SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
(Mark one)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the fiscal year ended October 31, 1994
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to .
Commission file number: 033-17921
AIR & WATER TECHNOLOGIES CORPORATION
(Exact Name of Registrant as Specified in its Charter)
Delaware 13-3418759
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification Number)
P.O. Box 1500, Somerville, New Jersey 08876
(Address of Principal Executive Offices) (Zip Code)
(Registrant's Telephone Number, Including Area Code) (908) 685-4600
Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange
Title of each class on which registered
Class A Common Stock,
$.001 par value American Stock Exchange, Inc.
Securities registered pursuant to Section 12(g) of the Act:
None
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.
Yes /X/ No / /
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of the Registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K. [ ]
The aggregate market value of the voting stock held by non-affiliates of the
Registrant was $79,547,268.00 on December 30, 1994.
The number of outstanding shares of the Registrant's Class A Common stock, par
value $.001 per share, was 32,018,004 on December 30, 1994.
The Exhibit Index to this Annual Report on Form 10-K is located at Page
104 herein.
ITEM 1. BUSINESS
RECENT DEVELOPMENTS
On June 14, 1994, the stockholders of Air & Water Technologies Corporation
("AWT" or the "Company") approved the issuance of Company securities pursuant
to an Investment Agreement dated as of March 30, 1994 (the "Investment
Agreement"), among AWT, Compagnie Generale des Eaux, a French corporation and
AWT's largest shareholder ("CGE"), and Anjou International Company, a Delaware
corporation and a wholly-owned subsidiary of CGE ("Anjou"), pursuant to which,
among other things, AWT (i) issued to CGE 1,200,000 shares of a newly
designated series of Preferred Stock, designated as 5 1/2% Series A
Convertible Exchangeable Preferred Stock, convertible into 4,800,000 shares of
Class A Common Stock, for cash consideration of $60,000,000, and (ii) issued
to Anjou an aggregate of 6,701,500 shares of Class A Common Stock in
connection with the acquisition from Anjou of Professional Services Group,
Inc., a Minnesota corporation, and 2815869 Canada, Inc., a Canadian corporation
(hereinafter collectively "Professional Services Group" or "PSG"). As a
result, CGE increased its ownership interest in AWT to approximately 48% of
the total voting power of the Company's voting securities. In addition, AWT
benefitted from certain financial undertakings from CGE, including a
$125,000,000 loan from CGE and became CGE's exclusive vehicle in the United
States, its possessions and its territories for CGE's water and wastewater
management and air pollution activities. CGE also has representation on AWT's
Board of Directors and the right to designate AWT's Chief Executive Officer
and Chief Financial Officer. See ITEM 13 -- CERTAIN RELATIONSHIPS AND RELATED
TRANSACTIONS for additional information.
BACKGROUND
AWT is a leading environmental treatment and services company that provides
a comprehensive range of services and technologies directed principally at
controlling air pollution, protecting the integrity of our nation's water
resources, providing services in support of the management and remediation of
hazardous waste, and providing complete services for the operations,
maintenance and management of treatment facilities. AWT believes it provides
a complement of products and services that satisfy the environmental and
essential services needs of its targeted client base. AWT markets its
products and services through three renowned trade names; namely,
Research-Cottrell for air-related products and services, Metcalf & Eddy for
water, wastewater-related and hazardous waste products and engineering
services and Professional Services Group for the operations, maintenance and
management of environmental treatment facilities. Research-Cottrell designs
and develops products and technologies targeted at specific client needs such
as pollution control equipment, emissions monitoring systems and process
control devices. Metcalf & Eddy provides engineering studies and design,
project management, regulatory assistance, and site evaluation for clients
with needs in the areas of water treatment and conservation, hazardous waste
site remediation, solid waste management and wastewater treatment and
disposal. Professional Services Group provides its clients with complete
services for the operations, maintenance and management of treatment
facilities in various water and wastewater and sludge and biosolid waste
management markets. AWT provides its full complement of products and services
to four major customer sectors consisting of the electric generating industry;
the solid waste incineration industry; governmental entities, including
municipalities and state and federal agencies; and specific industrial
categories, such as petroleum refining, pulp and paper, pharmaceutical,
chemical, primary and secondary metals, food processing, printing and
furniture manufacture.
Research-Cottrell's air-related services and technologies are directed
principally at the reduction of air pollution and the treatment of thermal
discharges, the dispersion of airborne contaminants, the monitoring of
emissions and the provision of regulatory and engineering services.
Research-Cottrell's services include identifying and analyzing air pollution
problems and air pollution control options; designing treatment facilities and
equipment; supervising equipment fabrication and installation; and providing
overall project management and quality control. Research-Cottrell's pollution
control technologies include scrubbers, precipitators, chimneys, cooling
towers, continuous emissions monitors and fabric filters and mechanical
collectors. These technologies are provided separately or combined into an
integrated pollution control system. Research-Cottrell also provides parts and
service and maintains, repairs and rebuilds pollution control systems and
components on a routine or emergency-response basis.
Metcalf & Eddy's services are directed principally at the protection and
effective management of water resources, both surface and groundwater as well
as the management of our clients' hazardous wastes. These activities include
providing services for the management or reduction of pollutants entering the
water resource from a variety of natural causes as well as waste disposal
practices such as wastewater treatment, solid waste landfilling, industrial
wastewater pretreatment and disposal of hazardous waste. These services
include management, treatment and distribution of water from surface and
groundwater sources; collection, treatment and disposal of wastewater and its
associated by-products such as sludge; pretreatment of industrial wastewater
prior to discharge into a municipal system or on-site treatment and disposal;
remediation of hazardous waste sites involving contaminated soils and
groundwater; renovation of groundwater and soil contaminated through improper
waste disposal practices; monitoring and closure of sanitary landfills with
disposal of associated leachate; and management and transportation of
hazardous waste.
PSG provides its clients with complete services for the operations,
maintenance and management of treatment facilities in the various water and
wastewater and sludge and biosolid waste management markets. These services
range from assisting owners and operators in addressing individual operating
needs to the assumption by PSG of complete responsibility for operating
complex treatment facilities. PSG provides operations, maintenance and
management services for water supply and wastewater treatment facilities,
primarily for cities, municipalities and other local governmental entities.
PSG has extensive experience in planning and implementing large sludge and
biosolid waste management plans. PSG is experienced in planning and
implementing alternative technologies and facilities for sludge and biosolid
waste management, including waste minimization programs, landfills,
incinerators, composting and land application as fertilizers and soil
nutrients.
AIR POLLUTION CONTROL - RESEARCH-COTTRELL
AWT's air-related services and technologies are directed principally at the
reduction of air pollution and the treatment of thermal discharges, the
dispersion of airborne contaminants, the monitoring of emissions and the
provision of regulatory and engineering services. In addition, AWT supplies
parts and maintenance and repair services for equipment utilized in these
areas of reduction, dispersion and monitoring. AWT's services include
identifying and analyzing pollution problems and pollution control options;
designing treatment facilities and equipment; supervising equipment
fabrication and installation; and providing overall project management and
quality control. AWT also provides continuous air emissions monitoring systems
and services, evaluates systems performance, and maintains, repairs and
rebuilds pollution control systems and components on a routine or
emergency-response basis.
AWT markets its air pollution control technologies using its various
trademarks: CUSTODIS chimneys and stacks; CUSTODIS-ECODYNETrademark
cooling towers; FLEX-KLEENTrademark fabric filters and mechanical
collectors; TELLERTrademark dry emissions control systems; KVBTrademark
continuous emissions monitors; ANALECTTrademark Fourier transform infrared
monitors; and RESEARCH-COTTRELLTrademark air pollution control systems,
including electrostatic precipitators, fabric filters, DOUBLE-LOOPTrademark
flue gas desulfurization systems ("FGD scrubbers"); and REECO
RE-THERMTrademark regenerative thermal oxidizers. AWT has recently obtained
the rights to market a number of new technologies to its utility and
industrial clients, including NOxOUTTrademark, Thermal DeNOxTrademark, and
SONOXTrademark products used to reduce NO(x) and SO(2) emissions from
industrial and utility boiler exhaust streams; KVB/MIP LASER OPACITY
MONITOR; EPRICON, an agentless flue gas conditioning system used to
improve the particulate collection efficiency of electrostatic
precipitators; and COHPAC (Compact Hybrid Particulate Collector), a
retrofit technology used to increase collection efficiency from utility and
industrial exhaust streams by adding a fabric filter downstream of an
energized precipitator or within the existing precipitator casing.
Demand for AWT's air pollution control services and technologies arises
principally from the expansion and modification of various utility and
industrial pollution sources, such as pulp and paper plants, waste incineration
plants and pharmaceutical and petrochemical facilities which must comply with
existing environmental legislation and regulations; the need for maintenance,
repair and rebuilding of existing pollution control devices; and stricter
legislation and regulations, particularly the amendments to the federal Clean
Air Act enacted in 1990, mandating new or increased levels of air pollution
control.
AWT estimates that it has installed or constructed over 5,000 electrostatic
precipitators, over 100,000 Flex-Kleen fabric filter systems and mechanical
collectors, 10 FGD scrubbers, over 10,000 Custodis chimneys, over 200 REECO
regenerative thermal oxidizers, over 11,000 Ecodyne cooling towers and over
1,100 KVB continuous emission monitors in the United States. AWT believes its
installed base of chimneys, precipitators and continuous emission monitors
provides a ready market for AWT's parts, maintenance and repair services.
In addition, as pollution control systems or major components age, they
often require rebuilding, upgrading and replacement. With the advent of
increased and stricter pollution control legislation, particularly the 1990
Clean Air Act Amendments, and associated regulations, many older facilities
will require significant retrofitting (upgrading of air pollution control
equipment by providing new or improved parts) in order to comply with new or
tighter emission control standards. For example, the 1990 Clean Air Act
Amendments will require 110 of the nation's largest coal-fired electrical
generating plants to reduce emissions of sulfur dioxide gases to a rate of 2.5
pounds per million Btu by 1995; by the year 2000 those same plants, in
addition to another 2400 units, must reduce sulfur dioxide emissions to a rate
of 1.2 pounds per million Btu. In the past, many of these plants had been
emitting sulfur dioxide at rates from three to six pounds per million Btu. AWT
has the capability and resources to provide the services and technologies
these older facilities may use to comply with the new standards.
Services and Technologies
AWT's regulatory services include advising clients of regulatory and
associated reporting requirements, as well as evaluating a client's existing
emissions in terms of those regulations. In addition, AWT supplies parts,
maintenance and repair services for equipment utilized in reduction,
dispersion and monitoring.
Technical Consulting
AWT provides technical consulting and client funded research and
development services for a wide range of air pollution and thermal discharge
problems. The consulting and research services offered by AWT enable its
clients to draw upon the expertise developed by the other divisions within the
air-related products and services group and to develop integrated solutions to
air-quality control problems. In addition, the 1990 amendments to the Federal
Clean Air Act, in particular its expansion of the number of companies subject
to the permitting, reporting, and compliance requirements and the Clean Air
Act's increasingly strict emissions limitations, could create increased demand
for the consulting services of this division.
Emission Control
AWT offers air emissions control technologies for the reduction of
particulates, sulfur oxides, nitrogen oxides, volatile organic compounds and
toxic compounds. AWT also provides technologies for the treatment of thermal
discharges resulting from the operation of electric generating facilities and
industrial boilers.
Particulate Emission Control Technologies. AWT has been an innovator in
the control of particulate emissions since Frederick Cottrell invented the
electrostatic precipitator in 1907. An electrostatic precipitator removes
particulate matter from the exhaust passing through it, using
electrodynamic forces. Current precipitator technologies offered by AWT
address both traditional particulate control objectives as measured by
weight, and the newer objectives measured by removal efficiencies of
particulate matter below ten microns in diameter. AWT has designed and
installed over 5,000 electrostatic precipitators, which AWT believes is the
largest installed base of precipitators in the United States.
AWT also offers a wide range of fabric filter systems to control and
recover particulates in a variety of industrial applications. AWT has sold
over 100,000 Flex-Kleen fabric filter systems, mechanical collectors and
similarly engineered products and systems for the recovery of valuable
product material and the removal of dust and other particulates primarily
to chemical manufacturing, food processing and consumer products companies.
AWT believes it is a market leader in both the number and diversity of
fabric filters installed for industrial applications. AWT's COHPAC and
EPRICON technologies allow utility and industrial clients to increase
particulate control efficiencies for existing equipment.
Sulfur Oxides Emission Control Technologies. Both sulfur oxide and
nitrogen oxide compounds contribute to "acid rain." In addition,
nitrogen oxides contribute to smog formation. Industrial and utility
fuel combustion remains a principal source of these emissions. AWT has
installed FGD systems, such as DOUBLE LOOPTrademark scrubbers, to
control sulfur dioxide emissions at 15 coal-burning plants generating an
aggregate of over 7,000 megawatts of electricity. AWT's proprietary
DOUBLE LOOPTrademark scrubber system is capable of achieving 95% sulfur
oxides removal from the emissions generated by "high-sulfur" coal. The
double loop design allows conversion of the scrubber waste stream to
gypsum that can be used to manufacture wallboard.
In February 1990, Research-Cottrell entered into an agreement (the
"Cooperation Agreement") with NOELL GmbH and KRC Umwelttechnik GmbH
("NOELL-KRC") to cooperate on an exclusive basis in the marketing and sale
of Research-Cottrell's proprietary wet flue gas desulfurization systems in
the United States, Canada and elsewhere in the world (with the exception of
certain central European countries). NOELL-KRC is an environmental
engineering and construction company headquartered in Wurzburg, Germany.
NOELL-KRC is owned by the Salzgitter Group, a leading European conglomerate.
Under the Cooperation Agreement, Research-Cottrell has licensed NOELL-
KRC to make, use, sell and practice Research-Cottrell's technology, subject
to payment to Research-Cottrell of certain license fees, commissions and
royalties. In addition, NOELL-KRC has agreed to make available all of its
improvements to Research-Cottrell's underlying technology, including
NOELL-KRC flue gas desulfurization patents, trade secrets and know-how.
Research-Cottrell retains exclusive rights to other technologies that often
accompany the installation of wet flue gas desulfurization systems.
Under the Cooperation Agreement, Research-Cottrell is responsible for
marketing efforts in the United States and Canada. NOELL-KRC is obligated
to responsively bid on all projects identified by Research-Cottrell and
provide bonding or other financial requirements stipulated in such bids.
NOELL-KRC is exclusively responsible for project execution. On a
case-by-case basis, Research-Cottrell and NOELL-KRC will agree upon
participation by Research-Cottrell in project management, construction,
start-up and other phases of project execution. The Cooperation Agreement
has an initial term of ten years, subject to renewal for additional one
year periods as mutually agreed by the parties.
AWT's combustion engineering services and combustion control equipment
can reduce formation of nitrogen oxides up to 40% in certain installations.
Nitrogen Oxide Emissions Control Technologies. Due to the requirements
of Title I of the Clean Air Act Amendments, there is a rapidly growing
demand for efficient, low cost nitrogen oxide (NO(x)) control technologies.
The Company believes that this market will continue to grow through the end
of the century and that the majority of these technology purchases will be
made by electric utilities, followed by oil and petrochemical industries,
the pulp/paper industries, and other industrial customers that operate
large boilers or furnaces.
For moderate levels of NO(x) reduction, Research-Cottrell offers
Selective Non-Catalytic Reduction (SNCR) under the trade names
NO(x)OUTRegistered and Thermal DeNO(x)Registered. NO(x)OUTRegistered is
licensed from Nalco Fuel Tech and Thermal DeNO(x)Registered is licensed
from Exxon Research and Engineering. The SNCR technology is a low
capital cost method that utilizes urea (NO(x)OUTRegistered) or ammonia
(Thermal DeNO(x)Registered) as a chemical reagent to reduce NO(x).
Research-Cottrell is licensed to implement SONOXTrademark, a technology
which provides simultaneous reductions of NO(x) and SO(2).
SONOXTrademark is licensed from Ontario Hydro International.
Selective Catalytic NO(x) Reduction (SCR) technology, also offered by
Research-Cottrell, is a somewhat more expensive technology that can be used
alone or in combination with SNCR for very high reductions of NO(x)
emissions.
Research-Cottrell offers complete evaluation, design, engineering,
equipment and start-up capabilities. With this range of capabilities and
its large utility and industrial customer base, AWT believes that
Research-Cottrell is well-positioned for growth in this market.
Toxic Compounds Control Technologies. The primary sources of potential
toxic air emissions are fossil-fuel utilities, industrial facilities and
waste-to-energy facilities. In 1987, AWT acquired Teller Environmental
Systems, Inc. and gained exclusive rights to the patented Teller system in
the United States. Teller technology is a leader in the acid gas abatement
market for the control of hydrochloric acid, toxic compounds and
particulate emissions from waste-to-energy facilities. Teller technology is
widely used in Japan, and there are several commercial resource recovery
facilities using the Teller technology in the United States.
In 1990, AWT acquired substantially all of the assets of Regenerative
Environmental Equipment Co., Inc. ("REECO"). REECO is primarily engaged in
the design, manufacture and installation of its RE-THERM regenerative
thermal oxidizer units which serve as industrial air pollution control and
energy recovery systems.
REECO is a market leader in technologies for controlling emission of
volatile organic compounds ("VOCs"). VOCs contribute to smog formation and
comprise about half of the 189 compounds that the Clean Air Act lists as
hazardous. Control of VOCs and air toxics is a major objective of the
Clean Air Act Amendments of 1990.
Thermal Discharge Technologies. Large boilers, such as those operated by
electric facilities and petroleum refineries, work most effectively when
the water entering the boiler is below a certain temperature. Continuously
drawing cool fresh water and discharging heated wastewater is often either
impractical or is regulated by environmental laws. Cooling tower systems
are used to recirculate and cool condenser water. Mechanical draft cooling
towers, typically of wood construction, are used in most industrial and
small power generation applications. AWT has designed and installed over
11,000 Ecodyne mechanical cooling towers for the petrochemical and
electricity-generating industries, of which approximately half are
currently in operation. Natural draft concrete cooling towers are used
almost exclusively by nuclear and fossil-fuel powered
electricity-generating plants. AWT has installed approximately 70 such
towers. In addition, AWT supplies its repair, maintenance and rebuilding
services to the owners of cooling towers supplied by AWT or by other
vendors.
Dispersion
The environmental impacts of airborne treated gases can be significantly
reduced by dispersion from a chimney of appropriate design. AWT designs and
constructs turnkey industrial chimneys and stacks to disperse such gas
streams. AWT has installed over 10,000 Custodis chimneys and stacks worldwide,
of which approximately 8,000 are still in use for a variety of
power-generating and industrial clients. AWT believes it has the largest
installed base of industrial chimneys in the United States and it provides
complete repair and maintenance services for these chimneys.
Monitoring
AWT also engineers, installs and maintains KVB/ANALECT continuous emissions
and process monitoring systems for utility and industrial customers, including
resource recovery facilities, petrochemical plants and cogeneration
facilities. The Clean Air Act Amendments of 1990 require some 110 power plants
to install continuous emissions monitoring systems ("CEMs") by 1995 as part of
the mandate to reduce acid rain. These systems measure the effectiveness of
air pollution control devices and allow customers to demonstrate compliance
with air quality standards. AWT has furnished over 1,100 monitoring systems to
measure air emissions. It also offers consulting services to governmental and
industrial customers in the area of air emissions control, combustion
efficiency and alternative energy conservation measures. In addition, AWT
makes available mobile testing laboratories located around the United States
for testing air emissions and certifying compliance with local emissions
standards.
Parts, Maintenance and Repairs
AWT supplies parts and maintenance and repair services for both AWT's and
its competitors' pollution control equipment. AWT offers maintenance contracts
which assure the availability of personnel during emergency and planned
outages, as well as operations contracts using independent contractors to
operate pollution control systems for extended periods. AWT has field
technicians located throughout the United States, to provide ready access to
clients for assistance in an emergency as well as repair project managers who
work on-site for more significant repair or rebuild jobs.
WATER AND WASTEWATER TREATMENT/HAZARDOUS WASTE REMEDIATION - METCALF & EDDY
AWT, through Metcalf & Eddy, provides a comprehensive range of
environmental treatment services to governmental, commercial and industrial
clients directed principally at the protection of the integrity of our nation's
water and land resources. Metcalf & Eddy's 88 years of experience has been
directed at managing, protecting and enhancing surface and groundwater
supplies through the rational utilization and treatment of water supplies and
through the effective management of all related waste disposal practices.
Metcalf & Eddy provides a range of services from treatment process design to
operation and ownership of facilities, as well as on-site and off-site
remediation of environmental contamination. Metcalf & Eddy's services involve
the collection, treatment and distribution of drinking water, the collection,
treatment and disposal of wastewater and wastewater by-products such as
sludge, the treatment and disposal of hazardous and toxic wastes, and
management of non-hazardous solid wastes. In addition to providing individual
service components, Metcalf & Eddy offers its clients total project delivery,
which includes design, installation, construction and operation of treatment
facilities.
Services and Technologies
To address water pollution problems, Metcalf & Eddy provides a full
spectrum of services focusing on design, construction, management and
operation of complex biological, chemical and physical treatment technologies,
as well as waste minimization and alternative disposal techniques; analyzes
and assesses complex aquatic and other environments; and prepares
specifications and designs for treatment systems. Metcalf & Eddy prepares
permit and license applications, manages construction and field installation
of treatment facilities, and provides startup, corrective action and
rehabilitation services for those facilities. Metcalf & Eddy also develops
operations and maintenance manuals for facilities and develops scheduling and
maintenance procedures to ensure their efficient operation.
Water Supply and Wastewater Treatment Services
Since 1907, Metcalf & Eddy has conducted extensive hydrologic and geologic
evaluations of hundreds of surface and groundwater supplies for governmental
and industrial clients in the United States and abroad. Metcalf & Eddy has
expertise in analyzing the nature of water resource problems, both in terms of
available capacities and the quality of the sources, and in developing and
evaluating different types of cost-effective treatment technologies. Metcalf
& Eddy's experience includes the design of over 50 water treatment facilities,
using technologies ranging from simple extraction and distribution of water to
more complex technologies such as ozonation, carbon adsorption, air stripping,
desalinization and diatomaceous earth filtration. Metcalf & Eddy has also
evaluated and investigated over 250 dams, conducted groundwater contamination
studies at over 300 sites and conducted computerized analyses on over 100
water distribution systems.
In the wastewater treatment market, Metcalf & Eddy has conducted
evaluations of a broad range of effluents discharged from various
municipalities and industries, including the petrochemical, petroleum,
chemical, pulp and paper, electroplating, textile, ferrous and non-ferrous
industries. Metcalf & Eddy has also conducted numerous studies of controlled
and uncontrolled discharges entering on-site and off-site treatment
facilities, lagoons and other bodies of water. Metcalf & Eddy has developed
and applied various biological, chemical and physical treatment technologies,
including activated sludge, trickling filters, nitrification/denitrification,
phosphorus removal and land application, to resolve wastewater treatment
problems. Metcalf & Eddy has designed over 200 wastewater treatment plants,
including some of the largest facilities in the United States, utilizing these
technologies.
Since August 1988, Metcalf & Eddy has been serving as lead design engineer
for the Massachusetts Water Resources Authority on the Boston Harbor clean-up
project. Under this contract, which presently runs through 1995, Metcalf &
Eddy has primary responsibility for directing the design of the entire primary
and secondary treatment facilities, including an inter-island tunnel and a 9.5
mile outfall tunnel/diffuser system. This work includes development of the
conceptual design for the entire wastewater treatment system, preparation of a
Project Design Manual, including standard specifications, development of the
Authority's CADD system, and management of all project design engineers
providing final design services. As lead engineer, Metcalf & Eddy has also
conducted a number of special investigations, including an air quality/odor
control pilot study, a hydroelectric feasibility study, a stacked clarifier
hydraulic model, a disinfection study, various hydraulic models of the
outfall/diffuser system, and a project-wide geotechnical exploration program.
During the construction phase, lead engineer services include coordinating
interaction among all construction packages, plantwide technical submittal
review and instrumentation and control systems. Metcalf & Eddy is also
providing, as a project design engineer, the final design services and
engineering services during construction for the entire primary treatment
portion of the wastewater plant.
Under a separate contract, Metcalf & Eddy is also performing a master plan
and combined sewer overflow ("CSO") facilities plan for the Massachusetts
Water Resources Authority. Like many other cities, Boston is faced with
optimizing the use of its combined sewers. This contract, which was awarded
in 1992, runs through 1996. In one of the largest CSO studies undertaken,
Metcalf & Eddy is providing a comprehensive investigation of the Authority's
collection systems. The project includes water quality monitoring, strategic
system planning, monitoring CSO's and interceptors, and developing CSO
management solutions.
Metcalf & Eddy is routinely asked to provide hands-on assistance to
numerous water and wastewater treatment facilities in such operational areas
as maintaining and servicing equipment, mechanical and instrumentation process
control, troubleshooting, training of staff, and facility rehabilitation and
upgrading.
Hazardous Waste Management and Remediation Services
Metcalf & Eddy provides a full range of services for the identification,
characterization, evaluation, design and implementation of cleanup measures
for soils and groundwater contaminated with hazardous, toxic and radiological
waste. Diagnostic services include geophysical surveys, surface and
subsurface sampling, hydrogeological investigations, analytical laboratory
services and underground storage tank testing. To evaluate and design remedial
measures, Metcalf & Eddy performs feasibility studies, public health and
ecological risk assessments, pilot and bench scale treatability studies and
groundwater modeling. Metcalf & Eddy applies a broad range of proven and
innovative technologies for soil and groundwater cleanup, including soil
venting, bioremediation, incineration, air stripping, heavy metals
precipitation, soil washing and thermal desorption, activated carbon
adsorption, UV-oxidation and ion exchange.
Metcalf & Eddy has been awarded several contracts with the Department of
Defense for investigation and remediation of site contamination problems at
military installations under the Base Realignment and Closure program, at
active installations and formerly-used defense sites under the Defense
Environmental Restoration Program, and at Superfund sites administered by the
Army Corps of Engineers for EPA. Turnkey design, construct and operate
contracts are currently held with the Army Corps of Engineers for groundwater
cleanup projects in New Jersey and Utah, respectively. Additional contracts
are held for operation of groundwater treatment plants at several military
installations. Contracts covering a wide range of hazardous, toxic, and
radiological investigation and design services are or were recently held with
the Army Corps of Engineers in New England, Savannah, Georgia, Louisville,
Kentucky and Fort Worth, Texas, with the Army Environmental Center for Total
Environmental Program Support nationwide, and with the Air Force Material
Command at Wright Patterson and Kelly Air Force Bases. Metcalf & Eddy is
performing nationwide contaminated soil and tank removal assignments under
contract to the Air Force Center for Environmental Excellence at Brooks Air
Force Base, nationwide remediation of petroleum oils and lubricants under
subcontract with the Naval Energy and Environmental Support Activity at Port
Hueneme, California, and has been selected for environmental compliance
services by both the Naval Facilities Engineering Command's Southern and
Western Divisions and by the Air Force Mobility Command for a major nationwide
subcontract role. Metcalf & Eddy is also a contractor to the Department of
Energy through subcontracts with the Department's Management and Operating
contractors at the Savannah River Site, South Carolina, Rocky Flats, Colorado
and Oak Ridge, Tennessee.
Metcalf & Eddy is an emergency response contractor for the Commonwealth of
Massachusetts, a remedial investigation and feasibility study contractor for
the states of Massachusetts and Connecticut, and a contractor to the USEPA for
a full spectrum of services from investigation to design and implementation of
remedial measures in the six New England states, and for technical enforcement
support in fifteen midwestern states.
In New England, Florida and Central New York, Metcalf & Eddy is a major
contractor to petroleum companies and other industrial customers for removal
and replacement of underground storage tanks, and remediation of associated
contamination problems. Metcalf & Eddy also has a licensed treatment and
storage facility in Central Massachusetts and is a licensed transporter for
all types of hazardous waste in the northeastern United States.
Sludge Management Services
Because of Metcalf & Eddy's experience with treatment technologies used for
water supply and wastewater disposal, numerous municipal and industrial
clients have engaged Metcalf & Eddy to assist in the management and disposal
of the sludge generated as a by-product of the treatment process. For these
clients, Metcalf & Eddy develops programs to minimize the generation of
sludge, to alter it to more environmentally acceptable forms, and to develop
and evaluate alternative processing and disposal technologies such as
thickening, anaerobic digestion, conditioning, dewatering, incineration,
composting and land farming. Metcalf & Eddy has assessed sludge handling and
disposal alternatives, designed and assisted in the implementation of
treatment technologies and operated sludge management facilities. Working
with its clients, Metcalf & Eddy has analyzed and designed innovative
technologies and treatment alternatives for over 45 sludge management projects
and facilities with over 3 billion gallons per day of treatment capacity.
Solid Waste Management Services
Metcalf & Eddy has assisted numerous clients in the evaluation of solid
waste management needs including quantification of amounts and type,
development of waste minimization programs and assessment of needed disposal
capacity. Metcalf & Eddy is experienced in planning and implementing
alternative technologies and facilities for solid waste management which
include landfills, incinerators, resource recovery plants and recycling.
Metcalf & Eddy's services for solid waste management facilities include
facility planning, siting and permitting, design, construction management,
operations and maintenance assistance, closure and post-closure programs for
landfills and the collection and treatment of leachate from landfills.
Metcalf & Eddy is also experienced in the installation of monitoring wells and
related sampling and testing procedures for groundwater protection in or about
landfills.
Metcalf & Eddy has been responsible for the final design of nine
waste-to-energy facilities, including a major solid waste resource recovery
facility located in Chicago, Illinois, and has assisted various communities in
activities associated with resource recovery implementation, including
evaluating and monitoring air emission control equipment programs. Metcalf &
Eddy is the operator of a municipal solid waste incinerator. In addition,
Metcalf & Eddy has designed landfills and ashfills in accordance with
regulatory requirements.
Program Management Services
Metcalf & Eddy has developed extensive program management capabilities
through its experience in the program planning and development, scheduling,
financial planning, contract administration, procurement, construction
management, control and coordination of large and complex projects. These
capabilities enable Metcalf & Eddy to effectively manage its own projects as
well as to provide program management services to large environmental
development and capital expenditure programs of others.
Metcalf & Eddy provides program management services for major national
defense programs, which have enabled Metcalf & Eddy to develop further its
program management expertise and resources. For example, under contract to
the United States Air Force Logistics Command for the Peace Shield project,
Metcalf & Eddy has entered into a joint venture with CRSS Inc. to provide
program management services to deliver ground based facilities to support a
new air defense system that the United States Air Force is delivering to the
Royal Saudi Arabian Air Force. Metcalf & Eddy is primarily responsible for
applying its geotechnical, hydrological and construction management skills to
site and build structures, roads, water and sewage systems and other
infrastructure necessary to support the complex defense system. These
facilities include underground command and control centers, long range radar
sites, a central command center, a central maintenance facility and
communications sites. These Peace Shield facilities are located throughout
the Kingdom of Saudi Arabia and the joint venture is managing their design,
procurement of major pieces of equipment, construction and certain start-up
activities. This project began in 1984 and the major facilities are
substantially complete. Additional support services are being provided by the
joint venture through 1996.
OPERATIONS, MAINTENANCE AND MANAGEMENT OF TREATMENT FACILITIES -
PROFESSIONAL SERVICES GROUP
Prior to its acquisition by AWT from CGE on June 14, 1994 pursuant to the
Investment Agreement, PSG had been a wholly-owned subsidiary of Anjou and an
indirect wholly-owned subsidiary of CGE. Since 1978, PSG has been operating,
maintaining and managing water and wastewater treatment facilities, sludge and
biosolid waste disposal programs and public works projects, and providing
operations assistance primarily to municipal entities but also to industrial
companies. In the following description, references to PSG are intended to
include, where appropriate, the operations, maintenance and management
services of Metcalf & Eddy Services, Inc, an AWT subsidiary involved in the
substantially identical business as PSG that has been integrated with PSG
subsequent to June 14, 1994.
Operations and Maintenance Services
PSG provides its clients with complete services for the operations,
maintenance and management of treatment facilities in the various water and
wastewater and sludge and biosolid waste management markets. These services
range from assisting owners and operators in addressing individual operating
needs to the assumption by PSG of complete responsibility for operating
complex treatment facilities. PSG does not, however, own any treatment
facilities except for a municipal sludge composting facility in Baltimore,
Maryland and a wastewater treatment plant in Auburn, Alabama. PSG believes
that it is the leader in providing operations, maintenance and management
service for water and wastewater treatment facilities, and sludge and biosolid
waste management services, particularly in the area of large municipal waste
treatment systems.
Water Supply and Wastewater Treatment Services
PSG provides operations, maintenance and management services for water
supply and wastewater treatment facilities, primarily for cities,
municipalities and other local governmental entities. Typically, under each
of PSG's contracts, the client owns the water supply or wastewater treatment
facilities and subcontracts to PSG, for a fixed annual fee, the provision of
staff, supervision and management for the operations, maintenance and
management of the facilities. In addition, as contract operator, PSG is
responsible for the efficient operations and maintenance of the facilities,
for maintaining compliance with federal, state and local regulations, and for
fulfilling all relevant reporting requirements with respect to the facilities.
Examples of water treatment facilities which PSG operates include Newark,
NJ; Brockton, MA; Plaquemines Parish, LA; and Houston, TX. PSG's wastewater
treatment facility contracts include Ottawa, Canada; New Orleans, LA; Oklahoma
City, OK; and Cranston, RI.
Sludge and Biosolid Waste Management Services
PSG has extensive experience in planning and implementing large sludge and
biosolid waste management plans. In addition to managing all of the sludge
and biosolid waste disposal programs under PSG's wastewater treatment facility
contracts, PSG has been engaged by clients to assist in the management and
disposal of sludge and biosolid waste generated as a byproduct of the
wastewater treatment process. PSG is experienced in planning and implementing
alternative technologies and facilities for sludge and biosolid waste
management, including waste minimization programs, landfills, incinerators,
composting and land application as fertilizers and soil nutrients.
Public Works
PSG provides a full range of public works services under contract to small
towns, villages and municipalities, including: meter reading, sanitation
services, street maintenance, customer billing, and parks and grounds
maintenance. PSG has, and is able to provide clients with, computer software
which schedules and tracks maintenance duties for public works projects.
These services are typically provided by PSG under operations, maintenance and
management contracts with a municipality's public works department for a fixed
annual fee. These contracts typically result in lower cost and reduced
administrative burdens for a municipality's personnel.
Composting
PSG has experience in operating and maintaining composting facilities and
effectively controlling and reducing offensive odors. Solid waste composting,
along with recycling and source reduction, is utilized by local governments as
a means of reducing landfills. In a composting facility, the non-decomposable
waste is removed, and the organic waste is shredded and then efficiently
broken down in the composting process, by naturally occurring micro-organisms,
in which moisture content, aeration and temperature of the organic waste is
controlled so as to accelerate the biological decomposition. Through further
processing, composting produces a fine humus-like soil product which is sold
or otherwise disposed of as a soil fertilizer or mulch. In Baltimore,
Maryland, PSG currently operates one of the largest facilities that transforms
municipal wastewater sludge into a usable compost product. PSG's management
believes that composting is an expanding market and has positioned PSG to
increase its business in this market segment.
Consulting Services
PSG has expertise in and provides consulting services for assessing project
designs, operations problems, developing operations and maintenance manuals,
and training municipal employees. PSG's largest consulting project is for
Kaiser Engineers, program manager for the metropolitan sanitary district in
Boston, for consulting work on the Boston Harbor cleanup. This consulting
project began in 1984 and currently expires in December, 1995, although PSG
anticipates executing an amendment that will extend the term of this contract
for a year.
Collection Systems Services
PSG has provided television inspection, cleaning and mapping services for
wastewater collection systems and has had experience in providing such
services for more than 2,000 wastewater collection systems throughout the
Untied States. In addition, PSG is responsible for the operation, maintenance
and management of wastewater collection systems as part of its contract with
several wastewater treatment facilities.
Pumping Stations
PSG operates approximately 777 pumping stations through full service
operations and maintenance contracts.
BUSINESS SEGMENTS AND FOREIGN OPERATIONS
Financial information concerning the Company's operations by industry
segment and the Company's foreign and domestic operations is set forth in Note
(14) to the Company's Consolidated Financial Statements captioned "Business
Segments and Geographic Data." See ITEM 8 - FINANCIAL STATEMENTS AND
SUPPLEMENTARY DATA.
MARKETS AND CUSTOMERS
AWT markets its services and technologies to governmental and industrial
customers throughout the United States, the Caribbean, Canada and the Pacific
Rim. AWT also services customers in Europe, the Middle East, Central and South
America and the Far East. A majority of AWT's sales are technical in nature
and involve senior technical and management professionals, supported by AWT's
marketing groups. AWT uses a coordinated system of in-house sales
representatives and marketing managers, organized primarily by business
segments and markets served. In fiscal 1994, sales to governmental customers
approximated 4%, 80% and 96% of AWT's Research-Cottrell, Metcalf & Eddy and
PSG segment sales, respectively.
Contracts with federal, state and municipal governmental agencies generally
may be terminated at any time at the option of the customer. In fiscal 1994,
no single project accounted for more than 10% of AWT's sales for such period.
AWT benefits substantially from its long-term relationships with many of its
clients which result in a significant amount of repeat business.
AWT has experienced no difficulty in obtaining raw materials used in its
operations and relies on a broad range of suppliers, the loss of any of which
would not have a material adverse effect on the Company.
BACKLOG
As of October 31, 1994 total backlog for AWT was approximately $823,000,000
as compared to approximately $547,000,000 as of October 31, 1993. The total
backlog at October 31, 1994 represents work for which AWT has entered into a
signed agreement or purchase order with respect thereto or has received an
order to proceed with work up to a specified dollar amount. Of this amount,
AWT estimates that approximately $350,000,000 represents work which will be
completed in the next 12 months. Additionally, AWT's current estimate of work
for which AWT has been notified that it has been chosen for a project but
where a contract or task orders to proceed with work have not yet been
finalized is approximately $50,000,000. Backlog amounts have historically
resulted in revenues; however, no assurance can be given that all amounts
included in backlog will ultimately be realized, even if covered by written
contracts or work orders. Most of AWT's long-term contracts contain
escalation provisions designed to protect AWT against increases in material
and unit labor costs. AWT's total backlog as of October 31, 1994 and 1993
plus selections where a contract has not been finalized includes approximately
86% and 76%, respectively, of work to be performed for federal, state and
municipal governmental agencies.
COMPETITION
AWT faces substantial competition in each market in which it operates. AWT
competes primarily on its engineering, scientific and technological expertise.
To the extent that non-proprietary or conventional technologies are used, AWT
also relies upon its experience and trade names as a basis for competition.
Such trade names include: "Metcalf & Eddy" in the hazardous waste remediation
market and "Metcalf & Eddy" and "Professional Services Group" in the water and
wastewater treatment and sludge management markets; "Research- Cottrell" and
"Flex-Kleen" in the air pollution control equipment market; "Custodis" and
"Ecodyne" in the chimney and cooling tower markets, respectively;
"KVB/Analect" in the market for continuous emission monitors and "REECO" in the
market for controlling emissions of volatile organic compounds. Many
companies, some of which have greater resources than AWT, participate in AWT's
markets and no assurance can be given that other companies, some of which may
have greater resources than AWT, will not enter its markets.
Almost all contracts for AWT's air pollution control services and
technologies are obtained through competitive bidding. Electric utilities and
industrial customers typically purchase these services and technologies after
a thorough evaluation of price, service, experience and quality. Although
price is an important factor, it is not necessarily the determining factor,
because contracts are often awarded in part on the basis of the efficiency or
reliability of products.
Customers for Metcalf & Eddy's and Professional Services Group's water and
wastewater services are primarily governmental entities and typically award
contracts on the basis of technical qualifications and price. For design
services contracts, the majority of which are cost-plus-fixed-fee
arrangements, technical qualifications are the primary factor followed by
price competitiveness. In obtaining treatment facility operations contracts,
technical qualification is required; however, price is generally a key
determining factor. Treatment facility operations agreements are generally
for three to five-year periods, with various renewal options up to five years
in duration, and contain certain escalators for inflation. In the hazardous
waste clean-up market, Metcalf & Eddy competes with many local, regional and
national firms on the basis of experience, reputation and price.
REGULATION
Significant environmental laws have been enacted in response to public
concern over the environment. These laws, and their implementation through
regulations, affect numerous industrial and governmental activities. AWT
believes that there has been and may continue to be a trend toward
comprehensive and complex environmental regulation and government enforcement
and that efforts to comply with the requirements of these laws have increased
demand for AWT's services. The costs of compliance can be funded through
federal as well as state, local and private sources. The principal federal
legislation affecting the demand for AWT's products and services are the
following:
The Clean Air Act ("CAA") and the federal and state regulations
implementing it largely determine the size and timing of the investments
the Company's clients make in air pollution control technologies. In
1990 Congress substantially amended the CAA, incorporating stringent
control requirements that will affect thousands of industrial sources of
air pollution that were little touched by the original 1970 CAA
provisions. Four titles of the 1990 Clean Air Act Amendments ("CAAA")
affect many AWT clients substantially. These are:
bullet Title I, covering emission sources in areas of the U.S. that
are "nonattainment" (i.e., do not meet specific federal
ambient air quality standards);
bullet Title III, covering sources that emit compounds listed as
"hazardous air pollutants" in the CAAA;
bullet Title IV, covering almost all coal-fired electrical
generating plants, whose emissions contribute to acid rain;
and,
bullet Title V, requiring thousands of sources to obtain
federally-enforceable permits in order to continue operating.
Two other titles -- Title II, governing mobile sources (automobiles and
trucks), and Title VI, phasing out certain chlorofluorocarbon compounds
harmful to the stratospheric ozone layer -- may potentially have market
implications for AWT by affecting what certain clients manufacture, use,
and sell (e.g., new fuels, gasoline additives, aerosols and refrigerants).
Extensive public attention has been given to the CAAA's Title IV impact
on electrical utilities, many of which operate coal-fired generating plants
which will have to install large flue gas scrubbers or alternative systems
to meet new emission standards, as well as continuous emissions monitoring
systems ("CEMSs") to verify compliance with these standards. On January
11, 1993, EPA promulgated a final rule detailing how the CAAA requirements
must be implemented by those utilities facing statutory ("Phase I") 1995
compliance deadlines. Even more stringent emission limitations will become
effective in the year 2000 (the "Phase II" deadline). On March 23, 1993,
EPA issued regulations implementing this second stage.
The CAAA Title III provisions for controlling Hazardous Air Pollutants
("HAPs") also have received considerable publicity. The CAAA lists 189
chemical compounds and families as "hazardous"; all "major" sources that
emit these chemicals in amounts from 10 tons per year ("tpy") of any one
pollutant, or 25 tpy of any combination of these pollutants, must obtain
operating permits, even if these sources are not subject -- by virtue of
their size or location -- to other CAAA provisions. The CAAA requires EPA
to regulate all such sources according to their industrial category or
process(es), under a statutory schedule that mandates promulgation of HAPs
emission standards (defined as "Maximum Available Control Technology"
("MACT")) for all 189 HAPs in all source (industrial) categories by the
year 2000. The majority of these HAPs exist or are emitted as VOCs; the
most widely used VOC control technologies include recovery (adsorber,
condenser, regenerative) systems or destruction (scrubber, incinerator)
equipment. On March 16, 1994, EPA issued final general air toxics rules,
setting a framework for the industry-specific rules that will follow.
Industry-specific rules will be issued through the year 2,000. In April
1994, the EPA promulgated HAPs emission standards for the Synthetic Organic
Chemical Manufacturing Industry ("SOCMI"). SOCMI regulations apply to
approximately 370 VOC-emitting chemical manufacturing facilities in the
U.S., and will require the expenditure of estimated capital control costs
of $450 million and estimated annual operating and maintenance costs of
$160 million.
Perhaps the least publicized -- but potentially most far-reaching --
CAAA requirements are the Title I provisions that set deadlines for areas
of the country that are classified as "nonattainment," i.e., not achieving
federal health-related standards for ambient (outdoor) air for specified
pollutants. The U.S. is divided into Air Quality Control Regions ("AQCRs")
that are generally coterminous with Consolidated Metropolitan Statistical
Areas in populated areas of the country; more than 100 AQCRs, containing
over 50 percent of the population, are now classified as "nonattainment"
for one or more pollutants. Under the CAAA, most states have prepared and
are implementing federally-approved "State Implementation Plans" ("SIPs")
that mandate source emission limitations or other control techniques that
will assure attainment of the relevant health standards by statutory dates.
For attaining the ozone (the most frequently violated) health standard,
these compliance dates are: November 1993 for AQCRs classified as
"marginal" nonattainment areas, 1996 for those classified as "moderate,"
1999 for "serious," 2005/7 for "severe," and 2010 for Los Angeles, the only
area classified as "extreme." Sources emitting as little as five tpy of
pollution may be required to adopt control techniques; these sources may
include such small establishments as neighborhood dry cleaners, bakeries,
and auto repair shops, or they may be other "area" sources such as
woodstoves and gas stations. In areas of the country where ambient air
quality meets health standards, statutory provisions for "Prevention of
Significant Deterioration" will require new, expanded or modified
facilities to install "Best Available Control Technology". In addition,
new or modified sources in certain industrial categories nationwide must
comply with "New Source Performance Standards", which EPA is required to
update periodically.
Title V provides the vehicle for EPA -- or the States to which EPA has
delegated authority -- to stipulate enforceable permit conditions under
which each affected source must conduct its operations. These operating
permits will generally specify such parameters as temperatures and
pressures, record-keeping and reporting, as well as any applicable emission
limitations and required control equipment. EPA promulgated minimum
requirements for state operating permit programs in July, 1992. It
reproposed significant portions of that rule on August 29, 1994. Such
programs (and permits issued under them) must be periodically revised to
incorporate new regulations as these are promulgated. More than 34,000
"major" sources or facilities in the U.S. are estimated to require
operating permits incorporating requirements of one or more CAAA titles.
AWT clients affected by CAAA requirements include industries in segments
such as: electrical generation, petroleum, petrochemical and chemical,
pharmaceutical, pulp and paper, cement and rock products, food processing,
primary and secondary ferrous and nonferrous metals, coating and printing,
waste-to-energy and incineration, and private and governmental facilities
such as wastewater treatment plants. For these and other clients, AWT
provides consulting services (for designing compliance strategies and
obtaining permits), on-line process, pollution control, and monitoring
equipment, as well as parts, rebuilds, service and maintenance for its own
equipment and that of other suppliers.
The Safe Drinking Water Act of 1974 directs the EPA to set drinking
water standards for the estimated 57,561 community water supply systems in
the United States. The 1986 reauthorization required that the EPA set
maximum drinking water contamination levels for previously unregulated
toxic substances and required water systems to monitor for unregulated
contaminants. The legislation also requires that the EPA set criteria
specifying when utilities using surface water supplies should filter their
water and issue national primary drinking water regulations requiring all
utilities to disinfect their water. In June 1989, the surface water
treatment requirements were finalized. By June 1993, all surface water
supplies were to have provided filtration and disinfection. Several
communities were unable to comply with the regulatory deadline, however,
and are still in need of consulting and engineering assistance. The total
coliform requirements were also finalized in June 1989 and became effective
on December 31, 1990. During 1990, EPA issued final regulations for
primary drinking water standards for lead and copper and issued proposed
standards for radionuclides. These new regulations are expected to result
in significant expenditures by water systems for evaluation and,
ultimately, for upgrading of many facilities.
The Federal Water Pollution Control Act of 1972 (the "Clean Water Act")
established a system of standards, permits and enforcement procedures for
the discharge of pollutants from industrial and municipal wastewater
sources. The law set treatment standards for industries and wastewater
treatment plants and provided federal grants to assist municipalities in
complying with the new standards. According to the EPA's 1990 survey of
wastewater and sewage treatment needs, as much as $149.1 billion will be
needed for construction and upgrade of wastewater treatment facilities over
the next 20 years. The EPA and/or delegated state agencies are placing
some of these non-complying communities under enforcement schedules. In
cases of non-compliance, the EPA may petition for court-ordered compliance
and penalties. In 1987, the law was amended to phase out federal grants by
1991 and replace them with state revolving funds, with a commitment to
provide federal money through 1994. It is presently expected that federal
funding will be extended for state revolving funds.
Key areas for which regulations have been issued include industrial
wastewater pretreatment, surface water toxics control and sewage sludge
disposal. The Clean Water Act requires pretreatment of industrial
wastewater before discharge into municipal systems and gives the EPA the
authority to set pretreatment limits for direct and indirect industrial
discharges. These rules issued by the EPA will increase the need for
facility upgrading and control of industrial discharges. The revised
regulations tighten prohibitions against discharge of toxic wastes, and
subject industries, which discharge into public sewers, to stringent
controls, inspections, monitoring and testing requirements. The surface
water toxics program requires states to identify waters adversely affected
by toxics and propose control strategies. Also under the Clean Water Act,
the EPA published, in February 1993 and amended in February 1994, a rule
setting standards for the use and disposal of sludge when it is applied to
land to condition the soil, is disposed on land by placing it in surface
disposal sites or is incinerated. Final Stormwater regulations were issued
in November 1990 and establish management requirements for municipalities
serving populations over 100,000 and industries within specified categories.
The Resource Conservation and Recovery Act of 1976 ("RCRA") provides a
comprehensive scheme for the regulation of generators and transporters of
hazardous waste as well as persons engaged in the treatment, storage and
disposal of hazardous waste. The intent of RCRA is to control hazardous
wastes from the time they are generated by industry until they are disposed
of properly. In addition, RCRA governs the disposal of solid wastes.
Under applicable RCRA regulations, generators who generate more than a
certain amount of hazardous waste per month are required to package and
label shipments of hazardous waste in accordance with detailed regulations
and to prepare a manifest identifying the material and stating its
destination before shipment off-site. Every facility that treats, stores
or disposes of hazardous waste must obtain a RCRA permit from the EPA, or a
state agency which has been authorized by EPA to administer its state
program, and must comply with certain operating, financial responsibility
and closure requirements. RCRA also provides for corrective actions to
remediate contamination resulting from the disposal of hazardous waste.
Regulations issued pursuant to RCRA will significantly affect the need
for the environmental treatment services in the following areas: municipal
solid waste disposal, land disposal of hazardous waste, remediation of
environmental contamination and management of underground storage tanks.
Final regulations on municipal solid waste landfills requiring installation
of leachate collection systems and groundwater monitoring and corrective
action, where necessary, were issued in October 1991. Municipal solid
waste landfills receiving waste on or after October 1993 will have to
comply with all provisions of these regulations. Regulations establishing
land disposal restrictions for hazardous waste are being published in
serial form, with the second of four phases of the rule having been
published in final form in September 1994. These final regulations
significantly revised the land disposal restrictions program as well as
included most of the characteristic hazardous wastes. Land disposal
restrictions for formerly characteristic wastes managed in wastewater
treatment systems whose ultimate discharge is covered by the Clean Water
Act will be promulgated by January 1996. A rule outlining requirements for
liners and leak detection systems for land disposal of hazardous wastes was
finalized in January 1992. Proposed corrective action rules for facilities
that generate, treat, store or dispose of hazardous waste were published in
July 1990 and established a regulatory framework and guidelines for
remedial actions. Although some of the regulations were finalized in
February 1993, federal contaminant levels that will trigger corrective
action have yet to be finalized. Underground storage tank regulations
requiring leak detection and corrective actions were finalized in September
1988.
Amendments to RCRA adopted in 1984 have increased the number of
hazardous waste generators subject to RCRA to over 250,000 and,
accordingly, have generally increased the need for professional services,
assistance in obtaining permits and industrial waste control.
The Comprehensive Environmental Response, Compensation and Liability Act
of 1980 ("Superfund") established the Superfund program to clean up
hazardous waste sites and provides for penalties for noncompliance.
Superfund has been interpreted to impose strict, joint and several
liability on owners and operators of facilities, transporters, and persons
who arrange for the disposal or treatment of hazardous substances for the
costs of removal and remediation, other necessary response costs and
damages for injury to natural resources. Where potentially responsible
parties cannot be identified, are without resources or are unresponsive,
federal funds may be used. Congress has authorized $1.4 billion for
Superfund through 1995. In addition, the Superfund Amendments and
Reauthorization Act of 1986 established more stringent cleanup standards
and accelerated mandatory schedules to ensure rapid and permanent solutions
in cleaning up sites. Although Superfund reauthorization was considered in
1994, Congress adjourned before voting on it. Currently, reauthorization
of Superfund is under consideration in the 1995-1996 Congress. Numerous
interest groups and businesses have recommended substantial changes to
Superfund. Many of the reform proposals include the elimination of
retroactive liability, establishment of national clean-up standards and the
exemption of certain entities from liability and state delegation or
authorization of the program. However, at this time, it is too early to
determine whether the law will be reauthorized and reformed in 1995-1996,
what the substance of those reforms, if any, will be, and the impact of
such reforms on the Company.
The Toxic Substances Control Act of 1976 regulates the manufacture,
import and production of chemical substances and bans, with limited
exceptions, the manufacture, use, import and export of a class of chemicals
known as polychlorinated biphenyls ("PCBs") and subjects them to a strict
regime of disposal. In December 1994, the EPA proposed an amendment to its
rules regarding the selection of acceptable disposal technologies for
certain PCB wastes.
In addition to federal environmental regulations, most states and many
local authorities have enacted laws regulating activities affecting the
environment, some of which impose stricter standards than their federal
counterpart.
BONDING
AWT is often required to procure bid and performance bonds from surety
companies, particularly for clients in the public sector. A bid bond
guarantees that AWT will enter into the contract under consideration at the
price bid and a performance bond guarantees performance of the contract. AWT
is required to indemnify surety companies providing bid and performance bonds
for any payments the sureties are required to make under the bonds.
AWT and certain of its subsidiaries, including Metcalf & Eddy and PSG,
obtain bid and performance bonds pursuant to two agreements with Reliance
Insurance Company, United Pacific Insurance Company and Planet Insurance
Company of Federal Way, Washington (collectively, the "Sureties"). The
bonding agreements require that Research-Cottrell and Metcalf & Eddy satisfy
certain financial tests. (See Note 9 to the Company's Consolidated Financial
Statements included in ITEM 8 -- FINANCIAL STATEMENTS AND SUPPLEMENTAL DATA.)
As of October 31, 1994, AWT had outstanding approximately $2,300,000 in bid
and $218,000,000 in performance bonds. In addition, AWT's credit facility (the
"AWT Credit Agreement") with the First National Bank of Chicago ("First
Chicago"), as agent bank, provides for issuance of up to $70 million of
letters of credit for purposes which include direct or indirect fulfillment of
bid and performance bond requirements by AWT and its subsidiaries, including
Metcalf & Eddy and PSG. AWT has never forfeited a bid or a performance bond
and no project sponsor has ever called and drawn upon a bond issued in support
of AWT's contract obligations.
INSURANCE
AWT currently maintains different types of insurance, including general and
professional liability and property coverages. AWT believes that it presently
maintains adequate insurance coverages for all of its present operational
activities, except that, like other companies in its industry, AWT has been
limited in obtaining additional environmental liability insurance due to
increases in the cost of such coverage caused by aggressive enforcement of
federal environmental regulations and legal decisions adverse to insurance
carriers involving pollution damage. A successful claim or claims in an
amount in excess of AWT's insurance coverage or for which there is no coverage
could have a material adverse effect on AWT.
PATENTS AND TRADEMARKS
AWT owns many trademarks and patents used in connection with its business.
AWT believes that the approximately 50 patents for its Teller acid fume
abatement system, approximately 20 patents for its Analect emissions monitors,
approximately 15 patents for its REECO VOC control technologies and its five
FGD systems patents are material to AWT's business and have competitive value.
AWT's patents for its Teller system continue in effect until 1995-2003, for
its Analect technology until 1995-2006 and those for its FGD systems until
1999. AWT does not believe that the expiration of any of its patents that
expire in the next several years will have a material adverse effect on AWT's
business. AWT has a continuing program to expand and strengthen its patent
protection. Although enhanced by its patent rights, AWT believes that its
ability to compete in the air pollution control market and in the water and
wastewater treatment market depends primarily on its engineering, scientific
and technological expertise. AWT relies on its trade names in marketing its
air pollution control products and relies on the name "Metcalf & Eddy" in
marketing its water and wastewater treatment and remediation services.
EMPLOYEES
At October 31, 1994, AWT had approximately 3,600 full-time employees, of
which approximately 1,800 were engineers, scientists and other professionals
and approximately 700 were treatment plant operation and maintenance
personnel. Approximately 250 employees of AWT, substantially all of whom are
employed by Professional Services Group, are represented by various unions
under several contracts. AWT considers relations with its employees to be
good.
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ITEM 2. PROPERTIES
AWT believes that its facilities are suitable and adequate for its
current and foreseeable operational and administrative needs. The principal
physical properties of AWT are as follows:
Approximate Approximate
Square Square
Footage Footage Lease
Location Function Owned Leased Expiration
- -------- --------- ----------- ----------- ----------
Branchburg, NJ Corporate Office 89,466 on -- --
46 acres
Wakefield, MA Metcalf & Eddy Office -- 165,484 1999
Palo Alto, CA Metcalf & Eddy Office 17,600 2005
Sunrise, FL Metcalf & Eddy Office 24,979 1996
Itasca, IL Metcalf & Eddy Office 57,056 2003
Honolulu, HI Metcalf & Eddy Office -- 22,333 1997
Houston, TX PSG Corporate Office -- 13,812 1998
Santa Barbara, CA Metcalf & Eddy Office -- 3,326 1997
New York, NY Metcalf & Eddy Office -- 8,940 1997
Columbus, OH Metcalf & Eddy Office -- 22,223 2004
Irvine, CA KVB Office & Manufacturing -- 80,496 1999
In addition, AWT leases or owns space at approximately 61 other
domestic locations and ten locations in Canada, Europe and the Middle East.
AWT has no current plans or requirements for additional space. Also, AWT
operates and provides services from 86 treatment facilities, two of which it
owns. Since June 14, 1994, AWT has been reducing its real estate holdings and
associated costs through a program of selling surplus owned real estate,
subleasing surplus rented space and renegotiation of all of its principal
leases.
ITEM 3. LEGAL PROCEEDINGS
In October 1990, a civil action was filed by the State of Hawaii in the
Hawaii Circuit Court, First Circuit, in Honolulu seeking unspecified civil
penalties and injunctive relief against the owner of the Hawaii Kai sewage
treatment plant, East Honolulu Community Services ("EHCS"), and MEPAC
Services, Inc. ("MEPAC"), for alleged violation of Hawaii statutes,
regulations and the wastewater discharge permit applicable to the Hawaii Kai
Plant. MEPAC is an indirect wholly-owned subsidiary of AWT and operated the
Hawaii Kai plant under contract from April 1986 to June 1990. In December
1993, MEPAC'S motion to dismiss the case on jurisdictional grounds was granted
by the Court. This ruling requires the State of Hawaii to pursue any claims
against MEPAC by way of an administrative proceeding before the State
Department of Health. In June 1994, the State of Hawaii reinstituted the
penalty claims against MEPAC and EHCS in an administrative complaint issued by
the State of Hawaii Department of Health. MEPAC filed an answer to this
administrative complaint, raising various defenses.
A Company-sponsored inquiry into an accidental discharge of
partially-treated sewage in January 1990 uncovered a number of unauthorized
discharges of sewage sludge or partially-treated sewage made in an apparently
deliberate manner over several years. MEPAC promptly terminated the suspected
employees, delivered its findings to federal and state authorities and
commenced litigation against the ex-employees, who then filed counterclaims
for wrongful discharge. The extent of the unauthorized violations has not
been determined. MEPAC received no financial benefits from such discharges.
The State complaint seeks civil penalties not to exceed $10,000 per day for
each violation.
On October 18, 1990, federal indictments for violations of the Clean
Water Act were filed in the U.S. District Court in Honolulu, Hawaii against
three former employee operators of the Hawaii Kai plant alleging a conspiracy
and overt actions to intentionally discharge waste activated sludge and to
conceal such acts by filing false reports. Neither AWT nor any subsidiaries
or executive employees thereof were named in such indictments.
On May 24, 1991 EHCS filed a cross complaint against MEPAC and third
party complaints against M&E Pacific, Inc., a wholly owned subsidiary of
Metcalf & Eddy, Inc., and two former employees of Metcalf & Eddy, Inc.,
seeking indemnification for any fines and penalties assessed against it as a
result of the civil action by the State of Hawaii. On June 26, 1991, one of
such former employees filed a cross complaint against M&E Pacific seeking
indemnification. AWT has denied that either EHCS or the employee is entitled
to indemnification. EHCS and MEPAC have entered into a standstill agreement
with respect to certain discovery between them and filed a motion to bifurcate
the trial. In January 1993, the court granted MEPAC's and EHCS's motion, so
that any trial of the issues between MEPAC and EHCS will occur only after any
trial of the state's case.
On October 2, 1991, the trial on the indictments against two of the three
former employees (the third former employee had entered a plea) was concluded
with the jury finding the defendants guilty on a number of counts. Appeals by
the employees have been taken and are pending. MEPAC's independent litigation
against the former employees, and their counterclaims for wrongful discharge,
have been voluntarily dismissed.
AWT is unable to determine at this time the amount of any civil penalties
for which MEPAC may be liable. After consultation with counsel and based on
an assessment by senior management, AWT believes, however, that such civil
penalties, if any, would not have a material adverse effect on the
consolidated financial position or results of operations of AWT.
In September 1990, Metcalf & Eddy, Inc. filed an action in United States
District Court in San Juan, Puerto Rico, seeking $52 million in damages from
the Puerto Rico Aqueduct and Sewer Authority ("PRASA"). Metcalf & Eddy's suit
initially sought $27 million in damages for payment for goods and services
Metcalf & Eddy sold and rendered to PRASA under a contract to rehabilitate
PRASA's wastewater treatment system and provide related program management
services. In July 1991, Metcalf & Eddy amended its action to seek $37.4
million in damages for these delinquent payments, which represented the total
account receivable with respect to the PRASA contract as of that date. The
suit also claims damages for anticipated claims by suppliers to Metcalf & Eddy
with respect to the PRASA contract and violations of good faith and fair
dealing under the contract. On December 18, 1990, Metcalf & Eddy announced
that it had suspended all work under the contract pending resolution of the
litigation between the parties. The matter is complex litigation. No
assurance as to the final outcome of the litigation can be given.
PRASA has been withholding payments under its contract with Metcalf &
Eddy. An audit of the contract, dated November 16, 1990, performed by a
governmental affiliate of PRASA, questioned up to $39,988,200 of billings for
possible technical violations of equipment procurement procedures under the
contract and charges outside the contract. PRASA has denied the allegations
of the complaint and challenged the jurisdiction of the United States District
Court. The trial court has denied PRASA's jurisdictional motions and the
United States Court of Appeals for the First Circuit dismissed PRASA's appeal
on procedural grounds. PRASA then filed a petition for a writ of certiorari
in the United States Supreme Court asking that court to review that procedural
dismissal, and the Supreme Court granted that petition. The trial court had
stayed all proceedings (including further factual discovery and an initial
trial date which had been set for May 18, 1992) pending disposition by the
Supreme Court of the appeal of the procedural issue. On January 12, 1993, the
Supreme Court decided this appeal in PRASA's favor and remanded the case to
the First Circuit for disposition on the merits of the jurisdictional issue.
On May 3, 1993, the First Circuit ruled against PRASA and in favor of Metcalf
& Eddy on the merits of the jurisdictional issue. Discovery in this matter is
completed. On April 15, 1994, the District Court issued an Order requiring a
Special Master to assist the Court with the complex accounting matters in this
case. A Special Master has been appointed and is scheduled to issue an
opinion in June 1995. The trial of this matter is scheduled to commence on
July 17, 1995.
Metcalf & Eddy disputes the findings of the PRASA audit. Metcalf & Eddy
believes that substantially all of the billings questioned by the audit
represent appropriate charges under the contract for goods and services
provided to PRASA by Metcalf & Eddy. In October 1992, the Supreme Court of
the Commonwealth of Puerto Rico ruled on a separate action entitled "Colegio
de Ingenieros vs. Autoridad de Acueductos y Metcalf & Eddy, Inc." which could
impact Metcalf & Eddy's action against PRASA. This ruling held that certain
portions of the multi-year contract between Metcalf & Eddy and PRASA were
invalid as contrary to Puerto Rican law insofar as they called for the
practice of engineering by Metcalf & Eddy. This action, originally filed in
September 1986 by the Puerto Rico College of Engineers, an island-wide
professional engineering organization, sought a declaratory judgment that the
engineering design portion of Metcalf & Eddy's contract violated Puerto Rico
law prohibiting corporations from practicing engineering. The Company has
filed a Motion for Reconsideration that remains undecided.
The Colegio decision complicates further what is complex commercial
litigation between Metcalf & Eddy and PRASA. In particular, uncertainty
exists as to how the Federal District Court in the PRASA case will interpret
and apply the Colegio decision to the facts before it. Because of this
uncertainty, at this time AWT is unable to determine with any specificity what
impact the Colegio decision will have on its efforts to recover monies from
PRASA. AWT has also consulted with counsel as to its obligations under the
contract and the course of the litigation generally. Based on its
consideration of all of the foregoing and the status of the litigation to
date, AWT believes that Metcalf & Eddy has performed substantially in
accordance with the terms of the contract and that, ultimately, at least a
majority of the sums due Metcalf & Eddy pursuant to the contract will be
realized.
AWT and its subsidiaries are parties to various other legal actions
arising in the normal course of their businesses, some of which involve claims
for substantial sums. AWT believes that the disposition of such various
actions, individually or in the aggregate, will not have a material adverse
effect on the consolidated financial position or results of operations of AWT
taken as a whole.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not Applicable.
[The remainder of this page left blank intentionally.]
Part II
ITEM 5. MARKET FOR REGISTRANT'S COMMON
EQUITY AND RELATED STOCKHOLDER MATTERS
AWT's Class A Common stock began trading publicly on August 10, 1989 at
an initial public offering price of $17.00 per share and is traded on the
American Stock Exchange under the symbol AWT. On December 30, 1994, there
were 687 holders of record of AWT's Class A Common Stock.
The following table sets forth, for the fiscal periods shown, the high
and low sales price for AWT's Class A Common Stock as reported on the American
Stock Exchange.
High Low
---- ---
Fiscal 1993
First Quarter..... $14.75 $10.50
Second Quarter.... $14.375 $ 9.625
Third Quarter..... $14.75 $10.00
Fourth Quarter.... $15.25 $10.00
Fiscal 1994
First Quarter..... $16.125 $13.00
Second Quarter.... $12.50 $ 7.25
Third Quarter..... $10.25 $ 7.25
Fourth Quarter.... $9.375 $ 6.75
On December 30, 1994, the closing price per share on the American Stock
Exchange for AWT's Class A Common Stock was $6.00.
AWT did not declare any cash dividends on its Class A Common stock during
Fiscal 1993 and Fiscal 1994. Pursuant to the AWT Credit Agreement with The
First National Bank of Chicago, as agent bank, AWT is prohibited from
declaring or paying cash dividends on its Class A Common stock or other
restricted payments, as defined, which in the aggregate are greater than
$2,000,000. AWT currently intends to retain its earnings to finance the
growth and development of its business and to repay outstanding indebtedness
and does not anticipate paying cash dividends on its Class A Common stock in
the foreseeable future.
