4.3 So long as the Indemnifying Party is conducting the
defense of the Third Party Claim in accordance with Section 5.4.2 above, (i) the
Indemnified Party may retain separate co-counsel at its cost and expense and
participate in the defense of the Third Party Claim, (ii) the Indemnified Party
will not consent to the entry of any judgment or enter into any settlement with
respect to the Third Party Claim without the prior written consent of the
Indemnifying Party (not to be withheld unreasonably), and (iii) the Indemnifying
Party will not consent to the entry of any judgment or enter into any settlement
with respect to the Third Party Claim without the prior written consent of the
Indemnified Party (not to be withheld unreasonably).
5.4.4 In the event any of the conditions in Section 5.4.2
above is or becomes unsatisfied, however, (i) the Indemnified Party may defend
against, and consent to the entry of any judgment or enter into any settlement
with respect to, the Third Party Claim in any manner it reasonably may deem
appropriate (and the Indemnified Party need not consult with, or obtain any
consent from, the Indemnifying Party in connection therewith), (ii) the
Indemnifying Party will reimburse the Indemnified Party promptly and
periodically for the costs of defending against the Third Party Claim (including
reasonable attorneys' fees and expenses), and (iii) the Indemnifying Party will
remain responsible for any and all Losses the Indemnified Party may suffer
resulting from, arising out of, relating to, in the nature of or caused by the
Third Party Claim to the fullest extent provided in this Article 5.
5.5 INDEMNIFICATION PAYMENTS. An Indemnifying Party shall pay to the
Indemnified Party the full amount of any and all Losses (other than Losses
resulting from a Third Party Claim) for which it is required to indemnify the
Indemnified Party under this Article 5 within ten (10) days after its receipt of
notice thereof from the Indemnified Party, and the full amount of any and all
Losses resulting from a Third Party Claim within ten (10) days after final
settlement or adjudication thereof; and in each case, thereafter the amount of
any such Loss shall bear interest at the rate of interest publicly announced in
Atlanta, Georgia from time to time by NationsBank of Georgia, N.A. as its prime
rate, plus two percent (2%) per annum. After complying with the provisions of
Section 5.4 hereof with respect to any Loss that results from a Third Party
Claim (if applicable), the Buyer shall be entitled to offset from any payments
due the Seller or any of the Seller Partner Parties as part of the Purchase
Price or otherwise (including but not limited to the SanTi Stock), the full
amount of any and all Losses (whether or not resulting from a Third Party Claim)
for which the Seller or any Seller Partner Party is required to indemnify any
Buyer Indemnitee pursuant to Section 5.2 hereof, and the Buyer shall not be
liable for any amounts so offset.
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5.6 OTHER RIGHTS AND REMEDIES NOT AFFECTED. The indemnification rights
of the Parties and other Persons under this Article 5 are independent of and in
addition to such other rights and remedies that the Parties and such other
Persons may have at law or in equity or otherwise for any misrepresentation,
breach of warranty or failure to fulfill any agreement or covenant hereunder on
the part of any Party hereto, including, without limitation, the right to
offset, seek specific performance, rescission or restitution, none of which
rights or remedies shall be adversely affected or diminished hereby.
ARTICLE 6. MISCELLANEOUS
6.1 COMPLIANCE WITH BULK SALES LAWS. The Parties hereby waive
compliance by the Buyer and the Seller with the bulk sales law and any other
similar laws in any applicable jurisdiction in respect of the transactions
contemplated by this Agreement.
6.2 TAXES. The Seller shall pay all federal, state and local income,
sales, use, other transfer, documentary, stamp and other taxes, if any, due as a
result of the purchase, sale or transfer of the Acquired Assets in accordance
herewith, whether such Taxes are imposed by law on the Seller or the Buyer.
6.3 NOTICES. All notices, requests, demands and other communications
required or permitted hereunder shall be in writing and shall be (i) delivered
by hand, (ii) mailed by United States registered or certified mail, return
receipt requested, first class postage prepaid and properly addressed, or (iii)
sent by national overnight courier service to the Parties or their permitted
assignees at the addresses set forth opposite the Parties' signatures hereto.
All notices, requests, instructions or documents given to any Party in
accordance with this Section 6.3 shall be deemed to have been given (i) on the
date of receipt if delivered by hand or overnight courier service, or (ii) on
the date five (5) business days after depositing with the United States Postal
Service if mailed by United States registered or certified mail, return receipt
requested, first class postage prepaid and properly addressed. Any Party may
change its address specified for notices herein by designating a new address by
notice in accordance with this Section 6.3.
6.4 ENTIRE AGREEMENT. All Exhibits and Schedules (including the
Disclosure Schedule) referred to herein are intended to be, and hereby are,
specifically incorporated into and made a part of this Agreement. This Agreement
constitutes the entire agreement among the Parties relating to the subject
matter hereof and supersedes all prior and contemporaneous negotiations,
writings and agreements relating to the subject matter of this Agreement.
6.5 MODIFICATIONS, AMENDMENTS AND WAIVERS. The Parties may, by mutual
written agreement and in no other manner, modify or amend the terms of this
Agreement. The failure or delay of any Party at any time or times to require the
performance of any provision of this Agreement shall in no manner affect its
right to enforce that provision. No single or partial waiver by any Party of any
condition of this Agreement, or the breach of any term, agreement or covenant
of, or the inaccuracy of any representation or warranty in, this Agreement,
whether by conduct or otherwise, in any one or more instances shall be construed
or deemed to be a further or continuing waiver of any such condition, breach or
inaccuracy or a waiver of any other condition, breach or inaccuracy.
6.6 SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon and
shall inure to the benefit of and be enforceable by the Parties, and their
respective successors and permitted assigns. This Agreement may not be assigned
by any Party without the prior written consent of the other Parties, except that
the Buyer may assign this Agreement and its rights and obligations hereunder to
one or more of its Affiliates, or to any of its lenders as collateral security.
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<PAGE> 17
6.7 GOVERNING LAW. This Agreement has been negotiated and executed in
the State of Georgia, will be substantially performed in the State of Georgia,
and shall be controlled, construed and enforced in accordance with the
substantive laws of the State of Georgia, without regard to any laws related to
choice or conflicts of laws.
6.8 SEVERABILITY. Should any one or more of the provisions of this
Agreement be determined to be invalid, illegal or unenforceable in any respect,
the validity, legality and enforceability of the remaining provisions hereof
shall not in any way be adversely affected or impaired thereby. The Parties
shall endeavor in good faith to replace the invalid, illegal or unenforceable
provisions with valid provisions the economic effect of which comes as close as
practicable to that of the invalid, illegal or unenforceable provisions.
6.9 ATTORNEYS' FEES AND EXPENSES. In any Litigation arising out of,
under or in connection with this Agreement in which one Party prevails over
another Party, the reasonable attorneys' fees and expenses incurred by the
prevailing Party in connection with such Litigation shall be paid for or
reimbursed by the opposing Party or Parties in such Litigation.
6.10 NO BENEFIT TO OTHERS. The representation, warranties, covenants
and agreements contained in this Agreement are for the sole benefit of the
Parties and, in the case of Article 5 hereof, the other Indemnified Parties, and
their respective heirs, executors, administrators, legal representatives,
successors and assigns, and they shall not be construed as conferring any rights
on any other Persons.
6.11 CONSTRUCTION. Nothing in any Schedule (including the Disclosure
Schedule) attached hereto shall be deemed adequate to disclose an exception to a
representation or warranty made herein unless the Schedule identifies the
exception with particularity and describes the relevant facts in detail (and in
terms of Liabilities, quantifies the amount thereof with specificity). Without
limiting the generality of the foregoing, the mere listing (or inclusion of a
copy) of a document or other item shall not be deemed adequate to disclose an
exception to a representation or warranty made herein, unless the representation
or warranty has to do with the existence of the document or other item itself.
The Parties intend that each representation, warranty and covenant contained
herein shall have independent significance. If any Party has breached any
representation, warranty or covenant contained herein in any respect, the fact
that there exists another representation, warranty or covenant relating to the
same subject matter (regardless of the relative levels of specificity) which the
Party has not breached shall not detract from or mitigate the fact that the
Party is in breach of the first representation, warranty or covenant.
6.12 EXPENSES. Except as otherwise provided herein, each of the Parties
will bear such Party's own costs and expenses (including legal fees and
expenses) incurred in connection with this Agreement and the transactions
contemplated hereby. The Seller agrees that Seller has not paid any of the costs
and expenses prior to the Closing of the Seller or any of the Seller Partner
Parties (including any of their legal fees and expenses) in connection with this
Agreement or any of the transactions contemplated hereby. The Seller also agrees
that it has not paid any amount to any third party with respect to any of the
costs and expenses of the Seller or any of the Seller Partner Parties (including
any of their legal fees and expenses) in connection with this Agreement or any
of the transactions contemplated hereby.
6.13 FURTHER ASSURANCES. From time to time, at any Party's request and
without further consideration (unless the requesting Party is entitled to
indemnity therefor as provided herein), the other Parties will execute and
deliver to the requesting Party such documents and take such other action as
such Party may reasonably request in order to consummate more effectively the
transactions contemplated hereby.
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IN WITNESS WHEREOF, the Parties have executed this Agreement under seal
effective as of the date first above written.
<TABLE>
<CAPTION>
SELLER:
QUALITY PLUMBING & SEPTIC
<S> <C> <C>
Address: 7851 Lee Road By: /s/ Ronda R. McMichael [SEAL]
Lithia Springs, GA 30057 --------------------------------------------------
Ronda R. McMichael, Authorized Partner
By: /s/ Kevin J. Sullivan [SEAL]
--------------------------------------------------
Kevin J. Sullivan, Authorized Partner
SELLER PARTNER PARTIES
Address: 1639 Lee Road
Lithia Springs, GA 30122 /s/ Ronda R. McMichael [SEAL]
-----------------------------------------------------
Ronda R. McMichael
Address: 2041 Chestnutstart Drive
Lithia Springs, GA 30122 /s/ Kevin J. Sullivan [SEAL]
-----------------------------------------------------
Kevin J. Sullivan
Address: 1639 Lee Road
Lithia Springs, GA 30122 /s/ Forney L. McMichael [SEAL]
-----------------------------------------------------
Forney L. McMichael
BUYER:
BONE-DRY ENTERPRISES, INC.
Address: 4696 Oakdale Road By: /s/ Terry White SEAL]
Smyrna, GA 30080 -----------------------------------------------------
Name:
---------------------------------------------------
Title:
---------------------------------------------------
</TABLE>
18
<PAGE> 1
ASSET PURCHASE AGREEMENT
THIS ASSET PURCHASE AGREEMENT (this "AGREEMENT") is made and entered
into, effective as of March 6, 1998 (the "CLOSING DATE"), between and among
SanTi Group of Florida, Inc., a Georgia corporation (the "BUYER"); Seagraves,
Inc., a Florida corporation (the "SELLER"); and William D. Seagraves, Sr., a
Florida resident ("W. SEAGRAVES"), and Seaburn Seagraves, a Florida resident
("S. SEAGRAVES") (W. Seagraves and S. Seagraves sometimes collectively referred
to herein as the "SELLER SHAREHOLDERS" and sometimes individually referred to
herein as a "SELLER SHAREHOLDER"), and Angelina P. Seagraves, a Florida resident
("A. SEAGRAVES") (the Seller Shareholders and A. Seagraves sometimes
collectively referred to herein as the "SELLER SHAREHOLDER PARTIES" and
sometimes individually referred to herein as a "SELLER SHAREHOLDER PARTY") (the
Buyer, the Seller and the Seller Shareholder Parties are sometimes referred to
collectively herein as the "PARTIES" and sometimes referred to individually
herein as a "PARTY").
WHEREAS, the Seller owns certain contract rights, customer accounts,
trucks, containers and other assets and is engaged in the non-hazardous liquid
waste collection and disposal business in the Orange County, Florida area,
including, but not limited to, under the names "Seagraves, Inc.", "Brownie
Environmental Services", "Brownie Sewer & Drain Cleaning Service" and "Brownie
Septic Tank Contractors" (the "BUSINESS"); and
WHEREAS, this Agreement contemplates a transaction in which the Buyer
will purchase all of the assets of the Seller used in the Business and assume
certain of the liabilities of the Seller in return for cash and the SanTi Stock.
NOW, THEREFORE, in consideration of the premises and the mutual
promises herein made, the Parties agree as follows.
ARTICLE 1. KEY DEFINITIONS
"ACCOUNTS" means (i) all customer accounts, names, lists, purchase
orders, service agreements and contracts (including implied or quantum meruit
contractual rights) or other rights of the Seller to provide liquid waste
services to customers of the Seller, and all rights to and in connection with
any activities commonly associated with such services, customer service
agreements, and contract rights (including implied or quantum meruit contractual
rights) with customers, and (ii) all files, correspondence, records (including
billing and service records for the preceding twelve (12) months) and related
proprietary information and material and other intellectual property which is
necessary, helpful or related to providing such services described above;
excluding, however, (x) all customer accounts, rights or contracts which deal in
hazardous chemical toxic or low-level radioactive waste or any Hazardous
Materials which the Buyer determines it does not wish to purchase, and (y) all
small business set aside contracts which the Buyer determines it does not wish
to purchase. All of the customer accounts, contracts and other rights which are
not being purchased, including those accounts described in items (x) and (y) of
this definition, shall be set forth on Schedule 1 and are hereinafter referred
to collectively as the "EXCLUDED ACCOUNTS".
"ACQUIRED ASSETS" means all right, title and interest in and to all of
the assets of the Seller used or useful in the Business, and shall include, but
not be limited to, all of the Seller's: (a) Accounts, (b) leaseholds and
subleaseholds in real property, improvements, fixtures, and fittings thereon,
and easements, rights-of-way, and other appurtenants thereto (such as
appurtenant rights in and to public streets), (c) tangible personal property
(such as repair parts, machinery, equipment, inventories of raw materials and
supplies, manufactured and purchased parts, goods in process and finished goods,
furniture, certain automobiles, trucks, tractors, trailers, tankers, tools,
pumps, stabilizers, jigs, and dies), (d) intellectual property (including, but
not limited to, the names "Brownie Environmental Services", "Brownie Sewer &
<PAGE> 2
Drain Cleaning Service" and "Brownie Septic Tank Contractors"), goodwill
associated therewith, licenses and sublicenses granted and obtained with respect
thereto, and rights thereunder, remedies against infringements thereof, and
rights to protection of interests therein under the laws of all applicable
jurisdictions, (e) leases, subleases, and rights thereunder, (f) agreements
(such as equipment rental agreements and service agreements), contracts,
customer agreements, disposal agreements, service agreements, indentures,
mortgages, instruments, Security Interests, guaranties, other similar
arrangements, and rights thereunder, (g) notes receivable and other receivables,
other than accounts receivable, (h) securities (including, but not limited to,
the capital stock of its Subsidiaries), (i) claims, deposits, prepayments,
refunds, causes of action, choses in action, rights of recovery, rights of set
off, and rights of recoupment (including any such item relating to the payment
of Taxes), (j) franchises, approvals, permits (including but not limited to
disposal permits), licenses (including but not limited to radio transmitter
licenses), orders, registrations, certificates, variances, and similar rights
obtained from governments and governmental agencies, servicemarks, trademarks,
logos, and (k) telephone numbers, yellow page advertising, books, records
(excluding bank accounts), ledgers, files, documents, correspondence, lists,
plats, architectural plans, drawings and specifications, creative materials,
advertising and promotional materials, operational, billing and payable
information, studies, reports, and other printed or written materials, computer
hardware and software; provided, however, that the Acquired Assets shall not
include those assets of the Seller set forth on Schedule 2 (collectively the
"EXCLUDED ASSETS").
"EMPLOYEE BENEFIT PLAN" means any (i) nonqualified deferred
compensation or retirement plan or arrangement, (ii) qualified defined
contribution retirement plan or arrangement which is an Employee Pension Benefit
Plan, (iii) qualified defined benefit retirement plan or arrangement which is an
Employee Pension Benefit Plan (including any Multiemployer Plan), or (iv)
Employee Welfare Benefit Plan or material fringe benefit or other retirement,
bonus, or incentive plan or program.
"ENVIRONMENTAL, HEALTH, AND SAFETY REQUIREMENTS" shall mean all
federal, state, local and foreign statutes, regulations, ordinances and other
provisions having the force or effect of law, all judicial and administrative
orders and determinations, all contractual obligations and all common law
concerning public health and safety, worker health and safety, and pollution or
protection of the environment, each as amended and as now or hereafter in
effect.
"HAZARDOUS MATERIALS" means any substance that has been designated by
any governmental authority whose requirements are applicable to any of the
Seller and its Subsidiaries to be radioactive, toxic, hazardous, or otherwise
pose potential danger to health or the environment, including, but not limited
to, volatile organic compounds and all substances listed pursuant to the federal
Comprehensive Environmental Response, Compensation and Liability Act, the
federal Resource Conservation Recovery Act, the federal Clean Air Act, the
federal Water Pollution Control Act, the Toxic Substance Control Act and the
Occupational Safety and Health Act, as such acts are amended to the Closing
Date, and the regulations and publications promulgated to the Closing Date
pursuant to said acts, and "extremely hazardous substances" (as said term is
defined in ss.302 of the Emergency Planning and Community Right-to-Know Act of
1986, as amended).
"KNOWLEDGE" means actual knowledge after reasonable investigation and
includes constructive knowledge.
"LIABILITY" means any liability (whether known or unknown, whether
asserted or unasserted, whether absolute or contingent, whether accrued or
unaccrued, whether liquidated or unliquidated, and whether due or to become
due).
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"LITIGATION" means any legal action, administrative or other
proceeding, arbitration, cause of action, claim, complaint, criminal
prosecution, inquiry, hearing, investigation (governmental or otherwise), or
notice (written or oral) by any Person alleging potential liability or
requesting information relating to or affecting the Seller, any of its
Subsidiaries, the Business, the Acquired Assets or the transactions contemplated
by this Agreement.
"LOSSES" means any and all direct or indirect demands, claims,
payments, obligations, recoveries, deficiencies, fines, penalties, interests,
assessments, actions, causes of action, suits, losses, diminution in the value
of any of the Acquired Assets, compensatory, punitive, exemplary or
consequential damages (including, without limitation, lost income and profits
and interruptions of business), Liabilities, costs, expenses (including, without
limitation, (i) interest, penalties and reasonable attorneys' fees and expenses,
(ii) attorneys' fees and expenses necessary to enforce rights to indemnification
hereunder, and (iii) consultant's fees and other costs of defense or
investigation); and interest on any amount payable to a third party as a result
of the foregoing, whether accrued, absolute, contingent, known, unknown or
otherwise.
"MONTHLY GROSS REVENUES" means (i) prior to the Closing, the monthly
gross revenues of the Seller from the Business (but only from the following
lines of business: sewer and drain cleaning, small plumbing repair, septic tank
installation and pumping, drainfield installation and repairs, wastewater
treatment plant, and yellow grease collection, processing and resale) determined
on an accrual basis, and (ii) subsequent to the Closing, the monthly gross
revenues of the Buyer from the Business (but only from the following lines of
business: sewer and drain cleaning, small plumbing repair, septic tank
installation and pumping, drainfield installation and repairs, wastewater
treatment plant, and yellow grease collection, processing and resale) determined
on an accrual basis. In each of the situations described in items (i) and (ii)
of this definition, the term Monthly Gross Revenues shall not include (i) any
revenues of the Seller or the Buyer, as the case may be, from the Business with
respect to extraordinary sales which may take place or which may be included in
the Business, (ii) any revenues of the Seller or the Buyer, as the case may be,
from the Business for services not actually rendered, or (iii) any revenues of
the Seller or the Buyer, as the case may be, from the Excluded Accounts.
"ORDINARY COURSE OF BUSINESS" means the ordinary course of business
consistent with past custom and practice (including with respect to quantity and
frequency).
"PERSON" means an individual, a partnership, a corporation, an
association, a joint stock company, a trust, a joint venture, an unincorporated
organization, or a governmental entity (or any department, agency, or political
subdivision thereof).
"SECURITY INTEREST" means any mortgage, pledge, lien, encumbrance,
charge, or other security interest, other than (i) mechanic's, materialmen's,
and similar liens, (ii) liens for Taxes not yet due and payable or for Taxes
that the taxpayer is contesting in good faith through appropriate proceedings,
(iii) purchase money liens and liens securing rental payments under capital
lease arrangements, and (iv) other liens arising in the Ordinary Course of
Business and not incurred in connection with the borrowing of money.
"SUBSIDIARY" means any corporation with respect to which a specified
Person (or a Subsidiary thereof) owns a majority of the common stock or has the
power to vote or direct the voting of sufficient securities to elect a majority
of the directors.
"TAX" means any federal, state, local, or foreign income, gross
receipts, license, payroll, employment, excise, severance, stamp, documentary,
occupation, premium, windfall profits, environmental (including taxes under
ss.59A of the Internal Revenue Code of 1986, as amended (the "CODE")), customs
duties, capital stock, franchise, profits, withholding, social security (or
similar), unemployment, disability,
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real property, personal property, sales, use, transfer, registration, value
added, alternative or add-on minimum, estimated, or other tax of any kind
whatsoever, including any interest, penalty, or addition thereto, whether
disputed or not.
"TAX RETURN" means any return, declaration, report, claim for refund,
or information return or statement relating to Taxes, including any schedule or
attachment thereto, and including any amendment thereof.
ARTICLE 2. BASIC TRANSACTIONS
2.1 PURCHASE AND SALE OF ASSETS. On and subject to the terms and
conditions of this Agreement, and effective as of 12:01 a.m. on the Closing
Date, the Buyer hereby purchases from the Seller, and the Seller hereby sells,
transfers, conveys, and delivers to the Buyer, all of the Acquired Assets, for
the consideration specified below in this Article 2, free and clear of any and
all Security Interests, other than the Assumed Liabilities.
2.2 ASSUMPTION OF LIABILITIES. On and subject to the terms and
conditions of this Agreement, and effective as of the Closing, the Buyer hereby
assumes and becomes responsible for all of the liabilities of the Seller set
forth on Schedule 3 (collectively the "Assumed Liabilities"). Except for the
Assumed Liabilities, nothing in this Agreement or any other document entered
into on the Closing Date shall in any way obligate the Buyer for any
Liabilities, obligations or charges of the Seller, any of its Subsidiaries, or
any of the Seller Shareholder Parties, including, but without limitation, any
Liabilities attributable to Environmental, Health and Safety Requirements, or
Liabilities or charges for Taxes or recording fees arising out of the sale or
transfer of the Acquired Assets. It is specifically understood and agreed by the
Parties that the Buyer does not assume any Liabilities, obligations or charges
of the Seller, any of its Subsidiaries, or the Seller Shareholder Parties except
for the Assumed Liabilities.
2.3 PURCHASE PRICE. The Buyer agrees to pay, issue and deliver to the
Seller the following (collectively, the "PURCHASE PRICE"): (i) cash in the
amount of $2,850,000, payable by wire transfer or delivery of other immediately
available funds, (ii) a promissory note (the "BUYER NOTE") in the aggregate
principal amount of $2,000,000; (iii) 60,000 shares (the "SANTI STOCK") of the
common stock of SanTi Group, Inc., a Delaware corporation ("SANTI"), and (iv)
documentation effecting the assumption of the Assumed Liabilities. The Buyer is
contemporaneously at the Closing tendering to the Seller (i) all of the cash
portion of the Purchase Price, less the sum of the amount(s) set forth on
Schedule 4 which is required to be paid to the third parties set forth on
Schedule 4 at the Closing in order to remove those Security Interests set forth
on Schedule 4 which encumber certain of the Acquired Assets immediately prior to
the Closing, (ii) the Buyer Note, (iii) documentation effecting the conveyance
of 60,000 shares of the SanTi Stock, and (iv) documentation effecting the
assumption of the Assumed Liabilities. The Seller acknowledges and agrees that
the Buyer is retaining 12,000 shares of the SanTi Stock, pursuant to that
certain Stock Pledge Agreement, of even date herewith, between the Buyer and the
Seller (the "STOCK PLEDGE"), to hold as security to offset against any Losses
asserted against, imposted upon or incurred by the Buyer arising out of any of
the matters listed in items (i) through (v) of Section 5.2 hereof.
2.4 THE CLOSING. The closing of the transactions contemplated by this
Agreement (the "CLOSING") is contemporaneously taking place at the offices of
David B. McEwen, P.A., 501 First Avenue North, #700, St. Petersburg, Florida
33701, commencing at 9:00 a.m. local time on the Closing Date.
2.5 ALLOCATION. The Parties agree to allocate the Purchase Price (and
all other capitalizable costs) among the Acquired Assets for all purposes
(including financial accounting and tax purposes) consistent with the Code and
in accordance with the allocation schedule to be agreed upon by the Parties.
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2.6 USE OF NAME. Following the Closing Date, the Seller shall not use
or give permission to any other Party to use the name "Brownie Environmental
Services", "Brownie Sewer & Drain Cleaning Service" and "Brownie Septic Tank
Contractors" or any substantially similar name in connection with the operation
of a waste collection and disposal business.
2.7 CONFIDENTIALITY. The Seller and each Seller Shareholder Party agree
that for a period of five (5) years after the Closing Date, none of them nor any
other person connected with any of them shall at any time divulge, and each of
them shall cause their respective agents, employees and "AFFILIATES" (as said
term is defined in Rule 12b-2 of the regulations promulgated under the
Securities Exchange Act of 1934, as amended) not to divulge, the existence and
terms of the negotiations resulting in this Agreement, the terms and conditions
of this Agreement and the financing arrangements of the Buyer and its
Affiliates, except as required by applicable federal, state or local statutes
pursuant to subpoena or court order.
2.8 TELEPHONE REFERRALS. From and after the Closing Date, the Seller
shall refer, and cause its agents to refer, all telephone calls to it or them
for liquid waste collection and disposal to the Buyer.
ARTICLE 3. REPRESENTATIONS AND WARRANTIES
OF THE SELLER AND THE SELLER SHAREHOLDER PARTIES
The Seller and each of the Seller Shareholder Parties jointly and
severally represent and warrant to the Buyer that the statements contained in
this Article 3 are correct and complete as of the Closing Date, except as set
forth in the disclosure schedule accompanying this Agreement and initialed by
the Parties (the "DISCLOSURE SCHEDULE"). The Disclosure Schedule will be
arranged in sections corresponding to the lettered and numbered sections
contained in this Article 3.
3.1 ORGANIZATION OF THE SELLER AND CERTAIN SELLER SHAREHOLDER PARTIES.
The Seller is a corporation duly organized, validly existing, and in good
standing under the laws of the jurisdiction of its incorporation. The Seller is
duly authorized to conduct business and the Business, and is in good standing,
under the laws of each jurisdiction where such qualification is required. If any
Seller Shareholder Party is an entity, such Seller Shareholder Party is duly
organized, validly existing, and in good standing under the laws of the
jurisdiction of its incorporation or other formation and organization.
3.2 AUTHORIZATIONS. The Seller has full power and authority (including
full corporate power and authority) to execute and deliver this Agreement and to
perform its obligations hereunder. Without limiting the generality of the
foregoing, the board of directors of the Seller and the Seller Shareholders have
duly authorized the execution, delivery, and performance of this Agreement by
the Seller. Each of the Seller Shareholder Parties has full power and authority
(including, if any Seller Shareholder Party is a corporation or other entity,
full corporate or other entity power and authority) to execute and deliver this
Agreement and to perform such Seller Shareholder Party's obligations hereunder.
This Agreement constitutes the valid and legally binding obligation of the
Seller and each Seller Shareholder Party, enforceable in accordance with its
terms and conditions.
3.3 NONCONTRAVENTION. Neither the execution and the delivery of this
Agreement by the Seller and the Seller Shareholder Parties, nor the consummation
by the Seller and the Seller Shareholder Parties of the transactions
contemplated hereby, will (i) violate any constitution, statute, regulation,
rule, injunction, judgment, order, decree, stipulation, ruling, charge, or other
restriction of any government, governmental agency, or court to which the
Seller, any of its Subsidiaries or any Seller Shareholder Party is subject (or,
if any Seller Shareholder Party is a corporation or other entity, any provision
of its charter or bylaws or other governing documents) or any provision of the
charter or bylaws of any of the Seller or any of its Subsidiaries, or (ii)
conflict with, result in a breach of, constitute a default under, result in the
acceleration of, create in any Person the right to accelerate, terminate,
modify, or cancel, or require any
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notice under any agreement, contract, lease, license, permit, instrument, or
other arrangement to which the Seller, any of its Subsidiaries, or any Seller
Shareholder Party is a party or by which the Seller, any of its Subsidiaries, or
any Seller Shareholder Party is bound or to which any assets of the Seller, any
of its Subsidiaries, or any Seller Shareholder Party is subject (or result in
the imposition of any Security Interest upon any assets of the Seller, any of
its Subsidiaries, or any Seller Shareholder Party). Neither the Seller nor any
of its Subsidiaries needs to give any notice to, make any filing with, or obtain
any authorization, consent, or approval of any government or governmental agency
in order for the Parties to consummate the transactions contemplated by this
Agreement.
3.4 SELLER SHARES; BROKERS' FEES. Each Seller Shareholder holds of
record the number of shares of issued and outstanding capital stock of the
Seller set forth next to such Seller Shareholder's name in Section 3.4 of the
Disclosure Schedule. Neither the Seller nor any of its Subsidiaries has any
Liability or obligation to pay any fees or commissions to any broker, finder, or
agent with respect to the transactions contemplated by this Agreement for which
the Buyer could become liable or obligated.
3.5 TITLE TO ASSETS. The Seller and its Subsidiaries have good and
marketable title to, or a valid leasehold interest in, the properties and assets
used by any of them, located on any of their respective premises, or shown on
the balance sheet contained within the Most Recent Financial Statements (the
"MOST RECENT BALANCE SHEET") or acquired after the date thereof, free and clear
of all Security Interests, other than the Assumed Liabilities, except for
properties and assets disposed of in the Ordinary Course of Business since the
date of the Most Recent Balance Sheet. Without limiting the generality of the
foregoing, the Seller has good and marketable title to all of the Acquired
Assets, free and clear of any Security Interest or restriction on transfer,
other than the Assumed Liabilities.
3.6 SUBSIDIARIES. Each Subsidiary of the Seller is listed in Section
3.6 of the Disclosure Schedule, and is a corporation duly organized, validly
existing, and in good standing under the laws of the jurisdiction of its
incorporation. Each Subsidiary of the Seller is duly authorized to conduct
business and is in good standing under the laws of each jurisdiction where such
qualification is required. Each Subsidiary of the Seller has full power and
authority (including full corporate power and authority) and all licenses,
permits, and authorizations necessary to carry on the Business and the other
businesses in which it is engaged and in which it presently proposes to engage
and to own and use the properties owned and used by it. All of the issued and
outstanding shares of capital stock of each Subsidiary of the Seller have been
duly authorized and are validly issued, fully paid, and nonassessable. The
Seller holds of record and owns beneficially all of the outstanding shares of
each Subsidiary of the Seller, free and clear of any restrictions on transfer
(other than restrictions under the Securities Act and state securities laws),
Taxes, Security Interests, options, warrants, purchase rights, contracts,
commitments, equities, claims, and demands. There are no outstanding or
authorized options, warrants, purchase rights, subscription rights, conversion
rights, exchange rights, or other contracts or commitments that could require
any of the Seller and its Subsidiaries to sell, transfer, or otherwise dispose
of any capital stock of any of its Subsidiaries or that could require any
Subsidiary of the Seller to issue, sell, or otherwise cause to become
outstanding any of its own capital stock (other than this Agreement). There are
no voting trusts, proxies, or other agreements or understandings with respect to
the voting of any capital stock of any Subsidiary of the Seller. The minute
books (containing the records of meetings of the stockholders, the board of
directors, and any committees of the board of directors), the stock certificate
books, and the stock record books of each Subsidiary of the Seller are correct
and complete. None of the Subsidiaries of the Seller is in default under or in
violation of any provision of its charter or bylaws. None of the Seller and its
Subsidiaries controls directly or indirectly or has any direct or indirect
equity participation in any corporation, partnership, trust, or other business
association which is not a Subsidiary of the Seller.
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3.7 FINANCIAL STATEMENTS. Attached hereto as Exhibit A are the
following financial statements (collectively, the "FINANCIAL STATEMENTS"): (i)
unaudited consolidated and unaudited consolidating balance sheets and statements
of income, changes in stockholders' equity, and cash flow as of and for the
fiscal years ended December 31, 1994, December 31, 1995, December 31, 1996, and
December 31, 1997 (the "MOST RECENT FISCAL YEAR END") for the Seller and its
Subsidiaries; and (ii) unaudited consolidated and consolidating balance sheets
and statements of income, changes in stockholders' equity, and cash flow (the
"MOST RECENT FINANCIAL STATEMENTS") as of and for the two (2) month period ended
February 28, 1998 (the "MOST RECENT FISCAL MONTH END") for the Seller and its
Subsidiaries. The Financial Statements (including the notes thereto) present
fairly the financial condition of the Seller and its Subsidiaries as of such
dates and the results of operations of the Seller and its Subsidiaries for such
periods, are correct and complete, and are consistent with the books and records
of the Seller and its Subsidiaries (which books and records are correct and
complete). The net book value of the Acquired Assets is not less than
$__________________.
3.8 EVENTS SUBSEQUENT TO MOST RECENT FISCAL YEAR END. Since the Most
Recent Fiscal Year End, there has not been any adverse change in the Business or
the business, financial condition, operations, results of operations, or future
prospects of the Seller or any of its Subsidiaries. Without limiting the
generality of the foregoing, since that date: (i) neither the Seller nor any of
its Subsidiaries has sold, leased, transferred, pledged or assigned any of its
assets, tangible or intangible, other than for a fair consideration in the
Ordinary Course of Business; (ii) neither the Seller nor any of its Subsidiaries
has entered into (or issued), accelerated, terminated, modified, or canceled any
agreement, contract, lease, note, bond, debt security or license either
involving more than $5,000 or outside the Ordinary Course of Business; (iii)
neither the Seller nor its Subsidiaries has made any capital expenditure (or
series of related capital expenditures) either involving more than $5,000 or
outside the Ordinary Course of Business; (iv) neither the Seller nor any of its
Subsidiaries has delayed or postponed the payment of accounts payable and other
Liabilities outside the Ordinary Course of Business; (v) neither the Seller nor
any of its Subsidiaries has canceled, compromised, waived, or released any right
or claim (or series of related rights and claims) either involving more than
$5,000 or outside the Ordinary Course of Business; (vi) neither the Seller nor
any of its Subsidiaries has issued, sold, disposed of or granted any rights to
purchase any of its capital stock, or declared, set aside, or paid any dividend
or made any distribution with respect to its capital stock (whether in cash or
in kind), or redeemed, purchased, or otherwise acquired any of its capital
stock; (vii) neither the Seller nor any of its Subsidiaries has experienced any
damage, destruction, or loss (whether or not covered by insurance) to its
property; (viii) neither the Seller nor any of its Subsidiaries has made any
loan to, or entered into any other transaction with, any of its directors,
officers, or employees outside the Ordinary Course of Business; (ix) neither the
Seller nor any of its Subsidiaries has (a) entered into any employment contract
or collective bargaining agreement, written or oral, or modified the terms of
any existing such contract or agreement; (b) granted any increase in the base
compensation of any of its directors, officers, or employees (or made any other
change in employment terms for such persons) outside the Ordinary Course of
Business; or (c) adopted, amended, modified, or terminated any Employee Benefit
Plan; (x) there has not been any other occurrence, event, incident, action,
failure to act, or transaction outside the Ordinary Course of Business involving
the Seller or any of its Subsidiaries; and (xi) neither the Seller nor any of
its Subsidiaries has committed to any of the foregoing.
3.9 UNDISCLOSED LIABILITIES. Neither the Seller nor any of its
Subsidiaries has any Liability (and there is no basis for any present or future
action, suit, proceeding, hearing, investigation, charge, complaint, claim, or
demand against any of them giving rise to any Liability), except for (i)
Liabilities set forth on the face of the Most Recent Balance Sheet (rather than
in any notes thereto) and (ii) Liabilities which have arisen after the Most
Recent Fiscal Month End in the Ordinary Course of Business (none of which
results from, arises out of, relates to, is in the nature of, or was caused by
any breach of contract, breach of warranty, tort, infringement, or violation of
law).
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3.10 LEGAL COMPLIANCE. Each of the Seller, its Subsidiaries, and its
predecessors and Affiliates has complied with all applicable laws (including
rules, statutes, regulations, codes, permits, plans, injunctions, judgments,
orders, decrees, rulings, and charges thereunder) of federal, state, local, and
foreign governments (and all agencies thereof), and no action, suit, proceeding,
hearing, investigation, charge, complaint, claim, demand, or notice has been
filed or commenced against any of them alleging any failure so to comply. None
of the Seller Shareholder Parties and the directors, officers and management
employees of the Seller has any Knowledge of any basis (existing prior to the
Closing) which could result in (i) any failure of the Buyer (based upon its
acquisition of the Business) to comply after the Closing with any and all
applicable laws (including rules, statutes, regulations, codes, permits, plans,
injunctions, judgments, orders, decrees, rulings, and charges thereunder) of
federal, state, local, and foreign governments (and all agencies thereof), or
any action, suit, proceeding, hearing, investigation, charge, complaint, claim,
demand or notice being filed or commenced after the Closing against the Buyer or
any of its Affiliates alleging any failure to so comply.
3.11 TAX MATTERS. Each of the Seller and its Subsidiaries has filed all
Tax Returns that it was required to file. All such Tax Returns were correct and
complete in all respects. All Taxes owed by any of the Seller and its
Subsidiaries (whether or not shown on any Tax Return) have been paid. No claim
has ever been made by an authority in a jurisdiction where any of the Seller and
its Subsidiaries does not file Tax Returns that it is or may be subject to
taxation by that jurisdiction. Each of the Seller and its Subsidiaries has
withheld and paid all Taxes required to have been withheld and paid in
connection with amounts paid or owing to any employee, independent contractor,
creditor, stockholder or other third party. No Seller Shareholder Party or
director or officer (or employee responsible for Tax matters) of any of the
Seller and its Subsidiaries expects any authority to assess any additional Taxes
for any period for which Tax Returns have been filed. There is no dispute or
claim concerning any Tax Liability of any of the Seller and its Subsidiaries
either (i) claimed or raised by any authority in writing or (ii) as to which any
of the Seller Shareholder Parties and the directors and officers (and employees
responsible for Tax matters) of any of the Seller and its Subsidiaries has
Knowledge based upon personal contact with any agent of such authority. Section
3.11 of the Disclosure Schedule lists all federal, state, local, and foreign
income Tax Returns filed with respect to any of the Seller and its Subsidiaries
for taxable periods ended on or after December 31, 1995, indicates those Tax
Returns that have been audited, and indicates those Tax Returns that currently
are the subject of audit. The Seller has delivered to the Buyer correct and
complete copies of all federal income Tax Returns, examination reports, and
statements of deficiencies assessed against or agreed to by any of the Seller
and its Subsidiaries since December 31, 1995. The unpaid Taxes of the Seller and
its Subsidiaries (i) did not, as of the Most Recent Fiscal Month End, exceed the
reserve for Tax Liability (rather than any reserve for deferred Taxes
established to reflect timing differences between book and Tax income) set forth
on the face of the Most Recent Balance Sheet (rather than in any notes thereto)
and (ii) do not exceed that reserve as adjusted for the passage of time through
the Closing Date in accordance with the past custom and practice of the Seller
and its Subsidiaries in filing their Tax Returns.
3.12 REAL PROPERTY.
(i) Section 3.12(i) of the Disclosure Schedule lists and
describes briefly all real property that any of the Seller and its Subsidiaries
owns. With respect to each such parcel of owned real property required to be
listed and described on Section 3.12(i) of the Disclosure Schedule: (A) the
identified owner has good and marketable title to the parcel of real property,
free and clear of any Security Interest, easement, covenant, or other
restriction, except for installments of special assessments not yet delinquent
and recorded easements, covenants, and other restrictions which do not impair
the current use, occupancy, or value, or the marketability of title, of the
property subject thereto; (B) there are no pending or threatened condemnation
proceedings, lawsuits, or administrative actions relating to the property or
other matters affecting adversely the current use, occupancy, or value thereof;
(C) the legal description for the parcel contained in the deed thereof describes
such parcel fully and adequately, the buildings and improvements
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are located within the boundary lines of the described parcels of land, are not
in violation of applicable setback requirements, zoning laws, and ordinances
(and none of the properties or buildings or improvements thereon are subject to
"permitted non-conforming use" or "permitted non-conforming structure"
classifications), and do not encroach on any easement which may burden the land,
the land does not serve any adjoining property for any purpose inconsistent with
the use of the land, and the property is not located within any flood plain or
subject to any similar type restriction for which any permits or licenses
necessary to the use thereof have not been obtained; (D) all facilities have
received all approvals of governmental authorities (including licenses and
permits) required in connection with the ownership or operation thereof and have
been operated and maintained in accordance with applicable laws, rules, and
regulations; (E) there are no leases, subleases, licenses, concessions, or other
agreements, written or oral, granting to any Person or Persons the right of use
or occupancy of any portion of the parcel of real property; (F) there are no
outstanding options or rights of first refusal to purchase the parcel of real
property, or any portion thereof or interest therein; (G) there are no Persons
(other than the Seller and its Subsidiaries) in possession of the parcel of real
property, other than tenants under any leases disclosed in Section 3.2.12(i) of
the Disclosure Schedule who are in possession of space to which they are
entitled; (H) all facilities located on the parcel of real property are supplied
with utilities and other services necessary for the operation of such
facilities, including gas, electricity, water, telephone, sanitary sewer, and
storm sewer, all of which services are adequate in accordance with all
applicable laws, ordinances, rules, and regulations and are provided via public
roads or via permanent, irrevocable, appurtenant easements benefitting the
parcel of real property; (I) each parcel of real property abuts on and has
direct vehicular access to a public road, or has access to a public road via a
permanent, irrevocable, appurtenant easement benefitting the parcel of real
property, and access to the property is provided by paved public right-of-way
with adequate curb cuts available; (J) no Hazardous Material is present in, on
or under such real property at any time prior to the Closing Date, including any
land and the improvements, ground water and surface water thereof, except in
accordance with applicable laws and regulations; and (K) there are and have been
no storage tanks located on or under such property.
(ii) Section 3.12(ii) of the Disclosure Schedule lists and
describes briefly all real property leased or subleased to or not owned but
otherwise used by any of the Seller and its Subsidiaries. The Seller has
delivered to the Buyer correct and complete copies of the leases and subleases
(as amended to date) required to be listed in Section 3.12(ii) of the Disclosure
Schedule. With respect to each lease and sublease required to be listed in
Section 3.12(ii) of the Disclosure Schedule: (A) the lease or sublease is legal,
valid, binding, enforceable, and in full force and effect; (B) the lease or
sublease will continue to be legal, valid, binding, enforceable, and in full
force and effect on identical terms following the consummation of the
transactions contemplated hereby; (C) no party to the lease or sublease is in
breach or default, and no event has occurred which, with notice or lapse of
time, would constitute a breach or default or permit termination, modification,
or acceleration thereunder; (D) there are no disputes, oral agreements, or
forbearance programs in effect as to the lease or sublease and no party to the
lease or sublease has repudiated any provision thereof; (E) with respect to each
sublease, the representations and warranties set forth in subsections (A)
through (D) above are true and correct with respect to the underlying lease; (F)
the Seller has not assigned, transferred, conveyed, mortgaged, deeded in trust,
or encumbered any interest in the leasehold or subleasehold; (G) all facilities
leased or subleased thereunder have received all approvals of governmental
authorities (including licenses and permits) required in connection with the
operation thereof and have been operated and maintained in accordance with
applicable laws, rules, and regulations; (H) all facilities leased or subleased
thereunder are supplied with utilities and other services necessary for the
operation of said facilities; (I) no Hazardous Material is present in, on or
under such real property at any time prior to the Closing Date, including any
land and the improvements, ground water and surface water thereof, except in
accordance with applicable laws and regulations; and (J) there are and have been
no storage tanks located on or under such property. With respect to each such
property used by but not owned by, leased to or subleased to any of the Seller
and its Subsidiaries, Section 3.12(ii) of the Disclosure Schedule states the
nature and terms of the relationship pursuant to which such property is used.
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3.13 TANGIBLE ASSETS. The Seller and its Subsidiaries own or lease all
buildings, machinery, equipment, other tangible assets, permits, licenses and
agreements necessary for the conduct of the Business as presently conducted and
as presently proposed to be conducted. Except as set forth on Section 3.13 of
the Disclosure Schedule, each such tangible asset is in good operating condition
and repair (subject to normal wear and tear). There are no defects in the
Acquired Assets which affect the plumbing, electrical, sewer, ventilating or air
conditioning systems thereof.
3.14 CONTRACTS. Section 3.14 of the Disclosure Schedule lists all
contracts and other agreements to which any of the Seller and its Subsidiaries
is a party. The Seller has delivered to the Buyer a correct and complete copy of
each written agreement (as amended to date) required to be listed in Section
3.14 of the Disclosure Schedule. With respect to each agreement required to be
listed in Section 3.14 of the Disclosure Schedule: (i) the agreement is legal,
valid, binding, enforceable, and in full force and effect; (ii) the agreement
will continue to be legal, valid, binding, enforceable, and in full force and
effect on identical terms following the consummation of the transactions
contemplated hereby; (iii) no party thereto is in breach or default, and no
event has occurred which with notice or lapse of time would constitute a breach
or default, or permit termination, modification, or acceleration, under the
agreement; and (iv) no party thereto has repudiated any provision of the
agreement.
3.15 POWERS OF ATTORNEY. There are no outstanding powers of attorney
executed by or on behalf of any of the Seller and its Subsidiaries.
3.16 INSURANCE. Section 3.16 of the Disclosure Schedule lists each
insurance policy (including policies providing property, casualty, liability,
and workers' compensation coverage and bond and surety arrangements) to which
any of the Seller and its Subsidiaries is a party, a named insured, or otherwise
the beneficiary of coverage. With respect to each insurance policy required to
be listed in Section 3.16 of the Disclosure Schedule: (i) the policy is legal,
valid, binding, enforceable, and in full force and effect; (ii) the policy will
continue to be legal, valid, binding, enforceable, and in full force and effect
on identical terms following the consummation of the transactions contemplated
hereby; (iii) neither the Seller and its Subsidiaries nor any other party to the
policy is in breach or default (including with respect to the payment of
premiums or the giving of notices), and no event has occurred which, with notice
or the lapse of time, would constitute such a breach or default, or permit
termination, modification, or acceleration, under the policy; and (iv) no party
to the policy has repudiated any provision thereof. Each of the Seller and its
Subsidiaries has been covered during the past 3 years by insurance in scope and
amount customary and reasonable for the Business and the other businesses in
which it has engaged during the aforementioned period. Section 3.16 of the
Disclosure Schedule describes any self-insurance arrangements affecting any of
the Seller and its Subsidiaries, as well as any pending claims with respect to
insurance coverage owned by the Seller or its Subsidiaries, including amounts
held in reserve by the Seller or its Subsidiaries in connection with any such
claim.
3.17 LITIGATION. Section 3.17 of the Disclosure Schedule sets forth
each instance in which any of the Seller and its Subsidiaries (i) is subject to
any outstanding injunction, judgment, order, decree, ruling, or charge or (ii)
is a party or is threatened to be made a party to any action, suit, proceeding,
hearing, or investigation of, in, or before any court or quasi-judicial or
administrative agency of any federal, state, local, or foreign jurisdiction or
before any arbitrator. None of the actions, suits, proceedings, hearings, and
investigations required to be set forth in Section 3.17 of the Disclosure
Schedule could result in any adverse change in the Business, the other business,
financial condition, operations, results of operations, or future prospects of
any of the Seller and its Subsidiaries. None of the Seller Shareholder Parties
and the directors and officers (and employees with responsibility for litigation
matters) of the Seller and its Subsidiaries has any reason to believe that any
such action, suit, proceeding, hearing, or investigation may be brought or
threatened against any of the Seller and its Subsidiaries.
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3.18 SERVICE WARRANTY AND LIABILITY. Each service provided or delivered
by any of the Seller and its Subsidiaries has been in conformity with all
applicable contractual commitments and all express and implied warranties, and
neither the Seller nor any of its Subsidiaries has any Liability (and there is
no basis for any present or future action, suit, proceeding, hearing,
investigation, charge, complaint, claim, or demand against any of the Seller and
its Subsidiaries giving rise to any Liability) (i) for damages in connection
therewith, or (ii) arising out of any injury to individuals or property as a
result of the use of any service provided or delivered by any of the Seller and
its Subsidiaries. No service provided or delivered by any of the Seller and its
Subsidiaries is subject to any guaranty, warranty, or other indemnity beyond the
applicable standard terms and conditions of sale. Section 3.18 of the Disclosure
Schedule includes copies of the standard terms and conditions of sale for each
of the Seller and its Subsidiaries (containing applicable guaranty, warranty,
and indemnity provisions).