ITEM 6. SELECTED CONSOLIDATED FINANCIAL DATA
The following table presents selected historical financial data for AWT.
The information contained herein should be read in conjunction with
"Management's Discussion and Analysis of Financial Condition and Results of
Operations," and the Consolidated Financial Statements and Notes thereto of
AWT.
<TABLE>
<CAPTION>
Fiscal Years Ended October 31,
-----------------------------------------------------------------------------
1994 1993 1992 1991(2) 1990(2)
--------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
Income Statement Data:
Sales $ 522,573 $ 575,949 $ 609,404 $ 571,080 $ 532,796
Cost of Sales 413,324 415,386 449,260 426,628 385,986
Selling, general and administrative expenses 138,815 123,602 139,642 134,472 106,515
Amortization of goodwill 7,738 6,794 6,724 6,169 5,550
Unusual Charges(1) 145,200 -- 7,000 16,000 --
--------- --------- --------- --------- ---------
Operating income (loss) from continuing
operations (182,504) 30,167 6,778 (12,189) 34,745
Interest income 1,283 797 1,276 2,553 5,285
Interest expense (24,386) (23,706) (21,361) (20,579) (32,072)
Other income (expense), net (4,580) (2,386) (1,370) (420) 1,968
--------- --------- --------- --------- ---------
Income (loss) from continuing operations
before income taxes, minority interest
and extraordinary item (210,187) 4,872 (14,677) (30,635) 9,926
Provision for income taxes 998 68 817 1,482 5,190
Minority interest (194) 21 265 (90) 2,532
--------- --------- --------- --------- ---------
Income (loss) from
Continuing operations before extraordinary
item (210,991) 4,783 (15,759) (32,027) 2,204
Discontinued operations (42,787) (10,338) 5,723 6,132 4,301
Extraordinary item (8,000) -- -- -- (26,490)
--------- --------- --------- --------- ---------
Net loss (261,778) (5,555) (10,036) (25,895) (19,985)
Earnings (loss) per share
Continuing operations before extraordinary
item (7.68) .20 (.63) (1.42) .12
Discontinued operations (1.55) (.42) .23 .27 .23
Extraordinary item (.29) -- -- -- (1.41)
Loss per share $(9.52) $(.22) $(.40) $(1.15) $(1.06)
--------- --------- --------- --------- ---------
Weighted average shares outstanding 27,632 24,815 24,812 22,437 18,854
October 31,
-----------------------------------------------------------------------------
1994 1993 1992 1991(2) 1990(2)
--------- --------- --------- --------- ---------
Balance Sheet Data:
Working capital $ (51,206) $ 101,371 $ 113,338 $ 127,766 $ 176,544
Total assets 602,938 594,028 601,752 590,193 585,942
Goodwill 283,638 235,329 240,617 245,342 211,596
Total long-term debt 245,984 221,463 221,048 224,476 224,496
Stockholders' equity 74,381 210,314 216,447 225,785 200,922
--------- --------- --------- --------- ---------
</TABLE>
(1) See Note 3 of the Notes to Consolidated Financial Statements of the
Company.
(2) On June 25, 1990, Metcalf & Eddy issued approximately 207,000 Shares
of its Common Stock in connection with the acquisition of Petrolgroup,
Inc. ("PIECO"). On July 7, 1989, the Company sold 850,000 shares of
Metcalf & Eddy Common Stock in a public offering. As a result of
these transactions, the Company's ownership in Metcalf & Eddy was
reduced to approximately 82%. On a pro forma basis, assuming these
transactions had occurred as of November 1, 1988, minority interest in
affiliates would have increased $130 for the fiscal year ended October
31, 1990. The resulting pro forma net income (loss) before
extraordinary items would have been $2,074 for the fiscal year ended
October 31, 1990. During 1991, the Company's ownership percentage
remained unchanged until October 31, 1991 when the Company completed
its merger with Metcalf & Eddy.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
BACKGROUND
AWT was organized by an investment group including Odyssey
Partners, L.P., Allen & Company Incorporated ("Allen & Company") and
affiliates of First Chicago Corporation to make a cash tender offer to
purchase all of the outstanding shares of capital stock of Research-Cottrell,
Inc. ("RCI") and its subsidiaries (collectively "Research-Cottrell").
The RCI acquisition was completed on July 13, 1987 ("the Acquisition").
As a result of the Acquisition, AWT incurred approximately
$250,000,000 in debt and recorded approximately $200,000,000 in goodwill.
AWT's results of operations since the Acquisition have been adversely
affected by the interest expense related to the Acquisition debt, which was
refinanced in 1990, and the amortization of goodwill. See Financial
Condition and the notes to the accompanying AWT Consolidated Financial
Statements.
CGE TRANSACTION
On June 14, 1994, the stockholders of the Company approved the
issuance of Company securities pursuant to the Investment Agreement, pursuant
to which, among other things, AWT (i) issued to CGE 1,200,000 shares of a
newly designated series of Preferred Stock, designated as 5 1/2% Series A
Convertible Exchangeable Preferred Stock, convertible into 4,800,000 shares of
Class A Common Stock, for cash consideration of $60,000,000 and (ii) issued
to Anjou an aggregate of 6,701,500 shares of Class A Common Stock in
connection with the acquisition from Anjou of PSG. As a result, CGE increased
its ownership interest in AWT to approximately 48% of the total voting power
of the Company's voting securities. In addition, AWT benefitted from certain
financial undertakings from CGE, including a $125,000,000 loan from CGE and
became CGE's exclusive vehicle in the United States, its possessions and its
territories for CGE's water and wastewater management and air pollution
activities. CGE also has representation on AWT's Board of Directors and the
right to designate AWT's Chief Executive Officer and Chief Financial Officer.
See ITEM 13 -- CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS for additional
information.
RESULTS OF OPERATIONS
AWT operates principally in three segments: Research-Cottrell,
focused on designing, supplying and servicing air pollution treatment and
control equipment; Metcalf & Eddy and its subsidiaries (collectively
"Metcalf & Eddy") focused on engineering consulting in the areas of
water/wastewater and hazardous waste remediation; and PSG (Contract
Operations), focused on the operation of water and wastewater treatment
facilities. This segment reflects the merger of PSG and the Company's
Metcalf & Eddy Services business units. The "other" segment primarily
represents the Company's activities related to a hazardous waste transfer
station.
DEMAND FOR THE COMPANY'S SERVICES AND TECHNOLOGIES
Demand for the Company's services and technologies arises principally
from three sources:
-expansion of and the need for new capacity at electric generating
facilities, water and wastewater treatment facilities and various industrial
pollution sources, such as waste incineration and industrial process plants,
which must comply with existing environmental legislation and regulations;
-need for maintenance, repair and rebuilding of existing pollution
control equipment and facilities; and
-stricter legislation and regulations mandating new or increased
levels of air and water pollution control and solid waste management as well
as remediation of contaminated sites.
Summarized below is certain financial information relating to the
core environmental business segments of the Company.
<TABLE>
<CAPTION>
Fiscal Years Ended October 31
(in thousands)
--------------------------------------------
1994 1993 1992
--------- -------- --------
<S> <C> <C> <C>
Sales:
Research-Cottrell $ 213,172 $276,584 $266,899
Metcalf & Eddy 219,106 246,824 297,836
PSG (Contract Operations) 83,678 46,000 38,489
Other and eliminations 6,617 6,541 6,180
$ 522,573 $575,949 $609,404
Cost of Sales:
Research-Cottrell $ 196,511 $219,734 $211,095
Metcalf & Eddy 141,757 159,532 204,241
PSG (Contract Operations) 71,098 32,875 30,979
Other and eliminations 3,958 3,245 2,945
$ 413,324 $415,386 $449,260
Selling, General and Administrative Expenses:
Research-Cottrell $ 42,251 $ 41,624 $ 42,823
Metcalf & Eddy 71,713 65,128 81,568
PSG (Contract Operations) 10,226 5,983 4,477
Other 3,464 2,847 3,678
Corporate (unallocated) 11,161 8,020 7,096
$ 138,815 $123,602 $139,642
Amortization of Goodwill:
Research-Cottrell $ 3,266 $ 3,252 $ 3,112
Metcalf & Eddy 3,483 3,078 3,148
PSG (Contract Operations) 989 464 464
$ 7,738 $ 6,794 $ 6,724
Unusual Charges:
Research-Cottrell $ 81,800 $ -- $ --
Metcalf & Eddy 38,700 -- 7,000
PSG (Contract Operations) 5,300 -- --
Other 4,200 -- --
Corporate 15,200 -- --
$ 145,200 $ -- $ 7,000
Operating Income (Loss):
Research-Cottrell $(110,656) $ 11,974 $ 9,869
Metcalf & Eddy (36,547) 19,086 1,879
PSG (Contract Operations) (3,935) 6,678 2,569
Other (5,005) 449 (443)
Corporate (26,361) (8,020) (7,096)
$(182,504) $ 30,167 $ 6,778
</TABLE>
DEPENDENCE ON KEY PROJECTS/GOVERNMENT CONTRACTS
In any given period, a substantial percentage of the Company's sales
is dependent upon several large projects. To the extent that these projects
are completed, cancelled or substantially delayed and not replaced, it could
have a material adverse impact on the Company's sales and earnings.
Approximately 51% of the Company's 1994 gross revenues were derived
from contracts with federal, state and municipal governmental agencies. The
termination of any of the Company's significant contracts with such
governmental agencies, or the failure to obtain either extensions or renewals
of certain existing contracts or additional contracts with such governmental
agencies, could have a material adverse effect on the Company's earnings and
business.
FISCAL YEAR ENDED OCTOBER 31, 1994 COMPARED TO FISCAL YEAR ENDED
OCTOBER 31, 1993
Consolidated sales of $522,573,000 for the year ended October 31,
1994 declined from $575,949,000 in the prior comparable period. The decline is
attributed to lower sales volumes in all segments, excluding PSG (Contract
Operations). Sales at Research-Cottrell decreased $63,412,000 compared to the
prior comparable period. The decrease was principally attributable to the
level of work derived from the Company's backlog, of which lower volumes of
approximately $50,525,000 were recorded primarily in Research-Cottrell's
particulate and acid gas control equipment product lines, both in the United
States and in Europe. The sales in the United States remain negatively
impacted as customers are continuing to evaluate both compliance options and
the enforcement framework related to the CAAA, as well as their capital
spending plans in view of the economic climate. Sales of particulate and acid
gas control equipment in Europe have decreased by $15,299,000. Lower volume
of $10,913,000 from Research-Cottrell's cooling tower business also
contributed to the decrease. The decline in cooling tower work resulted from
the Company's focus on higher margin services. Offsetting other less
significant decreases was an increase of $13,977,000 in sales of the Company's
continuous emission monitoring equipment product line due to equipment
deliveries and start up activities for its utility clients. Metcalf & Eddy
sales decreased $27,718,000 primarily from lower Peace Shield pass-through
sales of approximately $15,917,000 representing direct project costs passed
through to the client, reductions of $7,071,000 in its water/wastewater
services and decreases of $7,546,000 in general engineering due to economic
conditions affecting the Company's Hawaii International Airport program
management work, offset slightly by growth in hazardous waste remediation.
PSG (Contract Operations) sales increased by $37,678,000 of which the PSG
acquisition represented $35,939,000. The remainder of the increase was due to
volume growth resulting from contract awards which more than offset the
effects of the prior year revenues of $4,000,000 related to a claim
resolution.
Cost of sales decreased $2,062,000 to $413,324,000 from $415,386,000
for the year ended October 31, 1994. For Research-Cottrell, cost of sales
decreased by $23,223,000 to $196,511,000 primarily as a result of lower sales
volume partially offset by additional costs for advanced software and field
applications related to its emissions monitoring equipment ($15,200,000),
additional installation and construction costs associated with particulate and
acid gas control systems ($5,800,000) and chimneys ($4,600,000) as well as
higher insurance costs and inventory adjustments with its cooling tower
business ($2,100,000). At Metcalf & Eddy costs of sales decreased $17,775,000
to $141,757,000 primarily due to lower sales volume described above slightly
offset by higher levels of subcontracted services. Of the $38,223,000
increase in PSG (Contract Operations) cost of sales, $31,842,000 resulted from
the PSG acquisition with the remainder primarily due to the increased volume
discussed above. The increase as a percent of sales is primarily due to a
$4,000,000 resolution of an outstanding claim in 1993 and competitive market
pressures in 1994.
Selling, general and administrative expenses of $138,815,000
increased $15,213,000 from $123,602,000 in the prior period. Selling, general
and administrative expenses at Research-Cottrell, Metcalf & Eddy and the
Company's other segment remained fairly constant with minor changes due to
sales mix and normal inflationary impacts. Selling general and administrative
expense in the PSG (Contract Operations) segment increased $4,243,000
primarily due to the PSG acquisition, increased bid and proposal activity and
insurance costs. Selling, general and administrative expense in corporate
primarily increased due to unallocated legal and facility costs.
During 1994, the Company recorded unusual charges of approximately
$145,200,000. These charges relate to various cost reduction programs, new
management's de-emphasis of certain product lines which provide the
opportunity for a sharper focus on the Company's three core competency areas
(engineering consulting, contract operations and air pollution control) and to
costs directly attributable to the transactions contemplated by the Investment
Agreement (as discussed more fully in Note 2).
Included in the charges is (a) an impaired asset valuation charge
primarily related to certain businesses that no longer meet strategic
objectives and are anticipated to be divested. These businesses primarily
consist of the Company's cooling tower product line, and certain manufacturing
operations and properties which divert management attention from the Company's
core products and services provided by Research-Cottrell, Metcalf & Eddy and
PSG. As a result of the anticipated divestitures, the Company recorded a
$42,500,000 charge representing the difference between the carrying value
of these operations and management's estimate of the anticipated net sales
proceeds. Total assets of these operations approximate $62,600,000 at
October 31, 1994, which includes approximately $7,800,000 for accounts
receivable, $5,200,000 for costs and estimated earnings in excess of
billings, $10,900,000 for inventories, $7,200,000 for property plant and
equipment, $3,100,000 for other assets and $28,400,000 for goodwill. As of
October 31, 1994 several divestiture negotiations were currently ongoing in
addition to the sale of its natural gas compressor and power generation
systems operations ("Pamco") (see Note 5) which was completed in November
1994 and reported as a discontinued operation.
Also included in the above charge is; (b) various termination
benefits of which $4,600,000 relates to the Company's former Chairman under
the terms of an employment contract which were triggered by the transactions
contemplated by the Investment Agreement and include a $2,300,000 loan
forgiveness, certain tax payments and other payments; (c) approximately
$8,000,000 of costs associated with the termination of certain leases and the
closing of certain facilities; (d) approximately $11,200,000 related to the
ongoing PRASA litigation which reflects revised estimates of the expenses
required to pursue, through trial, the Company's belief that substantially all
of the billings questioned by PRASA (see Note 16) represent appropriate
charges and revised estimates of collectibility given the complexity of the
litigation and the continuing deferral of a trial date; (e) approximately
$18,500,000 of estimated costs to settle pending litigation primarily within the
Metcalf & Eddy segment; (f) approximately $9,700,000 primarily to write-off
substantially all of the Company's deferred software costs reflecting a shift
in focus to a standard industrial continuous emission monitor; (g)
approximately $37,400,000 of costs and asset writedowns associated primarily
with warranty and other claims in the Company's electrostatic precipitator and
continuous emission monitor product lines; (h) approximately $7,700,000 for
other items primarily representing revised estimates for potential insurance
claims.
Interest income increased $486,000 primarily as a result of a
favorable tax settlement and additional notes receivables. Interest expense
increased $680,000 primarily due to higher levels of average short-term
borrowings during the current period compared to the prior period. Other
expenses increased by $2,194,000 primarily as a result of adjustments to the
net investments in sales type leases, loss on sale of assets, additional
letters of credits and foreign exchange.
The Company on May 13, 1994 announced that it determined to
liquidate its asbestos abatement business. The Company previously reported
in January 1994 that it would discontinue its asbestos abatement operations
and that these operations, which it would seek to sell, had been considered
a discontinued operation for financial reporting purposes as of the Company's
1993 fiscal year. The Company made its determination to discontinue this
business after an operational review, initiated in the fourth quarter of its
1993 fiscal year, that was prompted by increasing negative cash flows during
fiscal 1993. The operational review led to a more extensive investigation of,
among other things, recorded financial results and internal operating controls
within the asbestos abatement operations after the discovery of accounting
irregularities. The Company further reported that certain members of senior
management of the asbestos abatement operations had been replaced.
Subsequently, for the first quarter of fiscal 1994, the asbestos abatement
operations incurred a loss of $3,229,000 primarily due to revisions of
estimates of costs to complete on existing contracts.
The Company's determination to liquidate its asbestos abatement
business and take an additional charge of $35,000,000 in the second quarter of
fiscal 1994 was based upon consideration of a number of factors occurring in
fiscal 1994 that have caused the Company to conclude that it will be unable to
realize value through the sale of the business and associated assets. The
Company's efforts to sell the business on a reasonable basis were unsuccessful
and, since the announcement of the Company's plans to discontinue the
business, the operations' performance continued to deteriorate. Factors that
contributed to the declining performance include the loss of management and
other personnel with the experience and skill necessary for the business to be
operated profitably and without continuing negative cash flows, deteriorating
margins both with respect to new project contracts and existing backlog,
greater difficulties in obtaining change orders from clients, and the
likelihood of further erosion of margins due to substantial increases in
required workers' compensation contributions for a significant percentage of
the business's employees. The $38,229,000 charge reflected in the current
period consists of operating losses of $15,988,000 and an estimated loss on
disposition of $22,241,000.
On November 18, 1994, the Company sold substantially all of the net
assets of Pamco for cash. Preliminary proceeds of $11,589,000 were received
during November, 1994, excluding $1,500,000 held in escrow, subject to the
finalization of the closing account balance and collection of Pamco's accounts
receivable. The related asset purchase agreement provides for a final
purchase price based on the net asset valuation, as defined, as of the closing
date. The $4,558,000 charge reflected in the current period consists of
operating losses of $1,758,000 (including certain asset reserves) and an
estimated loss on disposition of $2,800,000.
On June 14, 1994 the Company utilized a portion of the proceeds from
a $125,000,000 term loan from CGE (see Note 9) to retire its 11.18% Senior
Notes with The Prudential Insurance Company of America. The difference
between the redemption price of $107,500,000 in cash plus unamortized debt
issuance costs of $500,000 and the $100,000,000 carrying value of the debt has
been recorded as an extraordinary loss.
FISCAL YEAR ENDED OCTOBER 31, 1993 COMPARED TO FISCAL YEAR ENDED
OCTOBER 31, 1992
Consolidated sales of $575,949,000 for the year ended October 31,
1993 declined from $609,404,000 in the prior year. The decline is
primarily attributed to lower sales volumes in the Metcalf & Eddy segment
offset, in part, by higher sales volumes in the Research-Cottrell and PSG
(Contract Operations) segments. Sales at Research-Cottrell increased
$9,685,000 compared to the prior year. The increase was principally
attributable to the level of work derived from the Company's backlog.
Higher volumes were recorded in Research-Cottrell's emissions monitoring
equipment of approximately $19,400,000 and equipment for the control of
volatile organic compounds and acid gas of approximately $10,400,000. The
sales volume for Research-Cottrell's other equipment product lines,
primarily particulate control equipment, remain negatively impacted as
customers are continuing to evaluate both compliance options and the
enforcement framework related to the CAAA, as well as their capital
spending plans in view of the economic climate. The Company believes there
will be an improved pace of progress by the government in reducing the
compliance uncertainties relative to the requirements of the CAA which have
permeated the market over the last couple of years. These requirements
specify various compliance deadlines between 1993 and 2000. Lower volume
of $13,100,000 from Research-Cottrell's cooling tower business also offset
the above increases. The decline in cooling tower work resulted from the
Company's focus on higher margin services. Metcalf & Eddy sales decreased
$51,012,000 primarily from lower pass-through sales of approximately
$31,365,000 representing direct project costs passed through to the
Company's clients, as well as a decrease of $11,000,000 due to the
elimination of non-strategic service lines as the Company shifted its focus
to the more profitable value-added segments of the business. The PSG
(Contract Operations) segment recorded an increase in sales of $7,511,000
attributable to an increase in revenues of approximately $4,000,000 from
the resolution of a claim relating to costs previously incurred at one of
the Company's environmental treatment facilities and new contract awards.
Cost of sales decreased $33,874,000 to $415,386,000 from $449,260,000
in 1992. For Research-Cottrell, cost of sales increased by $8,639,000 to
$219,734,000 primarily as a result of higher sales volume. At Metcalf & Eddy,
cost of sales decreased $44,709,000 to $159,532,000 primarily due to lower
sales volume described above principally in low margin pass-through sales.
Cost of sales in PSG (Contract Operations) increased $1,896,000 to $32,875,000
as a result of the increased sales volume described above.
Selling, general and administrative expenses of $123,602,000
decreased $16,040,000 from $139,642,000 in the prior year consistent with the
Company strategy for 1993 of focusing on controlling costs in line with the
level of business activity and concentrating marketing activities on those
opportunities with the greatest return. Selling, general and administrative
expenses at Research-Cottrell decreased $1,199,000 compared to the prior-year.
The decrease relates to increased focus on cost control while shifting the
business focus from large utility projects to continuous emissions monitors
and air-toxics control systems. Metcalf & Eddy's selling, general and
administrative expenses decreased by $16,440,000. The lower level of selling,
general and administrative expenses was influenced by the continuing focus on
cost control and decreased overhead relating to lower volume ($8,447,000) and
lower levels of selling ($2,900,000), depreciation ($2,000,000) (see Note 1)
and legal expenses ($700,000). Increases in selling, general and
administrative expenses for PSG (Contract Operations) were due to higher
volume.
Operating income from continuing operations increased by $23,389,000.
In 1992, operating income was adversely affected by a $7,000,000 pretax charge
for costs associated with the Company's litigation with PRASA (see Note 16).
Interest income decreased $479,000 and interest expense increased
$2,345,000 primarily as a result of lower cash balances outstanding and higher
levels of short-term borrowings during 1993 compared to the prior year.
In January 1994, the Company announced that it would discontinue its
asbestos abatement operations. Accordingly, the asbestos abatement business,
as of the Company's 1993 fiscal year, is considered a discontinued operation
for financial reporting purposes. The Company made its determination to
discontinue this business after an operational review, prompted by increasing
negative cash flows during fiscal 1993. The review, which was initiated
during the fourth quarter of 1993, has led to a more extensive investigation
of among other things, recorded financial results and other internal operating
and accounting controls within the asbestos abatement operations, after the
discovery of accounting irregularities. Certain members of the senior
management team within the asbestos abatement operations have been replaced.
As a result of the review the Company recorded certain adjustments in
the fourth quarter of fiscal 1993. The asbestos abatement operations
experienced operating losses, leading to a fourth quarter loss of
$13,064,000. The adjustments consisted of a $2,200,000 reversal of
recorded revenues in connection with projects which were found to be non-
existent and $430,000 of inflated inventory quantities. The operating
losses resulted primarily from revised estimates by current management of
costs to complete on certain existing contracts.
FISCAL YEAR ENDED OCTOBER 31, 1992 COMPARED TO FISCAL YEAR ENDED
OCTOBER 31, 1991
Consolidated sales of $609,404,000 for the year ended October 31,
1992 increased $38,324,000 compared to the prior year. The increase is
primarily attributable to higher sales volumes in both the Research-Cottrell
and PSG (Contract Operations) segments offset, in part, by lower sales volumes
in the Metcalf & Eddy segment. Sales at Research-Cottrell increased 18% or
$40,986,000 compared to the prior year. The increase was attributable to
higher volume in Research-Cottrell's original equipment business
(approximately 85% of the increase) as well as to higher volumes during the
first half of the year in the aftermarket business (approximately 15% of the
increase), particularly with respect to servicing particulate equipment,
cooling towers and chimneys. With the exception of emission monitoring
equipment, the sales volume for Research-Cottrell's other original equipment
product lines, especially in the market for control of volatile organic
compounds, continues to be negatively impacted by delays in the award of
contracts as customers evaluate compliance options related to the CAAA and
capital spending plans in consideration of current economic conditions. The
Company does not anticipate the continuation of these delays given that both
utility and industrial businesses must comply with the requirements of the
CAA. These requirements specify various compliance deadlines between 1993 and
2000. Metcalf & Eddy sales decreased $6,389,000 primarily due to lower
pass-through sales of approximately $13,000,000 relating to the Peace Shield
and PRASA projects. Excluding these projects, sales increased throughout the
rest of Metcalf & Eddy. This increased volume was achieved largely by higher
levels of clean-up work for the U.S. Department of Defense as well as
engineering and design work primarily relating to water and wastewater
treatment. The PSG (Contract Operations) segment recorded an increase in
sales of $3,771,000 which was attributable to new contract awards.
Cost of sales increased $22,632,000 to $449,260,000 in 1992 from
$426,628,000 in 1991. For Research-Cottrell, cost of sales increased by
$32,722,000 to $211,095,000 primarily as a result of higher sales volumes. At
Metcalf & Eddy, cost of sales decreased $12,982,000 to $204,241,000 due
primarily to the lower volume described above principally in low margin
pass-through sales. Cost of sales in PSG (Contract Operations) increased
$2,927,000 to $30,979,000 as a result of the increased volume described above.
Selling, general and administrative expenses of $139,642,000
increased $5,170,000 from 1991. Increases occurred in the Research-Cottrell
and Metcalf & Eddy segments influenced by increased sales volume as well as
selling, general and administrative expenses related to the Company's efforts
to develop and improve its market position. The increased spending to improve
the Company's market position has contributed to the Company achieving a high
level of new orders. Selling, general and administrative expenses for
Research-Cottrell increased $4,705,000 compared to the prior year.
Research-Cottrell continues to invest in marketing and product development as
the group responds to business opportunities occurring and anticipated to
occur as a result of the passage of the CAA. The Company believes that its
array of air pollution services and technologies properly positions itself to
capitalize on the compliance requirements of the CAA. The Company's ability
to capitalize on the anticipated growth in the air pollution control market
could have a material impact on future operating results. However, the impact
of such growth in the air pollution control market on the Company's operating
results in future periods will depend on the timing of contract awards.
Metcalf & Eddy's selling, general and administrative expenses increased
$3,843,000. The increase was offset by a reduction of approximately
$1,200,000 in selling, general and administrative expenses relating to the
cessation of activity on the PRASA project. The higher level of Metcalf &
Eddy's selling, general and administrative expenses is influenced by the
marketing of its services, particularly with respect to what it considers to
be emerging.opportunities for environmental remediation work for the U.S.
Departments of Defense and Energy. Similar to the air pollution control
markets discussed above, the Company's ability to capitalize on the
anticipated growth and the timing and amount of successful awards in these
markets could have a material impact on future operating results. Decreases
in selling, general and administrative expenses for the other segment were due
to the effects of non-recurring costs and expenses incurred in the prior year
in connection with developing municipal sludge privatization opportunities for
the Company (approximately $2,000,000).
Operating income in 1992 was adversely affected by a $7,000,000
charge for costs associated with the Company's litigation with PRASA (see
Note 16). In 1991, operating income was adversely affected by a
$16,000,000 restructuring charge which reflected a one-time charge to
operations to achieve marketing leverage and operating efficiencies across
all AWT operating units. The charge provided for the estimated costs to be
incurred as a result of the consolidation of certain selling and
administrative functions, the integration of multiple information systems,
the consolidation of regional facilities, and the implementation of
corporate-wide cost-reduction programs.
Interest income decreased $1,277,000 and interest expense increased
$782,000 primarily as a result of lower cash balances outstanding and higher
levels of short term borrowings during 1992 compared to the prior year.
During August 1992, the Company amended terms and conditions of credit
agreements with two of its primary lenders which provide for higher interest
rates.
In the prior period, minority interest reduced the loss for the
period by $90,000. This benefit related principally to the minority interest
in the net loss for the period in Metcalf & Eddy Companies, Inc. With the
October 31, 1991 acquisition of the shares of Metcalf & Eddy Companies Inc.
not already held by AWT, this minority interest ceased to exist. Income was
reduced in the current year by $265,000 by the minority interest in the net
income of other affiliates.
FINANCIAL CONDITION
On June 14, 1994, the stockholders of the Company approved the
issuance of Company securities pursuant to the Investment Agreement, pursuant
to which, among other things, AWT (i) issued to CGE 1,200,000 shares of a
newly designated series of Preferred Stock, designated as 5 1/2% Series A
Convertible Exchangeable Preferred Stock, convertible into 4,800,000 shares of
Class A Common Stock, for cash consideration of $60,000,000 and (ii) issued
to Anjou an aggregate of 6,701,500 shares of Class A Common Stock in
connection with the acquisition from Anjou of PSG. As a result, CGE increased
its ownership interest in AWT to approximately 48% of the total voting power
of the Company's voting securities. In addition, AWT benefitted from certain
financial undertakings from CGE, including a $125,000,000 loan from CGE and
became CGE's exclusive vehicle in the United States, its possessions and its
territories for CGE's water and wastewater management and air pollution
activities. CGE also has representation on AWT's Board of Directors and the
right to designate AWT's Chief Executive Officer and Chief Financial Officer.
See ITEM 13 -- CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS for additional
information.
On June 14, 1994 the Company utilized a portion of the proceeds from
the $125,000,000 term loan from CGE (see Note 9) to retire its 11.18% Senior
Notes with The Prudential Insurance Company of America. The difference
between the redemption price of $107,500,000 in cash plus unamortized debt
issuance costs of $500,000 and the $100,000,000 carrying value of the debt has
been recorded as an extraordinary loss.
Cash used by continuing operations for the year ended October 31,
1994 amounted to $48,222,000. In addition, during the year ended October 31,
1994 the Company's discontinued operations (primarily asbestos abatement)
utilized $17,294,000 of cash, resulting in net cash used for operating
activities of $65,516,000. The Company also utilized $9,445,000 of cash for
capital expenditures, investments in environmental treatment facilities,
software development and other investment activities during the year.
Excluding the redemption of the Prudential Notes for $107,500,000 an
additional $13,105,000 of cash was used for the payment of notes payable and
long-term debt, and the reimbursement of a temporary $10,000,000 accounts
receivable purchase facility with First Chicago, during fiscal 1994.
These cash requirements were funded principally by the transactions
contemplated by the Investment Agreement.
The Company's principal sources of liquidity to meet short-term
working capital needs, in addition to its existing cash balances
($11,021,000 at October 31, 1994) consisted of its $70,000,000 Credit
Agreement with a syndicate of banks represented by First Chicago and its
$20,000,000 Accounts Receivable Purchase Agreement with First Chicago, both
of which facilities expire on March 2, 1995. Under the Credit Agreement,
the Company may borrow up to $40,000,000 for working capital purposes of
which $19,000,000 was outstanding on October 31, 1994 (compared to
$14,000,000 at October 31, 1993), with the remaining unused balance of the
Credit Agreement available for Letters of Credit, of which $25,900,000 was
issued and outstanding on October 31, 1994. Of these Letters of Credit
outstanding $14,300,000 support foreign borrowing facilities of which
$10,000,000 was borrowed on October 31, 1994. Under the Company's Account
Receivable Purchase Agreement, $20,000,000 was outstanding on October 31,
1994. At October 31, 1994 the Company had $25,100,000 of additional credit
capacity available under the Credit Agreement. As of January 27, 1995 the
Company had an additional $1,000,000 available to it under the Accounts
Receivable Purchase Agreement and $13,600,000 of additional credit capacity
available to it under the Credit Agreement.
The Company's operating losses and other cash requirements including
cash utilized through January 27, 1995, have resulted in the decreased
availability of working capital under the Company's credit facilities which
expire on March 2, 1995. Additional borrowings are anticipated during fiscal
1995 primarily due to the cash payments that will be made as a result of the
unusual charges recorded by the Company during 1994 which is currently
anticipated to be approximately $26,000,000 over the next twelve months. (See
Note 3).
Since its inception, the Company has historically re-negotiated or
amended its credit facilities to satisfy business needs. As a result of its
losses, the Company would have been in default of certain financial covenants
in a number of its loan agreements. The Company has requested and has received
waivers of default from its lenders.
On January 25, 1995, the Company received written commitments in
the amount of $200,000,000 of which up to $140,000,000 will be used in a
new three-year Senior Secured Credit Facility (the "New Credit Facility")
with First Chicago and Societe Generale acting as co-agents for a syndicate
which includes seven additional banks. The New Credit Facility will
replace the Credit Agreement and the Accounts Receivable Purchase Agreement
and will increases the amount of borrowings available to the Company and
may be used for general corporate purposes and the issuance of letters of
credit, both subject to limitations and secured by a first security
interest in substantially all of the assets of the Company.
Of the total commitment, borrowings are limited to the sum of a
percentage of certain eligible receivables, inventories, net property,
plant and equipment and costs and estimated earnings in excess of billings
(approximately $80,000,000 using October 31, 1994 financial data) and bear
interest at LIBOR, as defined, plus .725%. The New Credit Facility will
contain certain financial and other restrictive covenants with respect to
the Company, including, among other things, the maintenance of certain
financial ratios, and restrictions on the incurrence of additional
indebtedness, acquisitions, the sale of assets and the payment of dividends
or repurchase of subordinated debt. In addition, the agreement provides
for CGE to maintain a minimum 40% ownership interest in the Company.
The Company believes that it has the ability to manage its cash needs
and is currently continuing its efforts to control both its expense levels
(reflected by recent internal cost control programs) as well as reducing the
level of investment in customer projects. Further negotiations are continuing
to be pursued with potential buyers of certain Company businesses no longer
meeting strategic objectives (see Note 3). While the Company anticipates net
proceeds of approximately $28,000,000 upon the sale of those businesses, the
timing of receipt of those proceeds is not yet determinable except for
preliminary Pamco sale proceeds of $11,589,000 received during November 1994.
The businesses of the Company have not historically required
significant ongoing capital expenditures. For the years ended October 31,
1994, 1993 and 1992 total capital expenditures were $5,523,000 and $3,880,000
and $7,081,000, respectively. At October 31, 1994, the Company had no
material outstanding purchase commitments for capital expenditures.
INFLATION
The Company believes that inflation and changing prices have not had,
and are not expected in the near term to have, a material adverse effect on
its results of operations. Significant portions of the Company's sales and
the related costs result from contracts that provide for escalation recovery
on labor and material costs. Many other contracts are "cost-plus" government
contracts. Both types of contracts reduce the Company's exposure to the
adverse effects of inflation.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
INDEX TO FINANCIAL STATEMENTS
Air & Water Technologies Corporation: Page
Report of Independent Public Accountants........................... 34
Consolidated Balance Sheets as of October 31, 1994 and 1993........ 35
Consolidated Statements of Operations for the Years ended
October 31, 1994, 1993 and 1992.............................. 36
Consolidated Statements of Stockholders' Equity for the Years
Ended October 31, 1994, 1993 and 1992........................ 37
Consolidated Statements of Cash Flows for the Years Ended
October 31, 1994, 1993 and 1992.............................. 38
Notes to Consolidated Financial Statements......................... 39
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Air & Water Technologies Corporation:
We have audited the accompanying consolidated balance sheets of Air &
Water Technologies Corporation (a Delaware corporation) and subsidiaries as
of October 31, 1994 and 1993, and the related consolidated statements of
operations, stockholders' equity and cash flows for each of the three years
in the period ended October 31, 1994. 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 Air & Water
Technologies Corporation and subsidiaries as of October 31, 1994 and 1993, and
the results of their operations and their cash flows for each of the three
years in the period ended October 31, 1994, in conformity with generally
accepted accounting principles.
As more fully discussed in Note 16, a subsidiary of the Company entered
into a contract with the Puerto Rico Aqueduct and Sewer Authority ("PRASA") to
rehabilitate PRASA's wastewater treatment system and provide related program
management services. That subsidiary filed an action in the United States
District Court in San Juan, Puerto Rico which, among other things, seeks to
recover $37.4 million of outstanding receivables from PRASA. In October 1992,
the Supreme Court of the Commonwealth of Puerto Rico ruled in a separate
action involving the Company's subsidiary which could impact the Company's
action against PRASA pending in Federal Court. The Company believes that it
has performed substantially in accordance with the terms of its contract with
PRASA and that, ultimately, at least a majority of all sums due to its
subsidiary pursuant to the contract will be realized. Provisions have been
made in the accompanying consolidated financial statements for estimated costs
and expenses associated with the litigation and revised estimates of
collectibility. However, because of the uncertainty as to how the United
States District Court in the PRASA case will interpret and apply the ruling of
the Supreme Court of the Commonwealth of Puerto Rico to the facts before it,
the Company is unable to determine with any specificity what impact the
Commonwealth Court decision will have on its efforts to recover the $37.4
million from PRASA.
/s/ ARTHUR ANDERSEN LLP
Roseland, New Jersey
December 23, 1994
(Except with respect to paragraph
four of Note 8 as to which the
date is January 25, 1995)
Air & Water Technologies Corporation
CONSOLIDATED BALANCE SHEETS
As of October 31, 1994 and 1993
(in thousands, except share data)
<TABLE>
<CAPTION>
ASSETS 1994 1993
-------- --------
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents, including restricted cash of $1,435 and $1,529
in 1994 and 1993, respectively (Note 1) $ 11,021 $ 7,624
Accounts receivable, less allowance for doubtful accounts of $6,100 and
$2,900 in 1994 and 1993, respectively (Notes 6 and 16) 80,534 106,720
Costs and estimated earnings in excess of billings on uncompleted contracts
(Note 1) 59,250 78,657
Inventories (Note 1) 20,405 22,283
Prepaid expenses and other current assets 7,281 17,460
Net current assets of discontinued operations (Note 5) 9,825 30,333
Total current assets 188,316 263,077
PROPERTY, PLANT AND EQUIPMENT, net (Note 1) 43,013 41,853
INVESTMENTS IN ENVIRONMENTAL TREATMENT FACILITIES
(Note 7) 23,343 22,323
DEFERRED DEBT ISSUANCE COSTS, net (Note 1) 3,507 4,084
GOODWILL, net (Notes 1, 3 and 4) 283,638 235,329
NET NON-CURRENT ASSETS OF DISCONTINUED OPERATIONS
(Note 5) 6,295 11,280
OTHER ASSETS (Notes 1 and 16) 54,826 16,082
Total assets $ 602,938 $ 594,028
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Short-term borrowings (Note 8) $ 29,000 $ 28,240
Current installments of long-term debt (Note 9) 533 3,120
Accounts payable 50,988 51,860
Accrued expenses (Note 3) 126,158 49,833
Billings in excess of costs and estimated earnings on uncompleted contracts
(Note 1) 30,840 23,910
Income taxes payable (Note 15) 2,003 4,743
Total current liabilities 239,522 161,706
NON-CURRENT LIABILITIES (Note 3) 42,700 --
LONG-TERM DEBT (Note 9) 245,984 221,463
MINORITY INTEREST IN SUBSIDIARIES 351 545
COMMITMENTS AND CONTINGENCIES (Notes 12 and 16)
STOCKHOLDERS' EQUITY (Notes 2, 10 and 11):
Preferred stock, par value $.01, authorized 2,500,000 shares;
issued 1,200,000 shares in 1994; liquidation value $60,000 12 --
Common stock, par value $.001, authorized 100,000,000 shares; issued
32,107,906 and 24,908,183 shares in 1994 and 1993, respectively 32 25
Additional paid-in capital 427,028 301,048
Accumulated deficit (352,580) (89,557)
Common stock in treasury, at cost (108) (108)
Cumulative currency translation adjustment (3) (1,094)
Total stockholders' equity 74,381 210,314
Total liabilities and stockholders' equity $ 602,938 $ 594,028
</TABLE>
The accompanying notes to consolidated financial statements are an integral
part of these financial statements.
Air & Water Technologies Corporation
CONSOLIDATED STATEMENTS OF OPERATIONS
For the years ended October 31, 1994, 1993 and 1992
(in thousands, except per share data)
<TABLE>
<CAPTION>
1994 1993 1992
--------- ---------- ----------
<S> <C> <C> <C>
SALES (Note 1) $ 522,573 $ 575, 949 $ 609,404
COST OF SALES 413,324 415,386 449,260
--------- ---------- ----------
Gross margin 109,249 160,563 160,144
SELLING, GENERAL AND
ADMINISTRATIVE EXPENSES 138,815 123,602 139,642
AMORTIZATION OF GOODWILL (Note 1) 7,738 6,794 6,724
UNUSUAL CHARGES (Note 3) 145,200 --- 7,000
--------- ---------- ----------
Operating income (loss) from continuing
operations (182,504) 30,167 6,778
INTEREST INCOME 1,283 797 1,276
INTEREST EXPENSE (24,386) (23,706) (21,361)
OTHER INCOME (EXPENSE), net (Note 6) (4,580) (2,386) (1,370)
--------- ---------- ----------
Income (loss) from continuing operations
before income taxes and minority interest (210,187) 4,872 (14,677)
PROVISION FOR INCOME TAXES (Note 998 68 817
15)
MINORITY INTEREST (194) 21 265
--------- ---------- ----------
Income (loss) from continuing operations (210,991) 4,783 (15,759)
INCOME (LOSS) FROM DISCONTINUED
OPERATIONS (Note 5) (42,787) (10,338) 5,723
EXTRAORDINARY ITEM (Note 9) (8,000) --- ---
--------- ---------- ----------
Net loss $(261,778) $ (5,555) $ (10,036)
========= ========== ==========
EARNINGS (LOSS) PER SHARE (Note 1):
Continuing operations $ (7.68) $ .20 $ (.63)
Discontinued operations (1.55) (.42) .23
Extraordinary item (.29) -- --
--------- ---------- ----------
Net loss $ (9.52) $ (.22) $ (.40)
========= ========== ==========
</TABLE>
The accompanying notes to consolidated financial statements are an integral
part of these financial statements.
Air & Water Technologies Corporation
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
For the years ended October 31, 1994, 1993 and 1992
(in thousands, except share data)
<TABLE>
<CAPTION>
Common Stock Preferred Stock
-------------------- -------------------
Class A Class A Additional
-------------------- ------------------- Paid-in Accumulated
Shares Amount Shares Amount Capital Deficit
---------- ------ ------- ------- ---------- ------------
<S> <C> <C> <C> <C> <C> <C>
Balance, October 31,
1991 24,800,169 $ 25 --- $ --- $ 299,715 $ (73,966)
Net loss --- --- --- --- --- (10,036)
Treasury stock purchases --- --- --- --- --- ---
Exercise of stock options 36,802 --- --- --- 627 ---
Grant and amortization of
restricted stock 78,070 --- --- --- 265 ---
Currency translation
adjustment --- --- --- --- --- ---
---------- ------ ------- ------- ---------- ------------
Balance, October 31,
1992 24,915,041 25 --- --- 300,607 (84,002)
Net loss --- --- --- --- --- (5,555)
Treasury stock purchases --- --- --- --- --- ---
Treasury stock issued --- --- --- --- --- ---
Exercise of stock options 1,250 --- --- --- 13 ---
Forfeiture and
amortization of restricted
stock (8,108) --- --- --- 428 ---
Currency translation
adjustment --- --- --- --- --- ---
---------- ------ ------- ------- ---------- ------------
Balance, October 31,
1993 24,908,183 25 --- --- 301,048 (89,557)
Net loss --- --- --- --- --- (261,778)
Issuance of Common
Stock 7,201,500 7 --- --- 69,933 ---
Issuance of Series A
Preferred Stock --- --- 1,200,000 12 55,513 ---
Cash dividends, Series A
Preferred Stock --- --- --- --- --- (1,245)
Grant, forfeiture and
amortization of restricted
stock (1,777) --- --- --- 534 ---
Currency translation
adjustment --- --- --- --- --- ---
---------- ------ ------- ------- ---------- ------------
Balance, October 31,
1994 32,107,906 $32 1,200,000 $12 $ 427,028 $(352,580)
========== ====== ======= ======= ========== ============
Class A Common Cumulative
Treasury Stock Currency
------------------- Translation
Shares Amount Adjustment Total
------ -------- ------------ --------
<C> <C> <C> <C>
Balance, October 31, (56,406) $ (62) $ 73 $225,785
1991 --- --- --- (10,036)
Net loss (35,998) (47) --- (47)
Treasury stock purchases --- --- --- 627
Exercise of stock options
Grant and amortization of --- --- --- 265
restricted stock
Currency translation --- --- (147) (147)
adjustment ------- ------ ---------- --------
Balance, October 31, (92,404) (109) (74) 216,447
1992 --- --- --- (5,555)
Net loss (7,498) (9) --- (9)
Treasury stock purchases 10,000 10 --- 10
Treasury stock issued --- --- --- 13
Exercise of stock options
Forfeiture and
amortization of restricted --- --- --- 428
stock
Currency translation --- --- (1,020) (1,020)
adjustment ------- ------ ---------- --------
Balance, October 31, (89,902) (108) (1,094) 210,314
1993 --- --- --- (261,778)
Net loss
Issuance of Common --- --- --- 69,940
Stock
Issuance of Series A --- --- --- 55,525
Preferred Stock
Cash dividends, Series A --- --- --- (1,245)
Preferred Stock
Grant, forfeiture and
amortization of restricted --- --- --- 534
stock
Currency translation --- --- 1,091 1,091
adjustment ------- -------- ------------ --------
Balance, October 31, (89,902) $ (108) $ (3) $ 74,381
1994 ======= ======== ============ ========
</TABLE>
The accompanying notes to consolidated financial statements are an integral
part of these financial statements.
Air & Water Technologies Corporation
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the years ended October 31, 1994, 1993 and 1992
(in thousands, except share data)
<TABLE>
<CAPTION>
1994 1993 1992
------------ ----------- -----------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (261,778) $ (5,555) $ (10,036)
Adjustments to reconcile net loss to net cash provided by
(used for) continuing operations-
Discontinued operations 42,787 10,338 (5,723)
Depreciation and amortization 18,745 14,550 16,195
Minority interest (194) 21 265
Extraordinary item 8,000 --- ---
------------ ----------- -----------
(192,440) 19,354 701
Changes in working capital, net of effects from acquisitions -
(Increase) decrease in current assets-
Accounts receivable (1,307) 738 9,655
Costs and estimated earnings in excess of billings on
uncompleted contracts 22,230 18,064 (22,462)
Inventories 2,271 (2,288) (1,239)
Prepaid expenses and other current assets 10,934 (3,859) 1,116
Increase (decrease) in current liabilities-
Accounts payable (5,712) (5,943) 14,504
Accrued expenses 64,716 (15,859) (3,491)
Billings in excess of costs and estimated
earnings on uncompleted contracts 5,152 (6,437) 11,829
Income taxes (2,962) (1,391) (142)
Other assets 6,196 (1,158) (4,066)
Other liabilities 42,700 --- ---
------------ ----------- -----------
Net cash provided by (used for) continuing operations (48,222) 1,221 6,405
Net cash used for discontinued operations (17,294) (13,684) (2,610)
------------ ----------- -----------
Net cash provided by (used for) operating activities (65,516) (12,463) 3,795
------------ ----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (5,523) (3,880) (7,081)
Investment in environmental treatment facilities (1,020) (1,712) (2,229)
Software development (2,659) (10,680) ---
Other, net (243) (296) (567)
------------ ----------- -----------
Net cash used for investing activities $ (9,445) $ (16,568) $ (9,877)
------------ ----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuances of common and preferred stock 63,194 --- ---
Proceeds from issuance of notes payable and long-term debt 125,000 3,500 281
Payments of notes payable and long-term debt (110,605) (3,722) (4,468)
Net borrowings under line of credit 970 28,240 ---
Preferred dividends (970) --- ---
Stock issued under employee stock option plan --- 13 627
Change in cumulative currency translation adjustment 891 (1,020) (147)
Other, net (122) (477) (96)
------------ ----------- -----------
Net cash provided by (used for) financing activities 78,358 26,534 (3,803)
------------ ----------- -----------
Net increase (decrease) in cash and cash equivalents 3,397 (2,497) (9,885)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 7,624 10,121 20,006
------------ ----------- -----------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 11,021 $ 7,624 $ 10,121
============ =========== ===========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the year for interest $ 23,853 $ 23,765 $ 22,195
Cash paid during the year for income taxes $ 976 $ 2,587 $ 1,769
============ =========== ===========
</TABLE>
The accompanying notes to Consolidated Financial Statements are an integral
part of these financial statements.
Air & Water Technologies Corporation
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
October 31, 1994
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
Consolidation
The consolidated financial statements include the accounts of Air &
Water Technologies Corporation ("AWT" or the "Company") and all majority-owned
subsidiaries. All significant intercompany transactions have been eliminated.
Investments in joint ventures, which are 50% or less owned, are accounted for
using the equity method, while the Company's share of joint venture results of
operations are included pro rata in "sales", "cost of sales" and "selling,
general and administrative expenses" in the accompanying consolidated
statements of operations.
Cash equivalents
Cash equivalents consist of investments in short-term highly liquid
securities having an original maturity at the date of acquisition of three
months or less and primarily include investments in bank time deposits.
Revenue recognition
The Company follows the practice of accruing income from long-term
contracts using the percentage-of-completion method. Under this method, the
Company primarily recognizes as profit that proportion of the total
anticipated profit which the cost of work completed bears to the estimated
total cost of the work covered by the contract, including estimated warranty
and performance guarantee costs. As contracts extend over one or more years,
revisions of cost and profit estimates are made periodically and are reflected
in the accounting period in which they are determined. If the estimate of
total costs on a contract indicates a loss, the total anticipated loss is
recognized immediately. Estimated warranty and performance guarantee costs on
completed contracts are included in accrued expenses and amounted to
$16,200,000 and $2,900,000 in 1994 and 1993, respectively.
The asset, "costs and estimated earnings in excess of billings on
uncompleted contracts," represents contract costs incurred plus earned margin
in excess of amounts billed and includes unbilled retentions which result from
performance of work on contracts in progress in advance of billings pursuant
to certain contract terms. Approximately $56,535,000 of costs and estimated
earnings in excess of billings on uncompleted contracts is expected to be
collected in 1995. The liability, " billings in excess of costs and estimated
earnings on uncompleted contracts," represents billings in excess of contract
costs incurred and earned margin.
In connection with various agreements relating to the licensing of
the Company's technologies to third parties, the Company records sales for
licensing and related fees as they are earned as specified under the terms of
the related agreements.
Inventories
Inventories are stated principally at the lower of first-in,
first-out cost or market. Inventories at October 31 consist of the following
(in thousands):
1994 1993
------- -------
Raw materials $ 5,443 $ 4,747
Work in process 377 533
Components and parts 14,585 17,003
------- -------
$20,405 $22,283
======= =======
Property, plant and equipment
Property, plant and equipment is stated at cost. Depreciation and
amortization of property, plant and equipment is computed on the straight-line
method over the estimated useful lives of the assets. During 1993, the
Company standardized the estimated average useful lives used by each of its
subsidiaries to compute depreciation for property, plant and equipment. These
changes were made to better reflect the estimated periods during which such
assets remain in service. The estimated useful lives are 20 years for land
improvements, 20 to 30 years for buildings and improvements and 5 to 12 years
for machinery, equipment and fixtures. The revised estimated useful lives
decreased 1993 depreciation expense by approximately $2,500,000. Repair and
maintenance costs are expensed as incurred; major renewals and betterments are
capitalized. Property, plant and equipment at October 31 consist of the
following (in thousands):
1994 1993
------- -------
Land and
land improvements $ 6,100 $ 5,910
Buildings and
improvements 21,493 20,732
Machinery, equipment
and fixtures 47,604 40,238
------- -------
75,197 66,880
Less- Accumulated
depreciation and amortization (32,184) (25,027)
------- -------
$ 43,013 $ 41,853
======= =======
Software development costs
The Company had capitalized costs incurred in the development of
certain software elements to be sold for use with its emission monitoring
equipment. In accordance with Statement of Financial Accounting Standards No.
86, capitalization begins when technological feasibility has been established
and ends when the product is available for general release to customers.
Amortization was computed as the ratio of current sales over anticipated
future sales of emission monitoring systems over a five year period.
As more fully described in Note 3, approximately $9,700,000 of unamortized
capitalized software costs were written off during the period ended October
31, 1994 and the remaining amounts are not significant.
Amortization
Goodwill is being amortized over 40 years under the straight-line
method. Subsequent to its acquisition, the Company continually evaluates
whether later events and circumstances have occurred that indicate the
remaining estimated useful life of goodwill may warrant revision or that the
remaining balance of goodwill may not be recoverable. When factors indicate
that goodwill should be evaluated for possible impairment, the Company uses an
estimate of the related business operation's undiscounted operating income
over the remaining life of the goodwill in measuring whether the goodwill is
recoverable (see Note 3). Accumulated amortization of goodwill was
$44,717,000 and $36,979,000 at October 31, 1994 and 1993. Deferred debt
issuance costs are amortized over the life of the related debt utilizing the
effective interest method. Amortization of deferred debt issuance costs for
the periods ended October 31, 1994, 1993 and 1992 was $199,000, $520,000, and
$219,000, respectively.
Earnings (loss) per share
The earnings (loss) per share was computed by dividing the net
income (loss) after preferred dividends by the weighted average number of
common shares outstanding each period. The weighted average number of
shares outstanding were 27,632,000 in 1994, 24,815,000 in 1993, and
24,812,000 in 1992. Common Stock Equivalents (stock options) and the
Company's 8% Convertible Notes have not been included in the earnings
(loss) per share calculation since the effect is antidilutive.
Reclassifications
Certain reclassifications have been made to the 1993 and 1992
consolidated financial statements to conform to the 1994 presentation.
(2) CGE TRANSACTION:
On June 14, 1994, the stockholders of the Company approved the
issuance of Company securities pursuant to an Investment Agreement dated as of
March 30, 1994 (the "Investment Agreement"), among AWT, Compagnie Generale des
Eaux, a French corporation and AWT's largest shareholder ("CGE"), and Anjou
International Company, a Delaware corporation and a wholly-owned subsidiary of
CGE ("Anjou"), pursuant to which, among other things, AWT (i) issued to CGE
1,200,000 shares of a newly designated series of Preferred Stock, designated
as 5 1/2% Series A Convertible Exchangeable Preferred Stock, convertible into
4,800,000 shares of Class A Common Stock, for cash consideration of
$60,000,000, and (ii) issued to Anjou an aggregate of 6,701,500 shares of
Class A Common Stock in connection with the acquisition from Anjou of
Professional Services Group, Inc., a Minnesota corporation, and 2815869
Canada, Inc., a Canadian corporation (hereinafter collectively "Professional
Services Group" or "PSG"). As a result, CGE increased its ownership interest
in AWT to approximately 48% of the total voting power of the Company's voting
securities. In addition, AWT benefitted from certain financial undertakings
from CGE, including a $125,000,000 loan from CGE and became CGE's exclusive
vehicle in the United States, its possessions and its territories for CGE's
water and wastewater management and air pollution activities. CGE also has
representation on AWT's Board of Directors and the right to designate AWT's
Chief Executive Officer and Chief Financial Officer.
In connection with the Investment Agreement, the Company incurred
fees and expenses of approximately $9,800,000, including $7,750,000 payable
to Allen & Company for financial advisory services. The estimated fees and
expenses have been allocated to the PSG acquisition ($4,875,000), preferred
stock issuance ($4,475,000), common stock issuance ($400,000) and a term
loan from CGE ($50,000).
(3) UNUSUAL CHARGES:
During 1994, the Company recorded unusual charges of approximately
$145,200,000. These charges relate to various cost reduction programs, new
management's deemphasis of certain product lines which provide the opportunity
for a sharper focus on the Company's three core competency areas; engineering
consulting, contract operations and air pollution control and to costs
directly attributable to the transactions contemplated by the Investment
Agreement (as discussed more fully in Note 2).
The unusual charges consist of the following (in millions):
Charges to Operations
---------------------
1994 1992
------ ----
Impaired asset
Valuation charge $ 42.5 $ --
Termination benefits 10.2 --
Excess facility charge 8.0 --
PRASA 11.2 7.0
Pending litigation 18.5 --
Capitalized software costs 9.7 --
Claims, warranties & other 37.4 --
Insurance & other 7.7 --
------ ----
Total unusual charges $145.2 $ 7.0
====== ====
The reserves to be utilized in future periods are included in the
allowance for doubtful accounts ($2,900,000), inventory ($800,000), other
assets ($200,000), accrued expenses ($71,700,000) and non-current liabilities
($37,900,000) at October 31, 1994.
Included in the above charges is (a) an impaired asset valuation
charge which primarily relates to certain businesses that no longer meet
strategic objectives and are anticipated to be divested. These businesses
primarily consist of the Company's cooling tower product line, and certain
manufacturing operations and properties which divert management attention
from the Company's core products and services provided by Research-
Cottrell, Metcalf & Eddy and PSG. Sales from these non-core businesses
were approximately 7%, 9% and 10% of total Company sales for the periods
ending October 31, 1994, 1993 and 1992. As a result of the anticipated
divestitures, the Company recorded a $42,500,000 charge representing the
difference between the carrying value of these operations and management's
estimate of the anticipated net sales proceeds. Total assets of these
operations approximate $62,600,000 at October 31, 1994, which includes
approximately $7,800,000 for accounts receivable, $5,200,000 for costs and
estimated earnings in excess of billings, $10,900,000 for inventories,
$7,200,000 for property plant and equipment, $3,100,000 for other assets
and $28,400,000 for goodwill. As of October 31, 1994 several divestiture
negotiations were currently ongoing in addition to the sale of Pamco (see
Note 5) which was completed in November 1994 and reported as a discontinued
operation.
Also included in the above charges are; (b) various termination
benefits of which $4,600,000 relates to the Company's former Chairman under
the terms of an employment contract which were triggered by the CGE
Transaction and include a $2,300,000 loan forgiveness, certain tax payments and
other payments; (c) approximately $8,000,000 of costs associated with the
termination of certain leases and the closing of certain facilities; (d)
approximately $11,200,000 related to the ongoing PRASA litigation which
reflects revised estimates of the expenses required to pursue, through trial,
the Company's belief that substantially all of the billings questioned by
PRASA (see Note 16) represent appropriate charges and revised estimates of
collectibility given the complexity of the litigation and the continuing
deferral of a trial date; (e) approximately $18,500,000 of estimated costs to
settle pending litigation primarily within the Metcalf & Eddy segment; (f)
approximately $9,700,000 primarily to write-off substantially all of the
Company's capitalized software costs reflecting a shift in focus to a standard
industrial continuous emission monitor; (g) approximately $37,400,000 of costs
and asset writedowns associated primarily with warranty and other claims in
the Company's electrostatic precipitator and continuous emission monitor
product lines; (h) approximately $7,700,000 for other items primarily
representing revised estimates for potential insurance claims.
(4) ACQUISITIONS:
In connection with the transactions contemplated by the Investment
Agreement, the Company on June 14, 1994 acquired CGE's PSG water/wastewater
management subsidiary. The acquisition has been accounted for under the
purchase method and, accordingly, the operating results of PSG have been
included in the consolidated operating results since the date of
acquisition. The purchase price of $70,215,000 is based upon 6,701,500
shares of common stock issued in exchange for PSG valued at the quoted
market price at the date of issuance ($65,340,000) plus $4,875,000 of
estimated acquisition costs. The purchase price was assigned to tangible
assets of $26,072,000 and liabilities of $11,907,000 acquired at an
estimate of their fair value. The excess of purchase price over PSG's
tangible net assets acquired of $56,050,000 has been recorded as goodwill
and is being amortized over 40 years.
The following summary, prepared on a pro forma basis, combines the
consolidated results of operations as if PSG had been acquired as of the
beginning of the periods presented, after including the impact of certain
adjustments such as: amortization of goodwill and the related income tax
effects (in thousands, except per share data):
Year Ending Oct. 31
--------------------------------
1994 1993
(Unaudited) (Unaudited)
--------------- -------------
Sales $ 578,178 $653,549
Income (loss) from continuing operations (209,146) 6,037
Net income (loss) (260,737) (4,390)
Earnings (loss) per share:
Continuing operations (6.53) .19
Net loss $ (8.14) $ (.14)
The pro forma results are not necessarily indicative of what actually
would have occurred if the acquisition had been in effect for the periods
presented. In addition, they are not intended to be a projection of future
results and do not reflect any synergy that might be achieved from combined
operations.
(5) DISCONTINUED OPERATIONS:
Asbestos Abatement
The Company on May 13, 1994 announced that it had determined to
liquidate its asbestos abatement business. The Company previously reported in
January 1994 that it would discontinue its asbestos abatement operations and
that these operations, which it would seek to sell, had been considered a
discontinued operation for financial reporting purposes as of the Company's
1993 fiscal year. The Company made its determination to discontinue this
business after an operational review, initiated in the fourth quarter of its
1993 fiscal year, that was prompted by increasing negative cash flows during
fiscal 1993. The operational review led to a more extensive investigation of,
among other things, recorded financial results and internal operating controls
within the asbestos abatement operations after the discovery of accounting
irregularities. The Company further reported that certain members of senior
management of the asbestos abatement operations had been replaced.
Subsequently, for the first quarter of fiscal 1994, the Company reported that
the asbestos abatement operations incurred a loss of $3,229,000 primarily due
to revisions of estimates of costs to complete on existing contracts.
The Company's determination to liquidate its asbestos abatement
business and take an additional charge in the second quarter of fiscal 1994 was
based upon consideration of a number of factors occurring in fiscal 1994 that
have caused the Company to conclude that it will be unable to realize value
through the sale of the business and associated assets. The Company's efforts
to sell the business on a reasonable basis were unsuccessful and, since the
announcement of the Company's plans to discontinue the business, the
operations' performance continued to deteriorate. Factors that contributed to
the declining performance include the loss of management and other personnel
with the experience and skill necessary for the business to be operated
profitably and without continuing negative cash flows, deteriorating margins
both with respect to new project contracts and existing backlog, greater
difficulties in obtaining change orders from clients, and the likelihood of
further erosion of margins due to substantial increases in required workers'
compensation contributions for a significant percentage of the business's
employees.
Sales applicable to this business were $48,696,000, $59,218,000 and
$46,238,000 for the periods ended October 31, 1994, 1993 and 1992. Other
selected financial data from this business are as follows (in thousands):
1994 1993 1992
--------- --------- -------
Operating income (loss) $ (15,988) $ (10,108) $ 3,994
Loss on disposition (22,241) 0 0
--------- --------- -------
Total income (loss) (38,229) (10,108) 3,994
Depreciation and amortization 716 944 617
Changes in working capital 15,627 (7,229) (4,134)
Goodwill write-off 4,425 0 0
Capital expenditures 0 (874) (1,043)
Payment of long-term debt (367) (130) (96)
Other, net 368 (211) (74)
--------- --------- -------
Net cash flow $ (17,460) $ (17,608) $ (736)
========= ========= =======
Pamco
On November 18, 1994, the Company sold substantially all of the net
assets of its natural gas compressor and power generation systems operations
("Pamco") for cash. Preliminary proceeds of $11,589,000 were received during
November, 1994, excluding $1,500,000 held in escrow, subject to the
finalization of the closing account balances and collection of Pamco's
accounts receivable. The related asset purchase agreement provides for a
final purchase price based on the net assets valuation, as defined, as of the
closing date.
Sales applicable to this business were $40,025,000, $54,428,000 and
$63,545,000 for the periods ended October 31, 1994, 1993 and 1992. Other
selected financial data from this business are as follows (in thousands):
1994 1993 1992
--------- --------- -------
Operating income
(loss) $ (1,758) $ (230) $ 1,729
Loss on disposition (2,800) 0 0
--------- --------- -------
Total income (loss) (4,558) (230) 1,729
Depreciation and amortization 430 599 531
Changes in working capital 4,881 3,616 (3,330)
Capital expenditures (209) (1,308) (1,064)
Payment of long-term
debt (369) (483) 733
Other, net (9) 1,730 (473)
--------- --------- -------
Net cash flow $ 166 $ 3,924 $(1,874)
========= ========= =======
(6) ACCOUNTS RECEIVABLE:
As of October 31, 1994 and 1993, accounts receivable included
balances of $3,688,000 and $4,906,000, respectively, billed to customers under
retainage provisions of long-term contracts. Substantially all of the
retainage in accounts receivable as of October 31, 1994 is expected to be
collected in 1995.
Through an accounts receivable purchase agreement with First National
Bank of Chicago ("First Chicago"), the Company at its option may sell up to
$20,000,000 of eligible accounts receivable on an ongoing basis to First
Chicago until expiration of the agreement on March 2, 1995. This agreement
was temporarily increased by $10,000,000 through June 15, 1994. As needed,
the Company replaces accounts receivable previously sold when they are
collected. On average, the Company had approximately $20,846,000 of accounts
receivable outstanding under this agreement during 1994. Sales of accounts
receivable under the agreement are subject to limited recourse. As of October
31, 1994 and 1993, $20,000,000 of accounts receivable were outstanding under
the agreement and, accordingly, excluded from accounts receivable.
The difference between the proceeds received upon the sale of
accounts receivable and the net carrying value of such receivables has been
reflected as a loss. Such losses have been included in other expense and
amounted to approximately $1,308,000, $1,320,000, and $1,026,000, for the
periods ended October 31, 1994, 1993 and 1992, respectively.
(7) INVESTMENTS IN ENVIRONMENTAL TREATMENT FACILITIES:
The Company has designed and constructed environmental treatment
facilities for certain governmental entities (the "entities"). The cost of
these facilities was primarily funded through the issuance of tax-exempt
Industrial Revenue Bonds by the entities, the proceeds of which were loaned to
the Company. The entities have entered into long-term service agreements with
the Company which transfers to them substantially all risks of ownership and
which will generate sufficient revenues to service the debt and return the
Company's investment. Accordingly, these transactions have been accounted for
as sales-type leases. Consistent with the definition of a legal right of
offset (the related agreements provide for a net settlement of the obligations
between the parties, and the revenues referred to above are legally assigned
to payment of debt service), neither the facilities nor the associated debt
(approximately $32,365,000 and $33,469,000 at October 31, 1994 and 1993,
respectively) are reflected in the accompanying consolidated balance sheets.
These agreements provide for various performance guarantees by the Company.
Construction has been completed on all of these facilities and all are
operational. Management believes that the Company will continue to maintain
the stipulated performance guarantees.
During 1993, the long-term service agreement between the Company and
certain governmental entities relating to one of its treatment facilities was
amended. The amended agreement provided for an estimated settlement of
$4,000,000 of outstanding claims for which costs had previously been incurred,
the refinancing of the project's outstanding debt and related financing of
$3,500,000 for the enhancement and expansion of the facility to improve the
project's operating performance (see Note 9). The above settlement of claims
was recorded as revenue in 1993.
The net investment in these sales-type leases consists of the
following at October 31 (in millions):
1994 1993
------- -------
Future minimum lease
payments $ 47.6 $ 49.2
Expected residual value 9.3 9.3
Unearned income (5.6) (5.5)
------ ------
Net investment in leases 51.3 53.0
Offset- nonrecourse debt
of $32.4 million and
$33.5 million, respectively,
in 1994 and 1993, net of
available funds in hands
of trustee (28.0) (30.7)
------ ------
$ 23.3 $ 22.3
====== ======
At October 31, 1994, minimum lease payments to be received, net of
executory costs for the five succeeding fiscal years, are as follows (in
thousands):
1995 $1,788
1996 1,879
1997 1,864
1998 1,838
1999 1,925
(8) FINANCING ARRANGEMENTS:
In September 1990, the Company entered into a Credit Agreement ("the
Credit Agreement') with First Chicago as agent for a syndicate of three banks.