3.19 [THIS SECTION INTENTIONALLY LEFT BLANK]
3.20 EMPLOYEES AND INDEPENDENT CONTRACTORS. Section 3.20 of the
Disclosure Schedule contains a complete list of all employees and independent
contractors of each of the Seller and its Subsidiaries engaged in the conduct of
the Business, and for each employee or independent contractor required to be
listed on Section 3.20 of the Disclosure Schedule, their address, social
security number, current annual base salary or hourly rate and years of
employment or engagement with any of the Seller and its Subsidiaries. No
executive, key employee, group of employees, key independent contractor or group
of independent contractors has any plans to terminate employment or engagement
with any of the Seller and its Subsidiaries or with the Buyer if the Buyer has
made known to the Seller its intention to employ or engage such person, persons,
entity or entities. Neither the Seller nor any of its Subsidiaries is a party to
or bound by any collective bargaining agreement, or experienced any strikes,
grievances, claims of unfair labor practices, or other collective bargaining
disputes. Neither the Seller nor any of its Subsidiaries has committed any
unfair labor practice or taken an action which would give rise to a claim under
any federal or state law restricting discrimination in employment. None of the
Seller Shareholder Parties and the directors and officers (and employees with
responsibility for employment matters) of the Seller and its Subsidiaries has
any Knowledge of any organizational effort presently being made or threatened by
or on behalf of any labor union with respect to employees of any of the Seller
and its Subsidiaries.
3.21 EMPLOYEE BENEFITS. Section 3.21 of the Disclosure Schedule lists
each Employee Benefit Plan that any of the Seller and its Subsidiaries maintains
or to which any of the Seller and its Subsidiaries contributes or has any
obligation to contribute. Each Employee Benefit Plan (and each related trust,
insurance contract, or fund) required to be listed on Section 3.21 of the
Disclosure Schedule complies in form and in operation in all respects with the
applicable requirements of the Employee Retirement Income Security Act of 1974,
as amended ("ERISA"), the Code and other applicable laws.
3.22 GUARANTIES. Neither the Seller nor any of its Subsidiaries is a
guarantor or otherwise liable or responsible for any Liability or obligation
(including indebtedness) of any other Person.
3.23 ENVIRONMENTAL, HEALTH, AND SAFETY MATTERS.
(i) The Seller, its Subsidiaries, and its predecessors and
Affiliates have complied with all Environmental, Health, and Safety
Requirements, and no action, suit, proceeding, hearing, investigation, charge,
complaint, claim, demand, or notice has been filed or commenced against any of
them alleging any failure so to comply.
(ii) Neither the Seller nor any of its Subsidiaries has any
Liability (and none of their respective predecessors and Affiliates have handled
or disposed of any substance, arranged for the disposal of any substance,
exposed any employee or other individual to any substance or condition, or owned
or
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operated any property or facility in any manner that could form the basis for
any present or future action, suit, proceeding, hearing, investigation, charge,
complaint, claim, or demand against the Seller, giving rise to any Liability)
for damage to any site, location, or body of water (surface or subsurface), for
any illness of or personal injury to any employee or other individual, or for
any reason under any Environmental, Health and Safety Requirements, except in
compliance with all applicable Environmental, Health and Safety Requirements.
(iii) All properties and equipment used in the Business, the
Seller's Subsidiaries' businesses, and their respective predecessors' and
Affiliates' businesses, have been free of asbestos, PCB's, methylene chloride,
trichloroethylene, 1, 2-trans-dichloroethylene, dioxins, dibenzofurans, and all
Hazardous Materials.
(iv) Neither the Seller nor any of its Subsidiaries has
transported, stored, treated or disposed, nor allowed or arranged for any third
person to transport, store, treat or dispose of, waste to or at any location
other than a site lawfully permitted to receive such waste for such purposes.
Neither the Seller nor any of its Subsidiaries has transported, stored, treated
or disposed of, nor allowed or arranged for any third person to transport,
store, treat or dispose of, (A) any Hazardous Materials, or (B) any other waste
to or at any location designated for remedial action pursuant to the
Comprehensive Environmental Response, Compensation and Liability Act, as from
time to time amended, or any similar federal or state statute assigning
responsibility for the cost of investigating or remediating releases of
contaminants into the environment.
(v) Section 3.23(v) of the Disclosure Schedule is a complete
and accurate list of (A) locations (identified by name, address, owner/operator,
type of facility and type of waste) to which any of the Seller and its
Subsidiaries has ever transported, or ever caused to be transported, allowed or
arranged for any third party to transport, any type of waste material, generated
by any of the Seller and its Subsidiaries, or customers of any of the Seller and
its Subsidiaries, for storage (other than at a customer's facility), treatment,
burning, recycling or disposal, and (B) storage (other than at a customer's
facility), treatment, burning, recycling or disposal activities which any of the
Seller and its Subsidiaries has undertaken, at any time, at locations then or
presently owned or occupied by any of the Seller and its Subsidiaries (such list
to include property address, nature of the interest of the Seller or its
Subsidiaries in property, nature of the activity conducted at such location,
type and form or waste, estimated volume of waste disposal on or in ground, and
period of time the activity was conducted).
(vi) Neither the Seller nor any of its Subsidiaries has
received any notification (including requests for information directed to any of
the Seller and its Subsidiaries or any Seller Shareholder Party) from any
governmental agency or any other person asserting that any of the Seller and its
Subsidiaries is or may be a "potentially responsible person" or otherwise liable
with respect to a remediation or the payment of response costs at a waste
storage treatment or disposal action facility, pursuant to the provisions of the
Comprehensive Environmental Response, Compensation and Liability Act, as from
time to time amended, or any similar federal or state statute assigning
responsibility for the costs of investigating or remediating releases of
contaminants into the environment.
3.24 CERTAIN BUSINESS RELATIONSHIPS WITH THE SELLER AND ITS AFFILIATES.
None of the Seller Shareholder Parties nor any of their respective Affiliates
has been involved in any business arrangement or relationship with any of the
Seller and its Subsidiaries within the past 12 months which has caused or
resulted in increased gross revenues for the Seller from the Business and which,
if not continued subsequent to the Closing, will cause or result in decreased
revenues for the Buyer from the Business, and none of the Seller Shareholder
Parties nor any of their respective Affiliates owns or leases any asset,
tangible or intangible, which is used in the businesses of any of the Seller and
its Subsidiaries. Neither the Seller, any of its Subsidiaries nor any Seller
Shareholder Party owns or has any interest in a Person (other than the
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Seller and its Subsidiaries) conducting a liquid waste management business.
3.25 INVESTMENT. The Seller and each of the Seller Shareholders (i)
understands that the SanTi Stock has not been, and will not be, registered under
the Securities Act of 1933, as amended (the "SECURITIES ACT"), or under any
state securities laws, and is being offered and sold in reliance upon federal
and state exemptions for transactions not involving any public offering, (ii)
understands that the Seller is acquiring the SanTi Stock solely for its own
account for investment purposes, and not with a view to the distribution
thereof, (iii) is a sophisticated investor with knowledge and experience in
business and financial matters, (iv) has received certain information concerning
the Buyer and SanTi and has had the opportunity to obtain additional information
as desired in order to evaluate the merits and the risks inherent in holding the
SanTi Stock, (v) is able to bear the economic risk and lack of liquidity
inherent in holding the SanTi Stock, and (vi) is an "ACCREDITED INVESTOR" (as
said term is defined in Regulation D promulgated under the Securities Act) for
the reasons set forth in Section 3.25 of the Disclosure Schedule.
3.26 OWNERSHIP AND ASSIGNABILITY OF ACCOUNTS. The Seller is the lawful
owner of all of the Accounts, and all such Accounts are free and clear of all
claims, liens, mortgages, pledges, encumbrances and security interests of every
kind, including, but not limited to financing arrangements (including
receivables financing). There are no outstanding rights of any kind to acquire
from either the Seller or the Seller Shareholder Parties, either separately or
jointly, any interest whatsoever, whether current or future, in the Accounts,
held by any Person other than Buyer. Except for those Accounts expressly set
forth in Section 3.26 of the Disclosure Schedule, all Accounts are freely
assignable by the Seller, and such assignment, transfer and delivery thereof to
the Buyer of all of the Accounts will not constitute or result in a breach,
violation or default of any agreements relating to such Accounts, and such
agreements and Accounts shall remain in full force and effect as if there had
been no assignment, transfer or delivery.
3.27 REVENUE AND MAJOR ACCOUNTS. The average Monthly Gross Revenue of
the Seller for the calendar months of January, 1997 through February, 1998 is at
least $555,000. Section 3.27 of the Disclosure Schedule contains a listing of
the Monthly Gross Revenues of the Seller for the calendar months of January,
1997 through February, 1998. Unless otherwise noted on Section 3.27 of the
Disclosure Schedule, during the 12 calendar month period immediately preceding
the Closing Date, the Seller has not lost any customer that generated more than
ten percent (10%) of the Seller's gross revenues in any of the Seller's past
fiscal periods.
3.28 [THIS SECTION INTENTIONALLY LEFT BLANK]
3.29 POSSESSION OF FRANCHISES, LICENSES, ETC. Each of the Seller and
each of its Subsidiaries possesses, free from any burdensome restriction, all
franchises, certificates, licenses, permits, clearances, consents and other
authorizations from governmental political subdivisions or regulatory
authorities that are necessary for (i) the continued ownership, maintenance and
operation of the Business and the other businesses conducted by any of the
Seller and its Subsidiaries, as currently being operated and conducted, (ii) the
continued operation, use and ownership of the Acquired Assets, as currently
being operated and used, and (iii) the servicing of the Accounts, as currently
being serviced (collectively the "PERMITS"). Section 3.29 of the Disclosure
Schedule sets forth all of the Permits and for each Permit, accurately describes
the expiration and/or renewal date thereof. Neither the Seller nor any of its
Subsidiaries is in any way whatsoever in violation of any of the Permits, and
each of the Seller and its Subsidiaries has complied with all applicable
covenants and conditions of each of the Permits. There is no action, proceeding,
permit revocation, permit amendment, writ, injunction, claim or investigation
pending or threatened, concerning or relating to any of the Permits or the
Hazardous Materials activities of any of the Seller and its Subsidiaries,
including, but not limited to, the treatment, storage or disposal of Hazardous
Materials or liquid or solid waste materials which have been handled by the
Seller, any of its Subsidiaries, or any of their respective predecessors or
Affiliates.
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3.30 THIRD PARTY RELATIONSHIPS. Each of the Seller and its Subsidiaries
has good working relationships in accordance with past practices with all
suppliers, subcontractors, governmental regulators and other Persons necessary
or appropriate for the normal operation of the Business and the businesses of
the Seller's Subsidiaries. The consummation of the subject transaction will not
result in any injury to or disruption of such relationships, and none of the
Seller Shareholder Parties and the directors and officers of the Seller and its
Subsidiaries has any Knowledge that the Buyer will incur any costs or expenses
in order to continue such relationships as they had been maintained previous to
the Closing.
3.31 [THIS SECTION INTENTIONALLY LEFT BLANK]
3.32 DISCLOSURE. The representations and warranties contained in this
Article 3 do not contain any untrue statement of a material fact or omit to
state any material fact necessary in order to make the statements and
information contained in this Article 3 not misleading.
ARTICLE 4. REPRESENTATIONS AND WARRANTIES OF THE BUYER
The Buyer represents and warrants to the Seller that the statements
contained in this Article 4 are correct and complete as of the Closing Date,
except as set forth in the Disclosure Schedule. The Disclosure Schedule will be
arranged in sections corresponding to the lettered and numbered sections
contained in this Article 4.
4.1 ORGANIZATION OF THE BUYER. The Buyer is a corporation duly
organized, validly existing, and in good standing under the laws of the
jurisdiction of its incorporation.
4.2 AUTHORIZATION OF TRANSACTION. The Buyer has full power and
authority (including full corporate power and authority) to execute and deliver
this Agreement and to perform its obligations hereunder. This Agreement
constitutes the valid and legally binding obligation of the Buyer, enforceable
in accordance with its terms and conditions, except as enforceability may be
limited by bankruptcy, insolvency, reorganization, moratorium or other laws
affecting creditors' rights generally, or by the exercise of judicial discretion
in accordance with general equitable principles.
4.3 NONCONTRAVENTION. Neither the execution and the delivery of this
Agreement by the Buyer, nor the consummation by the Buyer of the transactions
contemplated hereby, will (i) violate any constitution, statute, regulation,
rule, injunction, judgment, order, decree, ruling, charge, or other restriction
of any government, governmental agency, or court to which the Buyer is subject
or any provision of its charter or bylaws or (ii) conflict with, result in a
breach of, constitute a default under, result in the acceleration of, create in
any Person the right to accelerate, terminate, modify, or cancel, or require any
notice under any agreement, contract, lease, license, permit, instrument, or
other arrangement to which the Buyer is a party or by which it is bound or to
which any of its assets is subject. The Buyer does not need to give any notice
to, make any filing with, or obtain any authorization, consent, or approval of
any government or governmental agency in order for the Parties to consummate the
transactions contemplated by this Agreement.
4.4 BROKERS' FEES. The Buyer has no Liability or obligation to pay any
fees or commissions to any broker, finder, or agent with respect to the
transactions contemplated by this Agreement for which the Seller could become
liable or obligated.
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ARTICLE 5. SURVIVAL OF REPRESENTATIONS AND WARRANTIES; INDEMNIFICATION
5.1 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. All representations,
warranties, agreements, covenants and obligations made or undertaken by the
Seller and each Seller Shareholder Party in this Agreement are, whether
specified as such or not, the joint and several representations, warranties,
agreements, covenants and obligations of all of the Seller and the Seller
Shareholder Parties, unless otherwise specifically indicated to the contrary
herein with respect to a particular representation, warranty, agreement,
covenant or obligation; are material, have been relied upon by the Buyer, shall
survive the Closing hereunder, and shall not merge in the performance of any
obligation by any Party; and, as to the representations and warranties, shall
terminate or expire on the fifth (5th) anniversary of the Closing Date, provided
that such representations and warranties shall not terminate or expire, but
shall continue, during the pendency of any suit, action, claim or other
proceeding brought in respect of such representations and warranties prior to
the termination or expiration of such five (5) year period. Notwithstanding the
above, all representations and warranties made by the Seller and each Seller
Shareholder Party in this Agreement that in any manner relate to (i) Tax
matters, (ii) environmental matters, and (iii) title matters, or as to the terms
and performance of this Agreement (collectively, the "SPECIAL MATTERS"), or any
of the foregoing, shall terminate or expire only upon the termination or
expiration of all applicable statutes of limitation. All representations,
warranties, agreements, covenants and obligations made or undertaken by the
Buyer in this Agreement shall survive the Closing hereunder, and shall not merge
in the performance of any obligation by any Party; and, as to the
representations and warranties, shall terminate or expire on the fifth (5th)
anniversary of the Closing Date, provided that such representations and
warranties shall not terminate or expire, but shall continue, during the
pendency of any suit, action, claim or other proceeding brought in respect of
such representations and warranties prior to the termination or expiration of
such five (5) year period.
5.2 OBLIGATION OF THE SELLER AND THE SELLER SHAREHOLDER PARTIES TO
INDEMNIFY. Subject to the limitations contained in this Article 5, the Seller
and the Seller Shareholder Parties, jointly and severally, shall defend,
indemnify and hold the Buyer and its shareholders, officers, directors,
employees, counsel, agents, Affiliates and assigns (collectively, the "BUYER
INDEMNITEES") harmless from and against any and all Losses asserted against,
imposed upon or incurred by the Buyer Indemnitees, or any of them, by reason of
or resulting from, arising out of, based upon or otherwise in respect of:
(i) any inaccuracy in any representation or warranty made by
the Seller or any Seller Shareholder Party pursuant to this Agreement or the
Disclosure Schedule;
(ii) any breach of any covenant or agreement made or to be
performed by the Seller or any Seller Shareholder Party pursuant to this
Agreement;
(iii) any Liability or Loss resulting from, arising out of,
based upon or otherwise in respect of any violation or alleged violation of any
Environmental, Health and Safety Requirements the Acquired Assets, or the
presence of any Hazardous Materials on the Acquired Assets, that occurred at any
time prior to Closing;
(iv) the Parties' failure to comply with any of the bulk sales
laws and any other similar laws in any applicable jurisdiction in respect of the
transactions contemplated by this Agreement, and any action brought or levy made
as a result thereof; and/or
(v) any Liability or obligation of the Seller, any of its
Subsidiaries (accruing prior to the Closing), or any of the Seller Shareholder
Parties, or in any manner related to the Business (accruing prior to the
Closing), the Acquired Assets (accruing prior to the Closing) or the Excluded
Assets, in each of the foregoing cases, other than the Assumed Liabilities.
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5.3 OBLIGATION OF THE BUYER TO INDEMNIFY. Subject to the limitations
contained in this Article 5, the Buyer shall defend, indemnify and hold the
Seller and its officers, directors, stockholders, employees, counsel, agents,
Affiliates and assigns (collectively, the "SELLER INDEMNITEES") harmless from
and against any and all Losses asserted against, imposed upon or incurred by the
Seller Indemnitees, or any of them, by reason of or resulting from, arising out
of, based upon or otherwise in respect of:
(i) any inaccuracy in any representation or warranty made by
the Buyer pursuant to this Agreement or the Disclosure Schedule;
(ii) any breach of any covenant or agreement made or to be
performed by the Buyer pursuant this Agreement; and/or
(iii) any Assumed Liability.
5.4 MATTERS INVOLVING THIRD PARTIES.
5.4.1 If any third party shall notify any Person that is
entitled to seek indemnification pursuant to Sections 5.2 or 5.3 hereof (the
"INDEMNIFIED PARTY") with respect to any matter (a "THIRD PARTY CLAIM") which
may give rise to a claim for indemnification against any other Person (the
"INDEMNIFYING PARTY") under this Article 5, then the Indemnified Party shall
promptly notify the Indemnifying Party thereof in writing; provided, however,
that no delay on the part of the Indemnified Party in notifying the Indemnifying
Party shall relieve the Indemnifying Party from any obligation hereunder unless
(and then solely to the extent) the Indemnifying Party thereby is prejudiced.
5.4.2 The Indemnifying Party will have the right to defend the
Indemnified Party against the Third Party Claim with counsel of its choice
reasonably satisfactory to the Indemnified Party so long as (i) the Indemnifying
Party notifies the Indemnified Party in writing within 15 days after the
Indemnified Party has given notice of the Third Party Claim that the
Indemnifying Party will indemnify the Indemnified Party from and against all
Losses the Indemnified Party may suffer resulting from, arising out of, relating
to, in the nature of or caused by the Third Party Claim, (ii) the Indemnifying
Party provides the Indemnified Party with evidence reasonably acceptable to the
Indemnified Party that the Indemnifying Party will have the financial resources
to defend against the Third Party Claim and fulfill its indemnification
obligations hereunder, (iii) the Third Party Claim involves only money damages
and does not seek an injunction or other equitable relief, (iv) settlement of,
or an adverse judgment with respect to, the Third Party Claim is not, in the
good faith judgment of the Indemnified Party, likely to establish a precedential
custom or practice adverse to the continuing business interests of the
Indemnified Party, and (v) the Indemnifying Party conducts the defense of the
Third Party Claim actively and diligently.
5.4.3 So long as the Indemnifying Party is conducting the
defense of the Third Party Claim in accordance with Section 5.4.2 above, (i) the
Indemnified Party may retain separate co-counsel at its cost and expense and
participate in the defense of the Third Party Claim, (ii) the Indemnified Party
will not consent to the entry of any judgment or enter into any settlement with
respect to the Third Party Claim without the prior written consent of the
Indemnifying Party (not to be withheld unreasonably), and (iii) the Indemnifying
Party will not consent to the entry of any judgment or enter into any settlement
with respect to the Third Party Claim without the prior written consent of the
Indemnified Party (not to be withheld unreasonably).
5.4.4 In the event any of the conditions in Section 5.4.2
above is or becomes unsatisfied, however, (i) the Indemnified Party may defend
against, and consent to the entry of any judgment or enter into any settlement
with respect to, the Third Party Claim in any manner it reasonably may deem
appropriate (and the Indemnified Party need not consult with, or obtain any
consent from, the Indemnifying
16
<PAGE> 17
Party in connection therewith), (ii) the Indemnifying Party will reimburse the
Indemnified Party promptly and periodically for the costs of defending against
the Third Party Claim (including reasonable attorneys' fees and expenses), and
(iii) the Indemnifying Party will remain responsible for any and all Losses the
Indemnified Party may suffer resulting from, arising out of, relating to, in the
nature of or caused by the Third Party Claim to the fullest extent provided in
this Article 5.
5.5 INDEMNIFICATION PAYMENTS. An Indemnifying Party shall pay to the
Indemnified Party the full amount of any and all Losses (other than Losses
resulting from a Third Party Claim) for which it is required to indemnify the
Indemnified Party under this Article 5 within ten (10) days after its receipt of
notice thereof from the Indemnified Party, and the full amount of any and all
Losses resulting from a Third Party Claim within ten (10) days after final
settlement or adjudication thereof; and in each case, thereafter the amount of
any such Loss shall bear interest at the rate of interest publicly announced in
Atlanta, Georgia from time to time by NationsBank of Georgia, N.A. as its prime
rate, plus one percent (1%) per annum. After complying with the provisions of
Section 5.4 hereof with respect to any Loss that results from a Third Party
Claim (if applicable), the Buyer shall be entitled to offset from any payments
due the Seller or any of the Seller Shareholder Parties as part of the Purchase
Price or otherwise (including but not limited to the SanTi Stock), the full
amount of any and all Losses (whether or not resulting from a Third Party Claim)
for which the Seller or any Seller Shareholder Party is required to indemnify
any Buyer Indemnitee pursuant to Section 5.2 hereof, and the Buyer shall not be
liable for any amounts so offset.
5.6 OTHER RIGHTS AND REMEDIES NOT AFFECTED. The indemnification rights
of the Parties and other Persons under this Article 5 are independent of and in
addition to such other rights and remedies that the Parties and such other
Persons may have at law or in equity or otherwise for any misrepresentation,
breach of warranty or failure to fulfill any agreement or covenant hereunder on
the part of any Party hereto, including, without limitation, the right to
offset, seek specific performance, rescission or restitution, none of which
rights or remedies shall be adversely affected or diminished hereby.
ARTICLE 6. MISCELLANEOUS
6.1 COMPLIANCE WITH BULK SALES LAWS. The Parties hereby waive
compliance by the Buyer and the Seller with the bulk sales law and any other
similar laws in any applicable jurisdiction in respect of the transactions
contemplated by this Agreement.
6.2 TAXES. The Seller shall pay all federal, state and local income,
sales, use, other transfer, documentary, stamp and other taxes, if any, due as a
result of the purchase, sale or transfer of the Acquired Assets in accordance
herewith, whether such Taxes are imposed by law on the Seller or the Buyer.
Notwithstanding the foregoing, the Buyer shall pay (i) any and all sales taxes
due as a result of transfer of the Acquired Assets consisting of motor vehicles,
and (ii) any and all amounts payable to the Florida Department of Revenue with
respect to documentary stamps in connection with the issuance of the Buyer Note
to the Seller.
6.3 NOTICES. All notices, requests, demands and other communications
required or permitted hereunder shall be in writing and shall be (i) delivered
by hand, (ii) mailed by United States registered or certified mail, return
receipt requested, first class postage prepaid and properly addressed, or (iii)
sent by national overnight courier service to the Parties or their permitted
assignees at the addresses set forth opposite the Parties' signatures hereto.
All notices, requests, instructions or documents given to any Party in
accordance with this Section 6.3 shall be deemed to have been given (i) on the
date of receipt if delivered by hand or overnight courier service, or (ii) on
the date five (5) business days after depositing with the United States Postal
Service if mailed by United States registered or certified mail, return receipt
requested, first class postage prepaid and properly addressed. Any Party may
change its address specified for notices herein by designating a new address by
notice in accordance with this Section 6.3.
17
<PAGE> 18
6.4 ENTIRE AGREEMENT. All Exhibits and Schedules (including the
Disclosure Schedule) referred to herein are intended to be, and hereby are,
specifically incorporated into and made a part of this Agreement. This Agreement
constitutes the entire agreement among the Parties relating to the subject
matter hereof and supersedes all prior and contemporaneous negotiations,
writings and agreements relating to the subject matter of this Agreement.
6.5 MODIFICATIONS, AMENDMENTS AND WAIVERS. The Parties may, by mutual
written agreement and in no other manner, modify or amend the terms of this
Agreement. The failure or delay of any Party at any time or times to require the
performance of any provision of this Agreement shall in no manner affect its
right to enforce that provision. No single or partial waiver by any Party of any
condition of this Agreement, or the breach of any term, agreement or covenant
of, or the inaccuracy of any representation or warranty in, this Agreement,
whether by conduct or otherwise, in any one or more instances shall be construed
or deemed to be a further or continuing waiver of any such condition, breach or
inaccuracy or a waiver of any other condition, breach or inaccuracy.
6.6 SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon and
shall inure to the benefit of and be enforceable by the Parties, and their
respective successors and permitted assigns. This Agreement may not be assigned
by any Party without the prior written consent of the other Parties, except that
the Buyer may assign this Agreement and its rights and obligations hereunder to
one or more of its Affiliates, or to any of its lenders as collateral security.
6.7 GOVERNING LAW. This Agreement shall be controlled, construed and
enforced in accordance with the substantive laws of the State of Florida,
without regard to any laws related to choice or conflicts of laws.
6.8 SEVERABILITY. Should any one or more of the provisions of this
Agreement be determined to be invalid, illegal or unenforceable in any respect,
the validity, legality and enforceability of the remaining provisions hereof
shall not in any way be adversely affected or impaired thereby. The Parties
shall endeavor in good faith to replace the invalid, illegal or unenforceable
provisions with valid provisions the economic effect of which comes as close as
practicable to that of the invalid, illegal or unenforceable provisions.
6.9 ATTORNEYS' FEES AND EXPENSES. In any Litigation arising out of,
under or in connection with this Agreement in which one Party prevails over
another Party, the reasonable attorneys' fees and expenses incurred by the
prevailing Party in connection with such Litigation shall be paid for or
reimbursed by the opposing Party or Parties in such Litigation.
6.10 NO BENEFIT TO OTHERS. The representation, warranties, covenants
and agreements contained in this Agreement are for the sole benefit of the
Parties and, in the case of Article 5 hereof, the other Indemnified Parties, and
their respective heirs, executors, administrators, legal representatives,
successors and assigns, and they shall not be construed as conferring any rights
on any other Persons.
6.11 CONSTRUCTION. Nothing in any Schedule (including the Disclosure
Schedule) attached hereto shall be deemed adequate to disclose an exception to a
representation or warranty made herein unless the Schedule identifies the
exception with particularity and describes the relevant facts in detail (and in
terms of Liabilities, quantifies the amount thereof with specificity). Without
limiting the generality of the foregoing, the mere listing (or inclusion of a
copy) of a document or other item shall not be deemed adequate to disclose an
exception to a representation or warranty made herein, unless the representation
or warranty has to do with the existence of the document or other item itself.
The Parties intend that each representation, warranty and covenant contained
herein shall have independent significance. If any Party has breached any
representation, warranty or covenant contained herein in any respect, the fact
that there
18
<PAGE> 19
exists another representation, warranty or covenant relating to the same subject
matter (regardless of the relative levels of specificity) which the Party has
not breached shall not detract from or mitigate the fact that the Party is in
breach of the first representation, warranty or covenant.
6.12 EXPENSES. Except as otherwise provided herein, each of the Parties
will bear such Party's own costs and expenses (including legal fees and
expenses) incurred in connection with this Agreement and the transactions
contemplated hereby.
6.13 FURTHER ASSURANCES. From time to time, at any Party's request and
without further consideration (unless the requesting Party is entitled to
indemnity therefor as provided herein), the other Parties will execute and
deliver to the requesting Party such documents and take such other action as
such Party may reasonably request in order to consummate more effectively the
transactions contemplated hereby.
IN WITNESS WHEREOF, the Parties have executed this Agreement under seal
effective as of the date first above written.
SELLER:
SEAGRAVES, INC.
Address: 3191 Bayou Sound By: /s/ William Seagraves [SEAL]
Longboat Key, FL 34228 ---------------------------------
Name:
-------------------------------------
Title:
------------------------------------
SELLER SHAREHOLDER PARTIES
Address: 3191 Bayou Sound
Longboat Key, FL 34228 /s/ William D. Seagraves [SEAL]
------------------------------------
William D. Seagraves, Sr.
Address: 1563 Foxden Road
Apopka, FL 32712 /s/ Seaburn Seagraves [SEAL]
------------------------------------
Seaburn Seagraves
Address: 3191 Bayou Sound
Longboat Key, FL 34228 /s/ Angelina P. Seagraves [SEAL]
------------------------------------
Angelina P. Seagraves
BUYER:
SANTI GROUP OF FLORIDA, INC.
Address: 4696 Oakdale Road By: /s/ Terry White [SEAL]
Smyrna, GA 30080 ---------------------------------
Name: Terry White
Title: Vice President
19
<PAGE> 20
EXHIBIT A
FINANCIAL STATEMENTS
See attached Financial Statements.
20
<PAGE> 21
SCHEDULE 1
EXCLUDED ACCOUNTS
None.
21
<PAGE> 22
SCHEDULE 2
EXCLUDED ASSETS
1. The corporate charter, qualifications to conduct business as a foreign
corporation, arrangements with registered agents relating to foreign
qualifications, taxpayer and other identification numbers, seals,
minute books, stock transfer books, blank stock certificates, and other
documents relating to the organization, maintenance, and existence of
the Seller as a corporation.
2. All of the Excluded Accounts.
3. All Accounts Receivable of the Seller.
4. Any asset related to Hazardous Materials.
5. Cash and cash equivalents of the Seller.
6. All right and time to the name "Seagraves, Inc.".
7. The following personal property owned by the Seller, or a principal of
the Seller, as well as any and all contracts or agreements connected
with any of the following and any and all indebtedness, obligations or
liabilities associated with any of the following:
(a) 1994 Mercedes Benz S500 (veh #20), v.i.n. WDBGA51E5RA169035
(asset #219 on Seagraves, Inc. Federal Depreciation Report
dated 3/5/98 for 1997 tax year)
(b) 1997 Ford F-150 Pick-up truck, v.i.n. 1FTDF0762VKB32103 (asset
#208 on Seagraves, Inc. Federal Depreciation Report dated
3/5/98 for 1997 tax year)
(c) fax machine (asset #226 on Seagraves, Inc. Federal
Depreciation Report dated 3/5/98 for 1997 tax year)
(d) file cabinet (asset #227 on Seagraves, Inc. Federal
Depreciation Report dated 3/5/98 for 1997 tax year)
(e) office cabinet (asset #228 on Seagraves, Inc. Federal
Depreciation Report dated 3/5/98 for 1997 tax year)
(f) Gateway 2000 computer (asset #175 on Seagraves, Inc. Federal
Depreciation Report dated 3/5/98 for 1997 tax year)
(g) buildings located on the real property described in Item 8
below (asset #2 on Seagraves, Inc. Federal Depreciation Report
dated 3/5/98 for 1997 tax year)
(h) building improvements located on the real property described
in Item 8 below (asset #114 on Seagraves, Inc. Federal
Depreciation Report dated 3/5/98 for 1997 tax year)
(i) castille cabinets located on the real property described in
Item 8 below (asset #153 on Seagraves, Inc. Federal
Depreciation Report dated 3/5/98 for 1997 tax year)
(j) leasehold improvements located on the real property described
in Item 8 below (asset #156 on Seagraves, Inc. Federal
Depreciation Report dated 3/5/98 for 1997 tax year)
22
<PAGE> 23
SCHEDULE 2
EXCLUDED ASSETS
(CONTINUED PAGE 2)
(k) fencing (whaley) located on the real property described in
Item 8 below (asset #116 on Seagraves, Inc. Federal
Depreciation Report dated 3/5/98 for 1997 tax year)
(l) organization costs (asset #24 on Seagraves, Inc. Federal
Depreciation Report dated 3/5/98 for 1997 tax year)
(m) loan costs (asset #52 on Seagraves, Inc. Federal Depreciation
Report dated 3/5/98 for 1997 tax year)
(n) loan costs (asset #127 on Seagraves, Inc. Federal Depreciation
Report dated 3/5/98 for 1997 tax year)
(o) loan costs (asset #130 on Seagraves, Inc. Federal Depreciation
Report dated 3/5/98 for 1997 tax year)
(p) loan costs (asset #117 on Seagraves, Inc. Federal Depreciation
Report dated 3/5/98 for 1997 tax year)
(q) loan costs (asset #136 on Seagraves, Inc. Federal Depreciation
Report dated 3/5/98 for 1997 tax year)
8. All of the following real estate owned by the Seller, or a principal of
the Seller, consisting of those certain premises located at (i) 1804
Nashville Street, Orlando, FL; (ii) 2127 West Pine Street, Orlando, FL;
and (iii) 1326 17th Street Orlando, FL, legally described as follows:
(a) Lots 12 and 13, Block 2, L.J. Dollins' Subdivision, according
to the plat thereof as recorded in Plat Book F, Page 102 of
the public records of Orange County, Florida.
(b) Lots 1 and 2, of Block 3, of CLEAR LAKE VIEWS, as per plat
thereof, recorded in Plat Book "J", page 145, Public Records
of Orange County, Florida.
(c) Lots 9 and 10, Block 1, CLEAR LAKE VIEWS SUBDIVISION,
according to plat thereof as recorded in Plat Book J, page
145, of the Public Records of Orange County, Florida.
(d) Lots 11, 12, 13, 14, 15, and 16 Block 1, Clear Lake View,
according to Plat Book J, Page 145, Public Records of Orange
County, Florida.
(e) The North 67.5 feet of Lots 25 & 26, Block 1, Clear Lake
Views, according to the Plat thereof as recorded in Plat Book
"J" at Page 145 of Public Records of Orange County, Florida.
(f) Lots 27, 28, 29 and 30, BLOCK 1, CLEAR LAKE VIEWS SUBDIVISION,
according to the plat thereof, as recorded in Plat Book J,
Page 145, Public Records of Orange County, Florida.
23
<PAGE> 24
SCHEDULE 2
EXCLUDED ASSETS
(CONTINUED PAGE 3)
(g) Lots 31, 32, 33, and 34, Block 1, CLEARLAKE VIEWS SUBDIVISION,
according to the plat thereof as recorded in plat book "J",
page 145, of the Public Records of Orange County, Florida.
(h) Lots 17, 18, 19 and 20, Block one (1), Clear Lake Views,
according to the plat thereof as recorded in plat book "J",
page 145, public records of Orange County, Florida.
(i) Lots 35, 36, 37 and 38, Block 1, CLEAR LAKE VIEWS, according
to the plat thereof as recorded in Plat Book J, Page 145,
Public Records of Orange County, Florida.
(j) Lots 39 & 40, Block 1, CLEAR LAKE VIEW SUBDIVISION, according
to the plat thereof as recorded in Plat Book J, Page 145,
Public records of Orange County, Florida.
24
<PAGE> 25
SCHEDULE 3
ASSUMED LIABILITIES
1. All obligations of the Seller directly associated with or under the
agreements, contracts, leases, licenses, and other arrangements
referred to in the definition of Accounts either (i) to furnish goods,
services, and other non-cash benefits to customers after the Closing,
or (ii) to pay for goods, services, and other non-cash benefits that
another Person will furnish to it after the Closing.
2. That indebtedness of the Seller to SunTrust Bank associated with each
of the following assets pursuant to the financing documents related
thereto in the approximate amount indicated therewith:
(a) Radio System for Trucks (approximately $62,712.86)
(b) 1989 Ford Pick Up (#7769) (approximately $35,821.39)
(c) 1996 Ford F250 Van (#2526) (amount included in item 2(b) above)
(d) 1996 Ford F250 Van (#4737) (amount included in item 2(b) above)
25
<PAGE> 26
SCHEDULE 4
CLOSING PAY-OFF INFORMATION
OTHER THAN WITH RESPECT TO ASSUMED LIABILITIES
Security Interest Holder Pay-Off Amount
See Attached Spreadsheet.
26
<PAGE> 27
DISCLOSURE SCHEDULE TO ASSET PURCHASE AGREEMENT
[the Seller and the Seller Shareholder Parties need to complete and provide
information required by Article 3, as well as set forth any other exceptions to
the representations and warranties of the Seller and the Seller Shareholder
Parties] [below is list of Sections in Article 3 which require certain
information] [other Sections may be required]
Section 3.4 [Seller Shares]
Section 3.4 [Subsidiaries]
Section 3.11 [Tax Returns]
Section 3.12(i) [Owned Real Property]
Section 3.12(ii) [Leased Real Property]
Section 3.14 [Contracts/Agreements]
Section 3.16 [Insurance]
Section 3.17 [Litigation]
Section 3.18 [Service Warranty]
Section 3.20 [Employees]
Section 3.21 [Employee Benefits]
Section 3.23(v) [Disposal Sites]
Section 3.25 [Accredited Investor Qualifications]
Section 3.26 [Nonassignable Accounts]
Section 3.27 [Accounts]
Section 3.29 [Permits]
27
<PAGE> 1
ASSET PURCHASE AGREEMENT
THIS ASSET PURCHASE AGREEMENT (this "AGREEMENT") is made and entered
into, effective as of March 6, 1998 (the "CLOSING DATE"), between and among
SanTi Group of Florida, Inc., a Georgia corporation (the "BUYER"); Grease-Tec,
Inc., a Florida corporation (the "SELLER"); and William D. Seagraves, Sr., a
Florida resident ("SELLER SHAREHOLDER"), and Angelina P. Seagraves, a Florida
resident ("A. SEAGRAVES") (the Seller Shareholder and A. Seagraves sometimes
collectively referred to herein as the "SELLER SHAREHOLDER PARTIES" and
sometimes individually referred to herein as a "SELLER SHAREHOLDER PARTY") (the
Buyer, the Seller and the Seller Shareholder Parties are sometimes referred to
collectively herein as the "PARTIES" and sometimes referred to individually
herein as a "PARTY").
WHEREAS, the Seller owns certain contract rights, customer accounts,
trucks, containers and other assets and is engaged in the non-hazardous liquid
waste collection and disposal business in the Orange County, Florida area,
including, but not limited to, under the name "Grease-Tec, Inc." (the
"BUSINESS"); and
WHEREAS, this Agreement contemplates a transaction in which the Buyer
will purchase all of the assets of the Seller used in the Business and assume
certain of the liabilities of the Seller in return for cash.
NOW, THEREFORE, in consideration of the premises and the mutual
promises herein made, the Parties agree as follows.
ARTICLE 1. KEY DEFINITIONS
"ACCOUNTS" means (i) all customer accounts, names, lists, purchase
orders, service agreements and contracts (including implied or quantum meruit
contractual rights) or other rights of the Seller to provide liquid waste
services to customers of the Seller, and all rights to and in connection with
any activities commonly associated with such services, customer service
agreements, and contract rights (including implied or quantum meruit contractual
rights) with customers, and (ii) all files, correspondence, records (including
billing and service records for the preceding twelve (12) months) and related
proprietary information and material and other intellectual property which is
necessary, helpful or related to providing such services described above;
excluding, however, (x) all customer accounts, rights or contracts which deal in
hazardous chemical toxic or low-level radioactive waste or any Hazardous
Materials which the Buyer determines it does not wish to purchase, and (y) all
small business set aside contracts which the Buyer determines it does not wish
to purchase. All of the customer accounts, contracts and other rights which are
not being purchased, including those accounts described in items (x) and (y) of
this definition, shall be set forth on Schedule 1 and are hereinafter referred
to collectively as the "EXCLUDED ACCOUNTS".
"ACQUIRED ASSETS" means all right, title and interest in and to all of
the assets of the Seller used or useful in the Business, and shall include, but
not be limited to, all of the Seller's: (a) Accounts, (b) leaseholds and
subleaseholds in real property, improvements, fixtures, and fittings thereon,
and easements, rights-of-way, and other appurtenants thereto (such as
appurtenant rights in and to public streets), (c) tangible personal property
(such as repair parts, machinery, equipment, inventories of raw materials and
supplies, manufactured and purchased parts, goods in process and finished goods,
furniture, certain automobiles, trucks, tractors, trailers, tankers, tools,
pumps, stabilizers, jigs, and dies), (d) intellectual property (including, but
not limited to, the name "Grease-Tec, Inc."), goodwill associated therewith,
licenses and sublicenses granted and obtained with respect thereto, and rights
thereunder, remedies against infringements thereof, and rights to protection of
interests therein under the laws of all applicable jurisdictions, (e) leases,
subleases, and rights thereunder, (f) agreements (such as equipment rental
agreements and service agreements), contracts, customer agreements, disposal
agreements, service
<PAGE> 2
agreements, indentures, mortgages, instruments, Security Interests, guaranties,
other similar arrangements, and rights thereunder, (g) notes receivable and
other receivables, other than accounts receivable, (h) securities (including,
but not limited to, the capital stock of its Subsidiaries), (i) claims,
deposits, prepayments, refunds, causes of action, choses in action, rights of
recovery, rights of set off, and rights of recoupment (including any such item
relating to the payment of Taxes), (j) franchises, approvals, permits (including
but not limited to disposal permits), licenses (including but not limited to
radio transmitter licenses), orders, registrations, certificates, variances, and
similar rights obtained from governments and governmental agencies,
servicemarks, trademarks, logos, and (k) telephone numbers, yellow page
advertising, books, records (excluding bank accounts), ledgers, files,
documents, correspondence, lists, plats, architectural plans, drawings and
specifications, creative materials, advertising and promotional materials,
operational, billing and payable information, studies, reports, and other
printed or written materials, computer hardware and software; provided, however,
that the Acquired Assets shall not include those assets of the Seller set forth
on Schedule 2 (collectively the "EXCLUDED ASSETS").
"EMPLOYEE BENEFIT PLAN" means any (i) nonqualified deferred
compensation or retirement plan or arrangement, (ii) qualified defined
contribution retirement plan or arrangement which is an Employee Pension Benefit
Plan, (iii) qualified defined benefit retirement plan or arrangement which is an
Employee Pension Benefit Plan (including any Multiemployer Plan), or (iv)
Employee Welfare Benefit Plan or material fringe benefit or other retirement,
bonus, or incentive plan or program.
"ENVIRONMENTAL, HEALTH, AND SAFETY REQUIREMENTS" shall mean all
federal, state, local and foreign statutes, regulations, ordinances and other
provisions having the force or effect of law, all judicial and administrative
orders and determinations, all contractual obligations and all common law
concerning public health and safety, worker health and safety, and pollution or
protection of the environment, each as amended and as now or hereafter in
effect.
"HAZARDOUS MATERIALS" means any substance that has been designated by
any governmental authority whose requirements are applicable to any of the
Seller and its Subsidiaries to be radioactive, toxic, hazardous, or otherwise
pose potential danger to health or the environment, including, but not limited
to, volatile organic compounds and all substances listed pursuant to the federal
Comprehensive Environmental Response, Compensation and Liability Act, the
federal Resource Conservation Recovery Act, the federal Clean Air Act, the
federal Water Pollution Control Act, the Toxic Substance Control Act and the
Occupational Safety and Health Act, as such acts are amended to the Closing
Date, and the regulations and publications promulgated to the Closing Date
pursuant to said acts, and "extremely hazardous substances" (as said term is
defined in ss.302 of the Emergency Planning and Community Right-to-Know Act of
1986, as amended).
"KNOWLEDGE" means actual knowledge after reasonable investigation and
includes constructive knowledge.
"LIABILITY" means any liability (whether known or unknown, whether
asserted or unasserted, whether absolute or contingent, whether accrued or
unaccrued, whether liquidated or unliquidated, and whether due or to become
due).
"LITIGATION" means any legal action, administrative or other
proceeding, arbitration, cause of action, claim, complaint, criminal
prosecution, inquiry, hearing, investigation (governmental or otherwise), or
notice (written or oral) by any Person alleging potential liability or
requesting information relating to or affecting the Seller, any of its
Subsidiaries, the Business, the Acquired Assets or the transactions contemplated
by this Agreement.
2
<PAGE> 3
"LOSSES" means any and all direct or indirect demands, claims,
payments, obligations, recoveries, deficiencies, fines, penalties, interests,
assessments, actions, causes of action, suits, losses, diminution in the value
of any of the Acquired Assets, compensatory, punitive, exemplary or
consequential damages (including, without limitation, lost income and profits
and interruptions of business), Liabilities, costs, expenses (including, without
limitation, (i) interest, penalties and reasonable attorneys' fees and expenses,
(ii) attorneys' fees and expenses necessary to enforce rights to indemnification
hereunder, and (iii) consultant's fees and other costs of defense or
investigation); and interest on any amount payable to a third party as a result
of the foregoing, whether accrued, absolute, contingent, known, unknown or
otherwise.
"MONTHLY GROSS REVENUES" means (i) prior to the Closing, the monthly
gross revenues of the Seller from the Business (but only from the following
lines of business: sewer and drain cleaning, small plumbing repair, septic tank
installation and pumping, drainfield installation and repairs, wastewater
treatment plant, and yellow grease collection, processing and resale) determined
on an accrual basis, and (ii) subsequent to the Closing, the monthly gross
revenues of the Buyer from the Business (but only from the following lines of
business: sewer and drain cleaning, small plumbing repair, septic tank
installation and pumping, drainfield installation and repairs, wastewater
treatment plant, and yellow grease collection, processing and resale) determined
on an accrual basis. In each of the situations described in items (i) and (ii)
of this definition, the term Monthly Gross Revenues shall not include (i) any
revenues of the Seller or the Buyer, as the case may be, from the Business with
respect to extraordinary sales which may take place or which may be included in
the Business, (ii) any revenues of the Seller or the Buyer, as the case may be,
from the Business for services not actually rendered, or (iii) any revenues of
the Seller or the Buyer, as the case may be, from the Excluded Accounts.
"ORDINARY COURSE OF BUSINESS" means the ordinary course of business
consistent with past custom and practice (including with respect to quantity and
frequency).
"PERSON" means an individual, a partnership, a corporation, an
association, a joint stock company, a trust, a joint venture, an unincorporated
organization, or a governmental entity (or any department, agency, or political
subdivision thereof).
"SECURITY INTEREST" means any mortgage, pledge, lien, encumbrance,
charge, or other security interest, other than (i) mechanic's, materialmen's,
and similar liens, (ii) liens for Taxes not yet due and payable or for Taxes
that the taxpayer is contesting in good faith through appropriate proceedings,
(iii) purchase money liens and liens securing rental payments under capital
lease arrangements, and (iv) other liens arising in the Ordinary Course of
Business and not incurred in connection with the borrowing of money.
"SUBSIDIARY" means any corporation with respect to which a specified
Person (or a Subsidiary thereof) owns a majority of the common stock or has the
power to vote or direct the voting of sufficient securities to elect a majority
of the directors.
"TAX" means any federal, state, local, or foreign income, gross
receipts, license, payroll, employment, excise, severance, stamp, documentary,
occupation, premium, windfall profits, environmental (including taxes under
ss.59A of the Internal Revenue Code of 1986, as amended (the "CODE")), customs
duties, capital stock, franchise, profits, withholding, social security (or
similar), unemployment, disability, real property, personal property, sales,
use, transfer, registration, value added, alternative or add-on minimum,
estimated, or other tax of any kind whatsoever, including any interest, penalty,
or addition thereto, whether disputed or not.
"TAX RETURN" means any return, declaration, report, claim for refund,
or information return or statement relating to Taxes, including any schedule or
attachment thereto, and including any amendment
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thereof.
ARTICLE 2. BASIC TRANSACTIONS
2.1 PURCHASE AND SALE OF ASSETS. On and subject to the terms and
conditions of this Agreement, and effective as of 12:01 a.m. on the Closing
Date, the Buyer hereby purchases from the Seller, and the Seller hereby sells,
transfers, conveys, and delivers to the Buyer, all of the Acquired Assets, for
the consideration specified below in this Article 2, free and clear of any and
all Security Interests, other than the Assumed Liabilities.
2.2 ASSUMPTION OF LIABILITIES. On and subject to the terms and
conditions of this Agreement, and effective as of the Closing, the Buyer hereby
assumes and becomes responsible for all of the liabilities of the Seller set
forth on Schedule 3 (collectively the "Assumed Liabilities"). Except for the
Assumed Liabilities, nothing in this Agreement or any other document entered
into on the Closing Date shall in any way obligate the Buyer for any
Liabilities, obligations or charges of the Seller, any of its Subsidiaries, or
any of the Seller Shareholder Parties, including, but without limitation, any
Liabilities attributable to Environmental, Health and Safety Requirements, or
Liabilities or charges for Taxes or recording fees arising out of the sale or
transfer of the Acquired Assets. It is specifically understood and agreed by the
Parties that the Buyer does not assume any Liabilities, obligations or charges
of the Seller, any of its Subsidiaries, or the Seller Shareholder Parties except
for the Assumed Liabilities.