The total line available under the Credit Agreement is $70,000,000, which may
be used for working capital loans and letters of credit to be used for general
corporate purposes. Of the total commitment, no more than $40,000,000 may be
used for working capital loans.
Working capital loans bear interest payable quarterly. At the option
of the Company, working capital loans bear interest at a floating rate
(corporate base rate, as defined, plus 1.5%, up to $30,000,000 in borrowings
and 2.0% above such amount) or a fixed rate (LIBOR, as defined, plus 2.5%, up
to $30,000,000 in borrowings and 3.0% above such amount). At October 31,
1994, the Company had short-term borrowings outstanding of $29,000,000 under
the total facility and an unused line of approximately $25,100,000 under the
total facility. The average daily balance on all short-term loans outstanding
under the facility was approximately $34,810,000, $26,407,000, and $11,336,000
in 1994, 1993 and 1992, respectively, at a weighted average interest rate of
approximately 7.7%, 6.6%, and 6.3% in 1994, 1993 and 1992, respectively. The
maximum month-end short-term loan balance outstanding under the facility was
$50,018,000, $33,791,000 and $20,000,000 in 1994, 1993 and 1992, respectively.
The gross amount of proceeds from and repayments of working capital
borrowings under the Credit Agreement consists of the following (in thousands):
1994 1993 1992
--------- --------- ---------
Borrowings $ 213,535 $ 196,240 $ 124,500
Repayments (212,565) (168,000) (124,500)
-------- -------- --------
Net $ 970 $ 28,240 $ 0
======== ======== ========
The Credit Agreement and the Account Receivable Purchase Agreement
(see Note 6) expire by their terms on March 2, 1995. On January 25, 1995,
the Company received written commitments in the amount of $200,000,000 of
which up to $140,000,000 will be used in a new three-year Senior Secured
Credit Facility with First Chicago and Societe Generale acting as co-agents
for a syndicate which includes seven additional banks. The New Credit
Facility will replace the Credit Agreement and the Accounts Receivable
Purchase Agreement and will increase the amount of borrowings available to
the Company and may be used for general corporate purposes and the issuance
of letters of credit, both subject to limitations and secured by a first
security interest in substantially all of the assets of the Company.
Of the total commitment, borrowings are limited to the sum of a
percentage of certain eligible receivables, inventories, net property,
plant and equipment and costs and estimated earnings in excess of billings
(approximately $80,000,000 using October 31, 1994 financial data) and bear
interest at LIBOR, as defined, plus 0.725%. The New Credit Facility will
contain certain financial and other restrictive covenants, with respect to
the Company, including, among other things, the maintenance of certain
financial ratios, and restrictions on the incurrence of additional
indebtedness, acquisitions, the sale of assets and the payment of dividends
or repurchase of subordinated debt. In addition, the agreement provides
for CGE to maintain a minimum 40% ownership interest in the Company.
(9) LONG-TERM DEBT:
The Company's long-term debt consists of the following at October 31
(in thousands):
<TABLE>
<CAPTION>
1994 1993
-------- --------
<S> <C> <C>
Term loan from CGE $125,000 $ ---
10.48% to 11.18% Senior Notes due September 18, 2000 --- 100,000
8% Convertible Subordinated Debentures due May 15, 2015 115,000 115,000
8.5% Note due July 1, 2007 (Note 7) 3,400 3,500
Real estate mortgage loans at 8.75% in 1994 2,899 5,045
Other 218 1,038
-------- --------
246,517 224,583
Less current installments of long-term debt (533) (3,120)
-------- --------
Long-term debt $245,984 $221,463
======== ========
</TABLE>
The $125,000,000 term loan from CGE is an unsecured facility bearing
interest at a rate based upon one, two, three or six-month LIBOR, as
selected by AWT, plus 125 basis points, as defined, and has a final
maturity of June 15, 2001. The term loan contains certain financial and
other restrictive covenants with respect to the Company relating to, among
other things, the maintenance of certain financial ratios, and restrictions
on the sale of assets and the payment of dividends on or the redemption,
repurchase, acquisition or retirement of securities of the Company or its
subsidiaries. The Company has obtained waivers relating to violations of
certain financial covenants under the CGE term loan and the bonding
agreement (see Note 16) through November 1, 1995.
On June 14, 1994 the Company utilized a portion of the proceeds from
the $125,000,000 CGE term loan to retire its 11.18% Senior Notes with The
Prudential Insurance Company of America. The difference between the
redemption price of $107,500,000 in cash plus unamortized debt issuance costs
of $500,000 and the $100,000,000 carrying value of the debt has been recorded
as an extraordinary loss. The Company paid approximately $1,857,000 to CGE as
interest on the term loan during Fiscal 1994.
During 1990, the Company completed the public offering of
$115,000,000 of 8% Convertible Subordinated Debentures. Interest on the
debentures is payable semiannually. The debentures are redeemable in whole or
in part at the option of the Company at any time on or after May 15, 1994, at a
redemption price of 104.8% of the principal amount in 1993 reducing to 100% of
the principal amount in 2000, together with accrued interest to the redemption
date. The debentures require equal annual sinking fund payments beginning May
15, 2000, which are calculated to retire 75% of the debentures prior to
maturity. The debentures are convertible into shares of Class A Common Stock
at a conversion price of $30.00 per share.
The aggregate net book value of property securing long-term debt
obligations was approximately $10,800,000 as of October 31, 1994.
The aggregate maturities of long-term debt are as follows (in
thousands):
Fiscal Year
-----------
1995 $ 533
1996 364
1997 378
1998 398
1999 440
Thereafter 244,404
(10) COMMON AND PREFERRED STOCK:
The Company has authorized 2,500,000 shares of Preferred Stock which
the Board of Directors may allocate to any class or series of preferred stock
and determine the relative rights and preferences for each class or series
designated.
As discussed in Note 2, the Company issued 1,200,000 shares of its
5.5% Series A Convertible Exchangeable Preferred Stock for $60,000,000. At
the option of the Company, this Preferred Stock is exchangeable for the
Company's 5.5% Convertible Subordinated Notes with a maturity of 10 years from
the date of issuance of such notes at $50 per share. Such notes and Preferred
Stock are convertible at $12.50 per share into shares of Class A Common Stock,
subject to adjustments as defined.
Each holder of outstanding shares of Common Stock at the date of the
Company's initial public stock offering in August 1989 is subject to an
Amended and Restated Stockholder Agreement dated June 13, 1989 (the
"Stockholder Agreement"), by and among the Company and such shareholders. This
agreement grants certain demand registration rights to Institutional Investors
(as defined) and certain piggy-back registration rights to all stockholders
with respect to the Common Stock. Unless terminated earlier by the written
consent of at least 70% of the stockholders, the Stockholder Agreement expires
on July 13, 1997.
(11) STOCK OPTION AND PURCHASE PLANS:
Under the Company's employee stock purchase plan (the "Stock Purchase
Plan"), officers and other key employees may be granted the right to purchase
up to 1,000,000 shares of the Company's Class A Common Stock. The
Compensation Committee of the Board of Directors determines the purchase price
of shares issuable under the Stock Purchase Plan. At October 31, 1994 and
1993, approximately 232,000 shares of Class A Common Stock were available for
sale under the Stock Purchase Plan.
The Company established its stock option and restricted stock award
plan (the "Plan") in 1989 under which incentive stock options and nonqualified
stock options may be granted to purchase shares of Common Stock of the Company
and restricted shares of Common Stock of the Company may be awarded. The Plan
authorizes the granting of stock options and restricted stock awards for up to
an aggregate of 2,892,735 shares of Class A Common Stock of the Company.
Options and restricted stock awards granted may not be exercised or vest
during the first year after grant but, thereafter, 25% of the shares granted
become exercisable or vest on the first through fourth anniversaries of grant.
The following is a summary of certain information pertaining to options under
the Plan.
1994 1993 1992
--------- --------- --------
Outstanding November 1 2,350,152 1,637,406 856,797
Granted 560,200 963,900 972,900
Exercised -- (1,250) (36,802)
Forfeited (619,005) (249,904) (155,489)
Outstanding October 31 2,291,347 2,350,152 1,637,406
At October 31
Exercisable 1,816,847 732,487 494,223
Options and
restricted stock
available for
grant 470,034 411,952 1,124,530
Option price range
per share-
Outstanding $ 7.38 $10.50 $10.50
to to to
$31.43 $31.43 $31.43
Exercised $ -- $10.50 $14.57
to
$19.13
In December 1991, the Company granted 78,070 restricted shares to its
employees in accordance with the terms of the Plan described above at the then
prevailing marketprice of the Company's Common Stock of $18.50. The aggregate
fair market value of the shares granted was recorded as unearned compensation
expense and amortized over the restricted period. The unamortized unearned
compensation value is shown as a reduction of shareholders' equity and
$534,000, $428,000 and $265,000 was amortized to expense during the years
ended October 31, 1994, 1993 and 1992.
(12) BENEFIT PLANS:
The Company maintains profit sharing plans providing for annual
discretionary Company contributions which are fixed by the Board of Directors
based on the performance of the applicable employee group. Company
contributions and forfeitures are allocated among the participants' accounts on
the basis of each participant's base salary. All full-time regular employees
who meet minimum age (21) and service requirements participate. Participants'
accounts vest at a rate of ten percent for the first four years and twenty
percent for the next three years of continuous service. No contributions to
profit sharing plans were made for the years ended October 31, 1994, 1993 and
1992.
Certain employees retiring from the Company between the ages of 55
and 62 who have rendered the requisite number of years of service (generally
25 years) are entitled to postretirement health care coverage. These benefits
are subject to deductibles, copayment provisions and other limitations. The
Company reserves the right to change or terminate the benefits at any time.
The total cost of these postretirement benefits charged to the results of
operations was $352,000, $286,000, and $380,000 for 1994, 1993 and 1992,
respectively.
During 1994, the Company adopted the Financial Accounting Standards
Board pronouncement on accounting for postretirement benefits. The Company is
amortizing the catch-up effect over participants' future service periods and
as a result the new prescribed accounting for postretirement benefits has not
had a significant effect on the Company's reported consolidated financial
position and results of operations in fiscal 1994.
(13) INVESTMENTS IN JOINT VENTURES:
The Company, in the normal conduct of its subsidiaries' business, has
entered into certain partnership arrangements, referred to as "joint
ventures," for engineering and program management projects. A separate joint
venture is established with respect to each such project. The joint venture
arrangements generally commit each venturer to supply a predetermined
proportion of the engineering labor and capital, and provide each venturer a
predetermined proportion of income or loss. Each joint venture is terminated
upon the completion of the underlying project. Summary financial information
for joint ventures follows (in thousands):
1994 1993
-------- --------
Financial position as
of October 31-
Current assets $ 61,472 $ 61,719
Current liabilities 55,134 54,114
------- ------
$ 6,338 $ 7,605
======= ======
1994 1993 1992
-------- -------- --------
Operations for the
years ended October 31-
Sales $ 76,230 $122,548 $162,195
Cost of sales 60,655 101,127 137,317
General and
administrative
expenses 9,811 11,730 12,687
-------- -------- --------
Income $ 5,764 $ 9,691 $ 12,191
======== ======== ========
Company share of
joint ventures for the
years ended October 31-
Sales $ 33,151 $ 49,788 $ 70,867
Cost of sales 26,232 40,385 59,075
General and
administrative
expenses 4,467 5,448 6,378
-------- -------- --------
Income $ 2,452 $ 3,955 $ 5,414
======== ======== ========
Investment as of
October 31 $ 681 $ 2,275 $ 2,841
======== ======== ========
The Company's share of joint venture income presented above includes
general and administrative expenses incurred by the joint venture. General
and administrative expenses incurred by the Company attributable to the
management and administration of the joint ventures are not included.
The Company's investment in joint ventures includes capital
contributed to the joint ventures and the Company's share of undistributed
earnings (included in other assets). In addition, the Company had receivables
from the joint ventures totaling $3,558,000 and $2,783,000 at October 31, 1994
and 1993, respectively, related to current services provided by the Company to
the joint ventures.
The data presented above primarily represents Metcalf & Eddy's
investment in a 43%-owned joint venture with CRSS Inc., providing services to
the U.S. Air Force in Saudi Arabia.
(14) BUSINESS SEGMENTS AND GEOGRAPHIC DATA:
The Company currently generates substantially all of its revenues
from environmental treatment and related services.
Research-Cottrell services include the initial analysis of
air/thermal pollution problems, consultation, design and installation of the
appropriate treatment technologies including electrostatic precipitators,
fabric filters, chimneys, cooling towers, dry emission control systems,
continuous emission monitors and thermal oxidizers. Additionally, this
segment provides parts, repairs, service and maintenance for its and others
installed equipment base.
Metcalf & Eddy provides a comprehensive range of water related
services, including treatment process design and on-site and off-site
remediation of environmental contamination. Gross sales to federal, state
and municipal governmental agencies totaled 80%, 72%, and 76% of Metcalf &
Eddy's gross sales in the years ended October 31, 1994, 1993 and 1992,
respectively.
PSG (Contract Operations) provides complete services for the
operations, maintenance and management of treatment facilities in the various
water and wastewater, and sludge and biosolids waste management markets.
Gross sales are primarily to municipal government agencies.
The Company's other activities are primarily related to its hazardous
waste transfer station which is currently held for sale.
Sales between segments are included within the segment recording the
sales transaction and eliminated for consolidation purposes. Operating profit
by segment is total operating revenue less operating expenses and amortization
of goodwill. Unallocated corporate expenses includes administrative costs not
allocable to a specific segment. Identifiable assets are those assets used by
each segment in its operation. Corporate assets primarily include cash, fixed
assets, net assets from discontinuated operations and deferred debt issuance
costs.
Sales and identifiable assets of foreign operations as of and for the
years ended October 31, 1994, 1993 and 1992 were less than 10% of consolidated
assets and sales. In addition, sales to the federal government represented
approximately 15%, 17%, and 18% of consolidated sales in the years ended
October 31, 1994, 1993 and 1992.
Information by business segment is as follows (in thousands):
<TABLE>
<CAPTION>
Metcalf PSG (Contract Unallocated
Research-Cottrell & Eddy Operations) Other Corporate Eliminations Consolidated
----------------- ------- ------------- ----- ----------- ------------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
For the year ended
October 31, 1994
Sales $ 213,172 $ 219,106 $ 83,678 $ 6,617 $ -- $ -- $ 522,573
Costs and expenses 238,762 213,470 81,324 7,422 11,161 -- 552,139
Amortization of goodwill 3,266 3,483 989 -- -- -- 7,738
Unusual charges 81,800 38,700 5,300 4,200 15,200 -- 145,200
--------- --------- -------- ------- -------- ------ ---------
Operating loss $(110,656) (36,547) (3,935) (5,005) (26,361) -- (182,504)
Interest income 304 232 555 -- 192 -- 1,283
Income expense (726) (303) (29) (10) (23,412) 94* (24,386)
Other income (expense) (818) (2,665) (329) (0) (768) (4,580)
--------- --------- -------- ------- -------- ------ ---------
Income (loss) before
income tax $(111,896) $(39,283) $ (3,738) $(5,015) $(50,349) $ 94 $(210,187)
========= ========= ======== ======= ======== ====== =========
Identifiable assets as of
October 31, 1994 $ 217,460 $ 205,589 $133,885 $ 6,769 $ 39,235 $ -- $ 602,938
========= ========= ======== ======= ======== ====== =========
Depreciation and amortization $ 1,795 $ 2,188 $ 580 $ 526 $ 1,122 $ -- $ 6,211
========= ========= ======== ======= ======== ====== =========
Capital expenditures $ 1,026 $ 2,069 $ 1,095 $ 293 $ 1,040 $ -- $ 5,523
========= ========= ======== ======= ======== ====== =========
For the year ended
October 31, 1993
Sales $ 276,584 $ 246,824 $ 46,000 $ 6,541 $ -- $ -- $ 575,949
Costs and expenses 261,358 224,660 38,858 6,092 8,020 -- 538,988
Amortization of goodwill 3,252 3,078 464 -- -- -- 6,794
--------- --------- -------- ------- -------- ------ ---------
Operating income (loss) 11,974 19,086 6,678 449 (8,020) -- 30,167
Interest income 407 133 48 9 200 -- 797
Interest expense (494) (1,389) (90) (31) (22,857) 1,155* (23,706)
Other income (expense) (525) (1,548) 147 -- (460) -- (2,386)
--------- --------- -------- ------- -------- ------ ---------
Income (loss) before
income tax $ 11,362 $ 16,282 $ 6,783 $ 427 $(31,137) $1,155 $ 4,872
========= ========= ======== ======= ======== ====== =========
Identifiable assets as of
October 31, 1993 $ 250,039 $ 225,951 $ 38,305 $ 7,757 $ 71,976 $ -- $ 594,028
========= ========= ======== ======= ======== ====== =========
Depreciation and
amortization $ 1,305 $ 2,261 $ 201 $ 570 $ (422) $ -- $ 3,915
========= ========= ======== ======= ======== ====== =========
Capital expenditures $ 1,760 $ 1,714 $ 47 $ 90 $ 269 $ -- $ 3,880
========= ========= ======== ======= ======== ====== =========
For the year ended
October 31, 1992
Sales $ 266,899 $ 297,836 $ 38,489 $ 6,180 $ -- $ -- $ 609,404
Costs and expenses 253,918 285,809 35,456 6,623 7,096 -- 588,902
Amortization of goodwill 3,112 3,148 464 -- -- -- 6,724
Unusual charge -- 7,000 -- -- -- -- 7,000
--------- --------- -------- ------- -------- ------ ---------
Operating income (loss) 9,869 1,879 2,569 (443) (7,096) -- 6,778
Operating income (loss) 9,869 1,879 2,569 (443) (7,096) -- 6,778
Interest income 466 74 50 31 655 -- 1,276
Interest expense (530) (2,452) (70) (20) (20,038) 1,749* (21,361)
Other income (expense) (997) (1,347) 130 -- 844 -- (1,370)
--------- --------- -------- ------- -------- ------ ---------
Income (loss) before
income tax $ 8,808 $ (1,846) $ 2,679 $ (432) $(25,635) $1,749 $ (14,677)
========= ========= ======== ======= ======== ====== =========
Identifiable assets as of
October 31, 1992 $ 250,577 $ 224,352 $ 47,554 $ 9,218 $ 70,051 $ -- $ 601,752
========= ========= ======== ======= ======== ====== =========
Depreciation and
amortization $ 2,091 $ 3,521 $ 216 $ 637 $ 671 $ -- $ 7,136
========= ========= ======== ======= ======== ====== =========
Capital expenditures $ 2,971 $ 3,131 $ 265 $ 254 $ 460 $ -- $ 7,081
========= ========= ======== ======= ======== ====== =========
</TABLE>
* Represents intercompany interest income/expense relating to loans to/from
Metcalf & Eddy, under the terms of a corporate and administrative service
agreement.
(15) INCOME TAXES:
During 1993, the Company adopted Statement of Financial Accounting
Standards No. 109 "Accounting for Income Taxes" (SFAS 109). SFAS 109
represents a new method of accounting for income taxes; it generally requires
that deferred taxes be calculated using an asset and liability approach at
currently enacted income tax rates. The cumulative effect of the change had
no effect on the Company's 1993 earnings or earnings per share.
SFAS 109 requires the recognition of deferred tax assets and
liabilities for both the expected future tax impact of differences between the
financial statement and tax basis of assets and liabilities, and for the
expected future tax benefit to be derived from tax loss carryforwards. SFAS
109 additionally requires the establishment of a valuation allowance to
reflect the likelihood of the realization of deferred tax assets.
At October 31, 1994, the Company had a net deferred tax asset of
$116,000,000 which has been fully reserved by a valuation allowance. The
deferred tax asset is comprised of the tax effects of net operating losses
($57,400,000), receivable reserves ($2,800,000), inventory reserves
($1,300,000), costs and estimated earnings in excess of billings on
uncompleted contracts ($2,700,000), other assets ($9,800,000) and accruals not
yet deductible ($38,700,000) and non-current liabilities ($13,700,000). The
deferred tax liability is comprised of fixed assets depreciation ($10,400,000).
At October 31, 1994, the Company had tax loss carryforwards of
approximately $164,000,000. Such carryforwards expire through 2009. The
transactions contemplated by the Investment Agreement resulted in an ownership
change which may limit the Company's ability to utilize its tax loss
carryforwards in future years.
Income (loss) from continuing operations before income taxes and
minority interest at October 31 was (in thousands):
1994 1993 1992
-------- -------- --------
United States $(206,191) $1,083 $(19,166)
Foreign (3,996) 3,789 4,489
-------- ----- -------
$(210,187) $4,872 $(14,677)
======== ===== =======
Provision for income taxes at October 31 includes
the following (in thousands):
1994 1993 1992
-------- -------- --------
U.S. Federal -
Currently payable $ -- $ -- $ --
Deferred -- -- --
Foreign - (274) 282 307
State (including approximately
$750 of benefit in 1993 from
the resolution of tax issues) 1,272 (214) 510
----- ---- ----
$ 998 $ 68 $ 817
===== ==== ====
The difference between the income tax provision
(benefit) computed by applying the statutory federal
income tax rate to pretax income (loss) and the actual
tax provision is as follows (in thousands)-
1994 1993 1992
-------- -------- --------
Statutory provision (benefit) $(73,565) $ 1,664 $(4,990)
State income taxes 827 (139) 337
Goodwill 2,708 2,364 2,286
Impact of net operating loss 69,903 (2,784) 4,403
Impact of foreign operations 1,125 (1,037) (1,219)
------- ------ ------
$ 998 $ 68 $ 817
======= ====== ======
(16) COMMITMENTS, CONTINGENCIES AND RELATED PARTY TRANSACTION:
At October 31, 1994 and 1993, approximately $37,400,000 in delinquent
payments on the Puerto Rico Aqueduct and Sewer Authority ("PRASA") contract
were outstanding. In September 1990, Metcalf & Eddy, Inc. filed an action in
United States District Court in San Juan, Puerto Rico, seeking $52 million in
damages from PRASA. Metcalf & Eddy's suit initially sought $27 million in
damages for payment for goods and services Metcalf & Eddy sold and rendered to
PRASA under a contract to rehabilitate PRASA's wastewater treatment system and
provide related program management services. In July 1991, Metcalf & Eddy
amended its action to seek $37.4 million in damages for these delinquent
payments, which represented the total account receivable with respect to the
PRASA contract as of that date. The suit also claims damages for anticipated
claims by suppliers to Metcalf & Eddy with respect to the PRASA contract and
violations of good faith and fair dealing under the contract. On December 18,
1990, Metcalf & Eddy announced that it had suspended all work under the
contract pending resolution of the litigation between the parties. The matter
is complex litigation. No assurance as to the final outcome of the litigation
can be given.
PRASA has been withholding payments under its contract with Metcalf &
Eddy. An audit of the contract, dated November 16, 1990, performed by a
governmental affiliate of PRASA, questioned up to $39,988,200 of billings for
possible technical violations of equipment procurement procedures under the
contract and charges outside the contract. PRASA has denied the allegations
of the complaint and challenged the jurisdiction of the United States District
Court. The trial court has denied PRASA's jurisdictional motions and the
United States Court of Appeals for the First Circuit dismissed PRASA's appeal
on procedural grounds. PRASA then filed a petition for a writ of certiorari
in the United States Supreme Court asking that court to review that procedural
dismissal, and the Supreme Court granted that petition. The trial court had
stayed all proceedings (including further factual discovery and an initial
trial date which had been set for May 18, 1992) pending disposition by the
Supreme Court of the appeal of the procedural issue. On January 12, 1993, the
Supreme Court decided this appeal in PRASA's favor and remanded the case to
the First Circuit for disposition on the merits of the jurisdictional issue.
On May 3, 1993, the First Circuit ruled against PRASA and in favor of Metcalf
& Eddy on the merits of the jurisdictional issue. Discovery in this matter is
completed. On April 15, 1994, the District Court issued an Order requiring a
Special Master to assist the Court with the complex accounting matters in this
case. A Special Master has been appointed and is scheduled to issue an
opinion in June 1995. The trial of this matter is scheduled to commence on
July 17, 1995.
Metcalf & Eddy disputes the findings of the PRASA audit. Metcalf &
Eddy believes that substantially all of the billings questioned by the audit
represent appropriate charges under the contract for goods and services
provided to PRASA by Metcalf & Eddy. In October 1992, the Supreme Court of the
Commonwealth of Puerto Rico ruled on a separate action entitled "Colegio de
Ingenieros vs. Autoridad de Acueductos y Metcalf & Eddy, Inc." which could
impact Metcalf & Eddy's action against PRASA. This ruling held that certain
portions of the multi-year contract between Metcalf & Eddy and PRASA were
invalid as contrary to Puerto Rican law insofar as they called for the
practice of engineering by Metcalf & Eddy. This action, originally filed in
September 1986 by the Puerto Rico College of Engineers, an island-wide
professional engineering organization, sought a declaratory judgment that the
engineering design portion of Metcalf & Eddy's contract violated Puerto Rico law
prohibiting corporations from practicing engineering. The Company has filed a
Motion for Reconsideration that remains undecided.
The Colegio decision complicates further what is complex commercial
litigation between Metcalf & Eddy and PRASA. In particular, uncertainty
exists as to how the Federal District Court in the PRASA case will interpret
and apply the Colegio decision to the facts before it. Because of this
uncertainty, at this time AWT is unable to determine with any specificity what
impact the Colegio decision will have on its efforts to recover monies from
PRASA. AWT has also consulted with counsel as to its obligations under the
contract and the course of the litigation generally. Based on its
consideration of all of the foregoing and the status of the litigation to
date, AWT believes that Metcalf & Eddy has performed substantially in
accordance with the terms of the contract and that, ultimately, at least a
majority of the sums due Metcalf & Eddy pursuant to the contract will be
realized.
As a result of these developments and the status of the litigation
with PRASA to date, the Company in its fourth quarter ended October 31,
1992 recorded a $7,000,000 charge to earnings reflecting costs associated
with the PRASA litigation. Additionally, in its third quarter ended July
31, 1994, the Company recorded a further pre-tax charge to earnings of
$11,200,000 to reflect a revised estimate of costs and expenses associated
with this litigation and revised estimates of collectibility.
Approximately $37,400,000 of amounts due from PRASA has been reclassified
to other assets at October 31, 1994 due to the continuing trial delays.
The PRASA related reserves are included in noncurrent liabilities at
October 31, 1994. If the Company were to recover less than all of the
receivables owed it by PRASA, the Company would recognize a corresponding
reduction in income (less any unutilized reserves) in the period in which a
final determination of the amount to be recovered is reached.
The Company and its subsidiaries are parties to various other legal
actions arising in the normal course of their businesses, some of which
involve claims for substantial sums. The Company believes that the
disposition of such actions, individually or in the aggregate, will not have a
material adverse effect on the consolidated financial position or results of
operations of the Company taken as a whole.
The Company and its subsidiaries are obligated under various leases
for office and manufacturing facilities and certain machinery, equipment and
fixtures. Lease terms range from under one year to ten years. Certain leases
have renewal or escalation clauses or both. Certain equipment leases have
purchase options. Total rent expense in the periods ended October 31, 1994,
1993 and 1992, was $21,173,000, $21,509,000, and $18,344,000, respectively.
Minimum rental commitments under all noncancellable leases as of
October 31, 1994 are as follows (in thousands):
Fiscal Year
-----------
1995 $14,700
1996 12,600
1997 10,900
1998 10,100
1999 9,700
Thereafter 20,000
It has been both a Company policy and a requirement of many customers
for the Company to carry insurance for the services it performs when such
insurance can be obtained on commercially reasonable terms. The Company and
others in its industry have been unable to cost effectively obtain additional
environmental liability insurance because of aggressive enforcement of federal
environmental regulations and legal decisions adverse to insurance carriers
involving pollution damage. In addition, for environmental and certain other
insurance coverages, insurance companies have switched from "occurrence" to
"claims made" liability policies so that the insured is only covered if the
claim is made during the period in which the policy is maintained. Under the
Company's general liability and other insurance policies, there are various
pollution and hazardous waste exclusions. Accordingly, there can be no
assurance that environmental liabilities, if any, that may be incurred by the
Company would be covered by its insurance or that the dollar amount of such
liabilities that are covered will not exceed the Company's policy limits.
Management believes that the Company is substantially in compliance with
applicable environmental regulations.
In connection with the sale of two manufacturing facilities in prior
years, the Company remains contingently liable as guarantor under $3,795,000
of Industrial Revenue Bond financing.
In March 1989, a subsidiary of the Company entered into a long-term
bonding arrangement with a surety company. The bonding agreement provides
substantially all of the Company's operating entities with bid bonds,
performance bonds and other surety instruments. This agreement requires that
the subsidiary satisfies certain financial tests, as defined.
On August 20, 1990, the Board of Directors of the Company made a
one-year, interest-free, unsecured loan of $2,300,000 to its then Chief
Executive Officer of the Company, so that he could satisfy certain personal
financial obligations without having to sell a substantial portion of his
equity investment in the Company. During 1991, the terms and conditions of
this loan were amended, among other things, to extend the term of the loan.
Interest has been imputed on the loan at approximately 8%. Subsequent to the
termination of such officer's employment with the Company as of June 14, 1994
as a result of the transactions contemplated by the Investment Agreement, the
Company and such officer entered into an agreement dated November 21, 1994
(the "Termination Agreement") relating to all aspects of their relationship
following such termination of employment. Under the terms of the Termination
Agreement, 20% of the principal amount of the loan will be forgiven in each of
the next five years.
The Company also entered into agreements in March 1994 (the
"Retention Agreements") with ten executive officers, which provide for each
executive's employment by the Company for an initial period of two years
beginning upon the occurrence of a Change-in-Control of the Company (as
defined). The Retention Agreements provide for annual salaries ranging from
$150,000 to $250,000. Salaries under the agreements may be increased by the
Board of Directors, in its sole discretion, taking into account the earnings
and overall productivity of the Company, available resources, the performance
of the executive and such other factors as it deems relevant. In addition,
the agreements with certain executive officers provide that the executive
officers will receive a bonus of up to $30,000 in each year of the initial
two-year period if, at any time during the initial two-year term, certain
operating targets are met. If, during the initial two-year term, the Company
terminates the executive's employment other than for death, Disability (as
defined), or Justifiable Cause (as defined) or the executive terminates his
employment for Good Reason (as defined), the executive will be entitled to
receive an amount equal to the balance of the salary due to him for the
remainder of the initial two-year term. In addition, in that event, the
executive will be entitled to exercise any options which were exercisable on
the date of termination until 90 days after the end of the initial two-year
term of the agreement or, if earlier, the date of termination of the option.
As of October 31, 1994, six retention agreements remain in effect. The
transactions contemplated by the Investment Agreement constituted a
Change-in-Control as defined in the Retention Agreements.
Information concerning (i) the Investment Agreement entered into with
CGE and (ii) the $125,000,000 loan from CGE is set forth in Notes 2 and 9.
QUARTERLY FINANCIAL DATA (UNAUDITED)
Summarized quarterly financial data for 1994 and 1993 are as follows
(in thousands, except share data):
<TABLE>
<CAPTION>
1994 By Quarter
-------------------------------------------------------------------------
First Second Third Fourth Year*
--------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
Sales $ 122,753 $ 119,657 $ 135,774 $ 144,389 $ 522,573
Cost of sales 100,079 96,067 103,510 113,668 413,324
-------- -------- -------- -------- --------
Gross profit 22,674 23,590 32,264 30,721 109,249
-------- -------- -------- -------- --------
Loss from continuing operations before
income taxes and minority interest (30,934) (18,849) (118,055) (42,349) (210,187)
Provision (benefit) for income taxes (22) 63 716 241 998
Minority interest (138) (121) 20 45 (194)
-------- -------- -------- -------- --------
Loss from continuing operations (30,774) (18,791) (118,791) (42,635) (210,991)
Discontinued operations (6,623) (34,956) (1,010) (198) (42,787)
Extraordinary Item --- --- (8,000) --- (8,000)
-------- -------- -------- -------- --------
Net loss $ (37,397) $ (53,747) $(127,801) $ (42,833) $(261,778)
======== ======== ======== ======== ========
Earnings (loss) per share:
Continuing operations $ (1.24) $ (.75) $ (4.15) $ (1.36) $ (7.68)
Discontinued operations (.27) (1.39) (.04) (.01) (1.55)
Extraordinary item -- -- (.28) -- (.29)
-------- -------- -------- -------- --------
Net loss $ (1.51) $ (2.14) $ (4.47) $ (1.37) $ (9.52)
======== ======== ======== ======== ========
</TABLE>
<TABLE>
<CAPTION>
1993 By Quarter
-------------------------------------------------------------------------
First Second Third Fourth Year*
--------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
Sales $ 150,540 $ 155,007 $ 127,706 $ 142,696 $ 575,949
Cost of sales 112,423 113,296 87,897 101,770 415,386
-------- -------- -------- -------- --------
Gross profit 38,117 41,711 39,809 40,926 160,563
-------- -------- -------- -------- --------
Income from continuing operations before
income taxes and minority interest 760 1,893 936 1,283 4,872
Provision (benefit) for income taxes 121 312 181 (546) 68
Minority interest 83 14 (16) (60) 21
-------- -------- -------- -------- --------
Income from continuing operations 556 1,567 771 1,889 4,783
Discontinued Operations (177) 1,408 1,219 (12,788) (10,338)
-------- -------- -------- -------- --------
Net income (loss) $ 379 $ 2,975 $ 1,990 $ (10,899) $ (5,555)
======== ======== ======== ======== ========
Earnings (loss) per share:
Continuing operations $ .03 $ .06 $ .03 $ .08 $ .20
Discontinued operations (.01) .06 .05 (.52) (.42)
-------- -------- -------- -------- --------
Net income (loss) $ .02 $ .12 $ .08 $ (.44) $ (.22)
======== ======== ======== ======== ========
</TABLE>
_________________________
*Earnings (loss) per share for the full year is not necessarily the sum of the
four quarters due to different average shares outstanding for each discrete
period.
ITEM 9.CHANGES IN AND DISAGREEMENTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE
Not applicable.
[The remainder of this page left blank intentionally.]
Part III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF AWT; COMPLIANCE
WITH SECTION 16(a) OF THE EXCHANGE ACT
Set forth below are the names, ages and principal occupations of the
directors and executive officers of AWT:
NAME AGE POSITION
---- --- --------
Claudio Elia............ 51 Chairman of the Board of Directors and
Chief Executive Officer
Arthur L. Glenn......... 60 President and Chief Operating Officer
Douglas A. Satzger...... 43 Senior Vice President, General Counsel
and Secretary
Robert S. Volland....... 53 Vice President and Chief Administrative
Officer
Alain Brunais........... 46 Vice President, Chief Financial Officer
and Treasurer
Christian Mavet......... 42 Vice President, Organization and
Corporate Development
Robert H. Cardell....... 43 President and Chief Executive Officer,
Research-Cottrell International
Donald A. Deieso........ 45 President and Chief Executive Officer,
Metcalf & Eddy,Inc.
George C. Mammola....... 53 President and Chief Executive Officer,
Research-Cottrell, Inc.
Michael M. Stump........ 55 President and Chief Executive Officer,
Professional Services Group, Inc.
Douglas M. Costle....... 55 Director
Jacques-Henri David..... 50 Director
Nicholas DeBenedictis... 48 Director
Jean-Dominique Deschamps 56 Director
Carol Lynn Green........ 48 Director
William Kriegel......... 49 Director
John W. Morris.......... 73 Director
Enrique F. Senior....... 51 Director
Mr. Elia was elected Chairman and Chief Executive Officer of AWT on June
14, 1994. Mr. Elia has been President and Chief Executive Officer of Anjou
International Company, a subsidiary of CGE and its United States holding
company, since 1988 and a director of Anjou since March 17, 1994. In this
capacity, Mr. Elia is the representative of CGE in the United States. He also
is President and Chief Executive Officer of Montenay International
Corporation, a United States waste-to-energy company which is part of CGE's
operations in the United States. Mr. Elia is also the President and Chief
Executive Officer of Limbach Holdings, Inc., a leading American climatization
company. Mr. Elia has been designated by CGE as Chairman and Chief Executive
Officer of AWT under the Investment Agreement. Mr. Elia previously held
positions with General Electric Corporation and Boston Consulting Group.
Mr. Glenn was elected President and Chief Operating Officer of AWT in
April 1993. Prior to joining AWT, Mr. Glenn had been employed since 1958 as
an executive in various capacities with the General Electric Corporation.
From 1989 to 1992, Mr. Glenn served as Vice President and General Manager of
General Electric's communications and strategic systems division. From 1988
to 1989, he was Vice President and General Manager of General Electric's
defense systems division. From 1983 to 1988, Mr. Glenn served as General
Manager of magnetic resonance imaging, and from 1980 to 1983 as General
Manager of computed tomography, at General Electric Medical Systems.
Mr. Satzger joined AWT in June 1991 as Deputy General Counsel. He was
elected Senior Vice President, General Counsel and Secretary in July 1993.
Prior to joining AWT, Mr. Satzger was a partner in the law firm Richards &
O'Neil, New York, New York, from April 1985 to June 1991.
Mr. Volland was elected Vice President of Administration of AWT in June
1994 with oversight responsibility for real estate, facilities management,
procurement, insurance and management information systems. Mr. Volland has
over 25 years of experience in finance, administration, asset management, cost
control and organizational efficiencies. From 1973 to 1986, Mr. Volland served
as Vice President and Treasurer for Commercial Credit Company. From 1986 to
1993 he served as Vice President and Treasurer, and Vice President, Corporate
Assets, for Primerica Corp. Prior thereto, he was Senior Vice President of
Real Estate for Paine Webber.
Mr. Brunais was elected Chief Financial Officer of AWT in September
1994, and AWT's Treasurer in October 1994. Prior to joining AWT, Mr. Brunais
was responsible since 1990 for foreign investment, primarily in the United
Kingdom under the direction of the Finance Director of CGE. From 1983 to 1989
he was responsible for corporate development for Ciments Francais in the U.S.
and Canada. Prior thereto, Mr. Brunais organized a sales and services network
for Aerospatiale General Aviation line of aircraft in Europe, Africa and North
America. Mr. Brunais has been designated by CGE as Chief Financial Officer of
AWT under the Investment Agreement.
Mr. Mavet was elected Vice President, Organization and Corporate
Development in November 1994 with responsibility for overseeing the
restructuring and reorganization of AWT. In this capacity, he serves as senior
managerial liaison with CGE and coordinates and plans the exchanges between
both entities are made through the right channels. He serves as the secretary
of the Municipal Committee, created to enhance the synergies between CGE,
Metcalf & Eddy and PSG. Prior to joining AWT, Mr. Mavet served in management
positions in the French government Ministry of Finance. He was Commercial
Counselor, responsible for promoting French business in the northeast U.S. for
the French Trade Office in New York.
Dr. Cardell was elected President and Chief Executive Officer of
Research-Cottrell International in December 1994. He became the Senior Vice
President of Operations and General Manager of RCI's Air Pollution Control
Division in Branchburg, New Jersey in November 1993. Prior thereto, he served
in various capacities at Foster Wheeler Corporation, including serving as a
member of the management committee, director of services, manager of Foster
Wheeler's cost control and administration departments, and manager of staff
services.
Dr. Deieso has served as President and Chief Executive Officer of
Metcalf & Eddy, Inc. since October 1993. Prior to joining Metcalf & Eddy,
Inc., he served as President and Chief Executive Officer of RCI from 1989 to
1993. Previously, he served the New Jersey Department of Environmental
Protection as both Assistant Commissioner of Environmental Management and
Control and Director of the Division of Environmental Quality from 1985 to
1989. Prior thereto, he served as Chief Chemical Engineer and Manager of
Environmental Engineering for Consolidated Edison Company of New York. Prior
thereto, he served as director of the U.S. EPA Region II Superfund program.
Mr. Mammola has been the President and Chief Executive Officer of RCI
since December 1994. From 1992 to 1994, he served in various senior
management positions for RCI. From 1989 to 1992 he served as Executive Vice
President and General Manager of REECO. Prior to joining REECO, Mr. Mammola
served as executive Vice President of PPS Inc., an industrial distributor of
fluid and air handling systems. Prior to this, he served in various positions
for Interpace Corporation, a manufacturer and provider of products and services
domestically and internationally to the water and wastewater and utility
industries.
Mr. Stump has been President and Chief Executive Officer of Professional
Services Group for more than the past five years. Mr. Stump has more than 30
years of management and operations experience in municipal services,
consulting engineering and computer systems. Mr. Stump oversees the
management and long-range direction of PSG, which provides operations and
maintenance services to municipalities throughout the country. From 1983 to
1986, he was President of an operations and maintenance firm. From 1980 to
1983, Mr. Stump served as treasurer of an international environmental
engineering firm. Prior thereto, he was President and Chief Executive Officer
of a consulting firm and served as senior vice president of a firm providing
environmental consulting and engineering services to municipalities and
industry.
Mr. Costle, Administrator of the EPA from 1976 to 1981, became a
director of AWT in August 1988. Mr. Costle also served as a director of
Metcalf & Eddy from 1988 to October 1991. He is presently a Distinguished
Senior Fellow of the Institute for Sustainable Communities at Vermont Law
School. He served as dean of Vermont Law School from July 1987 to July 1991.
Prior thereto, Mr. Costle was counsel to the law firms of Wald, Harkrader &
Ross in Washington, D.C. and Updike, Kelly and Spellacy in Hartford,
Connecticut. Mr. Costle also serves as a director of Clean Sites, Inc., an
independent non-profit corporation established to help accelerate the clean-up
of abandoned hazardous waste sites in the United States.
Mr. David was elected as a director of AWT on June 14, 1994. Mr. David
is Director General of CGE since 1992. Mr. David was formerly Chairman and
CEO of Banque Stern from 1989 to 1992. Mr. David is on the Board of Directors
of several French and non-French companies (among others, CertainTeed and
Saint-Gobain Corp. in the United States, Eridania, Beghin-Say and Banque Worms
in France). He is also Vice-Chairman of the Economic Commission of the French
Chief Executives' Board and Chairman of that Board's forecasting institute.
Mr. David has been designated by CGE as a Director of AWT under the Investment
Agreement.
Mr. DeBenedictis was elected as a director of AWT on June 14, 1994. Mr.
DeBenedictis is Chairman of Philadelphia Suburban Corporation ("PSC") (the
parent company of Philadelphia Suburban Water Company, one of America's
leading investor-owned water utilities), since May 1993. Mr. DeBenedictis
joined PSC in July 1992 as its President and Chief Executive Officer, and from
July 1992 to May 1993 also served as Chairman of PSC's principal subsidiary,
Philadelphia Suburban Water Company. From 1989 to 1992, Mr. DeBenedictis was
Senior Vice President of Corporate and Public Affairs for Philadelphia
Electric Company. Prior thereto, he served as President of the Greater
Philadelphia Chamber of Commerce. Mr. DeBenedictis also formerly served as
Secretary for the Department of Environmental Resources (1983 to 1986) and
Director of the Office of Economic Development (1981 to 1983) for the
Commonwealth of Pennsylvania. He serves on the Board of Directors of the PNC
East Bank Advisory Board, the Greater Philadelphia Chamber of Commerce, the
Philadelphia Convention and Visitors Bureau, the Pennsylvania Environmental
Council, and The Children's Hospital of Philadelphia. Mr. DeBenedictis is
also a member of the Board of Advisors of the School of Business
Administration of Drexel University. Mr. DeBenedictis has been designated by
CGE as a Director of AWT under the Investment Agreement.
Mr. Deschamps was elected as a director of AWT on June 14, 1994. Mr.
Deschamps is Adjunct Director General and Executive Vice President of CGE and
Executive Vice President since 1989. Mr. Deschamps is also Chairman and a
Director of PSG and Polymetrics, Inc. in the United States. He is also a
Director of Compagnie de l'Eau et de l'Ozone, Compagnie des Eaux de Paris,
Compagnie Fermiere de Services Publics, Societe des Eaux de Versailles et de
St. Cloud, Societe Guyanaise des Eaux, Societe d'Exploitation des Eaux de
Guinee, Compagnie Generale de Bruxelles, Anjou International Company, Hinckley
& Schmitt and Kruger Systems AS. Mr. Deschamps has been designated by CGE as
a Director of AWT under the Investment Agreement.
Ms. Green was elected as a director of AWT on June 14, 1994. Ms. Green
is a Partner in the Washington, DC law office of Bryan Cave where she has
practiced environmental law since 1986. Prior thereto, Ms. Green served at
the United States Department of Justice from 1980 to 1986 as the first
Assistant Chief of the Environmental Enforcement Section.
Mr. Kriegel was elected as a director of AWT on June 14, 1994. Mr.
Kriegel is Chairman of the Board, President, Chief Executive Officer and a
Director of Sithe Energies, Inc. and all of its subsidiaries since 1981.
Prior to coming to the United States in 1984, Mr. Kriegel co-founded an
unaffiliated French energy company that within three years of its formation in
1980 became France's largest privately-owned company engaged in the
development of small hydro-electric projects. In 1978, he co-founded
S.I.I.F., an unaffiliated company specializing in the purchase and
rehabilitation of residential buildings and historical properties in France.
Mr. Kriegel has been designated by CGE as a Director of AWT under the
Investment Agreement.
General Morris became a director of AWT in June 1992. From 1988 to
October 1992, General Morris served as a director of Metcalf & Eddy Companies
Inc. General Morris has been President of JW Morris Ltd., an engineering
consulting firm, for more than the past five years. In addition, he presently
serves as President of the National Waterways Foundation, Chairman of the
Water Resources Congress and Chairman of the Environmental Effects Committee
of the U.S. Committee on Large Dams. From 1986 to 1987 he served as President
and Chairman of the Engineering Group of Planning Research Corporations.
General Morris served as the Chief of Engineers, U.S. Army Corps of Engineers
from 1976 to 1980.
Mr. Senior has been a Managing Director of Allen & Company, an
investment banking firm, for more than the past five years. Mr. Senior became
a director of AWT in October 1987 and also serves as a director of dick clark
productions, inc.
* * * *
Directors are elected annually and executive officers hold office for
such terms as may be determined by the Board of Directors. The Board of
Directors of AWT has an Executive Committee which consists of Messrs. Elia,
Senior and David, an Audit Committee which consists of Messrs. DeBenedictis,
Costle and Morris and a Compensation and Stock Option Committee consisting of
Messrs. David, Senior and Morris and Ms. Green.
DIRECTORS' COMPENSATION
Directors who are not employees of AWT or any of its affiliated
companies receive an annual fee of $18,000 for service on the Board of
Directors and an additional $7,500 per annum for service on each Committee
thereof. In addition, directors are reimbursed for out-of-pocket expenses of
attending Board and Committee meetings.
COMPLIANCE WITH SECTION 16(a) OF THE SECURITIES EXCHANGE ACT OF 1934
Based solely upon a review of Forms 3 and 4 and amendments thereto
furnished to AWT under Rule 16a-3(d) of the Exchange Act during the fiscal
year ended October 31, 1994 and Form 5 and amendments thereto furnished to AWT
with respect to the fiscal year ended October 31, 1994, the Company has
identified the following persons as having filed late reports under Section
16(a) of the Securities Exchange Act of 1934: Robert S. Volland filed one
late report on Form 3 reporting his election as an executive officer of AWT
for the month of June 1994; CGE filed one late report on Form 4 with respect
to the acquisition of 222,500 shares of Class A Common Stock in the month of
October 1994.
ITEM 11. EXECUTIVE COMPENSATION AND OTHER INFORMATION
SUMMARY COMPENSATION TABLE
The following table shows, for the fiscal years ended October 31, 1994,
1993 and 1992, the cash compensation paid by AWT, as well as certain other
compensation paid or accrued for those years, to each of the six most highly
compensated executive officers of AWT in all capacities in which they served.
Annual Compensation Long Term Compensation
Awards
----------------------
Other
Name and Annual Restricted Securities All Other
Principal Compen- Stock Underlying Compensa-
Position Year Salary($) sation($) Award(s)($) Options(#) tion($)
Claudio Elia 1994 99,429(1) 0 20,000(2) 100,000 0
Chairman of
the Board and
Chief Executive
Officer
Eckardt C. Beck 1994 222,762 51,892(3) 0 0 106,885(4)
Former Chairman 1993 356,000 94,507(5) 0 26,000 145,389(6)
of the Board 1992 356,000 94,507 0 0 157,399
and Chief
Executive Officer
Arthur L. Glenn 1994 245,031 0 0 0 0
President and 1993 139,263(7) 0 22,000(8) 73,000 0
Chief Operating
Officer
Donald A.Deieso 1994 195,023 0 0 0 0
President and 1993 175,000 0 0 20,000 8,642(9)
Chief Executive 1992 175,000 0 0 0 11,501
Officer,Metcalf
& Eddy,Inc.
Douglas A.Satzger 1994 178,279 0 0 0 462(10)
Senior Vice 1993 153,333 0 0 15,000 465(9)
President and 1992 170,000 0 0 0 85
General Counsel
George C. Mammola 1994 184,080 0 0 0 693(10)
President and 1993 150,000 0 0 15,000 0
Chief Executive 1992 116,667 0 31,746(8) 12,500 0
Officer, Research-
Cottrell, Inc.
(1) Represents amounts paid to Mr. Elia since joining AWT on June 14, 1994.
Mr. Elia is paid a base salary of $275,000 per annum.
(2) As of October 31, 1994, Mr. Elia held 2,500 shares of restricted Class A
Common Stock, vesting over a four-year period, with an aggregate value of
$17,500. The Company's Long-Term Incentive Compensation Plan provides
that, upon a "change-in-control" of the Company (as determined by the Board
of Directors), all restrictions on these shares will lapse.
(3) "Other Annual Compensation" for Mr. Beck in fiscal 1994 includes $43,750
($6,250 per month) paid to Mr. Beck from November 1, 1993 through May 31,
1994 as a housing allowance, as well as other amounts paid to Mr. Beck for
time spent on behalf of AWT in Massachusetts and to reimburse Mr. Beck for
real estate and income taxes in Massachusetts.
(4) Includes (i) $105,578 of interest imputed to a loan made by AWT to Mr.
Beck (as more fully described below), for the period from November 1, 1993
to May 31, 1994 and (ii) a contribution of $1,307 to AWT's Thrift Plan.
(5) "Other Annual Compensation" for Mr. Beck in fiscal 1993 includes $75,000
($6,250 per month) paid to Mr. Beck as a housing allowance, as well as
other amounts paid to Mr. Beck for time spent on behalf of AWT in
Massachusetts and to reimburse Mr. Beck for real estate and income taxes in
Massachusetts.
(6) "All Other Compensation" for Mr. Beck in fiscal 1993 consists of the
following: (i) a contribution of $1,799 to AWT's Thrift Plan; (ii) a
contribution of $8,125 to AWT's Supplemental Pension Plan; and (iii)
$135,465 of interest imputed to a loan made by AWT to Mr. Beck more fully
described below.
(7) Represents amounts paid to Mr. Glenn since joining AWT on April 12, 1993.
Mr. Glenn is paid a base salary of $250,000 per annum.
(8) The restrictions on all of these shares (2,000 shares in the case of Mr.
Glenn and 1,761 shares in the case of Mr. Mammola) lapsed because the Board
of Directors of AWT determined that the consummation of the transactions
contemplated by the Investment Agreement constituted a "change-in-control"
of AWT. Thus, as of October 31, 1994, Mr. Glenn and Mr. Mammola do not
hold any restricted Class A Common Stock.
(9) "All Other Compensation" for fiscal 1993 consists of (i) $465 contributed
to AWT's Thrift Plan on behalf of Mr. Satzger and (ii) $8,642 contributed
to AWT's Supplemental Pension Plan on behalf of Mr. Deieso.
(10) "All Other Compensation" for Messrs. Satzger and Mammola in fiscal 1994
consists of (i) $462 contributed to AWT's Thrift Plan on behalf of Mr.
Satzger and (ii) $693 contributed to AWT's Thrift Plan on behalf of Mr.
Mammola.
EMPLOYMENT CONTRACTS AND TERMINATION AND CHANGE-IN-CONTROL ARRANGEMENTS
Employment Contract with Mr. Beck
The following arrangements were in effect when Mr. Beck was serving as
AWT's Chairman of the Board of Directors and Chief Executive Officer. His
employment by the Company was terminated on June 14, 1994 as contemplated by
the Investment Agreement. The following arrangements have been superseded by
the Termination Agreement (as defined below) as more fully described below in
Part III, ITEM 11 - EXECUTIVE COMPENSATION AND OTHER INFORMATION --
"Employment Contracts and Termination and Change-in-Control Arrangements --
Termination Agreement."
On August 20, 1990, the Board of Directors of AWT made a one-year,
interest-free, unsecured loan of $2,300,000 to Mr. Beck. This loan was made
to Mr. Beck so that he could satisfy certain personal financial obligations
without having to sell a substantial portion of his equity investment in the
Company. AWT does not currently intend to make loans to any members of
management with terms similar to those of Mr. Beck's loan. This loan will be
forgiven over the next five years as described below.
The Company and Mr. Beck entered into an Employment Agreement, dated as
of August 20, 1991, which, among other things, extended Mr. Beck's employment
term with AWT for a five-year term (the "Employment Agreement"). Pursuant to
the Employment Agreement, Mr. Beck served as AWT's Chairman of the Board of
Directors and Chief Executive Officer and a director and officer of AWT's
subsidiaries until his employment with the Company was terminated on June 14,
1994. AWT agreed in the Employment Agreement that, on each anniversary of the
date of the Employment Agreement, if Mr. Beck remained an employee of AWT
serving in the capacities of Chairman of the Board and Chief Executive Officer
at that time, AWT would forgive one-fifth of the unsecured, non-interest
bearing loan to Mr. Beck in the original principal amount of $2,300,000 to the
extent that all or any portion of the loan remained outstanding. AWT further
agreed to forgive such loan in its entirety in the event of Mr. Beck's death,
termination for disability (as defined), termination by AWT other than for
Cause (as defined), termination by Mr. Beck in the event of a material breach
of the Employment Agreement by AWT (such event is defined as "Good Reason"),
or upon a change of control (as defined) of AWT. In addition, if Mr. Beck's
employment was terminated by Mr. Beck for "Good Reason," or by AWT for any
reason other than for "Cause," or by reason of Mr. Beck's death or disability,
Mr. Beck would be entitled to payment of all "Accrued Benefits" (as defined)
through the date of termination, and to payment of all salary payments that
Mr. Beck would have been entitled to had his employment not been so
terminated. Under the terms of the Employment Agreement, Mr. Beck was entitled
to an annual salary, subject to cost-of-living adjustments, of $356,000 for
such services, participation in stock option and other bonus and incentive
programs available to other senior executives, as well as a housing allowance
of $6,250 per month and reimbursement for certain other living and associated
expenses.
In each of 1992 and 1993, due to AWT's financial performance, Mr. Beck
decided to waive the requirement that a portion of the loan be forgiven as
scheduled. As a result, the Executive Committee twice amended the Employment
Agreement to reflect this fact and added a sixth, and then a seventh year, to
the employment term so that Mr. Beck's Employment Agreement with AWT would
expire on August 20, 1998.
In anticipation of the consummation of the transactions contemplated by
the Investment Agreement, on March 17, 1994, the Company and Mr. Beck entered
into an amendment to the Employment Agreement which provided certain severance
payments to Mr. Beck by the Company at the time of the termination of Mr.
Beck's employment with the Company as contemplated by the Investment
Agreement, in addition to all other payments and benefits provided for in the
Employment Agreement. Mr. Beck and the Company also mutually acknowledged
that, effective upon the date of closing of the transactions contemplated by
the Investment Agreement, Mr. Beck's employment with AWT would cease and that
such cessation would be treated as termination of his employment other than
for Cause, pursuant to the Employment Agreement.
Termination Agreement
Notwithstanding the foregoing, subsequent to the termination of Mr.
Beck's employment with the Company as of June 14, 1994 as a result of the
consummation of the transactions contemplated by the Investment Agreement, the
Company and Mr. Beck have entered into an agreement dated November 21, 1994
(the "Termination Agreement") relating to all aspects of their relationship
following such termination of employment, which supersedes all rights and
obligations outstanding pursuant to the Employment Agreement, as amended. The
Termination Agreement provides, among other things, that: (a) Mr. Beck agrees
not to compete with the Company during the period beginning on June 14, 1994
and ending on December 31, 1999, (b) the Company agrees to pay Mr. Beck
$24,800 per month during the period beginning on January 1, 1995 and ending on
December 31, 1999 (the "Term"), (c) during the Term, the Company agrees to
reimburse Mr. Beck up to $10,000 per twelve-month period for the purchase of
health and medical insurance for him and his spouse, which obligation shall
terminate immediately upon Mr. Beck's becoming employed by an entity that
makes medical insurance available to its employees, (d) on January 1, 1995 and
on January 1 of each of the four succeeding years, the Company agrees to
forgive approximately one-fifth of the unsecured, non-interest-bearing loan to
Mr. Beck outstanding as of January 1, 1995 unless Mr. Beck breaches his
obligations under the Termination Agreement, the Consulting Agreement (as
defined below) and the Releases (as defined below), (e) the Company agrees to
pay Mr. Beck $330,000, which amount is intended to defray in whole or in part
various withholding taxes in connection with the Termination Agreement, (f)
the Company agrees to deliver to Mr. Beck a preferred stock certificate
representing ownership of a membership interest in Metedeconk National Golf
Club, Inc. and Mr. Beck agrees to pay to the Company $50,000 for such
transfer, and (g) all stock options held by Mr. Beck at the time of the
termination of his employment are cancelled. In addition, the Company and Mr.
Beck entered into a consulting agreement (the "Consulting Agreement") on the
same day, in which Mr. Beck agrees to make himself available throughout the
Term to serve, and the Company agrees to engage Mr. Beck, as a consultant to
the Company in connection with any litigation or claims in which the Company
or any of its affiliates is involved and in which Mr. Beck's testimony or
assistance is deemed necessary by the Company. The Company will pay Mr. Beck
$8,333 per month in consideration of his agreement to act as a consultant. As
a condition to the effectiveness of the Termination Agreement, Mr. Beck
executed certain releases (the "Releases") in which he agrees, among other
things, to indemnify the Company for certain litigation-related expenses
incurred by it on behalf of Mr. Beck.
Retention Agreements
The Company also entered into agreements in March 1994 (the "Retention
Agreements") with Messrs. Glenn, Satzger, Mammola and Deieso, and with certain
other executive officers, which provide for each executive's employment by the
Company for an initial period of two years beginning upon the occurrence of a
Change-in-Control of the Company (as defined). The Retention Agreements
provide for an annual salary of $250,000, $200,000, 210,000 and $210,000 for
Messrs. Glenn, Satzger, Mammola and Deieso, respectively. Salaries under the
agreements may be increased by the Board of Directors, in its sole discretion,
taking into account the earnings and overall productivity of the Company,
available resources, the performance of the executive and such other factors
as it deems relevant. In addition, the agreements with Mr. Deieso and certain
other executives provide that the executive will be eligible to receive a
bonus of up to $30,000 in each year of the initial two-year period if, at any
time during the initial two-year term, certain operating targets are met. If,
during the initial two-year term, the Company terminates the executive's
employment other than for death, Disability (as defined), or Justifiable Cause
(as defined) or the executive terminates his employment for Good Reason (as
defined), the executive will be entitled to receive an amount equal to the
balance of the salary due to him for the remainder of the initial two-year
term. In addition, in that event, the executive will be entitled to exercise
any options which were exercisable on the date of termination until 90 days
after the end of the initial two-year term of the agreement or, if earlier, the
date of termination of the option. The consummation of the transactions
contemplated by the Investment Agreement constituted a Change-in-Control as
defined in the Retention Agreements.
Options
AWT's Long-Term Incentive Compensation Plan provides that, upon a
"change-in-control" of the Company (as determined by the Board of Directors),
any outstanding options not theretofore fully exercisable shall immediately
become exercisable in their entirety. The Board of Directors has determined
that the consummation of the transactions contemplated by the Investment
Agreement constituted a "change-in-control" for purposes of such plan.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
During the period from November 1, 1993 to June 14, 1994, the
Compensation and Stock Option Committee (the "Compensation Committee") of the
Board of Directors consisted of Mr. Costle and Mr. Richard M. Dowd. Mr. Dowd
was a Director of the Company until December 1994. Since June 14, 1994,
Messrs. David, Senior and Morris and Ms. Green have been serving on the
Compensation Committee. Mr. David is Director General of CGE. Mr. Senior is
a Managing Director of Allen & Company, which has performed investment banking
and other services for the Company from time to time. Allen & Company served
as a financial advisor to the Company in connection with the transactions
contemplated by the Investment Agreement. Ms. Green is a partner at the law
firm of Bryan Cave, which has performed various legal services for the Company
from time to time.
SUPPLEMENTAL PENSION PLAN
The following table shows the estimated annual benefits payable upon
retirement to participants in AWT's Supplemental Pension Plan.
Estimated Annual Retirement Benefits
Years of Service
_____________________________________________
Bonus
Remuneration 15 20 25 30 35
------------
$25,000 $5,625 $7,500 $9,375 $11,250 $13,125
50,000 11,250 15,000 18,750 22,500 26,250
75,000 16,875 22,500 28,125 33,750 39,375
100,000 22,500 30,000 37,500 45,000 52,500
125,000 28,125 37,500 46,875 56,250 65,625
Certain officers and key employees of whom one is named in the Summary
Compensation Table, participate in an unfunded supplemental pension plan which
provides additional annual retirement benefits equal to 1.5% of the average
of the participant's final five bonuses multiplied by the participant's years
of service, up to a maximum of 35 years. No separate accounts are maintained
and no amounts are vested until a participant reaches retirement in the employ
of AWT. Mr. Deieso, who is named in the Summary Compensation Table, has been
credited with 5 years of service. The last bonus paid to Mr. Deieso was for
the fiscal year 1990. Therefore, no amount of cash compensation in the
Summary Compensation Table is used for determining benefit accruals for Mr.
Deieso under the Supplemental Pension Plan. The benefit amounts set forth in
the Table above are not subject to reduction for social security benefits or
for other offsets.
OPTION GRANTS IN LAST FISCAL YEAR
The following table contains information regarding the grant of stock
options under AWT's Long-Term Incentive Compensation Plan to the six named
executive officers of AWT during fiscal 1994. The potential realizable values
that would exist for the respective options are based on assumed rates of
annual compound stock price appreciation of 5% and 10% from the date of grant
over the full term of the option. Actual gains, if any, on stock options,
exercises and stock holdings are dependent on the future performance of the
Class A Common Stock.
Potential Realizable
Value at Assumed
Annual Rates of Stock
Price Appreciation for
Individual Grants Option Term
--------------------------------------- ---------------------
% of
Total
Number of Options
Securities Granted
Underlying to
Options Employees Exercise
Granted In Fiscal Price Expiration
Name (#)(1) Year ($/Sh)(2) Date 5%($) 10%($)
- ----------- -------- ---------- --------- ----------- ------ ----------
Claudio Elia 100,000 17.85% $8.00 8/19/2004 503,116 1,274,994
Eckardt C. Beck 0
Arthur L. Glenn 0
Donald A. Deieso 0
Douglas A. Satzger 0
George C. Mammola 0
(1) Options granted in fiscal 1994 vest annually in four equal installments
commencing one year from the date of grant. Under the terms of the
Company's Long-Term Incentive Compensation Plan, the Compensation
Committee retains discretion, subject to plan limits, to modify the
terms of outstanding options and to reprice the options. The options
were granted for a term of 10 years, subject to earlier termination in
certain events related to termination of employment. The Long-Term
Incentive Compensation Plan provides that, upon a "change-in-control" of
the Company (as determined by the Board of Directors), any outstanding
options not theretofore fully exercisable shall immediately become
exercisable in their entirety.
(2) The exercise price may be paid in cash, in shares of Class A Common
Stock valued at their fair market value on the date of exercise or
pursuant to a cashless exercise procedure under which the optionee
provides irrevocable instructions to a brokerage firm to sell the
purchased shares and to remit to AWT, out of the sale proceeds, an
amount equal to the exercise price plus all applicable withholding
taxes, if any.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR, AND FY-END OPTION VALUES
The following table sets forth information with respect to the named
executives concerning unexercised options, held as of October 31, 1994. No
options were exercised during fiscal 1994 by any of the named executive
officers.
Number of Securities Underlying Value of Unexercised
Unexercised Options at In-the-Money Options
FY-End at FY-End(1)
------------------------------- --------------------------
Exercisable Unexercisable Exercisable Unexercisable
Name (#) (#) ($) ($)
- ------------------- ---------- ------------- ----------- -------------
Claudio Elia(3) 0 100,000 N/A 0(2)
Eckardt C. Beck(4) 0 0 N/A N/A
Arthur L. Glenn(5) 73,000 0 0(2) N/A
Donald A. Deieso(6) 85,000 0 0(2) N/A
Douglas A. Satzger(7) 49,000 0 0(2) N/A
George C. Mammola(8) 37,500 0 0(2) N/A
- ------------------
(1) The value of unexercised in-the-money options at fiscal year end assumes a
fair market value for the Class A Common Stock of $7.00, the closing sale
price per share of the Class A Common as reported on the American Stock
Exchange Composite Tape for October 31, 1994.
(2) The exercisable options held by Messrs. Glenn, Deieso, Satzger and Mammola
and the unexercisable options held by Mr. Elia were not in-the-money as of
October 31, 1994.
(3) The exercise price of the options held by Mr. Elia is $8.00 per share,
which was the fair market value of AWT's Common Stock on the date of grant.
(4) Pursuant to the Termination Agreement, all stock options held by Mr. Beck
at the time of the termination of his employment were cancelled.
(5) The exercise price of the options held by Mr. Glenn is (i) $11.00 per
share in the case of his option to purchase 50,000 shares granted in April
1993 or (ii) $11.75 per share in the case of his option to purchase 23,000
shares granted in August 1993, in each case the fair market value of AWT's
Common Stock on the date of grant.
(6) The exercise price of the options held by Mr. Deieso is (i) $17.00 per
share in the case of his option to purchase 30,000 shares granted in August
1989, (ii) $19.125 per share in the case of his option to purchase 10,000
shares granted in December 1989, (iii) $18.50 per share in the case of his
option to purchase 25,000 shares granted in December 1991 or (iv) $11.75
per share in the case of his option to purchase 20,000 shares granted in
August 1993, in each case the fair market value of AWT's Common Stock on
the date of grant.
(7) The exercise price of the options held by Mr. Satzger is (i) $17.125 per
share in the case of his option to purchase 24,000 shares granted in June
1991, (ii) $18.50 per share in the case of his option to purchase 10,000
shares granted in December 1991 or (iii) $11.75 per share in the case of
his option to purchase 15,000 shares granted in August 1993, in each case
the fair market value of AWT's Common Stock on the date of grant.
(8) The exercise price of the options held by Mr. Mammola is (i) $23.00 per
share in the case of his option to purchase 10,000 shares granted in
February 1991, (ii) $18.50 per share in the case of his option to purchase
15,000 shares granted in August 1993, in each case the fair market value of
AWT's Common Stock on the date of grant.
REPORT OF THE COMPENSATION AND STOCK OPTION COMMITTEE
OF THE BOARD OF DIRECTORS
Decisions on compensation of the Company's executives generally are made by
the four-member Compensation and Stock Option Committee of the Board of
Directors (the "Compensation Committee" or "Committee"). In connection with
the transactions contemplated by the Investment Agreement, the Company changed
the composition of its Board of Directors and, as a result, the composition of
the Compensation Committee also changed. Prior to June 14, 1994, the
Compensation Committee consisted of Messrs. Costle and Dowd. After June 14,
1994, the Compensation Committee consists of Messrs. David, Senior and Morris
and Ms. Green. Each member of the Compensation Committee is a non-employee
director. The newly constituted Compensation Committee, among other things,
approved (i) Mr. Elia's salary and option and restricted stock awards and (ii)
Mr. Beck's Termination Agreement and related agreements.
Compensation Policy for Executive Officers
Under the supervision of the Compensation Committee, the Company has
developed and implemented compensation policies and programs that seek to
retain and motivate employees of the Company whose performance contributes to
the Company's goal of maximizing shareholder value in an industry that
continues to experience sluggish growth, overcapacity, intense competition and
marginal profitability. The Compensation Committee is of the opinion that
managing through a depressed market, such as the environmental markets of the
last few years, requires dedicated employees who can keep the Company on track
and position it for future competitive advantage. Historically, the Company
has sought to combine salaries with stock option awards, restricted stock
awards and, when appropriate, selected cash bonuses to provide a balanced
compensation package for its executives. The balance established by the
Committee is designed to reward past performance, retain key employees and
encourage future performance. Under this structure, long-term incentives are
based upon the value of the Company's Class A Common Stock in order to more
closely align executives' interests with those of shareholders. Compensation
decisions are made by the Compensation Committee after reviewing
recommendations prepared by the Company's Chief Executive Officer, with the
assistance of other Company personnel.
In approving and establishing compensation for the Company's executives for
fiscal 1994, several factors are considered by the Compensation Committee.
Performance criteria include individual performance, overall Company
performance (based on improvement in revenues, backlog and earnings) versus
that of its competitors and performance of the price of the Company's Class A
Common Stock in comparison to prior levels and to the relative stock prices of
its competitors. Emphasis is placed upon the Committee's subjective
assessment of an individual's integrity, loyalty and competence in his or her
areas of responsibility. When evaluating the foregoing performance criteria
in setting executive compensation, the Committee gives greatest weight to
those factors it believes have or will contribute the most towards maximizing
shareholder value and increasing the Company's financial viability. The
factors that contribute the most towards these goals vary depending on the
state of the environmental services industry in which the Company operates.
The Compensation Committee, however, recognizes that fiscal 1994 was a very
difficult year for the Company, and accordingly the factors noted above are
those the Committee believes will be most likley to contribute to
maximizing shareholder value and increasing the Company's financial
stability.
Messrs. Glenn, Deieso, Satzger and Mammola received salary increases
during in fiscal 1994 in connection with their entering into the Retention
Agreements and recognition of these individuals' past contributions and
their significant efforts on behalf of the Company in preserving its
businesses. As further described under Part III, ITEM 11 -- EXECUTIVE
COMPENSATION AND OTHER INFORMATION -- "Employment Contracts and Termination
and Change-in-Control Arrangements -- Retention Agreements", these
Agreements were designed to retain the services of Messrs. Glenn, Deieso,
Satzger and Mammola during and after the transactions contemplated by the
Investment Agreement between the Company and CGE.
Discussion of 1994 Compensation for the Chairman and Executive Officer
The employment arrangement with Mr. Beck, the former Chairman and Chief
Executive Officer of the Company, was terminated on June 14, 1994 as a result
of the consummation of the transactions contemplated by the Investment
Agreement. The Termination Agreement which includes the provisions for the
severance payments to Mr. Beck was approved by the Compensation Committee.
For the description of the Termination Agreement, see Part III, ITEM 11 --
EXECUTIVE COMPENSATION AND OTHER INFORMATION -- "Employment Contracts and
Termination and Change in Control Arrangements -- Termination Agreement."
In considering the compensation for Mr. Elia, the Chairman and Executive
Officer since June 14, 1994, the Compensation Committee established his base
salary level in accordance with the criteria described above.
In addition to regular salary payments to Mr. Elia, the Compensation
Committee granted stock options and restricted stock awards to Mr. Elia in
fiscal 1994 as an inducement to hire and as an incentive to future
performance. In deciding to make these awards, the Compensation Committee's
primary consideration was to provide a strong incentive to Mr. Elia to improve
the Company's performance in a manner that will have a positive effect on the
market value of the Company's Class A Common Stock.
COMPENSATION AND STOCK OPTION COMMITTEE
Jacques-Henri David
Carol Lynn Green
John W. Morris
Enrique F. Senior
[The remainder of this page left blank intentionally.]
STOCK PERFORMANCE GRAPH (ART)
AIR & WATER TECHNOLOGIES CORPORATION
Data Points on Stock Performance Graph
AWT S&P Fidelity
--- ---- --------
10/89 100 100 100
10/90 101 93 93
10/91 124 124 105
10/92 75 136 101
10/93 80 156 109
10/94 41 162 100
The above graph shows a comparison of the cumulative total return for the
period from November 1, 1989 through October 31, 1994, in (i) the Company's
Class A Common Stock, (ii) the S&P 500 Composite Stock Price Index, and (iii)
the Fidelity Select Environmental Services Fund. The stock price performance
shown on the graph above is not necessarily indicative of future price
performance.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
(a) The following table sets forth information as of December 30, 1994
(unless otherwise noted in the notes following the table), as to the
beneficial ownership of AWT's capital stock by (i) each person owning
beneficially more than five percent of the outstanding shares of its Class A
Common Stock, (ii) each director of AWT and (iii) all officers and directors
of AWT as a group. The persons named in the table have sole voting and
dispositive power with respect to all shares of Class A Common Stock unless
otherwise noted in the notes following the table.
Number of
Shares of Percent of
Class A Class A
Name of Person or Group Common Stock Common Stock
- ----------------------- ------------ ------------
Douglas M. Costle(1)............................ 43,467 *
Jacques-Henri David(2).......................... 18,141,975 49.3
Nicholas DeBenedictis........................... 0 *
Jean-Dominique Deschamps(2)..................... 18,141,975 49.3
Claudio Elia(3)................................. 18,144,975 49.3
Carol L. Green.................................. 0 *
William Kriegel................................. 0 *
John W. Morris.................................. 3,079 *
Enrique Senior(4)............................... 1,906,011 6.0
Donald A. Deieso................................ 85,500(5) *
Arthur L. Glenn................................. 107,000(6) *
George C. Mammola............................... 37,500(7) *
Douglas A. Satzger.............................. 51,000(8) *
Allen & Company Incorporated.................... 1,367,367 4.3
711 Fifth Avenue
New York, New York 10022
Compagnie Generale des Eaux(9).................. 18,141,975 49.3
52 Rue d'Anjou
75384 Paris Cedex 08
France
State of Wisconsin Investment Board............. 3,059,475 9.5
P.O. Box 7842
Madison, Wisconsin 53207
The Capital Group, Inc.......................... 2,834,700 8.8
333 South Hope Street
Los Angeles, California 90071
Brinson Partners
3 First National Plaza
Chicago, Illinois 60670....................... 2,055,200(10) 6.4
All directors and officers as a group
(18 persons)(11)(12).......................... 20,395,932 55.0
_____________
*Less than 1% ownership
(1) Includes 8,939 shares which may be acquired within 60 days of the date
of the table.
(2) All of these shares of Class A Common Stock (including the shares of
5 1/2 Series A Convertible Exchangeable Preferred Stock (the "Preferred
Stock") convertible into such shares) are beneficially owned by CGE,
with respect to which Messrs. David and Deschamps disclaim beneficial
ownership. Messrs. David and Deschamps are Director General and
Executive Vice President of CGE, respectively.
(3) Includes 18,141,975 shares of Class A Common Stock (including the
shares of the Preferred Stock convertible into such shares)
beneficially owned by CGE, with respect to which shares Mr. Elia
disclaims beneficial ownership. Mr. Elia is President and Chief
Executive Officer of Anjou International Company, a subsidiary of CGE.
(4) Includes (i) 125,776 shares of Class A Common Stock owned by Mr.
Senior's spouse, (ii) 50,309 shares of Class A Common Stock owned by a
trust for his minor children as to which shares Mr. Senior disclaims
beneficial ownership and (iii) 1,367,367 shares of Class A Common
Stock owned by Allen & Company, of which Mr. Senior is a Managing
Director, as to which shares Mr. Senior disclaims beneficial
ownership.
(5) Includes 85,000 shares which may be acquired within 60 days of the
date of the table.
(6) Includes 73,000 shares which may be acquired within 60 days of the
date of the table.
(7) Represents 37,500 shares which may be acquired within 60 days of the
date of the table.
(8) Includes 49,000 shares which may be acquired within 60 days of the
date of the table.
(9) Includes 4,800,000 shares of Class A Common Stock underlying the
1,200,000 shares of the Preferred Stock beneficially owned by CGE.
CGE owns all of the outstanding shares of the Preferred Stock.
(10) Based on the information as of December 31, 1993 as set forth in the
Schedule 13G filed by Brinson Partners with the Securities and
Exchange Commission on February 14, 1994.
(11) Includes shares of Class A Common Stock held by Allen & Company and CGE.
(12) Includes 4,995,439 shares which may be acquired within 60 days of the
date of the table.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
On June 14, 1994, the stockholders of AWT approved the issuance of
Company securities pursuant to an Investment Agreement dated as of March 30,
1994 (the "Investment Agreement"), among AWT, CGE, and Anjou pursuant to
which, among other things, AWT (i) issued to CGE 1,200,000 shares of a newly
designated series of Preferred Stock, designated as 5 1/2% Series A
Convertible Exchangeable Preferred Stock, convertible into 4,800,000 shares of
Class A Common Stock, for cash consideration of $60,000,000, and (ii) issued
to Anjou an aggregate of 6,701,500 shares of Class A Common Stock in
connection with the acquisition from Anjou of PSG and PSG Canada. As a
result, CGE increased its ownership interest in AWT to approximately 48% of
the total voting power of the Company's voting securities. In addition, AWT
benefitted from certain financial undertakings from CGE, including a
$125,000,000 loan from CGE and became CGE's exclusive vehicle in the United
States, its possessions and its territories for CGE's water and wastewater
management and air pollution activities. CGE also has representation on AWT's
Board of Directors and the right to designate AWT's Chief Executive Officer and
Chief Financial Officer all as further described below.
CERTAIN COVENANTS OF THE COMPANY
Representation on the Board of Directors; Management
Under the terms of the Investment Agreement, the Company has agreed that
CGE will have the right to cause the Company to include, as nominees for the
Company's Board of Directors recommended by the Board for election by the
shareholders, a number of directors (rounded down to the next whole number if
CGE owns in the aggregate less than one-half of the outstanding shares,
treating the shares of Series A Preferred Stock owned by CGE as having been
converted into shares of Class A Common Stock, or, if otherwise, rounded up to
the next whole number) that is equal to the product of the total number of
directors on the Board times a fraction the numerator of which is the
aggregate number of shares of Class A Common Stock owned by CGE and its
Affiliates (assuming conversion of the Series A Preferred Stock (or other
securities convertible into or exercisable or exchangeable for shares of Class
A Common Stock) held by CGE or its Affiliates) and the denominator of which
is the total number of shares of Class A Common Stock outstanding (assuming
conversion of the Series A Preferred Stock (or other securities convertible
into or exercisable or exchangeable for Shares of Class A Common Stock) held
by CGE or its affiliates). The Company has further agreed that CGE will have
proportionate representation on all Committees of the Board (other than any
Special Committee of Independent Directors) to the same extent as CGE is
entitled to representation on the Board of Directors. "Independent Director"
is defined for purposes of the Investment Agreement as any director who is not
an employee, agent or representative of the Company, CGE or any of their
respective Affiliates or Associates (as defined in the Investment Agreement)
and may include any person acting as outside counsel or financial advisor for
either the Company or CGE or any of their respective Affiliates or Associates.
All Independent Directors must be satisfactory to CGE.
AWT has also agreed in the Investment Agreement that CGE shall have the
right to designate the Chief Executive Officer and the Chief Financial Officer
of the Company.
At the Annual Meeting held on June 14, 1994, shareholders of the Company
elected five directors who were designated by CGE (Messrs. David, Elia,
Deschamps, DeBenedictis and Kriegel). Also in accordance with the terms of
the Investment Agreement, the Board of Directors appointed as designees of CGE
Claudio Elia as Chief Executive Officer and Alain Brunais as Chief Financial
Officer.
Registration Rights
Pursuant to the terms of the Investment Agreement, CGE and Anjou will
have the right to require on up to four occasions that the Company register
all shares of Class A Common Stock, Series A Preferred Stock or Convertible
Debt owned from time to time by CGE and its Affiliates for sale to the public
under the Securities Act (a "Demand Registration"), provided that the Company
is not obligated (i) to effect more than one Demand Registration in any
six-month period, (ii) to effect a Demand Registration for less than five
percent of the outstanding Class A Common Stock or (iii) to effect a Demand
Registration within six months of CGE or Anjou selling any shares pursuant to
a Piggyback Registration (as defined below). In addition, CGE and Anjou will
have the right to participate in registrations by the Company of its Class A
Common Stock (a "Piggyback Registration"). The Company will pay all
registration expenses on behalf of CGE and Anjou, including certain related
fees and expenses, other than underwriting fees and discounts.
Access to Books and Records
The Company has agreed that for so long as CGE beneficially owns
directly or indirectly at least 26% of the outstanding shares of Class A
Common Stock on a fully-diluted basis, CGE will have access on reasonable terms
to the books, records and employees of the Company and its subsidiaries and to
the provision by the Company of all information reasonably requested by CGE,
subject to confidentiality obligations that may be owed at the time by the
Company to third parties and to appropriate confidentiality arrangements and
requirements of law.
CERTAIN COVENANTS OF CGE
Exclusivity
CGE has agreed in the Investment Agreement that, for so long as CGE
(with its affiliates) is the largest shareholder of the Company, AWT will be
CGE's exclusive vehicle in the United States, its possessions and its
territories for CGE's water and waste water management and air pollution
activities. CGE also agreed to assist the Company in developing its water and
waste water management and air pollution activities in both Canada and Mexico,
subject to certain limitations, and CGE and the Company agreed to establish a
privileged commercial relationship for the development of air pollution
activities in Europe.
Affiliate Transactions
CGE has agreed on behalf of itself and its affiliates that any
transactions (or series of related transactions) between the Company and any
of its affiliates and CGE or any of its affiliates will be on an arm's length
basis. Any such transaction (or series of related transactions) having an
aggregate value in excess of $1,000,000 and any settlement of the existing
litigation between the Company and the Puerto Rico Aqueduct and Sewer
Authority must be approved by a majority of the Independent Directors or a
special committee thereof. The Company, CGE and Anjou have further agreed
that all claims by the Company against CGE or its Affiliates under the
Investment Agreement may be taken only by majority approval of such
Independent Directors on Special Committee.
Sales of Shares
CGE has also agreed to give the Company one day's prior written notice
of any sale of Company securities by CGE if, to the knowledge of CGE, such
sale would result in any party's beneficially owning more than 15% of the
outstanding shares of Class A Common Stock.
Letter Agreement
Pursuant to a letter agreement dated March 18, 1994 between the Company
and CGE, CGE purchased 500,000 shares of the Company's Class A Common Stock at
$10 a share for a total purchase price of $5,000,000. CGE also agreed in the
letter agreement that, subject to approval by CGE, CGE would co-sign on a
case-by-case basis with the Company applications for letters of credit with
respect to the Company's water and waste water management and air pollution
projects, which CGE acknowledged could reach or exceed the level of letters of
credit carried by the Company at March 18, 1994.
ISSUANCE OF SERIES A PREFERRED STOCK
General
Pursuant to the terms of the Investment Agreement, AWT issued to CGE,
1,200,000 shares of its 5 1/2% Series A Convertible Exchangeable Preferred
Stock, $.01 par value per share (the "Series A Preferred Stock"), convertible
into 4,800,000 shares of Class A Common Stock, for an aggregate cash purchase
price of $60,000,000. The Series A Preferred Stock is exchangeable at the
option of the Company for the Company's 5 1/2% Convertible Subordinated Notes
with a maturity of 10 years from the date of issuance of such notes (the
"Convertible Debt").
Dividends
The holders of shares of Series A Preferred Stock are entitled to
receive, when, as and if declared by the Board of Directors, out of funds
legally available therefor, cumulative dividends at an annual rate of $2.75 per
share, payable in cash quarterly in arrears in equal amounts on March 31, June
30, September 30 and December 31 of each year (each a "Dividend Payment
Date"), commencing on June 30, 1994. Dividends other than for a fully
quarterly period accrue on the basis of the actual number of days elapsed in a
365-day year. Quarterly dividends which are not paid in full in cash cumulate
without interest until declared and paid by the Board of Directors. Holders
of the Series A Preferred Stock entitled to receive all accrued dividends in
preference to and priority over dividends on the Company's Class A Common
Stock, and no distribution in respect of the Class A Common Stock and no
redemption, purchase, retirement or acquisition for value of Class A Common
Stock may occur, or money be set apart therefor, unless all dividends accrued
on the Series A Preferred Stock through the immediately preceding Dividend
Payment Date have been declared and paid. If the Series A Preferred Stock is
exchanged into Convertible Debt, the interest rate will be 5 1/2% per annum.
The Company paid approximately $970,000 to CGE as dividends on the Series A
Preferred Stock during fiscal 1994.
Liquidation Preference
In the event of any voluntary or involuntary liquidation, dissolution or
winding up of the affairs of the Company, holders of shares of Series A
Preferred Stock will be entitled to be paid out of the assets of the Company
available for distribution to its shareholders an amount in cash equal to $50
for each share outstanding, plus accrued and unpaid dividends thereon to the
date fixed for liquidation, dissolution or winding up, whether or not declared
to the date of such payment, before any payment shall be made or any assets
distributed to the holders of the Class A Common Stock. Neither a voluntary
sale, lease, or other transfer of all or substantially all of the assets of the
Company, nor a consolidation or merger of the Company with or into another
person, will be considered a liquidation, dissolution or winding up of the
Company for these purposes.
Exchange
Commencing June 30, 1997, the Series A Preferred Stock is exchangeable,
in whole and not in part, at the sole option of the Company, at any time, for
the Company's 5 1/2% Convertible Subordinated Notes, having a maturity of ten
years from the date of issuance of the Series A Preferred Stock, on not less
than 30 nor more than 60 days' prior written notice. Each share of Series A
Preferred Stock is exchangeable for $50 principal amount of Convertible Debt.
Conversion
The Series A Preferred Stock and Convertible Debt are convertible ,
in whole or in part, at the option of the holder, at any time and from time
to time, into shares of Class A Common Stock at a conversion price equal to
$12.50 per share of Class A Common Stock. The ratio at which the Series A
Preferred Stock and Convertible Debt are convertible into shares of Class A
Common Stock is subject to adjustment (using a weighted average in the case
of items (iii), (iv), (v) and (vi) below so as to preserve the fully
diluted percentage of Class A Common Stock into which the Series A
Preferred Stock and Convertible Debt are convertible) in the event of: (i)
stock dividends, stock reclassifications or recapitalizations, stock
splits, reverse splits and the like; (ii) dividends or other distributions
of cash or assets or evidence of indebtedness; (iii) dividends or other
distributions of securities or rights convertible into or exercisable for
shares of any class of common stock of the Company at a price less than the
then conversion price per common share of the Series A Preferred Stock;
(iv) issuance of shares of any class of common stock of the Company (other
than common stock issued upon conversion of the Series A Preferred Stock,
the Convertible Debt or the Company's 8% Convertible Subordinated
Debentures due May 15, 2015, or pursuant to the Company's stock option
plans or other stock related employee compensation plans approved by the
Board of Directors) at a price less than the then conversion price per
common share of the Series A Preferred Stock; (v) issuance of securities
or rights convertible into or exercisable for shares of any class of common
stock of the Company at a purchase price less than the then conversion
price per common share of the Series A Preferred Stock; and (vi) repurchase
by the Company, directly or indirectly, of shares of any class of common
stock at a price in excess of the then conversion price per common share of
the Series A Preferred Stock.
Redemption
The Series A Preferred Stock is not redeemable before June 30, 1997.
Between June 30, 1997 and June 30, 2000, the Series A Preferred Stock will be
redeemable, in whole or in part, at the option of the Company on not less than
30 or more than 60 days' prior written notice. The Company may exercise this
option during such time period only if for 20 trading days within any period
of 30 consecutive trading days, including the last trading day of such period,
the closing price of the Class A Common Stock exceeds $18.75, subject to
adjustments. After June 30, 2000, the Series A Preferred Stock will be
redeemable by the Company at any time. The same redemption provisions apply
to the Convertible Debt. The redemption price is 103.85% of the liquidation
preference, plus accrued and unpaid dividends to the date of redemption, after
June 30, 1997 and will decrease by .55% each year until it reaches 100% of the
liquidation preference, plus accrued and unpaid dividends to the date of
redemption, whereupon it will remain fixed. The Series A Preferred Stock is
perpetual preferred stock.
Voting
Holders of Series A Preferred Stock and Convertible Debt are entitled to
vote with the holders of Class A Common Stock on all matters submitted for a
vote of holders of Class A Common Stock, and are entitled to that number of
votes equal to the number of votes to which the shares of Class A Common stock
issuable upon conversion of such shares of Series A Preferred Stock and
Convertible Debt would have been entitled if such shares of Class A Common
Stock had been outstanding at the time of the applicable vote and related
record date. In addition, the Series A Preferred stock and Convertible Debt
will vote separately as a class on any amendments to the Restated Certificate
of Incorporation or By-Laws of the Company, whether by merger, consolidation,
combination, reclassification or otherwise, which would alter or circumvent
the voting powers, rights and preferences of the Series A Preferred Stock or
Convertible Debt. No amendment or alteration of the dividends payable,
liquidation preference or par value of the Series A Preferred Stock, or
interest rate and principal amount of the Convertible Debt, may be effected
without the consent of each holder of Series A Preferred Stock or Convertible
Debt, respectively.
Ranking
The Series A Preferred Stock with respect to dividend rights and rights
on liquidation, winding up and dissolution, ranks prior to all classes of the
Company's equity securities, including the Class A Common Stock. The
Convertible Debt will be subordinated to the Company's senior debt and senior
subordinated debt.
Restrictions on Resale; Registration Rights
The Series A Preferred Stock is a "restricted security" as that term is
defined in Rule 144 under the Securities Act of 1933, as amended (the
"Securities Act"). Consequently, resales of such shares by CGE, unless
registered under the Securities Act, are subject to the timing, volume and
other limitations of Rule 144. Under the Investment Agreement, CGE has
certain registration rights with respect to such shares. See "-Certain
Covenants of the Company-Registration Rights" above.
CGE CREDIT AGREEMENT
In connection with the Investment Agreement, the Company and CGE
entered into a Credit Agreement dated as of June 14, 1994 pursuant to which
the Company received a $125,000,000 term loan from CGE. The term loan is an
unsecured facility bearing interest at a rate based upon one, two, three or
six-month LIBOR, as selected by AWT, plus 125 basis points and has a final
maturity of June 15, 2001. The term loan contains certain financial and other
restrictive covenants with respect to the Company relating to, among other
things, the maintenance of certain financial ratios, and restrictions on the
sale of assets and the payment of dividends on or the redemption, repurchase,
acquisition or retirement of securities of the Company or its subsidiaries.
On June 14, 1994, the Company utilized a substantial portion of the proceeds
from the term loan to retire its 11.18% Senior Notes with The Prudential
Insurance Company of America. The Company paid approximately $1,857,000 to
CGE as interest on the term loan during fiscal 1994.
OTHER RELATED TRANSACTIONS
Mr. Senior, a Director of the Company since October 1987, is a Managing
Director of Allen & Company, which has performed investment banking and other
services for the Company from time to time. Allen & Company served as a
financial advisor to the Company in connection with the transactions
contemplated by the Investment Agreement. Ms. Green, a Director of the
Company since June 1994, is a partner at the law firm of Bryan Cave. Bryan
Cave has performed various legal services for the Company from time to time.
On August 20, 1990, the Board of Directors of AWT made a one-year,
interest-free, unsecured loan of $2,300,000 to Mr. Beck, the former Chairman
of the Board and Chief Executive Officer of AWT, so that he could satisfy
certain personal financial obligations without having to sell a substantial
portion of his equity investment in AWT. Under the terms of the Termination
Agreement with Mr. Beck as discussed more fully in Part III, ITEM 11 --
EXECUTIVE COMPENSATION AND OTHER INFORMATION -- "Employment Contracts and
Termination and Change-in-Control Arrangements--Termination Agreement" at page
70 of this Annual Report on Form 10-K, 20% of the principal amount of the loan
will be forgiven in each of the next five years. AWT does not currently
intend to make loans to other members of AWT management with terms similar to
those of Mr. Beck's loan.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENTS SCHEDULES AND REPORT ON FORM 8-K
a(1). Financial Statements and Supplementary Data.
See, "Index to Financial Statements" included in Part
II, Item 8 of this Annual Report on Form 10-K, at page 33.
a(2). Financial Statement Schedule.
See, "Index to Financial Statements" included in Part
II, Item 8 of this Annual Report on Form 10-K, at page 33.
a(3). Exhibits:
Exhibit No. Description Location
- ----------- ----------- --------
3.01 Restated Certificate of Incorporation of (1)
the Registrant dated July 10, 1987
3.01(a) Certificate of Amendment to Certificate (2)
of Incorporation of the Registrant dated
October 27, 1987
3.01(b) Certificate of Amendment to Certificate (2)
of Incorporation of the Registrant filed
June 21, 1989
3.01(c) Certificate of Amendment to Restated (2)
Certificate of Incorporation of the
Registrant filed July 5, 1989
3.01(d) Certificate of Designation of 5 1/2% Series Filed herewith
A Convertible Exchangeable Preferred Stock
filed June 14, 1994
3.02 By-Laws of the Registrant, as amended (1)
10.01 Employment Agreement, dated as of (1)(Ex.10.11)
April 2, 1987, between Research-Cottrell
and Stanley S. Thune
10.02 Lease, dated December 1, 1989, between Filed herewith
Harvard Mills Realty and Metcalf & Eddy,
Inc.
10.03 Form of Supplemental Pension (1)(Ex.10.20)
Agreement of Research-Cottrell
10.04 1988 Long-Term Incentive Compensation (10)
Plan of Metcalf & Eddy, effective as of
September 30, 1988, as amended
September 7, 1989 and March 19, 1990
10.04(a) 1989 Long-Term Compensation Plan (2)
of the Registrant, effective as of
July 31, 1989
10.05 Research-Cottrell Environmental (3)(Ex.10.27)
Engineering Profit Sharing Plan,
as amended
10.06 Research-Cottrell Thrift Plan (3)(Ex.10.29)
10.07 Stockholder Agreement, dated as of (1)(Ex.10.23)
July 13, 1987, among the Registrant
and the Stockholders of the Registrant
(the "Original Stockholder Agreement")
10.07(a) Amendment to Original Stockholder (2)
Agreement dated as of August 3, 1988
10.07(b) Amended and Restated Stockholder (4)
Agreement, dated as of June 13, 1989,
among the Registrant and the
Stockholders of the Registrant
10.08 Registration Rights Agreement, dated (1)(Ex.10.24)
as of July 13, 1987, among the
Registrant and certain investors
10.09 Preferred Stock Purchase Agreement, (1)(Ex.10.25)
dated July 13, 1987, among the Registrant
CSL Investments and Carlton Investments
10.10 Stock Purchase Agreement, dated (1)(Ex.10.26)
July 13, 1987, among the Registrant and
management investors
10.11 Stock Purchase Agreement, dated (1)(Ex.10.27)
July 13, 1987, among the Registrant,
Liberty Service Corporation and Carlton
Investments
10.12 Agreement, dated December 16, 1987, (1)(Ex.10.29)
between Research-Cottrell and ORFA
Corporation of America
10.13 Purchase Agreement, dated January 13, (1)(Ex.10.34)
1988, between Research-Cottrell
and Toromont
Industries, Ltd.
10.14 Agreement, dated October 19, 1987, (1)(Ex.10.37)
between Research-Cottrell and
American Thermophilic Corporation
10.15 Credit Agreement, dated as of (7)
September 12, 1990, by and among the
Company, the Banks (as defined therein)
and the First National Bank of Chicago
as agent
10.16 Agreement to Provide Professional (3)(Ex.10.5)
Services for Repair and Rehabilitation
of Existing Wastewater Treatment
Facilities and Operator Training
Program to Puerto Rico Aqueduct
and Sewer Authority by Metcalf &
Eddy, dated March 20, 1986,
as amended on June 27, 1986,
October 17, 1986 and May 1, 1987
10.17 Peace Shield Management Contract, (3)(Ex.10.6)
dated March 24, 1988, between the
Department of the Air Force and
CRS/SIRRINE & Metcalf & Eddy,
Joint Venture
10.17(a) Joint Venture Agreement, dated (3)(Ex.10.6(a))
February 27, 1984,between
CRS/SIRRINE, INC. and Metcalf
& Eddy
10.18 Extension Agreement, dated March 23, (1)(Ex.10.41)
1988, between Research-Cottrell and
Toromont Industries. Ltd
10.19 Tax Sharing Agreement, dated (3)(Ex.10.9)
October 17, 1988, among the
Registrant, Research-
Cottrell and Metcalf & Eddy
10.19(a) Amendment No. 1 to Tax Sharing Filed herewith
Agreement, dated November 10,
1989, among the Registrant,
Research-Cottrell and
Metcalf & Eddy
10.19(b) Amendment No. 2 to Tax Sharing (5)(Ex.10.22(b))
Agreement, dated March 1, 1990,
among the Registrant,
Research-Cottrell, Inc.
and Metcalf & Eddy Companies, Inc.
10.20 Purchase Agreement, dated as of (2)(Ex.10.23)
September 29, 1988 between Power
Application & Mfg. Co. Inc., Onan-
Cummins Power of California, Inc., DBA
Equipment Service Company and Waukesha
Engine Servicenter, Inc. and Waukesha
Engine Servicenter of Arizona
10.21 Letter Agreement, dated as of (2)(Ex.10.24)
June 10, 1988, by and among
Enerflex Systems, Ltd.,
Research-Cottrell and Toromont
Industries, Ltd.
10.22 Employment Agreement, dated as (4)(Ex.10.30)
of April 1, 1989, by and between
the Registrant and
Eckardt C. Beck
10.22(a) Amendment No. 1 to Employment (8)
Agreement by and between the
Registrant and Eckardt C. Beck
dated as of July 31, 1992
10.22(b) Amendment No. 2 to Employment (9)
Agreement by and between the
Registrant and Eckardt C. Beck
dated as of August 9, 1993
10.22(c) Amendment No. 3 to Employment Filed herewith
Agreement by and between the
Registrant and Eckardt C. Beck
dated as of March 17, 1994
10.22(d) Termination Agreement by and Filed herewith
between the Registrant and
Eckardt C. Beck,
dated as of November 21, 1994
10.22(e) Consulting Agreement by and Filed herewith
between the Registrant and
Eckardt C. Beck dated as
of November 21, 1994
10.23 Agreement, dated March 13, 1989, (4)(Ex.10.31)
between Research-Cottrell and
certain of its air subsidiaries
and Reliance Insurance Company,
United Pacific Insurance and
Planet Insurance
Company of Federal Way Washington
10.24 Agreement, dated March 13, 1989, (4)(Ex.10.31(A))
between Research-Cottrell and
certain of its water
subsidiaries and Reliance
Insurance Company, United Pacific
Insurance and Planet Insurance
Company of Federal Way Washington
10.25 Agreement, dated April 1, 1989, (4)(Ex.10.32)
by and between Metcalf & Eddy, Inc.
and the Environmental
Protection Agency (ARCS)
10.26 Agreement, dated April 1, 1989, (4)(Ex.10.33)
by and between Metcalf & Eddy,
Inc. and the Environmental
Protection Agency (TES)
10.27 License Agreement, dated March 6, (2)(Ex.10.29)
1989, by and between Inland Steel
Company and Research-Cottrell
10.28 Joint Venture and Option Agreement, Filed herewith
dated as of September 1, 1989,
between the Registrant and
Chemfix Technologies, Inc.
10.29 Agreement and Plan of Merger and Filed herewith
Reorganization, dated October 27,
1989, by and among the Registrant,
Falcon Acquisition Corp,
Falcon Associates,
Inc., and Jeffrey J. Cantwell
10.30 Receivables Purchase Agreement, (5)(Ex.10.31)
dated as of April 12, 1990,
between Metcalf & Eddy, Inc.
and Falcon Assets Securitization
Corporation
10.31 Cooperation Agreement, dated as of (5)(Ex.10.32)
February 8, 1990, between
Research-Cottrell,
Inc. and NOELL-KRC UMWELTTECHNIK
GmbH (The Commission has granted
confidential treatment for certain
portions of this agreement. A
complete copy of the
agreement is on file with the
Commission)
10.32 Stock Purchase Agreement, dated as of (5)(Ex.10.33)
May 13, 1990, between the Registrant
and Compagnie Generale des Eaux
10.33 Indenture, dated as of May 15, 1990, (6)(Ex.10.34)
between the Air & Water Technologies
Corporation and Midlantic National Bank
10.34 Stock Purchase Agreement, dated June 25, (6)(Ex.10.35)
1990, among Metcalf & Eddy Companies, Inc.,
William Wynne, Alfred Brescia, Richard
Donovan and Armando Lacasa
10.35 Stock Purchase Agreement, dated as of (6)(Ex.10.36)
June 22, 1990, between Compagnie
Generale des Eaux and Registrant
10.36 Note Agreement, dated as of September 12, (7)
1990, between the Registrant and the
Prudential Company of America
10.37 Letter Agreement dated March 18, 1994 Filed herewith
between the Registrant and Compagnie
Generale des Eaux
10.38 Investment Agreement, dated as of (10)
March 30, 1994, among the Registrant,
Compagnie Generale des Eaux and Anjou
International Compy
10.39 Credit Agreement, dated as of June 14, Filed herewith
1994, between the Registrant
and Compagnie Generale
des Eaux
10.40 Asset Purchase Agreement by and between Filed herewith
Asbestos Control Services, Inc. and
Asbestos Containment Services, Inc.
dated as of May 27, 1994
10.41 Asset Purchase Agreement by and Filed herewith
between Stewart & Stevenson
Power, Inc., Stewart
& Stevenson Realty Corporation,
Power and Application & Mfg. Co.
and the Registrant
dated as of November 8, 1994
10.42 Executive Retention Agreement, Filed herewith
dated as of March 17, 1994, by
and between Joseph M. Morena
and the Registrant
10.43 Executive Retention Agreement, Filed herewith
dated as of March 17, 1994,
by and between Ruthanne G. Neely
and the Registrant
10.44 Executive Retention Agreement, Filed herewith
dated as of March 17, 1994, by
and between Douglas A. Satzger
and the Registrant
10.45 Executive Retention Agreement, Filed herewith
dated as of March 17, 1994,
by and between William R. Lewis
and the Registrant
10.46 Executive Retention Agreement, Filed herewith
dated as of March 17, 1994 by
and between George C. Mammola
and the Registrant
10.47 Executive Retention Agreement, Filed herewith
dated as of March 17, 1994, by
and between John Cirello
and the Registrant
10.48 Executive Retention Agreement, Filed herewith
dated as of March 17, 1994, by
and between Donald A. Deieso
and the Registrant
10.49 Executive Retention Agreement, Filed herewith
dated as of March 17, 1994, by
and between Arthur L. Glenn
and the Registrant
10.50 Executive Retention Agreement, Filed herewith
dated as of March 17,1994, by
and between Joseph L. Boren
and the Registrant
10.51 Executive Retention Agreement, Filed herewith
dated as of March 16, 1994, by
and between Robert H. Cardell
and the Registrant
11 Statement Re computation of per Filed herewith
share earnings
21 List of Subsidiaries of the Registrant Filed herewith
23 Consents of Independent Public Filed herewith
Accountants to incorporation by reference
of financial material included in this
report into the Registrant's Registration
Statements on Form S-8
27 Financial Data Schedule Filed herewith
_____________
(1) Incorporated by reference to the similarly numbered exhibit
(unless otherwise indicated) to the Registrant's Registration
Statement on Form S-1 (No. 33-17833), as amended, which became
effective on April 12, 1988.
(2) Incorporated by reference to the similarly numbered exhibit
(unless otherwise indicated) to the Registrant's Registration
Statement on Form S-1 (No. 33-29568), as amended, which became
effective on August 10, 1989.
(3) Incorporated by reference to the similarly numbered exhibit
(unless otherwise indicated) to Metcalf & Eddy's Registration
Statement on Form S-1 (No. 33-24315), as amended, which became
effective on October 18, 1988.
(4) Incorporated by reference to the similarly numbered exhibit
(unless otherwise indicated) to Metcalf & Eddy's Registration
Statement on Form S-1 (No. 33-28846), as amended, which became
effective on June 29, 1989.
(5) Incorporated by reference to the similarly numbered exhibit
(unless otherwise indicated) to the Registrant's Registration
Statement on Form S-1 (No. 33-33088), as amended, which became
effective on May 15, 1990.
(6) Incorporated by reference to the similarly numbered exhibit
(unless otherwise indicated) to the Registrant's Registration
Statement on Form S-1 (No. 33-35421), as amended, which became
effective on July 5, 1990.
(7) Incorporated by reference to the similarly numbered exhibit
(unless otherwise indicated) to the Registrant's Annual Report on
Form 10-K for the fiscal year ended October 31, 1990, as filed
with the Securities and Exchange Commission on January 29, 1991.
(8) Incorporated by reference to the similarly numbered exhibit
(unless otherwise indicated) to the Registrant's Annual Report on
Form 10-K for the fiscal year ended October 31, 1992, as filed
with the Securities and Exchange Commission on January 29, 1993.
(9) Incorporated by reference to the similarly numbered exhibit
(unless otherwise indicated) to the Registrant's Annual Report on
Form 10-K for the fiscal year ended October 31, 1993, as filed
with the Securities and Exchange Commission on January 31, 1994.
(10) Incorporated by reference to Annex I to the Registrant's Proxy
Statement on Schedule 14A dated May 24, 1994, in connection with
its Annual Meeting of Stockholders held on June 14, 1994.
(b) Reports on Form 8-K.
Not Applicable.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, Air & Water Technologies Corporation has duly caused
this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
AIR & WATER TECHNOLOGIES CORPORATION
Dated: January 30, 1995 By: /s/ Claudio Elia
-----------------------------------
Claudio Elia
Chairman of the Board of Directors and
Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed by the following persons on behalf of Air & Water
Technologies Corporation and in the capacities and on the dates indicated:
Dated: January 30, 1995 By: /s/ Claudio Elia
---------------------------------------
Claudio Elia
Chairman of the Board of Directors
and Chief Executive Officer
(Principal Executive Officer)
Dated: January 30, 1995 By: /s/ Alain Brunais
---------------------------------------
Alain Brunais
Vice President, Chief Financial
Officer and Treasurer
(Principal Accounting Officer)
(Principal Financial Officer)
Dated: January 30, 1995 By: /s/ Jacques-Henri David
---------------------------------------
Jacques-Henri David
Director
Dated: January 30, 1995 By: /s/ Jean-Dominique Deschamps
-----------------------------------
Jean-Dominique Deschamps
Director
Dated: January 30, 1995 By: /s/ Douglas M. Costle
-----------------------------------
Douglas M. Costle
Director
Dated: January 30, 1995 By: /s/ Nicholas DeBenedictis
-----------------------------------
Nicholas DeBenedictis
Director
Dated: January 30, 1995 By: /s/ William Kriegel
-----------------------------------
William Kriegel
Director
Dated: January 30, 1995 By: /s/ Enrique F. Senior
-----------------------------------
Enrique F. Senior
Director
Dated: January 30, 1995 By: /s/ Carol Lynn Green
-----------------------------------
Carol Lynn Green
Director
Dated: January 30, 1995 By: /s/ John W. Morris
-----------------------------------
John W. Morris
Director
EXHIBIT INDEX
Exhibit
Number Description Page
- ------- ----------- ----
3.01(d) Certificate of Designation of 5 1/2% Series 107
A Convertible Exchangeable Preferred Stock
filed June 14, 1994
10.02 Lease, dated December 1, 1989, between 148
Harvard Mills Realty and Metcalf & Eddy, Inc.
10.19(a) Amendment No. 1 to Tax Sharing Agreement, 210
dated November 10, 1989, among
the Registrant, Research-Cottrell and
Metcalf & Eddy
10.22(c) Amendment No. 3 to Employment Agreement by and 213
between the Registrant and Eckardt C. Beck
dated as of August 9, 1993
10.22(d) Termination Agreement by and between 217
the Registrant and Eckardt C. Beck
dated as of November 21, 1994
10.22(e) Consulting Agreement by and between the 235
Registrant and Eckardt C. Beck dated as
of November 21, 1994
10.28 Joint Venture and Option Agreement, 251
dated as of September 1, 1989, between
the Registrant and Chemfix Technologies,
Inc.
10.29 Agreement and Plan of Merger and 338
Reorganization, dated October 27, 1989,
by and among the Registrant, Falcon
Acquisition Corp, Falcon Associates,
Inc., and Jeffrey J. Cantwell
10.37 Letter Agreement dated March 18, 1994 433
between the Registrant and Compagnie
Generale des Eaux
10.39 Credit Agreement, dated as of June 14, 1994, 450
between the Registrant and Compagnie Generale
des Eaux
10.40 Asset Purchase Agreement by and between 480
Asbestos Control Services, Inc. and Asbestos
Containment Services, Inc. dated as of
May 27, 1994
10.41 Asset Purchase Agreement by and between 526
Stewart & Stevenson Power, Inc., Stewart
& Stevenson Realty Corporation, Power and
Application & Mfg. Co. and the Registrant
dated as of November 8, 1994
10.42 Executive Retention Agreement, dated as of 566
March 17, 1994, by and between Joseph M. Morena
and the Registrant
10.43 Executive Retention Agreement, dated as of 600
March 17, 1994, by and between Ruthanne G. Neely
and the Registrant
10.44 Executive Retention Agreement, dated as of 639
March 17, 1994, by and between Douglas A. Satzger
and the Registrant
10.45 Executive Retention Agreement, dated as of 673
March 17, 1994,by and between William R. Lewis
and the Registrant
10.46 Executive Retention Agreement,dated as of 709
March 17, 1994 by and between George C. Mammola
and the Registrant
10.47 Executive Retention Agreement, dated as of 747
March 17, 1994, by and between John Cirello
and the Registrant
10.48 Executive Retention Agreement, dated as of 785
March 17, 1994, by and between Donald A. Deieso
and the Registrant
10.49 Executive Retention Agreement, dated as of 823
March 17, 1994, by and between Arthur L. Glenn
and the Registrant
10.50 Executive Retention Agreement, dated as of 857
March 17,1994, by and between Joseph L. Boren
and the Registrant
10.51 Executive Retention Agreement, dated as of 892
March 16, 1994, by and between Robert H. Cardell
and the Registrant
11 Statement Re computation of per share earnings 929
21 List of Subsidiaries of the Registrant 931
23 Consents of Independent Public 935
Accountants to incorporation by reference
of financial material included in this
report into the Registrant's Registration
Statements on Form S-8
27 Financial Data Schedule 937
[Conformed Copy]
AIR & WATER TECHNOLOGIES CORPORATION
CERTIFICATE OF DESIGNATION
5 1/2% SERIES A CONVERTIBLE EXCHANGEABLE PREFERRED STOCK
($0.01 par value)
We, the undersigned, William R. Lewis and Douglas A. Satzger of
Air & Water Technologies Corporation, a Delaware corporation (hereinafter
called the "Corporation"), pursuant to the provisions of Sections 103 and 151
of the General Corporation Law of the State of Delaware do hereby make this
Certificate of Designation under the corporate seal of the Corporation and do
hereby state and certify that pursuant to the authority expressly vested in
the Board of Directors of the Corporation by the Certificate of Incorporation,
the Board of Directors duly adopted the following resolutions:
RESOLVED, that, pursuant to Article Fourth of the Certificate
of Incorporation (which authorizes 2,500,000 shares of Preferred Stock, $0.01
par value, none of which are presently issued and outstanding), the Board of
Directors hereby fixes the voting powers, designation and preferences and
relative participating, optional and other special rights, and qualifications,
limitations and restrictions of a class of Preferred Stock.
RESOLVED, that each share of the Convertible Exchangeable
Preferred Stock shall rank equally in all respects and shall be subject to the
following provisions:
(1) Number and Designation. 1,200,000 shares of the Preferred
Stock of the Corporation shall be designated as 5 1/2% Series A Convertible
Exchangeable Preferred Stock (the "Series A Preferred Stock").
(2) Rank. The Series A Preferred Stock shall, with respect to
dividend rights and rights on liquidation, winding up and dissolution, rank
prior to all classes or series of equity securities of the Corporation,
including the Common Stock (as defined below).
(3) Dividends. (a) Except as otherwise provided in paragraph
(8) below, the holders of the shares of Series A Preferred Stock shall be
entitled to receive, when, as and if declared by the Board of Directors, out
of funds legally available for the payment of dividends, cumulative dividends,
at the annual rate of $2.75 per share, payable in cash quarterly in arrears in
equal amounts on March 31, June 30, September 30 and December 31 of each year,
commencing June 30, 1994, unless such day is not a business day, in which
event on the next succeeding business day (each of such dates being a
"Dividend Payment Date"), in preference to dividends on the Common Stock.
Such dividends shall be paid to the holders of record at the opening of
business on the record date for such Dividend Payment Date.
(b) Dividends shall accrue from the date of original issue of
the Series A Preferred Stock (the "Series A Initial Issuance Date").
Dividends, other than for a full quarterly period, shall accrue on the basis
of a year of 365 days and the actual number of days elapsed (including the
first day but excluding the last day of such period). Quarterly dividends
which are not paid in full in cash will cumulate without interest until such
accumulated quarterly dividends shall have been declared and paid in cash by
the Board of Directors of the Corporation. Any such declaration may be for a
portion, or all, of the then accumulated dividends. Any accumulated dividends
which are not paid will continue to cumulate in the manner described above.
(c)(i) The holders of the shares of the Series A Preferred
Stock shall be entitled to receive in preference to and in priority over
dividends upon any of the Common Stock all accrued dividends provided for in
this paragraph (3).
(ii) The Corporation shall not declare, pay or set apart for
payment any dividend on any of the Common Stock or make any distribution in
respect thereof, either directly or indirectly, and whether in cash,
obligations or shares of the Corporation or other property (all such dividends
and distributions hereinafter referred to as a "Common Stock Distribution"),
unless the holders of the shares of Series A Preferred Stock shall have
received all accrued dividends which such holders are entitled to receive
pursuant to paragraph (3) through and including the immediately preceding
Dividend Payment Date or, if such Common Stock Distribution is made on a
Dividend Payment Date, through and including such Dividend Payment Date. In
no event may the Corporation retire, redeem, purchase or otherwise acquire for
value (including acquiring, directly or indirectly, any equity interest in any
Person which owns, legally or beneficially, any Common Stock) any of the Common
Stock or make any payment on account of or set apart for payment money for a
sinking or other similar fund for the purchase, redemption or other retirement
of, any of the Common Stock, or permit any corporation or other entity
directly or indirectly controlled by the Corporation to purchase or redeem any
of the Common Stock unless, prior to or contemporaneously with such
retirement, redemption, purchase or acquisition, the holders of the shares of
Series A Preferred Stock shall have received all accrued dividends which such
holders are entitled to receive pursuant to paragraph (3) through and
including the immediately preceding Dividend Payment Date or, if such
retirement, redemption, purchase or acquisition is made on a Dividend Payment
Date, through and including such Dividend Payment Date.
(d) Subject to the foregoing provisions of this paragraph (3),
paragraph (8) and applicable law, the Board of Directors may declare and the
Corporation may pay or set apart for payment dividends on any of the Common
Stock, may make any payment on account of or set apart for payment money for a
sinking fund or other similar fund for the purchase, redemption or other
retirement of, any of the Common Stock, and may make any distribution in
respect thereof, either directly or indirectly, and whether in cash,
obligations or shares of the Corporation or other property, and may purchase
or otherwise redeem any of the Common Stock and the holders of the shares of
the Series A Preferred Stock shall not be entitled to share therein.
(e) All dividends paid with respect to shares of the Series A
Preferred Stock pursuant to the foregoing provisions of this paragraph (3)
shall be paid pro rata on each outstanding share of Series A Preferred Stock.
(f) Each fractional share of Series A Preferred Stock
outstanding shall be entitled to a ratably proportionate amount of all
dividends accruing with respect to each outstanding share of Series A
Preferred Stock pursuant to this paragraph (3), and all such dividends with
respect to such outstanding fractional shares shall be fully cumulative and
shall accrue (whether or not declared) without interest, and shall be payable
in the same manner and at such times as provided for in the foregoing
provisions of this paragraph (3) with respect to dividends on each outstanding
share of Series A Preferred Stock.
(4) Liquidation Preference. (a) In the event of any
voluntary or involuntary liquidation, dissolution or winding up of the affairs
of the Corporation, the holders of the shares of Series A Preferred Stock then
outstanding shall be entitled to be paid out of the assets of the Corporation
available for distribution to its stockholders an amount in cash equal to $50
for each share outstanding, plus an amount in cash equal to all accrued but
unpaid dividends thereon to the date fixed for liquidation, dissolution or
winding up (including pro rata dividends for the period from the last Dividend
Payment Date to the date fixed for liquidation, dissolution or winding up),
whether or not declared to the date of such payment, before any payment shall
be made or any assets distributed to the holders of any of the Common Stock.
If the assets of the Corporation, or the proceeds thereof, are not sufficient
to pay in full the liquidation payments payable on each outstanding share of
Series A Preferred Stock, then each such share shall share ratably in such
distribution of assets, or the proceeds thereof, in accordance with the amount
which would be payable on such distribution if the amount to which each
outstanding share of Series A Preferred Stock is entitled was paid in full.
Except as provided in the preceding sentences, the holders of the shares of
Series A Preferred Stock shall not be entitled to any distribution in the
event of liquidation, dissolution or winding up of the affairs of the
Corporation.
(b) For the purposes of this paragraph (4), neither the
voluntary sale, lease, or other transfer of all or substantially all the
property or assets of the Corporation nor the consolidation or merger of the
Corporation with or into one or more other Persons shall be deemed to be a
liquidation, dissolution or winding up of the Corporation.
(c) The liquidation payment with respect to each outstanding
fractional share of Series A Preferred Stock shall be equal to a ratably
proportionate amount of the liquidation payment with respect to each
outstanding share of Series A Preferred Stock.
(5) Redemption. Shares of Series A Preferred Stock shall be
redeemable by the Corporation as provided below (with all references in this
paragraph (5) to a redemption price per share to be adjusted proportionally in
respect of fractional shares).
(a) The shares of Series A Preferred Stock shall not be
redeemable prior to the Initial Redemption Date. The "Initial Redemption
Date" shall be June 30, 1997.
(b) At the option of the Corporation, shares of Series A
Preferred Stock may be redeemed at any time or from time to time (subject to
the provisions set forth below and paragraph (8)) on or after the Initial
Redemption Date, in whole or in part, at the price (the "Redemption Price"),
payable in cash, equal to the percentage set forth below of the liquidation
preference per share for redemptions during the 12-month periods beginning on
the Initial Redemption Date or the annual anniversaries thereof indicated
below, plus, in each case, an amount equal to accrued and unpaid dividends
thereon (whether or not declared and whether or not there are funds of the
Corporation legally available for the payment of dividends), to the date fixed
for redemption:
12-month period beginning on Percentage
---------------------------- ----------
Initial Redemption Date 103.85%
First Anniversary thereof 103.30%
Second Anniversary thereof 102.75%
Third Anniversary thereof 102.20%
Fourth Anniversary thereof 101.65%
Fifth Anniversary thereof 101.10%
Sixth Anniversary thereof 100.55%
Seventh Anniversary thereof
and thereafter 100.00%
Notwithstanding the foregoing, the Corporation may elect to redeem shares of
Series A Preferred Stock at any time on or after the Initial Redemption Date
and prior to the fourth anniversary of the Initial Redemption Date only if for
at least 20 Trading Days during the period consisting of the 30 consecutive
Trading Days ending on the date notice of such redemption is given, including
the last Trading Day of such period, the Closing Price per share of Common
Stock exceeds $18.75, as adjusted pursuant to paragraph (8)(h) (the
"Redemption Threshold").
(c) In the event that fewer than all of the shares of Series A
Preferred Stock are to be redeemed pursuant to this paragraph (5), the
Corporation shall call for redemption shares of Series A Preferred Stock pro
rata among the holders, based on the number of shares of Series A Preferred
Stock held by each holder, except that the Corporation may redeem all of the
shares of Series A Preferred Stock held by any holders of fewer than 100 shares
of Series A Preferred Stock (or all the shares of Series A Preferred Stock
held by holders who would hold less than 100 shares of Series A Preferred
Stock as a result of such redemption). Any redemption for which shares are
called for redemption on a pro rata basis (whether or not some of the shares
so called are subsequently converted pursuant to paragraph (8)) shall comply
with this paragraph (5)(c).
(d) In accordance with paragraph (7) hereof, the Corporation
shall mail to the record holders of Series A Preferred Stock written notice of
its intention to redeem shares of Series A Preferred Stock held by such
holders.
(6) Exchange. Subject to paragraph (8) below, commencing June
30, 1997, the Series A Preferred Stock shall be exchangeable, in whole and not
in part, at the sole option of the Corporation, at any time, for the
Corporation's 5 1/2% Convertible Subordinated Notes, a form of which is
attached hereto as Attachment A (the "Exchange Notes"). The holders of the
outstanding shares or fractional shares of Series A Preferred Stock will be
entitled to receive in exchange for each share of Series A Preferred Stock to
be exchanged by it Exchange Notes in a principal amount of $50 plus, with
respect to each outstanding fractional share, a ratably proportionate amount
thereof. An amount equal to all accrued but unpaid dividends on each such
share to the date which coincides with the date of exchange shall be paid on
such date (including pro rata dividends for the period from the last Dividend
Payment Date to the date of exchange). At the time of any exchange hereunder,
the rights of the holders of the shares of Series A Preferred Stock as
stockholders of the Corporation shall cease, and the persons entitled to
receive the Exchange Notes issuable upon exchange shall be treated for all
purposes as the registered holders of such Exchange Notes as of the date which
coincides with the date of exchange. In accordance with paragraph (7) hereof,
the Corporation shall mail to the record holders of Series A Preferred Stock
written notice of its intention to exchange shares of Series A Preferred Stock
held by such holders. The Corporation will cause the Exchange Notes to be
dated the date which coincides with the date of exchange thereof.
(7) Procedure for Redemption or Exchange. (a) In the event
the Corporation shall redeem or exchange shares of Series A Preferred Stock,
notice of such redemption or exchange shall be given by first class mail,
postage prepaid, mailed not less than 30 days nor more than 60 days prior to
the redemption or exchange date, to the holders of record of the shares to be
redeemed or exchanged at such holder's address as the same appears on the
stock register of the Corporation. Each such notice shall state: (i) the
redemption or exchange date; (ii) the redemption price or exchange rate; (iii)
the place or places where certificates for such shares are to be surrendered
for payment of the redemption price or exchange for the Exchange Notes; (iv)
that dividends on the shares to be redeemed or exchanged will cease to accrue
on such redemption date or the date of exchange; and (v) the number of shares
to be redeemed or exchanged.
(b) Notice having been mailed as aforesaid, from and after the
redemption date or as of the exchange date (unless, in the case of a
redemption, default shall be made by the Corporation in providing money for
the payment of the redemption price or a Notice of Election to Convert has been
delivered to the Corporation pursuant to paragraph (8)), dividends on the
shares of Series A Preferred Stock shall cease to accrue, and such shares
shall no longer be deemed to be outstanding and shall be cancelled and shall
not be available for reissue or redesignation, and all rights of the holders
thereof as stockholders of the Corporation (except the right to receive from
the Corporation the redemption price or the Exchange Notes and any other
amounts payable pursuant to paragraph (5) or paragraph (6)) shall cease. Upon
surrender in accordance with said notice of the certificates for any shares so
redeemed or exchanged (properly endorsed or assigned for transfer, if the
Board of Directors of the Corporation shall so require and the notice shall so
state), such shares shall be redeemed or exchanged by the Corporation at the
redemption price or exchange rate aforesaid.
(c) The Corporation shall pay any and all issuance and
delivery taxes that may be payable in respect of the issuance or delivery of
Exchange Notes in exchange for shares of Series A Preferred Stock. The
Corporation shall not, however, be required to pay any tax which may be
payable in respect of any transfer involved in the issuance and delivery of
Exchange Notes in a name other than that in which the shares of Series A
Preferred Stock so exchanged were registered, and no such issuance or delivery
shall be made unless and until the person requesting such issuance has paid to
the Corporation the amount of any such tax or has established to the
satisfaction of the Corporation that such tax has been paid.
(8) Conversion. (a) Subject to the provisions of this
paragraph (8), the holders of the shares of Series A Preferred Stock shall
have the right, at any time, from time to time, at such holder's option, to
convert any or all outstanding shares (and fractional shares) of Series A
Preferred Stock, in whole or in part, into fully paid and non-assessable
shares of Common Stock. The number of shares of Common Stock deliverable upon
conversion of a share of Series A Preferred Stock, adjusted as hereinafter
provided, is referred to herein as the "Conversion Ratio." The Conversion
Ratio as of the Series A Initial Issuance Date shall be 4.0, subject to
adjustment from time to time pursuant to paragraph (8)(g) hereof.
Notwithstanding any call for redemption pursuant to paragraph (5) or exchange
pursuant to paragraph (6), the right to convert shares so called for
redemption or exchange shall terminate at the close of business on the date
immediately preceding the date fixed for such redemption or exchange, as the
case may be, unless the Corporation shall default in making payment of the
amount payable upon such redemption or in making the exchange and payment of
any amount payable upon such exchange.
(b)(i) In order to exercise the conversion privilege, the
holder of the shares of Series A Preferred Stock to be converted shall
surrender the certificate representing such shares at the office of the
Corporation, specifying the number of shares of Series A Preferred Stock to
be converted. Unless the shares issuable on conversion are to be issued in
the same name as the name in which such shares of Series A Preferred Stock are
registered, each share surrendered for conversion shall be accompanied by
instruments of transfer, in form satisfactory to the Corporation, duly
executed by the holder or the holder's duly authorized attorney and an amount
sufficient to pay any transfer or similar tax.
(ii) As promptly as practicable after the surrender by the
holder of the certificates for shares of Series A Preferred Stock as
aforesaid, the Corporation shall issue and shall deliver to such holder, or on
the holder's written order to the holder's transferee, a certificate or
certificates for the whole number of shares of Common Stock issuable upon the
conversion of such shares in accordance with the provisions of this paragraph
(8).
(iii) Each conversion shall be deemed to have been effected
immediately prior to the close of business on the date on which the
certificates for shares of Series A Preferred Stock shall have been
surrendered and such notice received by the Corporation as aforesaid, and the
person in whose name or names any certificate or certificates for shares of
Common Stock shall be issuable upon such conversion shall be deemed to have
become the holder of record of the shares of Common Stock represented thereby
at such time on such date and such conversion shall be into a number of shares
of Common Stock equal to the product of the number of shares of Series A
Preferred Stock surrendered times the Conversion Ratio in effect at such time
on such date. All shares of Common Stock delivered upon conversion of the
Series A Preferred Stock will upon delivery be duly and validly issued and
fully paid and non-assessable, free of all liens and charges and not subject
to any preemptive rights. Upon the surrender of certificates representing
shares of Series A Preferred Stock, such shares shall no longer be deemed to
be outstanding and all rights of a holder with respect to such shares
surrendered for conversion shall immediately terminate except the right to
receive the Common Stock and other amounts payable pursuant to this paragraph
(8).
(c)(i) Upon delivery to the Corporation by a holder of shares
of Series A Preferred Stock of a notice of election to convert, the right of
the Corporation to redeem such shares of Series A Preferred Stock shall
terminate, regardless of whether a notice of redemption has been mailed as
aforesaid.
(ii) From the date of delivery by a holder of shares of Series
A Preferred Stock of such conversion notice, in lieu of dividends on such
Series A Preferred Stock pursuant to paragraph (3), such Series A Preferred
Stock shall participate equally and ratably with the holders of shares of
Common Stock in all dividends paid on the Common Stock as if such shares of
Series A Preferred Stock had been converted to shares of Common Stock at the
time of such delivery.
(iii) If a conversion notice is delivered by a holder of shares
of Series A Preferred Stock to the Corporation before the delivery by the
Corporation to such holder of a notice of redemption, such holder shall be
entitled to receive all accrued dividends which such holder is entitled to
receive pursuant to paragraph (3). In addition, such holder at the opening of
business on a Dividend Payment Date shall be entitled to receive the dividend
payable on such shares on such Dividend Payment Date notwithstanding the
Corporation's default in payment of the dividend due on such Dividend Payment
Date. Such dividends shall be in preference to and in priority over any
dividends on the Common Stock.
(iv) If, after receipt by a holder of shares of Series A
Preferred Stock of a notice of redemption pursuant to paragraph (5), such
holder delivers to the Corporation a conversion notice, such Series A
Preferred Stock shall cease to accrue dividends pursuant to paragraph (3) but
such shares shall continue to be entitled to receive all accrued dividends
which such holder is entitled to receive pursuant to paragraph (3) through the
date of delivery of such conversion notice (including pro rata dividends for
the period from the last Dividend Payment Date to the date of delivery of the
conversion notice) in preference to and in priority over any dividends on the
Common Stock. Such accrued dividends shall be payable to such holder when, as
and if declared by the Board of Directors, out of funds legally available for
the payment of dividends, as provided in paragraph (3) above.
(v) Except as provided above and in paragraph (8)(g), the
Corporation shall make no payment or adjustment for accrued and unpaid
dividends on shares of Series A Preferred Stock, whether or not in arrears, on
conversion of such shares or for dividends in cash on the shares of Common
Stock issued upon such conversion.
(d)(i) The Corporation covenants that it will at all times
reserve and keep available, free from preemptive rights, such number of its
authorized but unissued shares of Common Stock as shall be required for the
purpose of effecting conversions of the Series A Preferred Stock and Exchange
Notes.
(ii) Prior to the delivery of any securities which the
Corporation shall be obligated to deliver upon conversion of the Series A
Preferred Stock, the Corporation shall comply with all applicable federal and
state laws and regulations which require action to be taken by the
Corporation.
(e) The Corporation will pay any and all documentary stamp or
similar issue or transfer taxes payable in respect of the issue or delivery of
shares of Common Stock on conversion of the Series A Preferred Stock pursuant
hereto; provided, that the Corporation shall not be required to pay any tax
which may be payable in respect of any transfer involved in the issue or
delivery of shares of Common Stock in a name other than that of the holder of
the Series A Preferred Stock to be converted and no such issue or delivery
shall be made unless and until the person requesting such issue or delivery
has paid to the Corporation the amount of any such tax or has established, to
the satisfaction of the Corporation, that such tax has been paid.
(f) In connection with the conversion of any shares of Series
A Preferred Stock, no fractions of shares of Common Stock shall be issued, but
in lieu thereof the Corporation shall pay a cash adjustment in respect of such
fractional interest in an amount equal to such fractional interest multiplied
by the Daily Price per share of Common Stock on the Trading Day on which such
shares of Series A Preferred Stock are deemed to have been converted. If more
than one share of Series A Preferred Stock shall be surrendered for conversion
by the same holder (or Affiliate of such holder) at the same time, the number
of full shares of Common Stock issuable on conversion thereof shall be
computed on the basis of the total number of shares of Series A Preferred
Stock so surrendered.
(g)(i) In case the Corporation shall at any time after the
Series A Initial Issuance Date (I) declare a dividend or make a distribution
on Common Stock payable in Common Stock, (II) subdivide or split the
outstanding Common Stock, (III) combine or reclassify the outstanding Common
Stock into a smaller number of shares, (IV) issue any shares of its capital
stock in a reclassification of Common Stock (including any such
reclassification in connection with a consolidation or merger in which the
Corporation is the continuing corporation), or (V) consolidate with, or merge
with or into, any other Person, the Conversion Ratio in effect at the time of
the record date for such dividend or distribution or of the effective date of
such subdivision, split, combination, consolidation, merger or
reclassification shall be proportionately adjusted so that the conversion of
the Series A Preferred Stock after such time shall entitle the holder to
receive the aggregate number of shares of Common Stock or other securities of
the Corporation (or shares of any security into which such shares of Common
Stock have been combined, consolidated, merged or reclassified pursuant to
clause (III), (IV) or (V) above) which, if this Series A Preferred Stock had
been converted immediately prior to such time, such holder would have owned
upon such conversion and been entitled to receive by virtue of such dividend,
distribution, subdivision, split, combination, consolidation, merger or
reclassification, assuming such holder of Common Stock of the Corporation (x)
is not a Person with which the Corporation consolidated or into which the
Corporation merged or which merged into the Corporation or to which such
recapitalization, sale or transfer was made, as the case may be ("constituent
Person"), or an affiliate of a constituent Person and (y) failed to exercise
any rights of election as to the kind or amount of securities, cash and other
property receivable upon such reclassification, change, consolidation, merger,
recapitalization, sale or transfer (provided, that if the kind or amount of
securities, cash and other property receivable upon such reclassification,
change, consolidation, merger, recapitalization, sale or transfer is not the
same for each share of Common Stock of the Corporation held immediately prior
to such reclassification, change, consolidation, merger, recapitalization,
sale or transfer by other than a constituent Person or an affiliate thereof
and in respect of which such rights of election shall not have been exercised
("non-electing share"), then for the purpose of this subparagraph (g) the kind
and amount of securities, cash and other property receivable upon such
reclassification, change, consolidation, merger, recapitalization, sale or
transfer by each non-electing share shall be deemed to be the kind and amount
so receivable per share by a plurality of the non-electing shares). Such
adjustment shall be made successively whenever any event listed above shall
occur.
(ii) In case the Corporation shall issue or sell any Common
Stock (other than Common Stock issued (I) upon conversion of the Series A
Preferred Stock, the Exchange Notes or the 8% Convertible Subordinated
Debentures due May 15, 2015, (II) pursuant to the Corporation's Stock Option
Plans or pursuant to any other Common Stock related employee compensation plan
of the Corporation approved by the Corporation's Board of Directors or (III)
upon exercise or conversion of any security the issuance of which caused an
adjustment under paragraphs (g)(iii) or (g)(iv) hereof) without consideration
or for a consideration per share less than the then Conversion Price Per
Common Share (as defined in paragraph (g)(vi)), the Conversion Ratio to be in
effect after such issuance or sale shall be determined by multiplying the
Conversion Ratio in effect immediately prior to such issuance or sale by a
fraction, (A) the numerator of which shall be the product of the aggregate
number of shares of Common Stock outstanding immediately after such issuance
or sale and the Current Valuation Per Common Share (as defined in paragraph
(g)(vi)) immediately prior to such issuance or sale and (B) the denominator of
which shall be the sum of (x) the number of shares of Common Stock outstanding
immediately prior to the time of such issuance or sale multiplied by the
Current Valuation Per Common Share immediately prior to such issuance or sale
and (y) the aggregate consideration, if any, to be received by the Corporation
upon such issuance or sale. In case any portion of the consideration to be
received by the Corporation shall be in a form other than cash, the fair
market value of such noncash consideration shall be utilized in the foregoing
computation. Such fair market value shall be determined by the Board of
Directors of the Corporation; provided that if the holders of 25% of the
Series A Preferred Stock shall object to any such determination, the Board of
Directors shall retain an independent appraiser reasonably satisfactory to
such holders to determine such fair market value. The holders shall be
notified promptly of any consideration other than cash to be received by the
Corporation and furnished with a description of the consideration and the fair
market value thereof, as determined by the Board of Directors.