2.3 PURCHASE PRICE. The Buyer agrees to pay, issue and deliver to the
Seller the following (collectively, the "PURCHASE PRICE"): (i) cash in the
amount of $400,000, payable by wire transfer or delivery of other immediately
available funds, and (ii) documentation effecting the assumption of the Assumed
Liabilities. The Buyer is contemporaneously at the Closing tendering to the
Seller (i) all of the cash portion of the Purchase Price, less the sum of the
amount(s) set forth on Schedule 4 which is required to be paid to the third
parties set forth on Schedule 4 at the Closing in order to remove those Security
Interests set forth on Schedule 4 which encumber certain of the Acquired Assets
immediately prior to the Closing, and (ii) documentation effecting the
assumption of the Assumed Liabilities.
2.4 THE CLOSING. The closing of the transactions contemplated by this
Agreement (the "CLOSING") is contemporaneously taking place at the offices of
David B. McEwen, P.A., 501 First Avenue North, #700, St. Petersburg, Florida
33701, commencing at 9:00 a.m. local time on the Closing Date.
2.5 ALLOCATION. The Parties agree to allocate the Purchase Price (and
all other capitalizable costs) among the Acquired Assets for all purposes
(including financial accounting and tax purposes) consistent with the Code and
in accordance with the allocation schedule to be agreed upon by the Parties.
2.6 USE OF NAME. Following the Closing Date, the Seller shall not use
or give permission to any other Party to use the name "Grease-Tec, Inc." or any
substantially similar name in connection with the operation of a waste
collection and disposal business.
2.7 CONFIDENTIALITY. The Seller and each Seller Shareholder Party agree
that for a period of five (5) years after the Closing Date, none of them nor any
other person connected with any of them shall at any time divulge, and each of
them shall cause their respective agents, employees and "AFFILIATES" (as said
term is defined in Rule 12b-2 of the regulations promulgated under the
Securities Exchange Act of 1934, as amended) not to divulge, the existence and
terms of the negotiations resulting in this Agreement, the terms and conditions
of this Agreement and the financing arrangements of the Buyer and its
Affiliates, except as required by applicable federal, state or local statutes
pursuant to subpoena or court order.
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2.8 TELEPHONE REFERRALS. From and after the Closing Date, the Seller
shall refer, and cause its agents to refer, all telephone calls to it or them
for liquid waste collection and disposal to the Buyer.
ARTICLE 3. REPRESENTATIONS AND WARRANTIES
OF THE SELLER AND THE SELLER SHAREHOLDER PARTIES
The Seller and each of the Seller Shareholder Parties jointly and
severally represent and warrant to the Buyer that the statements contained in
this Article 3 are correct and complete as of the Closing Date, except as set
forth in the disclosure schedule accompanying this Agreement and initialed by
the Parties (the "DISCLOSURE SCHEDULE"). The Disclosure Schedule will be
arranged in sections corresponding to the lettered and numbered sections
contained in this Article 3.
3.1 ORGANIZATION OF THE SELLER AND CERTAIN SELLER SHAREHOLDER PARTIES.
The Seller is a corporation duly organized, validly existing, and in good
standing under the laws of the jurisdiction of its incorporation. The Seller is
duly authorized to conduct business and the Business, and is in good standing,
under the laws of each jurisdiction where such qualification is required. If any
Seller Shareholder Party is an entity, such Seller Shareholder Party is duly
organized, validly existing, and in good standing under the laws of the
jurisdiction of its incorporation or other formation and organization.
3.2 AUTHORIZATIONS. The Seller has full power and authority (including
full corporate power and authority) to execute and deliver this Agreement and to
perform its obligations hereunder. Without limiting the generality of the
foregoing, the board of directors of the Seller and the Seller Shareholder have
duly authorized the execution, delivery, and performance of this Agreement by
the Seller. Each of the Seller Shareholder Parties has full power and authority
(including, if any Seller Shareholder Party is a corporation or other entity,
full corporate or other entity power and authority) to execute and deliver this
Agreement and to perform such Seller Shareholder Party's obligations hereunder.
This Agreement constitutes the valid and legally binding obligation of the
Seller and each Seller Shareholder Party, enforceable in accordance with its
terms and conditions.
3.3 NONCONTRAVENTION. Neither the execution and the delivery of this
Agreement by the Seller and the Seller Shareholder Parties, nor the consummation
by the Seller and the Seller Shareholder Parties of the transactions
contemplated hereby, will (i) violate any constitution, statute, regulation,
rule, injunction, judgment, order, decree, stipulation, ruling, charge, or other
restriction of any government, governmental agency, or court to which the
Seller, any of its Subsidiaries or any Seller Shareholder Party is subject (or,
if any Seller Shareholder Party is a corporation or other entity, any provision
of its charter or bylaws or other governing documents) or any provision of the
charter or bylaws of any of the Seller or any of its Subsidiaries, or (ii)
conflict with, result in a breach of, constitute a default under, result in the
acceleration of, create in any Person the right to accelerate, terminate,
modify, or cancel, or require any notice under any agreement, contract, lease,
license, permit, instrument, or other arrangement to which the Seller, any of
its Subsidiaries, or any Seller Shareholder Party is a party or by which the
Seller, any of its Subsidiaries, or any Seller Shareholder Party is bound or to
which any assets of the Seller, any of its Subsidiaries, or any Seller
Shareholder Party is subject (or result in the imposition of any Security
Interest upon any assets of the Seller, any of its Subsidiaries, or any Seller
Shareholder Party). Neither the Seller nor any of its Subsidiaries needs to give
any notice to, make any filing with, or obtain any authorization, consent, or
approval of any government or governmental agency in order for the Parties to
consummate the transactions contemplated by this Agreement.
3.4 SELLER SHARES; BROKERS' FEES. The Seller Shareholder holds of
record all of the shares of issued and outstanding capital stock of the Seller,
which is such number of shares set forth next to the Seller Shareholder's name
in Section 3.4 of the Disclosure Schedule. Neither the Seller nor any of its
Subsidiaries has any Liability or obligation to pay any fees or commissions to
any broker, finder, or agent
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with respect to the transactions contemplated by this Agreement for which the
Buyer could become liable or obligated.
3.5 TITLE TO ASSETS. The Seller and its Subsidiaries have good and
marketable title to, or a valid leasehold interest in, the properties and assets
used by any of them, located on any of their respective premises, or shown on
the balance sheet contained within the Most Recent Financial Statements (the
"MOST RECENT BALANCE SHEET") or acquired after the date thereof, free and clear
of all Security Interests, other than the Assumed Liabilities, except for
properties and assets disposed of in the Ordinary Course of Business since the
date of the Most Recent Balance Sheet. Without limiting the generality of the
foregoing, the Seller has good and marketable title to all of the Acquired
Assets, free and clear of any Security Interest or restriction on transfer,
other than the Assumed Liabilities.
3.6 SUBSIDIARIES. Each Subsidiary of the Seller is listed in Section
3.6 of the Disclosure Schedule, and is a corporation duly organized, validly
existing, and in good standing under the laws of the jurisdiction of its
incorporation. Each Subsidiary of the Seller is duly authorized to conduct
business and is in good standing under the laws of each jurisdiction where such
qualification is required. Each Subsidiary of the Seller has full power and
authority (including full corporate power and authority) and all licenses,
permits, and authorizations necessary to carry on the Business and the other
businesses in which it is engaged and in which it presently proposes to engage
and to own and use the properties owned and used by it. All of the issued and
outstanding shares of capital stock of each Subsidiary of the Seller have been
duly authorized and are validly issued, fully paid, and nonassessable. The
Seller holds of record and owns beneficially all of the outstanding shares of
each Subsidiary of the Seller, free and clear of any restrictions on transfer
(other than restrictions under the Securities Act of 1933, as amended, and state
securities laws), Taxes, Security Interests, options, warrants, purchase rights,
contracts, commitments, equities, claims, and demands. There are no outstanding
or authorized options, warrants, purchase rights, subscription rights,
conversion rights, exchange rights, or other contracts or commitments that could
require any of the Seller and its Subsidiaries to sell, transfer, or otherwise
dispose of any capital stock of any of its Subsidiaries or that could require
any Subsidiary of the Seller to issue, sell, or otherwise cause to become
outstanding any of its own capital stock (other than this Agreement). There are
no voting trusts, proxies, or other agreements or understandings with respect to
the voting of any capital stock of any Subsidiary of the Seller. The minute
books (containing the records of meetings of the stockholders, the board of
directors, and any committees of the board of directors), the stock certificate
books, and the stock record books of each Subsidiary of the Seller are correct
and complete. None of the Subsidiaries of the Seller is in default under or in
violation of any provision of its charter or bylaws. None of the Seller and its
Subsidiaries controls directly or indirectly or has any direct or indirect
equity participation in any corporation, partnership, trust, or other business
association which is not a Subsidiary of the Seller.
3.7 FINANCIAL STATEMENTS. Attached hereto as Exhibit A are the
following financial statements (collectively, the "FINANCIAL STATEMENTS"): (i)
unaudited consolidated and unaudited consolidating balance sheets and statements
of income, changes in stockholders' equity, and cash flow as of and for the
fiscal years ended December 31, 1994, December 31, 1995, December 31, 1996, and
December 31, 1997 (the "MOST RECENT FISCAL YEAR END") for the Seller and its
Subsidiaries; and (ii) unaudited consolidated and consolidating balance sheets
and statements of income, changes in stockholders' equity, and cash flow (the
"MOST RECENT FINANCIAL STATEMENTS") as of and for the two (2) month period ended
February 28, 1998 (the "MOST RECENT FISCAL MONTH END") for the Seller and its
Subsidiaries. The Financial Statements (including the notes thereto) present
fairly the financial condition of the Seller and its Subsidiaries as of such
dates and the results of operations of the Seller and its Subsidiaries for such
periods, are correct and complete, and are consistent with the books and records
of the Seller and its Subsidiaries (which books and records are correct and
complete). The net book value of the Acquired Assets is not less than
$_____________________.
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3.8 EVENTS SUBSEQUENT TO MOST RECENT FISCAL YEAR END. Since the Most
Recent Fiscal Year End, there has not been any adverse change in the Business or
the business, financial condition, operations, results of operations, or future
prospects of the Seller or any of its Subsidiaries. Without limiting the
generality of the foregoing, since that date: (i) neither the Seller nor any of
its Subsidiaries has sold, leased, transferred, pledged or assigned any of its
assets, tangible or intangible, other than for a fair consideration in the
Ordinary Course of Business; (ii) neither the Seller nor any of its Subsidiaries
has entered into (or issued), accelerated, terminated, modified, or canceled any
agreement, contract, lease, note, bond, debt security or license either
involving more than $5,000 or outside the Ordinary Course of Business; (iii)
neither the Seller nor its Subsidiaries has made any capital expenditure (or
series of related capital expenditures) either involving more than $5,000 or
outside the Ordinary Course of Business; (iv) neither the Seller nor any of its
Subsidiaries has delayed or postponed the payment of accounts payable and other
Liabilities outside the Ordinary Course of Business; (v) neither the Seller nor
any of its Subsidiaries has canceled, compromised, waived, or released any right
or claim (or series of related rights and claims) either involving more than
$5,000 or outside the Ordinary Course of Business; (vi) neither the Seller nor
any of its Subsidiaries has issued, sold, disposed of or granted any rights to
purchase any of its capital stock, or declared, set aside, or paid any dividend
or made any distribution with respect to its capital stock (whether in cash or
in kind), or redeemed, purchased, or otherwise acquired any of its capital
stock; (vii) neither the Seller nor any of its Subsidiaries has experienced any
damage, destruction, or loss (whether or not covered by insurance) to its
property; (viii) neither the Seller nor any of its Subsidiaries has made any
loan to, or entered into any other transaction with, any of its directors,
officers, or employees outside the Ordinary Course of Business; (ix) neither the
Seller nor any of its Subsidiaries has (a) entered into any employment contract
or collective bargaining agreement, written or oral, or modified the terms of
any existing such contract or agreement; (b) granted any increase in the base
compensation of any of its directors, officers, or employees (or made any other
change in employment terms for such persons) outside the Ordinary Course of
Business; or (c) adopted, amended, modified, or terminated any Employee Benefit
Plan; (x) there has not been any other occurrence, event, incident, action,
failure to act, or transaction outside the Ordinary Course of Business involving
the Seller or any of its Subsidiaries; and (xi) neither the Seller nor any of
its Subsidiaries has committed to any of the foregoing.
3.9 UNDISCLOSED LIABILITIES. Neither the Seller nor any of its
Subsidiaries has any Liability (and there is no basis for any present or future
action, suit, proceeding, hearing, investigation, charge, complaint, claim, or
demand against any of them giving rise to any Liability), except for (i)
Liabilities set forth on the face of the Most Recent Balance Sheet (rather than
in any notes thereto) and (ii) Liabilities which have arisen after the Most
Recent Fiscal Month End in the Ordinary Course of Business (none of which
results from, arises out of, relates to, is in the nature of, or was caused by
any breach of contract, breach of warranty, tort, infringement, or violation of
law).
3.10 LEGAL COMPLIANCE. Each of the Seller, its Subsidiaries, and its
predecessors and Affiliates has complied with all applicable laws (including
rules, statutes, regulations, codes, permits, plans, injunctions, judgments,
orders, decrees, rulings, and charges thereunder) of federal, state, local, and
foreign governments (and all agencies thereof), and no action, suit, proceeding,
hearing, investigation, charge, complaint, claim, demand, or notice has been
filed or commenced against any of them alleging any failure so to comply. None
of the Seller Shareholder Parties and the directors, officers and management
employees of the Seller has any Knowledge of any basis (existing prior to the
Closing) which could result in (i) any failure of the Buyer (based upon its
acquisition of the Business) to comply after the Closing with any and all
applicable laws (including rules, statutes, regulations, codes, permits, plans,
injunctions, judgments, orders, decrees, rulings, and charges thereunder) of
federal, state, local, and foreign governments (and all agencies thereof), or
any action, suit, proceeding, hearing, investigation, charge, complaint, claim,
demand or notice being filed or commenced after the Closing against the Buyer or
any of its Affiliates alleging any failure to so comply.
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3.11 TAX MATTERS. Each of the Seller and its Subsidiaries has filed all
Tax Returns that it was required to file. All such Tax Returns were correct and
complete in all respects. All Taxes owed by any of the Seller and its
Subsidiaries (whether or not shown on any Tax Return) have been paid. No claim
has ever been made by an authority in a jurisdiction where any of the Seller and
its Subsidiaries does not file Tax Returns that it is or may be subject to
taxation by that jurisdiction. Each of the Seller and its Subsidiaries has
withheld and paid all Taxes required to have been withheld and paid in
connection with amounts paid or owing to any employee, independent contractor,
creditor, stockholder or other third party. No Seller Shareholder Party or
director or officer (or employee responsible for Tax matters) of any of the
Seller and its Subsidiaries expects any authority to assess any additional Taxes
for any period for which Tax Returns have been filed. There is no dispute or
claim concerning any Tax Liability of any of the Seller and its Subsidiaries
either (i) claimed or raised by any authority in writing or (ii) as to which any
of the Seller Shareholder Parties and the directors and officers (and employees
responsible for Tax matters) of any of the Seller and its Subsidiaries has
Knowledge based upon personal contact with any agent of such authority. Section
3.11 of the Disclosure Schedule lists all federal, state, local, and foreign
income Tax Returns filed with respect to any of the Seller and its Subsidiaries
for taxable periods ended on or after December 31, 1995, indicates those Tax
Returns that have been audited, and indicates those Tax Returns that currently
are the subject of audit. The Seller has delivered to the Buyer correct and
complete copies of all federal income Tax Returns, examination reports, and
statements of deficiencies assessed against or agreed to by any of the Seller
and its Subsidiaries since December 31, 1995. The unpaid Taxes of the Seller and
its Subsidiaries (i) did not, as of the Most Recent Fiscal Month End, exceed the
reserve for Tax Liability (rather than any reserve for deferred Taxes
established to reflect timing differences between book and Tax income) set forth
on the face of the Most Recent Balance Sheet (rather than in any notes thereto)
and (ii) do not exceed that reserve as adjusted for the passage of time through
the Closing Date in accordance with the past custom and practice of the Seller
and its Subsidiaries in filing their Tax Returns.
3.12 REAL PROPERTY.
(i) Section 3.12(i) of the Disclosure Schedule lists and
describes briefly all real property that any of the Seller and its Subsidiaries
owns. With respect to each such parcel of owned real property required to be
listed and described on Section 3.12(i) of the Disclosure Schedule: (A) the
identified owner has good and marketable title to the parcel of real property,
free and clear of any Security Interest, easement, covenant, or other
restriction, except for installments of special assessments not yet delinquent
and recorded easements, covenants, and other restrictions which do not impair
the current use, occupancy, or value, or the marketability of title, of the
property subject thereto; (B) there are no pending or threatened condemnation
proceedings, lawsuits, or administrative actions relating to the property or
other matters affecting adversely the current use, occupancy, or value thereof;
(C) the legal description for the parcel contained in the deed thereof describes
such parcel fully and adequately, the buildings and improvements are located
within the boundary lines of the described parcels of land, are not in violation
of applicable setback requirements, zoning laws, and ordinances (and none of the
properties or buildings or improvements thereon are subject to "permitted
non-conforming use" or "permitted non-conforming structure" classifications),
and do not encroach on any easement which may burden the land, the land does not
serve any adjoining property for any purpose inconsistent with the use of the
land, and the property is not located within any flood plain or subject to any
similar type restriction for which any permits or licenses necessary to the use
thereof have not been obtained; (D) all facilities have received all approvals
of governmental authorities (including licenses and permits) required in
connection with the ownership or operation thereof and have been operated and
maintained in accordance with applicable laws, rules, and regulations; (E) there
are no leases, subleases, licenses, concessions, or other agreements, written or
oral, granting to any Person or Persons the right of use or occupancy of any
portion of the parcel of real property; (F) there are no outstanding options or
rights of first refusal to purchase the parcel of real property, or any portion
thereof or interest therein; (G) there are no Persons (other than the Seller and
its Subsidiaries) in possession of the parcel of real property, other than
tenants under any leases disclosed in Section 3.2.12(i)
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of the Disclosure Schedule who are in possession of space to which they are
entitled; (H) all facilities located on the parcel of real property are supplied
with utilities and other services necessary for the operation of such
facilities, including gas, electricity, water, telephone, sanitary sewer, and
storm sewer, all of which services are adequate in accordance with all
applicable laws, ordinances, rules, and regulations and are provided via public
roads or via permanent, irrevocable, appurtenant easements benefitting the
parcel of real property; (I) each parcel of real property abuts on and has
direct vehicular access to a public road, or has access to a public road via a
permanent, irrevocable, appurtenant easement benefitting the parcel of real
property, and access to the property is provided by paved public right-of-way
with adequate curb cuts available; (J) no Hazardous Material is present in, on
or under such real property at any time prior to the Closing Date, including any
land and the improvements, ground water and surface water thereof, except in
accordance with applicable laws and regulations; and (K) there are and have been
no storage tanks located on or under such property.
(ii) Section 3.12(ii) of the Disclosure Schedule lists and
describes briefly all real property leased or subleased to or not owned but
otherwise used by any of the Seller and its Subsidiaries. The Seller has
delivered to the Buyer correct and complete copies of the leases and subleases
(as amended to date) required to be listed in Section 3.12(ii) of the Disclosure
Schedule. With respect to each lease and sublease required to be listed in
Section 3.12(ii) of the Disclosure Schedule: (A) the lease or sublease is legal,
valid, binding, enforceable, and in full force and effect; (B) the lease or
sublease will continue to be legal, valid, binding, enforceable, and in full
force and effect on identical terms following the consummation of the
transactions contemplated hereby; (C) no party to the lease or sublease is in
breach or default, and no event has occurred which, with notice or lapse of
time, would constitute a breach or default or permit termination, modification,
or acceleration thereunder; (D) there are no disputes, oral agreements, or
forbearance programs in effect as to the lease or sublease and no party to the
lease or sublease has repudiated any provision thereof; (E) with respect to each
sublease, the representations and warranties set forth in subsections (A)
through (D) above are true and correct with respect to the underlying lease; (F)
the Seller has not assigned, transferred, conveyed, mortgaged, deeded in trust,
or encumbered any interest in the leasehold or subleasehold; (G) all facilities
leased or subleased thereunder have received all approvals of governmental
authorities (including licenses and permits) required in connection with the
operation thereof and have been operated and maintained in accordance with
applicable laws, rules, and regulations; (H) all facilities leased or subleased
thereunder are supplied with utilities and other services necessary for the
operation of said facilities; (I) no Hazardous Material is present in, on or
under such real property at any time prior to the Closing Date, including any
land and the improvements, ground water and surface water thereof, except in
accordance with applicable laws and regulations; and (J) there are and have been
no storage tanks located on or under such property. With respect to each such
property used by but not owned by, leased to or subleased to any of the Seller
and its Subsidiaries, Section 3.12(ii) of the Disclosure Schedule states the
nature and terms of the relationship pursuant to which such property is used.
3.13 TANGIBLE ASSETS. The Seller and its Subsidiaries own or lease all
buildings, machinery, equipment, other tangible assets, permits, licenses and
agreements necessary for the conduct of the Business as presently conducted and
as presently proposed to be conducted. Except as set forth on Section 3.13 of
the Disclosure Schedule, each such tangible asset is in good operating condition
and repair (subject to normal wear and tear). There are no defects in the
Acquired Assets which affect the plumbing, electrical, sewer, ventilating or air
conditioning systems thereof.
3.14 CONTRACTS. Section 3.14 of the Disclosure Schedule lists all
contracts and other agreements to which any of the Seller and its Subsidiaries
is a party. The Seller has delivered to the Buyer a correct and complete copy of
each written agreement (as amended to date) required to be listed in Section
3.14 of the Disclosure Schedule. With respect to each agreement required to be
listed in Section 3.14 of the Disclosure Schedule: (i) the agreement is legal,
valid, binding, enforceable, and in full force and effect; (ii) the agreement
will continue to be legal, valid, binding, enforceable, and in full force and
effect on identical
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terms following the consummation of the transactions contemplated hereby; (iii)
no party thereto is in breach or default, and no event has occurred which with
notice or lapse of time would constitute a breach or default, or permit
termination, modification, or acceleration, under the agreement; and (iv) no
party thereto has repudiated any provision of the agreement.
3.15 POWERS OF ATTORNEY. There are no outstanding powers of attorney
executed by or on behalf of any of the Seller and its Subsidiaries.
3.16 INSURANCE. Section 3.16 of the Disclosure Schedule lists each
insurance policy (including policies providing property, casualty, liability,
and workers' compensation coverage and bond and surety arrangements) to which
any of the Seller and its Subsidiaries is a party, a named insured, or otherwise
the beneficiary of coverage. With respect to each insurance policy required to
be listed in Section 3.16 of the Disclosure Schedule: (i) the policy is legal,
valid, binding, enforceable, and in full force and effect; (ii) the policy will
continue to be legal, valid, binding, enforceable, and in full force and effect
on identical terms following the consummation of the transactions contemplated
hereby; (iii) neither the Seller and its Subsidiaries nor any other party to the
policy is in breach or default (including with respect to the payment of
premiums or the giving of notices), and no event has occurred which, with notice
or the lapse of time, would constitute such a breach or default, or permit
termination, modification, or acceleration, under the policy; and (iv) no party
to the policy has repudiated any provision thereof. Each of the Seller and its
Subsidiaries has been covered during the past 3 years by insurance in scope and
amount customary and reasonable for the Business and the other businesses in
which it has engaged during the aforementioned period. Section 3.16 of the
Disclosure Schedule describes any self-insurance arrangements affecting any of
the Seller and its Subsidiaries, as well as any pending claims with respect to
insurance coverage owned by the Seller or its Subsidiaries, including amounts
held in reserve by the Seller or its Subsidiaries in connection with any such
claim.
3.17 LITIGATION. Section 3.17 of the Disclosure Schedule sets forth
each instance in which any of the Seller and its Subsidiaries (i) is subject to
any outstanding injunction, judgment, order, decree, ruling, or charge or (ii)
is a party or is threatened to be made a party to any action, suit, proceeding,
hearing, or investigation of, in, or before any court or quasi-judicial or
administrative agency of any federal, state, local, or foreign jurisdiction or
before any arbitrator. None of the actions, suits, proceedings, hearings, and
investigations required to be set forth in Section 3.17 of the Disclosure
Schedule could result in any adverse change in the Business, the other business,
financial condition, operations, results of operations, or future prospects of
any of the Seller and its Subsidiaries. None of the Seller Shareholder Parties
and the directors and officers (and employees with responsibility for litigation
matters) of the Seller and its Subsidiaries has any reason to believe that any
such action, suit, proceeding, hearing, or investigation may be brought or
threatened against any of the Seller and its Subsidiaries.
3.18 SERVICE WARRANTY AND LIABILITY. Each service provided or delivered
by any of the Seller and its Subsidiaries has been in conformity with all
applicable contractual commitments and all express and implied warranties, and
neither the Seller nor any of its Subsidiaries has any Liability (and there is
no basis for any present or future action, suit, proceeding, hearing,
investigation, charge, complaint, claim, or demand against any of the Seller and
its Subsidiaries giving rise to any Liability) (i) for damages in connection
therewith, or (ii) arising out of any injury to individuals or property as a
result of the use of any service provided or delivered by any of the Seller and
its Subsidiaries. No service provided or delivered by any of the Seller and its
Subsidiaries is subject to any guaranty, warranty, or other indemnity beyond the
applicable standard terms and conditions of sale. Section 3.18 of the Disclosure
Schedule includes copies of the standard terms and conditions of sale for each
of the Seller and its Subsidiaries (containing applicable guaranty, warranty,
and indemnity provisions).
3.19 [THIS SECTION INTENTIONALLY LEFT BLANK]
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3.20 EMPLOYEES AND INDEPENDENT CONTRACTORS. Section 3.20 of the
Disclosure Schedule contains a complete list of all employees and independent
contractors of each of the Seller and its Subsidiaries engaged in the conduct of
the Business, and for each employee or independent contractor required to be
listed on Section 3.20 of the Disclosure Schedule, their address, social
security number, current annual base salary or hourly rate and years of
employment or engagement with any of the Seller and its Subsidiaries. No
executive, key employee, group of employees, key independent contractor or group
of independent contractors has any plans to terminate employment or engagement
with any of the Seller and its Subsidiaries or with the Buyer if the Buyer has
made known to the Seller its intention to employ or engage such person, persons,
entity or entities. Neither the Seller nor any of its Subsidiaries is a party to
or bound by any collective bargaining agreement, or experienced any strikes,
grievances, claims of unfair labor practices, or other collective bargaining
disputes. Neither the Seller nor any of its Subsidiaries has committed any
unfair labor practice or taken an action which would give rise to a claim under
any federal or state law restricting discrimination in employment. None of the
Seller Shareholder Parties and the directors and officers (and employees with
responsibility for employment matters) of the Seller and its Subsidiaries has
any Knowledge of any organizational effort presently being made or threatened by
or on behalf of any labor union with respect to employees of any of the Seller
and its Subsidiaries.
3.21 EMPLOYEE BENEFITS. Section 3.21 of the Disclosure Schedule lists
each Employee Benefit Plan that any of the Seller and its Subsidiaries maintains
or to which any of the Seller and its Subsidiaries contributes or has any
obligation to contribute. Each Employee Benefit Plan (and each related trust,
insurance contract, or fund) required to be listed on Section 3.21 of the
Disclosure Schedule complies in form and in operation in all respects with the
applicable requirements of the Employee Retirement Income Security Act of 1974,
as amended ("ERISA"), the Code and other applicable laws.
3.22 GUARANTIES. Neither the Seller nor any of its Subsidiaries is a
guarantor or otherwise liable or responsible for any Liability or obligation
(including indebtedness) of any other Person.
3.23 ENVIRONMENTAL, HEALTH, AND SAFETY MATTERS.
(i) The Seller, its Subsidiaries, and its predecessors and
Affiliates have complied with all Environmental, Health, and Safety
Requirements, and no action, suit, proceeding, hearing, investigation, charge,
complaint, claim, demand, or notice has been filed or commenced against any of
them alleging any failure so to comply.
(ii) Neither the Seller nor any of its Subsidiaries has any
Liability (and none of their respective predecessors and Affiliates have handled
or disposed of any substance, arranged for the disposal of any substance,
exposed any employee or other individual to any substance or condition, or owned
or operated any property or facility in any manner that could form the basis for
any present or future action, suit, proceeding, hearing, investigation, charge,
complaint, claim, or demand against the Seller, giving rise to any Liability)
for damage to any site, location, or body of water (surface or subsurface), for
any illness of or personal injury to any employee or other individual, or for
any reason under any Environmental, Health and Safety Requirements, except in
compliance with all applicable Environmental, Health and Safety Requirements.
(iii) All properties and equipment used in the Business, the
Seller's Subsidiaries' businesses, and their respective predecessors' and
Affiliates' businesses, have been free of asbestos, PCB's, methylene chloride,
trichloroethylene, 1, 2-trans-dichloroethylene, dioxins, dibenzofurans, and all
Hazardous Materials.
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(iv) Neither the Seller nor any of its Subsidiaries has
transported, stored, treated or disposed, nor allowed or arranged for any third
person to transport, store, treat or dispose of, waste to or at any location
other than a site lawfully permitted to receive such waste for such purposes.
Neither the Seller nor any of its Subsidiaries has transported, stored, treated
or disposed of, nor allowed or arranged for any third person to transport,
store, treat or dispose of, (A) any Hazardous Materials, or (B) any other waste
to or at any location designated for remedial action pursuant to the
Comprehensive Environmental Response, Compensation and Liability Act, as from
time to time amended, or any similar federal or state statute assigning
responsibility for the cost of investigating or remediating releases of
contaminants into the environment.
(v) Section 3.23(v) of the Disclosure Schedule is a complete
and accurate list of (A) locations (identified by name, address, owner/operator,
type of facility and type of waste) to which any of the Seller and its
Subsidiaries has ever transported, or ever caused to be transported, allowed or
arranged for any third party to transport, any type of waste material, generated
by any of the Seller and its Subsidiaries, or customers of any of the Seller and
its Subsidiaries, for storage (other than at a customer's facility), treatment,
burning, recycling or disposal, and (B) storage (other than at a customer's
facility), treatment, burning, recycling or disposal activities which any of the
Seller and its Subsidiaries has undertaken, at any time, at locations then or
presently owned or occupied by any of the Seller and its Subsidiaries (such list
to include property address, nature of the interest of the Seller or its
Subsidiaries in property, nature of the activity conducted at such location,
type and form or waste, estimated volume of waste disposal on or in ground, and
period of time the activity was conducted).
(vi) Neither the Seller nor any of its Subsidiaries has
received any notification (including requests for information directed to any of
the Seller and its Subsidiaries or any Seller Shareholder Party) from any
governmental agency or any other person asserting that any of the Seller and its
Subsidiaries is or may be a "potentially responsible person" or otherwise liable
with respect to a remediation or the payment of response costs at a waste
storage treatment or disposal action facility, pursuant to the provisions of the
Comprehensive Environmental Response, Compensation and Liability Act, as from
time to time amended, or any similar federal or state statute assigning
responsibility for the costs of investigating or remediating releases of
contaminants into the environment.
3.24 CERTAIN BUSINESS RELATIONSHIPS WITH THE SELLER AND ITS AFFILIATES.
None of the Seller Shareholder Parties nor any of their respective Affiliates
has been involved in any business arrangement or relationship with any of the
Seller and its Subsidiaries within the past 12 months which has caused or
resulted in increased gross revenues for the Seller from the Business and which,
if not continued subsequent to the Closing, will cause or result in decreased
revenues for the Buyer from the Business, and none of the Seller Shareholder
Parties nor any of their respective Affiliates owns or leases any asset,
tangible or intangible, which is used in the businesses of any of the Seller and
its Subsidiaries. Neither the Seller, any of its Subsidiaries nor any Seller
Shareholder Party owns or has any interest in a Person (other than the Seller
and its Subsidiaries) conducting a liquid waste management business.
3.25 [THIS SECTION INTENTIONALLY LEFT BLANK]
3.26 OWNERSHIP AND ASSIGNABILITY OF ACCOUNTS. The Seller is the lawful
owner of all of the Accounts, and all such Accounts are free and clear of all
claims, liens, mortgages, pledges, encumbrances and security interests of every
kind, including, but not limited to financing arrangements (including
receivables financing). There are no outstanding rights of any kind to acquire
from either the Seller or the Seller Shareholder Parties, either separately or
jointly, any interest whatsoever, whether current or future, in the Accounts,
held by any Person other than Buyer. Except for those Accounts expressly set
forth in Section 3.26 of the Disclosure Schedule, all Accounts are freely
assignable by the Seller, and such assignment, transfer and delivery thereof to
the Buyer of all of the Accounts will not constitute or result in
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a breach, violation or default of any agreements relating to such Accounts, and
such agreements and Accounts shall remain in full force and effect as if there
had been no assignment, transfer or delivery.
3.27 REVENUE AND MAJOR ACCOUNTS. The average Monthly Gross Revenue of
the Seller for the calendar months of January, 1997 through February, 1998 is at
least $35,000. Section 3.27 of the Disclosure Schedule contains a listing of the
Monthly Gross Revenues of the Seller for the calendar months of January, 1997
through February, 1998. Unless otherwise noted on Section 3.27 of the Disclosure
Schedule, during the 12 calendar month period immediately preceding the Closing
Date, the Seller has not lost any customer that generated more than ten percent
(10%) of the Seller's gross revenues in any of the Seller's past fiscal periods.
3.28 [THIS SECTION INTENTIONALLY LEFT BLANK]
3.29 POSSESSION OF FRANCHISES, LICENSES, ETC. Each of the Seller and
each of its Subsidiaries possesses, free from any burdensome restriction, all
franchises, certificates, licenses, permits, clearances, consents and other
authorizations from governmental political subdivisions or regulatory
authorities that are necessary for (i) the continued ownership, maintenance and
operation of the Business and the other businesses conducted by any of the
Seller and its Subsidiaries, as currently being operated and conducted, (ii) the
continued operation, use and ownership of the Acquired Assets, as currently
being operated and used, and (iii) the servicing of the Accounts, as currently
being serviced (collectively the "PERMITS"). Section 3.29 of the Disclosure
Schedule sets forth all of the Permits and for each Permit, accurately describes
the expiration and/or renewal date thereof. Neither the Seller nor any of its
Subsidiaries is in any way whatsoever in violation of any of the Permits, and
each of the Seller and its Subsidiaries has complied with all applicable
covenants and conditions of each of the Permits. There is no action, proceeding,
permit revocation, permit amendment, writ, injunction, claim or investigation
pending or threatened, concerning or relating to any of the Permits or the
Hazardous Materials activities of any of the Seller and its Subsidiaries,
including, but not limited to, the treatment, storage or disposal of Hazardous
Materials or liquid or solid waste materials which have been handled by the
Seller, any of its Subsidiaries, or any of their respective predecessors or
Affiliates.
3.30 THIRD PARTY RELATIONSHIPS. Each of the Seller and its Subsidiaries
has good working relationships in accordance with past practices with all
suppliers, subcontractors, governmental regulators and other Persons necessary
or appropriate for the normal operation of the Business and the businesses of
the Seller's Subsidiaries. The consummation of the subject transaction will not
result in any injury to or disruption of such relationships, and none of the
Seller Shareholder Parties and the directors and officers of the Seller and its
Subsidiaries has any Knowledge that the Buyer will incur any costs or expenses
in order to continue such relationships as they had been maintained previous to
the Closing.
3.31 [THIS SECTION INTENTIONALLY LEFT BLANK]
3.32 DISCLOSURE. The representations and warranties contained in this
Article 3 do not contain any untrue statement of a material fact or omit to
state any material fact necessary in order to make the statements and
information contained in this Article 3 not misleading.
ARTICLE 4. REPRESENTATIONS AND WARRANTIES OF THE BUYER
The Buyer represents and warrants to the Seller that the statements
contained in this Article 4 are correct and complete as of the Closing Date,
except as set forth in the Disclosure Schedule. The Disclosure Schedule will be
arranged in sections corresponding to the lettered and numbered sections
contained in this Article 4.
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4.1 ORGANIZATION OF THE BUYER. The Buyer is a corporation duly
organized, validly existing, and in good standing under the laws of the
jurisdiction of its incorporation.
4.2 AUTHORIZATION OF TRANSACTION. The Buyer has full power and
authority (including full corporate power and authority) to execute and deliver
this Agreement and to perform its obligations hereunder. This Agreement
constitutes the valid and legally binding obligation of the Buyer, enforceable
in accordance with its terms and conditions, except as enforceability may be
limited by bankruptcy, insolvency, reorganization, moratorium or other laws
affecting creditors' rights generally, or by the exercise of judicial discretion
in accordance with general equitable principles.
4.3 NONCONTRAVENTION. Neither the execution and the delivery of this
Agreement by the Buyer, nor the consummation by the Buyer of the transactions
contemplated hereby, will (i) violate any constitution, statute, regulation,
rule, injunction, judgment, order, decree, ruling, charge, or other restriction
of any government, governmental agency, or court to which the Buyer is subject
or any provision of its charter or bylaws or (ii) conflict with, result in a
breach of, constitute a default under, result in the acceleration of, create in
any Person the right to accelerate, terminate, modify, or cancel, or require any
notice under any agreement, contract, lease, license, permit, instrument, or
other arrangement to which the Buyer is a party or by which it is bound or to
which any of its assets is subject. The Buyer does not need to give any notice
to, make any filing with, or obtain any authorization, consent, or approval of
any government or governmental agency in order for the Parties to consummate the
transactions contemplated by this Agreement.
4.4 BROKERS' FEES. The Buyer has no Liability or obligation to pay any
fees or commissions to any broker, finder, or agent with respect to the
transactions contemplated by this Agreement for which the Seller could become
liable or obligated.
ARTICLE 5. SURVIVAL OF REPRESENTATIONS AND WARRANTIES; INDEMNIFICATION
5.1 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. All representations,
warranties, agreements, covenants and obligations made or undertaken by the
Seller and each Seller Shareholder Party in this Agreement are, whether
specified as such or not, the joint and several representations, warranties,
agreements, covenants and obligations of all of the Seller and the Seller
Shareholder Parties, unless otherwise specifically indicated to the contrary
herein with respect to a particular representation, warranty, agreement,
covenant or obligation; are material, have been relied upon by the Buyer, shall
survive the Closing hereunder, and shall not merge in the performance of any
obligation by any Party; and, as to the representations and warranties, shall
terminate or expire on the fifth (5th) anniversary of the Closing Date, provided
that such representations and warranties shall not terminate or expire, but
shall continue, during the pendency of any suit, action, claim or other
proceeding brought in respect of such representations and warranties prior to
the termination or expiration of such five (5) year period. Notwithstanding the
above, all representations and warranties made by the Seller and each Seller
Shareholder Party in this Agreement that in any manner relate to (i) Tax
matters, (ii) environmental matters, and (iii) title matters, or as to the terms
and performance of this Agreement (collectively, the "SPECIAL MATTERS"), or any
of the foregoing, shall terminate or expire only upon the termination or
expiration of all applicable statutes of limitation. All representations,
warranties, agreements, covenants and obligations made or undertaken by the
Buyer in this Agreement shall survive the Closing hereunder, and shall not merge
in the performance of any obligation by any Party; and, as to the
representations and warranties, shall terminate or expire on the fifth (5th)
anniversary of the Closing Date, provided that such representations and
warranties shall not terminate or expire, but shall continue, during the
pendency of any suit, action, claim or other proceeding brought in respect of
such representations and warranties prior to the termination or expiration of
such five (5) year period.
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5.2 OBLIGATION OF THE SELLER AND THE SELLER SHAREHOLDER PARTIES TO
INDEMNIFY. Subject to the limitations contained in this Article 5, the Seller
and the Seller Shareholder Parties, jointly and severally, shall defend,
indemnify and hold the Buyer and its shareholders, officers, directors,
employees, counsel, agents, Affiliates and assigns (collectively, the "BUYER
INDEMNITEES") harmless from and against any and all Losses asserted against,
imposed upon or incurred by the Buyer Indemnitees, or any of them, by reason of
or resulting from, arising out of, based upon or otherwise in respect of:
(i) any inaccuracy in any representation or warranty made by
the Seller or any Seller Shareholder Party pursuant to this Agreement or the
Disclosure Schedule;
(ii) any breach of any covenant or agreement made or to be
performed by the Seller or any Seller Shareholder Party pursuant to this
Agreement;
(iii) any Liability or Loss resulting from, arising out of,
based upon or otherwise in respect of any violation or alleged violation of any
Environmental, Health and Safety Requirements the Acquired Assets, or the
presence of any Hazardous Materials on the Acquired Assets, that occurred at any
time prior to Closing;
(iv) the Parties' failure to comply with any of the bulk
sales laws and any other similar laws in any applicable jurisdiction in respect
of the transactions contemplated by this Agreement, and any action brought or
levy made as a result thereof; and/or
(v) any Liability or obligation of the Seller, any of its
Subsidiaries (accruing prior to the Closing), or any of the Seller Shareholder
Parties, or in any manner related to the Business (accruing prior to the
Closing), the Acquired Assets (accruing prior to the Closing) or the Excluded
Assets, in each of the foregoing cases, other than the Assumed Liabilities.
5.3 OBLIGATION OF THE BUYER TO INDEMNIFY. Subject to the limitations
contained in this Article 5, the Buyer shall defend, indemnify and hold the
Seller and its officers, directors, stockholders, employees, counsel, agents,
Affiliates and assigns (collectively, the "SELLER INDEMNITEES") harmless from
and against any and all Losses asserted against, imposed upon or incurred by the
Seller Indemnitees, or any of them, by reason of or resulting from, arising out
of, based upon or otherwise in respect of:
(i) any inaccuracy in any representation or warranty made by
the Buyer pursuant to this Agreement or the Disclosure Schedule;
(ii) any breach of any covenant or agreement made or to be
performed by the Buyer pursuant this Agreement; and/or
(iii) any Assumed Liability.
5.4 MATTERS INVOLVING THIRD PARTIES.
5.4.1 If any third party shall notify any Person that is
entitled to seek indemnification pursuant to Sections 5.2 or 5.3 hereof (the
"INDEMNIFIED PARTY") with respect to any matter (a "THIRD PARTY CLAIM") which
may give rise to a claim for indemnification against any other Person (the
"INDEMNIFYING PARTY") under this Article 5, then the Indemnified Party shall
promptly notify the Indemnifying Party thereof in writing; provided, however,
that no delay on the part of the Indemnified Party in notifying the Indemnifying
Party shall relieve the Indemnifying Party from any obligation hereunder unless
(and then solely to the extent) the Indemnifying Party thereby is prejudiced.
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5.4.2 The Indemnifying Party will have the right to defend the
Indemnified Party against the Third Party Claim with counsel of its choice
reasonably satisfactory to the Indemnified Party so long as (i) the Indemnifying
Party notifies the Indemnified Party in writing within 15 days after the
Indemnified Party has given notice of the Third Party Claim that the
Indemnifying Party will indemnify the Indemnified Party from and against all
Losses the Indemnified Party may suffer resulting from, arising out of, relating
to, in the nature of or caused by the Third Party Claim, (ii) the Indemnifying
Party provides the Indemnified Party with evidence reasonably acceptable to the
Indemnified Party that the Indemnifying Party will have the financial resources
to defend against the Third Party Claim and fulfill its indemnification
obligations hereunder, (iii) the Third Party Claim involves only money damages
and does not seek an injunction or other equitable relief, (iv) settlement of,
or an adverse judgment with respect to, the Third Party Claim is not, in the
good faith judgment of the Indemnified Party, likely to establish a precedential
custom or practice adverse to the continuing business interests of the
Indemnified Party, and (v) the Indemnifying Party conducts the defense of the
Third Party Claim actively and diligently.
5.4.3 So long as the Indemnifying Party is conducting the
defense of the Third Party Claim in accordance with Section 5.4.2 above, (i) the
Indemnified Party may retain separate co-counsel at its cost and expense and
participate in the defense of the Third Party Claim, (ii) the Indemnified Party
will not consent to the entry of any judgment or enter into any settlement with
respect to the Third Party Claim without the prior written consent of the
Indemnifying Party (not to be withheld unreasonably), and (iii) the Indemnifying
Party will not consent to the entry of any judgment or enter into any settlement
with respect to the Third Party Claim without the prior written consent of the
Indemnified Party (not to be withheld unreasonably).
5.4.4 In the event any of the conditions in Section 5.4.2
above is or becomes unsatisfied, however, (i) the Indemnified Party may defend
against, and consent to the entry of any judgment or enter into any settlement
with respect to, the Third Party Claim in any manner it reasonably may deem
appropriate (and the Indemnified Party need not consult with, or obtain any
consent from, the Indemnifying Party in connection therewith), (ii) the
Indemnifying Party will reimburse the Indemnified Party promptly and
periodically for the costs of defending against the Third Party Claim (including
reasonable attorneys' fees and expenses), and (iii) the Indemnifying Party will
remain responsible for any and all Losses the Indemnified Party may suffer
resulting from, arising out of, relating to, in the nature of or caused by the
Third Party Claim to the fullest extent provided in this Article 5.
5.5 INDEMNIFICATION PAYMENTS. An Indemnifying Party shall pay to the
Indemnified Party the full amount of any and all Losses (other than Losses
resulting from a Third Party Claim) for which it is required to indemnify the
Indemnified Party under this Article 5 within ten (10) days after its receipt of
notice thereof from the Indemnified Party, and the full amount of any and all
Losses resulting from a Third Party Claim within ten (10) days after final
settlement or adjudication thereof; and in each case, thereafter the amount of
any such Loss shall bear interest at the rate of interest publicly announced in
Atlanta, Georgia from time to time by NationsBank of Georgia, N.A. as its prime
rate, plus one percent (1%) per annum. After complying with the provisions of
Section 5.4 hereof with respect to any Loss that results from a Third Party
Claim (if applicable), the Buyer shall be entitled to offset from any payments
due the Seller or any of the Seller Shareholder Parties as part of the Purchase
Price or otherwise, the full amount of any and all Losses (whether or not
resulting from a Third Party Claim) for which the Seller or any Seller
Shareholder Party is required to indemnify any Buyer Indemnitee pursuant to
Section 5.2 hereof, and the Buyer shall not be liable for any amounts so offset.
5.6 OTHER RIGHTS AND REMEDIES NOT AFFECTED. The indemnification rights
of the Parties and other Persons under this Article 5 are independent of and in
addition to such other rights and remedies that the Parties and such other
Persons may have at law or in equity or otherwise for any misrepresentation,
breach of warranty or failure to fulfill any agreement or covenant hereunder on
the part of any Party hereto,
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including, without limitation, the right to offset, seek specific performance,
rescission or restitution, none of which rights or remedies shall be adversely
affected or diminished hereby.
ARTICLE 6. MISCELLANEOUS
6.1 COMPLIANCE WITH BULK SALES LAWS. The Parties hereby waive
compliance by the Buyer and the Seller with the bulk sales law and any other
similar laws in any applicable jurisdiction in respect of the transactions
contemplated by this Agreement.
6.2 TAXES. The Seller shall pay all federal, state and local income,
sales, use, other transfer, documentary, stamp and other taxes, if any, due as a
result of the purchase, sale or transfer of the Acquired Assets in accordance
herewith, whether such Taxes are imposed by law on the Seller or the Buyer.
Notwithstanding the foregoing, the Buyer shall pay any and all sales taxes due
as a result of transfer of the Acquired Assets consisting of motor vehicles.
6.3 NOTICES. All notices, requests, demands and other communications
required or permitted hereunder shall be in writing and shall be (i) delivered
by hand, (ii) mailed by United States registered or certified mail, return
receipt requested, first class postage prepaid and properly addressed, or (iii)
sent by national overnight courier service to the Parties or their permitted
assignees at the addresses set forth opposite the Parties' signatures hereto.
All notices, requests, instructions or documents given to any Party in
accordance with this Section 6.3 shall be deemed to have been given (i) on the
date of receipt if delivered by hand or overnight courier service, or (ii) on
the date five (5) business days after depositing with the United States Postal
Service if mailed by United States registered or certified mail, return receipt
requested, first class postage prepaid and properly addressed. Any Party may
change its address specified for notices herein by designating a new address by
notice in accordance with this Section 6.3.
6.4 ENTIRE AGREEMENT. All Exhibits and Schedules (including the
Disclosure Schedule) referred to herein are intended to be, and hereby are,
specifically incorporated into and made a part of this Agreement. This Agreement
constitutes the entire agreement among the Parties relating to the subject
matter hereof and supersedes all prior and contemporaneous negotiations,
writings and agreements relating to the subject matter of this Agreement.
6.5 MODIFICATIONS, AMENDMENTS AND WAIVERS. The Parties may, by mutual
written agreement and in no other manner, modify or amend the terms of this
Agreement. The failure or delay of any Party at any time or times to require the
performance of any provision of this Agreement shall in no manner affect its
right to enforce that provision. No single or partial waiver by any Party of any
condition of this Agreement, or the breach of any term, agreement or covenant
of, or the inaccuracy of any representation or warranty in, this Agreement,
whether by conduct or otherwise, in any one or more instances shall be construed
or deemed to be a further or continuing waiver of any such condition, breach or
inaccuracy or a waiver of any other condition, breach or inaccuracy.
6.6 SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon and
shall inure to the benefit of and be enforceable by the Parties, and their
respective successors and permitted assigns. This Agreement may not be assigned
by any Party without the prior written consent of the other Parties, except that
the Buyer may assign this Agreement and its rights and obligations hereunder to
one or more of its Affiliates, or to any of its lenders as collateral security.
6.7 GOVERNING LAW. This Agreement shall be controlled, construed and
enforced in accordance with the substantive laws of the State of Florida,
without regard to any laws related to choice or conflicts of laws.
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6.8 SEVERABILITY. Should any one or more of the provisions of this
Agreement be determined to be invalid, illegal or unenforceable in any respect,
the validity, legality and enforceability of the remaining provisions hereof
shall not in any way be adversely affected or impaired thereby. The Parties
shall endeavor in good faith to replace the invalid, illegal or unenforceable
provisions with valid provisions the economic effect of which comes as close as
practicable to that of the invalid, illegal or unenforceable provisions.
6.9 ATTORNEYS' FEES AND EXPENSES. In any Litigation arising out of,
under or in connection with this Agreement in which one Party prevails over
another Party, the reasonable attorneys' fees and expenses incurred by the
prevailing Party in connection with such Litigation shall be paid for or
reimbursed by the opposing Party or Parties in such Litigation.
6.10 NO BENEFIT TO OTHERS. The representation, warranties, covenants
and agreements contained in this Agreement are for the sole benefit of the
Parties and, in the case of Article 5 hereof, the other Indemnified Parties, and
their respective heirs, executors, administrators, legal representatives,
successors and assigns, and they shall not be construed as conferring any rights
on any other Persons.
6.11 CONSTRUCTION. Nothing in any Schedule (including the Disclosure
Schedule) attached hereto shall be deemed adequate to disclose an exception to a
representation or warranty made herein unless the Schedule identifies the
exception with particularity and describes the relevant facts in detail (and in
terms of Liabilities, quantifies the amount thereof with specificity). Without
limiting the generality of the foregoing, the mere listing (or inclusion of a
copy) of a document or other item shall not be deemed adequate to disclose an
exception to a representation or warranty made herein, unless the representation
or warranty has to do with the existence of the document or other item itself.
The Parties intend that each representation, warranty and covenant contained
herein shall have independent significance. If any Party has breached any
representation, warranty or covenant contained herein in any respect, the fact
that there exists another representation, warranty or covenant relating to the
same subject matter (regardless of the relative levels of specificity) which the
Party has not breached shall not detract from or mitigate the fact that the
Party is in breach of the first representation, warranty or covenant.
6.12 EXPENSES. Except as otherwise provided herein, each of the Parties
will bear such Party's own costs and expenses (including legal fees and
expenses) incurred in connection with this Agreement and the transactions
contemplated hereby.
6.13 FURTHER ASSURANCES. From time to time, at any Party's request and
without further consideration (unless the requesting Party is entitled to
indemnity therefor as provided herein), the other Parties will execute and
deliver to the requesting Party such documents and take such other action as
such Party may reasonably request in order to consummate more effectively the
transactions contemplated hereby.
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IN WITNESS WHEREOF, the Parties have executed this Agreement under seal
effective as of the date first above written.
SELLER:
GREASE-TEC, INC.
Address: 3191 Bayou Sound By: /s/ William Seagraves [SEAL]
Longboat Key, FL 34228 ----------------------------------
Name:
--------------------------------
Title:
-------------------------------
SELLER SHAREHOLDER PARTIES
Address: 3191 Bayou Sound
Longboat Key, FL 34228 /s/ William D. Seagraves, Sr. [SEAL]
-------------------------------------
William D. Seagraves, Sr.
Address: 3191 Bayou Sound
Longboat Key, FL 34228 /s/ Angelina P. Seagraves [SEAL]
-------------------------------------
Angelina P. Seagraves
BUYER:
SANTI GROUP OF FLORIDA, INC.
Address: 4696 Oakdale Road By: /s/ Terry White [SEAL]
Smyrna, GA 30080 ----------------------------------
Name: Terry White
Title: Vice President
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EXHIBIT A
FINANCIAL STATEMENTS
See attached Financial Statements.
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SCHEDULE 1
EXCLUDED ACCOUNTS
None.
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SCHEDULE 2
EXCLUDED ASSETS
1. The corporate charter, qualifications to conduct business as a foreign
corporation, arrangements with registered agents relating to foreign
qualifications, taxpayer and other identification numbers, seals,
minute books, stock transfer books, blank stock certificates, and other
documents relating to the organization, maintenance, and existence of
the Seller as a corporation.
2. All of the Excluded Accounts.
3. All Accounts Receivable of the Seller.
4. Any asset related to Hazardous Materials.
5. Cash and cash equivalents of the Seller.
6. All of the following real estate owned by the Seller, or a principal of
the Seller, consisting of those certain premises located at (i) 1804
Nashville Street, Orlando, FL; (ii) 2127 West Pine Street, Orlando, FL;
and (iii) 1326 17th Street Orlando, FL, legally described as follows:
(a) Lots 12 and 13, Block 2, L.J. Dollins' Subdivision, according
to the plat thereof as recorded in Plat Book F, Page 102 of
the public records of Orange County, Florida.
(b) Lots 1 and 2, of Block 3, of CLEAR LAKE VIEWS, as per plat
thereof, recorded in Plat Book "J", page 145, Public Records
of Orange County, Florida.
(c) Lots 9 and 10, Block 1, CLEAR LAKE VIEWS SUBDIVISION,
according to plat thereof as recorded in Plat Book J, page
145, of the Public Records of Orange County, Florida.
(d) Lots 11, 12, 13, 14, 15, and 16 Block 1, Clear Lake View,
according to Plat Book J, Page 145, Public Records of Orange
County, Florida.
(e) The North 67.5 feet of Lots 25 & 26, Block 1, Clear Lake
Views, according to the Plat thereof as recorded in Plat Book
"J" at Page 145 of Public Records of Orange County, Florida.
(f) Lots 27, 28, 29 and 30, BLOCK 1, CLEAR LAKE VIEWS SUBDIVISION,
according to the plat thereof, as recorded in Plat Book J,
Page 145, Public Records of Orange County, Florida.
(g) Lots 31, 32, 33, and 34, Block 1, CLEARLAKE VIEWS SUBDIVISION,
according to the plat thereof as recorded in plat book "J",
page 145, of the Public Records of Orange County, Florida.
(h) Lots 17, 18, 19 and 20, Block one (1), Clear Lake Views,
according to the plat thereof as recorded in plat book "J",
page 145, public records of Orange County, Florida.
(i) Lots 35, 36, 37 and 38, Block 1, CLEAR LAKE VIEWS, according
to the plat thereof as recorded in Plat Book J, Page 145,
Public Records of Orange County, Florida.
(j) Lots 39 & 40, Block 1, CLEAR LAKE VIEW SUBDIVISION, according
to the plat thereof as recorded in Plat Book J, Page 145,
Public records of Orange County, Florida.
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SCHEDULE 3
ASSUMED LIABILITIES
1. All obligations of the Seller directly associated with or under the
agreements, contracts, leases, licenses, and other arrangements
referred to in the definition of Accounts either (i) to furnish goods,
services, and other non-cash benefits to customers after the Closing,
or (ii) to pay for goods, services, and other non-cash benefits that
another Person will furnish to it after the Closing.
2. That indebtedness of the Seller to SunTrust Bank associated with each
of the following assets pursuant to the financing documents related
thereto in the approximate amount indicated therewith:
(a) Radio System for Trucks (approximately $62,712.86)
(b) 1989 Ford Pick Up (#7769) (approximately $35,821.39)
(c) 1996 Ford F250 Van (#2526) (amount included in item 2(b) above)
(d) 1996 Ford F250 Van (#4737) (amount included in item 2(b) above)
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SCHEDULE 4
CLOSING PAY-OFF INFORMATION
OTHER THAN WITH RESPECT TO ASSUMED LIABILITIES
Security Interest Holder Pay-Off Amount
- ----------------- ------ --------------
See Attached Spreadsheet.
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DISCLOSURE SCHEDULE TO ASSET PURCHASE AGREEMENT
[the Seller and the Seller Shareholder Parties need to complete and provide
information required by Article 3, as well as set forth any other exceptions to
the representations and warranties of the Seller and the Seller Shareholder
Parties] [below is list of Sections in Article 3 which require certain
information] [other Sections may be required]
Section 3.4 [Seller Shares]
Section 3.4 [Subsidiaries]
Section 3.11 [Tax Returns]
Section 3.12(i) [Owned Real Property]
Section 3.12(ii) [Leased Real Property]
Section 3.14 [Contracts/Agreements]
Section 3.16 [Insurance]
Section 3.17 [Litigation]
Section 3.18 [Service Warranty]
Section 3.20 [Employees]
Section 3.21 [Employee Benefits]
Section 3.23(v) [Disposal Sites]
Section 3.26 [Nonassignable Accounts]
Section 3.27 [Accounts]
Section 3.29 [Permits]
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ASSET PURCHASE AGREEMENT
This Asset Purchase Agreement (the "Agreement") is made as of the 30th
day of April, 1998, by and between SANTI GROUP OF NEW YORK, INC., a Georgia
corporation, or its nominee or designee (the "Purchaser"), R.G.M. LIQUID WASTE
REMOVAL CORPORATION, a New York corporation (the "Sellers"), and RALPH G.
MACCHIO (the "Seller Shareholder").
W I T N E S S E T H:
WHEREAS, the Seller owns certain contract rights, customer accounts,
trucks, containers and other assets and is engaged in the non-hazardous liquid
waste collection, transfer and handling business in the New York metropolitan
area, including but not limited to, under the names "R.G.M. Liquid Waste
Removal" (the "Business"); and
WHEREAS, this Agreement contemplates a transaction in which the
Purchaser will purchase all of the assets of the Seller used in the Business and
assume certain of the liabilities of the Seller in return for payment of the
Purchase Price (as defined below);
NOW, THEREFORE, in consideration of the premises, mutual
representations, warranties, covenants and promises made in this Agreement, and
subject to the conditions contained in this Agreement, the parties agree as
follows:
1. PURCHASE AND SALE OF ASSETS; CLOSING.
1.1 PURCHASED ASSETS. Upon the execution of this Agreement and
effective as of 12:01 a.m. on the Closing Date (the "Time of Closing"), the
Seller agrees to sell, transfer, assign and deliver to the Purchaser, free and
clear of all liens, claims and encumbrances (except those which the Purchaser
has expressly agreed to assume in Section 1.3(c) hereof) the following assets
(the "Purchased Assets"):
(a) the machinery, equipment, vehicles and other operating assets owned by
the Seller identified on Schedule 1.1(a) to this Agreement (the "Operating
Assets");
(b) the Seller's right, title and interest (to the extent assignable and
transferable) in the customer accounts, customer accounts contracts, service
agreements, purchase orders and other rights to provide services to the
customers of Seller (collectively the "Customer Accounts"), other than those
customer accounts, rights, or contracts identified on Schedule 1.2 to this
Agreement;
(c) operating data (in both hard copy and computer format if available)
relevant to the Customer Accounts, including credit and accounting records for
the preceding twelve month period, customer contacts, phone numbers and
addresses, to the extent available (the "Operating Data");
(d) the Seller's files, correspondence, records, and related proprietary
information and other property that is necessary, helpful or related to
providing the services related to the Business;
(e) the Seller's intellectual property (including, but not limited to, the
name "R.G.M. Liquid Waste Removal"), goodwill associated therewith, licenses and
sublicenses granted and obtained with respect thereto;
<PAGE> 2
(f) to the extent transferable, franchises, approvals, permits, licenses
(including radio transmitter licenses), registrations, certificates, variances
and similar rights obtained from any government or agency thereof;
(g) the Seller's servicemarks, trademarks and logos; and
(h) telephone numbers and yellow page advertisings used in the Business.
1.2 EXCLUDED ASSETS. Anything to the contrary in Section 1.1
notwithstanding, the Purchased Assets shall exclude the following assets of the
Seller (collectively, the "Excluded Assets"):
(a) any corporate minute books, stock records and other corporate
records of the Seller;
(b) all note, accounts and other receivables of the Seller arising
prior to the Time of Closing;
(c) all cash, claims, deposits, refunds, causes of action, rights of
recovery and/or setoff and securities, and prepayments, retainage, security and
permit fees to the extent attributable to periods after the Closing;
(d) all leasehold improvements, fixtures and fittings used in the
Business;
(e) all insurance and bond premiums and other prepaid expenses (all as
outlined on Schedule 1.2 to this Agreement), to the extent relating to any
period after the Time of Closing; and
(f) any assets of the Seller specifically set forth on Schedule 1.2 to
this Agreement, including but not limited to those customer accounts, rights or
contracts set forth on Schedule 1.2.
1.3 PURCHASE PRICE; ALLOCATION; PAYMENT. (a) As consideration for the
Purchased Assets and that certain Nondisclosure, Noncompetition and
Nonsolicitation Agreement to be entered into by the Purchaser, the Seller and
the Seller Shareholder (the "Nondisclosure Agreement"), the Purchaser agrees,
subject to the terms, conditions and limitations set forth in this Agreement, to
issue and deliver to the Seller the following (collectively, the "Purchase
Price"): (i) cash in the amount of $1,615,000, and (ii) documentation effecting
the assumption of the Assumed Liabilities (as defined below).
(b) The parties agree that the Purchase Price shall be allocated
consistent with the Internal Revenue Code of 1986, as amended, and in accordance
with the allocation schedule to be agreed upon by the parties at or before the
Closing, which allocation shall be adhered to by the parties in filing all
returns to the appropriate taxing authorities.
(c) On and subject to the terms and conditions of this Agreement, and
effective as of the Time of Closing, the Purchaser shall assume and become
responsible for all of the liabilities of the Seller set forth on Schedule
1.3(c) of this Agreement (the "Assumed Liabilities"). Except for the Assumed
Liabilities, nothing in this Agreement or any other document entered into on the
Closing Date shall in any way obligate the Purchaser in any way for any
liability (whether known or unknown, asserted or unasserted, absolute or
contingent, accrued or unaccrued, liquidated or
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unliquidated, and due, or to become due), obligation, charges or tax of the
Seller, any of its subsidiaries, affiliates or related entities, or
shareholders, officers, directors, agents, or employees of the Seller.
(d) Notwithstanding anything contained herein to the contrary,
Purchaser shall have no responsibility whatsoever with respect to the following
liabilities, contracts, commitments, and other obligations of the Seller
(collectively, the "Excluded Liabilities"):
(i) any obligations or liabilities of the Seller arising
under this Agreement;
(ii) any lien or encumbrance affecting any of the Purchased
Assets, as set forth on Schedule 1.3(d) to this Agreement, which liens or
encumbrances will, subject to the provisions of Section 1.11 of this Agreement,
be removed at Closing;
(iii) except as set forth in Section 6.1 of this Agreement,
any obligation of the Seller for federal, state or local income tax liability
(including interest and penalties) arising from the operations of the Seller up
to the Time of Closing or arising out of the sale by the Seller of the Purchased
Assets pursuant to the terms of this Agreement;
(iv) any obligation of the Seller for expenses incurred in
connection with the sale of the Purchased Assets pursuant to the terms of this
Agreement; or
(v) any other liability or obligation of the Seller for
expenses incurred in connection with the sale of the Purchased Assets pursuant
to this Agreement.
1.4 TIME AND PLACE OF THE CLOSING. The Closing of the sale of the
Purchased Assets (the "Closing") shall take place at the offices of Purchaser at
10:00 a.m. local time, on May 1, 1998 (the "Closing Date"), or at such other
time and location as may be mutually agreed upon by the parties.
1.5 PROCEDURE AT THE CLOSING. At the Closing, the parties will take the
following actions and the completion of each action shall be a further condition
to the Closing:
(a) the Seller shall deliver to the Purchaser, in form reasonably
satisfactory to the Purchaser, such deeds, bills of sale, endorsements,
assignments, receipts and other instruments, as shall be sufficient to vest in
the Purchaser good title to the Purchased Assets, free and clear of all liens,
claims and encumbrances, except as otherwise permitted by this Agreement;
(b) the Purchaser shall deliver to the Seller the Purchase Price in
accordance with the provisions of Section 1.3(a) above;
(c) the Purchaser shall deliver to the Seller, in form and content
reasonably satisfactory to the Seller, instruments of assumption relating to the
Assumed Liabilities;
(d) the Purchaser shall enter into a lease with Equitable Realty for
certain property located at 972 and 977 Nicolls Road, Deer Park, New York
containing conditions to be as mutually agreed;
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(e) the Purchaser shall enter into an employment agreement with Steve
Macchio, containing terms and conditions to be as mutually agreed;
(f) the Purchaser shall enter into a consulting agreement with Ralph
Macchio, containing terms and conditions to be as mutually agreed;
(g) the Seller and the Seller Shareholder shall enter into a
nondisclosure, noncompetition and nonsolicitation agreement, containing terms
and conditions to be as mutually agreed;
(h) SanTi Group, Inc. shall deliver to the Seller and the Seller
Shareholder a guaranty of the Purchaser's obligations under this Agreement and
under the other agreements of the Purchaser contemplated by this Agreement,
containing terms and conditions to be as mutually agreed;
(i) the Seller, the Seller Shareholder and SanTi Group, Inc. shall
enter into an agency agreement covering any nontransferable and/or nonassignable
Customer Accounts or Permits, containing terms and conditions to be as mutually
agreed;
(j) the Seller, the Seller Shareholder, the Purchaser and such other
parties as may be appropriate or necessary shall enter into the Indemnification
Agreement, containing terms and conditions to be as mutually agreed;
(k) the Seller shall execute subscription documents and an investor
questionnaire relating to the issuance of the SanTi Stock; and
(l) each party shall deliver to the other party such other documents,
certificates and other instruments as may be contemplated by this Agreement or
necessary to accomplish the transaction contemplated by this Agreement.
1.6 USE OF NAME; RECEIVABLES. Following the Time of Closing, the
Sellers shall not use or give permission to any other person or entity to use
the name "R.G.M. Liquid Waste Removal" or any substantially similar name in
connection with any business or enterprise. Notwithstanding the foregoing, the
Seller is hereby granted a license to use such name for the sole purposes of
collecting receivables, and maintaining bank accounts for as short a period of
time after the Closing as is commercially reasonable in order to wind up its
affairs, provided that any such use does not in any way adversely affect the
Purchaser. In that regard, the Purchaser shall cooperate with the Seller from
time to time as the Seller may reasonably request in connection with the
Seller's efforts to collect its receivables.
1.7 CONFIDENTIALITY. The Purchaser, the Seller and the Seller
Shareholder each agree that for a period of five (5) years after the Closing
Date, none of them nor any other person connected with any of them shall at any
time divulge, and each of them shall cause their respective agents, employees
and Affiliates (as such term is defined in Rule 12b-2 of the regulations
promulgated under the Securities Exchange Act of 1934, as amended) not to
divulge the existence and terms of negotiations resulting in this Agreement, the
terms and conditions of this Agreement and the financing arrangements of the
Purchaser and its Affiliates, except as required by applicable federal, state or
local statutes pursuant to subpoena or court order, or as required to enforce
its rights under this Agreement.
1.8 TELEPHONE REFERRALS. From and after the Closing Date, the Sellers
shall refer, and cause its agents to refer, all telephone calls to it or them
for septic tank service and liquid waste collection, transfer and handling to
the Purchaser.
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1.9 COOPERATION WITH AUDITS. The Seller and the Seller Shareholder
agree to cooperate with the Purchaser in conducting any audits of the Business
during the period of time preceding the Closing, which audits shall be at the
Purchaser's sole expense.
1.10 PRESERVATION OF FILES AND RECORDS; ACCESS BY THE SELLER. The
Purchaser agrees to preserve and maintain for a period of not less than seven
(7) years from the Closing Date substantially all files, correspondence, records
and related proprietary information and other property acquired by the Purchaser
from the Seller which are part of the Purchased Assets. The Seller shall have
access after reasonable notice to the Purchaser to such files, correspondence,
records and related proprietary information to the extent reasonably necessary.
1.11 ENCUMBRANCES AFFECTING THE PURCHASED ASSETS. The Seller agrees to
take all actions reasonably necessary to promptly remove any lien or encumbrance
affecting any of the Purchased Assets as soon as possible after Closing, with
the exception of such encumbrances filed by Merco A Joint Venture (for which the
Seller Shareholder shall provide indemnification against pursuant to separate
agreement to be delivered at Closing).
2. REPRESENTATIONS AND WARRANTIES OF THE SELLER. The Seller and the Seller
Shareholders jointly and severally represent and warrant to the Purchaser the
following, which representations and warranties shall be reaffirmed as of the
Closing Date:
2.1 ORGANIZATION; POWER AND AUTHORITY. The Seller is a corporation duly
incorporated, validly existing and in good standing under the laws of the State
of New York. The Seller is duly authorized to conduct business and the Business,
and is in good standing, under the laws of each jurisdiction where such
qualification is required. The Seller has the corporate power and authority (a)
to own or lease its properties and carry on its business as it is now being
conducted, (b) to enter into this Agreement and to sell, convey, assign,
transfer and deliver the Purchased Assets to the Purchaser as provided herein,
and (c) to carry out the other transactions and agreements contemplated by this
Agreement. The Seller Shareholder has full power and authority to execute and
deliver this Agreement and perform such Seller Shareholder's obligations
hereunder.
2.2 OWNERSHIP OF THE PURCHASED ASSETS. (a) The Seller has good title
to, or a valid leasehold interest in, all of the Purchased Assets, free and
clear of all title defect, liens, claims or other encumbrances of any kind or
character, except for liens for current taxes, assessments and governmental
charges not yet due and payable and except for those liens shown on Schedule
1.3(d) to this Agreement, and subject to the provisions of Section 1.11 of this
Agreement, which liens will be discharged at Closing.
(b) Subject to Section 6.1, the Seller has paid all applicable taxes
that are due and payable with respect to the Purchased Assets.
2.3 DUE AUTHORIZATION; BINDING OBLIGATION. The execution, delivery and
performance of this Agreement and each of the other agreements contemplated by
this Agreement and consummation of the transactions contemplated by this
Agreement have been duly authorized by all necessary corporate actions of the
Seller. This Agreement has been duly executed and delivered by the Seller and is
a valid and binding obligation of the Seller and the Seller Shareholder,
enforceable in accordance with its terms, except as such enforceability may be
limited by bankruptcy, insolvency or similar laws and equitable principals.
Neither the execution and delivery of this Agreement nor the consummation of the
transactions contemplated hereby will: (a) conflict with or violate any
provision of the Seller's articles of incorporation or bylaws, or, to the
Seller's and the Seller Shareholder's knowledge, of any law, ordinance or
regulation or any decree or order of any court or administrative or other
governmental body which is either applicable to, binding upon or enforceable
against any Seller or any Seller Shareholder; or (b) except as set forth on
Schedule 2.3 to this Agreement, result in any breach of or default under any
mortgage, contract, agreement or other instrument which is either binding upon
or enforceable against the Seller, the Seller Shareholder or the Purchased
Assets.
2.4 LITIGATION. Except as set forth on Schedule 2.4 to this Agreement,
there are no actions, suits, claims, governmental investigations or arbitration
proceedings, to the knowledge of the Seller pending or threatened, against
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or affecting the Purchased Assets. Except as set forth on Schedule 2.4 to this
Agreement, there are no orders, decrees, judgments or stipulations currently in
effect issued by any local, state or federal judicial authority in any
proceeding relating to the Purchased Assets to which the Seller is or was a
party or by which the Seller is bound.
2.5 COMPLIANCE WITH LAWS. (a) Subject to Schedule 2.4, the Seller has
operated the Purchased Assets in compliance in all material respects with all
applicable laws, regulations, permits, franchises, licenses and orders. Without
limiting the generality of the foregoing, in the conduct of the business with
respect to the Purchased Assets, to Seller's knowledge, the Seller has not
transported, stored, treated or disposed of any quantities of waste to or at any
location other than a site lawfully permitted to receive such waste for such
purposes; nor to the Seller's knowledge has the Seller performed, arranged for
or allowed by any method or procedure such transportation or disposal in
contravention of any laws or regulations or in any other manner which could
reasonably be expected to result in material liability for contamination of the
environment.
(b) With respect to the conduct of the Business, the Seller has not
received any notification of any past or present failure by the Seller to comply
in any material respect with any laws, regulations, permits, franchises,
licenses or orders applicable to the Purchased Assets. Except as set forth on
Schedule 2.5(b), with respect to the Purchased Assets, the Seller has not
received any notification (including requests for information directed to the
Seller) from any governmental agency asserting that the Seller is or may be a
"potentially responsible person" for a remedial action at a waste storage,
treatment or disposal facility, pursuant to the provisions of the Comprehensive
Environmental Response, Compensation and Liability Act of 1980 ("CERCLA"), or
any other similar federal or state statute assigning responsibility for the
costs of investigating or remediating releases of contaminants into the
environment.
(c) Except as set forth on Schedule 2.4 to this Agreement, the Seller
has complied in all material respects with all applicable laws, of federal,
state, local, and foreign governments (and all agencies thereof) and, to the
Seller's and the Seller Shareholder's knowledge, no action suit, proceeding,
hearing, investigation, charge, complaint, claim, demand or notice has been
filed or commenced against the Seller alleging any failure so to comply.
(d) None of the Seller Shareholder or the directors, officers and
management employees of the Seller has any knowledge of any basis (existing
prior to the Closing) which could reasonably be expected to result in (i) any
failure of the Purchaser (based upon its acquisition of the Business) to comply
in all material respects after the Closing with any and all applicable laws of
federal, state, local and foreign governments (and all agencies thereof), or
(ii) any action, suit, proceeding, hearing, investigation, charge, complaint,
claim, demand or notice being filed or commenced after the Closing against the
Purchaser or any of its Affiliates alleging any failure to so comply.
2.6 SELLER'S SHAREHOLDERS. The Seller Shareholder owns all of the
issued and outstanding capital stock of the Seller.
2.7 SUBSIDIARIES. The Seller does not now have, nor has the Seller in
the past had, any corporation with respect to which any Seller owns a majority
of the common stock or has the power to vote or direct the voting of sufficient
securities to elect a majority of the directors (a "Subsidiary"). The Seller
does not now have nor, except for Merco A Joint Venture, has it had any direct
or indirect equity participation in any corporation, partnership, trust or other
business association.
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2.8 EMPLOYMENT TAXES. Proper amounts have been withheld by the Seller
for the employees set forth on Schedule 2.9(a) to this Agreement in compliance
in all material resects with applicable laws. Proper applicable tax returns have
been filed for which returns were due for employee income tax withholding,
social security and unemployment taxes with respect to the employees set forth
in Schedule 2.9(a).
2.9 EMPLOYEE MATTERS. (a) Set forth on Schedule 2.9(a) is a true,
complete and accurate list of the name, present position, starting date of
employment and rate of compensation of each of Seller's employees directly
involved with the business represented by the Purchased Assets immediately prior
to the Closing. The Seller has no knowledge of any such employees or any
independent contractors servicing the Purchased Assets who will not be available
for employment by the Purchaser after the Closing Date.
(b) Except as may be set forth on Schedule 2.9(b) of this Agreement,
the Seller is not a party to or bound by any employment agreement with any
employee or any collective bargaining agreement or any other agreement with any
labor union.
(c) Set forth on Schedule 2.9(c) is a complete list of (i) all pension
and employee benefit plans (as defined in Section 3 of the Employee Retirement
Income Security Act of 1974, as amended ("ERISA")) maintained or contributed to
by the Sellers and (ii) all other benefit programs available to the Sellers'
employees (collectively, the "Plans"). Such plans comply in form and in
operation with the applicable ERISA requirements, except where the failure to
comply would not have a material adverse effect on the financial condition of
the business with respect to the Purchased Assets. All contributions that are
due have been paid to such Plans. No action, suit, proceeding, hearing or
investigation with respect to the administration or the investment of assets of
any such Plans (other than routine claims for benefits) is pending, except where
such action, suit, proceeding, hearing or investigation would not have a
material adverse effect on the financial condition of the business with respect
to the Purchased Assets.
2.10 CONDUCT OF BUSINESS. Since April 8, 1998, except as otherwise
approved by the prior written consent of the Purchaser, the Seller (i) has
conducted the business and operations with respect to the Purchased Assets in
substantially the same manner in which the same have been traditionally
conducted, and (ii) there has been no material adverse change in the Purchased
Assets.
2.11 NET WORTH. The net worth of the Seller is as shown on Schedule
2.11 to this Agreement. The Sellers is not, and immediately after the
consummation of the transaction contemplated hereunder will not be, "insolvent"
within the meaning of the United States Bankruptcy Code as in effect as of the
Closing Date. The Seller does not intend to, nor believes that it will, incur
debts beyond its ability to pay such debts as they mature.
2.12 FINANCIAL STATEMENTS. Attached hereto as Schedule 2.12 are the
following financial statements (collectively, the "Financial Statements"): (i)
compilation report of income and expenses and balance sheet as of and for the
fiscal years ended October 31, 1995, October 31, 1996 and October 31, 1997 (the
"Most Recent Fiscal Year End") for the Seller; and (ii) compilation report of
income and expenses and balance sheet as of and for the three month period
ending March 31, 1998 (the "Most Recent Fiscal Month End") for the Seller and
all of its Subsidiaries. The Financial Statements present fairly in all material
respects the financial condition of the Seller as of such dates and the results
of the operations of the Seller for such periods, and are consistent with the
books and records of the Seller (which books and records are correct and
complete in all material respects).
2.13 EVENTS SUBSEQUENT TO MOST RECENT FISCAL MONTH END. Since the Most
Recent Fiscal Month End, there has not been any material adverse change in the
Business or the financial condition, operations or results of operations of the
Seller.
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2.14 UNDISCLOSED LIABILITIES. The Seller does not have any material
liability (whether known or unknown, asserted or unasserted, absolute or
contingent, accrued or unaccrued, liquidated or unliquidated, and due or to
become due) obligation, charge or tax, and, to the knowledge of the Seller,
there is no basis for any present or future action, suit, proceeding, hearing,
investigation, charge, complaint, claim or demand against any of them which
would give rise to a material liability, obligation, charge or claim except for
those liabilities, obligations, charges, taxes or claims (i) shown on the Most
Recent Financial Statements; or (ii) which have arisen in the ordinary course of
business of the Seller (none of which results from, arises out of, relates to,
is in the nature of, or was caused by any breach of contract, breach of
warranty, tort, infringement, or violation of law).
2.15 TAX MATTERS. The Seller has filed all federal and state tax
returns that it is required to file and all taxes shown to be due have been paid
in full. Subject to Schedule 2.15, all such tax returns were correct and
complete in all respects. Subject to Schedule 2.15, no Seller Shareholder or
director, officer or employee responsible for tax matters of the Seller expects
any authority to assess any additional taxes for any period for which tax
returns have been filed.
2.16 REAL PROPERTY. The Seller does not own any real property used in
the Business.
2.17 TANGIBLE ASSETS. The Seller owns or leases all buildings,
machinery, equipment, other tangible assets, permits, licenses and agreements
necessary for the conduct of the Business as presently conducted and as
presently proposed to be conducted. Except as set forth on Schedule 2.17 to this
Agreement, each such tangible asset is in good operating condition and repair,
normal wear and tear excepted. The net book value of these assets is $164,601.
2.18 CONTRACTS. (a) Schedule 2.18 of this Agreement is an accurate and
complete list of each agreement, contract or commitment to which the Seller is a
party or by which the Seller is bound and which is either (i) material to the
operation of the Business, or (ii) cannot be terminated without liability on 30
days notice or less. The Seller has delivered true and accurate copies of each
of the items shown on Schedule 2.18 of this Agreement.
(b) Neither the Seller nor, to the knowledge of the Seller, any party
thereto or bound thereby, is in material default under any of the contracts,
agreements or instruments comprising Schedule 2.18, and no act or event has
occurred which with notice or lapse of time, or both, would constitute such a
default on the part of the Seller or, to the knowledge of the Seller, any other
party thereto or bound thereby.
(c) With respect to all contract, agreements and instruments comprising
Schedule 2.18:
(i) each is in full force and effect and legally binding upon
the Seller; and
(ii) except as set forth on Schedule 2.3 to this Agreement,
the Seller has not released any of its rights thereunder nor will any other
party bound thereby be released from its obligations nor will any obligations of
any party be affected as the result of the transfer contemplated hereby nor will
the consent of any other party to any of the above be required with respect to
the transfer contemplated hereby.
2.19 INSURANCE. Schedule 2.19 to this Agreement lists all current
policies of liability, property damage, fire, workers' compensation/liability,
title or other forms of insurance related to the Business which are presently
owned or carried by the Seller and insurance agents and/or brokers providing
such insurance coverage and of all performance bonds and letters of credit
securing any obligations of the Seller presently maintained by the Seller in the
conduct of its business.
2.20 SERVICE WARRANTIES. Each service provided by the Seller has been
in conformity in all material respects with all applicable contractual
commitments and all express and implied warranties. Except as otherwise shown on
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Schedule 2.20 to this Agreement, no service provided or delivered by the Seller
is subject to any guaranty, warranty or other indemnity beyond the applicable
standard terms and conditions of sale and as provided by applicable law.
Schedule 2.20 includes copies of the standard terms and conditions of sale for
the Sellers (containing applicable guaranty, warranty and indemnity provisions).
2.21 BUSINESS RELATIONSHIPS. Neither the Seller nor the Seller
Shareholder owns or has an interest in any person or entity (other than the
Seller) conducting a liquid waste collection, handling or transfer business,
other than ancillary to the laundromat business or real estate ownership and
operation.
2.22 INVESTMENT. [This section is intentionally deleted].
2.23 POSSESSION OF FRANCHISES, LICENSES, ETC. The Seller possesses all
franchises, certificates, licenses, permits, clearances, consents and other
authorizations from governmental political subdivisions or regulatory
authorities that are necessary for (i) the continued ownership, maintenance and
operation of the Business, as currently being operated and conducted, (ii) the
continued operation, use and ownership of the Purchased Assets, as currently
being operated and used, and (iii) the servicing of the Customer Accounts, as
currently being serviced (collectively, the "Permits"). Schedule 2.23 to this
Agreement sets forth all of the Permits and for each Permit accurately describes
the expiration and/or renewal date thereof. No material violation of any of the
Permits has occurred that would reasonably likely result in a termination,
cancellation or suspension thereof and the Seller has complied in all material
respects with all applicable covenants and conditions of each of the Permits.
Except as set forth on Schedule 2.23, there is no action, proceeding, permit
revocation, permit amendment, writ, injunction or claim pending or, to the
knowledge of the Seller, threatened, concerning or relating to any of the
Permits.
2.24 ACQUISITION QUESTIONNAIRE. All statements and representations
contained in that certain Acquisition Questionnaire attached to Schedule 2.24 to
this Agreement initialed by the Seller Shareholder and tendered by the Seller to
the Purchaser is true and correct in all material respects.
2.25 DISCLOSURE. The representations and warranties contained in this
Article 2 do not contain any untrue statement of a material fact or omit or fail
to state any material fact necessary in order to make the statements and
information contained in this Article 2, in light of the circumstances in which
they were made, not misleading.
2.26 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. The representations
and warranties contained in this Article 2 shall survive for a period of one (1)
year from the Closing.
3. REPRESENTATIONS AND WARRANTIES OF THE PURCHASER. The Purchaser represents to
the Seller and the Seller Shareholder the following, which representations and
warranties shall be reaffirmed as of the Closing Date:
3.1 ORGANIZATION OF THE PURCHASER. The Purchaser is a corporation duly
incorporated, validly existing and in good standing under the laws of the
jurisdiction of its incorporation. The Purchaser is duly authorized to conduct
business and is in good standing under the laws of each jurisdiction where such
qualification is required. The Purchaser has the corporate power and authority
(a) to own or lease its properties and carry on its business as it is now being
conducted, (b) to enter into this Agreement and to purchase the Purchased Assets
as provided herein, and (c) to carry out the other transactions and agreements
contemplated by this Agreement.
3.2 DUE AUTHORIZATION; BINDING OBLIGATION. The execution, delivery and
performance of this Agreement and each of the other agreements contemplated by
this Agreement and consummation of the transactions contemplated by this
Agreement have been duly authorized by all necessary corporate actions of the
Purchaser. This Agreement has been duly executed and delivered by the Purchaser
and is a valid and binding obligation of the Purchaser, enforceable in
accordance with its terms. Neither the execution and delivery of this Agreement
nor the consummation of the transactions contemplated hereby will: (a) conflict
with or violate any provision of the Purchaser's articles of incorporation or
bylaws, or of any law, ordinance or regulation or any decree or order of any
court or administrative or other governmental body which is either applicable
to, binding upon or enforceable against the Purchaser; or (b)
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<PAGE> 10
result in any breach of or default under any mortgage, contract, agreement or
other instrument which is either binding upon or enforceable against the
Purchaser.
3.3 LITIGATION. There are no actions, suits, claims, governmental
investigations or arbitration proceedings, to the knowledge of the Purchaser
pending or threatened, against the Purchaser.
3.4 DISCLOSURE. The representations and warranties contained in this
Article 3 do not contain any untrue statement of a material fact or omit or fail
to state any material fact necessary in order to make the statements and
information contained in this Article 3, in light of the circumstances in which
they were made, not misleading.
3.5 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. The representations and
warranties contained in this Article 3 shall survive for a period of one (1)
year from the Closing.
4. INDEMNIFICATION. The Seller, the Seller Shareholder, the Purchaser and others
are entering into a separate Indemnification Agreement (the "Indemnification
Agreement") at the Closing. The remedies provided therein shall be the sole
remedies available to the parties for claims for money damages arising
hereunder.
5. SECURITY DEPOSIT. [This section is intentionally deleted]
6. MISCELLANEOUS.
6.1 TAXES. The Seller shall pay all federal, state and local income
taxes due as a result of the purchase, sale or transfer of the Purchased Assets
in accordance herewith. The Purchaser shall pay all sales, use and transfer
taxes due as a result of the purchase, sale and transfer of the Purchased
Assets.
6.2 NOTICES. All notices, requests, demands and other communications
required or permitted under this Agreement shall be in writing and shall be (i)
delivered by hand, (ii) mailed by United States registered or certified mail,
return receipt requested, first class prepaid and properly addressed, or (iii)
sent by national overnight courier service to the parties or their permitted
assigns at the address set forth opposite the parties' signatures to this
Agreement. All notices, requests, instructions or documents given to any party
in accordance with this Section 6.2 shall be deemed to have been given (i) on
the date of receipt if delivered by hand or overnight courier service, or (ii)
on the date five (5) days after depositing with the United States Postal Service
if mailed by United States registered or certified mail, return receipt
requested, first class postage prepaid and properly addressed. Any party may
change its address specified for notices by designating a new address in
accordance with this Section 6.2.
6.3 ENTIRE AGREEMENT. All Schedules and Exhibits referred to in this
Agreement are intended to be, and hereby are, specifically incorporated into and
made a part of this Agreement. This Agreement constitutes the entire agreement
among the parties relating to the subject matter hereof and supersedes all prior
and contemporaneous negotiations, writings and agreements relating to the
subject matter of this Agreement.
6.4 MODIFICATIONS, AMENDMENTS AND WAIVERS. The parties may, by mutual
agreement in written form and in no other manner, modify or amend the terms of
this Agreement. The failure or delay of any party at any time or times to
require the performance of any provision of this Agreement shall in no manner
affect its right to enforce that provision. No single or partial waiver by any
party of any condition of this Agreement, or the breach of any term, agreement
or covenant of, or the inaccuracy of any representation or warranty in, this
Agreement, whether by conduct or otherwise, in any one or more instances shall
be construed or deemed to be a further or continuing waiver of any such
condition, breach or inaccuracy or a waiver of any condition, breach or
inaccuracy.
6.5 SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon and
shall inure to the benefit of and be enforceable by the parties to this
Agreement and their respective successors and permitted assigns. This Agreement
may not be assigned by any party without written consent of the other parties,
except that the Purchaser may assign this Agreement and its rights and
obligations hereunder to one or more of its Affiliates or to any of its lenders
as collateral security.
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6.6 GOVERNING LAW. This Agreement shall be controlled, construed and
enforced in accordance with the substantive laws of the State of New York,
without regard to any laws to choice or conflicts of laws.
6.7 SEVERABILITY. Should any one or more of the provisions of this
Agreement be determined to be invalid, illegal or unenforceable in any respect,
the validity, legality and enforceability of the remaining provisions of this
Agreement shall not in any way be adversely affected or impaired thereby. The
parties shall endeavor in good faith to replace the invalid, illegal or
unenforceable provisions with valid provisions the economic effect of which
comes as close as practicable to that of the invalid, illegal or unenforceable
provisions.
6.8 NO BENEFIT TO OTHERS. The representations, warranties, covenants
and agreements contained into this Agreement are for the sole benefit of the
parties and, in the case of Article 4 hereof, the other Indemnified Parties, and
their respective heirs, executors, administrators, legal representatives,
successors and assigns, and they shall not be construed as conferring any rights
on any other person.
6.9 CONSTRUCTION. The parties intend that each representation, warranty
and covenant contained herein shall have independent significance. If any party
has breached any representation, warranty or covenant contained in this
Agreement in any respect, the fact that there exists another representation,
warranty or covenant relating to the same subject matter (regardless of the
relative levels of specificity) that the party has not breached shall not
detract from or mitigate the fact that the party is in breach of the first
representation, warranty or covenant.
6.10 EXPENSES. Except as otherwise provided herein, each of the parties
will bear such party's own costs and expenses (including legal fees and
expenses) incurred in connection with this Agreement and the transactions
contemplated hereby.
6.11 FURTHER ASSURANCES. From time to time, at any party's request and
without further consideration (unless the requesting party is entitled to
indemnity therefor as provided herein), the other parties will execute and
deliver to the requesting party such documents and take such other action as
such party may reasonably request in order to consummate more effectively the
transactions contemplated by this Agreement.
6.12 KNOWLEDGE. Whenever the term "to the best of the knowledge" of a
party is used, such term shall mean that the party making such representation or
warranty has conducted a reasonable investigation to determine the existence or
absence of the facts represented or warranted.
IN WITNESS WHEROF, the parties have executed this Agreement as of the
date first above written.
SELLER:
R.G.M. Liquid Waste Removal Corp.
Address: By: /s/Ralph G. Macchio
------------------------- --------------------------------
Name:
------------------------- ------------------------------
Title:
------------------------- --------------------------------
SELLER SHAREHOLDER:
Address: /s/ Ralph G. Macchio
------------------------- -----------------------------------
Ralph G. Macchio
-------------------------
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<PAGE> 1
EXHIBIT 10.11
ASSET PURCHASE AGREEMENT
This Asset Purchase Agreement (the "Agreement") is made as of the 30th
day of April, 1998, by and between SANTI GROUP OF NEW YORK, INC., a Georgia
corporation, or its nominee or designee (the "Purchaser"), DEVITO ENVIRONMENTAL
CORPORATION, a New York corporation (the "Sellers"), and ROSALIE MACCHIO (the
"Seller Shareholder").
WITNESSETH:
WHEREAS, the Seller owns certain contract rights, customer accounts,
trucks, containers and other assets and is engaged in the non-hazardous liquid
waste collection, transfer and handling business in the New York metropolitan
area, including but not limited to, under the names "Devito Environmental" (the
"Business"); and
WHEREAS, this Agreement contemplates a transaction in which the
Purchaser will purchase all of the assets of the Seller used in the Business and
assume certain of the liabilities of the Seller in return for payment of the
Purchase Price (as defined below);
NOW, THEREFORE, in consideration of the premises, mutual
representations, warranties, covenants and promises made in this Agreement, and
subject to the conditions contained in this Agreement, the parties agree as
follows:
1. PURCHASE AND SALE OF ASSETS; CLOSING.
1.1 PURCHASED ASSETS. Upon the execution of this Agreement and
effective as of 12:01 a.m. on the Closing Date (the "Time of Closing"), the
Seller agrees to sell, transfer, assign and deliver to the Purchaser, free and
clear of all liens, claims and encumbrances (except those which the Purchaser
has expressly agreed to assume in Section 1.3(c) hereof) the following assets
(the "Purchased Assets"):
(a) the machinery, equipment, vehicles and other operating assets owned
by the Seller identified on Schedule 1.1(a) to this Agreement (the "Operating
Assets");
(b) the Seller's right, title and interest (to the extent assignable
and transferable) in the customer accounts, customer accounts contracts, service
agreements, purchase orders and other rights to provide services to the
customers of Seller (collectively the "Customer Accounts"), other than those
customer accounts, rights, or contracts identified on Schedule 1.2 to this
Agreement;
(c) operating data (in both hard copy and computer format if available)
relevant to the Customer Accounts, including credit and accounting records for
the preceding twelve month period, customer contacts, phone numbers and
addresses, to the extent available (the "Operating Data");
<PAGE> 2
(d) the Seller's files, correspondence, records, and related
proprietary information and other property that is necessary, helpful or related
to providing the services related to the Business;
(e) the Seller's intellectual property (including, but not limited to,
the name "R.G.M. Liquid Waste Removal"), goodwill associated therewith, licenses
and sublicenses granted and obtained with respect thereto;
(f) to the extent transferable, franchises, approvals, permits,
licenses (including radio transmitter licenses), registrations, certificates,
variances and similar rights obtained from any government or agency thereof,
(g) the Seller's servicemarks, trademarks and logos; and
(h) telephone numbers and yellow page advertisings used in the
Business.
1.2 EXCLUDED ASSETS. Anything to the contrary in Section 1.1 notwithstanding,
the Purchased Assets shall exclude the following assets of the Seller
(collectively, the "Excluded Assets"):
(a) any corporate minute books, stock records and other corporate
records of the Seller;
(b) all note, accounts and other receivables of the Seller arising
prior to the Time of Closing;
(c) all cash, claims, deposits, refunds, causes of action, rights of
recovery and/or setoff and securities, and prepayments, retainage, security and
permit fees to the extent attributable to periods after the Closing;
(d) all leasehold improvements, fixtures and fittings used in the
Business;
(e) all insurance and bond premiums and other prepaid expenses (all as
outlined on Schedule 1.2 to this Agreement), to the extent relating to any
period after the Time of Closing; and
(f) any assets of the Seller specifically set forth on Schedule 1.2 to
this Agreement, including but not limited to those customer accounts, rights or
contracts set forth on Schedule 1.2.
1.3 PURCHASE PRICE; ALLOCATION; PAYMENT. (a) As consideration for the
Purchased Assets and that certain Nondisclosure, Noncompetition and
Nonsolicitation Agreement to be entered into by the Purchaser, the Seller and
the Seller Shareholder (the "Nondisclosure Agreement"), the Purchaser agrees,
subject to the terms, conditions and limitations set forth in this Agreement, to
issue and deliver to the Seller the following (collectively, the "Purchase
Price"): (i) cash in the amount of $1,670,000, (ii) 80,000 shares of the common
stock of SanTi Group, Inc., a Delaware corporation (the "SanTi Stock"), and
(iii) documentation effecting the assumption of the Assumed Liabilities (as
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defined below). The Seller acknowledges and agrees that the Purchaser is
retaining $500,000 and 27,500 shares of SanTi Stock (the "Security Deposit") to
be held pursuant to the provisions of the Indemnification Agreement (as defined
below). The Purchaser may, at its election, cause the Security Deposit to not be
issued by SanTi Group, Inc. until the time that such SanTi Stock is due under
the Indemnification Agreement.
(b) The parties agree that the Purchase Price shall be allocated
consistent with the Internal Revenue Code of 1986, as amended, and in accordance
with the allocation schedule to be agreed upon by the parties at or before the
Closing, which allocation shall be adhered to by the parties in filing all
returns to the appropriate taxing authorities.