(iii) In case the Corporation shall fix a record date for the
issuance of rights, options or warrants to the holders of its Common Stock or
other securities entitling such holders to subscribe for or purchase shares of
Common Stock (or securities convertible into shares of Common Stock) at a
price per share of Common Stock (or having a conversion price per share of
Common Stock, if a security convertible into shares of Common Stock) less than
the then Conversion Price Per Common Share on such record date, the maximum
number of shares of Common Stock issuable upon exercise of such rights,
options or warrants (or conversion of such convertible securities) shall be
deemed to have been issued and outstanding as of such record date and the
Conversion Ratio shall be adjusted pursuant to paragraph (g)(ii) hereof, as
though such maximum number of shares of Common Stock had been so issued for an
aggregate consideration payable by the holders of such rights, options,
warrants or convertible securities prior to their receipt of such shares of
Common Stock. In case any portion of such consideration shall be in a form
other than cash, the fair market value of such noncash consideration shall be
determined as set forth in paragraph (g)(ii) hereof. Such adjustment shall be
made successively whenever such record date is fixed; and in the event that
such rights, options or warrants are not so issued or expire unexercised, or
in the event of a change in the number of shares of Common Stock to which the
holders of such rights, options or warrants are entitled (other than pursuant
to adjustment provisions therein comparable to those contained in this
paragraph (g)), the Conversion Ratio shall again be adjusted to be the
Conversion Ratio which would then be in effect if such record date had not
been fixed, in the former event, or the Conversion Ratio which would then be
in effect if such holder had initially been entitled to such changed number of
shares of Common Stock, in the latter event.
(iv) In case the Corporation shall issue rights, options
(other than options issued pursuant to a plan described in clause II of
paragraph (g)(ii)) or warrants entitling the holders thereof to subscribe for
or purchase Common Stock (or securities convertible into shares of Common
Stock) or shall issue convertible securities, and the price per share of
Common Stock of such rights, options, warrants or convertible securities
(including, in the case of rights, options or warrants, the price at which
they may be exercised) is less than the then Conversion Price Per Common
Share, the maximum number of shares of Common Stock issuable upon exercise of
such rights, options or warrants or upon conversion of such convertible
securities shall be deemed to have been issued and outstanding as of the date
of such sale or issuance, and the Conversion Ratio shall be adjusted pursuant
to paragraph (g)(ii) hereof as though such maximum number of shares of Common
Stock had been so issued for an aggregate consideration equal to the aggregate
consideration paid for such rights, options, warrants or convertible
securities and the aggregate consideration payable by the holders of such
rights, options, warrants or convertible securities prior to their receipt of
such shares of Common Stock. In case any portion of such consideration shall
be in a form other than cash, the fair market value of such noncash
consideration shall be determined as set forth in paragraph (g)(ii) hereof.
Such adjustment shall be made successively whenever such rights, options,
warrants or convertible securities are issued; and in the event that such
rights, options or warrants expire unexercised, or in the event of a change in
the number of shares of Common Stock to which the holders of such rights,
options, warrants or convertible securities are entitled (other than pursuant
to adjustment provisions therein comparable to those contained in this
paragraph (g)), the Conversion Ratio shall again be adjusted to be the
Conversion Ratio which would then be in effect if such rights, options,
warrants or convertible securities had not been issued, in the former event,
or the Conversion Ratio which would then be in effect if such holders had
initially been entitled to such changed number of shares of Common Stock, in
the latter event. No adjustment of the Conversion Ratio shall be made
pursuant to this paragraph (g)(iv) to the extent that the Conversion Ratio
shall have been adjusted pursuant to paragraph (g)(iii) upon the setting of
any record date relating to such rights, options, warrants or convertible
securities and such adjustment fully reflects the number of shares of Common
Stock to which the holders of such rights, options, warrants or convertible
securities are entitled and the price payable therefor.
(v) In case the Corporation shall fix a record date for the
making of a distribution to holders of Common Stock (including any such
distribution made in connection with a consolidation or merger in which the
Corporation is the continuing corporation) of evidences of indebtedness,
assets or other property (other than dividends payable in Common Stock or
rights, options or warrants referred to in, and for which an adjustment is
made pursuant to, paragraph (g)(iii) hereof), the Conversion Ratio to be in
effect after such record date shall be determined by multiplying the
Conversion Ratio in effect immediately prior to such record date by a
fraction, (A) the numerator of which shall be the Current Valuation Per Common
Share on such record date, and (B) the denominator of which shall be the
Current Valuation Per Common Share on such record date, less the fair market
value (determined as set forth in paragraph (g)(ii) hereof) of the portion of
the assets, other property or evidence of indebtedness so to be distributed
which is applicable to one share of Common Stock. Such adjustments shall be
made successively whenever such a record date is fixed; and in the event that
such distribution is not so made, the Conversion Ratio shall again be adjusted
to be the Conversion Ratio which would then be in effect if such record date
had not been fixed.
(vi) For the purpose of any computation under paragraph (f) or
paragraphs (g)(ii), (iii), (iv) or (v) hereof, on any determination date, (I)
the "Current Valuation Per Common Share" shall be the greater of the Current
Market Price Per Common Share and the Conversion Price Per Common Share (each
as defined below), (II) the "Current Market Price Per Common Share" shall be
deemed to be the average (weighted by daily trading volume) of the Daily
Prices (as defined below) per share of the applicable class of Common Stock
for the 20 consecutive trading days immediately prior to such date, (III) the
"Conversion Price Per Common Share" shall be deemed to be the amount in
dollars which is equal to $50 divided by the Conversion Ratio immediately
prior to such adjustment, and (IV) "Daily Price" means (1) if the shares of
such class of Common Stock then are listed and traded on the American Stock
Exchange, Inc. ("AMEX"), the closing price on such day as reported on the AMEX
Composite Transactions Tape; (2) if the shares of such class of Common Stock
then are not listed and traded on the AMEX, the closing price on such day as
reported by the principal national securities exchange on which the shares are
listed and traded; (3) if the shares of such class of Common Stock then are
not listed and traded on any such securities exchange, the last reported sale
price on such day on the National Market of the National Association of
Securities Dealers, Inc. Automated Quotation System ("NASDAQ"); or (4) if the
shares of such class of Common Stock then are not traded on the NASDAQ
National Market, the average of the highest reported bid and lowest reported
asked price on such day as reported by NASDAQ. For purposes of any
computation under this paragraph (g), the number of shares of Common Stock
outstanding at any given time shall not include shares owned or held by or for
the account of the Corporation.
(vii) No adjustment to the Conversion Ratio pursuant to
paragraphs (g)(ii), (iii), (iv) and (v) above shall be required unless such
adjustment would require an increase or decrease of at least 1% in the
Conversion Ratio; provided however, that any adjustments which by reason of
this paragraph (g)(vii) are not required to be made shall be carried forward
and taken into account in any subsequent adjustment. All calculations under
this paragraph (g) shall be made to the nearest four decimal points.
(viii) In the event that, at any time as a result of the
provisions of this paragraph (g), the holder of this Series A Preferred Stock
upon subsequent conversion shall become entitled to receive any shares of
capital stock of the Corporation other than Common Stock, the number of such
other shares so receivable upon conversion of this Series A Preferred Stock
shall thereafter be subject to adjustment from time to time in a manner and on
terms as nearly equivalent as practicable to the provisions contained herein.
(h) Whenever an adjustment is made to the Conversion Ratio
pursuant to paragraph (8)(g), the Redemption Threshold shall be adjusted by
multiplying the Redemption Threshold by the Conversion Ratio in effect
immediately prior to such adjustment and dividing such product by the
Conversion Ratio in effect immediately after such adjustment. All adjustments
pursuant to this paragraph (8) shall be notified to the holders of this Series
A Preferred Stock and such notice shall be accompanied by a Schedule of
Computations of the adjustments.
(9) Voting Rights. (a) Except as otherwise provided by
applicable law, the holders of the shares of Series A Preferred Stock (i)
shall be entitled to vote with the holders of the Common Stock on all matters
submitted for a vote of holders of Common Stock, (ii) shall be entitled to a
number of votes equal to the number of votes to which the shares of Common
Stock issuable upon conversion of such shares of Series A Preferred Stock
would have been entitled if such shares of Common Stock had been outstanding
at the time of the applicable vote and related record date and (iii) shall be
entitled to notice of any stockholders' meeting in accordance with the
certificate of incorporation and by-laws of the Corporation.
(b) So long as any shares of Series A Preferred Stock are
outstanding, the Corporation shall not, without the written consent or
affirmative vote at a meeting called for that purpose of the holders of a
majority of the shares of Series A Preferred Stock then outstanding, amend,
alter or repeal, whether by merger, consolidation, combination,
reclassification or otherwise, the Certificate of Incorporation or By-laws of
the Corporation or of any provision thereof (including the adoption of a new
provision thereof) which would result in an alteration or circumvention of the
voting powers, designation and preferences and relative participating,
optional and other special rights, and qualifications, limitations and
restrictions of the Series A Preferred Stock; provided, however that any such
amendment or alteration that changes the dividend payable on, or the
liquidation preference or the par value of, the Series A Preferred Stock shall
require the affirmative vote at a meeting of holders of Series A Preferred
Stock duly called for such purpose, or the written consent, of the holder of
each share of Series A Preferred Stock.
(c) The consent or votes required in paragraph (b) above shall
be in addition to any approval of stockholders of the Corporation which may be
required by law or pursuant to any provision of the Corporation's Certificate
of Incorporation or By-Laws, which approval shall be obtained by vote of the
stockholders of the Corporation in the manner provided in paragraph (a) above.
(10) Issuance and Amendment. (a) The Corporation will not
issue more than 1,200,000 shares of Series A Preferred Stock and the number of
shares designated as shares of Series A Preferred Stock may not be increased or
decreased without the consent of the holders of a majority of the shares of
Series A Preferred Stock outstanding.
(b) Shares of Series A Preferred Stock which have been issued
and reacquired in any manner, including shares purchased, redeemed, converted
or exchanged, shall (upon compliance with any applicable provisions of the
laws of the State of Delaware) be cancelled and shall not be available for
reissue or redesignation.
(c) Upon any such reacquisition by the Corporation, a
certificate identifying the shares reacquired, stating that reissuance of such
shares is prohibited and reciting the retirement of such shares shall be
executed, acknowledged and filed in accordance with provisions of the laws of
the State of Delaware.
(11) Definitions. The following terms, as used herein, have the
following meanings:
"By-Laws", with respect to a corporation, shall mean the
by-laws, articles of association, or similar corporate organizational document.
"Certificate of Incorporation", with respect to a corporation,
shall mean the charter, certificate of incorporation, or similar corporate
organizational document.
"Common Stock" shall mean the Class A Common Stock, par value
$0.001 per share, of the Corporation.
"Common Stock Distribution" shall have the meaning set forth in
paragraph (3)(d)(ii).
"Series A Preferred Stock" shall have the meaning set forth in
paragraph (1).
"Dividend Payment Date" shall have the meaning set forth in
paragraph (3)(a).
"Exchange Notes" shall have the meaning set forth in paragraph
(6)
"Stock Option Plans" shall mean the 1989 Long-Term Incentive
Compensation Plan and the Employee Stock Purchase Plan of the Corporation.
"outstanding", when used with reference to shares of stock,
shall mean issued shares, excluding shares held by the Corporation or a
subsidiary.
"Person" shall mean any corporation, partnership, trust,
organization, association, group (within the meaning of Section 13(d)(3) of
the Securities Exchange Act of 1934, as amended), other entity or individual.
"Required Approvals" shall mean any approvals or consents
(including regulatory approvals) or the expiration of any waiting periods
required for conversion of the outstanding shares of Series A Preferred Stock.
"Trading Day" shall mean a day on which the principal national
securities exchange on which the shares of Common Stock are listed or admitted
to trading is open for the transaction of business or, if the shares of Common
Stock are not listed or admitted to trading on any national securities
exchange, a day on which NASDAQ or other similar system as may be then in use
is open for the reporting of bid and asked prices in the over-the-counter
market, or, if bid and asked prices for the shares of Common Stock are not so
reported by any such system, a Business Day.
(12) General Provisions. (a) The headings of the paragraphs,
subparagraphs, clauses and subclauses of this Certificate of Designation are
for convenience of reference only and shall not define, limit or affect any of
the provisions hereof.
(b) The holder of Series A Preferred Stock or Exchange Notes,
by acceptance thereof, acknowledges and agrees that payments of dividends,
interest, premium and principal on, and exchange, redemption and repurchase of,
such securities by the Corporation are subject to restrictions contained in
certain credit and financing agreements on the Corporation.
IN WITNESS WHEREOF, Air & Water Technologies Corporation has
caused this Certificate of Designation to be signed and attested by the
undersigned this 14th day of June, 1994.
AIR & WATER TECHNOLOGIES
CORPORATION
By /s/ William R. Lewis
--------------------------
Name: William R. Lewis
Title: Chief Financial Officer
By /s/ Douglas Satzger
-------------------------
Name: Douglas Satzger
Title: Senior Vice President
ATTEST:
/s/ Joseph M. Morena
- ---------------------
Name: Joseph M. Morena
Title: Assistant Secretary
Attachment A
to
Certificate of Designation
AIR & WATER TECHNOLOGIES CORPORATION
5 1/2% CONVERTIBLE SUBORDINATED NOTES
FOR VALUE RECEIVED, Air & Water Technologies Corporation, a
Delaware corporation (the "Company"), hereby promises to pay to _____________
or registered assigns, the principal amount of ____________ ($___________), on
the Maturity Date pursuant to Section 2.01 and promises to pay interest on the
unpaid principal amount of this Note on the dates and at the rate provided for
in Section 2.02.
This Note is one of the series designated 5 1/2% Convertible
Subordinated Notes, limited in aggregate principal amount to $60,000,000 (the
"Notes").
ARTICLE I
DEFINITIONS
SECTION 1.01. Definitions. The following terms, as used
herein, have the following meanings:
"Affiliate" of any Person means any other Person (other than,
in the case of the Company, a Subsidiary and, in the case of a Subsidiary, the
Company) directly or indirectly controlling, controlled by or under common
control with such Person. As used in this definition of "Affiliate", the term
"control" means the possession, directly or indirectly, of the power to direct
or cause the direction of the management and policies of a Person, whether
through ownership of voting securities, by contract or otherwise.
"Business Day" means any day except a Saturday, Sunday or other
day on which commercial banks in New York City are authorized by law to close.
"By-Laws", with respect to a corporation, shall mean the
by-laws, articles of association, or similar corporate organizational document.
"Capitalized Lease" means, as applied to any Person, any lease
of any property (whether real, personal or mixed) the obligations of such
Person as lessee under which, in conformity with generally accepted accounting
principles, are required to be capitalized on the balance sheet of that
Person.
"Capitalized Lease Obligation" means, as applied to any Person,
the obligation of such Person under any Capitalized Lease to the extent
required to be capitalized in accordance with generally accepted accounting
principles.
"Certicate of Incorporation", with respect to a corporation,
shall mean the charter, certificate of incorporation, or similar corporate
organizational document.
"Common Stock" shall mean the Class A Common Stock, par value
$0.001 per share, of the Company.
"Debt" of any Person means at any date, without duplication,
(i) all obligations of such Person for borrowed money, (ii) all obligations of
such Person evidenced by bonds, debentures, notes or other similar
instruments, (iii) all obligations of such Person to pay the deferred purchase
price of property or services, except trade accounts payable arising in the
ordinary course of business, (iv) all obligations of such Person to purchase
securities (or other property) for its own account which arise out of or in
connection with the sale of the same or substantially similar securities or
properties, (v) all obligations of such Person in respect of letters of credit
or bankers' acceptances or other similar instruments (or reimbursement
obligations with respect thereto), (vi) all obligations of such Person as
lessee under Capitalized Leases, (vii) all Debt of others Guaranteed by such
Person, (viii) all Debt of others secured by a Lien on any asset of such
Person, whether or not such Debt is assumed by such Person and (ix) all
renewals, extensions, refundings, deferrals, amendments or modifications of
Debt described in clauses (i), (ii), (iii), (iv), (v), (vii) and (viii) and
all renewals and extensions of Capital Leases described in clauses (vi), (vii)
and (viii).
"Default" means any condition or event which constitutes an
Event of Default or which with the giving of notice or lapse of time or both
would, unless cured or waived, become an Event of Default.
"Event of Default" has the meaning set forth in Article VII.
"Guarantee" by any Person means any obligation, contingent or
otherwise, of such Person directly or indirectly guaranteeing any Debt of any
other Person and, without limiting the generality of the foregoing, any
obligation, direct or indirect, contingent or otherwise, of such Person (i) to
purchase or pay (or advance or supply funds for the purchase or payment of)
such Debt (whether arising by virtue of partnership arrangements, by agreement
to keep-well, to purchase assets, goods, securities or services, to
take-or-pay, or to maintain financial statement conditions or otherwise) or
(ii) entered into for the purpose of assuring in any other manner the obligee
of such Debt of the payment thereof or to protect such obligee against loss in
respect thereof (in whole or in part), provided that the term Guarantee shall
not include endorsements for collection or deposit in the ordinary course of
business. The term "Guarantee" used as a verb has a corresponding meaning.
"Interest Payment Date" means the last Business Day of each
March, June, September and December.
"Lien" means, with respect to any asset, any mortgage, lien,
pledge, charge, security interest or encumbrance of any kind in respect of
such asset. For the purposes of this Agreement, the Company or any Subsidiary
shall be deemed to own subject to a Lien any asset which it has acquired or
holds subject to the interest of a vendor or lessor under any conditional sale
agreement, Capitalized Lease or other title retention agreement relating to
such asset.
"Maturity Date" means the earlier of (i) the tenth anniversary
of the date of issue of this Note and (ii) any date fixed for redemption in
accordance with Article V.
"Noteholder" means each Person which is a holder of any of the
Notes, and their respective successors.
"Notice of Election to Convert" shall mean the Notice of
Election to Convert set forth in Schedule A to this Note.
"Notice of Intention to Convert" shall mean a notice stating
that the Noteholder intends to convert this Note pursuant to Article IV upon
receipt of the Required Approvals.
"outstanding", when used with reference to shares of stock,
shall mean issued shares, excluding shares held by the Company or a
Subsidiary.
"Person" shall mean any corporation, partnership, trust,
organization, association, group (within the meaning of Section 13(d)(3) of
the Securities Exchange Act of 1934, as amended), other entity or individual.
"Required Approvals" shall mean any approvals or consents
(including regulatory approvals) or the expiration of any waiting periods
required for conversion of this Note.
"Series A Preferred Stock" shall mean the 5 1/2% Series A
Convertible Exchangeable Preferred Stock of the Company.
"Stock Option Plans" shall mean the 1989 Long-Term Incentive
Compensation Plan and the Employee Stock Purchase Plan of the Corporation.
"Subsidiary" means any corporation or other entity of which
securities or other ownership interests having ordinary voting power to elect
a majority of the board of directors or other persons performing similar
functions are at the time directly or indirectly owned by the Company.
"Trading Day" shall mean a day on which the principal national
securities exchange on which the shares of Common Stock are listed or admitted
to trading is open for the transaction of business or, if the shares of Common
Stock are not listed or admitted to trading on any national securities
exchange, a day on which NASDAQ or other similar system as may be then in use
is open for the reporting of bid and asked prices in the over-the-counter
market, or, if bid and asked prices for the shares of Common Stock are not so
reported by any such system, a Business Day.
ARTICLE II
PAYMENT OF PRINCIPAL AND INTEREST
SECTION 2.01. Mandatory Redemption. On the Maturity Date
(the "Principal Repayment Date") the principal amount of this Note together
with all accrued and unpaid interest to the Maturity Date shall be due and
payable, and the Company shall repay such amount on the Maturity Date to the
Noteholder.
SECTION 2.02. Interest Rate. (a) Except as provided in
Article IV, this Note shall bear interest on the outstanding principal amount
thereof, for each day from the date of this Note until it becomes due, at a
rate per annum equal to 5 1/2%. Such interest shall be payable in four equal
quarterly payments in arrears on each Interest Payment Date and on the
Maturity Date.
(b) Any overdue principal of or interest on the Loan shall
bear interest, payable on demand, for each day from and including the date
payment thereof was due to but excluding the date of actual payment, at a rate
per annum equal to 6 1/2%.
SECTION 2.03. Computation of Interest. Interest, other than
interest for a quarterly period, shall be computed on the basis of a year of
365 days and paid for the actual number of days elapsed (including the first
day but excluding the last day).
ARTICLE III
SUBORDINATION
SECTION 3.01. Definitions. The following term, as used in this
Article, shall have the following meaning:
"Superior Indebtedness" means all Debt of the Company (including,
without limitation, any interest which accrues after the commencement of any
case, proceeding or other action relating to the bankruptcy, insolvency or
reorganization of the Company) other than the Notes.
SECTION 3.02. Subordination to Superior Indebtedness. The Company
and the Noteholders agree for the benefit of the holders of the Superior
Indebtedness that the Notes shall, in the manner hereinafter set forth, be
subordinate and junior in right of payment to all Superior Indebtedness of the
Company.
SECTION 3.03. Limitations on Payments and Acceleration. (a) Upon
the maturity of all or any part of the Superior Indebtedness by lapse of time,
acceleration or otherwise, such Superior Indebtedness shall first be paid in
full, or such payment shall be duly provided for in cash or in a manner
satisfactory to the holders of the Superior Indebtedness, before any payment
by the Company is made on account of the principal of or interest on the Notes
or to acquire the Notes.
(b) In the event and during the continuation of any default in the
payment of any principal of or interest on any Superior Indebtedness when due
and payable (each a "Payment Default"), whether at maturity, upon any
redemption, by declaration or otherwise, no payment shall be made by the
Company on or with respect to the principal of, or interest on, the Notes or
to acquire the Notes unless and until such Payment Default shall have been
remedied. In any such event, no holder of the Notes shall accept or receive
any payment of or on account of the Notes, notwithstanding the terms of the
Notes.
(c) In the event that any event or condition shall occur and be
continuing which would permit, or which with notice or lapse of time or both
would permit, the holder or holders of any Superior Indebtedness (or a trustee
acting on behalf of the holders thereof) to declare such Superior Indebtedness
due and payable prior to the date on which it would otherwise have become due
and payable (each such event or condition being referred to in this Note as a
"Non-Payment Default"), no payment shall be made by the Company on or with
respect to the principal of, or interest on, the Notes or to acquire the Notes
during any period commencing on the date written notice of such Non-Payment
Default (a "Blockage Notice") shall have been given to the Company and the
holders of the Notes by the holders of a majority in principal amount of the
Superior Indebtedness then outstanding with respect to which such Non-Payment
Default shall have occurred (or their authorized agent) and ending on the
earliest to occur of the date (the "Blockage Expiration Date") (i) 180 days
after the date of the Blockage Notice, (ii) such Non-Payment Default shall
have been remedied or effectively waived or shall have ceased to exist and
(iii) the Superior Indebtedness in respect of which such Non-Payment Default
shall have occurred shall have been paid in full, provided that the foregoing
provisions do not limit the number of Blockage Notices which may be given
during any 360-day period, provided further that the number of days on which
payment on the Notes may be prohibited under this subdivision (c) during any
360-day period shall not exceed 180 days. At the Blockage Expiration Date,
the Company shall, subject to Section 3.03(b), promptly pay the holder or
holders of the Notes all sums not paid as a result of this Section 3.03(c).
In any such event, no holder of the Notes shall accept or receive during any
such period any payment of or an account of the Notes, notwithstanding the
terms of the Notes.
SECTION 3.04. Note Subordinated to Prior Payment of all Superior
Indebtedness on Dissolution, Liquidation or Reorganization of Company. In the
event of any insolvency or bankruptcy proceedings, and any receivership,
liquidation, reorganization or other similar proceedings in connection
therewith, relative to the Company or to its creditors, in their capacity as
creditors of the Company, or to substantially all of its property, and in the
event of any proceedings for voluntary liquidation, dissolution or other
winding up of the Company, whether or not involving insolvency or bankruptcy,
then
(a) the holders of all Superior Indebtedness shall first be entitled
to receive payment in full of the principal thereof, interest and all other
amounts payable thereon (accruing before and after the commencement of the
proceedings) before any holder of the Notes is entitled to receive any
payment on account of the principal of or interest on the Notes; and
(b) any payment or distribution of assets of the Company of any kind
or character, whether in cash, property or securities to which any holder
of the Notes would be entitled, but for the provisions of this Article III,
shall be paid or distributed by the liquidating trustee or agent or other
person making such payment or distribution, whether a trustee in
bankruptcy, a receiver or liquidating trustee or other trustee or agent,
directly to the holders of the Superior Indebtedness or any other
representative on behalf of the holders of Superior Indebtedness, to the
extent necessary to make payment in full of all principal, interest and all
other amounts payable on all Superior Indebtedness remaining unpaid, after
giving effect to any concurrent payment or distribution to the holders of
the Superior Indebtedness.
SECTION 3.05. Rights of Holders of Superior Indebtedness;
Subrogation. (a) Should any payment or distribution or security or the
proceeds of any thereof be collected or received by any holder of the Notes in
respect of the Notes, and such collection or receipt is prohibited hereunder
prior to the payment in full of the Superior Indebtedness, such holder will
forthwith deliver the same to the holders of the Superior Indebtedness for the
equal and ratable benefit of the holders of the Superior Indebtedness in
precisely the form received (except for the endorsement or the assignment of
or by such holder where necessary) for application to payment of all Superior
Indebtedness in full, after giving effect to any concurrent payment or
distribution to the holders of Superior Indebtedness and, until so delivered,
the same shall be held in trust by such holder as the property of the holders
of the Superior Indebtedness.
(b) All payments and distributions received by the holders of the
Superior Indebtedness in respect of the Notes, to the extent received in or
converted into cash, may be applied by the holders of the Superior
Indebtedness first to the payment of any and all reasonable out-of-pocket
expenses (including attorney's fees and legal expenses) paid or incurred by
the holders of the Superior Indebtedness or such representative in enforcing
the provisions hereof or in endeavoring to collect or realize upon the Notes
or any security therefor, and any balance thereof shall, solely as between any
holder of the Notes, on the one hand, and the holders of the Superior
Indebtedness, on the other hand, be applied by the holders of the Superior
Indebtedness in such order of application as the holders of the Superior
Indebtedness may from time to time select, toward the payment of the Superior
Indebtedness remaining unpaid.
(c) No holder of the Notes shall be subrogated to the rights of the
holders of the Superior Indebtedness to receive payments or distributions of
assets of the Company until all amounts payable with respect to the Superior
Indebtedness shall be paid in full; and, for the purposes of such subrogation,
no payments or distributions to the holders of the Superior Indebtedness of
any cash, property or securities to which any holder of the Notes would be
entitled except for these provisions shall, as between the Company, its
creditors other than the holders of the Superior Indebtedness, and such holders
of the Notes, be deemed to be a payment by the Company to or on account of the
Superior Indebtedness.
(d) Subject to the payment in full of all Superior Indebtedness, the
holders of the Notes shall be subrogated (equally and ratably with the holders
of all subordinated indebtedness of the Company which, by its terms, is not
superior in right of payment to the Notes, and ranks on a parity with the
Notes) to the rights of the holders of Superior Indebtedness to receive
payments or distributions of cash, property or securities of the Company
applicable to the Superior Indebtedness until all amounts owing on the Notes
shall be paid in full. For purposes of such subrogation, no payments or
distributions to the holders of the Notes of cash, property, securities or
other assets by virtue of the subrogation herein provided which otherwise
would have been made to the holders of the Superior Indebtedness shall, as
between the Company, its creditors other than the holders of Superior
Indebtedness and the holders of the Notes, be deemed to be a payment to or on
account of the Notes. The holders of the Notes agree that, in the event that
all or any part of any payment made on account of the Superior Indebtedness is
recovered from the holders of Superior Indebtedness as a preference,
fraudulent transfer or similar payment under any bankruptcy, insolvency or
similar law, any payment or distribution received by the holders of the Notes
on account of the Notes at any time after the date of the payment so
recovered, whether pursuant to the right of subrogation provided for in this
Section 3.05 or otherwise, shall be deemed to have been received by such
holders of the Notes in trust as the property of the holders of the Superior
Indebtedness and such holders shall forthwith deliver the same to the holders
of the Superior Indebtedness for the equal and ratable benefit of the holders
of the Superior Indebtedness for application to payment of all Superior
Indebtedness until paid in full.
SECTION 3.06. Renewals, Extensions and Increases of Superior
Indebtedness. Each holder of the Notes by his acceptance thereof thereby
waives any and all notice of renewal, extension, accrual or (consistent with
the definition of Superior Indebtedness) increase in the amount of any of the
Superior Indebtedness, present or future, and agrees and consents that without
notice to or assent by any holder or holders of the Notes:
(i) the obligation and liabilities of the Company or any other party
or parties for or upon the Superior Indebtedness (or any promissory note,
security document or guaranty evidencing or securing the same) may, from
time to time, in whole or in part, be renewed, extended, increased
(consistent with the definition of Superior Indebtedness), modified,
amended, accelerated, compromised, supplemented, terminated, sold,
exchanged, waived or released;
(ii) the holders of the Superior Indebtedness or any other
representative acting on behalf of the holders of the Superior Indebtedness
and the holders of the Superior Indebtedness may exercise or refrain from
exercising any right, remedy or power granted by or in connection with any
agreements relating to the Superior Indebtedness; and
(iii) any balance or balances of funds with any holders of the
Superior Indebtedness at any time standing to the credit of the Company
may, from time to time, in whole or in part, be surrendered or released;
all as the holders of the Superior Indebtedness or any other representative or
representatives acting on behalf of the holders of the Superior Indebtedness
and the holders of the Superior Indebtedness may deem advisable and all without
impairing, abridging, diminishing, releasing or affecting the subordination of
the Notes to the Superior Indebtedness provided for herein.
SECTION 3.07. Obligation of Company Unconditional. Nothing
contained in this Article III or in the Notes is intended to or shall impair,
as between the Company, its creditors other than the holders of the Superior
Indebtedness, and the holders of the Notes, the obligation of the Company,
which is absolute and unconditional, to pay to the holders of the Notes the
principal of, and interest on the Notes, as and when the same shall become due
and payable, by lapse of time, acceleration or otherwise, in accordance with
their terms, or is intended to or shall affect the relative rights of the
holders of the Notes and other creditors of the Company other than the holders
of the Superior Indebtedness, nor shall anything herein or therein prevent the
holder of the Notes (i) from taking all appropriate actions to preserve their
rights under the Notes not inconsistent with the rights of the holders of the
Superior Indebtedness under this Article III, or (ii) from exercising all
remedies, including without limitation equitable remedies, otherwise permitted
by applicable law upon default under the Notes, subject to the rights, if any,
under this Article III of the holders of the Superior Indebtedness in respect
of cash, property or securities of the Company otherwise payable or delivered
to such holders upon the exercise of any such remedy. The provisions of this
Article III are and are intended solely for the purpose of defining the
relative rights of holders of the Notes, on the one hand, and the holders of
the Superior Indebtedness, on the other hand.
SECTION 3.08. Miscellaneous. (a) Each holder of the Notes by its
acceptance thereof thereby acknowledges and agrees that the holders of the
Superior Indebtedness have relied upon and will continue to rely upon the
subordination provided for in this Article III in entering into the agreements
relating to Superior Indebtedness and in extending credit to the Company
pursuant thereto.
(b) No present or future holder of Superior Indebtedness shall be
prejudiced in his right to enforce the subordination contained herein in
accordance with the terms hereof by any act or failure to act on the part of
the Company or any holder of the Notes. The subordination provisions
contained in this Article III are for the benefit of the holders of the
Superior Indebtedness from time to time and, so long as Superior Indebtedness
is outstanding under any agreement, may not be rescinded, cancelled or
modified in any way without the prior written consent thereto of holders of at
least 75% in aggregate principal amount of the Superior Indebtedness at the
time outstanding.
(c) The subordination provisions contained in this Article III shall
be binding upon any holder of the Notes and upon the heirs, legal
representatives, successors and assigns of any holder of the Notes; and, to
the extent that any holder of the Notes is either a partnership or a
corporation, all references herein to any holder of the Notes shall be deemed
to include any successor or successors, whether immediate or remote, to such
partnership or corporation.
ARTICLE IV
CONVERSION
SECTION 4.01. Conversion. (a) Subject to the provisions of this
Article IV, the Noteholder shall have the right, at any time, at such
Noteholder's option, to convert any or all of the principal amount of this
Note, in whole or in part, into fully paid and non-assessable shares of Common
Stock. The number of shares of Common Stock deliverable upon conversion of
each $50 of principal amount of this Note, adjusted as hereinafter provided,
is referred to herein as the "Conversion Ratio." The Conversion Ratio as of
the date of issue of this Note shall be the Conversion Ratio under the Series
A Preferred Stock immediately prior to the exchange of such Series A Preferred
Stock for this Note, subject to adjustment from time to time pursuant to
Section 4.07 hereof. Notwithstanding any call for redemption pursuant to
Article V, the right to convert shares so called for redemption shall
terminate at the close of business on the date immediately preceding the date
fixed for such redemption or exchange, as the case may be, unless the Company
shall default in making payment of the amount payable upon such redemption or
in making the exchange and payment of any amount payable upon such exchange.
SECTION 4.02. Exercise Procedure. (a) In order to exercise the
conversion privilege, the Noteholder shall surrender this Note at the office
of the Company, with the Notice of Election to Convert completed and signed.
Unless the shares issuable on conversion are to be issued in the same name as
the name in which this Note is registered, each share surrendered for
conversion shall be accompanied by instruments of transfer, in form
satisfactory to the Company, duly executed by the Noteholder or the
Noteholder's duly authorized attorney and an amount sufficient to pay any
transfer or similar tax.
(b) As promptly as practicable after the surrender by the Noteholder
as aforesaid, the Company shall issue and shall deliver to such Noteholder, or
on the Noteholder's written order to the Noteholder's transferee, a
certificate or certificates for the whole number of shares of Common Stock
issuable upon the conversion of such shares in accordance with the provisions
of this Article IV.
(c) Each conversion shall be deemed to have been effected immediately
prior to the close of business on the date on which this Note shall have been
surrendered and such notice received by the Company as aforesaid, and the
person in whose name or names any certificate or certificates for shares of
Common Stock shall be issuable upon such conversion shall be deemed to have
become the holder of record of the shares of Common Stock represented thereby
at such time on such date and such conversion shall be into a number of shares
of Common Stock equal to the product of (A) the principal amount of this Note
surrendered for conversion divided by 50 and (B) the Conversion Ratio in
effect at such time on such date. All shares of Common Stock delivered upon
conversion of this Note will upon delivery be duly and validly issued and
fully paid and non-assessable, free of all liens and charges and not subject
to any preemptive rights. Upon the surrender of this Note, the principal
amount of this Note surrendered for conversion shall no longer be deemed to be
outstanding and all rights of a Noteholder with respect to the principal
amount of this Note surrendered for conversion shall immediately terminate
except the right to receive the Common Stock and other amounts, including any
accrued and unpaid interest on this Note, payable pursuant to this Article IV.
SECTION 4.03. Effect of Election. (a) Upon delivery to the Company
by the Noteholder of a Notice of Election to Convert or a Notice of Intention
to Convert, the right of the Company to redeem the principal amount of this
Note which is to be converted shall terminate, regardless of whether a notice
of redemption has been mailed.
(b) Interest on the outstanding principal amount of this Note
delivered for conversion shall cease to accrue on the date of delivery by the
Noteholder of such Notice of Election to Convert or Notice of Intention to
Convert. Any such accrued and unpaid interest shall be payable by the Company
to the Noteholder on the next succeeding Interest Payment Date. From and
after the date of such delivery, this Note shall participate equally and
ratably with the holders of shares of Common Stock in all dividends paid on
the Common Stock as if this Note had been converted to shares of Common Stock
at the time of such delivery.
(c) Except as provided above and in Section 4.07, the Company shall
make no adjustment for accrued and unpaid interest on this Note, on conversion
of this Note or for dividends in cash on the shares of Common Stock issued upon
such conversion.
SECTION 4.04. Issuance of Shares. (a) The Company covenants that
it shall at all times reserve and keep available, free from preemptive rights,
such number of its authorized but unissued shares of Common Stock as shall be
required for the purpose of effecting conversions of the Notes.
(b) Prior to the delivery of any securities which the Company shall
be obligated to deliver upon conversion of the Notes, the Company shall comply
with all applicable federal and state laws and regulations which require
action to be taken by the Company.
SECTION 4.05. Taxes on Conversion. The Company will pay any and all
documentary stamp or similar issue or transfer taxes payable in respect of the
issue or delivery of shares of Common Stock on conversion of any part of the
principal amount of this Note pursuant hereto; provided, that the Company shall
not be required to pay any tax which may be payable in respect of any transfer
involved in the issue or delivery of shares of Common Stock in a name other
than that of the Noteholder to be converted and no such issue or delivery
shall be made unless and until the person requesting such issue or delivery
has paid to the Company the amount of any such tax or has established, to the
satisfaction of the Company, that such tax has been paid.
SECTION 4.06. No Fractions of Common Stock to be Issued. In
connection with the conversion of the principal amount of this Note, no
fractions of shares of Common Stock shall be issued, but in lieu thereof the
Company shall pay a cash adjustment in respect of such fractional interest in
an amount equal to such fractional interest multiplied by the Daily Price (as
defined in Section 4.07(f)) per share of Common Stock on the Trading Day on
which this Note is deemed to have been converted. If more than one Note is
surrendered for conversion by the same Noteholder (or Affiliate of such
Noteholder) at the same time, the number of full shares of Common Stock
issuable on conversion of the principal amount thereof surrendered for
conversion shall be computed on the basis of the total principal amounts of
the Notes so surrendered.
Section 4.07. Anti-dilution. (a) In case the Company shall at any
time after the date of initial issue of this Note (I) declare a dividend or
make a distribution on Common Stock payable in Common Stock, (II) subdivide or
split the outstanding Common Stock, (III) combine or reclassify the
outstanding Common Stock into a smaller number of shares, (IV) issue any
shares of its capital stock in a reclassification of Common Stock (including
any such reclassification in connection with a consolidation or merger in
which the Company is the continuing corporation), or (V) consolidate with, or
merge with or into, any other Person, the Conversion Ratio in effect at the
time of the record date for such dividend or distribution or of the effective
date of such subdivision, split, combination, consolidation, merger or
reclassification shall be proportionately adjusted so that the conversion of
this Note after such time shall entitle the Noteholder to receive the
aggregate number of shares of Common Stock or other securities of the Company
(or shares of any security into which such shares of Common Stock have been
combined, consolidated, merged or reclassified pursuant to clause (III), (IV)
or (V) above) which, if this Note had been converted immediately prior to such
time, such Noteholder would have owned upon such conversion and been entitled
to receive by virtue of such dividend, distribution, subdivision, split,
combination, consolidation, merger or reclassification, assuming such holder
of Common Stock of the Company (x) is not a Person with which the Company
consolidated or into which the Company merged or which merged into the Company
or to which such recapitalization, sale or transfer was made, as the case may
be ("constituent Person"), or an affiliate of a constituent Person and (y)
failed to exercise any rights of election as to the kind or amount of
securities, cash and other property receivable upon such reclassification,
change, consolidation, merger, recapitalization, sale or transfer (provided,
that if the kind or amount of securities, cash and other property receivable
upon such reclassification, change, consolidation, merger, recapitalization,
sale or transfer is not the same for each share of Common Stock of the Company
held immediately prior to such reclassification, change, consolidation, merger,
recapitalization, sale or transfer by other than a constituent Person or an
affiliate thereof and in respect of which such rights of election shall not
have been exercised ("non-electing share"), then for the purpose of this
Section 4.07 the kind and amount of securities, cash and other property
receivable upon such reclassification, change, consolidation, merger,
recapitalization, sale or transfer by each non-electing share shall be deemed
to be the kind and amount so receivable per share by a plurality of the
non-electing shares). Such adjustment shall be made successively whenever any
event listed above shall occur.
(b) In case the Company shall issue or sell any Common Stock (other
than Common Stock issued (I) upon conversion of the Series A Preferred Stock,
the Notes or the 8% Convertible Subordinated Debentures due May 15, 2015, (II)
pursuant to the Company's Stock Option Plans or pursuant to any other Common
Stock related employee compensation plan of the Company approved by the
Company's Board of Directors or (III) upon exercise or conversion of any
security the issuance of which caused an adjustment under Sections 4.07(c) or
(d) hereof) without consideration or for a consideration per share less than
the then Conversion Price Per Common Share (as defined in Section 4.07(f)),
the Conversion Ratio to be in effect after such issuance or sale shall be
determined by multiplying the Conversion Ratio in effect immediately prior to
such issuance or sale by a fraction, (A) the numerator of which shall be the
product of the aggregate number of shares of Common Stock outstanding
immediately after such issuance or sale and the Current Valuation Per Common
Share (as defined in Section 4.07(f)) immediately prior to such issuance or
sale and (B) the denominator of which shall be the sum of (x) the number of
shares of Common Stock outstanding immediately prior to the time of such
issuance or sale multiplied by the Current Valuation Per Common Share
immediately prior to such issuance or sale and (y) the aggregate
consideration, if any, to be received by the Company upon such issuance or
sale. In case any portion of the consideration to be received by the Company
shall be in a form other than cash, the fair market value of such noncash
consideration shall be utilized in the foregoing computation. Such fair
market value shall be determined by the Board of Directors of the Company;
provided that if the Noteholders of 25% or more of the aggregate principal
amount of the Notes shall object to any such determination, the Board of
Directors shall retain an independent appraiser reasonably satisfactory to
such Noteholders to determine such fair market value. The Noteholders shall
be notified promptly of any consideration other than cash to be received by
the Company and furnished with a description of the consideration and the fair
market value thereof, as determined by the Board of Directors.
(c) In case the Company shall fix a record date for the issuance of
rights, options or warrants to the holders of its Common Stock or other
securities entitling such holders to subscribe for or purchase shares of
Common Stock (or securities convertible into shares of Common Stock) at a
price per share of Common Stock (or having a conversion price per share of
Common Stock, if a security convertible into shares of Common Stock) less than
the then Conversion Price Per Common Share on such record date, the maximum
number of shares of Common Stock issuable upon exercise of such rights,
options or warrants (or conversion of such convertible securities) shall be
deemed to have been issued and outstanding as of such record date and the
Conversion Ratio shall be adjusted pursuant to Section 4.07(b) hereof, as
though such maximum number of shares of Common Stock had been so issued for an
aggregate consideration payable by the holders of such rights, options,
warrants or convertible securities prior to their receipt of such shares of
Common Stock. In case any portion of such consideration shall be in a form
other than cash, the fair market value of such noncash consideration shall be
determined as set forth in Section 4.07(b) hereof. Such adjustment shall be
made successively whenever such record date is fixed; and in the event that
such rights, options or warrants are not so issued or expire unexercised, or
in the event of a change in the number of shares of Common Stock to which the
holders of such rights, options or warrants are entitled (other than pursuant
to adjustment provisions therein comparable to those contained in this Section
4.07), the Conversion Ratio shall again be adjusted to be the Conversion Ratio
which would then be in effect if such record date had not been fixed, in the
former event, or the Conversion Ratio which would then be in effect if such
holder had initially been entitled to such changed number of shares of Common
Stock, in the latter event.
(d) In case the Company shall issue rights, options (other than
options issued pursuant to a plan described in clause II of Section 4.07(b))
or warrants entitling the holders thereof to subscribe for or purchase Common
Stock (or securities convertible into shares of Common Stock) or shall issue
convertible securities, and the price per share of Common Stock of such
rights, options, warrants or convertible securities (including, in the case of
rights, options or warrants, the price at which they may be exercised) is less
than the then Conversion Price Per Common Share, the maximum number of shares
of Common Stock issuable upon exercise of such rights, options or warrants or
upon conversion of such convertible securities shall be deemed to have been
issued and outstanding as of the date of such sale or issuance, and the
Conversion Ratio shall be adjusted pursuant to Section 4.07(b) hereof as
though such maximum number of shares of Common Stock had been so issued for an
aggregate consideration equal to the aggregate consideration paid for such
rights, options, warrants or convertible securities and the aggregate
consideration payable by the holders of such rights, options, warrants or
convertible securities prior to their receipt of such shares of Common Stock.
In case any portion of such consideration shall be in a form other than cash,
the fair market value of such noncash consideration shall be determined as set
forth in Section 4.07(b) hereof. Such adjustment shall be made successively
whenever such rights, options, warrants or convertible securities are issued;
and in the event that such rights, options or warrants expire unexercised, or
in the event of a change in the number of shares of Common Stock to which the
holders of such rights, options, warrants or convertible securities are
entitled (other than pursuant to adjustment provisions therein comparable to
those contained in this Section 4.07), the Conversion Ratio shall again be
adjusted to be the Conversion Ratio which would then be in effect if such
rights, options, warrants or convertible securities had not been issued, in
the former event, or the Conversion Ratio which would then be in effect if
such holders had initially been entitled to such changed number of shares of
Common Stock, in the latter event. No adjustment of the Conversion Ratio shall
be made pursuant to this Section 4.07(d) to the extent that the Conversion
Ratio shall have been adjusted pursuant to Section 4.07(c) upon the setting of
any record date relating to such rights, options, warrants or convertible
securities and such adjustment fully reflects the number of shares of Common
Stock to which the holders of such rights, options, warrants or convertible
securities are entitled and the price payable therefor.
(e) In case the Company shall fix a record date for the making of a
distribution to holders of Common Stock (including any such distribution made
in connection with a consolidation or merger in which the Company is the
continuing corporation) of evidences of indebtedness, assets or other property
(other than dividends payable in Common Stock or rights, options or warrants
referred to in, and for which an adjustment is made pursuant to, Section
4.07(c) hereof), the Conversion Ratio to be in effect after such record date
shall be determined by multiplying the Conversion Ratio in effect immediately
prior to such record date by a fraction, (A) the numerator of which shall be
the Current Valuation Per Common Share on such record date, and (B) the
denominator of which shall be the Current Valuation Per Common Share on such
record date, less the fair market value (determined as set forth in Section
4.07(b) hereof) of the portion of the assets, other property or evidence of
indebtedness so to be distributed which is applicable to one share of Common
Stock. Such adjustments shall be made successively whenever such a record
date is fixed; and in the event that such distribution is not so made, the
Conversion Ratio shall again be adjusted to be the Conversion Ratio which
would then be in effect if such record date had not been fixed.
(f) For the purpose of any computation under Section 4.06 or
Sections 4.07(b), (c), (d) or (e) hereof, on any determination date, (I) the
"Current Valuation Per Common Share" shall be the greater of the Current
Market Price Per Common Share and the Conversion Price Per Common Share (each
as defined below), (II) the "Current Market Price Per Common Share" shall be
deemed to be the average (weighted by daily trading volume) of the Daily
Prices (as defined below) per share of the applicable class of Common Stock
for the 20 consecutive trading days immediately prior to such date, (III) the
"Conversion Price Per Common Share" shall be deemed to be the amount in
dollars which is equal to $50 divided by the Conversion Ratio immediately
prior to such adjustment, and (IV) "Daily Price" means (1) if the shares of
such class of Common Stock then are listed and traded on the American Stock
Exchange, Inc. ("AMEX"), the closing price on such day as reported on the AMEX
Composite Transactions Tape; (2) if the shares of such class of Common Stock
then are not listed and traded on the AMEX, the closing price on such day as
reported by the principal national securities exchange on which the shares are
listed and traded; (3) if the shares of such class of Common Stock then are
not listed and traded on any such securities exchange, the last reported sale
price on such day on the National Market of the National Association of
Securities Dealers, Inc. Automated Quotation System ("NASDAQ"); or (4) if the
shares of such class of Common Stock then are not traded on the NASDAQ
National Market, the average of the highest reported bid and lowest reported
asked price on such day as reported by NASDAQ. For purposes of any computation
under this Section 4.07, the number of shares of Common Stock outstanding at
any given time shall not include shares owned or held by or for the account of
the Company.
(g) No adjustment to the Conversion Ratio pursuant to Sections
4.07(b), (c), (d) and (e) above shall be required unless such adjustment would
require an increase or decrease of at least 1% in the Conversion Ratio;
provided however, that any adjustments which by reason of this Section 4.07(g)
are not required to be made shall be carried forward and taken into account in
any subsequent adjustment. All calculations under this Section 4.07 shall be
made to the nearest four decimal points.
(h) In the event that, at any time as a result of the provisions of
this Section 4.07, the Noteholder of this Note upon subsequent conversion
shall become entitled to receive any shares of capital stock of the Company
other than Common Stock, the number of such other shares so receivable upon
conversion of this Note shall thereafter be subject to adjustment from time to
time in a manner and on terms as nearly equivalent as practicable to the
provisions contained herein.
Section 4.08. Adjustment of Redemption Threshold. Whenever an
adjustment is made to the Conversion Ratio pursuant to Section 4.07, the
Redemption Threshold (as defined in Section 5.01(b) shall be adjusted by
multiplying the Redemption Threshold by the Conversion Ratio in effect
immediately prior to such adjustment and dividing such product by the
Conversion Ratio in effect immediately after such adjustment. All adjustments
pursuant to Sections 4.07 and 4.08 shall be notified to the Noteholders and
such notice shall be accompanied by a Schedule of Computations of the
adjustments.
ARTICLE V
REDEMPTION
SECTION 5.01. Redemption. The Notes shall be redeemable by the
Corporation as provided below.
(a) The Notes shall not be redeemable prior to the Initial
Redemption Date. The "Initial Redemption Date" shall be June 30, 1997.
(b) At the option of the Corporation, the Notes may be redeemed at
any time or from time to time (subject to the provisions set forth below and
in Article IV) on or after the Initial Redemption Date, in whole or in part,
at the price (the "Redemption Price"), payable in cash, equal to the percentage
set forth below of the principal amount of the Notes for redemptions during
the 12-month periods beginning on the Initial Redemption Date or the annual
anniversaries thereof indicated below, plus, in each case, an amount equal to
accrued and unpaid interest thereon, to the date fixed for redemption:
12-month period beginning on Percentage
---------------------------- ----------
Initial Redemption Date 103.85%
First Anniversary thereof 103.30%
Second Anniversary thereof 102.75%
Third Anniversary thereof 102.20%
Fourth Anniversary thereof 101.65%
Fifth Anniversary thereof 101.10%
Sixth Anniversary thereof 100.55%
Seventh Anniversary thereof
and thereafter 100.00%
Notwithstanding the foregoing, the Corporation may elect to redeem the Notes
at any time on or after the Initial Redemption Date and prior to the fourth
anniversary of the Initial Redemption Date only if for at least 20 Trading
Days during the period consisting of the 30 consecutive Trading Days ending on
the date notice of such redemption is given, including the last Trading Day of
such period, the Closing Price per share of Common Stock exceeds $18.75, as
adjusted pursuant to Section 4.08 (the "Redemption Threshold").
(c) In the event that less than all of the principal amount of the
Notes is to be redeemed pursuant to this Article V, the Corporation shall call
for redemption the Notes pro rata among the holders, based on the principal
amount of Notes held by each holder. Any redemption for which the principal
amount of Notes is called for redemption on a pro rata basis (whether or not
some of the principal amount of Notes so called are subsequently converted
pursuant to Article IV) shall comply with this Section 5.01(c).
SECTION 5.02. Procedure for Redemption. (a) In the event the
Company shall redeem the Notes, notice of such redemption shall be given by
first class mail, postage prepaid, mailed not less than 30 days nor more than
60 days prior to the redemption date, to the Noteholders of record at such
Noteholders' addresses as the same appears on the books of the Company. Each
such notice shall state: (i) the redemption date; (ii) the redemption price;
(iii) the place or places where the Notes is to be surrendered for payment of
the redemption price; (iv) that interest on the Notes will cease to accrue on
such redemption date, and (v) the principal amount of the Notes to be redeemed.
(b) Notice having been mailed as aforesaid, from and after the
redemption date (unless default shall be made by the Company in providing
money for the payment of the redemption price or a Notice of Intention to
Convert or Notice of Election to Convert has been delivered to the Company
pursuant to Article IV), interest on the principal amount of the Notes called
for redemption shall cease to accrue, and such principal amount of the Notes
called for redemption shall no longer be deemed to be outstanding and shall be
cancelled and shall not be available for reissue, and all rights of the
Noteholders as creditors of the Company (except the right to receive from the
Company the redemption price and any other amounts payable pursuant to Section
5.01) in respect of such principal amount of the Notes called for redemption
shall cease. Upon surrender in accordance with said notice of the Notes
representing the principal amount of the Notes called for redemption (properly
endorsed or assigned for transfer, if the Board of Directors of the Company
shall so require and the notice shall so state), the principal amount of the
Notes so called for redemption shall be redeemed by the Company at the
redemption price aforesaid.
ARTICLE VI
VOTING RIGHTS
Section 6.01. General. Except as otherwise provided by applicable
law, the Noteholders of the Notes (i) shall be entitled to vote with the
holders of the Common Stock on all matters submitted for a vote of holders of
Common Stock, (ii) shall be entitled to a number of votes equal to the number
of votes to which the shares of Common Stock issuable upon conversion of the
Notes would have been entitled if such shares of Common Stock had been
outstanding at the time of the applicable vote and related record date and
(iii) shall be entitled to notice of any stockholders' meeting in accordance
with the Certificate of Incorporation and By-Laws of the Company.
Section 6.02. No Changes to Voting Rights. So long as any of the
principal amount of the Notes is outstanding, the Company shall not, without
the written consent or affirmative vote of Noteholders which in the aggregate
own more than 50% of the aggregate principal amount of the Notes then
outstanding, at a meeting called for that purpose of the Noteholders, amend,
alter or repeal, whether by merger, consolidation, combination,
reclassification or otherwise, the Certificate of Incorporation or By-laws of
the Company or of any provision thereof (including the adoption of a new
provision thereof) which would result in an alteration or circumvention of the
voting powers or other rights of the Notes; provided, however that any such
amendment or alteration that changes the interest payable on, or the principal
amount of, the Notes shall require the affirmative vote at a meeting of
holders of the Notes duly called for such purpose, or the written consent, of
the holders of 100% of the aggregate principal amount of the Notes then
outstanding.
Section 6.03. Stockholder Approval Required. The consent or votes
required in Section 6.02 above shall be in addition to any approval of
stockholders of the Company which may be required by law or pursuant to any
provision of the Company's Certificate of Incorporation or By-Laws, which
approval shall be obtained by vote of the stockholders of the Company in the
manner provided in Section 6.01 above.
ARTICLE VII
DEFAULTS
If one or more of the following events ("Events of Default") shall
have occurred and be continuing:
(a) the Company shall fail to pay when due any principal of the
Notes, or shall fail to pay within fifteen days of the due date thereof any
interest or other amount payable hereunder;
(b) the Company shall fail to observe or perform any covenant or
agreement contained in the Notes (other than those covered by clause (a)
above) for 30 days after written notice thereof has been given to the
Company by the Noteholder;
(c) the Company (i) shall commence a voluntary case or other
proceeding seeking liquidation, reorganization or other relief with respect
to itself or its debts under any bankruptcy, insolvency or other similar
law now or hereafter in effect or seeking the appointment of a trustee,
receiver, conservator, liquidator, custodian or other similar official of
it or any substantial part of its property, or (ii) shall consent to any
such relief or to the appointment of or taking possession by any such
official in an involuntary case or other proceeding commenced against it, or
(iii) shall make a general assignment for the benefit of creditors, or (iv)
shall fail generally to pay its debts as they become due, or (v) shall take
any corporate action to authorize any of the foregoing;
(d) an involuntary case or other proceeding shall be commenced
against the Company seeking liquidation, reorganization or other relief
with respect to it or its debts under any bankruptcy, insolvency or other
similar law now or hereafter in effect or seeking the appointment of a
trustee, receiver, conservator, liquidator, custodian or other similar
official of it or any substantial part of its property, and such
involuntary case or other proceeding shall remain undismissed and unstayed
for a period of 90 days; or an order for relief shall be entered against the
Company under the Federal bankruptcy laws as now or hereafter in effect;
(e) a judgment or order for the payment of money in excess of
$5,000,000 shall be rendered against the Company or any Subsidiary and such
judgment or order shall continue unsatisfied and unstayed for a period of
30 days;
then, and in every such event, unless such Event of Default is no longer
continuing, the Noteholder may by notice to the Company accelerate the
maturity of the Notes by declaring the Notes (together with accrued interest
thereon) to be, and the Notes shall thereupon become, immediately due and
payable without presentment, demand, protest or other notice of any kind, all
of which are hereby waived by the Company; provided that in the case of any of
the Events of Default specified in subsection (c) or (d) above with respect to
the Company, without any notice to the Company or any other act by the
Noteholder, the Notes (together with accrued interest thereon) shall become
immediately due and payable without presentment, demand, protest or other
notice of any kind, all of which are hereby waived by the Company.
ARTICLE VIII
MISCELLANEOUS
SECTION 8.01. Notices. All notices, requests and other
communications to any party hereunder shall be in writing (including bank
wire, telex, facsimile transmission or similar writing) and shall be given to
such party, at its address, telex number or facsimile number set forth on the
signature pages hereof or such other address, telex number or facsimile as
such party may hereafter specify for the purpose of notice to the other party.
Each such notice, request or other communication shall be effective (i) if
given by telex, when such telex is transmitted to the telex number specified
in this Section and the appropriate answerback is received, (ii) if given by
facsimile, when such facsimile is transmitted to the facsimile number
specified in this Section and the appropriate confirmation is received, or
(iii) if given by any other means, when delivered at the address specified in
this Section.
SECTION 8.02. No Waivers. No failure or delay by the Noteholder in
exercising any right, power or privilege hereunder or under any Note shall
operate as a waiver thereof nor shall any single or partial exercise thereof
preclude any other or further exercise thereof or the exercise of any other
right, power or privilege. The rights and remedies herein provided shall be
cumulative and not exclusive of any rights or remedies provided by law.
SECTION 8.03. Amendments, Waivers and Issuance. (a) Any provision
of the Notes may be amended or waived if, but only if, such amendment or
waiver is in writing and is signed by the Company and Noteholders which in the
aggregate own more than 50% of the aggregate principal amount of the Notes.
(b) The Company will not issue more than $60,000,000 aggregate
principal amount of the Notes without the consent of Noteholders which in the
aggregate own more than 50% of the aggregate principal amount of the Notes.
SECTION 8.04. Governing Law. The Notes shall be governed by and
construed in accordance with the laws of the State of New York.
AIR & WATER TECHNOLOGIES
CORPORATION
By________________________
Name:
Title:
LEASE
DATED DECEMBER 1, 1989,
BETWEEN
HARVARD MILLS REALTY,
A MASSACHUSETTS LIMITED PARTNERSHIP,
Landlord
METCALF & EDDY, INC.,
Tenant
Premises: Wakefield, Massachusetts
TABLE OF CONTENTS
ARTICLE PAGE
1. Premises; Term.............................................. 1
2. Commencement of Term; Completion of
Demised Premises...................................... 3
3. Rent ...................................................... 4
4. Use ...................................................... 9
5. Facilities; Utilities....................................... 10
6. Covenant of Quiet Enjoyment................................. 11
7. Surrender of Premises....................................... 12
8. Assignment, Subletting, Mortgaging.......................... 12
9. Subordination; Estoppel Certificate......................... 14
10. Entry; Right to Change Portions of the
Building.............................................. 15
11. Laws, Ordinances, Requirement of Public
Authorities........................................... 16
12. Repairs........................................................ 17
13. Alterations; Fixtures; Tenant's Property....................... 18
14. Right to Perform Other Party's Obligations..................... 20
15. Non-Liability; Limitation of Liability
of Landlord........................................... 21
16. Insurance; Indemnity........................................... 23
17. Damage by Fire or Other Cause.................................. 27
18. Condemnation................................................... 29
19. Bankruptcy..................................................... 31
20. Defaults and Remedies; Waiver of
Redemption............................................... 32
21. Definition of Landlord...................................... 35
22. Notices..................................................... 36
23. Rules and Regulations....................................... 36
24. No Broker................................................... 37
25. Miscellaneous............................................... 37
26. Successors and Assigns...................................... 40
27. Tenant's Options............................................ 40
28. (Intentionally Omitted]..................................... 41
29. Arbitration................................................. 41
Schedule I - Demised Premises
Schedule I-A - New Demised Premises (see Section 1.01)
Schedule II - Site Plan
Schedule III - Tenant's Percentage; Use
Schedule III-A - Rent
Schedule III-B - Fixed Rent for New Demised Premises (see
Section 1.01)
Schedule IV - (Intentionally omitted)
Schedule V - Non-Disturbance Agreement
Rules and Regulations
Addendum (with Schedule BB attached)
LEASE made as of this 1st day of December, 1989, made between
HARVARD MILLS REALTY, A MASSACHUSETTS LIMITED PARTNERSHIP, a Massachusetts
limited partnership having an office at 433 North Camden Drive, Suite 960,
Beverly Hills, California 90210, hereinafter referred to as "Landlord," and
METCALF & EDDY, INC., a Delaware corporation having an office at 10 Harvard
Mills Square, Wakefield, Massachusetts 01880, hereinafter referred to as
"Tenant."
W I T N E S S E T H:
RECITALS
Landlord and Tenant are the parties to an Amended and Restated
Lease, dated July 26, 1989, for space in the Building located in Wakefield,
Massachusetts, as more particularly described in that lease. The Amended and
Restated Lease, and all existing and future amendments and associated
documents collectively are called the "Existing Lease." As described below,
this Lease is for additional space in the Building.
ARTICLE 1
PREMISES; TERM
1.01. Landlord hereby leases to Tenant and Tenant hires from
Landlord the premises shown on the floor plan attached hereto as Schedule I
(hereinafter called the "Demised Premises") in the building (the "Building")
located on the land (the "Land") shown on Schedule II attached hereto. The
Land and the Building and other improvements, additions, parking facilities
and common facilities thereon (hereinafter sometimes referred to as the
"Property") are shown on the Site Plan attached hereto as Schedule II. All
of the aforementioned Schedules are hereby made part hereof. The Demised
Premises are located on the second floor of the eastern wing of the Building.
Although there is no actual demising wall within the Demised Premises, for
certain purposes under this Lease the Demised Premises are separated into two
(2) areas: Area A, containing 15,012 rentable square feet, and Area B,
containing 9,000 rentable square feet, as shown in Schedule I.
Notwithstanding the depiction of the Demised Premises in
Schedule I hereto, at Landlord's option at any time on at least sixty (60)
days' prior written notice from Landlord to Tenant, Tenant will vacate
portions of the existing Demised Premises and occupy new space on the 2nd
floor of the eastern wing of the Building so that, thereafter, the Demised
Premises will be as shown in Schedule IA attached hereto (the "New Demised
Premises") and not as shown in Schedule I, and for all purposes under this
Lease and the Existing Lease the New Demised Premises will be deemed to be the
Demised Premises without any other change in the terms of this Lease, except
that: Landlord will construct any new demising walls necessary to separate
the New Demised Premises from the rest of the space on the 2nd floor and
provide for all required electrical and HVAC modifications (including rewiring
and submetering if necessary) to separate the New Demised Premises from the
rest of the space on the 2nd floor for the purpose of monitoring electrical
usage; and the rentable square footage of Area A will be reduced to 14,779
square feet, Tenant's Percentage and the Area A Tenant's Percentage in Schedule
III will be reduced to 10.45% and 6.5%, respectively, and Schedule III-B
(Fixed Rent) thereafter will be used in place of Schedule III-A.
The Demised Premises are leased, together with the
appurtenances, including, without limitation, (a) the non-exclusive right to
use certain parking spaces in the Garage shown on Schedule II as more fully
described in Section 5.02 hereof, and (b) the right to use in common with
others any Common Areas in or around the Building, as more fully described in
Section 5.01 hereof, including ingress and egress by pedestrians and/or
vehicles to the Demised Premises, the Building and all loading and unloading
areas and all parking spaces which Tenant has exclusive or non-exclusive
rights to use; but reserving and excepting to Landlord the rights set forth in
Section 10.01.
TO HAVE AND TO HOLD unto Tenant, its successors and assigns,
for the term of approximately ten (10) years which will commence on December
1, 1989 ("Commencement Date") and which shall end at 11:59 p.m. (Boston time)
on November 30, 1999 ("Expiration Date") unless the term shall terminate
sooner pursuant to any of the terms of this Lease or pursuant to law, or shall
be extended pursuant to Article 27, YIELDING AND PAYING the rents and
additional rents hereinafter set forth, all on the covenants, conditions and
agreements hereinbefore and hereinafter stated.
Tenant will not hold over in the Demised Premises after the
Expiration Date or the earlier termination of this Lease, and will indemnify
Landlord for, and defend and hold Landlord harmless from, any and all costs,
claims, damages and liabilities (including, without limitation, claims made
by any prospective tenants and any loss of rents suffered by Landlord) arising
out of or in connection with any holding over by Tenant. If, despite this
express agreement, Tenant holds over, in addition to any other rights and
remedies of Landlord, Tenant will pay Fixed Rent for entire Demised Premises
at the rate of one and one-half (1 1/2) times the Fixed Rent payable
immediately preceding the holding over, and if any tenancy is created it will
be a tenancy at will terminable at Landlord's sole option on seven (7) days'
prior written notice to Tenant and otherwise subject to the terms of this
Lease. Nothing in this Section or elsewhere permits Tenant to hold over or in
any way limits Landlord's other rights and remedies if Tenant holds over.
ARTICLE 2
COMMENCEMENT OF TERM;
COMPLETION OF DEMISED PREMISES
2.01. Except for the work to be performed by Landlord as
specifically described below in this Section 2.01, Tenant accepts the Demised
Premises absolutely "as is," and Tenant will be solely responsible at its
expense for all other improvements and modifications necessary in connection
with the Demised Premises. On or before sixty (60) days after this Lease is
executed and Landlord and its contractors are granted full and unimpeded
access (which will be continuous throughout the construction period),
Landlord, at its cost, will:
(a) Construct a demising wall separating the Demised Premises
from the rest of the second (2nd) floor of the eastern wing of the Building as
shown in Schedule I.
(b) Unless prohibited by applicable codes: provide a lockable
door to control access from the 1st floor of the eastern wing of the Building
to the [^^^] stairway in the "Old Lobby" (as defined in Section 5.01 of the
Existing Lease); or, if Landlord elects to have Tenant move into the New
Demised Premises under Section 1.01, a lockable door to control access to the
3rd floor via that same stairway (and remove the door on the 1st floor). All
security and/or card access modifications to these doors will be Tenant's sole
responsibility and expense, but egress from the stairway through these doors
will be permitted and available at all times.
(c) Install a door and ramp that will comply with building and
fire safety codes between the Premises on the 2nd floor of the eastern wing of
the Building and the floor of the same level in the western wing of the
Building.
(d) Install a submeter (or submeters) to measure Tenant's
electrical consumption for the Demised Premises and for the premises located
on the 3rd floor of the eastern wing of the Building leased to Tenant under
the Existing Lease.
[^^^]
2.02. In the performance of Landlord's work, Landlord shall
comply with all applicable laws, ordinances, rules, regulations and
governmental orders. All of Landlord's work shall be performed in a good and
workmanlike manner using new, first-class materials.