(c) On and subject to the terms and conditions of this Agreement, and
effective as of the Time of Closing, the Purchaser shall assume and become
responsible for all of the liabilities of the Seller set forth on Schedule
1.3(c) of this Agreement (the "Assumed Liabilities"). Except for the Assumed
Liabilities, nothing in this Agreement or any other document entered into on the
Closing Date shall in any way obligate the Purchaser in any way for any
liability (whether known or unknown, asserted or unasserted, absolute or
contingent, accrued or unaccrued, liquidated or unliquidated, and due, or to
become due), obligation, charges or tax of the Seller, any of its subsidiaries,
affiliates or related entities, or shareholders, officers, directors, agents, or
employees of the Seller.
(d) Notwithstanding anything contained herein to the contrary,
Purchaser shall have no responsibility whatsoever with respect to the following
liabilities, contracts, commitments, and other obligations of the Seller
(collectively, the "Excluded Liabilities"):
(i) any obligations or liabilities of the Seller arising
under this Agreement;
(ii) any lien or encumbrance affecting any of the Purchased
Assets, as set forth on Schedule 1.3(d) to this Agreement, which liens or
encumbrances, subject to the provisions of Section 1.11 of this Agreement,
subject to the provisions of Section 1.11 of this Agreement, will be removed at
Closing;
(iii) except as set forth in Section 6.1 of this Agreement,
any obligation of the Seller for federal, state or local income tax liability
(including interest and penalties) arising from the operations of the Seller up
to the Time of Closing or arising out of the sale by the Seller of the Purchased
Assets pursuant to the terms of this Agreement;
(iv) any obligation of the Seller for expenses incurred in
connection with the sale of the Purchased Assets pursuant to the terms of this
Agreement; or
(v) any other liability or obligation of the Seller for
expenses incurred in connection with the sale of the Purchased Assets pursuant
to this Agreement.
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1.4 TIME AND PLACE OF THE CLOSING. The Closing of the sale of the
Purchased Assets (the "Closing") shall take place at the offices of Purchaser at
10:00 a.m. local time, on May 1, 1998 (the "Closing Date"), or at such other
time and location as may be mutually agreed upon by the parties.
1.5 PROCEDURE AT THE CLOSING. At the Closing, the parties will take the
following actions and the completion of each action shall be a further condition
to the Closing:
(a) the Seller shall deliver to the Purchaser, in form reasonably
satisfactory to the Purchaser, such deeds, bills of sale, endorsements,
assignments, receipts and other instruments, as shall be sufficient to vest in
the Purchaser good title to the Purchased Assets, free and clear of all liens,
claims and encumbrances, except as otherwise permitted by this Agreement;
(b) the Purchaser shall deliver to the Seller the Purchase Price in
accordance with the provisions of Section 1.3(a) above;
(c) the Purchaser shall deliver to the Seller, in form and content
reasonably satisfactory the Seller, instruments of assumption relating to the
Assumed Liabilities;
(d) the Purchaser shall enter into a lease with Equitable Realty for
certain property located at 972 and 977 Nicolls Road, Deer Park, New York
containing conditions to be as mutually agreed;
(e) the Purchaser shall enter into an employment agreement with Steve
Macchio, containing terms and conditions to be as mutually agreed;
(f) the Purchaser shall enter into a consulting agreement with Ralph
Macchio, containing terms and conditions to be as mutually agreed;
(g) the Seller and the Seller Shareholder shall enter into a
nondisclosure, noncompetition and nonsolicitation agreement, containing terms
and conditions to be as mutually agreed;
(h) SanTi Group, Inc. shall deliver to the Seller and the Seller
Shareholder a guaranty of the Purchaser's obligations under this Agreement and
under the other agreements of the Purchaser contemplated by this Agreement,
containing terms and conditions to be as mutually agreed;
(i) the Seller, the Seller Shareholder and SanTi Group, Inc. shall
enter into an agency agreement covering any nontransferable and/or nonassignable
Customer Accounts or Permits, containing terms and conditions to be as mutually
agreed;
(j) the Seller, the Seller Shareholder, the Purchaser and such other
parties as may be appropriate or necessary shall enter into the Indemnification
Agreement, containing terms and conditions to be as mutually agreed;
(k) the Seller shall execute subscription documents and an investor
questionnaire relating to the issuance of the SanTi Stock; and
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<PAGE> 5
(1) each party shall deliver to the other party such other documents,
CERTIFICATES and other instruments as may be contemplated by this Agreement or
necessary to accomplish the transaction contemplated by this Agreement.
1.6 USE OF NAME; RECEIVABLES. Following the Time of Closing, the
Sellers shall not use or give permission to any other person or entity to use
the name "Devito Environmental " or any substantially similar name in connection
with any business or enterprise. Notwithstanding the foregoing, the Seller is
hereby granted a license to use such name for the sole purposes of collecting
receivables, and maintaining bank accounts for as short a period of time after
the Time of Closing as is commercially reasonable in order to wind up its
affairs, provided that any such use does not in any way adversely affect the
Purchaser. In that regard, the Purchaser shall cooperate with the Seller from
time to time as the Seller may reasonably request in connection with the
Seller's efforts to collect its receivables.
1.7 CONFIDENTIALITY. The Purchaser, the Seller and the Seller
Shareholder each agree that for a period of five (5) years after the Closing
Date, none of them nor any other person connected with any of them shall at any
time divulge, and each of them shall cause their respective agents, employees
and Affiliates (as such term is defined in Rule 12b-2 of the regulations
promulgated under the Securities Exchange Act of 1934, as amended) not to
divulge the existence and ten-ns of negotiations resulting in this Agreement,
the terms and conditions of this Agreement and the financing arrangements of the
Purchaser and its Affiliates, except as required by applicable federal, state or
local statutes pursuant to subpoena or court order, or as required to enforce
its rights under this Agreement.
1.8 TELEPHONE REFERRALS. From and after the Closing Date, the Sellers
shall refer, and cause its agents to refer, all telephone calls to it or them
for septic tank service and liquid waste collection, transfer and handling to
the Purchaser.
1.9 COOPERATION WITH AUDITS. The Seller and the Seller Shareholder
agree to cooperate with the Purchaser in conducting any audits of the Business
during the period of time preceding the Closing, which audits shall be at the
Purchaser's sole expense.
1.10 PRESERVATION OF FILES AND RECORDS; ACCESS BY THE SELLER. The
Purchaser agrees to preserve and maintain for a period of not less than seven
(7) years from the Closing Date substantially all files, correspondence, records
and related proprietary information and other property acquired by the Purchaser
from the Seller which are part of the Purchased Assets. The Seller shall have
access after reasonable notice to the Purchaser to such files, correspondence,
records and related proprietary information to the extent reasonably necessary.
1.11 ENCUMBRANCES AFFECTING THE PURCHASED ASSETS. The Seller agrees to
take all actions reasonably necessary to promptly remove any lien or encumbrance
affecting any of the Purchased Assets as soon as possible after Closing, with
the exception of such encumbrances filed by Merco A Joint Venture (for which the
Seller Shareholder shall provide indemnification against pursuant to separate
agreement to be delivered at Closing).
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<PAGE> 6
2. REPRESENTATIONS AND WARRANTIES OF THE SELLER. The Seller and the Seller
Shareholders jointly and severally represent and warrant to the Purchaser the
following, which representations and warranties shall be reaffirmed as of the
Closing Date:
2.1 ORGANIZATION; POWER AND AUTHORITY. The Seller is a corporation duly
incorporated, validly existing and in good standing under the laws of the State
of New York. The Seller is duly authorized to conduct business and the Business,
and is in good standing, under the laws of each jurisdiction where such
qualification is required. The Seller has the corporate power and authority (a)
to own or lease its properties and carry on its business as it is now being
conducted, (b) to enter into this Agreement and to sell, convey, assign,
transfer and deliver the Purchased Assets to the Purchaser as provided herein,
and (c) to carry out the other transactions and agreements contemplated by this
Agreement. The Seller Shareholder has full power and authority to execute and
deliver this Agreement and perform such Seller Shareholder's obligations
hereunder.
2.2 OWNERSHIP OF THE PURCHASED ASSETS. (a) The Seller has good title
to, or a valid leasehold interest in, all of the Purchased Assets, free and
clear of all title defect, liens, claims or other encumbrances of any kind or
character, except for liens for current taxes, assessments and governmental
charges not yet due and payable and except for those liens shown on Schedule 1.3
(d) to this Agreement, and subject to the provisions of Section 1. II to this
Agreement, which liens will be discharged at Closing.
(b) Subject to Section 6.1, the Seller has paid all applicable taxes
that are due and payable with respect to the Purchased Assets.
2.3 DUE AUTHORIZATION; BINDING OBLIGATION. The execution, delivery and
performance of this Agreement and each of the other agreements contemplated by
this Agreement and consummation of the transactions contemplated by this
Agreement have been duly authorized by all necessary corporate actions of the
Seller. This Agreement has been duly executed and delivered by the Seller and is
a valid and binding obligation of the Seller and the Seller Shareholder,
enforceable in accordance with its terms, except as such enforceability may be
limited by bankruptcy, insolvency or similar laws and equitable principals.
Neither the execution and delivery of this Agreement nor the consummation of the
transactions contemplated hereby will: (a) conflict with or violate any
provision of the Seller's articles of incorporation or bylaws, or, to the
Seller's and the Seller Shareholder's knowledge, of any law, ordinance or
regulation or any decree or order of any court or administrative or other
governmental body which is either applicable to, binding upon or enforceable
against any Seller or any Seller Shareholder; or (b) except as set forth on
Schedule 2.3 to this Agreement, result in any breach of or default under any
mortgage, contract, agreement or other instrument which is either binding upon
or enforceable against the Seller, the Seller Shareholder or the Purchased
Assets.
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<PAGE> 7
2.4 LITIGATION. Except as set forth on Schedule 2.4 to this Agreement,
there are no actions, suits, claims, governmental investigations or arbitration
proceedings, to the knowledge of the Seller pending or threatened, against or
affecting the Purchased Assets. Except as set forth on Schedule 2.4 to this
Agreement, there are no orders, decrees, judgments or stipulations currently in
effect issued by any local, state or federal judicial authority in any
proceeding relating to the Purchased Assets to which the Seller is or was a
party or by which the Seller is bound.
2.5 COMPLIANCE WITH LAWS. (a) Subject to Schedule 2.4, the Seller has
operated the Purchased Assets in compliance in all material respects with all
applicable laws, regulations, permits, franchises, licenses and orders. Without
limiting the generality of the foregoing, in the conduct of the business with
respect to the Purchased Assets, to Seller's knowledge, the Seller has not
transported, stored, treated or disposed of any quantities of waste to or at any
location other than a site lawfully permitted to receive such waste for such
purposes; nor to the Seller's knowledge has the Seller performed, arranged for
or allowed by any method or procedure such transportation or disposal in
contravention of any laws or regulations or in any other manner which could
reasonably be expected to result in material liability for contamination of the
environment.
(b) With respect to the conduct of the Business, the Seller has not
received any notification of any past or present failure by the Seller to comply
in any material respect with any laws, regulations, permits, franchises,
licenses or orders applicable to the Purchased Assets. Except as set forth on
Schedule 2.5(b), with respect to the Purchased Assets, the Seller has not
received any notification (including requests for information directed to the
Seller) from any governmental agency asserting that the Seller is or may be a
"potentially responsible person" for a remedial action at a waste storage,
treatment or disposal facility, pursuant to the provisions of the Comprehensive
Environmental Response, Compensation and Liability Act of 1980 ("CERCLA"), or
any other similar federal or state statute assigning responsibility for the
costs of investigating or remediating releases of contaminants into the
environment.
(c) Except as set forth on Schedule 2.4 to this Agreement, the Seller
has complied in all material respects with all applicable laws, of federal,
state, local, and foreign governments (and all agencies thereof) and, to the
Seller's and the Seller Shareholder's knowledge, no action suit, proceeding,
hearing, investigation, charge, complaint, claim, demand or notice has been
filed or commenced against the Seller alleging any failure so to comply.
(d) None of the Seller Shareholder or the directors, officers and
management employees of the Seller has any knowledge of any basis (existing
prior to the Closing) which could reasonably be expected to result in (i) any
failure of the Purchaser (based upon its acquisition of the Business) to comply
in all material respects after the Closing with any and all applicable laws of
federal, state, local and foreign governments (and all agencies thereof), or
(ii) any action, suit, proceeding, hearing, investigation, charge, complaint,
claim, demand or notice being filed or commenced after the Closing against the
Purchaser or any of its Affiliates alleging any failure to so comply.
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<PAGE> 8
2.6 SELLER'S SHAREHOLDERS. The Seller Shareholder owns all of the
issued and outstanding capital stock of the Seller.
2.7 SUBSIDIARIES. The Seller does not now have, nor has the Seller in
the past had, any corporation with respect to which any Seller owns a majority
of the common stock or has the power to vote or direct the voting of sufficient
securities to elect a majority of the directors (a "Subsidiary"). The Seller
does not now have nor, except for Merco A Joint Venture, has it had any direct
or indirect equity participation in any corporation, partnership, trust or
other business association.
2.8 EMPLOYMENT TAXES. Proper amounts have been withheld by the Seller
for the employees set forth on Schedule 2.9(a) to this Agreement in compliance
in all material respects with applicable laws. Proper applicable tax returns
have been filed for which returns were due for employee income tax withholding,
social security and unemployment taxes with respect to the employees set forth
in Schedule 2.9(a).
2.9 EMPLOYEE MATTERS. (a) Set forth on Schedule 2.9(a) is a true,
complete and accurate list of the name, present position, starting date of
employment and rate of compensation of each of Seller's employees directly
involved with the business represented by the Purchased Assets immediately prior
to the Closing. The Seller has no knowledge of any such employees or any
independent contractors servicing the Purchased Assets who will not be available
for employment by the Purchaser after the Closing Date.
(b) Except as may be set forth on Schedule 2.9(b) of this Agreement,
the Seller is not a party to or bound by any employment agreement with any
employee or any collective bargaining agreement or any other agreement with any
labor union.
(c) Set forth on Schedule 2.9(c) is a complete list of (i) all pension
and employee benefit plans (as defined in Section 3 of the Employee Retirement
Income Security Act of 1974, as amended ("ERISA")) maintained or contributed to
by the Sellers and (ii) all other benefit programs available to the Sellers'
employees (collectively, the "Plans"). Such plans comply in form and in
operation with the applicable ERISA requirements, except where the failure to
comply would not have a material adverse effect on the financial condition of
the business with respect to the Purchased Assets. All contributions that are
due have been paid to such Plans. No action, suit, proceeding, hearing or
investigation with respect to the administration or the investment of assets of
any such Plans (other than routine claims for benefits) is pending, except where
such action, suit, proceeding, hearing or investigation would not have a
material adverse effect on the financial condition of the business with respect
to the Purchased Assets.
2.10 CONDUCT OF BUSINESS. Since April 8, 1998, except as otherwise
approved by the prior written consent of the Purchaser, the Seller (i) has
conducted the business and operations with
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respect to the Purchased Assets in substantially the same manner in which the
same have been traditionally conducted, and (ii) there has been no material
adverse change in the Purchased Assets.
2.11 NET WORTH. The net worth of the Seller is as shown on Schedule
2.11 to this Agreement. The Sellers is not, and immediately after the
consummation of the transaction contemplated hereunder will not be, "insolvent"
within the meaning of the United States Bankruptcy Code as in effect as of the
Closing Date. The Seller does not intend to, nor believes that it will, incur
debts beyond its ability to pay such debts as they mature.
2.12 FINANCIAL STATEMENTS. Attached hereto as Schedule 2.12 are the
following financial statements (collectively, the "Financial Statements"): (i)
federal tax returns for the period ending October 31, 1994, October 31, 1995 and
October 31, 1996 (the "Most Recent Fiscal Year End") for the Seller. The
Financial Statements present fairly in all material respects the financial
condition of the Seller as of such dates and the results of the operations of
the Seller for such periods, and are consistent with the books and records of
the Seller (which books and records are correct and complete in all material
respects).
2.13 EVENTS SUBSEQUENT TO MOST RECENT FISCAL MONTH END. Since March 31,
1998, there has not been any material adverse change in the Business or the
financial condition, operations or results of operations of the Seller.
2.14 UNDISCLOSED LIABILITIES. The Seller does not have any material
liability (whether known or unknown, asserted or unasserted, absolute or
contingent, accrued or unaccrued, liquidated or unliquidated, and due or to
become due) obligation, charge or tax, and, to the knowledge of the Seller,
there is no basis for any present or future action, suit, proceeding, hearing,
investigation, charge, complaint, claim or demand against any of them which
would give rise to a material liability, obligation, charge or claim except for
those liabilities, obligations, charges, taxes or claims (i) shown on the Most
Recent Financial Statements; or (ii) which have arisen in the ordinary course of
business of the Seller (none of which results from, arises out of, relates to,
is in the nature of, or was caused by any breach of contract, breach of
warranty, tort, infringement, or violation of law).
2.15 TAX MATTERS. The Seller has filed all federal and state tax
returns that it is required to file and all taxes shown to be due have been paid
in full. Subject to Schedule 2.15, all such tax returns were correct and
complete in all respects. Subject to Schedule 2.15, no Seller Shareholder or
director, officer or employee responsible for tax matters of the Seller expects
any authority to assess any additional taxes for any period for which tax
returns have been filed.
2.16 REAL PROPERTY. The Seller does not own any real property used in
the Business.
2.17 TANGIBLE ASSETS. The Seller owns or leases all buildings,
machinery, equipment, other tangible assets, permits, licenses and agreements
necessary for the conduct of the Business as
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presently conducted and as presently proposed to be conducted. Except as set
forth on Schedule 2.17 to this Agreement, each such tangible asset is in good
operating condition and repair, normal wear and tear excepted. The net book
value of these assets is $0.
2.18 CONTRACTS. (a) Schedule 2.18 of this Agreement is an accurate and
complete list of each agreement, contract or commitment to which the Seller is a
party or by which the Seller is bound and which is either (i) material to the
operation of the Business, or (ii) cannot be terminated without liability on 30
days notice or less. The Seller has delivered true and accurate copies of each
of the items shown on Schedule 2.18 of this Agreement.
(b) Neither the Seller nor, to the knowledge of the Seller, any party
thereto or bound thereby, is in material default under any of the contracts,
agreements or instruments comprising Schedule 2.18, and no act or event has
occurred which with notice or lapse of time, or both,
would constitute such a default on the part of the Seller or, to the knowledge
of the Seller, any other party thereto or bound thereby.
(c) With respect to all contract, agreements and instruments comprising
Schedule 2.18:
(i) each is in full force and effect and legally binding upon
the Seller; and
(ii) except as set forth on Schedule 2.3 to this Agreement,
the Seller has not released any of its rights thereunder nor will any other
party bound thereby be released from its obligations nor will any obligations of
any party be affected as the result of the transfer contemplated hereby nor will
the consent of any other party to any of the above be required with respect to
the transfer contemplated hereby.
2.19 INSURANCE. Schedule 2.19 to this Agreement lists all current
policies of liability, property damage, fire, workers' compensation/liability,
title or other forms of insurance related to the Business which are presently
owned or carried by the Seller and insurance agents and/or brokers providing
such insurance coverage and of all performance bonds and letters of credit
securing any obligations of the Seller presently maintained by the Seller in the
conduct of its business.
2.20 SERVICE WARRANTIES. Each service provided by the Seller has been
in conformity in all material respects with all applicable contractual
commitments and all express and implied warranties. Except as otherwise shown on
Schedule 2.20 to this Agreement, no service provided or delivered by the Seller
is subject to any guaranty, warranty or other indemnity beyond the applicable
standard terms and conditions of sale and as provided by applicable law.
Schedule 2.20 includes copies of the standard terms and conditions of sale for
the Sellers (containing applicable guaranty, warranty and indemnity provisions).
2.21 BUSINESS RELATIONSHIPS. Neither the Seller nor the Seller
Shareholder owns or has an interest in any person or entity (other than the
Seller) conducting a liquid waste collection,
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<PAGE> 11
handling or transfer business, other than ancillary to the laundromat business
or real estate ownership and operation.
2.22 INVESTMENT. Each of the Seller and the Seller Shareholders (i)
understands that the SanTi Stock has not been, and will not at the Closing be,
registered under the Securities Act of 1933, as amended (the "Securities Act"),
or under any state securities laws, and is being offered and sold in reliance
upon federal and state exemptions for transactions not involving any public
offering, (ii) understands that the Seller is acquiring the SanTi Stock solely
for its own account for investment purpose, and not with a view to the
distribution thereof, (iii) has received certain information concerning the
Purchaser and SanTi and has had the opportunity to obtain additional information
as desired in order to evaluate the merits and the risks inherent in holding the
SanTi Stock, (iv) is able to bear the economic risk and lack of liquidity
inherent in holding the SanTi Stock, and (v) is an Accredited Investor (as such
term is defined in Regulation D promulgated under the Securities Act) for the
reasons set forth in Schedule 2.22 to this Agreement.
2.23 POSSESSION OF FRANCHISES, LICENSES, ETC. The Seller possesses all
franchises, certificates, licenses, permits, clearances, consents and other
authorizations from governmental political subdivisions or regulatory
authorities that are necessary for (i) the continued ownership, maintenance and
operation of the Business, as currently being operated and conducted, (ii) the
continued operation, use and ownership of the Purchased Assets, as currently
being operated and used, and (iii) the servicing of the Customer Accounts, as
currently being serviced (collectively, the "Permits"). Schedule 2.23 to this
Agreement sets forth all of the Permits and for each Permit accurately describes
the expiration and/or renewal date thereof. No material violation of any of the
Permits has occurred that would reasonably likely result in a termination,
cancellation or suspension thereof and the Seller has complied in all material
respects with all applicable covenants and conditions of each of the Permits.
Except as set forth on Schedule 2.23, there is no action, proceeding, permit
revocation, permit amendment, writ, injunction or claim pending or, to the
knowledge of the Seller, threatened, concerning or relating to any of the
Permits.
2.24 ACQUISITION QUESTIONNAIRE. All statements and representations
contained in that certain Acquisition Questionnaire attached to Schedule 2.24 to
this Agreement initialed by the Seller Shareholder and tendered by the Seller to
the Purchaser is true and correct in all material respects.
2.25 DISCLOSURE. The representations and warranties contained in this
Article 2 do not contain any untrue statement of a material fact or omit or fail
to state any material fact necessary in order to make the statements and
information contained in this Article 2, in light of the circumstances in which
they were made, not misleading.
2.26 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. The representations
and warranties contained in this Article 2 shall survive for a period of one (1)
year from the Closing.
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3. REPRESENTATIONS AND WARRANTIES OF THE PURCHASER. The Purchaser represents to
the Seller and the Seller Shareholder the following, which representations and
warranties shall be reaffirmed as of the Closing Date:
3.1 ORGANIZATION OF THE PURCHASER. The Purchaser is a corporation duly
incorporated, validly existing and in good standing under the laws of the
jurisdiction of its incorporation. The Purchaser is duly authorized to conduct
business and is in good standing under the laws of each jurisdiction where such
qualification is required. The Purchaser has the corporate power and authority
(a) to own or lease its properties and carry on its business as it is now being
conducted, (b) to enter into this Agreement and to purchase the Purchased Assets
as provided herein, and (c) to carry out the other transactions and agreements
contemplated by this Agreement.
3.2 DUE AUTHORIZATION; BINDING OBLIGATION. The execution, delivery and
performance of this Agreement and each of the other agreements contemplated by
this Agreement and consummation of the transactions contemplated by this
Agreement have been duly authorized by all necessary corporate actions of the
Purchaser. This Agreement has been duly executed and delivered by the Purchaser
and is a valid and binding obligation of the Purchaser, enforceable in
accordance with its terms. Neither the execution and delivery of this Agreement
nor the consummation of the transactions contemplated hereby will: (a) conflict
with or violate any provision of the Purchaser's articles of incorporation or
bylaws, or of any law, ordinance OR regulation or any decree or order of any
court or administrative or other governmental BODY which is either applicable
to, binding upon or enforceable against the Purchaser; OR (b) result in any
breach of or default under any mortgage, contract, agreement or other instrument
which is either binding upon or enforceable against the Purchaser.
3.3 LITIGATION. There are no actions, suits, claims, governmental
investigations or arbitration proceedings, to the knowledge of the Purchaser
pending or threatened, against the Purchaser.
3.4 DISCLOSURE. Neither the representations and warranties contained in
this Article 3 nor the statements in the offering memorandum provided to the
Seller in connection with the SanTi Stock contain any untrue statement of a
material fact or omit or fail to state any material fact necessary in order to
make the statements and information contained in this Article 3 or in such
offering memorandum, in light of the circumstances in which they were made, not
misleading.
3.5 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. The representations and
warranties contained in this Article 3 shall survive for a period of one (1)
year from the Closing.
4. INDEMNIFICATION. The Seller, the Seller Shareholder, the Purchaser and others
are entering into a separate Indemnification Agreement (the "Indemnification
Agreement") at the Closing. The remedies provided therein shall be the sole
remedies available to the parties for claims for money damages arising
hereunder.
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5. SECURITY DEPOSIT. The cash portion of the Security Deposit will be held
pursuant to that certain Escrow Agreement between the Seller, the Seller
Shareholder, the Purchaser and others and disbursed in accordance therewith and
the terms of the Indemnification Agreement.
6. MISCELLANEOUS.
6.1 TAXES. The Seller shall pay all federal, state and local income
taxes due as a result of the purchase, sale or transfer of the Purchased Assets
in accordance herewith. The Purchaser shall pay all sales, use and transfer
taxes due as a result of the purchase, sale and transfer of the Purchased
Assets.
6.2 NOTICES. All notices, requests, demands and other communications
required or permitted under this Agreement shall be in writing and shall be (i)
delivered by hand, (ii) mailed by United States registered or certified mail,
return receipt requested, first class prepaid and properly addressed, or (iii)
sent by national overnight courier service to the parties or their permitted
assigns at the address set forth opposite the parties' signatures to this
Agreement. All notices, requests, instructions or documents given to any party
in accordance with this Section 6.2 shall be deemed to have been given (i) on
the date of receipt if delivered by hand or overnight courier service, or (ii)
on the date five (5) days after depositing with the United States Postal Service
if mailed by United States registered or certified mail, return receipt
requested, first class postage prepaid and properly addressed. Any party may
change its address specified for notices by designating a new address in
accordance with this Section 6.2.
6.3 ENTIRE AGREEMENT. All Schedules and Exhibits referred to in this
Agreement are intended to be, and hereby are, specifically incorporated into and
made a part of this Agreement. This Agreement constitutes the entire agreement
among the parties relating to the subject matter hereof and supersedes all prior
and contemporaneous negotiations, writings and agreements relating to the
subject matter of this Agreement.
6.4 MODIFICATIONS, AMENDMENTS AND WAIVERS. The parties may, by mutual
agreement in written form and in no other manner, modify or amend the terms of
this Agreement. The failure or delay of any party at any time or times to
require the performance of any provision of this Agreement shall in no manner
affect its right to enforce that provision. No single or partial waiver by any
party of any condition of this Agreement, or the breach of any term, agreement
or covenant of, or the inaccuracy of any representation or warranty in, this
Agreement, whether by conduct or otherwise, in any one or more instances shall
be construed or deemed to be a @er or continuing waiver of any such condition,
breach or inaccuracy or a waiver of any condition, breach or inaccuracy.
6.5 SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon and
shall inure to the benefit of and be enforceable by the parties to this
Agreement and their respective successors and permitted assigns. This Agreement
may not be assigned by any party without written consent of the
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<PAGE> 14
other parties, except that the Purchaser may assign this Agreement and its
rights and obligations hereunder to one or more of its Affiliates or to any of
its lenders as collateral security.
6.6 GOVERNING LAW. This Agreement shall be controlled, construed and
enforced in accordance with the substantive laws of the State of New York,
without regard to any laws to choice or conflicts of laws.
6.7 SEVERABILITY. Should any one or more of the provisions of this
Agreement be determined to be invalid, illegal or unenforceable in any respect,
the validity, legality and enforceability of the remaining provisions of this
Agreement shall not in any way be adversely affected or impaired thereby. The
parties shall endeavor in good faith to replace the invalid, illegal or
unenforceable provisions with valid provisions the economic effect of which
comes as close as practicable to that of the invalid, illegal or unenforceable
provisions.
6.8 NO BENEFIT TO OTHERS. The representations, warranties, covenants
and agreements contained into this Agreement are for the sole benefit of the
par-ties and, in the case of Article 4 hereof, the other Indemnified Parties,
and their respective heirs, executors, administrators, legal representatives,
successors and assigns, and they shall not be construed as conferring any rights
on any other person.
6.9 CONSTRUCTION. The parties intend that each representation,
warranty and covenant contained herein shall have independent significance. If
any party has breached any representation, warranty or covenant contained in
this Agreement in any respect, the fact that there exists another
representation, warranty or covenant relating to the same subject matter
(regardless of the relative levels of specificity) that the party has not
breached shall not detract from or mitigate the fact that the party is in breach
of the first representation, warranty or covenant.
6.10 EXPENSES. Except as otherwise provided herein, each of the parties
will bear such party's own costs and expenses (including legal fees and
expenses) incurred in connection with this Agreement and the transactions
contemplated hereby.
6.11 FURTHER ASSURANCES. From time to time, at any party's request and
without @er consideration (unless the requesting party is entitled to indemnity
therefor as provided herein), the other parties will execute and deliver to the
requesting party such documents and take such other action as such party may
reasonably request in order to consummate more effectively the transactions
contemplated by this Agreement.
6.12 KNOWLEDGE. Whenever the term "to the best of the knowledge" of a
party is used, such term shall mean that the party making such representation or
warranty has conducted a reasonable investigation to determine the existence or
absence of the facts represented or warranted.
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<PAGE> 15
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.
SELLER:
Devito Environmental Company
Address: By: /s/ Rosalie Macchio
----------------------- ------------------------------------
Name:
----------------------- ----------------------------------
Title:
----------------------- ---------------------------------
SELLER SHAREHOLDER:
Address: /s/ Rosalie Macchio
----------------------- ---------------------------------------
Rosalie Macchio
-----------------------
-----------------------
PURCHASER:
SanTi Group of New York, Inc.
By: /s/ Daryl R. Griswold
------------------------------------
Name:
----------------------------------
Title:
---------------------------------
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<PAGE> 1
ASSET PURCHASE AGREEMENT
This Asset Purchase Agreement (the "Agreement") is made as of the 30th
day of April, 1998, by and between SANTI GROUP OF NEW YORK, INC., a Georgia
corporation, or its nominee or designee (the "Purchaser"), ADVANCED TRANSFER
TECHNOLOGY, INC., a New York corporation (the "Sellers"), and STEVE MACCHIO (the
"Seller Shareholder").
W I T N E S S E T H:
WHEREAS, the Seller owns certain contract rights, customer accounts,
trucks, containers and other assets and is engaged in the non-hazardous liquid
waste collection, transfer and handling business in the New York metropolitan
area, including but not limited to, under the names "Advanced Transfer
Technology" (the "Business"); and
WHEREAS, this Agreement contemplates a transaction in which the
Purchaser will purchase all of the assets of the Seller used in the Business and
assume certain of the liabilities of the Seller in return for payment of the
Purchase Price (as defined below);
NOW, THEREFORE, in consideration of the premises, mutual
representations, warranties, covenants and promises made in this Agreement, and
subject to the conditions contained in this Agreement, the parties agree as
follows:
1. PURCHASE AND SALE OF ASSETS; CLOSING.
1.1 PURCHASED ASSETS. Upon the execution of this Agreement and
effective as of 12:01 a.m. on the Closing Date (the "Time of Closing"), the
Seller agrees to sell, transfer, assign and deliver to the Purchaser, free and
clear of all liens, claims and encumbrances (except those which the Purchaser
has expressly agreed to assume in Section 1.3(c) hereof) the following assets
(the "Purchased Assets"):
(a) the machinery, equipment, vehicles and other operating assets owned by
the Seller identified on Schedule 1.1(a) to this Agreement (the "Operating
Assets");
(b) the Seller's right, title and interest (to the extent assignable and
transferable) in the customer accounts, customer accounts contracts, service
agreements, purchase orders and other rights to provide services to the
customers of Seller (collectively the "Customer Accounts"), other than those
customer accounts, rights, or contracts identified on Schedule 1.2 to this
Agreement;
(c) operating data (in both hard copy and computer format if available)
relevant to the Customer Accounts, including credit and accounting records for
the preceding twelve month period, customer contacts, phone numbers and
addresses, to the extent available (the "Operating Data");
(d) the Seller's files, correspondence, records, and related proprietary
information and other property that is necessary, helpful or related to
providing the services related to the Business;
(e) the Seller's intellectual property (including, but not limited to, the
name "R.G.M. Liquid Waste Removal"), goodwill associated therewith, licenses and
sublicenses granted and obtained with respect thereto;
<PAGE> 2
unknown, asserted or unasserted, absolute or contingent, accrued or unaccrued,
liquidated or unliquidated, and due, or to become due), obligation, charges or
tax of the Seller, any of its subsidiaries, affiliates or related entities, or
shareholders, officers, directors, agents, or employees of the Seller.
(d) Notwithstanding anything contained herein to the contrary,
Purchaser shall have no responsibility whatsoever with respect to the following
liabilities, contracts, commitments, and other obligations of the Seller
(collectively, the "Excluded Liabilities"):
(i) any obligations or liabilities of the Seller arising
under this Agreement;
(ii) any lien or encumbrance affecting any of the Purchased
Assets, as set forth on Schedule 1.3(d) to this Agreement, which liens or
encumbrances, subject to the provisions of Section 1.11 of this Agreement,
subject to the provisions of Section 1.11 of this Agreement, will be removed at
Closing;
(iii) except as set forth in Section 6.1 of this Agreement,
any obligation of the Seller for federal, state or local income tax liability
(including interest and penalties) arising from the operations of the Seller up
to the Time of Closing or arising out of the sale by the Seller of the Purchased
Assets pursuant to the terms of this Agreement;
(iv) any obligation of the Seller for expenses incurred in
connection with the sale of the Purchased Assets pursuant to the terms of this
Agreement; or
(v) any other liability or obligation of the Seller for
expenses incurred in connection with the sale of the Purchased Assets pursuant
to this Agreement.
1.4 TIME AND PLACE OF THE CLOSING. The Closing of the sale of the
Purchased Assets (the "Closing") shall take place at the offices of Purchaser at
10:00 a.m. local time, on May 1, 1998 (the "Closing Date"), or at such other
time and location as may be mutually agreed upon by the parties.
1.5 PROCEDURE AT THE CLOSING. At the Closing, the parties will take the
following actions and the completion of each action shall be a further condition
to the Closing:
(a) the Seller shall deliver to the Purchaser, in form reasonably
satisfactory to the Purchaser, such deeds, bills of sale, endorsements,
assignments, receipts and other instruments, as shall be sufficient to vest in
the Purchaser good title to the Purchased Assets, free and clear of all liens,
claims and encumbrances, except as otherwise permitted by this Agreement;
(b) the Purchaser shall deliver to the Seller the Purchase Price in
accordance with the provisions of Section 1.3(a) above;
(c) the Purchaser shall deliver to the Seller, in form and content
reasonably satisfactory to the Seller, instruments of assumption relating to the
Assumed Liabilities;
(d) the Purchaser shall enter into a lease with Equitable Realty for
certain property located at 972 and 977 Nicolls Road, Deer Park, New York
containing conditions to be as mutually agreed;
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<PAGE> 3
(e) the Purchaser shall enter into an employment agreement with Steve
Macchio, containing terms and conditions to be as mutually agreed;
(f) the Purchaser shall enter into a consulting agreement with Ralph
Macchio, containing terms and conditions to be as mutually agreed;
(g) the Seller and the Seller Shareholder shall enter into a
nondisclosure, noncompetition and nonsolicitation agreement, containing terms
and conditions to be as mutually agreed;
(h) SanTi Group, Inc. shall deliver to the Seller and the Seller
Shareholder a guaranty of the Purchaser's obligations under this Agreement and
under the other agreements of the Purchaser contemplated by this Agreement,
containing terms and conditions to be as mutually agreed;
(i) the Seller, the Seller Shareholder and SanTi Group, Inc. shall
enter into an agency agreement covering any nontransferable and/or nonassignable
Customer Accounts or Permits, containing terms and conditions to be as mutually
agreed;
(j) the Seller, the Seller Shareholder, the Purchaser and such other
parties as may be appropriate or necessary shall enter into the Indemnification
Agreement, containing terms and conditions to be as mutually agreed;
(k) each party shall deliver to the other party such other documents,
certificates and other instruments as may be contemplated by this Agreement or
necessary to accomplish the transaction contemplated by this Agreement.
1.6 USE OF NAME; RECEIVABLES. Following the Time of Closing, the
Sellers shall not use or give permission to any other person or entity to use
the name "Advanced Transfer Technology" or any substantially similar name in
connection with any business or enterprise. Notwithstanding the foregoing, the
Seller is hereby granted a license to use such name for the sole purposes of
collecting receivables, and maintaining bank accounts for as short a period of
time after the Time of Closing as is commercially reasonable in order to wind up
its affairs, provided that any such use does not in any way adversely affect the
Purchaser. In that regard, the Purchaser shall cooperate with the Seller from
time to time as the Seller may reasonably request in connection with the
Seller's efforts to collect its receivables.
1.7 CONFIDENTIALITY. The Purchaser, the Seller and the Seller
Shareholder each agree that for a period of five (5) years after the Closing
Date, none of them nor any other person connected with any of them shall at any
time divulge, and each of them shall cause their respective agents, employees
and Affiliates (as such term is defined in Rule 12b-2 of the regulations
promulgated under the Securities Exchange Act of 1934, as amended) not to
divulge the existence and terms of negotiations resulting in this Agreement, the
terms and conditions of this Agreement and the financing arrangements of the
Purchaser and its Affiliates, except as required by applicable federal, state or
local statutes pursuant to subpoena or court order, or as required to enforce
its rights under this Agreement.
1.8 TELEPHONE REFERRALS. From and after the Closing Date, the Sellers
shall refer, and cause its agents to refer, all telephone calls to it or them
for septic tank service and liquid waste collection, transfer and handling to
the Purchaser.
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1.9 COOPERATION WITH AUDITS. The Seller and the Seller Shareholder
agree to cooperate with the Purchaser in conducting any audits of the Business
during the period of time preceding the Closing, which audits shall be at the
Purchaser's sole expense.
1.10 PRESERVATION OF FILES AND RECORDS; ACCESS BY THE SELLER. The
Purchaser agrees to preserve and maintain for a period of not less than seven
(7) years from the Closing Date substantially all files, correspondence, records
and related proprietary information and other property acquired by the Purchaser
from the Seller which are part of the Purchased Assets. The Seller shall have
access after reasonable notice to the Purchaser to such files, correspondence,
records and related proprietary information to the extent reasonably necessary.
1.11 ENCUMBRANCES AFFECTING THE PURCHASED ASSETS. The Seller agrees to
take all actions reasonably necessary to promptly remove any lien or encumbrance
affecting any of the Purchased Assets as soon as possible after Closing, with
the exception of such encumbrances filed by Merco A Joint Venture (for which the
Seller Shareholder shall provide indemnification against pursuant to separate
agreement to be delivered at Closing).
2. REPRESENTATIONS AND WARRANTIES OF THE SELLER. The Seller and the Seller
Shareholders jointly and severally represent and warrant to the Purchaser the
following, which representations and warranties shall be reaffirmed as of the
Closing Date:
2.1 ORGANIZATION; POWER AND AUTHORITY. The Seller is a corporation duly
incorporated, validly existing and in good standing under the laws of the State
of New York. The Seller is duly authorized to conduct business and the Business,
and is in good standing, under the laws of each jurisdiction where such
qualification is required. The Seller has the corporate power and authority (a)
to own or lease its properties and carry on its business as it is now being
conducted, (b) to enter into this Agreement and to sell, convey, assign,
transfer and deliver the Purchased Assets to the Purchaser as provided herein,
and (c) to carry out the other transactions and agreements contemplated by this
Agreement. The Seller Shareholder has full power and authority to execute and
deliver this Agreement and perform such Seller Shareholder's obligations
hereunder.
2.2 OWNERSHIP OF THE PURCHASED ASSETS. (a) The Seller has good title
to, or a valid leasehold interest in, all of the Purchased Assets, free and
clear of all title defect, liens, claims or other encumbrances of any kind or
character, except for liens for current taxes, assessments and governmental
charges not yet due and payable and except for those liens shown on Schedule
1.3(d) to this Agreement, and subject to the provisions of Section 1.11 to this
Agreement, which liens will be discharged at Closing.
(b) Subject to Section 6.1, the Seller has paid all applicable taxes
that are due and payable with respect to the Purchased Assets.
2.3 DUE AUTHORIZATION; BINDING OBLIGATION. The execution, delivery and
performance of this Agreement and each of the other agreements contemplated by
this Agreement and consummation of the transactions contemplated by this
Agreement have been duly authorized by all necessary corporate actions of the
Seller. This Agreement has been duly executed and delivered by the Seller and is
a valid and binding obligation of the Seller and the Seller Shareholder,
enforceable in accordance with its terms, except as such enforceability may be
limited by bankruptcy, insolvency or similar laws and equitable principals.
Neither the execution and delivery of this Agreement nor the consummation of the
transactions contemplated hereby will: (a) conflict with or violate any
provision of the Seller's articles of incorporation or bylaws, or, to the
Seller's and the Seller Shareholder's knowledge, of any law, ordinance or
regulation or any decree or order of any court or administrative or other
governmental body which is either applicable to, binding upon or enforceable
against any Seller or any Seller Shareholder; or (b) except as set forth on
Schedule 2.3 to this Agreement, result in any breach of or default under any
mortgage, contract, agreement or other instrument which is either binding upon
or enforceable against the Seller, the Seller Shareholder or the Purchased
Assets.
2.4 LITIGATION. Except as set forth on Schedule 2.4 to this Agreement,
there are no actions, suits, claims, governmental investigations or arbitration
proceedings, to the knowledge of the Seller pending or threatened, against or
affecting the Purchased Assets. Except as set forth on Schedule 2.4 to this
Agreement, there are no orders, decrees,
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judgments or stipulations currently in effect issued by any local, state or
federal judicial authority in any proceeding relating to the Purchased Assets to
which the Seller is or was a party or by which the Seller is bound.
2.5 COMPLIANCE WITH LAWS. (a) Subject to Schedule 2.4, the Seller has
operated the Purchased Assets in compliance in all material respects with all
applicable laws, regulations, permits, franchises, licenses and orders. Without
limiting the generality of the foregoing, in the conduct of the business with
respect to the Purchased Assets, to Seller's knowledge, the Seller has not
transported, stored, treated or disposed of any quantities of waste to or at any
location other than a site lawfully permitted to receive such waste for such
purposes; nor to the Seller's knowledge has the Seller performed, arranged for
or allowed by any method or procedure such transportation or disposal in
contravention of any laws or regulations or in any other manner which could
reasonably be expected to result in material liability for contamination of the
environment.
(b) With respect to the conduct of the Business, the Seller has not
received any notification of any past or present failure by the Seller to comply
in any material respect with any laws, regulations, permits, franchises,
licenses or orders applicable to the Purchased Assets. Except as set forth on
Schedule 2.5(b), with respect to the Purchased Assets, the Seller has not
received any notification (including requests for information directed to the
Seller) from any governmental agency asserting that the Seller is or may be a
"potentially responsible person" for a remedial action at a waste storage,
treatment or disposal facility, pursuant to the provisions of the Comprehensive
Environmental Response, Compensation and Liability Act of 1980 ("CERCLA"), or
any other similar federal or state statute assigning responsibility for the
costs of investigating or remediating releases of contaminants into the
environment.
(c) Except as set forth on Schedule 2.4 to this Agreement, the Seller
has complied in all material respects with all applicable laws, of federal,
state, local, and foreign governments (and all agencies thereof) and, to the
Seller's and the Seller Shareholder's knowledge, no action suit, proceeding,
hearing, investigation, charge, complaint, claim, demand or notice has been
filed or commenced against the Seller alleging any failure so to comply.
(d) None of the Seller Shareholder or the directors, officers and
management employees of the Seller has any knowledge of any basis (existing
prior to the Closing) which could reasonably be expected to result in (i) any
failure of the Purchaser (based upon its acquisition of the Business) to comply
in all material respects after the Closing with any and all applicable laws of
federal, state, local and foreign governments (and all agencies thereof), or
(ii) any action, suit, proceeding, hearing, investigation, charge, complaint,
claim, demand or notice being filed or commenced after the Closing against the
Purchaser or any of its Affiliates alleging any failure to so comply.
2.6 SELLER'S SHAREHOLDERS. The Seller Shareholder owns all of the
issued and outstanding capital stock of the Seller.
2.7 SUBSIDIARIES. The Seller does not now have, nor has the Seller in
the past had, any corporation with respect to which any Seller owns a majority
of the common stock or has the power to vote or direct the voting of sufficient
securities to elect a majority of the directors (a "Subsidiary"). The Seller
does not now have nor, except for Merco A Joint Venture, has it had any direct
or indirect equity participation in any corporation, partnership, trust or other
business association.
2.8 EMPLOYMENT TAXES. Proper amounts have been withheld by the Seller
for the employees set forth on Schedule 2.9(a) to this Agreement in compliance
in all material resects with applicable laws. Proper applicable tax
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returns have been filed for which returns were due for employee income tax
withholding, social security and unemployment taxes with respect to the
employees set forth in Schedule 2.9(a).
2.9 EMPLOYEE MATTERS. (a) Set forth on Schedule 2.9(a) is a true,
complete and accurate list of the name, present position, starting date of
employment and rate of compensation of each of Seller's employees directly
involved with the business represented by the Purchased Assets immediately prior
to the Closing. The Seller has no knowledge of any such employees or any
independent contractors servicing the Purchased Assets who will not be available
for employment by the Purchaser after the Closing Date.
(b) Except as may be set forth on Schedule 2.9(b) of this Agreement,
the Seller is not a party to or bound by any employment agreement with any
employee or any collective bargaining agreement or any other agreement with any
labor union.
(c) Set forth on Schedule 2.9(c) is a complete list of (i) all pension
and employee benefit plans (as defined in Section 3 of the Employee Retirement
Income Security Act of 1974, as amended ("ERISA")) maintained or contributed to
by the Sellers and (ii) all other benefit programs available to the Sellers'
employees (collectively, the "Plans"). Such plans comply in form and in
operation with the applicable ERISA requirements, except where the failure to
comply would not have a material adverse effect on the financial condition of
the business with respect to the Purchased Assets. All contributions that are
due have been paid to such Plans. No action, suit, proceeding, hearing or
investigation with respect to the administration or the investment of assets of
any such Plans (other than routine claims for benefits) is pending, except where
such action, suit, proceeding, hearing or investigation would not have a
material adverse effect on the financial condition of the business with respect
to the Purchased Assets.
2.10 CONDUCT OF BUSINESS. Since April 8, 1998, except as otherwise
approved by the prior written consent of the Purchaser, the Seller (i) has
conducted the business and operations with respect to the Purchased Assets in
substantially the same manner in which the same have been traditionally
conducted, and (ii) there has been no material adverse change in the Purchased
Assets.
2.11 NET WORTH. The net worth of the Seller is as shown on Schedule
2.11 to this Agreement. The Sellers is not, and immediately after the
consummation of the transaction contemplated hereunder will not be, "insolvent"
within the meaning of the United States Bankruptcy Code as in effect as of the
Closing Date. The Seller does not intend to, nor believes that it will, incur
debts beyond its ability to pay such debts as they mature.
2.12 FINANCIAL STATEMENTS. Attached hereto as Schedule 2.12 are the
following financial statements (collectively, the "Financial Statements"): (i)
federal tax returns for the period ending October 31, 1994, October 31, 1995 and
October 31, 1996 (the "Most Recent Fiscal Year End") for the Seller. The
Financial Statements present fairly in all material respects the financial
condition of the Seller as of such dates and the results of the operations of
the Seller for such periods, and are consistent with the books and records of
the Seller (which books and records are correct and complete in all material
respects).
2.13 EVENTS SUBSEQUENT TO MOST RECENT FISCAL MONTH END. Since March 31,
1998, there has not been any material adverse change in the Business or the
financial condition, operations or results of operations of the Seller.
2.14 UNDISCLOSED LIABILITIES. The Seller does not have any material
liability (whether known or unknown, asserted or unasserted, absolute or
contingent, accrued or unaccrued, liquidated or unliquidated, and due or to
become due) obligation, charge or tax, and, to the knowledge of the Seller,
there is no basis for any present or future action, suit, proceeding, hearing,
investigation, charge, complaint, claim or demand against any of them which
would give rise to
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<PAGE> 7
a material liability, obligation, charge or claim except for those liabilities,
obligations, charges, taxes or claims (i) shown on the Most Recent Financial
Statements; or (ii) which have arisen in the ordinary course of business of the
Seller (none of which results from, arises out of, relates to, is in the nature
of, or was caused by any breach of contract, breach of warranty, tort,
infringement, or violation of law).