ARTICLE 3
RENT
3.01. During the term of this Lease, Tenant covenants and
agrees to pay to Landlord a fixed minimum rent ("Fixed Rent") in lawful money
of the United States as shown in Schedule III-A attached to this Lease.
Fixed Rent shall be payable in equal monthly installments in
advance on the first day of each month during the term of this Lease at the
office of Landlord or such other place as Landlord may designate. If Tenant
does not default and fail to cure within applicable periods as described in
Section 20.01A., Fixed Rent will be abated for the first (1st) year of the
Lease for Area A of the Demised Premises, and for the first two (2) years of
the Lease for Area B of the Demised Premises (subject to and except as
provided in Section 2(b) of Schedule III). However, if Tenant defaults and
fails to cure within applicable periods (and Landlord would be entitled under
Section 20.02 to receive liquidated damages as a result of that default),
Fixed Rent for the entire Demised Premises immediately will be due and payable
commencing as of December 1, 1989 and this abatement will be void ab initio.
If Tenant defaults and fails to cure within applicable periods but Landlord
would not be entitled under Section 20.02 to receive liquidated damages as a
result of that default, then Fixed Rent for the entire Demised Premises
immediately will be due and payable from and after the date of the default and
this abatement will be void from and after the date the default. Tenant shall
make no payment to Landlord of any amount in excess of one month's advance
rent without the prior written consent of the mortgagee.
3.02.A. (1) "Taxes" shall mean the total of all real estate
taxes, assessments, special and extraordinary assessments, water charges,
sewer charges and all other governmental levies imposed upon or assessed with
respect to the Property.
(2) The term "Tax Year" shall mean the fiscal tax
year of the Town of Wakefield, Massachusetts (presently the twelve (12) months
ending June 30 of each year). In the event of any change in the tax year of
the Town of Wakefield, the Tax Year hereunder shall be changed accordingly,
and an equitable adjustment with respect to this Section 3.02. shall be made
by the parties.
B. If Landlord is required to maintain an escrow account
for Taxes with the holder of any mortgage affecting the Property and if
Landlord receives interest on such escrow deposit, then, to the extent Tenant
has timely made its monthly payments as required under Section 3.03., Tenant
shall receive an allocable portion of such interest, based upon the ratio
which the amount of the portion of Tenant's payments constituting Taxes bears
to the total escrow deposit.
C. Landlord agrees to timely pay Taxes for each year
prior to the date same may be paid without interest or penalty (or, if later,
such interest and penalty shall not be included in Taxes) and shall, upon
request, furnish Tenant reasonable evidence of such payment. Landlord may
make payments under protest or take such other steps with regard to Taxes as
will not prejudice its opportunity to successfully contest the validity or
amount thereof. Tenant agrees to render Landlord full assistance timely in
contesting the validity or amount of any such Taxes, including, but not
limited to, joining in and signing any protest or pleading which Landlord may
deem it advisable to file. Should any rebate, refund or abatement be made on
account of any Taxes, a portion of which has been paid by Tenant to Landlord
pursuant to Section 3.03., Landlord shall refund Tenant's allocable share of
such rebate, refund or abatement (after deduction of all legal and other costs
incurred in obtaining the refund) to the extent of the amount paid by Tenant,
said share to be computed in the same manner in which Tenant's payments are
computed pursuant to Section 3.03.
D. If at any time the methods of taxation of real estate
prevailing at the date of this Lease shall be altered and there shall be
levied, assessed or imposed upon real property or upon real property owners
solely in their capacity as such owners expressly in substitution, in whole
or in part, for or in lieu of increase in the present general real estate
taxes, any of the following: (i) a capital levy tax, or (ii) or a tax
specifically upon revenues or rents derived from real estate or any other tax
howsoever denominated by whatsoever authority (including, but not limited to,
any municipal, county, state or federal authority) which shall be measured or
based in whole or in part upon the value of the property or by the revenues or
rents derived therefrom, or (iii) a corporation franchise tax, or (iv) income,
profit, or (v) value added, use or other tax, then all such taxes shall be
deemed to be included in the term "Taxes" for the purposes of this Lease
computed as if the Property were Landlord's sole asset. An assessment shall
be included in the definition of Taxes for each year only to the extent of the
portion of such assessment(s) allocable to such year, computed as if paid over
the longest period permitted by law, including interest due thereon,
notwithstanding that same may actually be paid over a shorter period. Under
no circumstances shall "Taxes" ever include general income or general
franchise taxes payable by Landlord.
3.03. Tenant shall pay or reimburse Landlord for a portion of
"Expenses" (as hereinafter defined) in accordance with the following:
A. "Expenses" shall mean the sum of: (i) all costs and
expenses incurred by Landlord in the sound and prudent management, operation
and maintenance of the Land and Building and Common Areas thereof, the
services provided to tenants therein which are not the obligation of such
tenants, repairs, or replacements and improvements appropriate for the
continued operation and maintenance of the Land and Building; premiums for
fire, extended coverage, public liability and other insurance which Landlord
deems necessary; reasonable costs respecting the employees of the Landlord or
Landlord's agent, affiliates or contractors who provide services for the
Property (including, without limitation, wages) and on-site building and/or
in-state office from which those services are provided (if any); and (ii)
Taxes. "Premises Expenses" are those expenses which relate solely to the
Demised Premises (such as the cost of cleaning services, refuse removal,
security for the Building and all other services to or utilities consumed at
the Demised Premises) and the repairs required to be made by Tenant pursuant
to Section 12.03. "Common Expenses" are those expenses which relate to the
entire Property, its common facilities and to all tenants thereof (such as
electricity, cleaning, snow removal and maintenance for the Garage and other
common facilities, Taxes, insurance premiums and all Expenses which are not
Premises Expenses).
Excluded from Expenses shall be capital expenditures required
to be made by Landlord pursuant to Section 12.02, except (i) those which under
generally accepted real estate practices are regarded as deferred costs and
(ii) capital expenditures required by law, which capital expenditures shall be
included in Expenses if amortized on a straight-line basis over the useful
life of the expenditure, but in no event shall costs of any capital
improvements related to the initial rehabilitation of the Building or
construction of any tenant's premises be included as an Expense. Also
excluded from "Expenses" are depreciation, mortgage debt service, costs of
financing, rent or other charges paid by Landlord under any superior lease,
and any other costs for which Tenant would not be responsible under this Lease.
B. "Lease Year" means each successive full twelve (12) calendar
month period following December 1, 1989.
C. Tenant shall pay in the manner set forth in E below,
Tenant's Percentage, as set forth on Schedule III, of Common Expenses
(including all Taxes) for any year ("Tenant's Expense Payment").
Notwithstanding the foregoing, if Tenant does not default and fail to cure
within applicable periods as described in Section 20.01A., the portion of
Common Expenses attributable to the "Area B Tenant's Percentage" in Schedule
III will be abated for the first two (2) years of the Lease (subject to and
except as provided in Section 2(b) of Schedule III). However, if Tenant
defaults and fails to cure within applicable periods (and Landlord would be
entitled under Section 20.02 to receive liquidated damages as a result of the
default), the portion of Common Expenses attributable to the "Area B Tenant's
Percentage" immediately will be due and payable commencing as of December 1,
1989 and this abatement will be void ab initio. If Tenant defaults and fails
to cure within applicable periods but Landlord would not be entitled under
Section 20.02 to receive liquidated damages as a result of that default, then
this portion of Common Expenses immediately will be due and payable from and
after the date of the default and this abatement will be void from and after
the date the default.
D. Within ninety (90) days following the end of each Lease
Year, Landlord will provide to Tenant a report of actual Common Expenses
incurred for that Lease Year. Such report shall be accompanied by a copy of
the bill(s) for Taxes included in Expenses for such Lease Year.
E. Tenant shall pay, together with each payment of Fixed Rent,
one-twelfth (1/12th) of Tenant's Expense Payment for the preceding Lease year
as an "Interim Payment." At the expiration of each Lease Year, within thirty
(30) days after the delivery to Tenant of the report of Expenses for such
Lease Year, Tenant shall pay to Landlord the amount, if any, by which Tenant's
Expense Payment for such Lease Year exceeds the Interim Payments made during
such Lease Year. Any amount by which the Interim Payments exceed Tenant's
Expense Payments for any Lease Year shall be refunded to Tenant not later than
thirty (30) days after the report of Expenses is delivered. Notwithstanding
the foregoing, as Taxes currently are paid to the Town of Wakefield twice a
year, within fifteen (15) days after Tenant's receipt of each semi-annual bill
for Taxes from Landlord, Tenant shall pay to Landlord Tenant's Percentage of
that semi-annual bill. Tenant will receive a credit against the amount due in
an amount equal to the Taxes (if any) included within the monthly Tenant's
Expense Payments paid by Tenant after Tenant's payment of its share of the
previous semi-annual bill for Taxes.
3.04. All adjustments of rent, Taxes, Expenses and other
charges which Tenant assumes, agrees or is obligated to pay to Landlord
pursuant to this Lease shall be deemed additional rent which Tenant covenants
to pay when due. All adjustments of additional rent shall survive the
expiration of the term of this Lease. In the event of nonpayment thereof,
Landlord shall have all the rights and remedies with respect thereto as is
herein provided for in case of nonpayment of Fixed Rent. All rent shall be
payable by Tenant to Landlord without offset, reduction, abatement,
counterclaims and/or deduction except as expressly provided to the contrary;
it being agreed that if Tenant obtains a judgment against Landlord arising out
of this Lease the amount thereof (including all attorneys' fees, costs, etc.)
may be deducted from Fixed Rent and from any additional rent and from all
other charges to Tenant provided for in this Lease until paid in full. Unless
the context otherwise requires, the term "rent" shall include Fixed Rent and
additional rent. Additional rent for any partial year at the beginning or end
of the term shall be appropriately prorated.
3.05. If any of the rent payable under the terms of this Lease
shall be or become uncollectible, reduced or required to be refunded because
of any rent control, federal, state or local law, regulation, proclamation or
other legal requirement, Tenant shall enter into such agreement(s) and take
such other steps (without additional expense to Tenant) as Landlord may
request and as may be legally permissible to permit Landlord to collect the
maximum rent which, from time to time, during the continuance of such rent
restriction may be legally permissible (and not in excess of the amounts then
reserved therefor under this Lease). Upon the termination of such rent
restriction, (a) the Fixed Rent and additional rent shall become and shall
thereafter be payable in accordance with the amounts reserved herein for the
periods following such termination and (b) Tenant shall promptly pay in full
to Landlord, to the extent legally permissible, an amount equal to (i) rent
which would have been paid pursuant to this Lease but for such rent
restriction less (ii) the rent actually paid by Tenant during the period such
rent restriction was in effect.
3.06. If any installment of Fixed Rent or additional rent is
not paid when due, then, commencing with the fourth (4th) day after actual
notice to Tenant of such nonpayment, Tenant shall also pay Landlord interest
thereon at the then announced prime interest rate charged by Wells Fargo
National Bank, N.A. on ninety (90) day unsecured loans (herein called the
"Prime Rate").
ARTICLE 4
USE
4.01. Tenant shall use and occupy the Demised Premises for the
purposes stated on Schedule III, and for no other purpose.
4.02. Tenant will not at any time use or occupy the Demised
Premises, or permit same to be used or occupied, in violation of the
certificate of occupancy for the Building or in any manner which would
materially interfere with the quiet enjoyment of any other tenant in the
Building. Landlord represents and warrants to Tenant that the Permitted Use
as presently contemplated based upon information specified by Tenant would not
materially interfere with the quiet enjoyment of any other tenant in the
Building.
4.03. Landlord represents that all other portions of the
Building (except for the lowest level of the Building, which also may be used
for storage, research and development and uses which are harmonious with
office use) shall be leased to tenants only for general office use with
ancillary storage, ancillary research and development and other ancillary uses
which are harmonious with office use.
ARTICLE 5
FACILITIES; UTILITIES
5.01. Landlord shall make available at all times during the
Lease term to Tenant, its officers, agents, customers, employees and invitees
all common areas of the Property, including, without limitation, all parking
areas described in Section 5.02(b) below, lavatories (including the bathrooms
closest to Tenant's Demised Premises on the 2nd floor of the eastern wing and
access thereto), hallways, corridors, elevators, stairways, driveways,
truckways, delivery passages, truck loading areas, access and egress roads,
walkways, sidewalks and landscaped and planted areas ("Common Areas"). Also,
after the Existing Space Termination Date (defined in Section 1.03 of the
Existing Lease), Tenant will be permitted to use the loading docks and the
existing freight elevator in the eastern wing of the Building to the extent
permitted under the Existing Lease. [^^^] Landlord shall operate, manage,
equip, light, repair and maintain the Common Areas for their intended purposes
and provide for the removal of snow and ice therefrom. Landlord shall not be
liable for any inconvenience or interruption of Tenant's business resulting
from (a) the making of repairs, replacements, improvements, alterations or
additions or from the doing of any other work, by or at the direction of
Landlord, to or upon any of such Common Areas, provided Landlord has taken all
reasonable steps to minimize any such inconvenience or interruption, or (b) the
delay or failure to perform such maintenance, snow removal or other work with
respect to such Common Areas where such delay or failure is attributable to
strikes or from any cause beyond Landlord's reasonable control. Landlord may
from time to time change the size, location and nature of any Common Area
provided that Tenant's use and occupancy of the Demised Premises is not
materially adversely affected thereby. Tenant and its officers, employees,
agents, customers and invitees shall have the right, in common with Landlord
and all other to whom Landlord may from time to time grant rights, to use the
Common Areas for their intended purposes subject to the Rules and Regulations.
5.02. Landlord shall provide the following parking facilities:
forty-five (45) parking spaces on a non-assigned or designated basis in the
Garage for parking by Tenant's employees. (These parking spaces are in
addition to parking spaces provided under the Existing Lease and are not in
lieu thereof.)
5.03. Except as may otherwise be specifically set forth in
this Lease (if at all), Landlord has absolutely no obligations to provide
services or utilities to the Demised Premises,, it being understood and agreed
that all gas, electricity, water, air conditioning, sewer, security for the
Building or the Garage, cleaning, refuse removal and other services and
utilities supplied to or consumed at or in the Demised Premises shall be
furnished by Tenant at Tenant's sole cost and expense. If Tenant receives
utilities or services in the Demised Premises for which it is not directly
billed by the provider of those services Tenant will pay to Landlord, as
additional rent, the cost of those utilities and services consumed in the
Demised Premises within fifteen (15) days after the receipt of Landlord's bill
therefor. Those costs will be based on submeters, or, where submeters are not
used, Tenant's share of those costs will be based on the relative rentable
square footages of Tenant and any other tenants in the Building that share
those particular utilities and services or the master meters therefor.
5.04. Landlord shall not be responsible for providing
telephone service.
5.05. Landlord shall have no liability to Tenant for any loss
or damage caused by interruption or temporary cessation of any utility or
service beyond Landlord's reasonable control. Landlord agrees to proceed
promptly and diligently to remedy any such interruptions or cessations of any
utility.
ARTICLE 6
COVENANT OF QUIET ENJOYMENT
Landlord, its successors and assigns covenant and agree with
Tenant that, upon Tenant's paying the Fixed Rent and additional rent and
observing and performing all of the terms, covenants and conditions of this
Lease on Tenant's part to be observed and performed, Tenant shall peaceably
and quietly enjoy the Demised Premises, subject to the terms and conditions of
this Lease.
ARTICLE 7
SURRENDER OF PREMISES
7.01. Upon the expiration or other termination of the term of
this Lease, Tenant shall quit and surrender the Demised Premises in the order
and condition as of the Commencement Date, ordinary wear and tear, matters
which are Landlord's obligation to repair and damage by fire or other casualty
excepted, and shall remove all its property therefrom, except as otherwise
provided in this Lease, and repair any damage to the Demised Premises or the
Building caused thereby. Tenant's obligation to observe or perform this
covenant shall survive the expiration or other termination of the term of this
Lease. Any property of Tenant not removed at the end of the term shall be
deemed abandoned and may be removed and disposed of by Landlord at Tenant's
expense in such manner as Landlord may determine.
7.02. All alterations, decoration, installations, additions or
improvements upon the Demised Premises affixed to the realty so that they
cannot be removed without material damage shall, unless Landlord elects
otherwise, become the property of Landlord and shall remain upon, and be
surrendered with, the Demised Premises, as a part thereof, at the end of the
term, except that Tenant may remove any Alterations made by Tenant pursuant to
Article 13 if Tenant repairs any damage caused by such removal.
ARTICLE 8
ASSIGNMENT, SUBLETTING, MORTGAGING
8.01. Tenant or its legal representatives will not by
operation of law or otherwise (i) mortgage or encumber this Lease under any
circumstances, (ii) except as expressly set forth below, sublet or permit the
Demised Premises or any part thereof to be used or occupied by others, or
(iii) assign this Lease or Tenant's interest therein in whole or in part
unless the entire Existing Lease and all of Tenant's interest therein is
assigned in accordance with the terms thereof, in which case this Lease also
shall be deemed assigned to the same assignee, who shall automatically be
deemed to have assumed all obligations and liabilities under this Lease.
(a) In the event that Tenant desires to sublease all or a
portion of the Demised Premises, Tenant shall give Landlord notice thereof,
which notice shall include a copy of the proposed sublease and information
concerning the proposed sublessee's financial condition, business reputation
and the nature of its contemplated use or occupancy. Landlord shall within
thirty (30) days after receipt of all of the foregoing either consent to such
sublease or reject same. Landlord's consent shall not be unreasonably
withheld. Tenant may following receipt of consent to sublet its rights to the
Demised Premises in accordance with the terms of said proposed agreement. In
the event of any assignment or sublease, the Tenant named herein shall remain
fully liable for the obligations of the Tenant hereunder, including, without
limitation, the obligation to pay the rent and other amounts provided under
this Lease and compliance with the other provisions hereof.
(b) No assignment or subletting shall impair, limit or reduce
or otherwise affect any guaranty of Tenant's obligations hereunder.
8.02. A consent by the Landlord to any assignment or
subletting, whether by Tenant or any other tenant in the Building, shall not
be a waiver of or constitute a diminution of Landlord's right to withhold its
consent to any other assignment or subletting and shall not be construed to
relieve Tenant from obtaining Landlord's express written consent to any other
or further assignment or subletting.
8.03. If this Lease shall be assigned, or if the Demised
Premises or any part thereof be subject or occupied by any person or persons
other than Tenant, Landlord may, after default by Tenant, collect rent from
the assignee, subtenant or occupant and apply the net amount collected to the
rent herein reserved, but no such assignment, subletting occupancy or
collection of rent shall be deemed a waiver of the covenants in this Article,
nor shall it be deemed acceptance of the assignee, subtenant or occupant as a
tenant or a release of Tenant from the full performance by Tenant of all of
the terms, conditions and covenants of this Lease.
8.04. Each assignee, sublessee or transferee permitted or
consented to as above provided shall assume and be deemed to have assumed this
Lease and shall be remain liable jointly and severally with Tenant for the
payment of the Fixed Rent and additional rent and for the due performance of
all the terms, covenants, conditions and agreements herein contained on
Tenant's part to be performed for the term of this Lease. No assignment shall
be effective unless Tenant shall promptly deliver to Landlord a duplicate
original of the instrument of assignment, in form reasonably satisfactory to
Landlord, containing a covenant of assumption by the assignee of all of the
obligations aforesaid.
ARTICLE 9
SUBORDINATION; ESTOPPEL CERTIFICATE
9.01. Subject to the condition specified in the last sentence
of this Section 9.01, this Lease is and shall be subject and subordinate in
all respects to all mortgages which may now or hereafter affect the Land
and/or the Building, to each and every advance made or hereafter to be made
under such mortgages, and to all renewals, modifications, consolidations,
replacements and extensions of such mortgages, and to the lien of any ground
leases, overriding leases and underlying leases of the Land and/or the
Building which may hereafter be created for financing purposes. Tenant agrees
to promptly execute and deliver any instrument that Landlord, the lessor of
any such lease or the holder of any such mortgage or any of their respective
successors in interest may reasonably request to evidence such subordination.
With respect to any mortgage or ground lease now or hereafter placed upon the
Land or the Building by Landlord, Tenant's subordination thereto shall be
conditioned upon the holder of such mortgage (or lessor) entering into an
agreement with Tenant in substantially the form of Schedule V.
9.02. Landlord and Tenant each agree, at any time and from
time to time, upon not less than fifteen (15) days prior request from the
other, to execute, acknowledge and deliver to the other a statement in writing
certifying that this Lease is unmodified and in full force and effect (or, if
there have been modifications, that the same is in full force and effect as
modified and stating the modifications), stating the dates to which the Fixed
Rent, additional rent and other charges have been paid, and stating whether or
not to the best knowledge of the signer of such certificate, there exists any
default in the performance of any covenant, agreement, term, provision or
condition contained in this Lease, and, if so, specifying each such default of
which the signer may have knowledge, it being intended that any such statement
delivered pursuant hereto may be relied upon, as to statements from Tenant, by
Landlord and by any mortgagee or prospective mortgagee of any mortgage
affecting the Land and/or the Building, by any purchaser or prospective
purchaser of the Land and/or Building and by any landlord under a ground or
underlying lease affecting the Land and/or the Building, or, as to statement
from Landlord, by Tenant, any assignee or sublessee.
ARTICLE 10
ENTRY; RIGHT TO CHANGE PORTIONS OF THE BUILDING
10.01. (a) Tenant shall permit Landlord to erect, use,
repair, replace and maintain pipes and conduits, utility lines, and mechanical
equipment in and through the Demised Premises. Landlord or its agents or
designees shall have the right to enter the Demised Premises upon reasonable
notice and at reasonable hours (except in emergencies), for the purpose of
making such repairs or alterations as Landlord shall be required or shall have
the right to make by the provisions of this Lease and, subject to the
foregoing, shall also have the right to enter the Demised Premises for the
purpose of inspecting them or exhibiting them to prospective purchasers or
lessees of the Building or the Demised Premises, or to prospective mortgagees
or to prospective assignees of any such mortgagees. Landlord shall be allowed
to take all material into and upon the Demised Premises that may be required
for the repairs or alterations above mentioned without the same constituting an
eviction of Tenant in whole or in part and the rent reserved shall in no wise
abate, except as otherwise provided in this Lease, while said repairs or
alterations are being made.
(b) Landlord reserves the right to (and Tenant agrees to
provide) unrestricted access at all times through the Demised Premises for the
purpose of: providing emergency ingress or egress through the main elevator
and stairs located within the Demised Premises as shown in Schedules I and IA;
and providing access to the freight elevator located within the Demised
Premises for Landlord or any other tenants on the 2nd floor of the eastern
wing, all of whom are permitted to use this freight elevator on a non-
exclusive basis with Tenant on reasonable prior notice (which notice need not
ever exceed twenty-four (24) hours in advance of the proposed use).
10.02. Landlord shall have the right at any tine without
thereby creating an actual or constructive eviction or incurring any liability
to Tenant therefor, to change the arrangement or location in the Common Areas
only of entrances, passageways doors and doorways, corridors, stairs, toilets
and other like public service portions of the Building, provided that no such
changes shall be made which would (a) materially alter or affect the general
scope and nature of the Building or the Property as shown on Schedule II, (b)
eliminate or decrease the size of the Garage in any manner which would reduce
available parking for Tenant as provided in Article 5, or (c) materially
adversely affect Tenant's occupancy of the Demised Premises or of the Common
Areas as otherwise provided herein.
10.03. Landlord shall, in its implementation of the rights
granted in Sections 10.01 and 10.02 above, do so in such manner as shall not
materially interfere with Tenant's use and occupancy of the Demised Premises,
and shall not materially affect the appearance or structural components of the
Demised Premises, or decrease the size of the Demised Premises, and in such
manner as shall conform to other applicable provisions hereof.
ARTICLE 11
LAWS, ORDINANCES, REQUIREMENTS OF PUBLIC AUTHORITIES
11.01. Tenant shall comply with all laws, orders, ordinances
and regulations of federal, state, county and municipal authorities and with
any direction made pursuant to law or any public officers which shall, with
respect to the occupancy, use or manner of such of the Demised Premises or to
any abatement of nuisance, impose any violation, order or duty upon Landlord
or Tenant arising from Tenant's occupancy, use or manner of use of the Demised
Premises or any installations made therein by or at Tenant's request, or
required by reason of a breach of any of Tenant's covenants or agreements
hereunder. If any law or requirement referred to in this Section 11.01 is
applicable solely to Tenant's particular business or Tenant's particular use
of the Demised Premises (as opposed to such a law or requirement as would be
applicable to anyone occupying the Demised Premises or the Building), then
Tenant's compliance will be at Tenant's expense (unless such expense is caused
by Landlord's failure to fulfill any of its obligations under this Lease);
otherwise, the cost of such compliance shall be borne as elsewhere provided in
this Lease, i.e., either by Landlord (without reimbursement by Tenant) or as a
Common Expense shared by all tenants of the Building, pro rata.
11.02. If Tenant receives written notice of any violation of
law, ordinance, rule, order or regulation applicable to the Demised Premises,
it shall give prompt notice thereof to Landlord.
11.03. Except if noncompliance would render Landlord liable to
prosecution for a crime, Tenant may defer the compliance required by Section
11.01 during that period of time in which Tenant in good faith, and by
appropriate legal proceedings, is contesting the validity of any such laws,
ordinances, order, rules, regulations or requirements, provided that Tenant
first gives Landlord and the holder of any superior mortgage requiring same
assurance (which may be by bond covering the cost of compliance in favor of
Landlord and any mortgagee) reasonably satisfactory to Landlord against any
loss, cost or expense on account thereof.
11.04. Landlord represents and warrants that, to the best of
its actual knowledge (without any inquiry, investigation, inspection or due
diligence of any kind), Tenant may use the Demised Premises for offices and
storage.
11.05. Landlord shall comply or cause compliance with all laws
and ordinances and the orders, rules, regulations and requirements of all
federal, state, county and municipal government applicable to the Building and
the Land, subject to inclusion of the cost of compliance by Landlord in Common
Expenses if same constitutes an Expense and is not otherwise required to be
borne by Landlord without reimbursement by Tenant pursuant to the other
provisions of this Lease, including, without limitation, Article 12. Landlord
may, however, defer compliance required hereby during that period of time in
which Landlord (or any other tenant) in good faith, and by appropriate legal
proceedings, is contesting the validity of any such laws, ordinances, orders,
rules, regulations or requirements, provided that such deferral does not
interfere significantly with Tenant's use and occupancy of the Demised
Premises.
ARTICLE 12
REPAIRS
12.01. Except for damage described in Article 17, all damage
or injury to the Demised Premises, whether structural or non-structural, and
to its fixtures, glass, appurtenances and equipment and/or to the Building or
to its fixtures, glass, appurtenances and equipment caused by Tenant moving
property in or out of the Building or by installation or removal of furniture
fixtures or other property, or resulting from Tenant's acts, omissions or
negligence or breach of any of Tenant's covenants or agreements hereunder,
shall be repaired, restored or replaced promptly by Tenant at its sole cost
and expense. All aforesaid repairs, restorations and replacements shall be in
quality and class equal to the work provided for in the Work Letter and shall
be done in a good and workmanlike manner. If Tenant fails to make such
repairs, restorations or replacements, same may be made by Landlord at the
expense of Tenant and all sums so spent and expenses incurred by Landlord
shall be collectible as additional rent and shall be paid by Tenant within ten
(10) days after rendition of a bill or statement therefor.
12.02. Landlord shall, at its expense, make all repairs and
replacements necessary in order to keep in good order and repair the roof,
exterior walls, glass and glass windows, foundation, exterior doors, floor
slabs and other structural portions of the Building and the Demised Premises.
Landlord shall also, at its expense, make all major capital improvements (of
the type excluded from Expenses pursuant to Section 3.03A) necessary to
replace (as opposed to the regular repair and maintenance provided in Section
12.03 below of) all mechanical systems, heating, air conditioning, water,
sewer, elevator, sprinkling, smoke and fire alarm, ventilating, electrical and
utilities systems serving the Building, the Demised Premises and the Property
and the public portions of the Property. Landlord may make such repairs
during business hours. Tenant agrees to notify Landlord of the necessity for
any repairs of which Tenant may have knowledge, for which Landlord may be
responsible under the provisions of this Section, but failure to so notify
Landlord shall not relieve Landlord of its obligation hereunder to make any
such repair or replacement.
12.03. Tenant shall take good care of the Demised Premises and
the equipment, fixtures, mechanical and electrical systems and appurtenances
therein and at its sole cost and expense shall repair and maintain all
mechanical systems, heating, air conditioning, water, sewer, elevator,
sprinkler, smoke and fire alarm, ventilation, electrical and utilities systems
serving the Demised Premises (including, without limitation, those in the
powerhouse located on the Property which serves the western wing of the
Building) as and when needed to preserve them in good working order and
condition (subject to reasonable wear and tear). Landlord shall repair and
maintain the Common Areas for their intended purposes and the cost and expense
incurred by Landlord for such repairs and maintenance shall be included in
Common Expenses. Tenant shall not be responsible for the structural, roof and
other repairs which are the responsibility and obligation of Landlord pursuant
to Section 12.02.
ARTICLE 13
ALTERATIONS; FIXTURES TENANT'S PROPERTY
13.01. Tenant may from time to time make such interior,
nonstructural alterations, installations, additions or improvements which do
not affect the heating, ventilating and air conditioning system or the plumbing
system or result in exceeding the capacity of the electrical system serving
the Demised Premises (hereinafter called "Alterations") in or to the Demised
Premises, the cost of which Alterations shall not exceed $50,000.00 in the
aggregate for any one job or series of related jobs (including the cost of
Alterations under the Existing Lease for the same job or series of related
jobs) without the consent of Landlord, but upon the condition that Tenant has
given Landlord ten (10) days prior written notice of such Alterations. All
such work shall be performed by Tenant at its sole expense in a good and
workmanlike manner and in compliance with all laws and regulations of
government bodies having jurisdiction over the same.
13.02. Tenant may make alterations to the Demised Premises
other than those provided for in Section 13.01 at any time and from time to
time, provided that Tenant shall first obtain the written consent of Landlord
to such alterations, which consent shall not be unreasonably withheld, and
which consent may be subject to such reasonable conditions for the protection
of Landlord's interest as Landlord may require. Such alterations consented to
by Landlord shall constitute Alterations.
13.03. If any mechanic's lien is filed against the Demised
Premises or the Building for work claimed to have done for or materials
claimed to have been furnished to Tenant, it shall be discharged by Tenant
within twenty (20) days thereafter, at Tenant's expense, by filing the bond
required by law or payment of otherwise. If Tenant shall fail to do so,
Landlord may, at its option, do so at Tenant's expense. In addition, Tenant
shall defend, save and hold Landlord harmless from any such mechanic's lien or
claim, including, without limitation, Landlord's reasonable attorneys' fees,
costs and expenses. Landlord shall not be liable for any failure of any
Building facilities or services, including, but not limited to, the heating,
ventilating and air conditioning equipment in the Demised Premises installed
by Landlord, caused by alterations, installations, and/or additions by Tenant
and Tenant shall correct any such faulty installation.
13.04. All Alterations shall be performed in such manner so as
not to interfere with the occupancy of any other tenant nor delay or impose
any additional expense upon Landlord in the maintenance, cleaning, repair,
safety, management, or security of the Building (or the Building's equipment)
or in the performance of any improvements. If any additional expense is
incurred Landlord may collect the same from Tenant and Tenant shall promptly
pay same when billed as additional rent.
13.05. No approval of any plans or specifications by Landlord
or consent by Landlord allowing Tenant to make any improvements or any
inspection of improvements made by or for Landlord shall in any way be deemed
to be an agreement by Landlord that the contemplated improvements comply with
any legal requirements or insurance requirements or the certificates of
occupancy for the Building nor shall it be deemed to be a waiver by Landlord
of the compliance by Tenant with any provision of this Lease.
ARTICLE 14
RIGHT TO PERFORM OTHER PARTY'S OBLIGATIONS
14.01. If Tenant shall default in the observance or
performance of any term or covenants on its part to be observed or performed
under or by virtue of any of the terms or provisions in any Article of this
Lease, Landlord, without being under any obligation to do so and without
thereby waiving such default, may, at any time after five (5) days notice
(except in the event of emergency, when no notice need be given), remedy such
default for the account and at the expense of Tenant. If Landlord reasonably
makes any expenditures or incurs any obligations for the payment of money in
connection therewith, including, but not limited to, reasonable attorneys'
fees in instituting, prosecuting or defending any action or proceeding, such
sums paid or obligations incurred, as well as any damages or fines or other
expenses sustained or incurred by Landlord due to non- performance of,
non-compliance with non-observance or breach of any term, covenant or
condition of this Lease on Tenant's part to be kept, observed, performed or
complied with, together with interest at the Prime Rate and costs shall be
deemed to be additional rent hereunder and shall be paid to Landlord by Tenant
on demand.
14.02. If Landlord shall default in the observance or
performance of any term or covenant on its part to be observed or performed
under or by virtue of any of the terms or provisions in any Article of this
Lease, Tenant, without being under any obligation to do so and without thereby
waiving such default, may, at any time after five (5) days notice (except in
the event of emergency, when no notice need be given), reasonably remedy such
default for the account and at the expense of Landlord. If Tenant makes any
expenditures or incurs any obligations for the payment of money in connection
therewith, including, but not limited to, reasonable attorneys' fees in
instituting, prosecuting or defending any action or proceeding, such sums paid
or obligations incurred, as well as any damages or fines or other expenses
sustained or incurred by Tenant due to the nonperformance of, noncompliance
with or nonobservance or breach of any term, covenant or condition of this
Lease on Landlord's part to be kept, observed, performed or complied with,
together with interest at the Prime Rate and costs, shall be paid to Tenant by
Landlord on demand. If Landlord shall fail to pay Tenant as herein provided
and Tenant secures a judgment against Landlord, Tenant may deduct the amount
thereof (together with all attorneys' fees, costs, etc.) from the Fixed Rent
and any additional rent and any other charges to Tenant under this Lease.
ARTICLE 15
NON-LIABILITY; LIMITATION OF LIABILITY OF LANDLORD
15.01. Landlord or Landlord's agents have made no
representations or promises with respect to the Building, the Land or the
Demised Premises except as herein expressly set forth, and no rights,
easements or licenses are acquired by Tenant by implication or otherwise
except as expressly set forth, in the provisions of this Lease.
15.02.A. Except for injury to any person or damage to property
caused by (a) the negligence or misconduct of Landlord or its officers,
employees, agents, contractors or invitees, (b) the failure of Landlord to
repair and maintain any portions of the Building or the Demised Premises or
the Property which Landlord is obligated to repair and maintain, (c) the
failure of Landlord to properly perform and repair Landlord's Work in
accordance with the provisions of this Lease, or (d) the failure of Landlord
to perform any other of its obligations under this Lease, Landlord's liability
shall be limited as follows: (A) Tenant agrees that all of the furnishings,
fixtures, equipment, effects and personal property of every kind, nature and
description of Tenant and of all persons claiming by, through or under Tenant
which, during the continuance of this Lease or any occupancy of the Demised
Premises by Tenant or anyone claiming under Tenant, may be on the Demised
Premise or elsewhere in the Building, shall be at the sole risk and hazard of
Tenant, and if the whole or any part thereof shall be destroyed or damaged, no
part of said loss or damage is to be charged to or to be borne by Landlord,
and (B) Landlord and its agents shall not be liable (i) for any injury (or
death) to persons or (ii) loss of or damage to property by theft or otherwise
(including, without limitation, injury, death or damage to persons or property
resulting from fire, explosion, falling plaster, steam, gas, electricity,
water, rain or snow, or leaks from any part of the Building or from the pipes,
appliances or plumbing works or from the roof, street or subsurface or from
any other place or by dampness or by other tenants or persons in the Building
which occurs within the Demised Premises or, if outside the Demised Premises,
which results from the negligence or misconduct of Tenant, its agents,
employees, contractors or invitees.
B. Except for any injury to any person or damage to any
property caused by the negligence or misconduct of Tenant, or the failure of
Tenant to perform any of its obligations under this Lease, Tenant shall not be
liable to Landlord or its agents, officers, employees or invitees, or to any
other person whomsoever, for any injury resulting in death or disability to
any person or damage to property in the Building other than within the Demised
Premises.
15.03. No recourse shall be had on any of Landlord's
obligations under this Lease or for any claim based thereon or otherwise in
respect thereof against any incorporator of Landlord, subscriber to Landlord's
capital stock, shareholder, officer or director, past, present or future, of
any corporation, or any partner or joint venturer of any partnership or joint
venture which shall be Landlord hereunder or included in the term "Landlord"
or of any successor of any such corporation, or against any principal,
disclosed or undisclosed, or any affiliate of any party which shall be
Landlord or included in the term "Landlord", or any employee or agent of
Landlord, whether directly or through Landlord or through any receiver,
assignee, agent, trustee in bankruptcy or through any other person, firm or
corporation, whether by virtue of any constitution, statute or rule of law or
by enforcement of any assessment or penalty or otherwise, all such liability
being expressly waived and released by Tenant.
15.04. Tenant shall look only and solely to Landlord's estate
and interest in and to the Building and the rents and profits therefrom for
the satisfaction of any right of Tenant arising out of this Lease, or for the
collection of a judgment or other judicial process or arbitration award
requiring the payment of money by Landlord and no other property or assets of
Landlord, Landlord's agents, incorporators, shareholders, employees, officers,
directors, partners, agents, principals (disclosed or undisclosed), joint
venturers, or affiliates shall be subject to levy, lien, execution,
attachment, or other enforcement procedure for the satisfaction of Tenant's
rights and remedies under or with respect to this Lease, the relationship of
Landlord and Tenant hereunder or under law, or Tenant's use and occupancy of
the Demised Premises or any other liability of Landlord to Tenant.
15.05. If by reason of the limitations on liability and
recourse provided for in Sections 15.03 and 15.04 Tenant is deprived in any
way of any of its rights or benefits provided for under this Lease and if
Tenant secures a judgment in respect of the same, which judgment is
unsatisfied by reason of the operation of said Sections 15.03 and 15.04, then
Tenant shall have the right and option either to (i) deduct the amount of its
damage or loss covered by such judgment from the rent or additional rent or
any other charges provided for under this Lease or (ii) terminate this Lease
upon thirty (30) days notice to Landlord, in which latter event such
termination shall be full satisfaction of the judgment.
ARTICLE 16
INSURANCE; INDEMNITY
16.0l.A. Tenant shall not do or permit to be done any act or
thing in or upon the Demised Premises which will invalidate or be in conflict
with the terms of the standard form of fire, boiler, sprinkler, water damage
or other standard insurance policies copies of which are delivered to Tenant
covering the Building and the fixtures and property therein; and Tenant shall
comply with all rules, orders, regulations or requirements of the Board of Fire
Underwriters or any other similar body having jurisdiction (except to the
extent such compliance is Landlord's obligation under Section 11.05), and
shall not knowingly do or permit anything to be done in or upon the Demised
Premises or bring or keep anything therein or use the Demised Premises in a
manner which increases the rate of fire insurance upon the Building or on any
property or equipment located therein over the rate in effect at the
commencement of the term of this Lease. If any requirement referred to in this
Section 16.0l.A is applicable solely to Tenant's particular business or
Tenant's particular use of the Demised Premises (as opposed to such a
requirement as would be applicable to anyone occupying the Demised Premises
or the Building), then Tenant's compliance will be at Tenant's expense (unless
such expense is caused by Landlord's failure to fulfill any of its obligations
under this Lease); otherwise, the cost of such compliance shall be borne as
elsewhere provided in this Lease, i.e., either by Landlord or as a Common
Expense shared by all tenants of the Building, pro rata.
B. Landlord represents and warrants to Tenant that the use of
the Demised Premises for the permitted uses does not and will not invalidate
or be in conflict with the Certificate of Occupancy to be obtained for the
Demised Premises or the terms of the Massachusetts standard form of fire,
boiler, sprinkler, water damage or other standard insurance policies covering
the Building and the fixtures and properties therein, or any rules, orders,
regulations or requirements of the Massachusetts Board of Fire Underwriters
or any other similar body having jurisdiction, or cause any increase in the
rate of any such insurance.
16.02. If, by reason of any failure of Tenant to comply with
the provisions of this Lease, the rate of standard fire, boiler, sprinkler,
water damage or other insurance (with extended coverage) on the Building or on
the property and equipment of Landlord or any other tenant or subtenant in the
Building shall be higher than it otherwise would be, Tenant shall reimburse
Landlord, as additional rent, for that part of the fire, boiler, sprinkler,
water damage or other insurance premiums thereafter paid by Landlord which
shall have been charged solely because of such failure by Tenant and Tenant
shall make the reimbursement on the first day of the month following such
payment by Landlord and receipt of a bill therefor, together with a
computation of such increase and statement by the insurance company (or by the
insurance broker of record who has been charged with the responsibility for
billing the company) as to Tenant's responsibility therefor. Landlord agrees
that, so long as any such failure to comply is not also a violation of law,
Landlord's sole remedy for such failure to comply which results in an increase
in insurance premiums as specified herein shall be reimbursement by Tenant of
such increase in premiums, and the same shall not be considered an event of
default hereunder.
16.03. Tenant shall obtain and keep in full force and effect
during the term, at its own cost and expense, naming and protecting Landlord
and Landlord's managing agent and any mortgagee of which Tenant shall be
notified, as well as Tenant as insureds (a) public liability insurance (with
contractual liability endorsements) to afford protections against any and all
claims for personal injury, death or property damage occurring in, upon, about
or connected with the Demised Premises, in an amount of not less then
$3,000,000.00 for injury or death arising out of any one occurrence and
$500,000.00 for damage to property in respect to any one occurrence, or in any
increased amount reasonably required by Landlord; and (b) insurance against
loss or damage by fire and such other risks and hazards as are insurable under
then available standard forms of fire insurance policies with extended
coverage, to Tenant's property for the full insurable value thereof; and (c)
such workmen's compensation insurance as may be required by law. During such
time as Tenant shall be constructing any improvements, alterations and/or
additions to the Demised Premises, Tenant shall also carry insurance covering
all physical loss, in an amount reasonably satisfactory to, and to
specifically protect, Landlord and the holder of any mortgage.
All such insurance shall be written in form and substance
reasonably satisfactory to Landlord by an insurance company of recognized
responsibility licensed to do business in Massachusetts. Upon failure of
Tenant to procure, maintain and pay all premiums therefor, Landlord at its
option may, do so, and Tenant agrees to pay the cost thereof to Landlord upon
demand as additional rent. Tenant shall cause to be included in all such
insurance policies a provision to the effect that the same will be
non-cancellable and not permitted to lapse except upon thirty (30) days' prior
notice to Landlord. On the Commencement Date, appropriate certificates shall be
deposited with Landlord. Any renewals, replacements or endorsements thereto
shall also be so deposited.
16.04.A. Tenant shall indemnify and hold Landlord harmless
from and against all claims or damage (including attorneys' fees) to person or
property occurring in or about the Demised Premises or arising from, related
to or in connection with the use or occupancy of the Demised Premises or the
conduct of Tenant's business therein or therefrom, except if caused by the
negligence of Landlord, its agents or employees, or Landlord's failure to
perform its obligations under this Lease.
B. Landlord shall indemnify and hold Tenant harmless from and
against all claims or damage (including attorneys' fees) occurring in or about
the Building of the Property excluding the Demised Premises or arising from,
related to or in connection with the use or occupancy of portions of the
Building or Property other than the Demised Premises or the conduct of
businesses therein or therefrom, except if caused by the negligence of Tenant
or Tenant's employees or agents or Tenant's failure to fulfill its obligations
under this Lease.
16.05. Landlord agrees to maintain, with insurance companies
qualified to do business in the Commonwealth of Massachusetts, in full force
during the term hereof (a) a policy or blanket policy (or policies) of general
public liability insurance (with contractual liability endorsement) under
which Tenant and Landlord are named insureds thereunder to afford protection
against claims for personal injury, death or property damage occurring in the
public portions of the Property; and (b) fire and casualty insurance in such
amounts as will impose full replacement value coverage (if available) in the
event of fire or casualty to the Demised Premises and the Building (excluding
Tenant's property); and (c) workmen's compensation insurance required by law;
and (d) builder's risk insurance during the period of construction of
Landlord's Work and other improvements. Landlord shall supply Tenant with a
certificate of insurance evidencing insurance coverage required hereunder.
Such policy shall provide that such insurance shall not be reduced or
cancelled, or any material change therein made, unless thirty (30) days prior
written notice is given to Tenant. The minimum limits of liability of such
public liability insurance shall be, with respect to personal injury and/or
death and/or property damage, $3,000,000.00.
16.06.A. Neither party shall acquire as insured under any
insurance carried by the other any right to participate in the adjustment of
loss or to receive insurance proceeds, and agrees upon request to promptly
endorse and deliver to the other party any checks or other instruments in
payment of loss in which it is named as payee.
B. In the event of any claim under this Lease by one party
hereto against the other, the claiming party shall look first to insurance
which is required to be carried under the terms of this Lease for satisfaction
of such claim. To the extent that the claim is not completely covered by such
insurance the party against whom the claim is being made shall be fully
responsible for any such deficiency in coverage, except (i) where the party
against whom the claim is made failed to carry such insurance, such party
shall have the full liability for such excess, or (ii) where the claimant
failed to carry such insurance, the claimant shall have the full liability for
such excess.
16.07. The parties hereto shall each procure and maintain in
force and effect an appropriate clause in, or endorsement on, any fire or
extended coverage insurance covering the Demised Premises and the Building and
the personal property, fixtures and equipment located therein or thereon,
pursuant to which the insurance companies waive subrogation, provided such
waiver is procurable without additional premium, and having obtained such
clause or endorsement of waiver of subrogation, each party hereby agrees that
it will not make any claims against or seek to recover from the other for any
loss or damage to its property or the property of the other, covered by such
fire and extended coverage insurance, or by any such insurance which is
required hereunder to be maintained with respect to which it is possible to
secure such provision (whether or not such insurance has actually been
maintained), reserving, however, any rights with respect to any excess of loss
or injury over the amount recovered by such insurance; provided, however, that
the release, discharge, exoneration and covenant not to sue herein contained
shall be limited by the terms and provisions of the waiver of subrogation
clause and/or endorsements and shall be coextensive therewith. If such waiver
of subrogation shall be procurable only by payment of an additional premium
therefor, notice of such requirement shall be furnished to the other party;
and if such other party fails to pay such additional premium, of if such
waiver of subrogation shall no longer be obtainable, then the provisions
hereof shall not be applicable to such other party.
ARTICLE 17
DAMAGE BY FIRE OR OTHER CAUSE
17.0l.A. If the Demised Premises shall be damaged by fire or
other cause (and this Lease is not terminated as hereinafter provided), the
damages shall be repaired to substantially their condition prior to the date
of such damage (exclusive of any Alterations performed by Tenant pursuant to
Sections 13.01 or 13.02 and exclusive of any of Tenant's property) by and at
the expense of Landlord, and until such repairs shall be made, the Fixed Rent
and other charges provided for in this Lease shall be apportioned and abated
as to the part of the Demised Premises which is not usable by Tenant. If the
Demised Premises are totally or partially damaged or are rendered wholly or
partially untenantable by fire or other casualty, Landlord shall within ten
(10) days thereafter advise Tenant whether in Landlord's judgment the Demised
Premises can be rebuilt within eight (8) months or specifying such longer
period as will be required. If the building will require eight (8) months or
less, Landlord will proceed diligently with such rebuilding and the rent and
other charges shall be abated as provided above. If the rebuilding will
require more than eight (8) months, Tenant shall have the right within ten
(10) days after receipt of Landlord's advice to elect to cancel this Lease by
notice given as in Article 22 hereof provided; and thereupon the term of this
Lease shall expire by lapse of time upon the third day after such notice is
given, and Tenant shall vacate the Demised Premises and surrender same to
Landlord.
B. If this Lease has not been terminated pursuant to Section
17.01A and (1) if the work of repairing, replacing or rebuilding the Demised
Premises or the Building shall not have been commenced within a reasonable
period, or after commencement shall not be proceeding with reasonable
continuity and diligence, or shall not have been fully completed within seven
(7) months after the date of such fire or other casualty, Tenant shall have
the right to give Landlord written notice of Tenant's intention to itself
perform such repair and if Landlord has not cured such failure within thirty
(30) days thereof the, at Tenant's option upon two days' written notice given
within fifteen (15) days after the expiration of such thirty (30) day period,
Tenant may complete such repair, replacement or rebuilding in which even
Landlord shall make available to Tenant all insurance proceeds received or
receivable under any and all policies of insurance (in the event that such
proceeds actually received by Tenant are not sufficient to fully accomplish
said repairs, restoration and rebuilding, Tenant shall have the right to
deduct the cost of such repair, replacement and rebuilding in excess of such
proceeds from the Annual Fixed Rent and other charges payable hereunder; or
(2) if Landlord has not substantially completed the making of the required
repairs to the Demised Premises within seven (7) months from the date of such
fire or other casualty, Tenant may within fifteen (15) days after the
expiration of such period serve notice on Landlord of its intention to
terminate this Lease, and if within thirty (30) days after such notice
Landlord shall not have completed the making of the required repairs, this
lease shall terminate on the expiration of the thirty-first (31st) day
following the giving of Tenant's notice as if such date were the Expiration
Date.
C. If more than twenty percent (20%) of the Demised Premises
and the premises leased under the Existing Lease (combined) or a substantial
portion of the Building shall be damaged by fire or other casualty during
years 9 or 10, or years 14, 15, 20 or 21 (assuming that the applicable
extension options have been validly exercised), of the term of this Lease,
either Landlord or Tenant may, upon written notice to the other party given
within thirty (30) days after the date of such casualty, cancel and terminate
this Lease as of the date set forth in such notice, as if such date were the
stated Expiration Date of this Lease and Landlord shall have no duty to repair
and/or restore the Demised Premises; provided if in years 9 or 14, and such
termination is by Landlord, Tenant may nullify such cancellation by exercising
its option to extend this Lease at the end of years 10 or 19 (if permitted
under and in accordance with Article 27), as the case may be, by written
notice to Landlord given within ten (10) days after receipt of such
cancellation notice (except if Landlord's cancellation is due to a
determination by landlord that the Demised Premises cannot be rebuilt within
eight (8) months pursuant to Section 17.01A).
17.02. No damage, compensation or claims shall be payable by
Landlord for inconvenience, loss of business or annoyance arising from any
repair or restoration of any portion of the Demised Premises or of the
Building. Landlord shall use its best efforts to effect such repairs promptly
and in such manner as not unreasonably to interfere with Tenant's occupancy.
17.03. Landlord will use its best efforts to require that any
mortgage of the Property shall provide for application of casualty insurance
loss proceeds to the repair or reconstruction of the Building and Demised
Premises upon any casualty loss.
ARTICLE 18
CONDEMNATION
18.01. In the event that the whole of the Demised Premises
shall be condemned or taken in any manner for any public or quasi-public use,
this Lease and the term and estate hereby granted shall forthwith cease and
terminate as of the date of vesting of title. In the event that only a part
of the Demised Premises or the Property shall be so condemned or taken such
that Tenant in its reasonable opinion is capable of conducting its business in
the part not so taken in the same manner and to the fullest extent as prior to
the taking, of which Tenant shall notify Landlord within thirty (30) days
thereafter, then, effective as of the date of vesting of title, the Fixed Rent
and other charges provided for in this Lease for such part shall be equitably
abated and this Lease shall continue as to such part not so taken. In the
event that only a part of the Property shall be so condemned or taken, then
(a) if (i) substantial structural alteration or reconstruction of the Building
shall, in the reasonable opinion of Landlord, be necessary or appropriate as a
result of such condemnation or taking (whether or not the Demised Premises be
affected), Landlord may, at its option, or (ii) in its reasonable opinion
Tenant cannot conduct its business in the parts not so taken in the same
manner and to the fullest extent conducted prior to the taking (it being
understood that if parking places have been taken and can be replaced within a
reasonable distance from the Demised Premises then Tenant shall be deemed
capable of so conducting its business), either party may, at its option,
terminate this Lease and the term and estate hereby granted as of the date of
such vesting of title by notifying the other in writing of such termination
within 60 days following the date on which Landlord or Tenant, as the case may
be, shall have received notice of vesting of title, or (b) if Landlord (or
Tenant, as the case may be) does not elect to terminate this Lease, as
aforesaid, this Lease shall be and remain unaffected by such condemnation or
taking, except that the Fixed Rent and other charges under this Lease shall be
abated to the extent hereinbefore provided. In the event that only a part of
the Demised Premises shall be so condemned or taken and this Lease and the
term and estate hereby granted are not terminated as hereinbefore provided,
Landlord will, at its expense, (i) restore with reasonable diligence the
remaining portions of the Demised Premises as nearly as practicable to the
same condition as it was in prior to such condemnation or taking and (ii)
replace any parking taken with substantially the same number of spaces,
reasonably proximate to the Property.
18.02. In the event of termination in any of the cases
hereinabove provided, this Lease and the term and estate hereby granted shall
expire as of the date of such termination with the same effect as if that were
the Expiration Date hereinbefore specified, and the rent hereunder shall be
apportioned as of such date.
18.03. In the event of any condemnation or taking hereinabove
mentioned of all or a part of the Building, Landlord shall be entitled to
receive the entire award in the condemnation proceeding, including any award
made for the value of the estate vested by this Lease in Tenant, and Tenant
hereby expressly assigns to Landlord any and all right, title and interest of
Tenant now or hereafter arising in or to any such award or any part thereof,
and Tenant shall be entitled to receive no part of such award. Tenant shall
have no claim for the value of any unexpired term of this Lease. Tenant may,
however, make a separate and independent claim or claims for damages to
tenant's fixtures, furnishings, machinery and equipment, or on account of any
expenses which it shall incur in removing its fixtures, furnishings, machinery
and equipment from the Demised Premises. Landlord and Tenant shall each
cooperate and join with the other in such proceedings, including the signing
of necessary documents, all as shall be necessary to enable the maintenance of
such proceedings.
18.04. Landlord will use its best efforts to require that any
mortgages of the Property provide for application of the proceeds of any
taking awards to restoration, repair, and rebuilding of the portion of the
Property or Demised Premises remaining after the taking.
ARTICLE 19
BANKRUPTCY
19.01. If at any time prior to the date herein fixed as the
Commencement Date there shall be filed by or against Tenant in any court
pursuant to any statute either of the United States or of any State a petition
in bankruptcy, or there shall be commenced a case under the Bankruptcy Code by
or against Tenant, or a petition filed for insolvency or for reorganization or
for the appointment of a receiver or trustee of all or a portion of Tenant's
property, and within thirty (30) days thereafter Tenant fails to secure a
discharge thereof, or if Tenant makes an assignment for the benefit of
creditors, or petitions for or enters into an arrangement with its creditors,
this Lease shall ipso facto be cancelled and terminated, in which event
neither Tenant nor any person claiming through or under Tenant or by virtue of
any statute or of an order of any court shall be entitled to possession of the
Demised Premises and Landlord, in addition to the other rights and remedies
given by Section 19.03 hereof and/or by virtue of any other provision herein
or elsewhere in this Lease contained or by virtue of any statute or rule of
law, may retain as liquidated damages any rent, security, deposit or monies
received by it from Tenant or others on behalf of Tenant upon the execution
hereof.
19.02. If at the date fixed as the Commencement Date or if at
any time during the term hereby demised there shall be filed by or against
Tenant in any court pursuant to any statute either of the United States or of
any State a petition in bankruptcy, or there shall be commenced a case by or
against Tenant under the Bankruptcy Code, or a petition filed in insolvency or
for reorganization or for the appointment of a receiver or trustee of all or a
portion of Tenant's property, and within sixty (60) days thereafter Tenant
fails to secure a discharge thereof, or if Tenant makes an assignment for the
benefit of creditors or petitions for or enters into an arrangement with its
creditors, this Lease, at the option of Landlord, exercised within a
reasonable time after notice of the happening of any one or more of such
events, may be cancelled and terminated, in which event neither Tenant nor any
person claiming through or under Tenant by virtue of any statute or of an
order of any court shall be entitled to possession or to remain in possession
of the Demised Premises but shall forthwith quit and surrender the Demised
Premises, and Landlord, in addition to the other rights and remedies given by
Section 19.03 hereof or which Landlord has by virtue of any other provision
herein or elsewhere in this Lease contained or by virtue of any statute or
rule of law, may retain as liquidated damages any rent, security, deposit or
monies received by it from Tenant or others on behalf of Tenant.
19.03. It is stipulated and agreed that in the event of the
termination of this Lease pursuant to Sections 19.01 or 19.02 hereof,
Landlord, notwithstanding any other provisions of this Lease or the Existing
Lease to the contrary, shall be entitled to recover forthwith from Tenant as
and for liquidated damages an amount equal to the difference between the rent
reserved hereunder for the unexpired portion of the term demised and the then
fair and reasonable rental value of the Demised Premises for the same period,
provided, however, that the "unexpired portion of the term" shall be the first
ten (10) years of the term plus the term(s) of any option(s) to extend
exercised pursuant to Article 27. Nothing herein contained shall limit or
prejudice the right of the Landlord to prove for and obtain as liquidated
damages by reason of such termination, an amount equal to the maximum allowed
by any statute or rule of law in effect at the time when, and governing the
proceedings in which, such damages are to be proved, whether or not such
amount be greater, equal to or less than the amount of the difference referred
to above. Nothing in this Article or the rest of this Lease is meant to
diminish or cancel any rights and remedies Landlord may have under this Lease,
the Existing Lease or otherwise.
ARTICLE 20
DEFAULTS AND REMEDIES; WAIVER OF REDEMPTION
20.0l.A. If (i) Tenant shall default in the payment of any
installment of Fixed Rent or additional rent reserved herein when due and such
default shall continue for ten (10) days after Tenant is given written notice
thereof, or (ii) Tenant defaults in fulfilling any of the covenants of this
Lease, other than the covenants for the payment of Fixed Rent or additional
rent, or if the Demised Premises become deserted (which for purposes hereof
shall not be deemed to have occurred if Tenant maintains a guard in the
Demised Premises and its insurance is in full force and effect), then, in any
one or more of such events, and such default shall continue for thirty (30)
days after Tenant is given written notice thereof, or if the said default or
omission complained of shall be of such a nature that the same cannot be
completely cured or remedied within said thirty (30) day period, and Tenant
shall not within said thirty (30) day period commence and thereafter with
reasonable diligence and in good faith proceed to remedy or cure such default;
or (iii) if any execution or attachment shall be issued against Tenant or any
of Tenant's property whereupon the Demised Premises shall be taken or occupied
by someone other than Tenant; or (iv) if any of the foregoing acts, omissions
or events occur under or in connection with the Existing Lease or the premises
leased thereunder (which will be deemed to be a default under this Lease); then
Landlord may serve a written three (3) day notice of cancellation of this
Lease upon Tenant, and upon the expiration of said three (3) days, this Lease
and the term hereof shall end and expire as fully and completely as if the
date of expiration of such three (3) day period were the Expiration Date and
Tenant shall then quit and surrender the Demised Premises to Landlord by
Tenant shall remain liable as hereinafter provided.
B. If the three (3) day notice provided for in Section 20.01 A
above shall have been given, and the term shall expire as aforesaid, (or if
the event specified in (i) of Section 20.01 A above shall occur whether or not
said three (3 day termination notice shall have been given), then and in any
of such events Landlord may without notice, re- enter the Demised Premises
either by force or otherwise, and dispossess Tenant by summary proceedings or
otherwise, and the legal representative of Tenant or other occupant of the
Demised Premises and remove their effects and hold the Demised Premises as if
this Lease had not been made but Tenant shall remain liable hereunder as
hereinafter provided, and Tenant hereby waives the service of notice of
intention to re-enter or to institute legal proceedings to that end.
20.02. In case of any such default, re-entry, expiration
and/or dispossess by summary proceedings or otherwise, (a) the Fixed Rent and
additional rent shall become due thereupon and be paid to the time of such re-
entry, dispossess and/or expiration, together with such reasonable expenses as
Landlord may incur for legal expenses, attorney's fees, brokerage, and/or
putting the Demised Premises in the order and condition provided for in
Article 7; (b) Landlord may re-let the Demised Premises or any part or parts
thereof for a term or terms, which may, at Landlord's option, be less than or
exceed the period which would otherwise have constituted the balance of the
term of this Lease; and/or (c) Tenant or the legal representatives of Tenant
shall also pay Landlord as liquidated damages for the failure of Tenant to
observe and perform said Tenant's covenants herein contained, any deficiency
between the Fixed Rent and additional rent hereby reserved and/or covenants
herein contained, any deficiency between the Fixed Rent and additional rent
hereby reserved and/or covenanted to be paid and the net amount, if any, of
the rents collected or to be collected on account of the lease or leases of
the Demised Premises for each month of the period which would otherwise have
constituted the balance of the term of this Lease; provided, however, that the
"balance of the term of this Lease" shall mean, for all purposes of this
Article 20, the first ten (10) years of the term hereof plus the term(s) of
any option(s) to extend the Lease exercised pursuant to Article 27. In
computing such damages there shall be added to the said deficiency such
expenses as Landlord may incur in connection with reletting as are provided
for in (a) above. Any such damages shall be paid in monthly installments by
Tenant on the rent days specified in this Lease and any suit brought to
collect said sums for any month or months shall not prejudice in any way the
rights of Landlord to collect the deficiency for any subsequent month or
months by a similar proceeding. In the event any installment of such damages
shall not be paid when due and such default in payment shall continue for ten
(10) days after written notice to Tenant thereof, then Landlord may
immediately accelerate such deficiency for the entire balance of the term of
this Lease (as defined above). Landlord at Landlord's option may make such
alterations, repairs, replacements and/or decorations in the Demised Premises
as Landlord in Landlord's sole judgment considers advisable and necessary for
the purpose of reletting the Demised Premises; and the making of such
alterations and/or decorations shall not operate or be construed to release
Tenant from liability hereunder as aforesaid. Provided that Landlord uses
reasonable efforts to relet the Demised Premises and to mitigate Tenant's
damages by so reletting, Landlord shall in no event be liable for failure to
relet the Demised Premises, or in the event that the Demised Premises are
relet, for inability to collect the rent thereof under such reletting, nor
shall any such failure or inability release or affect Tenant's liability for
damages. In the event of a breach by Tenant of any of the covenants or
provisions hereof, Landlord shall have the right of injunction and the right
to invoke any remedy allowed at law or in equity as if re-entry, summary
proceedings and other remedies were not herein provided for. Mention in this
lease of any particular remedy, shall not preclude Landlord from any other
remedy, in law or in equity. The foregoing remedies and rights of Landlord
are cumulative. Tenant hereby expressly waives any and all rights of
redemption granted by or under any present or future laws in the event Tenant
is evicted or dispossessed for any cause, or in the event Landlord obtains
possession of the Demised Premises by reason of the violation by Tenant of any
of the covenants and conditions of this Lease, or otherwise.
20.03. If any of the acts, omissions or events described in
Section 20.01A (i), (ii), (iii) or (iv) occur, they also automatically shall
be deemed to have occurred under and in connection with the Existing Lease and
the premises leased thereunder, and to be a default under the Existing Lease,
and Landlord shall also have all of the rights and remedies available under
the Existing Lease or otherwise with respect thereto, including, without
limitation, all rights to terminate the Existing Lease, accelerate amounts due
thereunder and collect damages from Tenant in connection therewith.
ARTICLE 21
DEFINITION OF LANDLORD
The term "Landlord" wherever used in this Lease shall be
limited to mean and include only the owner or owners at the time in question
of the Land and the Building or tenant under any ground lease hereafter
affecting the Land and the Building to whom this Lease may be assigned, or a
mortgagee in possession, as the case may be, so that in the event of any sale,
assignment, transfer or lease of the Building, such owner, tenant or mortgagee
in possession shall thereupon be released and discharged from all covenants,
conditions and agreements shall be deemed assumed by and binding upon each new
owner, tenant under such ground lease, or mortgagee in possession for the time
being, until the Building is sold, assigned or transferred; provided that the
party then constituting "landlord" at any particular time shall always be
fully responsible for all obligations of Landlord provided for in this Lease
and that Tenant's obligations under this Lease shall not be changed in any way
by operation of this Article 21.
ARTICLE 22
NOTICES
Any notice, request or demand permitted or required to be given
by the terms and provisions of this Lease, or by any law or governmental
regulation, either by Landlord to Tenant or by Tenant to Landlord, shall be
given in writing. Unless otherwise required by such law or regulation such
notice, request or demand shall be given by certified or registered mail,
return receipt requested, enclosed in a securely closed postpaid wrapper, in a
United States Government general or branch post office, or by Federal Express
or other overnight courier or by messenger service (provided in all cases that
a receipt for delivery is obtained), addressed if to Tenant at its address as
stated on the first page of this Lease; and, if to Landlord, addressed to
Landlord at its address stated on the first page of this Lease with a copy to
Brickstone Properties, Inc., 200 Brickstone Square, Andover, Massachusetts
01810, Attention: Martin Spagat; and shall be deemed to have been served and
given when received by Landlord or Tenant, as the case may be. Either party,
by notice as aforesaid may designate a different address or addresses for
notices, requests or demands to it.
ARTICLE 23
RULES AND REGULATIONS
23.01. Tenant, its servants, employees, agents, visitors, and
licensees shall observe and comply with the Rules and Regulations attached
hereto and incorporated herein. Landlord shall have the right from time to
time during the term of this Lease to make reasonable changes in and additions
to the said Rules and Regulations covering matters similar to those covered by
those attached hereto with the same force and effect as if they were originally
attached hereto and incorporated herein; provided that
(a) Landlord delivers to Tenant reasonable prior written
notice of such changes or additions together with a copy thereof;
(b) such changes or additions do not impose additional costs or
burdensome obligations on Tenant and will not materially interfere with
Tenant's use and occupancy of, or the conduct of its business operations in,
the Demised Premises, or Tenant's access to and egress from the Demised
Premises; and
(c) in the event that the provisions of any Rules and
Regulations conflict or are inconsistent with the provisions of this Lease,
the provisions of this Lease shall govern and control. Landlord shall
incorporate the Rules and Regulations substantially as annexed to this Lease
(as so modified) in all leases and occupancy agreements for space in the
Building.
23.02. Any failure by Landlord to enforce any Rules and
Regulations now or hereafter in effect, either against Tenant or any other
tenant in the Building, shall not constitute a waiver of the enforceability of
any such Rules and Regulations, provided same are not enforced so as to
discriminate against Tenant.
ARTICLE 24
NO BROKER
24.01. Tenant represents and warrants that no brokers were
retained, used or referred to it with respect to this amendment and
restatement of the Lease and Tenant shall defend, indemnify and hold Landlord
harmless from any and all costs, claims, liability, damage or expense,
including but not limited to attorneys' fees, arising out of or resulting from
a breach of this representation and warranty.
24.02. Landlord represents and warrants that no brokers were
retained, used or referred to it with respect to the amendment and restatement
of the Lease and Landlord shall defend, indemnify and hold Tenant harmless
from any and all costs, claims, liability, damage or expense, including but
not limited to attorneys' fees, arising out of or resulting from a breach of
this representation and warranty.