2.15 TAX MATTERS. The Seller has filed all federal and state tax
returns that it is required to file and all taxes shown to be due have been paid
in full. Subject to Schedule 2.15, all such tax returns were correct and
complete in all respects. Subject to Schedule 2.15, no Seller Shareholder or
director, officer or employee responsible for tax matters of the Seller expects
any authority to assess any additional taxes for any period for which tax
returns have been filed.
2.16 REAL PROPERTY. The Seller does not own any real property used in
the Business.
2.17 TANGIBLE ASSETS. The Seller owns or leases all buildings,
machinery, equipment, other tangible assets, permits, licenses and agreements
necessary for the conduct of the Business as presently conducted and as
presently proposed to be conducted. Except as set forth on Schedule 2.17 to this
Agreement, each such tangible asset is in good operating condition and repair,
normal wear and tear excepted. The net book value of these assets is $0.
2.18 CONTRACTS. (a) Schedule 2.18 of this Agreement is an accurate and
complete list of each agreement, contract or commitment to which the Seller is a
party or by which the Seller is bound and which is either (i) material to the
operation of the Business, or (ii) cannot be terminated without liability on 30
days notice or less. The Seller has delivered true and accurate copies of each
of the items shown on Schedule 2.18 of this Agreement.
(b) Neither the Seller nor, to the knowledge of the Seller, any party
thereto or bound thereby, is in material default under any of the contracts,
agreements or instruments comprising Schedule 2.18, and no act or event has
occurred which with notice or lapse of time, or both, would constitute such a
default on the part of the Seller or, to the knowledge of the Seller, any other
party thereto or bound thereby.
(c) With respect to all contract, agreements and instruments comprising
Schedule 2.18:
(i) each is in full force and effect and legally binding upon
the Seller; and
(ii) except as set forth on Schedule 2.3 to this Agreement,
the Seller has not released any of its rights thereunder nor will any other
party bound thereby be released from its obligations nor will any obligations of
any party be affected as the result of the transfer contemplated hereby nor will
the consent of any other party to any of the above be required with respect to
the transfer contemplated hereby.
2.19 INSURANCE. Schedule 2.19 to this Agreement lists all current
policies of liability, property damage, fire, workers' compensation/liability,
title or other forms of insurance related to the Business which are presently
owned or carried by the Seller and insurance agents and/or brokers providing
such insurance coverage and of all performance bonds and letters of credit
securing any obligations of the Seller presently maintained by the Seller in the
conduct of its business.
2.20 SERVICE WARRANTIES. Each service provided by the Seller has been
in conformity in all material respects with all applicable contractual
commitments and all express and implied warranties. Except as otherwise shown on
Schedule 2.20 to this Agreement, no service provided or delivered by the Seller
is subject to any guaranty, warranty or other indemnity beyond the applicable
standard terms and conditions of sale and as provided by applicable law.
Schedule 2.20 includes copies of the standard terms and conditions of sale for
the Sellers (containing applicable guaranty, warranty and indemnity provisions).
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2.21 BUSINESS RELATIONSHIPS. Neither the Seller nor the Seller
Shareholder owns or has an interest in any person or entity (other than the
Seller or Envirotec Leasing and Rental Corporation) conducting a liquid waste
collection, handling or transfer business, other than ancillary to the
laundromat business or real estate ownership and operation.
2.22 INVESTMENT. [This section is intentionally deleted].
2.23 POSSESSION OF FRANCHISES, LICENSES, ETC. The Seller possesses all
franchises, certificates, licenses, permits, clearances, consents and other
authorizations from governmental political subdivisions or regulatory
authorities that are necessary for (i) the continued ownership, maintenance and
operation of the Business, as currently being operated and conducted, (ii) the
continued operation, use and ownership of the Purchased Assets, as currently
being operated and used, and (iii) the servicing of the Customer Accounts, as
currently being serviced (collectively, the "Permits"). Schedule 2.23 to this
Agreement sets forth all of the Permits and for each Permit accurately describes
the expiration and/or renewal date thereof. No material violation of any of the
Permits has occurred that would reasonably likely result in a termination,
cancellation or suspension thereof and the Seller has complied in all material
respects with all applicable covenants and conditions of each of the Permits.
Except as set forth on Schedule 2.23, there is no action, proceeding, permit
revocation, permit amendment, writ, injunction or claim pending or, to the
knowledge of the Seller, threatened, concerning or relating to any of the
Permits.
2.24 ACQUISITION QUESTIONNAIRE. All statements and representations
contained in that certain Acquisition Questionnaire attached to Schedule 2.24 to
this Agreement initialed by the Seller Shareholder and tendered by the Seller to
the Purchaser is true and correct in all material respects.
2.25 DISCLOSURE. The representations and warranties contained in this
Article 2 do not contain any untrue statement of a material fact or omit or fail
to state any material fact necessary in order to make the statements and
information contained in this Article 2, in light of the circumstances in which
they were made, not misleading.
2.26 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. The representations
and warranties contained in this Article 2 shall survive for a period of one (1)
year from the Closing.
3. REPRESENTATIONS AND WARRANTIES OF THE PURCHASER. The Purchaser represents to
the Seller and the Seller Shareholder the following, which representations and
warranties shall be reaffirmed as of the Closing Date:
3.1 ORGANIZATION OF THE PURCHASER. The Purchaser is a corporation duly
incorporated, validly existing and in good standing under the laws of the
jurisdiction of its incorporation. The Purchaser is duly authorized to conduct
business and is in good standing under the laws of each jurisdiction where such
qualification is required. The Purchaser has the corporate power and authority
(a) to own or lease its properties and carry on its business as it is now being
conducted, (b) to enter into this Agreement and to purchase the Purchased Assets
as provided herein, and (c) to carry out the other transactions and agreements
contemplated by this Agreement.
3.2 DUE AUTHORIZATION; BINDING OBLIGATION. The execution, delivery and
performance of this Agreement and each of the other agreements contemplated by
this Agreement and consummation of the transactions contemplated by this
Agreement have been duly authorized by all necessary corporate actions of the
Purchaser. This Agreement has been duly executed and delivered by the Purchaser
and is a valid and binding obligation of the Purchaser, enforceable in
accordance with its terms. Neither the execution and delivery of this Agreement
nor the consummation of the transactions contemplated hereby will: (a) conflict
with or violate any provision of the Purchaser's articles of incorporation or
bylaws, or of any law, ordinance or regulation or any decree or order of any
court or administrative or other governmental body which is either applicable
to, binding upon or enforceable against the Purchaser; or (b) result in any
breach of or default under any mortgage, contract, agreement or other instrument
which is either binding upon or enforceable against the Purchaser.
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3.3 LITIGATION. There are no actions, suits, claims, governmental
investigations or arbitration proceedings, to the knowledge of the Purchaser
pending or threatened, against the Purchaser.
3.4 DISCLOSURE. The representations and warranties contained in this
Article 3 do not contain any untrue statement of a material fact or omit or fail
to state any material fact necessary in order to make the statements and
information contained in this Article 3, in light of the circumstances in which
they were made, not misleading.
3.5 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. The representations and
warranties contained in this Article 3 shall survive for a period of one (1)
year from the Closing.
4. INDEMNIFICATION. The Seller, the Seller Shareholder, the Purchaser and others
are entering into a separate Indemnification Agreement (the "Indemnification
Agreement") at the Closing. The remedies provided therein shall be the sole
remedies available to the parties for claims for money damages arising
hereunder.
5. SECURITY DEPOSIT. The cash portion of the Security Deposit will be held
pursuant to that certain Escrow Agreement between the Seller, the Seller
Shareholder, the Purchaser and others and disbursed in accordance therewith and
the terms of the Indemnification Agreement.
6. MISCELLANEOUS.
6.1 TAXES. The Seller shall pay all federal, state and local income
taxes due as a result of the purchase, sale or transfer of the Purchased Assets
in accordance herewith. The Purchaser shall pay all sales, use and transfer
taxes due as a result of the purchase, sale and transfer of the Purchased
Assets.
6.2 NOTICES. All notices, requests, demands and other communications
required or permitted under this Agreement shall be in writing and shall be (i)
delivered by hand, (ii) mailed by United States registered or certified mail,
return receipt requested, first class prepaid and properly addressed, or (iii)
sent by national overnight courier service to the parties or their permitted
assigns at the address set forth opposite the parties' signatures to this
Agreement. All notices, requests, instructions or documents given to any party
in accordance with this Section 6.2 shall be deemed to have been given (i) on
the date of receipt if delivered by hand or overnight courier service, or (ii)
on the date five (5) days after depositing with the United States Postal Service
if mailed by United States registered or certified mail, return receipt
requested, first class postage prepaid and properly addressed. Any party may
change its address specified for notices by designating a new address in
accordance with this Section 6.2.
6.3 ENTIRE AGREEMENT. All Schedules and Exhibits referred to in this
Agreement are intended to be, and hereby are, specifically incorporated into and
made a part of this Agreement. This Agreement constitutes the entire agreement
among the parties relating to the subject matter hereof and supersedes all prior
and contemporaneous negotiations, writings and agreements relating to the
subject matter of this Agreement.
6.4 MODIFICATIONS, AMENDMENTS AND WAIVERS. The parties may, by mutual
agreement in written form and in no other manner, modify or amend the terms of
this Agreement. The failure or delay of any party at any time or times to
require the performance of any provision of this Agreement shall in no manner
affect its right to enforce that provision. No single or partial waiver by any
party of any condition of this Agreement, or the breach of any term, agreement
or covenant of, or the inaccuracy of any representation or warranty in, this
Agreement, whether by conduct or otherwise, in any one or more instances shall
be construed or deemed to be a further or continuing waiver of any such
condition, breach or inaccuracy or a waiver of any condition, breach or
inaccuracy.
6.5 SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon and
shall inure to the benefit of and be enforceable by the parties to this
Agreement and their respective successors and permitted assigns. This Agreement
may not be assigned by any party without written consent of the other parties,
except that the Purchaser may assign this Agreement and its rights and
obligations hereunder to one or more of its Affiliates or to any of its lenders
as collateral security.
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6.6 GOVERNING LAW. This Agreement shall be controlled, construed and
enforced in accordance with the substantive laws of the State of New York,
without regard to any laws to choice or conflicts of laws.
6.7 SEVERABILITY. Should any one or more of the provisions of this
Agreement be determined to be invalid, illegal or unenforceable in any respect,
the validity, legality and enforceability of the remaining provisions of this
Agreement shall not in any way be adversely affected or impaired thereby. The
parties shall endeavor in good faith to replace the invalid, illegal or
unenforceable provisions with valid provisions the economic effect of which
comes as close as practicable to that of the invalid, illegal or unenforceable
provisions.
6.8 NO BENEFIT TO OTHERS. The representations, warranties, covenants
and agreements contained into this Agreement are for the sole benefit of the
parties and, in the case of Article 4 hereof, the other Indemnified Parties, and
their respective heirs, executors, administrators, legal representatives,
successors and assigns, and they shall not be construed as conferring any rights
on any other person.
6.9 CONSTRUCTION. The parties intend that each representation, warranty
and covenant contained herein shall have independent significance. If any party
has breached any representation, warranty or covenant contained in this
Agreement in any respect, the fact that there exists another representation,
warranty or covenant relating to the same subject matter (regardless of the
relative levels of specificity) that the party has not breached shall not
detract from or mitigate the fact that the party is in breach of the first
representation, warranty or covenant.
6.10 EXPENSES. Except as otherwise provided herein, each of the parties
will bear such party's own costs and expenses (including legal fees and
expenses) incurred in connection with this Agreement and the transactions
contemplated hereby.
6.11 FURTHER ASSURANCES. From time to time, at any party's request and
without further consideration (unless the requesting party is entitled to
indemnity therefor as provided herein), the other parties will execute and
deliver to the requesting party such documents and take such other action as
such party may reasonably request in order to consummate more effectively the
transactions contemplated by this Agreement.
6.12 KNOWLEDGE. Whenever the term "to the best of the knowledge" of a
party is used, such term shall mean that the party making such representation or
warranty has conducted a reasonable investigation to determine the existence or
absence of the facts represented or warranted.
IN WITNESS WHEROF, the parties have executed this Agreement as of the
date first above written.
SELLER:
Advanced Transfer Technology, Inc.
Address: By: /s/ Steve Macchio
------------------------- ----------------------------------
Name:
------------------------- --------------------------------
Title:
------------------------- -------------------------------
SELLER SHAREHOLDER:
Address: /s/ Steve Macchio
------------------------- ----------------------------------
Steve Macchio
-------------------------
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<PAGE> 1
ASSET PURCHASE AGREEMENT
This Asset Purchase Agreement (the "Agreement") is made as of the 30th
day of April, 1998, by and between SANTI GROUP OF NEW YORK, INC., a Georgia
corporation, or its nominee or designee (the "Purchaser"), ENVIROTEC LEASING AND
RENTAL CORPORATION, a New York corporation (the "Sellers"), and STEVE MACCHIO
(the "Seller Shareholder").
W I T N E S S E T H:
WHEREAS, the Seller owns certain contract rights, customer accounts,
trucks, containers and other assets and is engaged in the non-hazardous liquid
waste collection, transfer and handling business in the New York metropolitan
area, including but not limited to, under the names "Envirotec Leasing and
Rental" (the "Business"); and
WHEREAS, this Agreement contemplates a transaction in which the
Purchaser will purchase all of the assets of the Seller used in the Business and
assume certain of the liabilities of the Seller in return for payment of the
Purchase Price (as defined below);
NOW, THEREFORE, in consideration of the premises, mutual
representations, warranties, covenants and promises made in this Agreement, and
subject to the conditions contained in this Agreement, the parties agree as
follows:
1. PURCHASE AND SALE OF ASSETS; CLOSING.
1.1 PURCHASED ASSETS. Upon the execution of this Agreement and
effective as of 12:01 a.m. on the Closing Date (the "Time of Closing"), the
Seller agrees to sell, transfer, assign and deliver to the Purchaser, free and
clear of all liens, claims and encumbrances (except those which the Purchaser
has expressly agreed to assume in Section 1.3(c) hereof) the following assets
(the "Purchased Assets"):
(a) the machinery, equipment, vehicles and other operating assets owned by
the Seller identified on Schedule 1.1(a) to this Agreement (the "Operating
Assets");
(b) the Seller's right, title and interest (to the extent assignable and
transferable) in the customer accounts, customer accounts contracts, service
agreements, purchase orders and other rights to provide services to the
customers of Seller (collectively the "Customer Accounts"), other than those
customer accounts, rights, or contracts identified on Schedule 1.2 to this
Agreement;
(c) operating data (in both hard copy and computer format if available)
relevant to the Customer Accounts, including credit and accounting records for
the preceding twelve month period, customer contacts, phone numbers and
addresses, to the extent available (the "Operating Data");
(d) the Seller's files, correspondence, records, and related proprietary
information and other property that is necessary, helpful or related to
providing the services related to the Business;
(e) the Seller's intellectual property (including, but not limited to, the
name "R.G.M. Liquid Waste Removal"), goodwill associated therewith, licenses and
sublicenses granted and obtained with respect thereto;
<PAGE> 2
(f) to the extent transferable, franchises, approvals, permits, licenses
(including radio transmitter licenses), registrations, certificates, variances
and similar rights obtained from any government or agency thereof;
(g) the Seller's servicemarks, trademarks and logos; and
(h) telephone numbers and yellow page advertisings used in the Business.
1.2 EXCLUDED ASSETS. Anything to the contrary in Section 1.1
notwithstanding, the Purchased Assets shall exclude the following assets of the
Seller (collectively, the "Excluded Assets"):
(a) any corporate minute books, stock records and other corporate
records of the Seller;
(b) all note, accounts and other receivables of the Seller arising
prior to the Time of Closing;
(c) all cash, claims, deposits, refunds, causes of action, rights of
recovery and/or setoff and securities, and prepayments, retainage, security and
permit fees to the extent attributable to periods after the Closing;
(d) all leasehold improvements, fixtures and fittings used in the
Business;
(e) all insurance and bond premiums and other prepaid expenses (all as
outlined on Schedule 1.2 to this Agreement), to the extent relating to any
period after the Time of Closing; and
(f) any assets of the Seller specifically set forth on Schedule 1.2 to
this Agreement, including but not limited to those customer accounts, rights or
contracts set forth on Schedule 1.2.
1.3 PURCHASE PRICE; ALLOCATION; PAYMENT. (a) As consideration for the
Purchased Assets and that certain Nondisclosure, Noncompetition and
Nonsolicitation Agreement to be entered into by the Purchaser, the Seller and
the Seller Shareholder (the "Nondisclosure Agreement"), the Purchaser agrees,
subject to the terms, conditions and limitations set forth in this Agreement, to
issue and deliver to the Seller the following (collectively, the "Purchase
Price"): (i) 80,000 shares of the common stock of SanTi Group, Inc., a Delaware
corporation (the "SanTi Stock"), and (ii) documentation effecting the assumption
of the Assumed Liabilities (as defined below). The Seller acknowledges and
agrees that the Purchaser is retaining 27,500 shares of SanTi Stock (the
"Security Deposit") to be held pursuant to the provisions of the Indemnification
Agreement (as defined below). The Purchaser may, at its election, cause the
Security Deposit to not be issued by SanTi Group, Inc. until the time that such
SanTi Stock is due under the Indemnification Agreement.
(b) The parties agree that the Purchase Price shall be allocated
consistent with the Internal Revenue Code of 1986, as amended, and in accordance
with the allocation schedule to be agreed upon by the parties at or before the
Closing, which allocation shall be adhered to by the parties in filing all
returns to the appropriate taxing authorities.
(c) On and subject to the terms and conditions of this Agreement, and
effective as of the Time of Closing, the Purchaser shall assume and become
responsible for all of the liabilities of the
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Seller set forth on Schedule 1.3(c) of this Agreement (the "Assumed
Liabilities"). Except for the Assumed Liabilities, nothing in this Agreement or
any other document entered into on the Closing Date shall in any way obligate
the Purchaser in any way for any liability (whether known or unknown, asserted
or unasserted, absolute or contingent, accrued or unaccrued, liquidated or
unliquidated, and due, or to become due), obligation, charges or tax of the
Seller, any of its subsidiaries, affiliates or related entities, or
shareholders, officers, directors, agents, or employees of the Seller.
(d) Notwithstanding anything contained herein to the contrary,
Purchaser shall have no responsibility whatsoever with respect to the following
liabilities, contracts, commitments, and other obligations of the Seller
(collectively, the "Excluded Liabilities"):
(i) any obligations or liabilities of the Seller arising
under this Agreement;
(ii) any lien or encumbrance affecting any of the Purchased
Assets, as set forth on Schedule 1.3(d) to this Agreement, which liens or
encumbrances, subject to the provisions of Section 1.11 of this Agreement,
subject to the provisions of Section 1.11 of this Agreement, will be removed at
Closing;
(iii) except as set forth in Section 6.1 of this Agreement,
any obligation of the Seller for federal, state or local income tax liability
(including interest and penalties) arising from the operations of the Seller up
to the Time of Closing or arising out of the sale by the Seller of the Purchased
Assets pursuant to the terms of this Agreement;
(iv) any obligation of the Seller for expenses incurred in
connection with the sale of the Purchased Assets pursuant to the terms of this
Agreement; or
(v) any other liability or obligation of the Seller for
expenses incurred in connection with the sale of the Purchased Assets pursuant
to this Agreement.
1.4 TIME AND PLACE OF THE CLOSING. The Closing of the sale of the
Purchased Assets (the "Closing") shall take place at the offices of Purchaser at
10:00 a.m. local time, on May 1, 1998 (the "Closing Date"), or at such other
time and location as may be mutually agreed upon by the parties.
1.5 PROCEDURE AT THE CLOSING. At the Closing, the parties will take the
following actions and the completion of each action shall be a further condition
to the Closing:
(a) the Seller shall deliver to the Purchaser, in form reasonably
satisfactory to the Purchaser, such deeds, bills of sale, endorsements,
assignments, receipts and other instruments, as shall be sufficient to vest in
the Purchaser good title to the Purchased Assets, free and clear of all liens,
claims and encumbrances, except as otherwise permitted by this Agreement;
(b) the Purchaser shall deliver to the Seller the Purchase Price in
accordance with the provisions of Section 1.3(a) above;
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(c) the Purchaser shall deliver to the Seller, in form and content
reasonably satisfactory to the Seller, instruments of assumption relating to the
Assumed Liabilities;
(d) the Purchaser shall enter into a lease with Equitable Realty for
certain property located at 972 and 977 Nicolls Road, Deer Park, New York
containing conditions to be as mutually agreed;
(e) the Purchaser shall enter into an employment agreement with Steve
Macchio, containing terms and conditions to be as mutually agreed;
(f) the Purchaser shall enter into a consulting agreement with Ralph
Macchio, containing terms and conditions to be as mutually agreed;
(g) the Seller and the Seller Shareholder shall enter into a
nondisclosure, noncompetition and nonsolicitation agreement, containing terms
and conditions to be as mutually agreed;
(h) SanTi Group, Inc. shall deliver to the Seller and the Seller
Shareholder a guaranty of the Purchaser's obligations under this Agreement and
under the other agreements of the Purchaser contemplated by this Agreement,
containing terms and conditions to be as mutually agreed;
(i) the Seller, the Seller Shareholder and SanTi Group, Inc. shall
enter into an agency agreement covering any nontransferable and/or nonassignable
Customer Accounts or Permits, containing terms and conditions to be as mutually
agreed;
(j) the Seller, the Seller Shareholder, the Purchaser and such other
parties as may be appropriate or necessary shall enter into the Indemnification
Agreement, containing terms and conditions to be as mutually agreed;
(k) the Seller shall execute subscription documents and an investor
questionnaire relating to the issuance of the SanTi Stock; and
(l) each party shall deliver to the other party such other documents,
certificates and other instruments as may be contemplated by this Agreement or
necessary to accomplish the transaction contemplated by this Agreement.
1.6 USE OF NAME; RECEIVABLES. Following the Time of Closing, the
Sellers shall not use or give permission to any other person or entity to use
the name "Envirotec Leasing and Rental" or any substantially similar name in
connection with any business or enterprise. Notwithstanding the foregoing, the
Seller is hereby granted a license to use such name for the sole purposes of
collecting receivables, and maintaining bank accounts for as short a period of
time after the Time of Closing as is commercially reasonable in order to wind up
its affairs, provided that any such use does not in any way adversely affect the
Purchaser. In that regard, the Purchaser shall cooperate with the Seller from
time to time as the Seller may reasonably request in connection with the
Seller's efforts to collect its receivables.
1.7 CONFIDENTIALITY. The Purchaser, the Seller and the Seller
Shareholder each agree that for a period of five (5) years after the Closing
Date, none of them nor any other person connected with any of them shall at any
time divulge, and each of them shall cause their respective agents, employees
and Affiliates (as such term is defined in Rule 12b-2 of the regulations
promulgated under the Securities Exchange Act of 1934, as amended) not to
divulge the existence and terms of negotiations resulting in this Agreement, the
terms and conditions of this Agreement and the
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financing arrangements of the Purchaser and its Affiliates, except as required
by applicable federal, state or local statutes pursuant to subpoena or court
order, or as required to enforce its rights under this Agreement.
1.8 TELEPHONE REFERRALS. From and after the Closing Date, the Sellers
shall refer, and cause its agents to refer, all telephone calls to it or them
for septic tank service and liquid waste collection, transfer and handling to
the Purchaser.
1.9 COOPERATION WITH AUDITS. The Seller and the Seller Shareholder
agree to cooperate with the Purchaser in conducting any audits of the Business
during the period of time preceding the Closing, which audits shall be at the
Purchaser's sole expense.
1.10 PRESERVATION OF FILES AND RECORDS; ACCESS BY THE SELLER. The
Purchaser agrees to preserve and maintain for a period of not less than seven
(7) years from the Closing Date substantially all files, correspondence, records
and related proprietary information and other property acquired by the Purchaser
from the Seller which are part of the Purchased Assets. The Seller shall have
access after reasonable notice to the Purchaser to such files, correspondence,
records and related proprietary information to the extent reasonably necessary.
1.11 ENCUMBRANCES AFFECTING THE PURCHASED ASSETS. The Seller agrees to
take all actions reasonably necessary to promptly remove any lien or encumbrance
affecting any of the Purchased Assets as soon as possible after Closing, with
the exception of such encumbrances filed by Merco A Joint Venture (for which the
Seller Shareholder shall provide indemnification against pursuant to separate
agreement to be delivered at Closing).
2. REPRESENTATIONS AND WARRANTIES OF THE SELLER. The Seller and the Seller
Shareholders jointly and severally represent and warrant to the Purchaser the
following, which representations and warranties shall be reaffirmed as of the
Closing Date:
2.1 ORGANIZATION; POWER AND AUTHORITY. The Seller is a corporation duly
incorporated, validly existing and in good standing under the laws of the State
of New York. The Seller is duly authorized to conduct business and the Business,
and is in good standing, under the laws of each jurisdiction where such
qualification is required. The Seller has the corporate power and authority (a)
to own or lease its properties and carry on its business as it is now being
conducted, (b) to enter into this Agreement and to sell, convey, assign,
transfer and deliver the Purchased Assets to the Purchaser as provided herein,
and (c) to carry out the other transactions and agreements contemplated by this
Agreement. The Seller Shareholder has full power and authority to execute and
deliver this Agreement and perform such Seller Shareholder's obligations
hereunder.
2.2 OWNERSHIP OF THE PURCHASED ASSETS. (a) The Seller has good title
to, or a valid leasehold interest in, all of the Purchased Assets, free and
clear of all title defect, liens, claims or other encumbrances of any kind or
character, except for liens for current taxes, assessments and governmental
charges not yet due and payable and except for those liens shown on Schedule
1.3(d) to this Agreement, and subject to the provisions of Section 1.11 to this
Agreement, which liens will be discharged at Closing.
(b) Subject to Section 6.1, the Seller has paid all applicable taxes
that are due and payable with respect to the Purchased Assets.
2.3 DUE AUTHORIZATION; BINDING OBLIGATION. The execution, delivery and
performance of this Agreement and each of the other agreements contemplated by
this Agreement and consummation of the transactions contemplated by this
Agreement have been duly authorized by all necessary corporate actions of the
Seller. This Agreement has been duly executed and delivered by the Seller and is
a valid and binding obligation of the Seller and the Seller Shareholder,
enforceable in accordance with its terms, except as such enforceability may be
limited by bankruptcy, insolvency or similar laws and equitable principals.
Neither the execution and delivery of this Agreement nor the consummation of the
transactions contemplated hereby will: (a) conflict with or violate any
provision of the Seller's articles of incorporation or bylaws, or, to the
Seller's and the Seller Shareholder's knowledge, of any law, ordinance or
regulation or any decree or order of any court or administrative or other
governmental body which is either applicable to, binding
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upon or enforceable against any Seller or any Seller Shareholder; or (b) except
as set forth on Schedule 2.3 to this Agreement, result in any breach of or
default under any mortgage, contract, agreement or other instrument which is
either binding upon or enforceable against the Seller, the Seller Shareholder or
the Purchased Assets.
2.4 LITIGATION. Except as set forth on Schedule 2.4 to this Agreement,
there are no actions, suits, claims, governmental investigations or arbitration
proceedings, to the knowledge of the Seller pending or threatened, against or
affecting the Purchased Assets. Except as set forth on Schedule 2.4 to this
Agreement, there are no orders, decrees, judgments or stipulations currently in
effect issued by any local, state or federal judicial authority in any
proceeding relating to the Purchased Assets to which the Seller is or was a
party or by which the Seller is bound.
2.5 COMPLIANCE WITH LAWS. (a) Subject to Schedule 2.4, the Seller has
operated the Purchased Assets in compliance in all material respects with all
applicable laws, regulations, permits, franchises, licenses and orders. Without
limiting the generality of the foregoing, in the conduct of the business with
respect to the Purchased Assets, to Seller's knowledge, the Seller has not
transported, stored, treated or disposed of any quantities of waste to or at any
location other than a site lawfully permitted to receive such waste for such
purposes; nor to the Seller's knowledge has the Seller performed, arranged for
or allowed by any method or procedure such transportation or disposal in
contravention of any laws or regulations or in any other manner which could
reasonably be expected to result in material liability for contamination of the
environment.
(b) With respect to the conduct of the Business, the Seller has not
received any notification of any past or present failure by the Seller to comply
in any material respect with any laws, regulations, permits, franchises,
licenses or orders applicable to the Purchased Assets. Except as set forth on
Schedule 2.5(b), with respect to the Purchased Assets, the Seller has not
received any notification (including requests for information directed to the
Seller) from any governmental agency asserting that the Seller is or may be a
"potentially responsible person" for a remedial action at a waste storage,
treatment or disposal facility, pursuant to the provisions of the Comprehensive
Environmental Response, Compensation and Liability Act of 1980 ("CERCLA"), or
any other similar federal or state statute assigning responsibility for the
costs of investigating or remediating releases of contaminants into the
environment.
(c) Except as set forth on Schedule 2.4 to this Agreement, the Seller
has complied in all material respects with all applicable laws, of federal,
state, local, and foreign governments (and all agencies thereof) and, to the
Seller's and the Seller Shareholder's knowledge, no action suit, proceeding,
hearing, investigation, charge, complaint, claim, demand or notice has been
filed or commenced against the Seller alleging any failure so to comply.
(d) None of the Seller Shareholder or the directors, officers and
management employees of the Seller has any knowledge of any basis (existing
prior to the Closing) which could reasonably be expected to result in (i) any
failure of the Purchaser (based upon its acquisition of the Business) to comply
in all material respects after the Closing with any and all applicable laws of
federal, state, local and foreign governments (and all agencies thereof), or
(ii) any action, suit, proceeding, hearing, investigation, charge, complaint,
claim, demand or notice being filed or commenced after the Closing against the
Purchaser or any of its Affiliates alleging any failure to so comply.
2.6 SELLER'S SHAREHOLDERS. The Seller Shareholder owns all of the
issued and outstanding capital stock of the Seller.
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2.7 SUBSIDIARIES. The Seller does not now have, nor has the Seller in
the past had, any corporation with respect to which any Seller owns a majority
of the common stock or has the power to vote or direct the voting of sufficient
securities to elect a majority of the directors (a "Subsidiary"). The Seller
does not now have nor, except for Merco A Joint Venture, has it had any direct
or indirect equity participation in any corporation, partnership, trust or other
business association.
2.8 EMPLOYMENT TAXES. Proper amounts have been withheld by the Seller
for the employees set forth on Schedule 2.9(a) to this Agreement in compliance
in all material resects with applicable laws. Proper applicable tax returns have
been filed for which returns were due for employee income tax withholding,
social security and unemployment taxes with respect to the employees set forth
in Schedule 2.9(a).
2.9 EMPLOYEE MATTERS. (a) Set forth on Schedule 2.9(a) is a true,
complete and accurate list of the name, present position, starting date of
employment and rate of compensation of each of Seller's employees directly
involved with the business represented by the Purchased Assets immediately prior
to the Closing. The Seller has no knowledge of any such employees or any
independent contractors servicing the Purchased Assets who will not be available
for employment by the Purchaser after the Closing Date.
(b) Except as may be set forth on Schedule 2.9(b) of this Agreement,
the Seller is not a party to or bound by any employment agreement with any
employee or any collective bargaining agreement or any other agreement with any
labor union.
(c) Set forth on Schedule 2.9(c) is a complete list of (i) all pension
and employee benefit plans (as defined in Section 3 of the Employee Retirement
Income Security Act of 1974, as amended ("ERISA")) maintained or contributed to
by the Sellers and (ii) all other benefit programs available to the Sellers'
employees (collectively, the "Plans"). Such plans comply in form and in
operation with the applicable ERISA requirements, except where the failure to
comply would not have a material adverse effect on the financial condition of
the business with respect to the Purchased Assets. All contributions that are
due have been paid to such Plans. No action, suit, proceeding, hearing or
investigation with respect to the administration or the investment of assets of
any such Plans (other than routine claims for benefits) is pending, except where
such action, suit, proceeding, hearing or investigation would not have a
material adverse effect on the financial condition of the business with respect
to the Purchased Assets.
2.10 CONDUCT OF BUSINESS. Since April 8, 1998, except as otherwise
approved by the prior written consent of the Purchaser, the Seller (i) has
conducted the business and operations with respect to the Purchased Assets in
substantially the same manner in which the same have been traditionally
conducted, and (ii) there has been no material adverse change in the Purchased
Assets.
2.11 NET WORTH. The net worth of the Seller is as shown on Schedule
2.11 to this Agreement. The Sellers is not, and immediately after the
consummation of the transaction contemplated hereunder will not be, "insolvent"
within the meaning of the United States Bankruptcy Code as in effect as of the
Closing Date. The Seller does not intend to, nor believes that it will, incur
debts beyond its ability to pay such debts as they mature.
2.12 FINANCIAL STATEMENTS. Attached hereto as Schedule 2.12 are the
following financial statements (collectively, the "Financial Statements"): (i)
federal tax returns for the period ending October 31, 1994, October 31, 1995 and
October 31, 1996 (the "Most Recent Fiscal Year End") for the Seller. The
Financial Statements present fairly in all material respects the financial
condition of the Seller as of such dates and the results of the operations of
the Seller for such periods, and are consistent with the books and records of
the Seller (which books and records are correct and complete in all material
respects).
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2.13 EVENTS SUBSEQUENT TO MOST RECENT FISCAL MONTH END. Since March 31,
1998, there has not been any material adverse change in the Business or the
financial condition, operations or results of operations of the Seller.
2.14 UNDISCLOSED LIABILITIES. The Seller does not have any material
liability (whether known or unknown, asserted or unasserted, absolute or
contingent, accrued or unaccrued, liquidated or unliquidated, and due or to
become due) obligation, charge or tax, and, to the knowledge of the Seller,
there is no basis for any present or future action, suit, proceeding, hearing,
investigation, charge, complaint, claim or demand against any of them which
would give rise to a material liability, obligation, charge or claim except for
those liabilities, obligations, charges, taxes or claims (i) shown on the Most
Recent Financial Statements; or (ii) which have arisen in the ordinary course of
business of the Seller (none of which results from, arises out of, relates to,
is in the nature of, or was caused by any breach of contract, breach of
warranty, tort, infringement, or violation of law).
2.15 TAX MATTERS. The Seller has filed all federal and state tax
returns that it is required to file and all taxes shown to be due have been paid
in full. Subject to Schedule 2.15, all such tax returns were correct and
complete in all respects. Subject to Schedule 2.15, no Seller Shareholder or
director, officer or employee responsible for tax matters of the Seller expects
any authority to assess any additional taxes for any period for which tax
returns have been filed.
2.16 REAL PROPERTY. The Seller does not own any real property used in
the Business.
2.17 TANGIBLE ASSETS. The Seller owns or leases all buildings,
machinery, equipment, other tangible assets, permits, licenses and agreements
necessary for the conduct of the Business as presently conducted and as
presently proposed to be conducted. Except as set forth on Schedule 2.17 to this
Agreement, each such tangible asset is in good operating condition and repair,
normal wear and tear excepted. The net book value of these assets is $512,166.
2.18 CONTRACTS. (a) Schedule 2.18 of this Agreement is an accurate and
complete list of each agreement, contract or commitment to which the Seller is a
party or by which the Seller is bound and which is either (i) material to the
operation of the Business, or (ii) cannot be terminated without liability on 30
days notice or less. The Seller has delivered true and accurate copies of each
of the items shown on Schedule 2.18 of this Agreement.
(b) Neither the Seller nor, to the knowledge of the Seller, any party
thereto or bound thereby, is in material default under any of the contracts,
agreements or instruments comprising Schedule 2.18, and no act or event has
occurred which with notice or lapse of time, or both, would constitute such a
default on the part of the Seller or, to the knowledge of the Seller, any other
party thereto or bound thereby.
(c) With respect to all contract, agreements and instruments comprising
Schedule 2.18:
(i) each is in full force and effect and legally binding upon
the Seller; and
(ii) except as set forth on Schedule 2.3 to this Agreement,
the Seller has not released any of its rights thereunder nor will any other
party bound thereby be released from its obligations nor will any obligations of
any party be affected as the result of the transfer contemplated hereby nor will
the consent of any other party to any of the above be required with respect to
the transfer contemplated hereby.
2.19 INSURANCE. Schedule 2.19 to this Agreement lists all current
policies of liability, property damage, fire, workers' compensation/liability,
title or other forms of insurance related to the Business which are presently
owned or carried by the Seller and insurance agents and/or brokers providing
such insurance coverage and of all performance bonds and letters of credit
securing any obligations of the Seller presently maintained by the Seller in the
conduct of its business.
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2.20 SERVICE WARRANTIES. Each service provided by the Seller has been
in conformity in all material respects with all applicable contractual
commitments and all express and implied warranties. Except as otherwise shown on
Schedule 2.20 to this Agreement, no service provided or delivered by the Seller
is subject to any guaranty, warranty or other indemnity beyond the applicable
standard terms and conditions of sale and as provided by applicable law.
Schedule 2.20 includes copies of the standard terms and conditions of sale for
the Sellers (containing applicable guaranty, warranty and indemnity provisions).
2.21 BUSINESS RELATIONSHIPS. Neither the Seller nor the Seller
Shareholder owns or has an interest in any person or entity (other than the
Seller and Advanced Transfer Technology, Inc.) conducting a liquid waste
collection, handling or transfer business, other than ancillary to the
laundromat business or real estate ownership and operation.
2.22 INVESTMENT. Each of the Seller and the Seller Shareholders (i)
understands that the SanTi Stock has not been, and will not at the Closing be,
registered under the Securities Act of 1933, as amended (the "Securities Act"),
or under any state securities laws, and is being offered and sold in reliance
upon federal and state exemptions for transactions not involving any public
offering, (ii) understands that the Seller is acquiring the SanTi Stock solely
for its own account for investment purpose, and not with a view to the
distribution thereof, (iii) has received certain information concerning the
Purchaser and SanTi and has had the opportunity to obtain additional information
as desired in order to evaluate the merits and the risks inherent in holding the
SanTi Stock, (iv) is able to bear the economic risk and lack of liquidity
inherent in holding the SanTi Stock, and (v) is an Accredited Investor (as such
term is defined in Regulation D promulgated under the Securities Act) for the
reasons set forth in Schedule 2.22 to this Agreement.
2.23 POSSESSION OF FRANCHISES, LICENSES, ETC. The Seller possesses all
franchises, certificates, licenses, permits, clearances, consents and other
authorizations from governmental political subdivisions or regulatory
authorities that are necessary for (i) the continued ownership, maintenance and
operation of the Business, as currently being operated and conducted, (ii) the
continued operation, use and ownership of the Purchased Assets, as currently
being operated and used, and (iii) the servicing of the Customer Accounts, as
currently being serviced (collectively, the "Permits"). Schedule 2.23 to this
Agreement sets forth all of the Permits and for each Permit accurately describes
the expiration and/or renewal date thereof. No material violation of any of the
Permits has occurred that would reasonably likely result in a termination,
cancellation or suspension thereof and the Seller has complied in all material
respects with all applicable covenants and conditions of each of the Permits.
Except as set forth on Schedule 2.23, there is no action, proceeding, permit
revocation, permit amendment, writ, injunction or claim pending or, to the
knowledge of the Seller, threatened, concerning or relating to any of the
Permits.
2.24 ACQUISITION QUESTIONNAIRE. All statements and representations
contained in that certain Acquisition Questionnaire attached to Schedule 2.24 to
this Agreement initialed by the Seller Shareholder and tendered by the Seller to
the Purchaser is true and correct in all material respects.
2.25 DISCLOSURE. The representations and warranties contained in this
Article 2 do not contain any untrue statement of a material fact or omit or fail
to state any material fact necessary in order to make the statements and
information contained in this Article 2, in light of the circumstances in which
they were made, not misleading.
2.26 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. The representations
and warranties contained in this Article 2 shall survive for a period of one (1)
year from the Closing.
3. REPRESENTATIONS AND WARRANTIES OF THE PURCHASER. The Purchaser represents to
the Seller and the Seller Shareholder the following, which representations and
warranties shall be reaffirmed as of the Closing Date:
3.1 ORGANIZATION OF THE PURCHASER. The Purchaser is a corporation duly
incorporated, validly existing and in good standing under the laws of the
jurisdiction of its incorporation. The Purchaser is duly authorized to conduct
business and is in good standing under the laws of each jurisdiction where such
qualification is required. The Purchaser has the corporate power and authority
(a) to own or lease its properties and carry on its business as it is now being
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conducted, (b) to enter into this Agreement and to purchase the Purchased Assets
as provided herein, and (c) to carry out the other transactions and agreements
contemplated by this Agreement.
3.2 DUE AUTHORIZATION; BINDING OBLIGATION. The execution, delivery and
performance of this Agreement and each of the other agreements contemplated by
this Agreement and consummation of the transactions contemplated by this
Agreement have been duly authorized by all necessary corporate actions of the
Purchaser. This Agreement has been duly executed and delivered by the Purchaser
and is a valid and binding obligation of the Purchaser, enforceable in
accordance with its terms. Neither the execution and delivery of this Agreement
nor the consummation of the transactions contemplated hereby will: (a) conflict
with or violate any provision of the Purchaser's articles of incorporation or
bylaws, or of any law, ordinance or regulation or any decree or order of any
court or administrative or other governmental body which is either applicable
to, binding upon or enforceable against the Purchaser; or (b) result in any
breach of or default under any mortgage, contract, agreement or other instrument
which is either binding upon or enforceable against the Purchaser.
3.3 LITIGATION. There are no actions, suits, claims, governmental
investigations or arbitration proceedings, to the knowledge of the Purchaser
pending or threatened, against the Purchaser.
3.4 DISCLOSURE. Neither the representations and warranties contained in
this Article 3 nor the statements in the offering memorandum provided to the
Seller in connection with the SanTi Stock contain any untrue statement of a
material fact or omit or fail to state any material fact necessary in order to
make the statements and information contained in this Article 3 or in such
offering memorandum, in light of the circumstances in which they were made, not
misleading.
3.5 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. The representations and
warranties contained in this Article 3 shall survive for a period of one (1)
year from the Closing.
4. INDEMNIFICATION. The Seller, the Seller Shareholder, the Purchaser and others
are entering into a separate Indemnification Agreement (the "Indemnification
Agreement") at the Closing. The remedies provided therein shall be the sole
remedies available to the parties for claims for money damages arising
hereunder.
5. SECURITY DEPOSIT. [This section is intentionally deleted]
6. MISCELLANEOUS.
6.1 TAXES. The Seller shall pay all federal, state and local income
taxes due as a result of the purchase, sale or transfer of the Purchased Assets
in accordance herewith. The Purchaser shall pay all sales, use and transfer
taxes due as a result of the purchase, sale and transfer of the Purchased
Assets.
6.2 NOTICES. All notices, requests, demands and other communications
required or permitted under this Agreement shall be in writing and shall be (i)
delivered by hand, (ii) mailed by United States registered or certified mail,
return receipt requested, first class prepaid and properly addressed, or (iii)
sent by national overnight courier service to the parties or their permitted
assigns at the address set forth opposite the parties' signatures to this
Agreement. All notices, requests, instructions or documents given to any party
in accordance with this Section 6.2 shall be deemed to have been given (i) on
the date of receipt if delivered by hand or overnight courier service, or (ii)
on the date five (5) days after depositing with the United States Postal Service
if mailed by United States registered or certified mail, return receipt
requested, first class postage prepaid and properly addressed. Any party may
change its address specified for notices by designating a new address in
accordance with this Section 6.2.
6.3 ENTIRE AGREEMENT. All Schedules and Exhibits referred to in this
Agreement are intended to be, and hereby are, specifically incorporated into and
made a part of this Agreement. This Agreement constitutes the entire agreement
among the parties relating to the subject matter hereof and supersedes all prior
and contemporaneous negotiations, writings and agreements relating to the
subject matter of this Agreement.
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6.4 MODIFICATIONS, AMENDMENTS AND WAIVERS. The parties may, by mutual
agreement in written form and in no other manner, modify or amend the terms of
this Agreement. The failure or delay of any party at any time or times to
require the performance of any provision of this Agreement shall in no manner
affect its right to enforce that provision. No single or partial waiver by any
party of any condition of this Agreement, or the breach of any term, agreement
or covenant of, or the inaccuracy of any representation or warranty in, this
Agreement, whether by conduct or otherwise, in any one or more instances shall
be construed or deemed to be a further or continuing waiver of any such
condition, breach or inaccuracy or a waiver of any condition, breach or
inaccuracy.
6.5 SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon and
shall inure to the benefit of and be enforceable by the parties to this
Agreement and their respective successors and permitted assigns. This Agreement
may not be assigned by any party without written consent of the other parties,
except that the Purchaser may assign this Agreement and its rights and
obligations hereunder to one or more of its Affiliates or to any of its lenders
as collateral security.
6.6 GOVERNING LAW. This Agreement shall be controlled, construed and
enforced in accordance with the substantive laws of the State of New York,
without regard to any laws to choice or conflicts of laws.
6.7 SEVERABILITY. Should any one or more of the provisions of this
Agreement be determined to be invalid, illegal or unenforceable in any respect,
the validity, legality and enforceability of the remaining provisions of this
Agreement shall not in any way be adversely affected or impaired thereby. The
parties shall endeavor in good faith to replace the invalid, illegal or
unenforceable provisions with valid provisions the economic effect of which
comes as close as practicable to that of the invalid, illegal or unenforceable
provisions.
6.8 NO BENEFIT TO OTHERS. The representations, warranties, covenants
and agreements contained into this Agreement are for the sole benefit of the
parties and, in the case of Article 4 hereof, the other Indemnified Parties, and
their respective heirs, executors, administrators, legal representatives,
successors and assigns, and they shall not be construed as conferring any rights
on any other person.
6.9 CONSTRUCTION. The parties intend that each representation, warranty
and covenant contained herein shall have independent significance. If any party
has breached any representation, warranty or covenant contained in this
Agreement in any respect, the fact that there exists another representation,
warranty or covenant relating to the same subject matter (regardless of the
relative levels of specificity) that the party has not breached shall not
detract from or mitigate the fact that the party is in breach of the first
representation, warranty or covenant.
6.10 EXPENSES. Except as otherwise provided herein, each of the parties
will bear such party's own costs and expenses (including legal fees and
expenses) incurred in connection with this Agreement and the transactions
contemplated hereby.
6.11 FURTHER ASSURANCES. From time to time, at any party's request and
without further consideration (unless the requesting party is entitled to
indemnity therefor as provided herein), the other parties will execute and
deliver to the requesting party such documents and take such other action as
such party may reasonably request in order to consummate more effectively the
transactions contemplated by this Agreement.
6.12 KNOWLEDGE. Whenever the term "to the best of the knowledge" of a
party is used, such term shall mean that the party making such representation or
warranty has conducted a reasonable investigation to determine the existence or
absence of the facts represented or warranted.
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IN WITNESS WHEROF, the parties have executed this Agreement as of the
date first above written.
SELLER:
Envirotec Leasing and Rental Corporation
Address: By: /s/ Steve Macchio
------------------------- --------------------------------------
Name:
------------------------- ------------------------------------
Title:
------------------------- -----------------------------------
SELLER SHAREHOLDER:
Address: /s/ Steve Macchio
------------------------- -----------------------------------------
------------------------- Steve Macchio
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ASSET PURCHASE AGREEMENT
This Asset Purchase Agreement (the "Agreement") is made as of the 8th
day of May, 1998, by and between SANTI GROUP OF PENNSYLVANIA, INC., a Georgia
corporation, or its nominee or designee (the "Purchaser") ELDREDGE WASTEWATER
MANAGEMENT, INC., a Pennsylvania corporation (the "Seller"), and ROBERT
ELDREDGE, CURTIS ELDREDGE and JOHN ELDREDGE (collectively, the "Seller
Shareholders").