ARTICLE 25
MISCELLANEOUS
25.01. Tenant shall not move any safe or heavy or bulky
equipment or other matter which would create a load in excess of 125 pounds
per square foot in or out of the Demised Premises or the Building without
Landlord's written consent, which consent Landlord agrees not unreasonably to
withhold or delay, provided Tenant shall not place a load upon any floor of
the Demised Premises which exceeds the load per square foot which such floor
was designed to carry and which is allowed by law. Tenant shall not abuse or
mistreat the Demised Premises or the installations therein.
25.02. Business machines and mechanical equipment belonging to
Tenant which may cause noise, vibration or any other nuisance that may be
transmitted to the structure or other portions of the Building or to the
Demised Premises to such a degree as to adversely affect the structure of the
Building or which may interfere with the use or enjoyment by other tenants of
their premises or the public portions of the Building, shall be placed and
maintained by Tenant, at Tenant's cost and expense, in vibration eliminators
sufficient to eliminate noise or vibration.
25.03. In the event that an excavation or any construction
should be made for building or other purposes upon land adjacent to the
Building, or should be authorized to be made, Tenant shall, if necessary,
afford to the person or persons causing or authorized to cause such excavation
or construction or other purpose, license to enter upon the Demised Premises
at reasonable hours and after reasonable notice (except in emergencies) for
the purpose of doing such work as shall reasonably be necessary to protect or
preserve the wall or walls of the Building, or the Building, from injury or
damage and to support them by proper foundations, pinning and/or underpinning,
or otherwise, provided that such work shall not significantly interfere with
Tenant's use of the Demised Premises.
25.04. Landlord shall not be deemed, in any way or for any
purpose, to have become, by the execution of this Lease or any action taken
thereunder, a partner of Tenant in its business or otherwise a joint venturer
or a member of any enterprise with Tenant.
25.05. No consent or waiver, express or implied, by Landlord
or Tenant to or of any breach of any covenant, condition or duty of Tenant or
Landlord, respectively, shall be construed as a consent or waiver to or of any
other breach of the same or any covenant, condition or duty. The failure of
Landlord to insist upon the strict performance of any of the Rules and
Regulations attached hereto or hereafter adopted by Landlord, shall not
prevent a subsequent violation from having all the force and effect of an
original violation. The receipt or acceptance by Landlord of rent with
knowledge of the breach of any covenant of this Lease shall not be deemed a
waiver of such breach. Except as may have been otherwise agreed to, no
payment by Tenant or receipt by Landlord of a lesser amount then the fixed
rent and additional rent required to be paid shall be deemed to be other than
received on account of the earliest such rent, nor shall any endorsement or
statement on any check or any letter accompanying any check or payment as rent
be binding on the Landlord or be deemed an accord and satisfaction, and
Landlord may accept such check or payment without prejudice to Landlord's
right to recover the balance of such rent or pursue any other remedy in this
Lease provided.
25.06. This Lease with its Schedules and Annexes contains the
entire agreement between Landlord and Tenant; any executory agreement
heretofore or hereafter made between Landlord and Tenant shall be ineffective
to change, modify, waive, release, discharge, terminate or effect an
abandonment of this Lease, in whole or in part, unless such agreement of
change, modification, waiver, release discharge, termination or effecting an
abandonment, is signed by the party against whom enforcement is sought.
Landlord shall use its best efforts to secure the consent of any mortgagee of
the Demised Premises to any amendment, modification, etc. hereunder if the
same is required under the terms of any mortgage on the Demised Premises.
25.07. The captions of Articles in this Lease and its Table of
Contents are inserted only for convenient reference and in no way define,
limit or describe the scope of this Lease or the intent of any provision
hereof. References to Articles and Sections are to those in this Lease unless
otherwise noted.
25.08. This Lease shall be governed by the laws of
Massachusetts. If any term, covenant, conditions or provision of this Lease
or the application thereof to any circumstance or to any person, firm or
corporation shall be invalid or unenforceable to any extent, the remaining
terms, covenants, conditions and provisions of this Lease or the application
thereof to any circumstances or to any person, firm or corporation or
provision is held invalid or unenforceable, shall not be affected thereby and
each remaining term, covenant, condition and provision of this Lease shall be
valid and shall be enforceable to the fullest extent permitted by law.
25.09. Tenant and Landlord agree that they will not record
this Lease. Tenant and Landlord shall, upon the execution hereof, execute and
deliver a notice of this Lease in appropriate form to be recorded at the South
Middlesex Registry of Deeds. If this Lease is terminated before the Term
expires, the parties shall execute, deliver and so record an instrument
acknowledging such fact and the actual date of termination of this Lease, and
Tenant hereby appoints Landlord its attorney-in-fact in its name and behalf to
execute such instrument.
25.10. In any case where either party hereto is required to do
any act (other than Tenant's obligation to pay rent), delays caused by or
resulting from Acts of God, war, civil commotion, fire or other casualty, labor
difficulties, shortages of labor, materials or equipment, government
regulations or other causes beyond such party's reasonable control shall not
be counted in determining the time during which such act shall be completed,
whether such time be designated by a fixed date, a fixed time or "a reasonable
time".
25.11. In any action or proceeding or arbitration between
Landlord and Tenant, the party prevailing in such action or proceeding or
arbitration shall be reimbursed by the other party for its reasonable
attorneys' fees and other expenses of such action, proceeding or arbitration.
25.12. Tenant may not install any signs on the exterior of the
Building, or that can be seen from outside of the Demised Premises. (However,
Tenant does have additional signage rights under the Existing Lease.)
ARTICLE 26
SUCCESSORS AND ASSIGNS
The covenants, conditions and agreements contained in this
Lease shall bind and inure to the benefit of the parties hereto and their
respective heirs, legal representatives, successors and, except as otherwise
provided herein, their assigns.
ARTICLE 27
TENANT'S OPTIONS
Under the terms of the Existing Lease, Tenant has been granted
two (2) options to extend the term of the Existing Lease for two (2)
additional terms of five (5) years each. The first (1st) option extends the
term of the Existing Lease from December 1, 1999 through November 30, 2004,
and the second (2nd) option extends the term of the Existing Lease from
December 1, 2004 through November 30, 2009. If the term of the Existing Lease
is extended pursuant to the valid exercise of one or both of the options under
the Existing Lease, then Tenant will have the concurrent option to extend the
term of this Lease [^^-] for the same period(s) on the same terms and
conditions as this Lease, except that the Fixed Rent during the extension terms
will be as set forth in Schedule III-A, provided that: concurrently with its
delivery of its notice of exercise under the Existing Lease Tenant also
delivers unconditional written notice of exercise of its option under this
Lease; Tenant may not exercise the second (2nd) option to extend this Lease
unless it first has validly exercised its first (1st) option to extend this
Lease; these options are granted to and may be exercised by Tenant on the
express condition that, at the time of exercise and at all times prior to the
commencement date of each option period, Tenant is not in default under this
Lease or the Existing Lease; and the dates set forth in the Existing Lease,
which apply to the giving of Tenant's exercise notice under the Existing Lease
and this Lease, shall not be extended for any reason whatsoever, and time
shall be of the essence.
ARTICLE 28
(INTENTIONALLY OMITTED]
ARTICLE 29
ARBITRATION
29.01. Any disputes relating to the obligations or provisions
of this Lease (if demand for arbitration is given prior to the sixtieth (60th)
day after the notice of default as to defaults specified in Section 20.01A),
shall be determined by arbitration conducted in the manner hereafter
specified.
The party demanding such arbitration shall give written notice
thereof to the other party and shall in such notice appoint an arbitrator.
Within 20 days thereafter the other party shall by written notice to the
original party appoint a second arbitrator. The arbitrators thus appointed
shall appoint a third arbitrator and such three arbitrators shall as promptly
as possible determine the disputed meaning or application, provided that:
(a) if the second arbitrator shall not have been appointed as
aforesaid the first arbitrator shall alone proceed to determine such matter;
(b) if the two arbitrators appointed by the parties shall be
unable to agree upon the selection of such third arbitrator within fifteen
days after the appointment of the second arbitrator, they or either of them
shall give written notice of such failure to agree to the parties, and, if the
parties fail to agree upon the selection of such third arbitrator within
fifteen days after the arbitrators appointed by the parties give notice as
aforesaid, then the third such arbitrator shall be the president of the Greater
Boston Real Estate Board, or on his failure, refusal or inability to act, the
parties may apply for such appointment to a court of competent jurisdiction.
Each arbitrator shall be qualified by virtue of experience in the area of the
matter under dispute. The parties shall be entitled to present evidence to
the arbitrators in support of their respective positions;
(c) the arbitrators may not make any determination inconsistent
with any of the terms of this Lease or deprive any parties thereto of any
right or warranty reserved in the Lease, or decided any matter other than the
specific issue referred to arbitration as herein provided;
(d) the determination of the majority of the arbitrators, or of
the sole arbitrator, as the case may be, shall be conclusive upon the parties.
The arbitrators, or the sole arbitrator, as the case may be, shall give written
notice to the parties stating their or his determination, and shall furnish to
each party a signed copy thereof;
(e) the fees and expenses of the arbitrators and the other
expenses of the arbitration properly incurred hereunder shall be paid as
provided in Section 25.11. Judgment on the award may be entered in any court
of competent jurisdiction; and
(f) While the computation of an amount may be in dispute, the
non-payment of any Fixed Rent or additional rent shall not be subjected to
arbitration, and all such amounts shall be paid as billed pending resolution
of any dispute, and any overpayment shall be promptly repaid following such
determination. In the event a dispute involves performance of an obligation,
the nonperformance of which constitutes or would create an emergency or cause a
default under any mortgage or ground lease, same may be performed by the other
party at its option and the arbitrators shall determine the responsibility for
the payment of the cost of such performance.
IN WITNESS WHEREOF, Landlord and Tenant have respectively
signed and sealed this Lease as of the date first above written.
HARVARD MILLS REALTY,
A MASSACHUSETTS LIMITED PARTNERSHIP
By: NIUNA-WAKEFIELD, INC.,
General Partner
WITNESS:
- -------------------------- By: ---------------------
(signature) Martin Spagat
Vice President and
Assistant Treasurer
- -------------------------- -------------------------
Name printed
METCALF & EDDY, INC.,
a Delaware corporation
WITNESS:
- -------------------------- By: ---------------------
(Signature) President
- -------------------------- -------------------------
Name printed Name printed
WITNESS:
- -------------------------- By: ---------------------
(Signature) Secretary or Treasurer
- -------------------------- -------------------------
Name printed Name printed
SCHEDULE I
DEMISED PREMISES
2nd Floor - Eastern Wing
SCHEDULE IA
THE NEW DEMISED PREMISES
2nd Floor - Eastern Wing
SCHEDULE II
SITE PLAN
HARVARD MILLS, WAKEFIELD, MASSACHUSETTS
SCHEDULE III
TENANT'S PERCENTAGE; USE
1. Tenant's Percentage: 10.55% (combined Area A and Area B)
(a) Area A Tenant's Percentage: 6.6%. NOTE:
ADDITIONAL
(b) Area B Tenant's Percentage: 3.95% TENANT'S
PERCENTAGE
PURSUANT
TO
ADDENDUM
2. Use:
(a) As to Area A of the Demised Premises, for general office
use, including executive, administrative and clerical offices and uses
ancillary thereto which are harmonious with office use.
(b) As to the Area B of the Demised Premises, for the storage
of Tenant's records and office supplies, furniture and unplugged equipment, or
for the uses described in subparagraph (a) above (subject to compliance with
all laws).
Although Area B is and will remain part of the Demised Premises
under this Lease, in order to make the most efficient use of its space, Tenant
may designate one or two other locations within the premises leased to Tenant
under the Existing Lease (the "Swap Locations") which will, in effect, be used
in place of Area B only for the purpose of determining whether Fixed Rent and
a portion of Common Expenses continue to be abated as described below. Tenant
must designate the Swap Locations (whether one or two) pursuant to a written
notice to Landlord given no later than January 31, 1990. The Swap Locations
must be clearly and distinctly designated (with dimensions) on floor plans
attached to this notice, and the square footage of each Swap Location must be
included in this notice. (The square footage of the Swap Location(s) must be
within 10% of the rentable square footage of Area B, and Tenant's measurements
will be subject to remeasurement and approval by Landlord.) If this notice is
not given as required, there will be no Swap Location(s), but if this notice
is given as required the Swap Location(s) cannot be changed.
If Tenant uses Area B (assuming no Swap Locations are
designated) or a Swap Location for any use other than solely for the storage
of Tenant's records, office supplies, furniture and unplugged equipment, or
for use or occupancy by people for any purpose other than while actually
placing or retrieving stored items in the ordinary course of business, then
Tenant will immediately notify Landlord in writing. (For example, the
establishment or occupation of temporary or permanent offices or areas by
people who place or retrieve stored items would constitute a changed use and
would require notification.) Tenant's failure to notify Landlord within three
days of the changed use will be a default under this Lease.
(i) If the changed use occurs after November 30, 1990
and before December 1, 1991, from and after the date of the changed use Fixed
Rent no longer will be abated as described in Section 3.01 for the entire Area
B (assuming no Swap Location(s) designated), or for the entire Swap
Location(s) where the changed use has occurred.
(ii) If the changed use occurs after February 1, 1990
and before December 1, 1991, from and after the date of the changed use Common
Expenses no longer will be abated as described in Section 3.03C for the entire
Area B (assuming no Swap Location(s) designated), or for the entire Swap
Location(s) designated), or for the entire Swap Location(s) where the changed
use has occurred.
(iii) As a hypothetical example, assuming that two Swap
Locations are designated, one containing 5,000 square feet and the other
containing 4,000 square feet, the 5,000 square foot Swap Location is used for
non-storage purposes on June 1, 1990, and the 4,000 square foot Swap Location
is used for non-storage purposes on June 1, 1991, the abatement of Fixed Rent
and Common Expenses would be affected as follows:
Period Fixed Rent Abatement
----------- ----------------------
12/1/89-11/30/90 Full abatement (non-storage
use occurred before 11/30/90)
11/30/90-6/1/91 Abatement on 4,000 s.f. only
(non-storage use in 5,000 s.f.
Swap Location)
6/1/91-12/1/91 No abatement (non-storage use
in both Swap Locations)
Period Common Expenses Abatement
--------- ---------------------------
12/1/89-6/1/90 Full abatement, 3.95% of
Tenant's Percentage (both Swap
Locations used solely for
storage)
6/1/90-6/1/91 Abatement on 4,000 s.f. only,
1.75% of Tenant's Percentage
(storage use in 5,000 s.f.
Swap Location)
6/1/91-12/1/91 No Abatement (non-storage use
in both Swap Locations)
SCHEDULE III-A
FIXED RENT
Annual Fixed
Period Rent Per S.F. Annual Rent Monthly Rent
- --------------- --------------- ----------------- -----------------
Until $13.50(*) $324,162.00(*) $27,013.50(*)
8/31/92*
9/1/92- 14.85 356,578.20 29,714.85
8/31/95
9/1/95- 17.95 431,015.40 35,917.95
8/31/99
9/1/99- 20.44 490,805.28 40,900.44
8/31/2002
9/1/2002- 23.00 552,276.00 46,023.00
8/31/2005
9/1/2005- 25.87 621,190.44 51,765.87
8/31/2008
9/1/2008- 29.09 698,509.08 58,209.09
11/30/2009
NOTE ADDITIONAL FIXED RENT PAYABLE PURSUANT TO ADDENDUM
- -------------
*Rent will be abated as described in Section 3.01 (except as described in
and subject to Section 2(b) of Schedule III).
SCHEDULE III - B
FIXED RENT FOR NEW DEMISED PREMISES
Annual Fixed
Period Rent Per S.F. Annual Rent Monthly Rent
- --------------- --------------- ----------------- -----------------
Until $13.50(*) $321,016.50(*) $26,751.37(*)
8/31/92(*)
9/1/92- 14.85 353,118.15 29,426.51
8/31/95
9/1/95- 17.95 426,833.05 35,569.42
8/31/99
9/1/99- 20.44 486,042.76 40,503.56
8/31/2002
9/1/2002- 23.00 546,917.00 45,576.42
8/31/2005
9/1/2005- 25.87 615,162.73 51,263.56
8/31/2008
9/1/2008- 29.09 691,731.11 57,644.26
11/30/2009
NOTE ADDITIONAL FIXED RENT PAYABLE PURSUANT TO ADDENDUM
- ------------
*Rent will be abated as described in Section 3.01 (except as described in
and subject to Section 2(b) of Schedule III).
SCHEDULE IV
[INTENTIONALLY OMITTED]
SCHEDULE V
FORM OF SUBORDINATION,
NONDISTURBANCE AND ATTORNMENT AGREEMENT
1. Identifications. This Subordination, Nondisturbance and
Attornment Agreement dated as of January __, 1984, is made by and between
METCALF & EDDY, INC. ______________, a Delaware corporation, ("Tenant"), and
WELLS FARGO BANK, N.A. ("Mortgagee"), mortgagee under a construction mortgage
dated as of May 5, 1983 recorded with Middlesex South District Deeds in Book
15006, Page 409, ("Mortgage") from HARVARD MILLS REALTY, A MASSACHUSETTS
LIMITED PARTNERSHIP, a Massachusetts limited partnership, "Owner"), to
Mortgagee securing a promissory note dated as of May 5, 1983 in the principal
amount of $8,400,000.00 and Owner.
2. Recitals.
2.1 Lease. Tenant is the lessee under a certain lease dated
January __, 1984, from Owner, a true and correct copy of which has been
submitted to Mortgagee (the "Lease"), of a portion of certain real property in
Wakefield, Massachusetts, described in the Mortgage (the "Premises"). Said
lease is described in a Notice of Lease to be recorded herewith.
2.2 Mortgage and Assignment. Pursuant to the Mortgage and by
a separate Assignment of Lessor's Interest in Leases dated as of May 5, 1983
recorded with said Deeds in Book 15006, Page 442, (the "Assignment"), Owner has
mortgaged the Premises and has assigned all of its rights under the Lease to
Mortgagee.
3. Agreements. In consideration of the foregoing and the
mutual covenants hereinafter contained, Tenant and Mortgagee hereby agree as
follows:
3.1 Representations by the Tenant Concerning the Lease.
Owner and Tenant hereby certify that the Lease is a complete statement of the
agreement of the parties thereto with respect to the letting of the Premises,
that the Lease is in full force and effect and the execution thereof by Tenant
was duly authorized; that neither Owner nor Tenant is in default under the
Lease and that neither Owner nor Tenant has knowledge of any default or claim
of default on the part of, or claim of offset against the rent and other
amounts payable to Owner under the lease, and that no security deposits, rent
or other amounts due or to be due under the Lease have been paid to Owner in
advance.
Tenant further certifies that it has not made and there is not
now contemplated any assignment for the benefit of creditors or the filing of
any petitions or the institution of any proceedings under the bankruptcy or
similar laws of the United States or of any state; that there are, to the
knowledge of Tenant's officers, no such petitions or proceedings pending or
threatened against Tenant; and that Tenant is not insolvent within the meaning
of the Bankruptcy Code.
3.2 Consent to Assignment by the Tenant. Tenant hereby
consents to the Mortgage and Assignment.
3.3 Covenants. Regardless of whether or not Mortgagee has
notified Tenant of Mortgagee's exercise of its rights under the Assignment,
Tenant hereby agrees as follows:
(a) not, without the prior written consent of Mortgagee, to
pay security deposits, rent or other amounts aggregating
at any time in excess of one month's rent in advance on
account of the Lease; and
(b) not, without the prior written consent of Mortgagee, to
amend or modify the Lease or any of the terms thereof,
or, except pursuant to the terms of the Lease, cancel,
terminate or surrender the Lease.
3.4 Mortgagee's Opportunity to cure Owner's Defaults. In the
event of default by Owner under the Lease, Tenant shall not be entitled to
exercise any right which Tenant may have under the Lease or at law to cancel
the Lease or abate the rent thereunder (i) unless Tenant shall first have
given written notice of such default to the Mortgagee and (ii) unless
Mortgagee, after receipt of such notice, fails to cure, or cause to be cured,
the specified default within a reasonable time thereafter; but nothing herein
shall be deemed to impose any obligation on Mortgagee to cure such default.
"Reasonable time" as used herein includes a reasonable time to obtain
possession of the Premises if the default cannot be cured without such
possession.
3.5 Subordination of Lease and Attornment by Tenant. Tenant,
in consideration of Mortgagee's covenants hereunder, hereby agrees with
Mortgagee that the Lease shall be subject and subordinate to the estate of the
Mortgage and any renewals, extensions, modifications or replacements thereof
(provided that any such renewals, extensions, modifications or replacements do
not affect Tenant's rights or duties under the Agreement or the Lease) as
though the Mortgage and any such renewal, extension, modification or
replacement had been executed, acknowledged and delivered prior to the Lease
and recorded prior to the Lease and any notice of the Lease.
Tenant further attorns to Mortgagee and agrees that in the
event of the exercise by Mortgagee of its rights under the Mortgage and the
taking of possession of, or the acquisition of title to, the premises by
Mortgagee or by any other purchaser of the Premises, whether through
foreclosure proceedings or otherwise, Tenant shall recognize Mortgagee or such
other purchaser as the lessor under the Lease and the Lease shall continue in
full force and effect in accordance with its terms.
3.6 Recognition and Nondisturbance. Mortgagee hereby agrees
that, so long as Tenant duly and promptly performs all of its obligations
under the Lease, and hereunder, Mortgagee shall not, in or after taking
possession of or acquiring title to the Premises through foreclosure
proceedings or otherwise, disturb the possession and other rights of Tenant
under the Lease, and will accept Tenant as lessee under the terms and
conditions and for the entire duration of the term of the Lease, including any
extensions and renewals set forth in the Lease and any modifications or
amendments thereof to which Mortgagee has previously agreed in writing. From
and after such taking of possession or acquiring title, Mortgagee shall be
responsible for the Landlord's obligations to the extent set forth in the
Lease, as if it were the Landlord thereunder. Mortgagee, its successors and
assigns, shall not, however, be:
(a) liable for any act or omission of any prior lessor
(including Owner), except as provided in Sections 2.05,
3.04 and 14.02 of the Lease;
(b) subject to any offset or defense which Tenant might have
against any prior lessor (including Owner), except as
provided in Sections 2.05, 3.04 and 14.02 of the Lease;
(c) bound by any payment of rent or additional rent made by
Tenant to Owner more than one month in advance; or
(d) bound by any amendment to or modification of the Lease
made without the written consent of Mortgagee.
4. General.
4.1 Notices. All notices required or permitted to be given
hereunder shall be in writing and delivered by hand or mailed, postage
prepaid, by registered or certified mail, addressed in the case of the
Mortgagee to it, c/o Real Estate Industries Group, 9600 Santa Monica Boulevard,
Beverly Hills, California 90213, Attention: Kenneth Peterson; and in the case
of the Tenant to it at the Premises; and in the case of Owner to it at 433
North Camden Drive, Suite 960, Beverly Hills, California 90210; or such other
address as the addressee may have designated by notice given hereunder to the
other parties.
4.2 Amendments. This Agreement may not be waived, changed or
discharged orally, but only by an agreement in writing and signed by Mortgagee
and Tenant, and any oral waiver, change or discharge of any provision of this
Agreement shall be without authority and of no force and effect.
4.3 Captions. Article and paragraph captions are not a part
hereof.
4.4 Severability. The invalidity of any provision of this
Agreement, as determined by a court of competent jurisdiction, shall in no way
affect the validity of any other provisions hereof.
4.5 Successors and Assigns. This Agreement shall be binding
upon and inure to the benefit of the respective successors and assigns of the
parties hereto, which in the case of Mortgagee shall expressly include any
purchaser at foreclosure sale pursuant to the Mortgage, and such purchaser's
successors and assigns.
4.6 Applicable Law. This Agreement shall be governed by the
laws of the Commonwealth of Massachusetts.
WITNESS the execution hereof under seal as of the day and year
first above written.
METCALF & EDDY, INC., Tenant
By_______________________________
Its
WELLS FARGO BANK, N.A., Mortgagee
By_______________________________
Its
HARVARD MILLS REALTY, A
MASSACHUSETTS LIMITED
PARTNERSHIP, Owner
By NIUNA-WAKEFIELD, INC.,
General Partner,
By_______________________________
John Kusmiersky
President
COMMONWEALTH OF MASSACHUSETTS
, SS. , 198
On this day of , 198 , personally appeared
before me , to me personally known, who, being by me duly
sworn, did say that he is the of ,
and that this instrument was signed and sealed on behalf of said Corporation
pursuant to resolutions duly adopted and said officer acknowledged the
foregoing to be the free act and deed of said Corporation.
IN WITNESS WHEREOF, I have hereunto set my hand and affixed my
official seal the day and year first above written.
_______________________________
Notary Public
My Commission Expires:
STATE OF CALIFORNIA
, SS. , 198
On this day of , 198 , personally appeared
before me , to me personally known, who, being by me duly
sworn, did say that he is an authorized officer of Wells Fargo Bank, N.A., and
that this instrument was signed and sealed on behalf of said Corporation by
authority of its board of directors, and said officer acknowledged the
foregoing to be the free act and deed of said Corporation.
IN WITNESS WHEREOF, I have hereunto set my hand and affixed my
official seal the day and year first above written.
_______________________________
Notary Public
My Commission Expires:
STATE OF )
) ss.:
COUNTY OF )
On the day of January, 1984, before me personally came
to me known, who, being by me duly sworn, did depose and
say that he resides at No. ; that he is the
of NIUNA-WAKEFIELD, INC., the corporation
described in and which executed the foregoing instrument as a general partner
of HARVARD MILLS REALTY, A MASSACHUSETTS LIMITED PARTNERSHIP; that he knows
the seal of said corporation; that the seal affixed to said instrument is such
corporation's seal; that it was so affixed by order of the board of directors
of said corporation, and that he signed his name thereto by like order for and
on behalf of said corporation, for and on behalf of said limited partnership.
___________________________
Notary Public
RULES AND REGULATIONS
1. Fire exits and stairways other than in the Demised
Premises are for emergency use only, and they shall not be used for any other
purposes by the tenants, their employees, licensees or invitees. No tenant
shall encumber or obstruct, or permit the encumbrance or obstruction of, or
store any materials on any of the sidewalks, plaza, entrances, corridors,
elevators, fire exits or stairways of the Building. The Landlord reserves the
right to control and operate the pubic portions of the Building and the public
facilities, as well as facilities furnished for the common use of the tenants,
in such manner as it deems best for the benefit of the tenants generally.
2. The Demised Premises shall not be used for lodging or
sleeping or for any immoral or illegal purpose.
3. Any person whose presence in the Building at any time
shall, in the judgment of Landlord, be prejudicial to the safety, character,
reputation and interests of the Building or its tenants may be denied access
to the Building or may be ejected therefrom. In case of invasion, riot,
public excitement or other commotion, the Landlord may prevent all access to
the Building during the continuance of the same, by closing the doors or
otherwise, for the safety of the tenants and protection of property in the
Building. The Landlord shall, in no way, be liable to any tenant for damages
or loss arising from the admission, exclusion or ejection of any person to or
from the tenant's premises or the Building under the provisions of this rule.
4. No awnings or other projections over or around the
windows shall be installed by any tenant, and only such window blinds as are
permitted by the Landlord shall be used in a tenant's premises.
5. Hand trucks shall not be used in any space, or in the
public halls of the Building, either by the Tenant or by others, in the
delivery or receipt of merchandise, except those equipped with rubber tires
and side guards.
6. No noise, including the playing of any musical
instruments, radio or television, which, in the judgement of the Landlord,
might disturb other tenants in the Building shall be made or permitted by
any tenant, and no cooking shall be done in the Tenant's premises, except
in areas expressly approved by the Landlord. Tenant shall not permit any
cooking or food odors emanating within the Demised Premised to seep into
other portions of the Building. Nothing shall be done or permitted in any
tenant's premises, and nothing shall be brought into or kept in any
tenant's premises, which would impair or interfere with any of the Building
services or the proper and economic servicing of the Building or the
premises, or the use or enjoyment by any other tenant of any other
premises.
7. No dangerous, inflammable, combustible or explosive
object or material shall be brought into the Building by any tenant or with
the permission of any tenant.
8. Canvassing, soliciting and peddling in the Building are
prohibited, and each tenant shall cooperate to prevent same.
9. No acids, vapors or other materials shall be discharged
or permitted to be discharged into the waste lines, vents or flues of the
Building which may damage them. The water and wash closets and other plumbing
fixtures in or serving any tenant's premises shall not be used for any purpose
other than the purpose for which they were designed or constructed, and no
sweepings, rubbish, rags, acids or other foreign substances shall be deposited
therein.
10. No signs, advertisements, notices or other lettering
shall be exhibited, inscribed, painted or affixed by any tenant on any part of
the outside or inside of the premises or the Building which are visible from
the exterior of the Building without the prior written consent of Landlord.
Tenant shall cause the exterior of any sign to be kept clean, properly
maintained and in good order and repair throughout the term of this Lease. In
the event of the violation of the foregoing by any tenant, Landlord may remove
the same without any liability, and may charge the expense incurred by such
removal to the tenant or tenants violating this rule.
11. All movers used by any tenant or occupant of the Building
shall be appropriately licensed and shall maintain adequate insurance
coverage. Tenant shall protect the Demised Premises, including all Finishing
Work, from damage or soiling by Tenant's movers and contractors and shall pay
for extra cleaning or replacement or repairs by reason of Tenant's failure to
do so.
ADDENDUM TO LEASE
DATED DECEMBER 1, 1989
This Addendum is attached to and is a part of the
above-described Lease. This Addendum is meant to be read together with the
rest of this Lease, but if there is any conflict, this Addendum will control.
1. In addition to the Demised Premises referred to in the
rest of this Lease, which are on the 2nd floor of the eastern wing of the
Building, the Demised Premises also include space on the 1st floor of the
eastern wing of the Building as shown on Schedule BB attached to this Addendum
and incorporated herein by this reference (the "Travel Space"). The Travel
Space is agreed to contain 160 rentable square feet. Tenant may use the
Travel Space only as a travel service office and for no other purpose. Tenant
accepts the Travel Space absolutely "as is" and agrees that Landlord is not
required to perform or make any repairs, maintenance or improvements to the
Travel Space or provide services therefor.
2. Either Landlord or Tenant may terminate this lease with
respect to the Travel Space at any time on at least ninety (90) days' prior
written notice to the other. All amounts due with respect to the Travel Space
will be paid through and including the termination, but otherwise there will
be no liability for termination as described above (except for liabilities
incurred prior to termination).
3. In addition to any amounts due in connection with the
rest of the Demised Premises, Tenant will pay Fixed Rent for the Travel Space
at the same rates and in the same manner as Fixed Rent is payable for the rest
of the Demised Premises. For example, until September 1, 1992, the annual
Fixed Rent per square foot for the Travel Space will be $13.50, for an annual
rent of $2,160.00 and a monthly rent of $180.00. Tenant also will pay for any
utilities used or consumed in connection with the Travel Space, its pro rata
share of all Common Expenses for the Travel Space, and all other charges due
in connection with the Travel Space. Tenant's Percentage for the Travel Space
is .07%.
AMENDMENT NO. 1 TO GUARANTY
1. Metcalf & Eddy Companies Inc. ("MECI") entered into a Guaranty, dated
September 21, 1989 (the "Guaranty"), pursuant to which MECI guaranteed the
obligations of Metcalf & Eddy, Inc. ("Tenant") under an Amended and Restated
Lease, dated July 26, 1989 with Harvard Mills Realty ("Landlord"). Unless
otherwise defined, terms used in this Amendment have the same meanings as
those used in the Guaranty.
2. Tenant and Landlord have executed or are about to execute a new
lease, dated December 1, 1989, for additional space on the second floor at
Harvard Mills (the "New 2nd Floor Lease"). The parties wish to amend the
Guaranty to include MECI's guaranty of the obligations of Tenant under the New
2nd Floor Lease. To accomplish this, for good and valuable consideration, the
receipt and sufficiency of which is acknowledged, the Guaranty is amended as
follows:
3. In addition to Guarantor's obligations under the Guaranty with
respect to the Amended and Restated lease, all of the terms of the Guaranty
and all of Guarantor's obligations thereunder also apply with respect to the
obligations, covenants, conditions and agreements contained in the New 2nd
Floor Lease and all Schedules and Annexes thereto and all renewals,
modifications or extensions of the New 2nd Floor Lease, all of which are now
fully guaranteed by MECI under the Guaranty.
4. The Guaranty, as so amended, remains in full force and effect.
IN WITNESS WHEREOF, intending to be legally bound, the
undersigned has executed this Amendment as of December 1, 1989.
METCALF & EDDY COMPANIES INC.
WITNESS:
________________________ BY:___________________________
Signature Signature
________________________ ______________________________
Name printed, title Name printed, title
Authorized Signatory
HARVARD MILLS REALTY
c/o Brickstone Properties
300 Brickstone Square
Andover, MA 01810
February 13, 1991
Jeremy Long
Metcalf & Eddy, Inc.
10 Harvard Mills Square
Wakefield, MA 01880
Re: Harvard Mills Square
Lease, dated December 1, 1989 (the "Lease")
Dear Jeremy:
As we agreed, as of November 20, 1990, Metcalf & Eddy, Inc.
leased 2,200 rentable square feet of space on the 2nd floor of the eastern
wing of the project as shown in Exhibit "AA" attached (the "Additional
Space"). So, we are confirming our agreements and the Lease is amended as
follows:
1. As of November 20, 1990, the Additional Space is part of
the Demised Premises. Tenant accepts the Additional Space as is, but Landlord
will reimburse Tenant for Tenant's reasonable cost to construct the demising
wall for the Additional Space.
2. With the Additional Space, Tenant's Percentage is
increased from 10.55% to 11.62% (not including the Travel Space). Fixed Rent
for the Additional Space will be charged at the same rate per square foot as
Fixed Rent for the rest of the Demised Premised as shown in Schedule III-A to
the lease, but if Tenant does not default it will be abated until November 20,
1992.
Sincerely,
Niuna-Wakefield, Inc.
general partner
By:____________________________
Martin Spagat
Vice President
Assistant Treasurer
Agreed on March 28, 1991.
METCALF & EDDY, INC.
By:_____________________________
(signature)
________________________________
Name Printed, Title
EXHIBIT A
AMENDMENT NO. 1 TO
TAX SHARING AGREEMENT
This Amendment No. 1 dated as of November 10, 1989 to the Tax Sharing
Agreement ("Agreement") of October 17, 1988 by and among AIR & WATER
TECHNOLOGIES CORPORATION, formerly known as R-C HOLDING INC., a Delaware
corporation ("AWT"), RESEARCH-COTTRELL, INC., a New Jersey corporation and, as
of the date hereof, a wholly-owned subsidiary of AWT ("R-C"), and METCALF &
EDDY COMPANIES, INC., a Delaware corporation and, as of the date hereof, a
subsidiary of R-C ("M&E").
WHEREAS, AWT, R-C and M&E are parties to the Agreement; and
WHEREAS, the parties desire to make certain amendments thereto;
NOW THEREFORE, the parties hereby agree to amend the Agreement as follows:
1. Paragraph l(b) of the Agreement is hereby amended by adding at the
end thereof the following:
"except that any corporation which is included in the audited
financial statements of the M&E group shall be considered a member of
the M&E affiliated group as that term is defined in the Internal
Revenue Code of 1986, as amended (the "Code"), even if that
corporation fails to satisfy the 80% stock ownership requirement for
being included in a consolidated federal income tax return with M&E
as if M&E were the common parent."
2. Paragraph 3 (b)(iii) is hereby amended by striking the word "and" at
the end thereof and substituting in lieu thereof the following:
"; however AWT and R-C agree that M&E shall be paid for any tax
credits it generates if not used to reduce the Consolidated Group's
consolidated federal tax liability at the date the Consolidated
Group's right to use such credits on a carry-forward basis expires,
and"
3. Paragraph 8 is hereby deleted in its entirety and the following
substituted in lieu thereof:
"In the event that the Consolidated Group (or any member thereof) is
required or elects to file unitary, combined or consolidated state,
local or foreign income tax returns, all of the principles embodied
in this agreement shall apply in connection with the determination
and allocation of such of such tax liabilities among the appropriate
members of the Consolidated Group except that if AWT joins in filing a
unitary, combined or consolidated income tax return, M&E shall be
entitled on a current basis to a pro rata share of any tax benefit
resulting thereby even if AWT, the contributor of the benefit, is
eligible to carry forward such benefit to future years."
4. This Amendment No. 1 shall be effective as of November 1, 1988.
Except as specifically amended above, the Agreement shall continue in full
force and effect.
IN WITNESS WHEREOF, the parties have executed this Amendment No. 1 to the
Agreement on the day and year first above written.
AIR & WATER TECHNOLOGIES CORPORATION
By:
---------------------------------
Executive Vice President
METCALF & EDDY COMPANIES INC.
By:
---------------------------------
RESEARCH-COTTRELL, INC.
By:
---------------------------------
AMENDMENT NO. 3
TO
EMPLOYMENT AGREEMENT
Agreement made and entered into this 17th day of March, 1994 by
and between Air & Water Technologies Corporation, a Delaware corporation (the
"Company"), and Eckardt C. Beck, residing at 556 Navesink River Road, Red
Bank, New Jersey 07701 (hereinafter called the "Executive").
W I T N E S S E T H
WHEREAS, the Executive has been employed by the company as its
Chairman of the Board of Directors and Chief Executive Officer pursuant to the
terms of a certain Employment Agreement dated as of August 20, 1991 as amended
by Amendment No. 1 dated July 31, 1992 and Amendment No. 2 dated August 9,
1993 (the "Employment Agreement");
WHEREAS, Executive is a skilled and dedicated employee who has
important management responsibilities and talents which have benefitted the
Company and the Company and the Executive hereby acknowledge that the Company
and Compagnie Generale des Eaux, a French corporation, are entering into
letter agreements on or about March 17, 1994 contemplating the entering into
of an investment agreement (the "Investment Agreement");
WHEREAS, the Company and the Executive desire to make certain
changes, as hereinafter set forth, to amend certain terms of the Employment
Agreement;
NOW THEREFORE, in consideration of the foregoing, and the
mutual covenants, understandings and agreements hereinafter contained, the
parties do hereby mutually covenant and agree as follows:
1. Effective on the date of closing of the transactions
contemplated by the Investment Agreement, the Executive's employment with the
Company shall cease and the Company and the Executive mutually acknowledge
that such cessation of the Executive's employment with the Company shall be
treated as termination by the Company other than for Cause, pursuant to the
Employment Agreement.
2. Section 1 of the Employment Agreement is amended and
restated in its entirety to add a new subsection (g) as follows:
(g) CGE Change of Control. For purposes of this
Agreement, the term "CGE Change of Control" shall
mean the closing of that transaction to be provided
in the Investment Agreement or as contemplated by
the letter agreements dated on or about March 17,
1994 between the Company and Compagnie Generale des
Eaux, a French corporation ("CGE") as may be
modified and agreed to by the parties.
3. Section 3 of the Employment Agreement is amended and
restated in its entirety to add a new subsection (h), which shall read as
follows:
(h) Upon a CGE Change of Control, in addition to all
other payments and benefits provided for herein
upon a Change of Control, Executive shall be
entitled to receive from the Company a bonus in
cash in a lump sum equal to the sum of (a) any
income tax imposed on the amount of forgiveness of
the Loan provided for herein, (b) any excise tax
on any excess parachute payments under Section 4999
of the Internal Revenue Code of 1986, as amended,
(the sum of (a) and (b) to be known hereafter as
"Primary Gross-Up Payment"), and (c) payment of the
amount of any income tax imposed on the Primary
Gross-Up Payment.
4. This Amendment No. 3 to the Employment Agreement amends
the Employment Agreement as specifically described herein. All terms of the
Employment Agreement not specifically amended hereby shall remain in full
force and effect and the Employment Agreement, as amended by this Amendment
No. 3 and as further amended or supplemented from time to time, shall
constitute the Employment Agreement.
IN WITNESS WHEREOF, the parties have caused this Amendment No.
3 to be executed this 17th day of March, 1994.
AIR & WATER TECHNOLOGIES CORPORATION
By: /s/ Douglas A. Satzger
-----------------------------
Douglas A. Satzger
Senior Vice President
/s/ Eckardt C. Beck
-----------------------------
Eckardt C. Beck
AGREEMENT, made and entered into as of this 21st day of
November, 1994 by and between AIR & WATER TECHNOLOGIES CORPORATION, a Delaware
corporation (on behalf of and, unless otherwise clearly indicated by context,
including its subsidiaries and affiliates, the "Company") and ECKARDT C. BECK
(the "Executive").
WHEREAS, the Executive was employed by the Company as its
Chairman of the Board of Directors and Chief Executive Officer, pursuant to
the terms of the Employment Agreement dated as of August 20, 1991, as amended
by Amendment No. 1 thereto dated July 31, 1992, Amendment No. 2 thereto dated
August 2, 1993 and Amendment No. 3 thereto dated March 17, 1994 (the
"Employment Agreement");
WHEREAS, the Executive's employment with the Company terminated
effective June 14, 1994; and
WHEREAS, the Company and the Executive desire to enter into an
agreement relating to all aspects of their relationship following such
termination of employment, which agreement will be entered into in
consideration of the cancellation of and in full settlement of all rights and
obligations outstanding pursuant to the Employment Agreement or arising from
any other source;
NOW, THEREFORE, in consideration of the foregoing, and the
mutual covenants, understanding and agreements hereinafter contained, the
parties do hereby mutually covenant and agree as follows:
1. Tender of Resignation. The Executive hereby acknowledges
that his employment by the Company terminated effective June 14, 1994, and the
Company hereby acknowledges the Executive's resignation as a director of the
Company, effective October 17, 1994.
2. Noncompetition and Confidentiality. (a) The Executive
agrees that at no time during the period beginning on June 14, 1994 and
ending on December 31, 1999, will the Executive directly or indirectly in
any capacity (i) engage in any business which is directly or indirectly in
competition with any line of business presently conducted by the Company (a
"Competitive Business"), or (ii) solicit Comptetive Business from or engage
in the sale of Competitive Business goods to or performance of Competitive
Business services for any person who is presently a customer or client of
the Company.
(b) The Executive acknowledges that the Company's trade
secrets, information concerning products and their development, technical
information, marketing, investment, and sales activities and procedures,
promotion and pricing techniques and credit and financial data concerning the
Company, and any information of third parties made available to the Company
directly or indirectly pursuant to licensing or franchise agreements (the
"Proprietary Information") are valuable, special and unique assets of the
Company, access to and knowledge of which have been gained by virtue of the
Executive's position and involvement with the Company. The Executive agrees
that all Proprietary Information obtained by the Executive as a result of any
such position or involvement shall be considered confidential. In recognition
of such fact, the Executive agrees that the Executive will not disclose any of
such Proprietary Information to any person or other entity for any reason or
purpose whatsoever (unless compelled by law, court order or governmental
process), and that the Executive will not make use of any Proprietary
Information for his own purposes or for the benefit of any person or other
entity.
(c) The Executive also agrees that during the period
beginning on June 14, 1994 and ending on December 31, 1999 Executive will not,
without the prior written consent of the Company, directly or indirectly,
recruit, seek to recruit, or hire any present or former employee of the
Company until at least one (1) year has passed after the termination of such
person's employment by the Company.
(d) The Executive acknowledges and agrees that the Company's
remedies at law for a breach or threatened breach of any of the provisions of
this Section 2 would be inadequate and, in recognition of this fact, Executive
agrees that, in the event of a breach or threatened breach, in addition to any
remedies at law, the Company, without posting any bond, shall be entitled to
obtain equitable relief in the form of specific performance, temporary
restraining order, temporary or permanent injunction or any other equitable
remedy which may then be available.
(e) It is expressly understood and agreed that although the
Executive and the Company consider the restrictions contained in this
Section 2 to be reasonable, if a final judicial determination is made by a
court of competent jurisdiction that the time or territory or any other
restriction contained in this Agreement is an unenforceable restriction
against the Executive, the provisions of this Agreement shall not be
rendered void but shall be deemed amended to apply as to such maximum time
and territory and to such other maximum extent as such court may judicially
determine or indicate to be enforceable. Alternatively, if any court of
competent jurisdiction finds that any restriction contained in this
Agreement is unenforceable, and such restriction cannot be amended so as to
make it enforceable, such finding shall not affect the enforceability any
of the other restrictions contained herein.
(f) In consideration of the Executive's prior services, and
in consideration of his agreements and covenants in this Section 2, the
Company agrees to pay the executive $24,800.00 per month during the period
beginning on January 1, 1995 and ending on December 31, 1999 (the "Term"),
which amount shall be subject to all applicable withholding taxes. Such
payments will be made monthly, in accordance with the Company's normal payroll
practices.
3. Medical Insurance. (a) During the Term, the Company
will reimburse the Executive up to $10,000 (which amount shall be subject to
all applicable withholding taxes) per twelve-month period for the purchase of
health and medical insurance for the Executive and his spouse.
(b) The Executive shall provide documentation of any premium
paid by him for such insurance as a condition of reimbursement under Section
3(a).
(c) The Company's reimbursement obligation under this Section
3 shall terminate immediately upon the Executive's becoming employed or
retained by an entity that makes medical insurance available to its employees.
4. Additional Amounts. (a) In regard to an outstanding
loan from the Company to the Executive, the Company agrees that as of January
1, 1995 and on January 1 of each of the four succeeding years, unless the
Executive breaches his obligations under this Agreement or under any of the
Ancillary Agreements, as defined in Section 10, the Company will forgive a
portion of the amount of such loan which is outstanding on any such date,
which portion shall be a fraction the numerator of which shall be one and the
denominator of which shall be: 5 in 1995, 4 in 1996, 3 in 1997, 2 in 1998 and
1 in 1999. In the event that the Executive breaches any of his obligations
under this Agreement (including any of the Ancillary Agreements), the then
outstanding balance of the loan shall thereupon immediately become due and
payable.
(b) The Company will pay the Executive $330,000, which amount
is intended to defray in whole or in part various withholding tax and other
withholding obligations arising in connection with or pursuant to this
Agreement. This amount shall be applied as follows: (i) to satisfy any
withholding obligations arising in connection with the application of such
amount or portion thereof in accordance with this Section 4(b), (ii) to
satisfy any withholding obligations arising in connection with the forgiveness
of indebtedness pursuant to Section 4(a) and (iii) to satisfy any other
unsatisfied withholding obligations arising in connection with other payments
to the Executive or other provisions of this Agreement. If any of the above
amount remains after satisfaction of all withholding obligations described
above during any year in the Term, such remaining amount shall be retained and
applied as set forth above to withholding obligations arising in subsequent
years of the Term. If, and only if, any of the above amount of $330,000
remains after full satisfaction of all withholding obligations of the Company
arising out of or in connection with this Agreement, such remaining amount
will be paid to the Executive within 30 days following such determination.
5. Consulting. (a) The Executive agrees to make himself
available throughout the Term to serve, and the Company agrees to engage the
Executive, as a consultant to the Company, in accordance with the provisions
of a consulting agreement (the "Consulting Agreement") substantially in the
form of the agreement attached hereto as Exhibit A.
(b) In consideration of the Executive's entering into the
Consulting Agreement, the Company will pay the Executive $8,333 per month in
accordance with the provisions of the Consulting Agreement.
6. Miscellaneous. (a) Upon execution and delivery of this
Agreement, the Company will deliver to the Executive any and all preferred
stock certificates and other indicia of ownership of a membership interest in
Metedeconk National Golf Club, Inc.
(b) In consideration of such transfer, the Executive shall
pay to the Company $50,000, of which amount $12,500 per month shall be
withheld from the monthly payments otherwise owed to the Executive under
Section 2(f) until fully satisfied.
7. Stock Options. All stock options held by the Executive
at the time of his termination of employment shall be cancelled.
8. Toth Litigation. (a) The Executive shall have no
obligation to reimburse the Company for any legal fees and expenses incurred
or advanced by the Company on the Executive's behalf prior to September 1,
1994 in connection with the lawsuit bearing Docket No. SOM-L-3230-91, in the
Superior Court of New Jersey, Law Division, Somerset County, captioned Douglas
Toth Building Contractor, Inc. v. Eckardt and Barbara Beck (the "Toth
Litigation").
(b) The Executive shall be responsible for the fees and
expenses incurred by himself and his spouse on and after September 1, 1994 in
connection with the Toth Litigation. The Company shall be responsible for the
fees and expenses incurred by Lerman Design Corp. ("Lerman") in the Toth
Litigation.
9. General Release. It shall be a condition to the
effectiveness of this Agreement that the Executive shall have entered into a
general release (the "Release") substantially in the form attached hereto as
Exhibit B and that the Company shall have granted the Executive a general
release satisfactory to both parties.
10. Toth Release. It shall be a condition to the
effectiveness of this Agreement that the Executive shall have entered into
a Release, Covenant not to Sue and Indemnity Agreement (the "Toth Release"
and, together with the Release and the Consulting Agreement, the "Ancillary
Agreements") in the form attached hereto as Exhibit C. Notwithstanding the
Executive's execution of the Release or the Toth Release, Executive does
not waive any rights to which Executive may be entitled (i) to seek to
enforce this Agreement or (ii) to seek unemployment compensation benefits
or benefits under retirement plans maintained by the Company.
11. Confidentiality; No Disparagement. (a) The Company and
the Executive each agree not to cause or participate in the publication of any
information concerning the facts underlying the termination of the Executive's
employment with the Company or the terms and conditions of this Agreement
(including the Ancillary Agreements) to anyone. This provision shall not
prevent the Company from making any such disclosure which is required by law
and shall not prevent the Executive from disclosing such information to the
Executive's immediate family, an outplacement counseling service, or to the
Executive's legal counsel and accountants in order to obtain professional
advice or to any financial institution or credit agency in order to obtain
personal financing; provided that such family members, service providers and
advisors are advised as to and agree to observe the confidentiality of such
information.
(b) The Company and the Executive each agree that it or he, as
the case may be, shall not make disparaging statements or representations, or
otherwise communicate disparagingly, directly or indirectly, in writing,
orally, or otherwise, or take any action which may, directly or indirectly,
disparage or be damaging to the other party, its or his business or
reputation, including, in the case of the Company, its subsidiaries,
affiliates, successors or their officers, directors, employees, business or
reputation. From and after the date hereof, the Executive shall communicate
directly with the Company's General Counsel (presently Douglas A. Satzger,
Esq.) regarding any matters relating to the Company and shall otherwise not
contact or attempt to contact the Company, its officers, directors,
shareholders, employees or agents regarding any matters relating to the
Company, unless such person first contacts the Executive.
(c) The Company shall give the Executive at least thirty days
prior written notice specifying any conduct being engaged in by the Executive
which the Company regards as being in violation of this Agreement before
pursuing any remedies it may have hereunder, during which period the Executive
may cure any such violation.
12. Arbitration. (a) Any and all claims against the Company
or against any of the Company's employee benefit plans, trusts, committees or
boards or any past or present owners, stockholders, agents, independent
contractors, servants, directors, officers, employees, supervisors, trustees,
fiduciaries, administrators, sponsors, representatives or attorneys of any of
the foregoing (all of such parties other than the Company being hereinafter
referred to as the "Other Defendants") arising out of or relating to (i) this
Agreement or (ii) any breach of any provision of this Agreement shall be
settled by arbitration. Such arbitration proceeding shall be conducted
pursuant to the Commercial Arbitration Rules of the American Arbitration
Association ("AAA") then in effect, by a single arbitrator, and shall be held
in Branchburg, New Jersey or such other location as the parties mutually agree
to in writing. The arbitrator shall not have the power to award punitive
damages. Each party shall bear his or its own costs of the arbitration
proceeding. The judgment upon the award rendered by the arbitrator may be
entered in any court having competent jurisdiction thereof. Before resorting
to arbitration, the parties agree first to try in good faith to settle the
dispute by mediation administered by the AAA under its Commercial Mediation
Rules. With respect to claims that are within the scope of this Section
12(a), if the Executive has the same, similar or related claims against any of
the Other Defendants, and if the Executive seeks to litigate such claims
against the Other Defendants in a civil action or any other proceeding
(including before an administrative agency), the Executive agrees that any of
all of such Other Defendants may compel the Executive to arbitrate his claims
against them pursuant to the terms of this Section 12.
(b) The arbitrator selected by the parties pursuant to the
AAA rules shall have expertise in commercial arbitration and shall hear and
determine the case promptly. The burden of persuasion shall at all times be
upon the party seeking relief.
(c) In the event the Executive files suit in a court of
competent jurisdiction and asserts that certain claims are not subject to
arbitration under this Section 12 because of the limitation on the power of
the arbitrator to award punitive damages (the "Limitation"), the parties agree
that they will request the court to resolve that legal issue on an expedited
basis, and if the court rules in favor of the Executive on the Limitation
issue, the parties agree as follows: (i) the arbitration shall proceed as if
this Section 12 did not contain such Limitation; (ii) the parties will request
the court to enter judgment in favor of the Executive on the Limitation issue,
at which time the Company may appeal that ruling; (iii) in the event the
arbitrator determines that the Executive is entitled to punitive damages, the
punitive damages aspect of the arbitrator's award will be stayed pending the
exhaustion or lapse of all rights of appeal of the Company under (ii)
immediately above; and (iv) in the event an appellate court rules in favor of
the Company on the Limitation issue, the arbitrator shall vacate the award of
punitive damages.
The procedures set forth in this subparagraph (c) shall also
apply in the event the Executive seeks relief in some other tribunal, such as
an administrative agency, and the Company files a civil action to compel
arbitration.
(d) Any provision of this Agreement to the contrary
notwithstanding, subparagraph (a) immediately above shall not be construed or
interpreted to preclude the Company from filing suit in a court of competent
jurisdiction in order to enforce its rights and remedies under Section 2 of
this Agreement. In any such suit, the court is empowered to and shall resolve
any dispute as to whether the claim asserted by the Company is within the
scope of Section 2 of this Agreement, and the court shall not refer such
dispute to arbitration.
13. Entire Agreement; Amendment. This Agreement, including
the Ancillary Agreements, shall supersede the Employment Agreement in its
entirety as well as any other existing agreements between the Executive and
the Company or any of its subsidiaries or affiliates relating to the terms of
the Executive's employment, and contains the entire understanding of the
parties with respect to the Executive's resignation and the termination of the
Executive's employment and the relationship of the parties following such
resignation and termination. This Agreement may not be altered, modified or
amended except by a written agreement signed by both parties hereto.
14. No Waiver. The failure of a party to insist upon strict
adherence to any term of this Agreement on any occasion shall not be
considered a waiver of such party's rights or deprive such party of the right
thereafter to insist upon strict adherence to that term or any other term of
this Agreement.
15. Severability. In the event that any one or more of the
provisions of this Agreement shall be or become invalid, illegal or
unenforceable in any respect, the validity, legality or enforceability of the
remaining provisions of this Agreement shall not be affected thereby.
16. Assignment. This Agreement shall inure to the benefit of
and be binding upon the parties hereto, the Other Defendants and their
respective heirs, executors, administrators, representatives, successors and
assigns. Upon the death of the Executive, payments by the Company shall
continue to be made in accordance with this Agreement to his estate. This
Agreement shall not be assignable by the Executive.
17. Acknowledgement. The Executive acknowledges that
Executive has carefully read this Agreement, fully understands and accepts all
of its provisions and signs it voluntarily of Executive's own free will. The
Executive further acknowledges that Executive has been provided a full
opportunity to review and reflect on the terms of this Agreement and to seek
the advice of legal counsel of the Executive's choice.
18. Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of New Jersey.
19. Withholding. The parties agree that the Executive shall
be obligated to pay, and the Company shall be entitled to withhold from any
amounts payable to the Executive hereunder or from any other payments owing to
the Executive from the Company or from any other source, all amounts required
to be withheld by the Company in respect of any payments to the Executive
hereunder or in respect of any of the provisions of this Agreement or the
Ancillary Agreements by applicable federal, state and local tax law and by
applicable social security, medicare or similar law.
20. Setoff. The Company shall not have the right to set off
against amounts owed to the Executive hereunder any amount that may hereafter
be owed by the Executive to the Company, except for amounts owed by the
Executive under Sections 6(b), 8(b) or 19 of this Agreement or under Paragraph
10 of the Consulting Agreement.
21. Notices. All notices required to be transmitted herein
shall be sent in writing and by first class mail or hand delivery as follows:
If to the Executive: Eckardt C. Beck
5801 NW 24th Ave.
Boca Raton, FL 33496
After 1/31/95: 6345 NW 26th Terrace
Boca Raton, FL 33496
With a copy to: Norman J. Peer, Esq.
Wilentz, Goldman & Spitzer
90 Woodbridge Center Drive
P.O. Box 10
Woodbridge, NJ 07095-0958
If to the Company: Air & Water Technologies
Corporation
P.O. Box 1500
Somerville, NJ 08876
Attn: General Counsel
or to such other address as one party shall have notified the other party in
like fashion.
22. Default. Any alleged breach of or default under this
Agreement shall be communicated to the party alleged to be in breach or
default by the other party in writing, and the recipient of any such notice
shall have at least fifteen days, except as otherwise expressly set forth
herein, after receipt of such notice to cure such breach or default before the
party sending any such notice may pursue any remedy available to such party
under this Agreement.
23. Counterparts. This Agreement may be signed in
counterparts, each of which shall be an original, with the same effect as if
the signatures thereto and hereto were upon the same instrument.
IN WITNESS WHEREOF, the Company, on behalf of itself and its
subsidiaries and affiliates, and the Executive have duly executed this
Agreement as of the day and year first above written.
/s/ Eckardt C. Beck
------------------------
ECKARDT C. BECK
AIR & WATER TECHNOLOGIES
CORPORATION
By: /s/ Douglas A. Satzger
------------------------
Name:
Title:
EXHIBIT A
CONSULTING AGREEMENT
THIS CONSULTING AGREEMENT ("Agreement") is made and entered
into as of this 21st day of November, 1994, by and between ECKARDT C. BECK
("Beck") and AIR & WATER TECHNOLOGIES CORPORATION (the "Company", as defined
below).
1. As used in this Agreement:
a. "Claim" or "Claims" means and includes one or more
charges, complaints, claims, grievances (including grievances filed pursuant
to a collective bargaining agreement), liabilities, obligations, promises,
covenants, agreements, controversies, damages, injuries, actions, causes of
action, suits, rights, demands, deficiencies, levies, assessments,
attachments, executions, judgments, recoveries, awards, costs, losses, debts,
and expenses (including attorneys' fees and costs actually incurred) of any
kind or nature whatsoever, whether known or unknown, suspected or unsuspected,
contingent, liquidated or unliquidated.
b. "Companies" means and includes the Company and all of
its affiliated Entities, including, but not limited to (i) parent and
subsidiary companies (whether wholly or partially owned and whether direct or
indirect), partnerships, and joint ventures, and (ii) Metcalf & Eddy, Inc.,
Research-Cottrell, Inc., and Professional Services Group, Inc.
c. "Confidential Information" means and includes, without
limitation, business and proprietary information and technology, trade
secrets, patented processes, research and development projects and data,
know-how, product development and design, methods of doing business, and
technical information of the Companies; financial information not previously
reported in public releases or filings; information regarding costs, profits,
markets, sales, products, market studies and forecasts, pricing policies and
data, sales plans, key personnel, other business affairs and methods,
customers and customer prospects, business plans, competitive analyses, and
prospects and opportunities (such as possible expansions or contractions of
business operations) which have been discussed or considered by the Companies'
management; the substance of agreements with customers and others, marketing
and dealership arrangements, and servicing and training programs and
arrangements; customer or client lists; master files; supplier or vendor
lists; and information concerning operational strengths or weaknesses of the
Companies' operating units, all to the extent not previously revealed to the
public or to the trade by the Companies' management.
d. "Entity" or "Entities" means and includes one or more
organizations of any kind or nature whatsoever, including, without limitation,
corporations, companies, partnerships, joint ventures, sole proprietorships,
and divisions.
e. "Termination Agreement" means the Agreement of even
date herewith between Beck and the Company setting forth the agreements of the
parties with respect to Beck's termination of employment with the Company.
f. "Other Defendants" means and includes: (i) any of the
Companies' employee benefit plans, trusts, committees or boards; and (ii) any
past or present owners, stockholders, agents, independent contractors,
servants, directors, officers, employees, supervisors, trustees, fiduciaries,
administrators, sponsors, representatives, or attorneys of the Companies or
the Companies' employee benefit plans, trusts, committees or boards.
2. The Company shall retain Beck as a consultant, the terms of
such consultancy to be as follows:
a. The period of the consultancy arrangement shall
commence on January 1, 1995 and end on December 31, 1999 (the "Consulting
Period") unless sooner terminated (i) by the Company for "Cause" (as defined
below) or (ii) by Beck for "Cause". During the Consulting Period, Beck will
render such advice and services as the Company may reasonably require, and
will assist and cooperate with the Company in connection with any litigation
or Claims in which any of the Companies is involved in which Beck's testimony
or assistance is deemed necessary by the Company's internal or external legal
counsel; provided, however, that the parties agree that Beck shall not be
required to devote more than 90 days in any twelve-month period to the
performance of his obligations under this Agreement. The termination of this
consultancy arrangement, whether by either or both Beck and the Company or by
the expiration of the Consulting Period, in no way terminates or modifies the
parties' obligations, duties, and rights set forth in Paragraphs 11, 14, 18
and 19 of this Agreement or in the Termination Agreement. The Consulting
Period shall not be extended or renewed, except as mutually agreed to and set
forth in writing by Beck and the Company.
b. For purposes of Paragraph 2 of this Agreement, "Cause"
for termination by the Company of the consulting portion of this Agreement
shall be limited to the following conduct, actions, or inactions of Beck:
(i) Beck's engaging in willful or intentional
conduct, actions, or inactions in violation of his obligations
under this Agreement or under the Termination Agreement or
knowing violation or reckless disregard of law, governmental
regulation, or judicial decree which has caused substantial
injury to any of the Companies, financial or otherwise;
(ii) Beck's conviction of a felony, as evidenced by a
binding and final judgment, order, or decree of a court of
competent jurisdiction, in effect after exhaustion or lapse of
all rights of appeal; or
(iii) the willful or continual failure by Beck to
perform his duties and responsibilities under this Agreement.
c. For purposes of Paragraph 2 of this Agreement, "Cause"
for termination by Beck of the consulting portion of this Agreement shall be
limited to the Company's engaging in intentional conduct in violation of its
obligations under this Agreement.
d. Any termination of this Agreement for Cause shall not
take effect until the party attempting to so terminate the Agreement shall
have notified the other party in writing of the specific event(s) or
circumstance(s) constituting Cause, and the recipient of such notice shall
have had a period of not less than 30 days following the receipt of such
notice to cure such event or circumstance.
3. a. During the Consulting Period, Beck shall be available
to perform such services, including assistance with Claims and litigation as
described above, as shall be reasonably requested by the Company. In
consideration of Beck's agreement to be available to perform such services,
the Company shall pay Beck $8,333 per month during the Consulting Period.
Such payments shall be made monthly, in arrears.
b. If, pursuant to Paragraph 2(a) of this Agreement, this
consultancy arrangement is terminated for Cause by the Company, Beck shall not
be entitled to any further payment hereunder, except that Beck shall be paid
for services rendered through the date of termination. If this consulting
arrangement is terminated for Cause by Beck, or is terminated as a result of
Beck's death or Beck's inability to perform his obligations hereunder as a
result of his physical or mental disability, the Company will remain obligated
to make all payments owing hereunder to Beck or his estate, as the case may
be, in accordance with the provisions of this Agreement.
c. Beck will be given reasonable advance notice in
writing of the Company's needs for his professional services.
4. Beck agrees to execute any forms or documents that the
Company normally requires independent contractors to complete in order to
comply with accounting and tax requirements.
5. During the Consulting Period, Beck shall reside in the
location of his choice but shall make himself reasonably available to provide
consulting services hereunder at such locations as may be reasonably requested
by the Company, including at the offices of the Company's clients, outside
legal counsel, and/or experts. The time Beck spends in traveling to the
offices of the Company, its clients, its outside legal counsel, or its experts
or to a legal proceeding on behalf of the Company shall not be treated as time
spent providing consultant services. Beck shall be responsible for all
travel, transit, lodging, meal and other expenses incurred in the performance
of his duties hereunder; provided, however, that Beck shall be reimbursed for
such expenses in connection with any travel requested by the Company to a
destination more than fifty miles from his place of residence.
6. During the Consulting Period, Beck shall perform such
services as shall be requested by Francis X. Ferrara (the Company's
"Designee"). The Company shall notify Beck in writing of any successor
Designee. Under no circumstances shall Beck render any consultant services to
the Company without the express prior request of the Designee. Beck shall
have exclusive control over the details and the means by which, and the manner
in which, he accomplishes the duties he has been retained to perform.
7. Beck shall make every reasonable effort to make himself
available to perform his consultant services during normal business hours (8
a.m. to 5 p.m.) of the normal business week (Monday to Friday) or at such other
hours or days as the parties may mutually agree to in writing. Beck shall
make every reasonable effort to accommodate the legitimate and significant
schedule requirements of the Company, its outside legal counsel, or its
experts, and the Company shall make every reasonable effort to accommodate the
legitimate and significant schedule requirements of Beck.
8. During the Consulting Period, Beck will be an independent
contractor and not an employee or agent of any of the Companies for any
purpose whatsoever. Beck acknowledges that he will not participate in any
benefits or privileges available to employees of any of the Companies during
the Consulting Period.
9. Beck is not authorized to enter into any contractual
obligations of any nature whatsoever on behalf of any of the Companies.
Nothing in this Agreement is intended to nor shall be interpreted to confer
any authority upon Beck to enter into any contractual obligations of any
nature whatsoever on behalf of any of the Companies. Beck shall not at any
time during the Consulting Period represent that, or act as if, he were so
authorized.
10. Because Beck will be an independent contractor, the Company
will not withhold federal, state, and local taxes and Social Security from any
amounts due Beck under this Agreement. In the event an administrative agency
or a court of competent jurisdiction determines that all or part of any amount
paid to Beck under this Agreement is subject to withholding or tax, (i) such
determination will not affect the enforceability of this Agreement and will
not entitle Beck to receive any additional payments from any of the Companies,
(ii) Beck will be solely responsible for paying any such taxes or amounts
determined not to have been properly withheld, including any interest and
penalties that may be assessed, and (iii) Beck will indemnify and hold the
Company harmless from and against any Claims for any such taxes or amounts
determined not to have been properly withheld, including any interest and
penalties that may be assessed.
11. Beck acknowledges and represents that upon termination of
the Consulting Period he will immediately return to the Company all originals
and copies of all documents, memoranda, notes, records, reports, and other
property of the Companies that he possessed or had under his control during
the Consulting Period and that he will not disclose to any other person or
Entity, or use for his own benefit or gain, and agrees to return to the
Company if in his possession or under his control, any Confidential
Information of the Companies obtained by him incident to this consultancy
arrangement. The obligations of Beck under this Paragraph 11 shall be in
furtherance of, and not in limitation of, any other similar covenants Beck may
have entered into in the Termination Agreement.
12. Beck shall not transfer or assign any of his rights or
obligations under this Agreement without the express prior written consent of
the Company.
13. The parties hereto represent and acknowledge that, in
executing this Agreement, they do not rely and have not relied upon any
representation or statement, written or oral, made by any of the parties or by
any of the parties' agents, attorneys, or representatives with regard to the
subject matter, basis, or effect of this Agreement or otherwise, other than
those specifically stated in this written Agreement and in the Termination
Agreement.
14. This Agreement shall be binding upon and shall inure to the
benefit of the parties hereto, the Other Defendants and their respective
heirs, administrators, representatives, executors, Companies, successors, and
assigns.