W I T N E S S E T H:
WHEREAS, the Seller is engaged in the collection and disposal of (i)
wastewater from commercial, industrial and residential facilities related to
food processing, preparation, ingestion, digestion and elimination, and (ii)
municipal liquid and sludge wastes, excluding car wash pit and sump waste and
pharmaceutical manufacturing and production ("Non-hazardous Liquid Waste"); and
WHEREAS, the Seller owns certain contract rights, customer accounts,
trucks, containers and other assets and is engaged in the collection and
disposal of Non-hazardous Liquid Waste in the Lancaster, Montgomery, Bucks and
Chester Counties, Pennsylvania, and Sussex and New Castle, Delaware areas,
including but not limited to, under the name "Eldredge Wastewater Management"
(the "Business"); and
WHEREAS, this Agreement contemplates a transaction in which the
Purchaser will purchase substantially all of the assets of the Seller used in
the Business and assume certain of the liabilities of the Seller in return for
payment of the Purchase Price (as defined below);
NOW, THEREFORE, in consideration of the premises, mutual
representations, warranties, covenants and promises made in this Agreement, and
subject to the conditions contained in this Agreement, the parties agree as
follows:
1. PURCHASE AND SALE OF ASSETS; CLOSING.
1.1 PURCHASED ASSETS. Upon the execution of this Agreement and
effective as of 12:01 a.m. on the Closing Date (the "Time of Closing"), the
Seller agrees to sell, transfer, assign and deliver to the Purchaser, free and
clear of all liens, claims and encumbrances (except those which the Purchaser
has expressly agreed to assume in Section 1.3(c) hereof) the following assets
(the "Purchased Assets"):
(a) the machinery, equipment, vehicles and other operating assets owned by
the Seller identified on Schedule 1.1(a) to this Agreement (the "Operating
Assets");
(b) Seller's right, title and interest in the customer accounts, customer
accounts contracts, service agreements, purchase orders and other rights to
provide services to the customers of Seller (collectively the "Customer
Accounts"), other than those customer accounts, rights, or contracts identified
on Schedule 1.2 to this Agreement;
<PAGE> 2
(c) operating data (in both hard copy and computer format if available)
relevant to the Customer Accounts, including credit and accounting records for
the preceding twelve month period, customer contacts, phone numbers and
addresses, to the extent available (the "Operating Data");
(d) leaseholds and improvements, fixtures and fittings thereon, all of
which are identified on Schedule 1.1(d) to this Agreement;
(e) files, correspondence, records, and related proprietary information and
other property that is necessary, helpful or related to providing the services
related to the Business;
(f) intellectual property (including, but not limited to, the name
"Eldredge Wastewater Management"), goodwill associated therewith, licenses and
sublicenses granted and obtained with respect thereto;
(g) notes receivable (other than accounts receivable), claims, deposits,
prepayments, refunds, causes of action, rights of recovery and/or setoff;
(h) securities;
(i) franchises, approvals, permits, licenses (including radio transmitter
licenses), registrations, certificates, variances and similar rights obtained
from any government or agency thereof;
(j) the Seller's servicemarks, trademarks and logos; and
(k) telephone numbers and yellow page advertisings used in the Business.
1.2 EXCLUDED ASSETS. Anything to the contrary in Section 1.1
notwithstanding, the Purchased Assets shall exclude the following assets of the
Seller (collectively, the "Excluded Assets"):
(a) any corporate minute books, stock records and other records of the
Seller;
(b) all receivables of the Seller with respect to services rendered by
the Seller prior to the Time of Closing; and
(c) any assets of the Seller specifically set forth on Schedule 1.2 to
this Agreement, including but not limited to those customer accounts, rights or
contracts set forth on Schedule 1.2..
1.3 PURCHASE PRICE; ALLOCATION; PAYMENT. (a) As consideration for the
Purchased Assets and that certain Nondisclosure, Noncompetition and
Nonsolicitation Agreement to be entered into by the Purchaser, the Seller and
the Seller Shareholders (the "Nondisclosure Agreement"), the Purchaser agrees,
subject to the terms, conditions and limitations set forth in this Agreement to
pay, issue and deliver to the Seller the following (collectively, the "Purchase
Price"): (i) cash in the amount of $2,400,000, payable by wire transfer or
delivery of other immediately available funds, (ii) 100,000 shares of the common
stock of SanTi Group, Inc., a Delaware corporation (the "SanTi Stock"), and
(iii) documentation effecting the assumption of the Assumed Liabilities (as
defined below). The Purchaser will contemporaneously at Closing tender to the
Seller all of the cash portion of the Purchaser Price, less the sum of the
amount(s) set forth on Schedule 1.3(a) that is required to be paid to the third
parties set forth on Schedule 1.3(a) of this Agreement in order to remove liens
and encumbrances affecting certain of the Purchased Assets immediately prior to
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the Closing. The Seller acknowledges and agrees that the Purchaser is retaining
$360,000 from the cash due at Closing and 15,000 shares of SanTi Stock (the
"Security Deposit") to be held pursuant to the provisions of Article 5 of this
Agreement and that certain Escrow Agreement of even date herewith between the
Purchaser, the Seller and the Seller Shareholders (the "Escrow Agreement"). At
Closing, the Purchaser shall cause the cash portion of the Security Deposit to
be deposited with the escrow agent pursuant to the terms of the Escrow
Agreement. The Purchaser may, at its election, cause that portion of the
Security Deposit which is SanTi Stock to not be issued by SanTi Group, Inc.
until the time that such SanTi Stock is due under this Agreement.
(b) The parties agree that the Purchase Price shall be allocated
consistent with the Internal Revenue Code of 1986, as amended, and in accordance
with the allocation schedule to be agreed upon by the parties at or before the
Closing.
(c) On and subject to the terms and conditions of this Agreement, and
effective as of the Closing, the Purchaser shall assume and become responsible
for all of the liabilities of the Seller set forth on Schedule 1.3(c) of this
Agreement (the "Assumed Liabilities"). Except for the Assumed Liabilities,
nothing in this Agreement or any other document entered into on the Closing Date
shall in any way obligate the Purchaser in any way for any liability (whether
known or unknown, asserted or unasserted, absolute or contingent, accrued or
unaccrued, liquidated or unliquidated, and due or to become due) obligation,
charges or tax of the Seller, any of its subsidiaries, affiliates or related
entities, or shareholders, officers, directors, agents, or employees of the
Seller.
(d) Notwithstanding anything contained herein to the contrary,
Purchaser shall have no responsibility whatsoever with respect to the following
liabilities, contracts, commitments, and other obligations of the Seller
(collectively, the "Excluded Liabilities"):
(i) any obligations or liabilities of the Seller arising
under this Agreement;
(ii) any obligation of the Seller for federal, state or local
income tax liability (including interest and penalties) arising from the
operations of the Seller up to the Closing Date or arising out of the sale by
the Seller of the Purchased Assets pursuant to the terms of this Agreement;
(iii) any obligation of the Seller for expenses incurred in
connection with the sale of the Purchased Assets pursuant to the terms of this
Agreement; or
(iv) any other liability or obligation of the Seller for
expenses incurred in connection with the sale of the Purchased Assets pursuant
to this Agreement.
1.4 TIME AND PLACE OF THE CLOSING. The Closing of the sale of the
Purchased Assets (the "Closing") shall take place at the offices of the
Purchaser at 10:00 a.m. local time, on May 8, 1998 (the "Closing Date"), or at
such other time and/or place as mutually agreed upon by the parties.
1.5 PROCEDURE AT THE CLOSING. At the Closing, the parties will take the
following actions and the completion of each action shall be a further condition
to the Closing:
(a) the Seller shall deliver to the Purchaser, in form reasonably
satisfactory to the Purchaser, such deeds, bills of sale, endorsements,
assignments, receipts and other instruments, as shall be sufficient to vest in
the Purchaser good and marketable title to the Purchased Assets, free and clear
of all liens, claims and encumbrances, except as otherwise permitted by this
Agreement;
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(b) the Purchaser shall deliver to the Seller the Purchase Price in
accordance with the provisions of Section 1.3(a) above; and
(c) each party shall deliver to the other party such other documents,
certificates and other instruments as may be contemplated by this Agreement or
necessary to accomplish the transaction contemplated by this Agreement.
1.6 USE OF NAME. Following the Closing Date, the Seller shall not use
or give permission to any other person or entity to use the name "Eldredge
Wastewater Management" or any substantially similar name in connection with any
business or enterprise. Notwithstanding the foregoing, the Seller may continue
to use the names "Eldredge, Inc.", "The Eldredge Companies, Inc." and "Eldredge
Equipment Services, Inc."
1.7 CONFIDENTIALITY. The Seller and each Seller Shareholder agree that
for a period of five (5) years after the Closing Date, none of them nor any
other person connected with any of them shall at any time divulge, and each of
them shall cause their respective agents, employees and Affiliates (as such term
is defined in Rule 12b-2 of the regulations promulgated under the Securities
Exchange Act of 1934, as amended) not to divulge the existence and terms of
negotiations resulting in this Agreement, the terms and conditions of this
Agreement and the financing arrangements of the Purchaser and its Affiliates,
except as required by applicable federal, state or local statutes pursuant to
subpoena or court order, or as required to enforce their respective rights under
this Agreement.
1.8 TELEPHONE REFERRALS. From and after the Closing Date, the Seller
shall refer, and cause its agents to refer, all telephone calls to it or them
pertaining to the Business.
1.9 DISPOSAL AGREEMENT. At Closing, the Purchaser will enter into a
five year disposal agreement with Eldredge, Inc. whereby the Purchaser agrees to
deliver or cause to be delivered to the processing facility owned by Eldredge,
Inc. located at 896 and 898 Fern Hill Road, West Chester, Pennsylvania any
hydrocarbon/petroleum contaminated material (such as soil, water or debris) that
is collected by the Purchaser or any Affiliate (as defined below) within a 100
mile radius of such facility. The terms and conditions of this disposal
agreement will be as mutually agreed upon by the parties.
1.10 LEASE. At Closing, the Purchaser shall enter into a lease with
Eldredge Associates for that certain real property located at 896 Fern Hill
Road, West Chester, Pennsylvania and 898 Fern Hill Road, West Chester,
Pennsylvania. This lease will have a term of one year with annual renewal of one
year and a total term not to exceed ten years. The monthly rental under this
lease will be $7,600. The terms and conditions of this lease will be as mutually
agreed upon by the parties.
1.11 EMPLOYMENT AGREEMENTS. At Closing, the Purchaser will enter into
employment agreements with Curtis Eldredge and John Eldredge, the terms of
conditions of which will be mutually agreed upon by the parties.
1.12 ESCROW AGREEMENT. At Closing, the Purchaser, the Seller and the
Seller Shareholders will enter into the Escrow Agreement, the terms and
conditions of which will be mutually agreed upon by the parties.
2. REPRESENTATIONS AND WARRANTIES OF THE SELLER. The Seller and each of the
Seller Shareholders jointly and severally represent and warrant to the Purchaser
the following, which representations and warranties shall be reaffirmed as of
the Closing Date:
2.1 ORGANIZATION; POWER AND AUTHORITY. The Seller is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Pennsylvania. The Seller is duly authorized to conduct business and the
Business, and is in good standing, under the laws of each jurisdiction where
such qualification is required. The Seller has full corporate power and
authority (a) to own or lease its properties and carry on its business as it is
now being conducted, (b) to enter into this Agreement and to sell, convey,
assign, transfer and deliver the Purchased Assets to the
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Purchaser as provided herein, and (c) to carry out the other transactions and
agreement contemplated by this Agreement. If any Seller Shareholder is an entity
other than a natural person, such Seller Shareholder is duly organized, validly
existing and in good standing under the laws of the jurisdiction of its
incorporation or other formation and organization. Each of the Seller
Shareholders has full power and authority (including, if any Seller Shareholder
is a corporation or other entity, full corporate or other entity power and
authority) to execute and deliver this Agreement and perform such Seller
Shareholder's obligations hereunder.
2.2 OWNERSHIP OF THE PURCHASED ASSETS. (a) The Seller has good and
marketable title to, or a valid leasehold interest in, all of the Purchased
Assets, free and clear of all title defect, liens, claims or other encumbrances
of any kind or character, except for liens for current taxes, assessments and
governmental charges not yet due and payable.
(b) The Seller has paid all applicable taxes that are due and payable
with respect to the Purchased Assets.
2.3 DUE AUTHORIZATION; BINDING OBLIGATION. The execution, delivery and
performance of this Agreement and each of the other agreements contemplated by
this Agreement and consummation of the transactions contemplated by this
Agreement have been duly authorized by all necessary corporate actions of the
Seller. This Agreement has been duly executed and delivered by the Seller and is
a valid and binding obligation of the Seller and each Seller Shareholder,
enforceable in accordance with its terms. Except as set forth on Schedule 2.3 to
this Agreement, neither the execution and delivery of this Agreement nor the
consummation of the transactions contemplated hereby will: (a) conflict with or
violate any provision of the Seller's (or to the extent applicable, any Seller
Shareholder's) articles of incorporation or bylaws, or of any law, ordinance or
regulation or any decree or order of any court or administrative or other
governmental body which is either applicable to, binding upon or enforceable
against the Seller or any Seller Shareholder; or (b) result in any breach of or
default under any mortgage, contract, agreement or other instrument which is
either binding upon or enforceable against the Seller, a Seller Shareholder or
the Purchased Assets.
2.4 LITIGATION. Except as set forth on Schedule 2.4 to this Agreement,
there are no actions, suits, claims, governmental investigations or arbitration
proceedings pending, or to the knowledge of the Seller threatened, against or
affecting the Purchased Assets. There are no orders, decrees, judgments or
stipulations currently in effect issued by any local, state or federal judicial
authority in any proceeding relating to the Purchased Assets to which the Seller
is or was a party or by which the Seller is bound.
2.5 COMPLIANCE WITH LAWS. (a) The Seller has operated the Purchased
Assets legally and in substantial compliance with all applicable laws,
regulations, permits, franchises, licenses and orders. Without limiting the
generality of the foregoing, in the conduct of the business with respect to the
Purchased Assets, to Seller's knowledge, neither the Seller nor any Subsidiary
(as defined in Section 2.7 below) has transported, stored, treated or disposed
of any quantities of waste to or at any location other than a site lawfully
permitted to receive such waste for such purposes; nor has the Seller or any
Subsidiary performed, arranged for or allowed by any method or procedure such
transportation or disposal in contravention of any laws or regulations or in any
other manner which may result in material liability for contamination of the
environment.
(b) With respect to the conduct of the Business, the Seller has not
received any notification of any past or present failure by the Seller or any
Subsidiary to comply in any material respect with any laws, regulations,
permits, franchises, licenses or orders applicable to the Purchased Assets.
Except as set forth on Schedule 2.5(b), with respect to the Purchased Assets,
the Seller has not received any notification (including requests for information
directed to the Seller) from any governmental agency asserting that the Seller
or any Subsidiary is or may be a "potentially responsible person" for a remedial
action at a waste storage, treatment or disposal facility, pursuant to the
provisions of the Comprehensive Environmental Response, Compensation and
Liability Act of 1980 ("CERCLA"), or any other similar federal or state statute
assigning responsibility for the costs of investigating or remediating releases
of contaminants into the environment.
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(c) Each of the Seller, its Subsidiaries, affiliates, related entities
and predecessors has complied with all applicable laws, of federal, state,
local, and foreign governments (and all agencies thereof) and no action suit,
proceeding, hearing, investigation, charge, complaint, claim, demand or notice
has been filed or commenced against any of them alleging any failure so to
comply.
(d) None of the Seller Shareholders and the directors, officers and
management employees of the Seller has any knowledge of any basis (existing
prior to the Closing) which could result in (i) any failure of the Purchaser
(based upon its acquisition of the Business) to comply after the Closing with
any and all applicable laws of federal, state, local and foreign governments
(and all agencies thereof), or any action, suit, proceeding, hearing,
investigation, charge, complaint, claim, demand or notice being filed or
commenced after the Closing against the Purchaser or any of its Affiliates
alleging any failure to so comply.
2.6 SELLER SHARES. Each Seller Shareholder holds of record the number
of shares of issued and outstanding capital stock of the Seller set forth next
to such Seller Shareholder's name shown on Schedule 2.6 to this Agreement.
2.7 SUBSIDIARIES. Any corporation with respect to which the Seller owns
a majority of the common stock or has the power to vote or direct the voting of
sufficient securities to elect a majority of the directors (a "Subsidiary") is
shown on Schedule 2.7 to this Agreement. Each such entity is a corporation
validly existing, and in good standing under the laws of the jurisdiction of its
incorporation. Each such entity has full corporate power and authority to own or
lease its properties and carry on its business as it is now being conducted. The
Seller holds of record and owns beneficially all of the outstanding shares of
the capital stock of such entity. Except as shown on Schedule 2.7 to this
Agreement, none of the Seller and its Subsidiaries has any direct or indirect
equity participation in any corporation, partnership, trust or other business
association that is not a Subsidiary of the Seller.
2.8 EMPLOYMENT TAXES. Proper amounts have been withheld by the Seller
for the employees set forth on Schedule 2.9 to this Agreement in compliance with
applicable laws. Proper applicable tax returns have been filed for which returns
were due for employee income tax withholding, social security and unemployment
taxes with respect to the employees set forth in Schedule 2.9.
2.9 EMPLOYEE MATTERS. (a) Set forth on Schedule 2.9 is a true, complete
and accurate list of the name, present position, starting date of employment and
rate of compensation of each of the employees directly involved with the
business represented by the Purchased Assets immediately prior to the Closing.
All such employees or any independent contractors servicing the Purchased Assets
will be available for employment by the Purchaser after the Closing Date.
(b) Except as may be set forth on Schedule 2.9(b) of this Agreement,
the Seller is not a party to or bound by any employment agreement with any
employee or any collective bargaining agreement or any other agreement with any
labor union.
(c) Set forth on Schedule 2.9(c) is a complete list of (i) all pension
and employee benefit plans (as defined in Section 3 of the Employee Retirement
Income Security Act of 1974, as amended ("ERISA")) maintained or contributed to
by the Seller and (ii) all other benefit programs available to the Seller's
employees (collectively, the "Plans"). Such plans comply in form and in
operation with the applicable ERISA requirements, except where the failure to
comply would not have a material adverse effect on the financial condition of
the business with respect to the Purchased Assets. All contributions that are
due have been paid to such Plans. No action, suit, proceeding, hearing or
investigation with respect to the administration or the investment of assets of
any such
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Plans (other than routine claims for benefits) is pending, except where such
action, suit, proceeding, hearing or investigation would not have a material
adverse effect on the financial condition of the business with respect to the
Purchased Assets.
2.10 CONDUCT OF BUSINESS. Since April 8, 1998, the Seller (i) has
conducted the business and operations with respect to the Purchased Assets in
substantially the same manner in which the same have traditionally conducted,
and (ii) there has been no material adverse change in the Purchased Assets.
2.11 NET WORTH. The Seller is not, and immediately after the
consummation of the transaction contemplated hereunder will not be, "insolvent"
within the meaning of the United States Bankruptcy Code as in effect as of the
Closing Date. The assets of the Seller are not, and immediately following the
Closing will not be unreasonably small in relation to the business in which the
Seller is engaged. The Seller does not intend to, or believe that it will, incur
debts beyond its ability to pay such debts as they mature.
2.12 FINANCIAL STATEMENTS. Attached hereto as Schedule 2.12 are the
following financial statements (collectively, the "Financial Statements"): (i)
compilation report of income and expenses and balance sheet as of and for the
fiscal years ended December 31, 1995, December 31, 1996 for the Seller and all
its Subsidiaries; (ii) internally prepared reports of income and expenses and
balance sheet as of and for the period ending December 31, 1997 (the "Most
Recent Fiscal Year End") for the Seller and all its Subsidiaries; and (iii)
internally prepared reports of income and expenses and balance sheet as of and
for the three month period ending March 31. 1998 (the "Most Recent Fiscal Month
End") for the Seller and all of its Subsidiaries. The Financial Statements
present fairly the financial condition of the Seller and its Subsidiaries as of
such dates and the results of the operations of the Seller and its Subsidiaries
for such periods, are correct and complete, and are consistent with the books
and records of the Seller (which books and records are correct and complete).
2.13 EVENTS SUBSEQUENT TO MOST RECENT FISCAL MONTH END. Since the Most
Recent Fiscal Month End, there has not been any adverse change in the Business
or the business, financial condition, operations or results of operations of the
Seller.
2.14 UNDISCLOSED LIABILITIES. Neither the Seller nor any of its
Subsidiaries has any liability (whether known or unknown, asserted or
unasserted, absolute or contingent, accrued or unaccrued, liquidated or
unliquidated, and due or to become due) obligation, charge or tax, and there is
no basis for any present or, to the best knowledge of the Seller and the Seller
Shareholders, future action, suit, proceeding, hearing, investigation, charge,
complaint, claim or demand against any of them which would give rise to a
liability, obligation, charge or claim except for those liabilities,
obligations, charges, taxes or claims (i) shown on the Financial Statements; and
(ii) which have arisen after the Most Recent Fiscal Month End in the ordinary
course of business of the Seller (none of which results from, arises out of,
relates to, is in the nature of, or was caused by any breach of contract, breach
of warranty, tort, infringement, or violation of law).
2.15 TAX MATTERS. Each of the Seller and its Subsidiaries has filed all
federal and state tax returns that it is required to file and all taxes due have
been paid in full. All such tax returns were correct and complete in all
respects. No Seller Shareholder or director, officer or employee responsible for
tax matters of the Seller expects any authority to assess the Seller or any of
its Subsidiaries any additional taxes for any period for which tax returns have
been filed.
2.16 REAL PROPERTY. Schedule 2.16 of this Agreement lists and briefly
describes all real property owned, leased or subleased by the Seller or any of
its Subsidiaries and used by the Seller in the Business. As to any property
leased or subleased, Schedule 2.16 of this Agreement shows the current lessor or
sublessor, the term of the lease or sublease, the rental and other charges due
under the lease or sublease. As to any property owned by the Seller, the Seller
represents and warrants that (i) the identified owner has good and marketable
title to such property, free and clear of any lien or encumbrance; (ii) there
are no easements, covenants or other restrictions affecting such property that
impair the current use, occupancy, value or marketability of such property;
(iii) all facilities and improvements thereon have received all approvals and
authorizations required; and (iv) there is no person or entity in possession of
such property
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<PAGE> 8
or who has any right or claim of possession or use for such property. The Seller
has delivered to the Purchaser true and correct copies of each of the leases and
subleases shown on Schedule 2.16 to this Agreement.
2.17 TANGIBLE ASSETS. The Seller and its subsidiaries, affiliates and
related entities own or lease all buildings, machinery equipment, other tangible
assets, permits, licenses and agreements necessary for the conduct of the
Business as presently conducted and as presently proposed to be conducted.
Except as set forth on Schedule 2.17 to this Agreement, each such tangible asset
is in good operating condition and repair.
2.18 CONTRACTS. (a) Schedule 2.18 of this Agreement is an accurate and
complete list of each agreement, contract or commitment to which the Seller or
any Subsidiary is a party or by which the Seller or any Subsidiary is bound and
which is either (i) material to the operation of the Business, or (ii) cannot be
terminated without liability on 30 days notice or less. The Seller has delivered
true and accurate copies of each of the items shown on Schedule 2.18 of this
Agreement.
(b) Neither the Seller nor any party thereto or bound thereby is in
default under any of the contracts, agreements or instruments comprising
Schedule 2.18, and, to the best knowledge of the Seller and the Seller
Shareholders, no act or event has occurred which with notice or lapse of time,
or both, would constitute such a default. The Seller is not a party to, nor is
it or any of its property bound by, any other agreement or instrument which is
material to the continued conduct of the Business as now being conducted or with
respect to which a default might materially and adversely affect its properties,
business or financial condition. With the exception of the consents necessary
for assignment of the agreements listed on Schedule 2.3 to this Agreement, the
contracts, agreements and instruments comprising Schedule 2.18 confer on the
Seller all rights necessary to enable it to conduct the Business now being
conducted.
(c) With respect to all contract, agreements and instruments comprising
Schedule 2.18:
(i) each is in full force and effect and legally binding upon
the parties thereto; and
(ii) with the exception of the consents necessary for
assignment of the agreements listed on Schedule 2.3, the Seller has not released
any of its rights thereunder nor will any other party bound thereby be released
from its obligations nor will any obligations of any party be affected as the
result of the transfer contemplated hereby nor will the consent of any other
party to any of the above be required with respect to the transfer contemplated
hereby.
2.19 INSURANCE. Schedule 2.19 to this Agreement lists all current
policies of liability, property damage, fire, workers' compensation/liability,
title or other forms of insurance related to the Business which are owned or
carried at any time by the Seller and insurance agents and/or brokers providing
such insurance coverage and of all performance bonds and letters of credit
securing any obligations of the Seller at any time maintained by the Seller in
the conduct of its business.
2.20 SERVICE WARRANTIES. Each service provided by the Seller or any of
its Subsidiaries has been in conformity with all applicable contractual
commitments and all express and implied warranties. Except as otherwise shown on
Schedule 2.20 to this Agreement, no service provided or delivered by the Seller
is subject to any guaranty, warranty or other indemnity beyond the applicable
standard terms and conditions of sale. Schedule 2.20 includes copies of the
standard terms and conditions of sale for the Seller (containing applicable
guaranty, warranty and indemnity provisions).
2.21 BUSINESS RELATIONSHIPS. Other than the Business conducted by the
Seller and/or the Seller Shareholders as of the Closing through Eldredge, Inc.,
none of the Seller or its Subsidiaries, or the Seller Shareholders owns or has
an interest in any person or entity (other than the Seller) in the Business.
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<PAGE> 9
2.22 INVESTMENT. The Seller and each of the Seller Shareholders (i)
understands that the SanTi Stock has not been, and will not be, registered under
the Securities Act of 1933, as amended (the "Securities Act"), or under any
state securities laws, and is being offered and sold in reliance upon federal
and state exemptions for transactions not involving any public offering, (ii)
understands that the Seller is acquiring the SanTi Stock solely for its own
account for investment purpose, and not with a view to the distribution thereof,
(iii) is a sophisticated investor with knowledge and experience in business and
financial matters, (iv) has received certain information concerning the
Purchaser and SanTi and has had the opportunity to obtain additional information
as desired in order to evaluate the merits and the risks inherent in holding the
SanTi Stock, (v) is able to bear the economic risk and lack of liquidity
inherent in holding the SanTi Stock, and (vi) is an Accredited Investor (as such
term is defined in Regulation D promulgated under the Securities Act) for the
reasons set forth in Schedule 2.22 to this Agreement.
2.23 REVENUE. (a) The average monthly gross revenue of the Seller for
the Customer Accounts for the calendar months of January through December 1997
derived solely from servicing the Customer Accounts is $333,333.33. Schedule
2.23 to this Agreement contains a listing of all of the Customer Accounts and
the gross monthly revenues of such Customer Accounts for the calendar months of
January through December 1997. Unless otherwise noted on Schedule 2.23(a), all
of the Customer Accounts remain currently active, there has not been a material
decline in the aggregate monthly billing level of such Customer Accounts over
the 12 calendar month period immediately preceding the Closing Date, all such
Customer Accounts are paid currently, and during the 12 calendar month period
immediately preceding the Closing Date, the Seller has not lost any customer
that individually generated more than ten percent (10%) of the Seller's gross
revenues in the Seller's Most Recent Fiscal Year End.
(b) The Seller and Seller Shareholders further represent and warrant
that during the 365 day period immediately following the Closing (the
"Performance Period"), the average monthly gross revenues generated by the
Business from the Purchased Assets will not be less than $333,333.33 (the
"Revenue Guaranty"). To the extent that the average monthly gross revenues
generated by the Business from the Purchased Assets are less than $333,333.33,
the parties agree that the Purchaser shall be deemed to have suffered a loss in
an amount equal to the product of said deficiency and the factor of 13.35 and
that the Purchaser shall be entitled to indemnity from the Seller in the amount
of such loss or to offset the amount of such loss against the Security Deposit
pursuant to the provisions of Article 5 of this Agreement. By way of example,
should the gross revenues for the Customer Accounts for the twelve month period
immediately following the Closing be $3,900,000 (that is, average monthly gross
revenues of $325,000), the Purchaser shall be deemed to have suffered a loss of
$111,249.96.
(c) In the event that the Purchaser removes and permanently reassigns
more than twenty percent (20%) of the Operating Assets to another location
during the Performance Period (a "Reassignment"), then the gross revenues
generated by the Business shall be examined at that time for purposes of
determining whether the Revenue Guaranty has been met and if the Purchaser shall
have suffered a loss pursuant to the terms of subsection (b) above. By way of
example, should a Reassignment occur at the end of the fifth (5th) month of the
Performance Period and the gross revenues generated by the Business from the
Purchased Assets for such five month period were $1,600,000 (that is, average
monthly gross revenues for such five month period of $320,000), the Purchaser
shall be deemed to have suffered a loss of $177,999.96 ($333,333.33 -
$320,000.00 = $13,333.33 x 13.35 =$177,999.96).
2.24 POSSESSION OF FRANCHISES, LICENSES, ETC. The Seller possesses,
free from any burdensome restriction, all franchises, certificates, licenses,
permits, clearances, consents and other authorizations from governmental
political subdivisions or regulatory authorities that are necessary for (i) the
continued ownership, maintenance and operation of the Business and the other
businesses conduced by the Seller, as currently being operated and conducted,
(ii) the continued operation, use and ownership of the Purchased Assets, as
currently being operated and used, and (iii) the servicing of the Customer
Accounts, as currently being serviced (collectively, the "Permits"). Schedule
2.24 to this Agreement sets forth all of the Permits and for each Permit
accurately describes the expiration and/or renewal date thereof. No violation of
any of the Permits has occurred and the Seller has complied with all applicable
covenants and conditions of each of the Permits. There is no action, proceeding,
permit revocation, permit amendment, writ, injunction, claim or investigation
pending or threatened, concerning or relating to any of the Permits.
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<PAGE> 10
2.25 DISCLOSURE. The representations and warranties contained in this
Article 2 do not contain any untrue statement of a material fact or omit to
state any material fact necessary in order to make the statements and
information contained in this Article 2 not misleading.
3. REPRESENTATIONS AND WARRANTIES OF THE PURCHASER. The Purchaser represents to
the Seller the following, which representations and warranties shall be
reaffirmed as of the Closing Date:
3.1 ORGANIZATION OF THE PURCHASER. The Purchaser is a corporation duly
organized, validly existing and in good standing under the laws of the
jurisdiction of its incorporation.
3.2 DUE AUTHORIZATION; BINDING OBLIGATION. The execution, delivery and
performance of this Agreement and each of the other agreements contemplated by
this Agreement and consummation of the transactions contemplated by this
Agreement have been duly authorized by all necessary corporate actions of the
Purchaser. This Agreement has been duly executed and delivered by the Purchaser
and is a valid and binding obligation of the Purchaser, enforceable in
accordance with its terms. Neither the execution and delivery of this Agreement
nor the consummation of the transactions contemplated hereby will: (a) conflict
with or violate any provision of the Purchaser's articles of incorporation or
bylaws, or of any law, ordinance or regulation or any decree or order of any
court or administrative or other governmental body which is either applicable
to, binding upon or enforceable against the Purchaser; or (b) result in any
breach of or default under any mortgage, contract, agreement or other instrument
which is either binding upon or enforceable against the Purchaser.
3.3 DISCLOSURE. The representations and warranties contained in this
Article 3 do not contain any untrue statement of a material fact or omit to
state any material fact necessary in order to make the statements and
information contained in this Article 3 not misleading.
4. INDEMNIFICATION.
4.1 INDEMNIFICATION PROVISIONS FOR THE BENEFIT OF THE PURCHASER. From
and after the Closing Date, the Seller and the Seller Shareholders, jointly and
severally, agree to defend, indemnify and hold the Purchaser, its shareholders,
officers, directors, employees, counsel, agents, Affiliates and assigns
(collectively, the "Purchaser Indemnities") harmless from and against all
indemnifiable damages of the Purchaser. For this purpose, "indemnifiable
damages" means the aggregate of all expenses, losses, costs, deficiencies,
liabilities and damages (including attorneys' fees and court costs) incurred or
suffered by any of the Purchaser Indemnities as a result of or in connection
with: (a) any inaccurate representation or warranty made by the Seller in or
pursuant to this Agreement, or in or pursuant to any other agreement made by the
Seller and/or any of the Seller Shareholders in connection with the transaction
contemplated by this Agreement (including but not limited to the Nondisclosure
Agreement; collectively, the "Related Agreements"); (b) any breach of or default
in the performance of any of the covenants or agreements made by the Seller or
any Seller Shareholder in this Agreement or any of the Related Agreements; (c)
any failure of the Seller to pay, discharge or perform any of the Excluded
Liabilities, or any asserted liability resulting from any dispute or claim
against the Purchaser concerning any of the Excluded Liabilities; (d) any claim
resulting or caused proximately by any liability of the Seller that becomes a
liability of the Purchaser under any bulk sales law of the Commonwealth of
Pennsylvania.
4.2 INDEMNIFICATION PROVISIONS FOR THE BENEFIT OF THE SELLER. From and
after the Closing Date, the Purchaser agrees to defend, indemnify and hold the
Seller, its shareholders, officers, directors, employees, counsel, agents,
Affiliates and assigns (collectively, the "Seller Indemnities") harmless from
and against all indemnifiable damages of the Seller. For this purpose,
"indemnifiable damages" means the aggregate of all expenses, losses, costs,
deficiencies, liabilities and damages (including attorneys' fees and court
costs) incurred or suffered by any of the Seller Indemnities as a result of or
in connection with (a) any inaccurate representation or warranty by the
Purchaser in or pursuant to this Agreement or in or pursuant to any Related
Agreement; (b) any breach of or default in the performance of any of the
covenants or agreements made by the Purchaser in this Agreement or any Related
Agreement; or (c) any failure of the Purchaser to pay, discharge or perform any
of the Assumed Liabilities, or any asserted liability resulting from any dispute
or claim against the Seller or any Seller Shareholder concerning any of the
Assumed Liabilities;
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<PAGE> 11
4.3 MATTERS INVOLVING THIRD PARTIES. (a) If any third party shall
notify any person or entity that is entitled to seek indemnification pursuant to
either Section 4.1 or 4.2 of this Agreement (the "Indemnified Party") with
respect to any matter (a "Third Party Claim") which may give rise to a claim for
indemnification against any other party (the "Indemnifying Party") under this
Article 4, then the Indemnified Party shall promptly (and in any event within
ten business days after receiving notice of the Third Party Claim) notify the
Indemnifying Party thereof in writing.
(b) Any Indemnifying Party will have the right at any time to assume
and thereafter conduct the defense of the Third Party Claim with counsel of his
or its choice reasonably satisfactory to the Indemnified Party; provided,
however, that the Indemnifying Party will not consent to the entry of any
judgment or enter into any settlement with respect to the Third Party Claim
without the prior written consent of the Indemnified Party (not to be withheld
unreasonably) unless the judgment or proposed settlement involves only the
payment of money damages and does not impose an injunction or other equitable
relief upon the Indemnified Party.
(c) Unless and until the Indemnifying party assumes the defense of the
Third Party Claim as provided in subsection (b) above, the Indemnified Party may
defend against the Third Party Claim in any manner he or it reasonably may deem
appropriate.
(d) In no event will the Indemnified Party consent to the entry of any
judgment or enter into any settlement with respect to the Third Party Claim
without the prior written consent of the Indemnifying Party not to be withheld
unreasonably.
4.4 OTHER RIGHTS AND REMEDIES NOT AFFECTED. The indemnification
provisions in this Article 4 are the sole remedies available to the parties for
claims for money damages arising under this Agreement. Nothing contained herein
shall prevent a party from pursuing any statutory, equitable or common law
remedy (other than a claim for money damages) any party may have for any
misrepresentation, breach of warranty or failure to fulfill any agreement or
covenant hereunder on the part of any party to this Agreement, including without
limitation, the right to offset, seek specific performance or rescission, none
of which rights or remedies shall be adversely affected or diminished hereby.
4.5 LIMITATIONS. Except for claims of the Purchaser pursuant to Section
2.23, neither the Purchaser Indemnities nor the Seller Indemnities shall make
any claim for indemnification from the other until the aggregate combined
indemnifiable damages of the Purchaser Indemnities or the Seller Indemnities, as
the case may be, shall exceed the sum of $50,000, whereupon the Purchaser
Indemnities or the Seller Indemnities, as the case may be, shall be entitled to
indemnification hereunder for all indemnifiable damages over $50,000 up to a
maximum of $2,400,000. Claims made by the Purchaser pursuant to Section 2.23
shall be subject not be subject to the minimum of $50,000 but will be subject to
the maximum of $800,000.
5. SECURITY DEPOSIT.
5.1 OFFSET AGAINST SECURITY DEPOSIT. The Purchaser may claim an offset
against the Security Deposit (described in Section 1.3 above) for any loss, cost
or expense for which the Seller may be responsible under this Agreement, whether
or not indemnified as described in Article 4 of this Agreement, subject,
however, to the following terms and conditions:
(a) the Purchaser shall give written notice, in accordance with the
terms of this Agreement, to the Seller of any claimed breach of any such
representation or warranty made or obligation incurred, or failure to meet the
revenue guaranty set forth in Section 2.23 of this Agreement, which notice shall
set forth the amount of loss, damage, cost or expense that the Purchaser claims
to have
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sustained by reason thereof (a "Claim Notice"), with a copy of such Claim Notice
being sent to the escrow agent pursuant to the terms of the Escrow Agreement);
(b) unless otherwise agreed in writing by the parties, setoff shall be
effected on the date of the Claim Notice and setoff shall be charged against the
Security Deposit;
(c) if such claim is contested, the Seller shall notify the Purchaser
(with a copy of such notice being sent by the Seller to the escrow agent
pursuant to the terms of the Escrow Agreement) in writing within ten days of the
Claim Notice (the "Notice of Contest") of an intention to dispute the claim. If
such dispute is not resolved within thirty days after Notice of Contest is given
(the "Resolution Period"), then such dispute shall be resolved as set forth in
Section 5.5 of this Agreement.
5.2 INSUFFICIENCY OF SECURITY DEPOSIT. Subject to Section 4.5 of this
Agreement, should the Security Deposit be insufficient to pay in full the amount
of any claim made by the Purchaser pursuant to the terms of this Agreement, then
Purchaser may setoff the amount of such claim against any and all amounts
currently due and payable, but unpaid, to any of the Seller Shareholders under
any and all employment and/or consulting agreements entered into between the
Purchaser and any of the Seller Shareholders on or about the Closing Date, or
proceed against any and all other assets of the Seller and/or any of the Seller
Shareholders.
5.3 DELIVERY OF REMAINING SECURITY DEPOSIT. If there is no pending
Claim Notice on the date that is thirteen (13) months after the Closing Date,
then the balance of the Security Deposit shall be delivered to the Seller.
Should there be a pending Claim Notice at such time, then an amount not to
exceed the amount of the pending claim shall continue to be held pursuant to the
terms of the Escrow Agreement until resolution of such pending Claim Notice.
Upon resolution of such pending Claim Notice, the balance, if any, of the
Security Deposit shall be delivered to the Seller, including, without
limitation, all accrued interest with respect to the Security Deposit in
accordance with the provisions of the Escrow Agreement.
5.4 ALLOCATION OF CLAIMS AGAINST THE SECURITY DEPOSIT. Any setoff
against the Security Deposit shall be 49% against the cash portion of the
Security Deposit and 51% against the SanTi Stock portion of the Security
Deposit. In determining the offset against the SanTi Stock, the parties
acknowledge and agree that the SanTi Stock shall be valued at the fair market
value of such SanTi Stock at the time of resolution of the Claim Notice. For
purposes of this Section 5.4, "fair market value" shall be determined by taking
the twenty day average of the closing prices of the SanTi Stock.
5.5 ARBITRATION OF CLAIMS. (a) Any dispute or difference between or
among the parties arising out of this Agreement or the transactions contemplated
hereby, which the parties are unable to resolve themselves in the manner set
forth in Section 5.1(c) shall be submitted to and resolved by arbitration as
herein provided. Either the Purchaser or the Seller may request the American
Arbitration Association ("AAA") to designate one arbitrator, who shall be
qualified as an arbitrator under the standards of the AAA and who is not
affiliated with any party in interest to such arbitration and who has
substantial professional experience with regard to corporate legal matters.
(b) The arbitrator shall consider the dispute at issue in metropolitan
Philadelphia, Pennsylvania area at a mutually agreed upon time within sixty (60)
days (or such longer period as may be acceptable to the parties or as directed
by the arbitrator) of the designation of the arbitrator. The arbitration
proceeding shall be held in accordance with the rules for commercial arbitration
of the AAA in effect on the date of the initial request by either the Purchaser
or the Seller, as the case may be, that gave rise to the dispute to be
arbitrated (as such rules are modified by the terms of this Agreement or may be
further modified by mutual agreement of the parties to this Agreement) and shall
include an opportunity for the parties to conduct discovery in advance of the
proceeding. Notwithstanding the foregoing, the parties hereto agree that they
will attempt, and they intend that they and the arbitrator should use their best
efforts in that attempt, to conclude the arbitration proceeding and have final
decision from the arbitrator within one hundred twenty (120) days from the date
of the selection of the arbitrator. The parties agree that any such award of the
arbitrator
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shall be final, conclusive and binding and that they will not contest any action
by any other party thereto in accordance with an award of the arbitrator.
(c) The parties agree to share the cost of all fees, costs and expenses
incurred with respect to the arbitration; provided, however, that each party
shall be responsible for all costs it incurs with respect to the preparation of
its arbitration case (including attorneys' fees and expenses).
6. MISCELLANEOUS.
6.1 TAXES. The Seller shall pay all federal, state and local income,
sales, use, transfer, documentary, stamp and other taxes, if, any, imposed on
the Seller and due as a result of the purchase, sale or transfer of the
Purchased Assets in accordance herewith, whether such taxes are imposed by law
on the Seller.
6.2 NOTICES. All notices, requests, demands and other communications
required or permitted under this Agreement shall be in writing and shall be (i)
delivered by hand, (ii) mailed by United States registered or certified mail,
return receipt requested, first class prepaid and properly addressed, or (iii)
sent by national overnight courier service to the parties or their permitted
assigns at the address set forth opposite the parties' signatures to this
Agreement. All notices, requests, instructions or documents given to any party
in accordance with this Section 6.2 shall be deemed to have been given (i) on
the date of receipt if delivered by hand or overnight courier service, or (ii)
on the date five (5) days after depositing with the United States Postal Service
if mailed by United States registered or certified mail, return receipt
requested, first class postage prepaid and properly addressed. Any party may
change its address specified for notices by designating a new address in
accordance with this Section 6.2.
6.3 ENTIRE AGREEMENT. All Schedules and Exhibits referred to in this
Agreement are intended to be, and hereby are, specifically incorporated into and
made a part of this Agreement. This Agreement constitutes the entire agreement
among the parties relating to the subject matter hereof and supersedes all prior
and contemporaneous negotiations, writings and agreements relating to the
subject matter of this Agreement.
6.4 MODIFICATIONS, AMENDMENTS AND WAIVERS. The parties may, by mutual
agreement and in no other manner, modify or amend the terms of this Agreement.
The failure or delay of any party at any time or times to require the
performance of any provision of this Agreement shall in no manner affect its
right to enforce that provision. No single or partial waiver by any party of any
condition of this Agreement, or the breach of any term, agreement or covenant
of, or the inaccuracy of any representation or warranty in, this Agreement,
whether by conduct or otherwise, in any one or more instances shall be construed
or deemed o be a further or continuing waiver of any such condition, breach or
inaccuracy or a waiver of any condition, breach or inaccuracy.
6.5 SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon and
shall inure to the benefit of and be enforceable by the parties to this
Agreement and their respective successors and permitted assigns. This Agreement
may not be assigned by any party without written consent of the other parties,
except that the Purchaser may assign this Agreement and its rights and
obligations hereunder to one or more of its Affiliates o to any of its lenders
as collateral security.
6.6 GOVERNING LAW. This Agreement shall be controlled, construed and
enforced in accordance with the substantive laws of the State of Pennsylvania,
without regard to any laws to choice or conflicts of laws.
6.7 SEVERABILITY. Should any one or more of the provisions of this
Agreement be determined to be invalid, illegal or unenforceable in any respect,
the validity, legality and enforceability of the remaining provisions of this
Agreement shall not in any way be adversely affected or impaired thereby. The
parties shall endeavor in good faith to replace the invalid, illegal or
unenforceable provisions with valid provisions the economic effect of which
comes as close as practicable to that of the invalid, illegal or unenforceable
provisions.
6.8 ATTORNEYS' FEES AND EXPENSES. Subject to the provisions of Section
5.5 of this Agreement, each party shall bear the costs and expenses of its own
attorneys, consultants and experts with respect to any litigation or other
proceeding arising out of, under or in connection with this Agreement.
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6.9 NO BENEFIT TO OTHERS. The representations, warranties, covenants
and agreements contained into this Agreement are for the sole benefit of the
parties and, in the case of Article 4 hereof, the other Indemnified Parties, and
their respective heirs, executors, administrators, legal representatives,
successors and assigns, and they shall not be construed as conferring any rights
on any other person.
6.10 CONSTRUCTION. Nothing in any Schedule to this Agreement shall be
deemed adequate to disclose any exception to a representation or warranty made
in this Agreement unless the Schedule identifies the exception with
particularity and describes the relevant facts in detail (and in terms of any
liability, quantifies the amount thereof with specificity). Without limiting the
generality of the foregoing, the mere listing (or inclusion of a copy) of a
document or other item shall not be deemed adequate to disclose any exception to
a representation or warranty made herein, unless the representation or warranty
has to do with the existence of the document or other item itself. The parties
intend that each representation, warranty and covenant contained herein shall
have independent significance. If any party has breached any representation,
warranty or covenant contained in this Agreement in any respect, the fact that
there exists another representation, warranty or covenant relating to the same
subject matter (regardless of the relative levels of specificity) that the party
has not breached shall not detract from or mitigate the fact that the party is
in breach of the first representation, warranty or covenant.
6.11 EXPENSES. Except as otherwise provided herein, each of the parties
will bear such party's own costs and expenses (including legal fees and
expenses) incurred in connection with this Agreement and the transactions
contemplated hereby.
6.12 FURTHER ASSURANCES. From time to time, at any party's request and
without further consideration (unless the requesting party is entitled to
indemnity therefor as provided herein), the other parties will execute and
deliver to the requesting party such documents and take such other action as
such party may reasonably request in order to consummate more effectively the
transactions contemplated by this Agreement.
6.13 KNOWLEDGE. Whenever the term "to the best of the knowledge" of a
party is used, such term shall mean that the officers of the Seller and the
Seller Shareholders, or the officers of the Purchaser, as the case may be, have
conducted a reasonable investigation to determine the existence or absence of
the facts represented or warranted.
IN WITNESS WHEROF, the parties have executed this Agreement under seal
as of the date first above written.
SELLER:
Eldredge Wastewater Management, Inc.
Address: By: /s/ Curtis Eldredge
------------------------- -------------------------------------
Name:
------------------------- -----------------------------------
Title:
------------------------- ----------------------------------
[CORPORATE SEAL]
SELLER SHAREHOLDERS:
Address: /s/ Robert Eldredge (SEAL)
-------------------------- -----------------------------------
Robert Eldredge
--------------------------
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Address: /s/ Curtis Eldredge (SEAL)
-------------------------- -----------------------------------
Curtis Eldredge
--------------------------
Address: /s/ John Eldredge (SEAL)
-------------------------- -----------------------------------
John Eldredge
--------------------------
PURCHASER:
SanTi Group of Pennsylvania, Inc.
Address: 7200 Bishop Road By: /s/ Daryl Griswold
Austell, GA 30168 ---------------------------------
Name:
-------------------------------
Title:
------------------------------
[CORPORATE SEAL]
15
<PAGE> 1
CONTRACT FOR PURCHASE AND SALE OF CERTAIN ASSETS OF
ANDREWS ENVIRONMENTAL SERVICES, INC.
This Agreement dated this 20th day of March, 1997 among and between
BONE-DRY ENTERPRISES, INC., a Georgia corporation (the "Buyer"), located at 2139
Summerchase Drive, Woodstock, Georgia and ANDREWS ENVIRONMENTAL SERVICES, INC.,
a Georgia corporation, located at 2470 Weaver Way, Doraville, Georgia 30340 (the
"Seller").
RECITALS
WHEREAS, the Seller is in the business of commercial and governmental
grease extraction, collection and transportation services in Georgia and other
states which comprise Seller's current and prospective business ("Seller's
Grease Business") more specifically set forth herein;
WHEREAS, the Seller desires to sell and Buyer desires to purchase
certain assets of Seller; and
WHEREAS, pursuant to the terms and conditions of this Agreement, the
Buyer agrees to purchase and the Seller agrees to sell the assets set forth in
Exhibits "A", "B", "C" and "D";
NOW, THEREFORE, for good and valuable consideration, the receipt and
legal sufficiency of which are hereby acknowledged by each of the parties to
this Agreement, the parties contract and agree as follows:
SECTION 1. PURCHASE AND SALE.
Pursuant to the terms and conditions of this Agreement. the Seller
hereby agrees to sell, convey, transfer and deliver to the Buyer and the Buyer
hereby agrees to purchase from the Seller the following assets related to
Seller's Grease Business (collectively, the "Assets"):
(a) All good will, if any, associated with and all of Seller's right,
title and interest in current Seller's Grease Business customer accounts, names,
lists, telephone and facsimile numbers, correspondence, billing and service
records, purchase orders, service agreements and contracts or other rights of
the Seller's Grease Business and all rights to and in connection with any
activities commonly associated with such services, customer service agreements,
and contract rights with customers ("Accounts") as attached to Exhibit "A";
(b) Certain intellectual property owned by Seller including certain
telephone and facsimile numbers, and all software currently used for maintaining
records, of Seller's Grease Business as attached to Exhibit "B";
<PAGE> 2
(c) Copies of all files, correspondence, purchase orders, records,
(including billing and service records) and related proprietary information and
material which is necessary, helpful or related to providing such services (in
both hard copy and computer format if available) described above as to Seller's
Grease Business as attached to Exhibit "C". All of the Accounts and other rights
being purchased, including accounts and other rights of the type described
herein shall hereinafter be referred to collectively as the "Accounts".
(d) Use of Seller's trade name, related trademarks and service marks of
ANDREWS ENVIRONMENTAL SERVICES, INC. for a period of three months following
Closing, but only as it pertains to the operation of Seller's Grease Business.
(e) Certain physical assets used by Seller in Seller's Grease Business
as more fully described in the attached Bill of Sale.
(f) All permits, to the extent transferable, issued to Seller and
utilized in Seller's Grease Business as described in Exhibit "D" attached.
Notwithstanding the above, the Assets shall not include any cash,
accounts receivable, notes receivable, other receivables, or any other Assets of
Seller not specified above.
SECTION 2. PURCHASE PRICE.
The Purchase Price shall be paid as follows:
(a) Buyer shall pay to Seller, Andrews Environmental Services, Inc., a
Purchase Price of Two Hundred Fifty Thousand and no/100 Dollars ($250,000.00)
for the Assets.
(b) The Purchase Price for all Assets shall be paid as follows:
(i) Buyer shall pay to Seller Two Hundred Fifty Thousand and
no/100 Dollars ($250,000.00) at the Closing;
SECTION 3. NON ASSUMPTION OF LIABILITIES.
The Buyer hereby assumes and agrees to pay, discharge and perform all
liabilities and obligations of the Seller that arise after the Closing in
connection with the operation of the Seller's Grease Business by the Buyer,
including all post-Closing Seller liabilities and obligations under the
contracts and agreements included in the Accounts and Assets; provided however,
Buyer shall not be responsible for obligations or liabilities: (i) in the nature
of any taxes, including sales or transfer taxes, arising out of the Sale of
Assets; (ii) in which the event giving rise thereto occurred prior to Closing.
Except as otherwise stated herein, the Buyer does not
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<PAGE> 3
assume, agree to perform or discharge, or otherwise have any responsibility for
any liabilities, contingent or otherwise, or contractual obligations of the
Seller.
SECTION 4. EMPLOYEES.
(a) At Closing, Seller shall identify by name, address and social
security number three (3) employees who currently perform sales, collection,
extraction and transportation services for Seller as it pertains to its grease
operation who will be available for full time employment on behalf of Buyer
("Employees") as set forth in Exhibit "E". Seller agrees to terminate said
Employees prior to Closing, conditioned upon Buyer's employment of them after
Closing.
(b) The Buyer shall not be responsible to the Seller or to any current
or former employee of the Seller for any employee benefits due with respect to
their employment while an employee of the Seller. The Buyer does not purchase,
recognize, assume or otherwise acquire any rights, obligations, assets or
liabilities under, arising from or resulting from any employment agreement in
existence between the Seller and any employee, or any person employed to consult
or perform work by or for the Seller, or otherwise.
SECTION 5. REPRESENTATIONS AND WARRANTIES OF THE SELLER.
The Seller represents and warrants to the Buyer as of the Closing as
follows:
(a) Title to the Assets. The Seller shall deliver at the Closing to the
Buyer good and marketable title to all of the Assets free and clear of all
claims, liens, encumbrances, and security interests, except for the current
debt, liens, claims, encumbrances and/or security interests on the 1992 Ford
truck included in the Assets, which debt will be paid by Seller in full no later
than five (5) business days after Closing, and promptly thereafter, Seller
agrees to provide Buyer with all documents, including a release of said lien,
indicating the payment of said debt in full by Seller.
(i) Assignability of Accounts. All Accounts are or will be at the time
of Closing freely assignable by the Seller and such assignment, transfer and
delivery thereof to Buyer of all or any portion of each of the Accounts, will
not be or result in a breach, violation or default of any agreements relating to
such Accounts and such agreements and Accounts shall remain in full force and
effect as if there had been no assignment. transfer or delivery.
(ii) Credits, Refunds, Defaults. No customer of the Accounts of Seller
has any rights to any credit or refund pursuant to any agreement, understanding
or practice of the Seller which, singularly and in the aggregate, would have a
material adverse effect on the Seller's Grease Business, or the operation or use
of the Assets. To the best of the Seller's knowledge, after due inquiry, there
is no material default by any party under any of the Accounts, nor has any event
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<PAGE> 4
occurred which, with notice or the passage of time, or both, would constitute a
material default by any party under any of the Accounts.
(b) Organization. The Seller is a corporation duly organized, validly
existing and in good standing under the laws of the State of Georgia, and has
all necessary corporate power and authority to own its properties as such
properties are now owned and to conduct its business as and when its business is
conducted;
(c) Authority. The Seller has full right, power, authority and capacity
to execute and deliver this Agreement and to perform its obligations under this
Agreement;
(d) Financial Statements. The Seller has provided the Buyer with
certain financial information regarding Seller as prepared by Seller's
accountant concerning the Seller's operation including the Seller's Grease
Business ("Financial Data"). The Financial Data is true, correct, and complete
in all material respects, was maintained on a basis consistent with prior years,
and presents fairly the information set forth (including without imitation gross
profits of Seller) as at the date therefore and the results of operations for
the period then ended;
(e) The Seller has properly and accurately prepared and filed all
federal, state, local and other tax returns and reports required to be filed by
all applicable statutes, laws and regulations on or before the due dates thereof
that pertain to the Assets. The Seller has paid all federal, state, local and
other taxes, including all Interest, penalties and assessments, which are due
and payable that pertain to the Assets, and all such taxes due and payable by
the Seller have been fully discharged.
(f) Employment Taxes. Proper and accurate amounts have been withheld by
the Seller from its employees for all periods in full and complete compliance
with the tax withholding provisions of applicable federal, state and local law.
Proper and accurate federal, state and local returns have been filed by the
Seller for all periods for which returns were due with respect to employee
income tax withholding, social security and unemployment taxes and the amounts
shown thereon to be due and payable have been paid in full;
(g) Authorizations. The execution and delivery of this Agreement, the
consummation of the transactions contemplated hereby, and the performance and
fulfillment of its obligations and undertakings thereunder by the Seller will
not (A) violate any provision of, or result in the breach of or accelerate or
permit the acceleration of any performance required by the terms of, (1) any
applicable law, ordinance, rule or regulation of any governmental body, (II) the
articles of incorporation or bylaws of the Seller or (III) except for the loan
agreement with respect to the 1992 Ford truck included in the Assets, any
agreement or undertaking relating to the Seller's Grease Business to which the
Seller is a party, or by which Seller may be bound, or of any judgment, decree,
writ, injunction, order or award of any arbitration panel, court or governmental
authority applicable to it;
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<PAGE> 5
(B) result in the creation of any claim, lien, charge or encumbrance upon any of
the Assets; or (C) terminate or cancel or result in the termination or
cancellation of any Account.
The execution and delivery of this Agreement, the consummation of the
transactions contemplated hereby, and the performance and fulfillment of the
obligations and understandings hereunder, have been duly authorized by ail
requisite corporate action of the Seller;
(h) Contracts. Except for the Accounts attached to Exhibit "A", and
except for the loan agreement with respect to the 1992 Ford truck included in
the Assets, the Assets will not be bound or affected by any other agreements,
oral or written. The Seller is not a party to any written or oral contract,
agreement or commitment of any kind containing covenants by the Seller not to
compete in the Grease Business;
(i) Litigation and Pending Proceedings. There are no claims of any kind
or any actions, suits, proceedings arbitrations or investigations pending or to
the best of the Seller's knowledge threatened in any court or before any
governmental agency or instrumentality or arbitration panel or otherwise
against, by or affecting, the Seller's Grease Business or business prospects or
condition (financial or otherwise) or any of the properties or Assets used in
Seller's Grease Business;
(j) No Finder. Buyer represents and warrants that no broker or finder
has acted on its behalf in connection with this Agreement or the transactions
contemplated herein.
(k) Working Relationships. To the best of the Seller's knowledge, the
Seller enjoys good working relationships under substantially all Accounts or
arrangements necessary to the normal operation of Seller's Grease Business and
Seller has conducted the Seller's Grease Business in substantially the same
manner in which the same have traditionally been conducted during the past ten
(10 weeks);
(1) Completeness of Statements. No statement, Exhibit, annex,
certificate, information, representation or warranty of the Seller contained in
this Agreement or furnished by or on behalf of the Seller to the Buyer or its
agents pursuant thereto or in connection with the transactions contemplated
thereby contains or shall contain any untrue statement of a material fact or
omits to state a material fact necessary in order to make a statement contained
therein not misleading;
(m) Gross Profit of Current Accounts. To the best of Seller's
knowledge, the gross profit for Seller's Grease Business related to the then
current Accounts for the four month period ending December 31, 1996 was Two
Hundred Twenty Five Thousand Five Hundred Eighty Two Dollars ($225,582.00).
(n) Physical Assets. To the best of Seller's knowledge, the physical
assets as identified in the attached Bill of Sale are in good working order,
condition and repair,
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<PAGE> 6
subject to normal wear and -tear, and are suited for their present use and
operated in conformity with all applicable ordinances, laws and regulations.
(o) Environmental Matters. In conducting Seller's Grease Business.
Seller has complied with all laws and regulations relating to health and safety,
pollution and environmental control, including any applicable ordinance, rule or
regulation with respect to any of the Assets, the failure to comply with which
would, singularly or in the aggregate, have a material adverse effect on the
Seller's Grease Business or the use or operation of the Assets. In conducting
Seller's Grease Business, Seller has kept all records and made all filings
required by applicable state and federal laws and regulations with respect to
emissions into the environment (including solid, liquids, and gasses) and the
proper disposal of material (including liquid, and solid waste materials).
Seller has no knowledge of any material "release" as such term is defined in
CERCLA by the Seller of any "Hazardous Substance," from or upon any of the
Assets, and there has been no transportation, disposal or treatment by the
Seller or by any person employed by the Seller of such "Hazardous Substances" as
defined above, during the operation of Seller's Grease Business.
(p) Knowledge. As used in this Agreement, "Knowledge" shall be deemed
to include actual knowledge and any knowledge which a person or entity should in
the exercise of reasonable care have had or acquired.
SECTION 6. REPRESENTATIONS AND WARRANTIES OF THE BUYER.
The Buyer represents and warrants to the Seller as of the Closing Date
as follows:
(a) Organization. The Buyer is a corporation duly organized, validly
existing and in good standing under the laws of the State of Georgia.
(b) Authority. The Seller has full right, power, authority and capacity
to execute and deliver this Agreement and to perform its obligations under this
Agreement;
(c) Authorizations. The execution and delivery of this Agreement, the
consummation of the transactions contemplated thereby, and the performance and
fulfillment its obligations and undertakings thereunder by the Buyer will not
(A) violate any provision of, or result in the breach of or accelerate or permit
the acceleration of any performance required by the terms of (I) any applicable
law, ordinance, rule or regulation of any governmental body, (II) the articles
of incorporation or bylaws of the Buyer or (III) any agreement or undertaking
relating to the Buyer to which the Buyer is a party, or by which Buyer may be
bound. or of any judgment, decree, writ, injunction, order or award of any
arbitration panel, court or governmental authority applicable to it.
(d) Buyer represents and warrants that no broker or finder has acted on
its behalf in connection with this Agreement or the transactions contemplated
herein.
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<PAGE> 7
(e) Completeness of Statements. No statement, Exhibit, annex,
certificate, information, representation or warranty of the Buyer contained in
this Agreement or furnished by or on behalf of the Buyer to the Seller or its
agents pursuant thereto or in connection with the transactions contemplated
thereby contains or shall contain any untrue statement of a material fact or
omits to state a material fact necessary in order to make a statement contained
therein not misleading.
SECTION 7. SURVIVAL OF REPRESENTATIONS AND WARRANTIES.
The representations, warranties and indemnities set forth in this
Agreement shall survive the Closing of the purchase and sale of the Assets
notwithstanding any investigation undertaken by any party and such survival
shall last for a period of twelve (12) months following the Closing, during
which time all claims, including third party claims, for indemnity must be
delivered to the opposing party in writing, provided however, all
representations, warranties and indemnities pertaining to Title to the Assets
(as set forth in subsection (a) of Section 5 herein) shall not be subject to any
statute of limitations. Furthermore, all representations, warranties and
Indemnities under subsection (o) of Section 5 herein shall survive for a period
of three (3) years following the Closing, during which time all claims,
including third party claims, for indemnity must be delivered to the opposing
party in writing. The rights of the Indemnitee under Sections 7 and 9 herein are
independent of and in addition to such rights and remedies as the Indemnitee may
have at law or in equity or otherwise for any misrepresentation, breach of
warranty or the failure to fulfill any agreement or covenant hereunder on the
part of any Indemnitor including without limitation the right to seek specific
performance, rescission or restitution. none of which rights or remedies shall
be affected or diminished hereby.
SECTION 8. ADDITIONAL AGREEMENTS.
(a) Upon Buyer's written notice to Seller, ("Audit Request") Seller
shall authorize and provide Buyer, and anyone directed by same the night to
inspect, with respect to Seller's Grease Business and any other businesses
operated by Seller at the time of the Closing Date (collectively "Seller's
Business"), and review, and copy, Seller's books, financial data, including but
not limited to, financial statements and other records as required for an audit
of Seller's Business by a certified public accounting firm for the period
beginning the date of the Audit Request and through the past three years from
the date of such Audit Request, which will be provided and made available by
Seller. Seller and Buyer acknowledge Buyer may provide more than one Audit
Request to Seller. Upon Seller's receipt of any Audit Request, Seller and Buyer
agree to execute and deliver a Confidentiality Agreement acceptable to the
parties.
(b) Seller acknowledges and agrees to provide Buyer a credit for the
total cost of one hundred (100) tractor trailer hauls of grease and grease waste
other than any disposal fee (which will be paid by Buyer) from Seller's
principal place of business currently located at 2470 Weaver Way, Doraville,
Georgia to a disposal site acceptable to Buyer located in or around Pell City,
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<PAGE> 8
Alabama, and to conduct said hauls within a commercially reasonable manner as
requested by Buyer to do so.
(c) Seller agrees to authorize two (2) employees of Seller, Carole
Bingham and John Dawson, (collectively "Independent Contractors") to assist and
cooperate with Buyer by providing services pertaining to billing, invoicing and
routing to Buyer for a period of six (6) months from the Closing Date, and Buyer
agrees to pay to Seller Four Hundred Dollars ($400.00) per week for said
services unless and until the parties agree otherwise. Seller shall use its best
efforts to ensure said Independent Contractors will perform said services in a
commercially reasonable manner. Said Independent Contractors shall be deemed
independent contractors and not employees, of Buyer.
SECTION 9. INDEMNIFICATION.
(a) Seller hereby agrees to indemnify, defend, save and hold harmless
Buyer and Buyer's officers, directors, shareholders, employees "and agents
(collectively, the "Buyer Parties") from and against any and all damage,
liability, loss, expense, assessment, judgment or deficiency of any nature
whatsoever, including, without limitation, reasonable attorney's fees and other
costs and expenses incident to any suit, action or proceeding (collectively, a
"Loss"), incurred or sustained by the Buyer Parties, or any of them, which shall
arise out of result from or relate to (I) any breach of or failure to perform
any representation, warranty or covenant of Seller contained in this Agreement;
and (II) any and all liabilities and obligations in any manner related to the
operation of Seller's Grease Business prior to the Closing; (III) any and all
claims and liabilities arising out of all service provided by the Independent
Contractors and for all claims and liabilities which any person or entity may
suffer or become liable for arising out of any accidents, damage or injuries.
either to person or property of Buyer, or to any other parties in any manner
covered by or arising out of the gross negligence of the Independent Contractor.
Buyer hereby agrees to indemnify, defend, save and hold harmless Seller and
Seller's officers, directors, shareholders, employees and agents (collectively,
the "Seller Parties") from and against any and all Loss incurred or sustained by
the Seller Parties, or any of them, which shall arise out of, result from, or
relate to (I) any breach of or failure to perform any representation, warranty
or covenant of Buyer contained in this Agreement; and (II) any and all
liabilities and obligations in any manner related to the operation of Seller's
Grease Business after the Closing, except as stated herein.
(b) Should any claim or action by a third party arise after the
Closing, Date for which the party who is obligated to indemnify (the
"Indemnitor") is liable, under the terms of this Agreement, the party entitled
to indemnification (the "Indemnitee") shall notify the Indemnitor within a
reasonable time after such claim or action arises and is known to Indemnitee,
and shall give the Indemnitor a reasonable opportunity:
(i) to take part in any examination of the book and records of the
Indemnitee;
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<PAGE> 9
(ii) to conduct any proceeding or negotiations in connection
therewith and necessary or appropriate to defend the
Indemnitee,
(iii) to take all other required steps or proceedings to settle or
defend any such claim or action; and
(iv) to employ Counsel to contest any such claim or action in the
name of the Indemnitee or otherwise.
(c) The expenses of all proceedings, contests or lawsuits with respect
to such claims or actions shall be borne by the Indemnitor. If the Indemnitor
wishes to assume the defense of such claim or action it shall give written
notice to the Indemnitee within ten (10) days after notice from the Indemnitee
of such claim or action, and the Indemnitor shall thereafter assume the defense
of any such claim or liability, through counsel reasonably satisfactory to the
Indemnitee, provided that Indemnitee may participate in such defense at its own
expense and shall, in any event, have the right to control the defense of the
claim or action.
(d) If the Indemnitor shall refuse to assume the defense of, or if
after so assuming it shall fall to defend, any such claim or action, the
indemnitee may defend, against any such claim or action in such manner as it may
deem appropriate and the Indemnitee may settle such claim or litigation on such
terms as they may deem appropriate, and the Indemnitor shall promptly reimburse
the Indemnitee for the amount of all reasonable expenses, legal and otherwise
incurred by the Indemnitee in connection with the defense against and settlement
of such claim or action. If no settlement of such claim or litigation is made,
the Indemnitor shall satisfy any judgment rendered with respect to such claim or
in such action, before Indemnitee is required to do so, and pay all reasonable
expenses, legal or otherwise, incurred by the Indemnitee in the defense against
such claims or litigation. Notwithstanding the above, no settlement of any such
claim or litigation involving liability of the Indemnitor hereunder shall be
made without the prior written consent of the Indemnitor. which consent shall
not be unreasonably, withheld.
(e) If a judgment is rendered against the Indemnitee, or any lien
attaches to any of the assets of the Indemnitee, in any action covered by the
indemnification hereunder, Indemnitor shall immediately upon such entry or
attachment pay such judgment in full or discharge such lien unless, at the
Indemnitor's expense and direction, an appeal is taken under which the execution
of the judgment or satisfaction of the lien is stayed. If and when a judgment is
rendered in any such action, the Indemnitor shall pay such judgment or discharge
such lien before the Indemnitee is compelled to do so.
(f) The Indemnitor agrees that the failure of the Indemnitee to give
any notice or to take any action hereunder shall not be deemed a waiver of any
of the rights of the Indemnitee, provided however, Indemnitee is required to
give Indemnitor reasonable notice of any lawsuit which is served on Indemnitee
and for which Indemnitor is liable under this Agreement.
(g) The maximum amount of Loss for which the Seller shall be liable
under this Section 9 shall be the Purchase Price. No claim shall be made under
this Section 9 by an
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Indemnitee unless and until the Loss for which indemnification is sought exceeds
Ten Thousand Dollars ($10,000.00).
SECTION 10. COOPERATION.
The Seller shall use its best, diligent, good faith efforts to
facilitate negotiations and communications by the Buyer with any persons
reasonably necessary to ensure a smooth transition of ownership of the Assets.
The Seller shall, upon the request of Buyer, execute any documents necessary for
the contemplated transactions set forth herein, including but not limited to
Seller's transfer of all permits identified in Exhibit D, attached, (to the
extent transferable) and prepare correspondence which reflect Seller's best,
diligent and good faith efforts to facilitate negotiations and communication by
the Buyer with any persons reasonably necessary to ensure said transition of
ownership of Assets.
SECTION II. THE CLOSING.
(a) Time and Place of the Closing. The closing of the transactions
contemplated by this Agreement (the "Closing,") shall occur as of the close of
business on March 20, 1997 or such later date as the parties mutually agree (the
"Closing, Date") and shall take place at such place as the Buyer and the Seller
shall agree.
(b) Deliveries by the Seller . At the Closing, the Seller shall deliver
to the Buyer:
(i) an executed Bill of Sale in the form attached hereto,
(ii) a complete, accurate, and legible written list of
Seller's Assets satisfactory to Buyer;
(iii) a complete, accurate and updated written list (and in
disk form, if available) consisting of the Accounts set forth in Exhibit "A"
satisfactory to the Buyer,
(iv) copies of all files, purchase orders, records relating
to providing the grease collection, extraction and transportation services as
set forth in Exhibit "C", and
(v) all keys, if applicable, to the Assets identified in the
attached Bill of Sale and such other documents deemed necessary or appropriate
to vest title of said Assets in Buyer;
(vi) an aged trial balance for unpaid accounts with respect
to the Accounts transferred hereunder.
(vii) duly approved and adopted resolution by the Board of
Directors of Seller authorizing said sale and execution of all necessary
documents;
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<PAGE> 11
(c) Deliveries by Buyer. At the Closing, Buyer shall deliver to Seller:
(i) duly approved and adopted resolution by the Board of
Directors of Buyer authorizing it to execute, deliver and perform its
obligations under this Agreement and authorizing it to effect the transactions
contemplated hereunder;
(ii) a check made payable to Seller in the amount of Two
Hundred Fifty Thousand and no/100 Dollars ($250,000.00).
SECTION 12. MISCELLANEOUS.
12.1 Invalid Provisions.
The invalidity or unenforceability of any particular provision in this
Agreement shall not affect the other provisions hereof, and this Agreement shall
be construed in all respects as if such invalid and unenforceable provisions
were omitted.
12.2 Binding Effect.
This Agreement shall inure to the benefit of and shall be binding upon
the parties hereto and their Successors and permitted assigns. As used in this
Agreement, the term "Successor" shall include any person, firm, corporation, or
other business entity which at any time, whether by merger, purchase or
otherwise acquires all or substantially all of the assets or businesses of the
Seller or Buyer.
12.3 Counterparts.
This Agreement may be executed in two or more counterparts, each of
which shall be deemed to be an original, but all of which together shall
constitute one and the same instrument.
12.4 Construction. This Agreement shall be interpreted, construed and
enforced in accordance with the laws of the State of Georgia. Titles of the
sections and subsections herein have been inserted as a matter of convenience of
reference only and shall not affect the meaning or construction of any of the
terms or provisions herein.
12.5 Notices and Other Communications.
Any notice or other communication provided for or required by this
Agreement shall be in writing and shall be deemed to have been given and
received when delivered by hand or three (3) business days after having been
deposited in the United States mail, certified or registered, return receipt
requested, postage prepaid, properly addressed to the person to whom such notice
or other communication is intended to be given, at such address as such person
has set forth herein, or, if such person has subsequently furnished another
address in writing to the Company pursuant to the provisions hereof, at such new
address.
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<PAGE> 12
12.6 Modification and Waiver. This Agreement may be amended or modified
only in an instrument in writing executed by the parties sought to be bound. No
waiver by any party with respect to any breach or default or of any right or
remedy shall be deemed to constitute a continuing waiver of any other breach or
default or of any other right or remedy. No failure, forbearance or delay by any
party in exercising any night or remedy available hereunder, or otherwise
available under law, shall constitute a waiver or modification of any such right
or remedy of or any obligation of the other party to perform strictly in
accordance with the terms hereof
12.7 Entire Agreement.
This Agreement is the sole and exclusive agreement among the parties
with respect to the subject matter hereof
12.8 Time is of Essence.
Time is of the essence of this Agreement.
Buyer:
BONE-DRY ENTERPRISES, INC.
By: /s/ Joyce Bone
----------------------------------------
Joyce Bone, President
Seller
ANDREWS ENVIRONMENTAL
SERVICES, INC.
By: /s/ William R. Andrews
----------------------------------------
William R. Andrews, President
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<PAGE> 13
EXHIBIT "A"
SEE ATTACHED.
<PAGE> 14
EXHIBIT "B"
NUTPLUS ROUTE FILE PROGRAM INTERNALLY CREATED BY SELLER. TELEPHONE NUMBER (770)
449-8844.
<PAGE> 15
EXHIBIT "C"
PROVIDED.
<PAGE> 16
EXHIBIT "D"
LIQUID WASTE HAULER PUMPER PERMITS TO THE EXTENT TRANSFERABLE ISSUED BY
GWINNETT, FULTON AND COBB COUNTIES TO SELLER FOR SELLER'S GREASE BUSINESS
PERMIT NUMBERS OF SAID PERMITS ARE PRINTED ON THE TRUCKS.
<PAGE> 17
EXHIBIT "E"
<TABLE>
<S> <C>
CURTIS R. DIXON, SR. PHONE: 77-322-1461
4908 BROOKSTONE PLACE
ELLENWOOD, GA 30049 SSN: ###-##-####
CHARLIE WATKINS, JR. PHONE: 770-922-4358
2181 LAKE ROCKAWAY ROAD
CONYERS, GA 30207 SSN: ###-##-####
LAMARIAN V. JOLLEY PHONE: 770-948-6670
938 ELLISON COURT
AUSTELL, GA 30001 SSN: ###-##-####
</TABLE>
<PAGE> 1
EMPLOYMENT AGREEMENT
This Employment Agreement ("Agreement") is executed and delivered as of
June 1 , 1998, by and between SanTi Group, Inc., (formerly known as Mircolytics,
Inc., and it is contemplated that the name will be changed to EarthCare USA,
Inc.) a Delaware corporation ("Company"), and Terry Patrick, an individual
("Employee").
RECITALS
The Company is a comprehensive, national service company catering to
the non-hazardous liquid waste customer. SantTi's services include grease trap
pumping, septic (including pumping, installation and maintenance), portable
toilets, biosolids management, bulk liquid waste services and liquid waste
processing and disposal services. The Employee is an executive with extensive
experience in the waste industry. The Company desires to hire Employee as
President and Chief Operations Officer and the Employee desires to accept the
position offered.
The position of the Employee with the Company will give the Employee
access to and familiarity with confidential information and business methods
used in the operation of the Business. During the course of Employee's
employment, Employee will become familiar with and aware of information as to
the specific manner of doing business and the customers of the Company and the
Company's future plans. Employee has and will have knowledge of trade secrets of
the Company which are valuable assets of the Company.
Employee recognizes that the business of the Company is dependent upon
a number of trade secrets and confidential business information, including
customer lists, customer data and operational information. The protection of
these trade secrets is of critical importance to the
1
<PAGE> 2
Company. The Company will sustain great loss and damage if, for whatever reason,
during the term of this Agreement or Employee's employment with Company and for
a period following the termination of this Agreement or Employee's employment,
Employee should violate the provisions of Paragraph 3 of this Agreement.
Further, Employee acknowledges that any such violation would cause irreparable
harm to Company and that company would be entitled, without limitation, to
injunctive relief to remedy such violation.
NOW, THEREFORE, in consideration of Ten Dollars ($10), and the mutual
promises, terms and conditions set forth herein and the performance of each, the
parties hereby agree as follows:
1. Services
(a) Company hereby employs Employee as its President and Chief
Operations Officer. Additional or different duties, titles or positions may be
assigned to Employee or may be taken from Employee from time to time by the
Board of Directors of the Company; provided, that the Employee consents to such
changes.
(b) Employee hereby accepts employment upon the terms and conditions
contained in this Agreement. Employee shall faithfully adhere to , execute and
fulfill all directions and policies established by the Company, to the extent
such instructions do not violate applicable laws.
(c) Employee may, during the term of his employment hereunder, without
the prior written consent of Company, be engaged in any other business activity
pursued for gain, profit or other pecuniary advantage, if such activity does not
interfere with Employee's duties and responsibilities under this Agreement.
Employee may make personal investments in such form or manner as will neither
require any material amount of his services in the operation or affairs of the
enterprises in which such investments are made nor violate the terms of
Paragraph 3.
2
<PAGE> 3
2. Compensation
(a) For all services to be rendered by Employee to Company, Company
shall pay Employee an annual salary at the rate of One Hundred Fifty Thousand
Dollars ($150,000) per year, payable monthly, in advance; provided, however,
that payment of Employee's salary shall commence January 1, 1999. The Company,
at its discretion, may from time to time grant bonuses and raises to the
Employee; provided, however, that Employee's annual bonus shall be not less than
50% ("Minimum Bonus").
(b) Employee has been granted stock options ("Options") exercisable for
shares of the Company's common stock as reflected on Schedule A, attached
hereto. In addition, the Employee may be granted additional Options in the
future in accordance with any plans to issue options adopted by the Company. One
fourth of the Options shall vest on each anniversary date of this Agreement.
Notwithstanding the prior sentence the Options shall all vest immediately, if
the Company's Board of Directors accepts a binding agreement of merger,
consolidation or other business combination with any other publicly traded
company or any private company in which the Company is not the surviving
entity. In addition, all Options shall vest immediately on the death of
Employee and will be paid to Employee's estate or designated beneficiary.
(c) To the extent that Company, from time to time in its sole
discretion, offers or provides any of the following to its employees, then
Employee, on an equal basis with such other employees, shall be entitled to: (i)
participation in all, if any, life, health, medical, hospital, accident
3
<PAGE> 4
and disability insurance programs of Company in existence for the benefit of its
employees and for which Employee qualifies; (ii) participation in all, if any,
pension, retirement, profit sharing or stock purchase plans for which Employee
qualifies, and (iii) participation in any other employee benefits which Company
accords to its employees.
(d) During the term of Employee's employment with Company, Employee
shall be entitled to reimbursement for reasonable business expenses incurred on
behalf of Company.
3. Noncompetition Covenants.
(a) Employee agrees that the noncompetition covenants contained in this
Paragraph 3 are a material and substantial part of this Agreement.
(b) Employee covenants that during Employee's employment with Company
and for one year following the termination of Employee's employment (regardless
of the reason for the termination) the Employee shall not, directly or
indirectly, without the prior express written consent of Company, do any of the
things set forth in item (i) below. Employee covenants that during Employee's
employment with Company and for two years following the termination of
Employee's employment (regardless of the reason for the termination) the
Employee shall not, directly, or indirectly, without the prior express written
consent of Company, do any of the things set forth in items (ii) through (vi)
below.
(i) engage, as an officer, director, shareholder, owner, partner,
joint venturer, agent, or in a managerial capacity, whether as an employee,
independent contractor, consultant, or advisor, or as a sales representative, in
the liquid waste disposal industry, within seventy-five (75) miles of any
Company business operation at the date of Employee's termination (the
"Territory");
(ii) call upon any person who is, at that time, within the Territory,
an employee of Company
4
<PAGE> 5
or its affiliates in a managerial capacity, for the purpose or with the intent
of enticing such employee away from or out of the employ of Company or its
affiliates;
(iii) call upon any person or entity, which is, at that time, or which
has been, within one year prior to that time, a customer of the company or its
affiliates within the Territory, for the purpose of soliciting or selling any of
the services which are the services offered by the Company within the Territory;
(iv) call upon any prospective acquisition candidate located within
the Territory, on his own behalf or on behalf of any competitor of Company or
its affiliates, which candidate was known to Employee as an acquisition
candidate of the Company's or Company's affiliates;
(v) disclose the identity of the customers of Company or its
affiliates, whether in existence or proposed , to any person, firm, partnership,
corporation or other entity whatsoever, for any reason or purpose whatsoever,
except to do so by a governmental agency, Court Order or subpoena; or
(vi) promote, or assist, financially or otherwise, any person, firm,
partnership, corporation or other entity whatsoever to do any of the above.
Notwithstanding the above, the foregoing covenant shall not be deemed to
prohibit Employee from acquiring as an investment not more than two percent of
the capital stock of a competing business, the stock of which is traded on a
national securities exchange or over-the-counter.
For the purposes of this Agreement, the term "affiliates" shall mean
one or more of: (a) each subsidiary of Company, and (b) each other entity under
the direct or indirect control of the Company.
(c) The Company will sustain significant losses and damages as a result
of the breach by Employee of the covenants in this Paragraph 3. There is no
adequate monetary remedy for the immediate and irreparable damage that would be
caused to Company by Employee's breach of its
5
<PAGE> 6
non-competition covenants. Employee agrees that, in the event of a breach by him
of the foregoing covenants, such covenants may be enforced by Company by,
without limitation, injunctions and restraining orders.
(d) It is agreed by the parties that the covenants in this Paragraph 3
impose a reasonable restraint on Employee in light of the activities and
business of Company on the date of the execution of this Agreement and future
plans of Company.
(e) The covenants in this Paragraph 3 are severable and separate, and
the unenforceability of any specific covenant shall not affect the provisions of
any other covenant. If any court of competent jurisdiction shall determine that
the scope, time or territorial restrictions set forth are unreasonable, then it
is the intention of the parties that such restrictions be enforced to the
fullest extent which the court deems reasonable, and the Agreement shall thereby
be reformed.
(f) The covenants in this Paragraph 3 shall be construed as independent
of any other provision of this Agreement and the existence of any claim or cause
of action of Employee against Company whether predicated on this Agreement, or
otherwise, shall not constitute a defense to the enforcement by Company of such
covenants. It is specifically agreed that the duration of the noncompetition
covenants stated above shall be computed by excluding from such computation all
time during which Employee is in violation of any provision of this Paragraph 3
and all time during which there is pending in any court of competent
jurisdiction any action (including any appeal from any judgement) brought by any
person, whether or not a party to this Agreement, in which action Company seeks
to enforce the agreements and covenants of Employee or in which any person
contests the validity of such agreements and covenants or their enforceability
or seeks to avoid their performance or enforcement. Provided that, no such
exclusion shall include the period of time
6
<PAGE> 7
within which Employee has ceased violating this paragraph, whether or not as a
result of being in compliance with Court injunction or doing so voluntarily, and
whether or not any action is pending against Employee.
4. Return of Company Property. All correspondence, reports, charts,
products, records, designs, patents, plans, manuals, "field guides," memoranda,
advertising materials, lists and other data or property collected by or
delivered to Employee by or on behalf of the Company or its representatives,
customers and government entities (including, without limitation, customers
obtained for Company by Employee), and all other materials compiled by Employee
which pertain to the business of Company shall be and shall remain the property
of Company, shall be subject at all times to the Company's discretion and
control and shall be delivered promptly to Company upon request at any time and
without request upon completion or other termination of Employee's employment
hereunder.
5. Inventions. Employee shall disclose promptly to Company any and all
conceptions and ideas for invention, improvements, and valuable discoveries,
whether patentable or not, which are conceived or made by Employee solely or
jointly with another during the period of employment or within one year
thereafter and which are related to the business or activities of the Company.
Employee hereby assigns and agrees to assign all his interests therein to
Company or its nominee. Whenever requested to do so by Company, Employee shall
execute any and all applications, assignments or other instruments that Company
shall deem necessary to apply for and obtain Letters Patent of the United States
or any foreign country or to otherwise protect Company's interest therein. These
obligations shall continue beyond the termination of employment with respect to
inventions, improvements and valuable discoveries, whether patentable or not,
conceived,
7
<PAGE> 8
made or acquired by Employee during the period of employment or within one year
thereafter, and shall be binding upon Employee's heirs, assigns, executors,
administrators and other legal representatives.
6. Term; Termination; Rights of Termination. The term of this Agreement
shall begin on the date of this Agreement and continue for a term of 5 years and
shall be automatically renewed at the end of each 12 month period for an
additional one year. Employee's employment under this Agreement may be
terminated during the term hereof in any one or more of the following ways:
(a) Automatically upon the resignation of Employee.
(b) By Company upon written notice to Employee in the event of:
(i) Employee's material breach of this Agreement or
unsatisfactory performance of his duties or other obligations hereunder, as
determined in good faith by the Board of Directors of the Company; provided,
however, that the Board of Directors of the Company shall give Employee written
notice specifically identifying any such material breach or unsatisfactory
performance and Employee shall have the right to cure any such breach or
unsatisfactory performance during the sixty day period following receipt of such
written notice;
(ii) The Company's merger, consolidation, or other business
combination with another publicly traded entity or with a private entity where
the Company is not the surviving entity or the Company's sale of substantially
all its assets;
(iii) Employee's inability to perform his duties under this
Agreement because of illness or physical or mental disability or other
incapacity which continues for a period of 90 days; or
8
<PAGE> 9
(iv) Employee's conviction for fraud with respect to the
business or affairs of Company or if Employee if convicted of a felony with
respect to the business or affairs of Company. If this Agreement is terminated
by the Company, the Employee shall be provided with a written notice of
termination which shall state the reason for Employee's termination.
(c) Upon termination of Employee's employment under this Paragraph 6
(save and except only under Paragraph 6(b)(ii)), Employee shall be entitled to
receive all compensation to the date of such termination and, upon termination
pursuant to Paragraph 6(b)(ii), shall immediately be paid in full, an amount
equal to the remaining salary and Minimum Bonus paid for each of the remaining
years (or portions thereof) under the full term hereof. In the event of
termination by the death of Employee, Employee's estate shall be paid Employee's
salary for 90 days after the date of death. In addition, upon termination by
death or under Paragraph 6(b)(ii) all Options granted Employee shall immediately
vest in full and Company shall continue Employee's insurance benefits for two
years following termination.
(d) In the event of termination of Employee's employment under this
Agreement under Paragraphs 6(a) or 6(b) (save and except only under Paragraph
6(b)(ii)), all rights and obligations of Company to Employee under this
Agreement shall cease immediately, except that Employee's obligations under
Paragraph 3, 4, 5, and 8 hereof shall survive such termination.
7. Authority. Employee may take orders from customers of the Company in
accordance with the standard Company form of agreement and all Company policies
and procedures from time to time in effect and at all times subject to
acceptance by Company. Employee does not have any power or authority to contract
for, bind or commit Company in any manner, unless given express permission in
advance, without limiting the generality of the foregoing statement, but as
9
<PAGE> 10
illustrative of its intent, Employee shall not have or exercise or purport to
have any powers or rights to make, explain, amplify or modify any warranties as
may be contained in said standard Company form of agreement.
8. Representations of Employee and Employer. Employee represents and
warrants to Company that he is not subject to any restriction or noncompetition
covenant in favor of a former employer or any other person or entity, and that
the execution of this Agreement by Employee and his provision of services to
Company and the performance of his obligations hereunder will not violate or be
a breach of any agreement with a former employer or any other person or entity.
Further, Employee agrees to indemnify Company for any claim, including, but not
limited to, attorneys' fees and expenses of investigation, by any such third
party that such third party may now have or may hereafter come to have against
Company based upon or arising out of any noncompetition agreement or invention
and secrecy agreement between Employee and such third party.
9. Complete Agreement. This Agreement is the final, complete and
exclusive statement and expression of the agreement between Company and
Employee, it being understood that there are no oral representations,
understandings or agreements covering the same subject matter as this Agreement.
This Agreement supersedes, and cannot be varied, contradicted or supplemented by
evidence of any prior or contemporaneous discussions, correspondence, or oral or
written agreements of any kind. This Agreement may be modified, altered or
otherwise amended only by a written instrument executed by both Company and
Employee.
10. No Waiver; Remedies Cumulative. No waiver by the parties hereto of
any default or breach of any term, condition or covenant of this Agreement shall
be deemed to be a waiver of
10
<PAGE> 11
any subsequent default or breach of the same or any other term, condition or
covenant contained herein. No right, remedy or election given by any term of
this Agreement shall be deemed exclusive but each shall be cumulative with all
other rights, remedies and elections available at law or in equity.
11. Assignment; Binding Effect Employee understands that he has been
selected by Company on the basis of his personal qualifications, experience and
skills. This Agreement is not assignable. This Agreement shall be binding upon
and inure to the benefit of the parties hereto and Company's successors.
12. Notice. All notices or other communications required or permitted
hereunder shall be in writing and may be given by depositing the same in the
United States mail, addressed to the party to be notified, postage prepaid and
registered or certified with return receipt requested, by overnight courier or
by delivering the same in person to such party.
To Company: Chairman of the Board
address
city, state, zip code
with a copy to: Robert C. Gist, Esq.
12809 Plum Hollow Drive
Oklahoma City, OK 73142
To Employee: Terry Patrick
2404 Willow Bend Drive
Plano, TX 75093
Notice shall be deemed given and effective the day personally delivered, the day
after being sent by overnight courier and three days after the deposit in the
U.S. mail of a writing addressed as above and sent first class mail, certified,
return receipt requested, or when actually received, if earlier.
11
<PAGE> 12
Either party may change the address for notice by notifying the other party of
such change in accordance with this Paragraph 12.
13. Severability; Headings. If any portion of this Agreement is held
invalid or inoperative, the other portion of this Agreement shall be deemed
valid and operative and, so far as is reasonable and possible, effect shall be
given to the intent manifested by the portion held invalid or inoperative. The
paragraph headings herein are for reference purposed only and are not intended
in any way to describe, interpret, define or limit the extent or intent of this
Agreement or of any part hereof.
14. Governing Law. This Agreement shall in all respects be constructed
in accordance with the laws of Texas.
Santi, Group, Inc.
By: /s/ Terry Patrick
-------------------------------------
/s/ Terry Patrick
-----------------------------------------
Terry Patrick
12
<PAGE> 13
SCHEDULE A
TO EMPLOYMENT AGREEMENT
(TERRY PATRICK)
Options granted to Employee
<TABLE>
<CAPTION>
Number of Shares Exercise Price
---------------- --------------
<S> <C>
175,000 $ 6.00
150,000 $15.00
200,000 $25.00
</TABLE>
<PAGE> 14
SCHEDULE TO EXHIBIT 10.16
The Company entered into Employment Agreements substantially similar to
Exhibit 10.16 except as follows:
(1) Donald F. Morehead, Jr. as Chief Executive Officer and Chairman of the
Board.
(2) Kenneth Peak as Vice President and Chief Financial Officer
Two year term.
$100,000 annual base salary
Minimum bonus - 25% of annual base salary
<PAGE> 1
EXHIBIT 10.17
FORM OF
LOCK-UP AGREEMENT
August ____, 1998
SanTi Group, Inc.
14901 Quorum Drive
Suite 200
Dallas, Texas 75240
Re: Registration of 8,113,379 Shares of Common Stock of
SanTi Group, Inc. (the "Company")
Ladies and Gentlemen:
The undersigned officer or director is the beneficial owner of
_________ shares of common stock, $.0001 par value per share ("Common Stock"),
of SanTi Group, Inc. (the "Company"). The undersigned understands that the
Company has filed a Registration Statement on Form S-1 (the "Registration
Statement") with the Securities and Exchange Commission (the "Commission") for
the registration of approximately 8,113,379 shares of Common Stock (the
"Registration").
In order to induce the Company to proceed with the Registration, at
its expense, the undersigned agrees, for the benefit of the Company, the
undersigned will not, without the prior written consent of the Company, directly
or indirectly, offer, sell, offer to sell, contract to sell, pledge, grant any
option to purchase, transfer or otherwise sell or dispose (or announce any
offer, sale, offer of sale, contract of sale, pledge, grant of an option to
purchase or other sale or disposition) of (i) any shares of Common Stock subject
to the Registration Statement (the "Shares") or (ii) other capital stock or any
securities convertible into, or exercisable or exchangeable for, any shares of
Common Stock, beneficially owned (within the meaning of Rule 13d-3 under the
Securities Exchange Act of 1934, as amended) by the undersigned on the date
hereof or hereafter acquired for a period of 180 days (with respect to 25% of
the Shares) to 365 days (with respect to the remaining 75% of the Shares) after
the date of the final Prospectus filed with the Commission pursuant to Rule
424(b) of the Securities Act of 1933, as amended (the "Act") promulgated by the
Commission or if no filing under Rule 424(b) is made, the date of the final
Prospectus included in the Registration Statement when declared effective under
the Act, provided, however, that the undersigned may make the following
transfers: (i) bona fide gifts and transfers effected by the undersigned other
than on any securities exchange or in the over-the-counter market to donees or
transferees that agree to execute
<PAGE> 2
an agreement in the form of this agreement and to be bound by the restrictions
described herein and therein; (ii) transfers to the transferor's affiliates, as
such term is defined in Rule 405 promulgated under the Act, provided the
transferee agrees in writing to be bound by the terms hereof, or (iii) transfers
made with the prior written consent of the Company, which consent must be
approved unanimously by the non-employee members of the Board.
Further, the undersigned agrees that prior to the effective date of
the Registration Statement, the undersigned will not, without the prior written
consent of the Company, other than as disclosed in the Registration Statement,
directly or indirectly, offer, sell, offer to sell, contract to sell, pledge,
grant any option to purchase or otherwise sell or dispose (or announce any
offer, sale, offer of sale, contract of sale, pledge, grant of an option to
purchase or other sale or disposition) of (i) any Shares or (ii) other capital
stock or any securities convertible into, or exercisable or exchangeable for,
any shares of Common Stock or other capital stock of the Company or any right to
purchase or acquire Common Stock or other capital stock of the Company,
beneficially owned (within the meaning of Rule 13d-3 under the Securities
Exchange Act of 1934, as amended) by the undersigned on the date hereof or
hereafter acquired without first requiring any such offering or acquiring
parties to execute and deliver to you an agreement of substantially similar to
this Agreement.
This letter shall bind the undersigned and his heirs, personal
representatives and assigns.
Very truly yours,
-----------------------------
Signature
Name:
<PAGE> 1
LIST OF SUBSIDIARIES
Bone-Dry Enterprises, Inc., is incorporated in the state of Georgia,
and operates under the following tradenames: Andrews Environmental, Bone-Dry
Enterprises and Quality Plumbing and Septic.
SanTi Group of Florida, Inc. is incorporated in the state of Georgia,
and operates under the following tradenames: Brownie Environmental Services,
Grease-Tec and A Rapid Rooter Sewer and Drain.
SanTi Group of Pennsylvania, Inc. is incorporated in the state of
Georgia, and operates under the following tradenames: Ferrero Wastewater
Management and Eldredge Wastewater Management.
SanTi Group of New York, Inc. is incorporated in Georgia, and operates
under the following tradenames: RGM Liquid Waste Removal and Devito
Environmental.
Nutrecon, Inc. is incorporated in Pennslyvania.
<PAGE> 1
EXHIBIT 23.2
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the use of our reports
and to all references to our Firm included in or made a part of this
registration statement.
ARTHUR ANDERSEN LLP
Atlanta, Georgia
July 31, 1998
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> MAR-31-1998
<CASH> 13,504,967
<SECURITIES> 0
<RECEIVABLES> 1,193,160
<ALLOWANCES> 77,659
<INVENTORY> 0
<CURRENT-ASSETS> 14,777,962
<PP&E> 3,989,205
<DEPRECIATION> (135,711)
<TOTAL-ASSETS> 30,927,594
<CURRENT-LIABILITIES> 15,651,792
<BONDS> 0
0
0
<COMMON> 679
<OTHER-SE> 13,140,500
<TOTAL-LIABILITY-AND-EQUITY> 13,141,179
<SALES> 0
<TOTAL-REVENUES> 2,634,722
<CGS> 0
<TOTAL-COSTS> 3,349,819
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 59,784
<INTEREST-EXPENSE> 106,713
<INCOME-PRETAX> (821,810)
<INCOME-TAX> (318,536)
<INCOME-CONTINUING> (503,274)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (503,274)
<EPS-PRIMARY> (.10)
<EPS-DILUTED> (.10)
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> DEC-31-1997
<CASH> 195,552
<SECURITIES> 0
<RECEIVABLES> 143,652
<ALLOWANCES> 17,875
<INVENTORY> 0
<CURRENT-ASSETS> 467,889
<PP&E> 593,416
<DEPRECIATION> (31,874)
<TOTAL-ASSETS> 2,614,143
<CURRENT-LIABILITIES> 1,621,450
<BONDS> 0
0
0
<COMMON> 329
<OTHER-SE> 812,124
<TOTAL-LIABILITY-AND-EQUITY> 812,453
<SALES> 0
<TOTAL-REVENUES> 737,858
<CGS> 0
<TOTAL-COSTS> 1,055,348
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 104,494
<INCOME-PRETAX> (421,984)
<INCOME-TAX> (163,632)
<INCOME-CONTINUING> (258,352)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (258,352)
<EPS-PRIMARY> (.28)
<EPS-DILUTED> (.28)
</TABLE>