15. Any waiver by either party of a breach of any provision of
this Agreement shall not operate as or be construed as a waiver of any
subsequent breach hereof, or as a waiver of a breach of any other provision.
16. Should any part, term, or provision of this Agreement be
declared or be determined by any court of competent jurisdiction to be
illegal, invalid, or unenforceable, the legality, validity, and enforceability
of the remaining parts, terms, or provisions shall not be effected thereby,
and said illegal, unenforceable, or invalid part, term, or provision shall be
deemed not to be a part of this Agreement.
17. This Agreement shall be interpreted in accordance with the
plain meaning of its terms and not strictly for or against any of the parties
hereto.
18. This Agreement and all provisions hereof shall be governed
by and construed under the laws of the State of New Jersey.
19. a. Except as provided in subparagraph (d) immediately
below, any and all Claims against the Companies or the Other Defendants
arising out of or relating to (i) this Agreement or (ii) any breach of any
provision of this Agreement shall be settled by arbitration. Such arbitration
proceeding shall be conducted pursuant to the Commercial Arbitration Rules of
the American Arbitration Association ("AAA") then in effect, by a single
arbitrator, and shall be held in Branchburg, New Jersey or such other location
as the parties mutually agree to in writing. The arbitrator shall not have
the power to award punitive damages. Each party shall pay his or its own
costs of the arbitration proceeding. The judgment upon the award rendered by
the arbitrator may be entered in any court having competent jurisdiction
thereof. Before resorting to arbitration, the parties agree first to try in
good faith to settle the dispute by mediation administered by the AAA under its
Commercial Mediation Rules. With respect to Claims that are within the scope
of this Paragraph 19, if Beck has the same, similar or related Claims against
any of the Other Defendants, and if Beck seeks to litigate such Claims against
the Other Defendants in a civil action or any other proceeding (including
before an administrative agency), Beck agrees that any or all of such Other
Defendants may compel Beck to arbitrate his Claims against them pursuant to the
terms of this Paragraph 19.
b. The arbitrator selected by the parties pursuant to the
AAA rules shall have expertise in commercial arbitration and shall hear and
determine the case promptly. The burden of persuasion shall at all times be
upon the party seeking relief.
c. In the event Beck files suit in a court of competent
jurisdiction and asserts that certain Claims are not subject to arbitration
under this Paragraph 19 because of the limitation on the power of the
arbitrator to award punitive damages (the "Limitation"), the parties agree that
they will request the court to resolve that legal issue on an expedited basis,
and if the court rules in favor of Beck on the Limitation issue, the parties
agree as follows: (i) the arbitration shall proceed as if this Paragraph 19
did not contain such Limitation; (ii) the parties will request the court to
enter judgment in favor of Beck on the Limitation issue, at which time the
Company may appeal that ruling; (iii) in the event the arbitrator determines
that Beck is entitled to punitive damages, the punitive damages aspect of the
arbitrator's award will be stayed pending the exhaustion or lapse of all
rights of appeal of the Company under (ii) immediately above; and (iv) in the
event an appellate court rules in favor of the Company on the Limitation
issue, the arbitrator shall vacate the award of punitive damages.
The procedures set forth in this subparagraph (c) shall also
apply in the event Beck seeks relief in some other tribunal, such as an
administrative agency, and the Company files a civil action to compel
arbitration.
d. Nothing in subparagraph (a) immediately above shall be
construed or interpreted to preclude the Company from filing suit in a court
of competent jurisdiction in order to enforce its rights and remedies under
Paragraph 11 of this Agreement. In any such suit, the court is empowered to
and shall resolve any dispute as to whether the Claim asserted by the Company
is within the scope of Paragraph 11 of this Agreement, and the court shall not
refer such dispute to arbitration under subparagraph (a) immediately above.
20. All representations and warranties herein shall survive any
termination or expiration of this Agreement, and the termination or expiration
of this Agreement shall not affect the enforceability of Paragraphs 10, 11,
12, 14, 18, 19, 20 and 21 of this Agreement, which Paragraphs shall survive
the termination or expiration of this Agreement.
21. All notices required to be transmitted herein shall be sent
in writing and by first class mail or hand delivery as follows:
If to Beck: Eckardt C. Beck
5801 NW 24th Ave.
Boca Raton, FL 33496
After 1/31/95: 6345 NW 26th Terrace
Boca Raton, FL 33496
With a copy to: Norman J. Peer, Esq.
Wilentz, Goldman & Spitzer
90 Woodbridge Center Drive
P.O. Box 10
Woodbridge, NJ 07095-0958
If to the Company: Air & Water Technologies
Corporation
P.O. Box 1500
Somerville, NJ 08876
Attention: Designee specified in
Paragraph 6 of this Agreement (presently
Francis X. Ferrara)
or to such other address as one party shall have notified the other party in
like fashion.
22. The Company shall not have the right to set off against
amounts owed to Beck hereunder any amount that may hereafter be owed by Beck
to the Company, except for amounts owed by Beck under Paragraph 10 of this
Agreement or under Sections 6(b), 8(b) or 19 of the Termination Agreement.
IN WITNESS WHEREOF, the Company, on behalf of itself and all
other Companies, and Beck have hereunto affixed their signatures as of the
date first above written.
AIR & WATER TECHNOLOGIES CORPORATION
By:/s/ Douglas A. Satzger
----------------------------------
Title:
-------------------------------
/s/ Eckardt C. Beck
-------------------------------------
ECKARDT C. BECK
JOINT VENTURE AND OPTION AGREEMENT
between
AIR & WATER TECHNOLOGIES CORPORATION
and
CHEMFIX TECHNOLOGIES, INC.
September 1, 1989
TABLE OF CONTENTS
Page
SECTION 1: CERTAIN DEFINITIONS......................................... 1
SECTION 2: FORMATION OF THE JOINT VENTURE.............................. 7
A. Formation................................................ 7
B. Name and Filings......................................... 7
C. Place of Business........................................ 7
D. Purpose.................................................. 7
E. Other Purposes........................................... 7
F. Uniform Partnership Act.................................. 7
G. Equal Interests.......................................... 8
H. Joint Venture Property................................... 8
I. Contributions............................................ 8
J. Fiscal Year.............................................. 8
K. Transfer of Joint Venture Interests...................... 8
L. Relationship of the Parties.............................. 8
SECTION 3: MANAGEMENT OF THE JOINT VENTURE............................. 9
A. Steering Committee....................................... 9
B. Steering Committee Role.................................. 9
C. Steering Committee Meetings.............................. 9
D. Votes of the Steering Committee.......................... 10
E. Operating Group.......................................... 10
F. Delegation............................................... 10
G. Party Contributions...................................... 10
H. Third Party Costs........................................ 11
SECTION 4: NON-COMPETITION............................................. 11
A. AWT Non-Competition...................................... 11
B. AWT Exceptions........................................... 11
C. CTI Non-Competition...................................... 12
D. CTI Exceptions........................................... 12
E. Existing Municipalities.................................. 13
F. Clarifications........................................... 13
G. Solicitation of Employees................................ 13
H. Injunctive Relief........................................ 13
SECTION 5: NOTICE AND PURSUIT OF CERTAIN BUSINESS
OPPORTUNITIES.......................................... 14
A. Notice................................................... 14
B. Non-Municipal Sludge Projects............................ 14
C. AWT Engineering Project Municipalities................... 14
D. Evaluation of Project.................................... 15
E. Vote on Projects......................................... 15
F. Vote to Proceed: Allocations............................ 15
G. Expanded Non-Compete..................................... 16
H. Vote Not to Proceed...................................... 16
I. Deemed Vote Not to Proceed............................... 17
J. CTI License.............................................. 17
SECTION 6: FORMATION OF AND RELATIONSHIP WITH
SUBSIDIARIES................................................ 17
A. Determination Regarding Subsidiaries..................... 17
B. Formation of Subsidiaries................................ 18
C. Project Implementation Services.......................... 18
D. CTI License Agreement.................................... 19
E. AWT License Agreements................................... 19
F. Confidentiality Agreement................................ 20
G. Reagent Supply........................................... 20
H. Additional Services...................................... 20
I. Liabilities to Third Parties............................. 21
SECTION 7: AGRICULTURAL MATERIAL....................................... 21
A. NEC Option............................................... 21
B. Special Services......................................... 22
C. Right to Assign.......................................... 22
D. Indemnification.......................................... 22
E. Certain Transfers........................................ 22
SECTION 8: NEW TECHNOLOGY.............................................. 22
A. Joint Venture New Intellectual Property.................. 22
B. Development of Joint Venture New Intellectual
Property................................................. 23
C. Party New Intellectual Property.......................... 23
D. Certain Actions.......................................... 23
SECTION 9: PERMITTING.................................................. 24
SECTION 10: FINANCIAL ARRANGEMENTS..................................... 24
A. Bonding Arrangements..................................... 24
B. Other Financial Arrangements............................. 25
C. Party Financing Arrangements............................. 25
SECTION 11: REPRESENTATIONS AND WARRANTIES............................. 26
A. CTI Representations and Warranties....................... 26
B. AWT Representations and Warranties....................... 28
SECTION 12: CONFIDENTIAL AND PROPRIETARY INFORMATION................... 29
A. Provision of Confidential Information.................... 29
B. Inclusions............................................... 29
C. Exceptions............................................... 30
D. Need to Know............................................. 31
E. Permitted Purposes....................................... 31
F. Return of Confidential Information....................... 31
G. Survival of Obligations.................................. 31
H. Injunctive Relief........................................ 31
SECTION 13: STOCK OPTIONS.............................................. 32
A. Cash Option.............................................. 32
B. Vesting Options.......................................... 32
C. Earn in Options.......................................... 33
D. Performance Criteria for Earn In Options................. 34
E. Restrictions............................................. 34
F. Injunctive Relief........................................ 35
G. Survival of Obligations.................................. 36
SECTION 14: JOINT VENTURE BOOKS OF ACCOUNT, AUDITS
AND ACCOUNTING........................................ 36
A. Responsibility for Records............................... 36
B. Audits................................................... 36
C. Right of Inspection...................................... 36
D. Presentation of Records.................................. 36
SECTION 15: COMPLIANCE WITH LAW........................................ 37
SECTION 16: TERM OF AGREEMENT AND TERMINATION.......................... 37
A. Term..................................................... 37
B. Termination.............................................. 37
C. Effect of Termination.................................... 38
D. Bankruptcy............................................... 39
SECTION 17: DISPUTES................................................... 40
A. Resolution of Disputes................................... 40
B. Notice of Meeting........................................ 40
C. Act Governs.............................................. 40
D. Notice of Dispute........................................ 41
E. Selection of Umpire...................................... 41
F. Proceeding............................................... 42
G. Fees..................................................... 42
H. Provisional Relief....................................... 42
I. Timing of Decision....................................... 42
J. Act Governs Proceedings.................................. 42
K. Counsels................................................. 42
L. Extensions............................................... 43
SECTION 18: INDEMNITY.................................................. 43
SECTION 19: ASSIGNMENT................................................. 43
A. Permitted Assignees...................................... 43
B. Effect of Assignment..................................... 44
SECTION 20: MISCELLANEOUS.............................................. 44
A. Force Majeure............................................ 44
B. Maintenance and Access to Records........................ 44
C. Obligations.............................................. 44
D. Publicity................................................ 46
E. Further Assurances....................................... 46
F. Full Agreement of the Parties............................ 46
G. Notices.................................................. 47
H. Agency Limitation........................................ 47
I. Schedules and Appendices................................. 47
J. Applicable Law........................................... 48
K. Successors and Assigns................................... 48
L. Counterparts............................................. 48
TABLE OF SCHEDULES
SCHEDULE 1 CHEMFIX INTELLECTUAL PROPERTY
CHEMFIX TECHNOLOGIES, INC. UNITED STATES
TRADEMARKS AND SERVICE MARKS
SCHEDULE 4D CTI EXISTING MUNICIPALITIES
SCHEDULE 4F AWT ALTERNATE TECHNOLOGY
ENGINEERING PROJECT MUNICIPALITIES
SCHEDULE 11A(7) PATENTS, LICENSES AND AGREEMENTS
APPENDICES
APPENDIX A OPTION AGREEMENT
This JOINT VENTURE AND OPTION AGREEMENT (the "Agreement")
entered into as of the 1st day of September, 1989, by and between Air & Water
Technologies Corporation ("AWT"), a Delaware corporation, having its principal
place of business at Route 22 West & Station Road, Branchburg, New Jersey
08853 with a post office address of P.O. Box 1500, Somerville, New Jersey
08876; and Chemfix Technologies, Inc. ("CTI"), a Delaware corporation, having
its principal place of business at 2424 Edenborn Avenue, Metairie, Louisiana
70001.
W I T N E S S E T H:
WHEREAS AWT and the other AWT Companies are engaged in the
business of the treatment of sewage, the production of sewage sludge and the
design and construction of sludge management systems; have established
operating relationships with sewage sludge and septage producers throughout
the United States and Puerto Rico; and have developed a financing capability
for such projects; and
WHEREAS, CTI and the other CTI Companies are in the business of
the design, installation and operation of the Chemfix Process and have
produced a soil-like product determined to be suitable for re-use as bulk fill
and/or landfill cover material by several state regulatory agencies; and
WHEREAS, CTI currently holds several patents issued by the U.S.
Patent and Trademark Office relating to processes and equipment used to treat
and convert sludge into a recyclable, soil-like product; and
WHEREAS, the Parties desire to establish a national, joint
venture relationship for the purpose of selecting specific projects for
participation by the Parties resulting in the re-use and recycling of
municipal sewage sludge and septage as bulk fill and/or landfill cover
material using CTI's proprietary solidification/chemical fixation technology;
NOW, THEREFORE, in consideration of the mutual covenants and
agreements contained herein, the Parties mutually agree as follows:
SECTION 1: CERTAIN DEFINITIONS
As used herein, the following terms shall have the following
meanings:
Acceptance Tests - shall have the meaning set forth in Section
6C.
Act - shall have the meaning set forth in Section 17C.
Additional Earn in Options - shall have the meaning set forth
in Section 13C.
Agreement - shall mean this Joint Venture and Option Agreement,
as the same may be amended by mutual agreement of AWT and CTI from time to
time.
Aggregate Earn in Options - shall have the meaning set forth in
Section 13C.
Aggregate Net Profits - shall mean the Net Profits of the Joint
Venture and all Subsidiaries aggregated.
Alternate Technology - shall mean any and all methods of
treating Municipal Sludge using technologies other than Chemical Fixation
Technology, including, but not limited to aerobic digestion, air drying,
anaerobic digestion, composting, heat drying, heat treatment, beta ray
irradiation, gamma ray irradiation, pasteurization, incineration, land
application and all forms of wet air oxidation.
Analytical Services Agreement - shall have the meaning set
forth in Section 13D.
Assignee - shall mean any party to whom AWT assigns any Options
granted by CTI to AWT pursuant to this Agreement and any assignee or remote
assignee of such party.
AWT - shall mean Air & Water Technologies Corporation and its
successors and assigns.
AWT Companies - shall mean AWT and its direct and indirect
wholly-owned or majority-owned subsidiaries, whether now existing or
hereinafter formed.
AWT Chemical Fixation Engineering Project Municipalities -
shall have the meaning set forth in Subsection 4B of this Agreement.
AWT Chemical Fixation Engineering Project Municipalities List -
shall have the meaning set forth in Subsection 4B of this Agreement.
AWT Engineering Project Municipalities List - shall have the
meaning set forth in Subsection 5C of this Agreement.
Cash Option - shall mean the option CTI grants to AWT pursuant
to Subsection 13A of this Agreement.
Cash Option Price - shall mean the price of the Cash Option as
set forth in Subsection 13A.
Chemfix Intellectual Property - shall mean all right, title and
interest of the CTI Companies in and to all U.S. patents, U.S. patent
applications, trademarks, service marks, trade names, copyrights, inventions,
improvements, processes, trade secrets and know-how of the CTI Companies, U.S.
or foreign, used in the Chemfix Process as of the date of this Agreement as it
relates to the treatment of Municipal Sludge.
Chemfix Patents and Trademarks - shall mean all patents and
trademarks of CTI relating to the Chemfix Process set forth in Schedule 1
hereto.
Chemfix Process - shall mean the Chemical Fixation Technologies
practiced by the CTI Companies from time to time utilizing, among other
things, Chemfix Intellectual Property.
Chemical Fixation Technology - shall mean any and all methods
and technologies for the treatment of Municipal Sludge using solidification or
chemical fixation, including, without being limited to, the Chemfix Process,
lime stabilization and lime conditioning, but not including the treatment of
Municipal Sludge using Alternate Technology.
Confidentiality Agreement - shall have the meaning set forth in
Section 6F.
Confidential Information - shall have the meaning set forth in
Section 12.
Cost - shall mean the direct cost of the services or material
which either of the Parties supplies to the Joint Venture or any Subsidiary,
including, without being limited to, salaries, benefits and out-of-pocket
expenses, but not including any profit margin or overhead for such Party.
CTI - shall mean Chemfix Technologies, Inc. and its successors
and assigns.
CTI Companies - shall mean CTI and its direct or indirect
wholly-owned or majority-owned subsidiaries, whether now existing or
hereinafter formed, including but not limited to: BTC Environmental Inc.,
Chemfix International, Inc., Chemfix Environmental Services, Inc., Chemfix of
Massachusetts, Inc., Environmental Industrial Research Associates, Inc., Houma
Fluid Services, Inc and VenVirotek.
CTI Existing Municipalities - shall have the meaning set forth
in Subsection 4D of this Agreement.
Dispute Notice - shall have the meaning set forth in Section
16B3(b).
Earn in Options - shall mean the stock options which CTI grants
to AWT pursuant to Subsection 13C of this Agreement.
Earn in Maximum - shall have the meaning set forth in Section
13C.
Extension Term - shall mean each and every additional one-year
renewal term of this Agreement, the first of which may begin at the end of the
Initial Term.
Initial Term - shall mean the initial term of this Agreement,
which shall be for a period of five (5) years from the date first set forth
above.
Joint Venture - shall mean the unincorporated joint venture
formed by AWT and CTI pursuant to this Agreement to be known as "Renewable
Earth Products, a Joint Venture".
Joint Venture New Intellectual Property - shall have the
meaning set forth in Section 8A.
License Agreement - shall have the meaning set forth in Section
6D.
Municipality - shall mean any governmental body or entity,
including, but not limited to cities, towns, counties or states, and any
agency or authority thereof, including regional agencies.
Municipal Sludge Project - shall mean any project in the United
States and/or Puerto Rico related to (i) the treatment of municipal sludge
utilizing Chemical Fixation Technology (including, without being limited to,
the Chemfix Process) which produces a product which is suitable for use as
bulkfill, strip mine reclamation, land reclamation material, erosion control
material, agricultural material, landfill cover material and/or landfill,
and/or (ii) the provision of services ancillary to the projects referred to
in clause (i), which services may include, but are not necessarily limited to,
dewatering, designing, engineering, construction management, facility
operation and maintenance, equipment procurement, transportation, disposal and
marketing of end product services. Notwithstanding the foregoing, the term
"Municipal Sludge Project" shall not include any project related to the
treatment of Municipal Sludge utilizing lime stabilization and/or lime
conditioning to the extent that the product which is produced is used for
agricultural material or disposed of as a waste in landfill. (By way of
clarification, nothing contained in clause (i) of the definition of Municipal
Sludge Project shall be deemed to include projects involving the treatment of
Municipal Sludge using Alternate Technology, and nothing contained in clause
(ii) of the definition of Municipal Sludge Project shall be deemed to include
any service performed by any of the AWT Companies or any of the CTI Companies
where such services are not in connection with the treatment of Municipal
Sludge utilizing Chemical Fixation Technology.)
Municipal Sludge - shall mean sewage sludge and septage
produced at privately-owned or publicly-owned Municipal, county, state or
regional wastewater and/or sewage facilities, and/or produced by individual
residences or business that do not have public sewer service. For the
purposes of resolving any questions regarding the interpretation of the
preceding sentence, the term Municipal Sludge shall have the same meaning as
such term has in various federal and state statutes and regulations applicable
to the regulation of sewage sludge and septage.)
Net Profits - shall mean, with respect to the Joint Venture or
any Subsidiary for any given fiscal year, pre-tax profits (or losses)
calculated in accordance with generally accepted accounting principles applied
on a consistent basis.
Neutral Accountants - shall have the meaning set forth in
Section 16B3(b).
Operating Group - shall have the meaning set forth in
Subsection 3E.
Option Agreement - shall mean the form of Option Agreement
appended to this Agreement as Appendix A.
Options - shall mean the stock options granted concurrently
herewith and to be granted by CTI to AWT pursuant to Section 13 hereof.
Party - shall mean AWT acting on behalf of itself and the other
AWT Companies or CTI acting on behalf of itself and the other CTI Companies,
as the context may require.
Party New Intellectual Property - shall have the meaning set
forth in Section 8C.
Project Implementation Services - shall have the meaning set
forth in Section 6C.
Project Notice - shall have the meaning set forth in Section 5.
Request to Vote - shall have the meaning set forth in
Subsection 5E of this Agreement.
Representatives - shall have the meaning set forth in Section
12D.
Steering Committee - shall mean the management organ of the
Joint Venture formed pursuant to Section 2 hereof.
Subsidiary - shall mean any corporation, partnership or other
business entity formed at the direction of the Steering Committee of the Joint
Venture and owned by the Joint Venture or jointly by any of the AWT Companies,
on the one hand, and any of the CTI Companies, on the other hand.
Vesting Options - shall mean the stock options which CTI grants
to AWT pursuant to Subsection 13B of this Agreement.
Vesting Option Price - shall mean the exercise price of the
Vesting Options as set forth in Subsection 13B of this Agreement.
Voting Shares - shall mean all issued and outstanding common
shares of CTI plus all issued and outstanding "common stock equivalents" of
CTI as the term "common stock equivalents" is used in generally accepted
accounting principles.
SECTION 2: FORMATION OF THE JOINT VENTURE
A. Formation. AWT acting on behalf of itself and the other
AWT Companies and CTI acting on behalf of itself and the other CTI Companies
hereby associate themselves to form an unincorporated joint venture (the
"Joint Venture") pursuant to the laws of the State of New Jersey for the
limited purposes and upon the terms, provisions and conditions set forth in
this Agreement.
B. Name and Filings. The name of the Joint Venture shall be
"Renewable Earth Products, a Joint Venture". The Steering Committee of the
Joint Venture shall cause to be executed and filed of record all assumed or
fictitious name certificates and other certificates required by law in
connection with the formation and operation of the Joint Venture.
C. Place of Business. The principal place of business of
the Joint Venture shall be located in Branchburg, New Jersey or such other
place or places as the Steering Committee of the Joint Venture shall determine
from time to time.
D. Purpose. The purpose of the Joint Venture shall be to
evaluate Municipal Sludge Projects and to pursue and implement such selected
Municipal Sludge Projects as the Steering Committee of the Joint Venture shall
determine from time to time.
E. Other Purposes. The Joint Venture may also explore other
business concepts, including, without being limited to: the development of a
landfill cover and closure business; the securing of state and federal rulings
on the derived product designating it as a "non sludge" product; and, as may
be specifically agreed to by the Parties, the application of other Municipal
Sludge reuse and recycling technologies that provide environmentally sound,
inexpensive means of Municipal Sludge processing and disposal.
Notwithstanding the foregoing, the purpose of the Joint Venture shall not
include and the Joint Venture shall not be authorized to pursue any of the
business concepts except for those set forth in Subsection 2D of this
Agreement unless the Parties shall approve in writing the expansion of the
purpose of the Joint Venture to include such new business concepts.
F. Uniform Partnership Act. Except as expressly stipulated
to the contrary in this Agreement, the rights and obligations of AWT and CTI
between themselves and the administration, termination and liquidation of the
Joint Venture shall be governed by the New Jersey Uniform Partnership Act, as
amended.
G. Equal Interests. AWT and CTI shall each have an equal
interest in the Joint Venture and shall share equally all profits, losses,
liabilities and other economic benefits and burdens of the Joint Venture. The
Joint Venture shall distribute any net profits of the Joint Venture on an
equal basis to AWT and CTI at such times as the Steering Committee shall
determine from time to time.
H. Joint Venture Property. Any property that is acquired by
the Joint Venture shall be beneficially owned jointly by AWT and CTI in equal
proportion, and such ownership shall be subject to all terms and conditions of
this Agreement. Each of AWT and CTI hereby expressly waive the right to
require partition of any assets of the Joint Venture or any part thereof.
I. Contributions. Neither AWT nor CTI shall be required to
make capital contributions to the Joint Venture. However, each Party shall be
required to provide such services and make such other non-cash contributions
to the Joint Venture as set forth in this Agreement. Except to the extent
otherwise agreed in advance of any cash contribution, in the event that either
or both of the Parties voluntarily make cash contributions to the Joint
Venture, the Party making such cash contribution shall have the right upon
thirty (30) days prior notice to demand and receive a return of such cash
contribution.
J. Fiscal Year. The fiscal year of the Joint Venture and
any Subsidiary created by the Joint Venture pursuant to this Agreement shall
end on August 31.
K. Transfer of Joint Venture Interests. Except as set forth
in Section 19 of this Agreement, neither AWT nor CTI may, without the prior
written consent of the other Party, sell, assign, transfer, encumber,
hypothecate, mortgage, pledge or otherwise dispose of any part of its right,
title or interest in the Joint Venture or this Agreement. Any attempted
assignment or transfer by a Party of any interest in the Joint Venture in
violation of this Subsection shall be void and confer no rights upon any third
person.
L. Relationship of the Parties. The relationship of the
Parties shall be a joint venture for the sole purposes of carrying out the
activities provided for in this Agreement. No provision of this Agreement
shall be construed to constitute the Parties as members of any partnership,
association, syndicate or other entity except to the extent expressly provided
for in this Agreement. Nothing contained in this Agreement shall be construed
as constituting any Party as the agent or partners of the other Party or as
conferring on any Party the authority to enter into any contract to make any
legal commitment or other binding obligation on behalf of the Joint Venture
without the prior approval of the Steering Committee or on behalf of the other
Party under any circumstances.
SECTION 3: MANAGEMENT OF THE JOINT VENTURE
A. Steering Committee. The Joint Venture shall be managed
by a Steering Committee which shall consist at all times of four (4) members.
Each of AWT and CTI shall appoint two (2) members of the Steering Committee
and may remove and replace any member so appointed at any time by written
notice to the other Party. The initial members of the Steering Committee
shall be Mark E. Alpert and Paul Alderdice, who are appointed by AWT, and
Daniel N. Silverman III and David L. Donaldson, who are appointed by CTI. The
Steering Committee shall always consist of an equal number of members
appointed by each Party and so that AWT and CTI shall always have equal voting
interests in the Joint Venture.
B. Steering Committee Role. The Steering Committee of the
Joint Venture shall provide overall direction, guidance and decision-making
with respect to all business activities of the Joint Venture. Accordingly,
the activities of the Steering Committee shall include, but are not limited
to: (i) deciding which Municipal Sludge Projects the Joint Venture should
or should not undertake and the particular form of business relationship of
any approved Municipal Sludge Project (e.g. separate corporation); (ii)
establishing budgetary and contract policy for specific Municipal Sludge
Projects of the Joint Venture; (iii) providing general administrative
oversight of project development, marketing, and project implementation
activities; (iv) approving all contracts executed by or on behalf of the
Joint Venture; and (v) approving all borrowing by or on behalf of the Joint
Venture.
C. Steering Committee Meetings. Meetings of the Steering
Committee shall be held at such places and at such times as the Steering
Committee shall determine from time to time. Each member of the Steering
Committee shall be given reasonable notice of any meeting of the Steering
Committee at which a vote is to be taken; provided, however, that no notice is
necessary if all members of the Steering Committee are present or
participating or if either before or after the meeting is held, those absent
or not participating waive notice in writing. Meetings may be conducted by
telephone conference or similar communications equipment by means of which all
persons participating in the meeting can hear each other. It is the intention
of AWT and CTI that the Steering Committee shall meet in person alternately at
CTI's offices in Metairie, Louisiana, or AWT's offices in Branchburg, New
Jersey, at least once every eight (8) weeks.
D. Votes of the Steering Committee. Two members of the
Steering Committee including one representative of each of AWT and CTI
shall constitute a quorum for the transaction of business at a meeting of
the Steering Committee; provided, however, that at each meeting at which a
vote is taken there must be an equal number of representatives of AWT and
CTI present in order for there to be a quorum. The vote of a majority of
the members of the Steering Committee at a meeting at which a quorum is
present shall constitute the act of the Steering Committee. Any action
which may be taken at a meeting of the Steering Committee at which a quorum
is present may also be taken by unanimous written consent of all members of
the Steering Committee.
E. Operating Group. The Steering Committee shall establish
an operating group (the "Operating Group") consisting of at least one
representative functioning in the lead role for each of the Parties, plus an
alternate. The Operating Group shall implement and conduct the daily project
development activities, marketing, business/strategic planning, proposal
development, and day-to-day interface with operating affiliates of the Parties
as directed by the Steering Committee.
F. Delegation. It is the intent of the Parties that the
Steering Committee may subsequently delegate most responsibilities reasonably
necessary for the day-to-day operation of Joint Venture activities to the
Operating Group and/or directly to any staff of the Subsidiaries.
G. Party Contributions. Unless otherwise agreed by the
Steering Committee, the Parties shall contribute at no cost to the Joint
Venture or to the other Party the resources of such Party and the time and
efforts of its employees as determined by the Steering Committee to be
reasonably necessary to initiate and continue the business activities of the
Joint Venture consistent with the intent of this Agreement, including but not
necessarily limited to meeting attendance, proposal development, and data
gathering and background information development. With respect to the costs
associated with pursuit of a given Municipal Sludge Project prior to the
establishment of a Subsidiary with respect to such Municipal Sludge Project,
each respective Party shall contribute the resources of such Party and the
time and effort of its employees and the costs of such contributions shall not
be chargeable to the Joint Venture, the applicable Subsidiary or the other
Party, unless and to the extent otherwise agreed by the Steering Committee.
H. Third Party Costs. It is the intent of AWT and CTI to
limit the expenses owing to third parties incurred by the Joint Venture in
connection with the pursuit of prospective Municipal Sludge Projects prior
to the establishment of a Subsidiary with respect to a given Municipal
Sludge Project. To the extent that any such expenses owing to third
parties are incurred either with respect to pursuit of a given prospective
Municipal Sludge Project (e.g., legal fees, site evaluation and permitting,
detailed engineering, etc.) or with respect to broad marketing activities
applicable to multiple prospective Municipal Sludge Projects (e.g.,
preparation of brochures, trade show fees, etc.), the Party initiating the
incurrence of such expense shall be responsible for the payment of such
expense, unless and to the extent otherwise agreed by the Steering
Committee.
SECTION 4: NON-COMPETITION
A. AWT Non-Competition. Except in accordance with the
procedures set forth in Section 5 of this Agreement and subject only to the
exceptions set forth in Subsection 4B, AWT agrees on behalf of itself and the
other AWT Companies not to knowingly engage or participate in, or attempt to
engage or participate in, either directly or indirectly, Municipal Sludge
Projects during the Initial Term and any Extension Terms of this Agreement and
(i) for one (1) year following the expiration or termination of this Agreement
for any reason, or (ii) if terminated prior to expiration of the Initial Term,
for two (2) years following termination of this Agreement for any reason.
B. AWT Exceptions. The provisions of Subsection 4A shall
not apply to Municipal Sludge Projects: (i) where a Municipality specifies
in a formal procurement document without the influence of any of the AWT
Companies that the Municipal Sludge shall be treated utilizing a patented
chemical fixation process which CTI does not and is legally unable to
practice; (ii) where AWT and/or the other AWT Companies act primarily as,
and only for so long as they act primarily as, consulting engineer or
technical advisor for procurement for a Municipality and the applicable AWT
Company reasonably determines that the submission to or pursuit by the
Joint Venture of such Municipal Sludge Project would, or would reasonably
be perceived to, compromise such AWT Company's independent professional
judgment as a consulting engineer or technical advisor, as the case may be;
(iii) where an AWT Company acts primarily as facilities operator for a
Municipality for a Municipal Sludge Project treatment facility and, except
as provided in clause (ii) above, the technology utilized to treat the
Municipal sludge is not chemical Fixation Technology; and (iv) where the
Steering Committee has unanimously agreed that the provisions of Subsection
4A shall not apply to such Municipal Sludge Project. (The Municipalities
which are covered by clauses (i), (ii) and (iii) of this Subsection 4B from
time to time are hereinafter collectively referred to as the "AWT Chemical
Fixation Engineering Project Municipalities".) AWT agrees to provide CTI
with a list of the AWT Chemical Fixation Engineering Project Municipalities
(the "AWT Chemical Fixation Engineering Project Municipalities List") at
the beginning of every calendar quarter, which list shall identify whether
AWT considers the Municipality to be covered by clause (i), (ii) or (iii)
of this Subsection 4B; and provided, however, that AWT shall not be in
default of the provisions of this sentence in the event that AWT
unintentionally fails to include any Municipality which is covered by
clauses (i), (ii) or (iii) of this Subsection 4B on such AWT Chemical
Fixation Engineering Project Municipalities List.
C. CTI Non-Competition. Except in accordance with the
procedures set forth in Section 5 of this Agreement and subject only to the
exceptions set forth in Subsection 4D, CTI agrees on behalf of itself and the
other CTI Companies not to knowingly engage or participate in, or attempt to
engage or participate in, either directly or indirectly, municipal Sludge
Projects during the Initial term and any Extension Terms of this Agreement.
The foregoing prohibition shall be deemed to include, but not be limited to, a
prohibition against CTI and the other CTI Companies licensing the Chemfix
process for use in Municipal Sludge Projects, directly or indirectly, to any
entity other than the Joint Venture, any Subsidiary, or any AWT Company.
D. CTI Exceptions. The provisions of Subsection 4C shall
not apply to Municipal Sludge Projects: (i) with the Municipalities set forth
on Schedule 4D hereto or contemplated in the agreements set forth in Schedule
4D hereto, (the "CTI Existing Municipalities"); (ii) with the AWT Chemical
Fixation Engineering Project Municipalities; and (iii) where the steering
Committee has unanimously agreed that the provisions of Subsection 4C shall
not apply to such Municipal Sludge Project.
E. Existing Municipalities. Notwithstanding any of the
other provisions of this Agreement, the AWT Companies agree not to participate
in, or attempt to participate in, either directly or indirectly, any projects
involving the treatment, recycling or disposal of Municipal Sludge using
Chemical Fixation Technology or Alternate Technology at the CTI Existing
Municipalities. CTI agrees to use reasonable efforts to enable AWT to
participate in projects at the CTI Existing Municipalities, provided in each
case that such efforts would not, in the sole discretion of CTI, create a
conflict of interest, adversely impact CTI's legal position, or otherwise
adversely affect CTI's relationship with the applicable Municipality.
F. Clarifications. By way of clarification and without
intending to alter the meanings of Subsections A, B, C and D of this Section
4, (i) nothing contained in such Subsections A, B, C and D of this Section 4
is intended to prevent either Party from participating in projects which are
not Municipal Sludge Projects (including, without being limited to, the
projects set forth on Schedule 4F and other project involving the treatment of
Municipal Sludge utilizing Alternate Technology) without the involvement of
the Joint Venture, any Subsidiary or the other Party, except to the extent
otherwise provided in Subsection 4E and 5G of this Agreement; and (ii) nothing
contained in Subsections 4A and 4C of this Agreement is intended to prevent
either Party from participating in Municipal Sludge Projects pursuant to
Subsection 5H of this Agreement without the involvement of the Joint Venture,
any Subsidiary or the other Party.
G. Solicitation of Employees. During the term of this
Agreement and for a period of one (1) year thereafter, each Party agrees not
to, directly or indirectly, solicit for employment or hire the employees of
the other Party (including its affiliates), the Joint Venture or any
Subsidiary without the written permission of the other Party.
H. Injunctive Relief. The Parties agree and acknowledge
that, in the event of a breach or threatened breach of the provisions of this
Section 4 by any of the AWT Companies or any of the CTI Companies, monetary
damages would be an inadequate remedy at law and that both preliminary and
permanent equitable injunctive relief is necessary to protect the rights of
the Parties. In the event of a breach of this Section 4 by either Party, the
running of the non-compete covenants contained in this Section 4 relating to
such Party shall be extended by that period of time during which such Party
was found to be in breach.
SECTION 5: NOTICE AND PURSUIT OF CERTAIN BUSINESS
OPPORTUNITIES
A. Notice. Except to the extent prohibited by law or
contract, each Party agrees to use reasonable efforts to inform the Steering
Committee in writing (the "Project Notice") of any and all projects involving
the treatment, recycling or disposal of Municipal Sludge (including, without
being limited to, the treatment of Municipal Sludge using Chemical Fixation
Technology or Alternate Technology) as soon as reasonably possible after such
Party learns of such project, but in no event later than the date such Party
decides to submit a bid, proposal or formal contract offer with respect to
such project; provided, however, that the AWT Companies shall not be required
to provide the Steering Committee with notice of any projects of which any AWT
Company becomes aware of by virtue of acting in the capacity of or bidding on
a contract to become a (i) consulting engineer to a Municipality, (ii)
technical advisor to a Municipality for procurement for a Municipal Sludge
treatment facility, or (iii) facilities operator for a Municipality for a
Municipal Sludge treatment facility which is not utilizing Chemical Fixation
Technology and where there has been no change in the technology used for
treating the Municipal Sludge from Alternate Technology to Chemical Fixation
Technology at the commencement of or at any time during the period such AWT
Company provides such facilities operation services. The Project Notice shall
contain general information regarding the potential project, including,
without being limited to, the identity of the Municipality, a brief
description of the nature of the potential project and any bid specifications
or proposed contract terms.
B. Non-Municipal Sludge Projects. Notwithstanding the
notice requirements contained in Subsection 5A, either Party may proceed with
the development, bidding, negotiation and consummation of any projects which
are not Municipal Sludge Projects without the participation, permission or
involvement of the other Party or the Joint Venture.
C. AWT Engineering Project Municipalities. AWT agrees to
provide CTI upon request with a list of the Municipalities where any AWT
Company serves, as of the date of such list, as a consulting engineer,
technical advisor for procurement or facilities operator for a Municipality
for a Municipal Sludge treatment facility (the "AWT Engineering Project
Municipality List"); provided, however, that CTI may not make a request for
such list more frequently than once every three months; and provided, further,
that AWT shall not be in default of the provisions of this Subsection 5B in
the event that AWT unintentionally fails to include any Municipality where any
AWT Company serves as consulting engineer, technical advisor for procurement
or facilities operator for a Municipality for a Municipal Sludge treatment
facility on such AWT Engineering Project Municipality List.
D. Evaluation of Project. After the Steering Committee
receives a Project Notice from either Party or otherwise learns of a
prospective Municipal Sludge Project, the Steering Committee shall, within
such time period as shall be reasonable under the circumstances, conduct an
evaluation of the prospective Municipal Sludge Project to determine whether to
bid upon or otherwise pursue such prospective Municipal Sludge Project. In
conducting such evaluation, the Steering Committee shall consider, among other
things, the technical applicability, cost/pricing strategy, regulatory
environment, likely competition, available disposal options and necessary
financing arrangements.
E. Vote on Projects. After completing such evaluation as
may be appropriate under the circumstances, either Party may, by written
notice to the other Party (the "Request to Vote"), request that the Steering
Committee vote as to whether or not to bid upon or otherwise pursue the
prospective Municipal Sludge Project. The Steering Committee shall conduct
such vote within ten (10) days after the receiving Party has received such
Request to Vote, unless otherwise agreed by the Steering Committee. In the
event that the Steering Committee does not conduct such vote within such ten
(10) day period, the Party receiving such Request to Vote shall be deemed to
have voted not to pursue such prospective Municipal Sludge Project for the
purposes of this Section 5.
F. Vote to Proceed: Allocations. In the event that the
Steering Committee votes to pursue a given Municipal Sludge Project, the
Parties shall pursue such Municipal Sludge Project only through the Joint
Venture or a Subsidiary established by the Joint Venture and only in
accordance with the terms and conditions of this Agreement. At such stage in
the process of pursuing the Municipal Sludge Project as the Steering Committee
deems appropriate, the Parties shall establish a separate Subsidiary for the
purposes of further pursuing and conducting the Municipal Sludge Project.
Notwithstanding any other provisions of this Agreement to the contrary and
unless otherwise agreed in writing by both Parties, each Party shall own an
equal interest in any Subsidiary, shall share any profits and losses of any
Subsidiary on an equal basis, and shall share any other benefits, burdens,
risks and liabilities associated with such Subsidiary on an equal basis.
G. Expanded Non-Compete. In the event that the Steering
Committee votes to pursue a given prospective Municipal Sludge Project,
neither the AWT Companies nor the CTI Companies shall thereafter knowingly
engage or participate in, directly or indirectly, any activity involving the
treatment, recycling or disposal of Municipal Sludge of such Municipality,
including, without being limited to, treatment by Chemical Fixation Technology
or Alternate Technology; provided, however, that either Party may continue any
activities at the applicable site of the applicable Municipality which are not
prohibited by Section 4 of this Agreement and which pre-dated the affirmative
vote of the Steering Committee. Notwithstanding the provisions of the
preceding sentence, AWT or CTI may request the consent of the other Party,
which request shall be responded to promptly and which consent shall not be
unreasonably withheld, to:
(a) submit bids to the applicable Municipality for the
treatment of Municipal Sludge using Alternate Technology if the Municipality
has specified in advance in a formal procurement document that it intends to
award multiple bids to contractors using Chemical Fixation Technology and
Alternate Technology; (e.g., Municipality specifies 50% Chemical Fixation
Technology and 50% composting), or
(b) submit bids to the Municipality for other projects using
Alternate Technology within the Municipality at other separate and
geographically distinct sites for which separate bids have been solicited.
For the purposes of this Subsection 5G, the only reasonable grounds for
withholding a consent requested pursuant to this Subsection shall be where the
requested bid would materially decrease: (i) the chance that a bid of a
Subsidiary would be successful, (ii) the volume of Municipal Sludge which
would be awarded to a Subsidiary pursuant to a successful bid, or (iii) the
chance that the Joint Venture or the applicable Subsidiary would be able to
successfully implement a Municipal Sludge Project.
H. Vote Not to Proceed. In the event that the Steering
Committee votes not to pursue a given prospective Municipal Sludge Project,
(a) the Party which has voted or has been deemed to have voted
not to pursue such Municipal Sludge Project shall not thereafter participate,
directly or indirectly, in such Municipal Sludge Project using Chemical
Fixation Technology alone or in combination with any third party, unless the
other Party consents to such participation in writing; and
(b) the other Party shall be entitled to participate in such
Municipal Sludge Project alone or in combination with any third party using
Chemical Fixation Technology or Alternate Technology without the involvement
of the other Party, the Joint Venture or any Subsidiary.
I. Deemed Vote Not to Proceed. In the event that either
Party is willing to pursue a prospective Municipal Sludge Project, but (i) is
not willing to share the ownership, benefits and burdens of such Municipal
Sludge Project on an equal basis in accordance with the provisions of
Subsection 5F or (ii) is not willing to provide services to the Joint Venture
or any Subsidiary with respect to such prospective Municipal Sludge Project
pursuant to Sections 6 or 9 hereof at Cost or estimated Cost, such Party shall
be deemed to have voted not to pursue such Municipal Sludge Project for the
purposes of this Section 5.
J. CTI License. In the event that CTI is the Party which
has voted or has been deemed to have voted not to pursue a given prospective
Municipal Sludge Project, CTI shall, upon request from AWT, license to an AWT
Company so much of the Chemfix Intellectual Property as shall be necessary or
appropriate for AWT to pursue such Municipal Sludge Project at a commercially
reasonable royalty rate to be mutually agreed upon between the Parties at the
time of the grant of such license.
SECTION 6: FORMATION OF AND RELATIONSHIP WITH SUBSIDIARIES
A. Determination Regarding Subsidiaries. Project-specific,
organizational and contractual arrangements shall be established by the
Steering Committee for each Municipal Sludge Project actively bid or otherwise
pursued during the term of this Agreement. Unless otherwise determined by the
Steering Committee, upon approval by the Steering Committee of a Municipal
Sludge Project to be pursued by the Joint Venture, the Joint Venture shall
direct the formation of a Subsidiary, which shall be the entity through which
the Joint venture pursues that particular Municipal Sludge Project.
B. Formation of Subsidiaries. The Subsidiary shall be
established under the laws of the State of Delaware and shall have as its
principal place of business the same principal place of business as the Joint
Venture, unless the Steering Committee determines that for purposes of bidding
and/or pursuing the target Municipal Sludge Project, other arrangements are
preferable. Each Subsidiary shall have the number of directors on its board
or controlling partners as shall be determined by the Steering Committee,
provided, however, that each Party shall be equally represented on the body
managing the affairs of each Subsidiary. The terms of the certificate of
incorporation, by-laws, partnership agreements and/or management procedures
for each Subsidiary shall be, to the extent applicable and where permitted by
law, substantially similar to those of the Joint Venture.
C. Project Implementation Services. For each Subsidiary
formed by the Joint Venture in connection with a Municipal Sludge Project,
where applicable, the appropriate CTI Company and the appropriate AWT Company
shall each enter into agreements with each Subsidiary pursuant to which such
CTI Company and AWT Company, respectively, shall agree to provide or arrange
for the provision of certain project implementation services (the "Project
Implementation Services") to the Subsidiary, including, without being limited
to, laboratory analysis, engineering analysis, equipment design, equipment
procurement, mobilization, equipment assembly, reagent procurement, acceptance
testing and related services. Such Project Implementation Services shall be
provided by such CTI Company and such AWT Company at the lesser of Cost or
estimated Cost. Unless otherwise provided in the applicable agreements, in
the event that such CTI Company or such AWT Company agrees to provide such
Project Implementation Services to the Subsidiary at estimated Cost and the
actual Cost of providing such Project Implementation Services exceeds the
estimated Cost, such CTI Company or AWT Company, as the case may be, shall be
responsible for the amount by which actual Costs exceed the estimated Costs
and shall not be entitled to reimbursement for such excess Costs from the
Subsidiary, the Joint Venture or the other Party, unless otherwise agreed by
the Steering Committee. Such Project Implementation services and any
dewatering and/or treatment facilities constructed pursuant thereto shall be
accepted by the Subsidiary pursuant to acceptance tests agreed upon among the
applicable Party, the Steering Committee and the Subsidiary (the "Acceptance
Tests"), which Acceptance Tests shall be sufficient for the Subsidiary to
meet any applicable requirements established by the applicable Municipality in
connection with the Municipal Sludge Project and/or any agreed upon regulatory
permit conditions required for the operation of the facility. In the event
that the Acceptance Tests in such agreements are not met, such CTI Company or
such AWT Company, as the case may be, shall, subject to such terms and
conditions as shall be mutually agreed upon among the Parties, the Steering
Committee and the Subsidiary, continue to provide such Project Implementation
Services until the Acceptance Tests are met. In the event that the Acceptance
Tests have been met, such CTI Company or such AWT Company, as the case may be,
shall have no further liability to the Subsidiary, the Joint Venture or the
other Party with respect to the provision of such Project Implementation
Services or the operation of the facilities.
D. CTI License Agreement. For each Subsidiary formed by the
Joint Venture for the purposes of pursuing a Municipal Sludge Project, CTI
shall, where appropriate, enter into a license agreement (the "License
Agreement") with each Subsidiary at no cost to such Subsidiary pursuant to
which CTI, as licensor, shall license to each Subsidiary, as Licensee, so much
of the Chemfix Intellectual Property as shall be necessary or appropriate for
such Subsidiary to conduct its intended business purposes. The License
Agreement shall contain such terms and conditions as CTI and the Steering
Committee shall agree upon from time to time. However, unless not necessary
or appropriate for a given Municipal Sludge Project, the License Agreement
shall (i) grant the Subsidiary rights to use the Chemfix Intellectual Property
for the purposes of the Municipal Sludge Project with the applicable
Municipality, subject, if applicable, to those agreements identified on
Schedule 4D to this Agreement and licenses granted to other Subsidiaries; (ii)
provide that the rights of the Subsidiary to use the Chemfix Intellectual
Property shall be for the term of the agreement between the Subsidiary and the
applicable Municipality and shall survive the termination of the Joint Venture
or the expiration or termination of this Agreement for any reason; and (iii)
include representations by the CTI Companies that they own or have the right
to license the Chemfix Intellectual Property; and (iv) provide that the
Subsidiary shall be indemnified by CTI against the Chemfix Patents and
Trademarks infringing the proprietary rights of others.
E. AWT License Agreements. In the event that any of the AWT
Companies own as of the date of this Agreement any proprietary information or
intellectual property which would be useful to any Subsidiary for the purposes
of conducting its intended business purposes, the AWT Companies shall
contribute and/or license such proprietary information or intellectual
property to such Subsidiary on substantially the same terms and conditions as
the License Agreement; provided, however, that, under appropriate
circumstances, the applicable AWT company may charge the Subsidiary a license
fee which reasonably reflects the fair market value of such proprietary
information or intellectual property or reasonably reflects an allocable
portion of the Cost of the development of such proprietary information or
intellectual property.
F. Confidentiality Agreement. Where appropriate, each
Subsidiary shall enter into a confidentiality, non-disclosure and/or
non-competition agreement (a "Confidentiality Agreement") with any party which
provides services to such Subsidiary (including, without being limited to, any
AWT Company or any CTI Company) on such terms and conditions as the Steering
Committee, the Subsidiary, AWT, CTI and such other party shall mutually agree
upon. It is the intention of the Parties that any such Confidentiality
Agreements shall provide, at a minimum, that such other party shall not use
confidential and proprietary information learned from the Subsidiary, AWT or
CTI, as the case may be, to compete against the Subsidiary, AWT or CTI, as the
case may be.
G. Reagent Supply. CTI shall have the right to identify and
select the suppliers of reagents used by the Joint Venture or any Subsidiary
in the treatment of Municipal Sludge using Chemical Fixation Technology and to
procure or arrange for the procurement of such reagents at competitive prices
from such suppliers on behalf of the Joint Venture or the Subsidiary;
provided, further, that the price to the Joint Venture or the Subsidiary, as
the case may be, of such reagents shall not include, directly or indirectly,
any profit or overhead of CTI.
H. Additional Services. The AWT Companies may provide
additional services to the Joint Venture or any Subsidiary, including, without
being limited to, the following:
1. Technical analyses needed to support specific permit
applications and associated regulatory agency mandated environmental studies;
2. Engineering and design of processing facilities related
to the total project concept proposed to a Municipal Sludge generator;
3. Construction management;
4. Equipment procurement;
5. Studies needed to assess the applicability of the Chemfix
Process or the utilization of the end product;
6. Overall program management; and
7. Facility operation and maintenance.
The CTI Companies may provide additional services to the Joint Venture or any
Subsidiaries, including, without being limited to, the following:
1. Technical review of the Chemfix Process applicability;
2. Laboratory analyses of Municipal Sludge, septage, or
other liquid non-hazardous wastes;
3. Equipment procurement;
4. Facility operation and maintenance;
5. Engineering and design of processing facilities related
to the total project concept proposed to a Municipal Sludge Generator; and
6. Studies needed to assess the applicability of the Chemfix
Process or the utilization of the end product.
Unless otherwise required by the applicable Party at the time
of the agreement to provide such additional services, all additional services
provided by the Parties to the Subsidiaries shall be provided at the lesser of
Cost or estimated Cost.
I. Liabilities to Third Parties. Neither the Joint Venture
nor the Subsidiary shall assume any liability to third parties in connection
with the sale or other disposition of the end product resulting from the
treatment of Municipal Sludge utilizing Chemical Fixation Technology without
the prior approval of the Steering Committee of the Joint Venture.
SECTION 7: AGRICULTURAL MATERIAL
A. NEC Option. National Environmental Controls, Inc.
("NEC") shall have the exclusive right to purchase for agricultural use any or
all of the treated Municipal Sludge produced by the Joint Venture or any
Subsidiary that has not been contractually committed for an end use as
bulkfill, strip mine reclamation, land reclamation, erosion control, or
landfill cover material on terms and conditions not materially different than
the option CTI granted to NEC pursuant to a Naturite Purchase Option Agreement
dated November 30, 1988, a copy of which has been provided to AWT as of the
date of this Agreement. (Pursuant to such agreement, the Joint Venture or the
Subsidiary, as the case may be, will be entitled to the greater of one third
(1/3) of the net profits realized by NEC in connection with the treated
Municipal Sludge purchased by NEC or one dollar ($1.00) per ton.)
B. Special Services. The applicable Subsidiary shall be
obligated to perform such additional treatment procedures and services as
shall be reasonably required by NEC in order to meet the reasonable
agricultural material requirements of NEC, provided that neither the Joint
Venture nor the Subsidiary shall incur any additional costs or obligations
which are not reimbursed or assumed by CTI or NEC.
C. Right to Assign. NEC shall have the right to assign the
rights and options set forth in this Section 7 to a wholly owned subsidiary of
NEC without the prior consent of AWT, the other AWT Companies, the Joint
Venture or any of the Subsidiaries, provided that NEC shall have provided AWT
with prior written notice of such assignment.
D. Indemnification. CTI shall indemnify the AWT Companies,
the Joint Venture or the Subsidiaries, as the case may be, for any losses,
liabilities, claims, damages, including reasonable attorneys' fees and costs,
amounts paid in fines or settlement, suffered, paid or otherwise incurred by
the Joint Venture or Subsidiary, as the case may be, arising out of the option
granted to NEC pursuant to this Section 7, unless such action is based on the
willful misconduct or gross negligence of the Subsidiary or AWT.
E. Certain Transfers. The Joint Venture and/or any of the
Subsidiaries shall not utilize or sell, give or otherwise transfer treated
Municipal Sludge to any third party which intends to utilize treated Municipal
Sludge as agricultural material except as provided herein.
SECTION 8: NEW TECHNOLOGY
A. Joint Venture New Intellectual Property. In the event
that the Joint Venture, any Subsidiary or any employees thereof conceive of
and/or develop any new patents, copyrights, trade secrets, processes,
discoveries, inventions or other forms of proprietary know-how (collectively
"Joint Venture New Intellectual Property"), all ownership rights in such Joint
Venture New Intellectual Property shall belong to the Joint Venture or the
Subsidiary, as the case may be, it being understood and agreed that it is the
intention of the Parties that each Party shall have an equal interest in the
Joint Venture New Intellectual Property through their equal respective
interests in the Joint Venture or the Subsidiary, as the case may be. The
Joint Venture or any Subsidiary, as the case may be, shall, upon request,
grant to the Joint Venture, other Subsidiaries and each Party a non-exclusive,
free, perpetual license to use such Joint Venture New Intellectual Property.
B. Development of Joint Venture New Intellectual Property.
In the event that the Joint Venture, any Subsidiary or any employees thereof
conceive of any Joint Venture New Intellectual Property but the Joint Venture
or Subsidiary, as the case may be, does not choose to invest in the costs of
developing and/or patenting such Joint Venture New Intellectual Property, then
such Joint Venture or Subsidiary shall, upon request, assign their rights in
such Joint Venture New Intellectual Property to either or both of the Parties
at no cost.
C. Party New Intellectual Property. In the event that
either Party conceives of and/or develops patents, copyrights, trade secrets,
processes, discoveries, inventions or other proprietary know-how, singly or
jointly with third parties, whether pursuant to a contract or subcontract with
any Subsidiary or otherwise, (collectively "Party New Intellectual Property"),
such Party New Intellectual Property shall belong to such Party. In the event
that any portion of such Party New Intellectual Property would be useful to
the Joint Venture or any Subsidiary, such Party shall, to the extent and on
such contractual terms as it is legally able, license such Party New
Intellectual Property to the Joint Venture or such Subsidiary on substantially
the same terms and conditions as the License Agreement; provided, however,
that, under appropriate circumstances, the applicable AWT Company or CTI
Company, as the case may be, may charge the Subsidiary a license fee which
reasonably reflects the fair market value of such Party New Intellectual
Property.
D. Certain Actions. Neither Party shall take any action
which would detract from the ability of the Joint Venture, any Subsidiary or
the other Party, as the case may be, to patent any Joint Venture New
Intellectual Property or Party New Intellectual Property.
SECTION 9: PERMITTING
Unless any CTI Company or AWT Company is already a permittee
for a specific Municipal Sludge Project or is in the process of securing
specific permits (in which case such entity will use its best efforts to
transfer the permit to the Subsidiary at no cost), the Subsidiary will obtain
all necessary permits in its own name (which shall become an asset of that
Subsidiary) with the Parties contributing all existing information reasonably
necessary to obtain permits at no cost to that Subsidiary; provided, however,
that AWT or CTI, as the case may be, will be compensated for any unusual costs
agreed upon by the Steering Committee. It is further understood by the
Parties that should additional costs be incurred in conducting legal research
and technical studies and analyses required by state and/or Federal regulatory
agencies, such costs would be reimbursed through Municipal Sludge Project
processing fees.
SECTION 10: FINANCIAL ARRANGEMENTS
A. Bonding Arrangements. The Parties agree that a material
part of this Agreement is the commitment by AWT and the other AWT Companies to
jointly present with CTI specific Municipal Sludge Project opportunities to
AWT's current bonding company, Reliance Insurance Group ("Reliance") or any
successor bonding company. AWT agrees that it and the other AWT Companies
shall use their best efforts to obtain bonding facilities and/or bid and
performance bonds for the Joint Venture and/or any Subsidiary from Reliance
and other bonding companies. In the event Reliance approves a bond for the
Joint Venture or a Subsidiary, AWT and the AWT Companies agree to use so much
of their bonding capacity as is then available under their existing bonding
facilities with Reliance for bonds for the Joint Venture and any Subsidiaries,
which capacity AWT shall determine in its sole discretion. The Parties agree
that the AWT Companies shall be responsible for providing such security,
letters of credit or other credit enhancements as Reliance or any other
bonding company shall require for the issuance of a bond. The AWT Companies
shall contribute the services of their employees in procuring bonding
commitments at no cost to the Joint Venture or the Subsidiaries. However, the
AWT Companies shall charge the Joint Venture or any Subsidiary, as the case
may be, for the direct, non-contingent costs of obtaining such bonds, such as
"points", interest rate charges and the pro rata cost of any letter of credit
usage required to support the bond or the bonding facility.
B. Other Financial Arrangements. With respect to the
capital and financing requirements of the Joint Venture or any Subsidiary, the
AWT Companies shall use their best efforts to secure third-party financing or
financing commitments for the Joint Venture and/or the Subsidiaries.
Financing requirements and arrangements for each Subsidiary shall be
determined by the Steering Committee. Such financing arrangements shall be
subject to prevailing market conditions at the time of financing. The AWT
Companies shall contribute the services of their employees in procuring
financing at no cost to the Joint Venture or the Subsidiaries, unless the AWT
Companies incur unusual or extraordinary expenses in providing such services.
It is the intention of the Parties that, to the extent possible, the Joint
Venture and any Subsidiaries shall be financed on the basis of their own
creditworthiness and without requiring guarantees or credit enhancements by
either Party. However, it is also the intention of the Parties that, in the
event that financing cannot be obtained on the basis of the creditworthiness
of the Joint Venture or the Subsidiary, as the case may be, and the guarantees
or credit enhancements of the Parties are required, such guarantees and credit
enhancements shall be provided, in the first instance, by the AWT Companies
and that the CTI Companies shall not provide guarantees or credit enhancements
unless the guarantees and credit enhancements of the AWT Companies alone are
determined to be insufficient. Notwithstanding the foregoing, nothing in this
Subsection 10B shall be deemed to constitute a commitment by the AWT Companies
to provide guarantees or credit enhancements to the Joint Venture or any
Subsidiary, and the AWT Companies shall only provide such guarantees or credit
enhancements on a best efforts basis.
C. Party Financing Arrangements. In the event that either
Party agrees to loan funds to any Subsidiary, such Party shall be entitled to
repayment over the term of the applicable Municipal Sludge Project of the
principal amount of such funds plus interest on such funds at the prime rate
of such Party's primary lender plus one percent. The payment of such
principal and interest shall be deemed to be expenses of the Subsidiary for
the purposes of determining whether there are any net profits of the
Subsidiary available to be distributed to the Parties.
[THIS SPACE HAS BEEN INTENTIONALLY LEFT BLANK]
SECTION 11: REPRESENTATIONS AND WARRANTIES
A. CTI Representations and Warranties. CTI represents and
warrants, on behalf of itself and the other CTI Companies, knowing and
intending that AWT is relying hereon in entering into this Agreement, as
follows:
(1) Due Organization; Good Standing. CTI is a corporation
duly organized, validly existing and in good standing under the laws of the
State of Delaware; is duly qualified and in good standing in all jurisdictions
in which its ownership of property and conduct of its business requires such
qualification; and has full corporate power to carry on its business as now
conducted and to own and operate the properties and assets now owned by it.
(2) Corporate Authorization. The execution of this Agreement
by CTI, and the transfers, conveyances, assignments, deliveries and other
agreements contemplated hereby, have been duly authorized by its Board of
Directors and no further corporate action is necessary on the part of CTI to
make this Agreement valid and binding upon it in accordance with its terms.
(3) No Violations. The execution, delivery and performance by
CTI of this Agreement is not inconsistent with and will not violate its
Certificate of Incorporation, by-laws or other governing documents; does not
contravene any law, governmental rule, regulation or order applicable to the
CTI Companies; does not and will not contravene any provision of, result in
any loss of benefits under, constitute a default under, or with the lapse of
time or action by a third party, constitute a default under, any
indenture,mortgage, lease, contract or other instrument or order, writ,
injunction or decree to which any of the CTI Companies is a party or by which
they or any of their assets are bound; and will not result in the imposition
of a lien upon the assets of any of the CTI Companies pursuant to the terms of
any agreement or instrument to which any of the CTI Companies is a party or by
which they are bound.
(4) Stock Options. The issuance of the Cash Option, Vesting
Options and Earn In Options described in Section 13 hereof does not currently
violate any federal or state law applicable to the issuance of such securities
including, without limitation, the Securities Act of 1933 and the rules and
regulations promulgated thereunder. CTI presently has a sufficient number of
authorized but unissued common shares to be able to fulfill its obligations
under such Cash Option, Vesting Options and Earn In Options. All shares of
CTI common stock issuable upon the exercise of such options shall be duly
authorized.
(5) Litigation. Except as set forth in CTI's most recent Form
10-K for the fiscal year ended August 31, 1988, there is no claim, suit,
action or proceeding pending or, to the knowledge of CTI, overtly threatened
against or affecting the CTI Companies which can reasonably be expected to
affect materially and adversely the business, properties or financial
condition of the CTI Companies taken as a whole. There is no outstanding
order, writ, injunction or decree or, to the knowledge of CTI, any claim or
investigation of any court, governmental agency or arbitration tribunal
materially and adversely affecting or which can reasonably be expected to
materially and adversely affect the CTI Companies, or their respective
properties, assets or business, franchises, licenses or permits under which
they operate.
(6) Governmental Approvals. No governmental consent,
approval, hearing, filing, registration or other action, including the passage
of time, is necessary for the execution and delivery of this Agreement or
consummation of the transactions contemplated hereby except the permits and
authorizations required for particular Municipal Sludge Projects.
(7) Patents, Copyrights, Trademarks, Etc.
(a) Schedule 11A(7) contains a list or description of: (i)
all United States patents, United States patent applications, copyright
registrations, all United States, state and foreign trade names, trademarks
and service marks owned, assigned to or used by the CTI Companies for the
Chemfix Process in treating Municipal Sludge showing in each case the
registration date and number, if any; and (ii) all material licenses,
distributorship agreements, franchise agreements or other agreements
(excluding any financing arrangements) which grant or limit the right to
use any asset, property or right of the character described in the
preceding clause to which any CTI Company is a party.
(b) Except as otherwise provided in the agreements identified
in Schedule 11A(7), the CTI Companies are, singly or collectively, the owners
of all right, title and interest in and to the Chemfix Intellectual Property;
there is no proceeding, pending or overtly threatened, challenging the CTI's
Companies' ownership of any of the Chemfix Intellectual Property; CTI has no
knowledge of infringing use of any of the Chemfix(Trademark) Patents and
Trademarks which would render the Chemfix(Trademark) Patents or Trademarks
unenforceable; CTI has no knowledge or reason to know of any facts which would
invalidate any of the Chemfix(Trademark) Patents or Trademarks; CTI has not
entered into any contract, agreement or arrangement, whether oral or written,
which would compete or be in conflict, in whole or in part, with any of the
warranties and representations in this Subsection or any of the rights claimed
herein. To the best of CTI's knowledge, none of the CTI Companies'
operations, activities, products, equipment, machinery or processes related to
the Chemfix Intellectual Property infringe the patents, trademarks, service
marks, trade names, copyrights or other property rights of others.
B. AWT Representations and Warranties. AWT represents and
warrants, on behalf of itself and the other AWT Companies, knowing and
intending that CTI is relying hereon in entering into this Agreement, that:
(1) Due Organization; Good Standing. AWT is a corporation
duly organized, validly existing and in good standing under the laws of the
State of Delaware; is duly qualified and in good standing in all jurisdictions
in which its ownership of property and conduct of its business requires such
qualification; and has full corporate power to carry on its business as now
conducted and to own and operate the properties and assets now owned by it.
(2) Corporate Authorization. The execution of this Agreement
by AWT, and the transfers, conveyances, assignments, deliveries and other
agreements contemplated hereby, have been duly authorized by its Board of
Directors and no further corporate action is necessary on the part of AWT to
make this Agreement valid and binding upon it in accordance with its terms.
(3) No Violations. The execution, delivery and performance by
AWT of this Agreement is not inconsistent with and will not violate its
Certificate of Incorporation, by-laws or other governing documents; does not
contravene any law, governmental rule, regulation or order applicable to the
AWT Companies; does not and will not contravene any provision of, result in
any loss of benefits under, constitute a default under, or with the lapse of
time or action by a third party, constitute a default under, any indenture,
mortgage, lease, contract or other instrument or order, writ, injunction or
decree to which any of the AWT Companies is a party or by which they or any of
their assets are bound; and will not result in the imposition of a lien upon
the assets of any of the AWT Companies pursuant to the terms of any agreement
or instrument to which any of the AWT Companies is a party or by which they
are bound.
(4) Litigation. There is no claim, suit, action or
proceeding pending or, to the knowledge of AWT, overtly threatened against or
affecting the AWT Companies which can reasonably be expected to affect
materially and adversely the business, properties or financial conditions of
the AWT Companies taken as a whole. There is no outstanding order, writ,
injunction or decree or, to the knowledge of AWT, any claim or investigation
of any court, governmental agency or arbitration tribunal materially and
adversely affecting or which can reasonably be expected to materially and
adversely affect the AWT Companies, or their respective properties, assets or
business taken as a whole, franchises, licenses or permits under which they
operate.
(5) Governmental Approvals. No governmental consent,
approval, hearing, filing, registration or other action, including the passage
of time, is necessary for the execution and delivery of this Agreement or
consummation of the transactions contemplated hereby.
(6) AWT Intellectual Property. To the best of the AWT
Companies' knowledge, the AWT Companies do not have any patents or patent
applications containing claims which embody Chemical Fixation Technology.
SECTION 12: CONFIDENTIAL AND PROPRIETARY INFORMATION
A. Provision of Confidential Information. In furtherance of
this Joint Venture, it is contemplated that the AWT Companies and the CTI
Companies shall disclose to each other, to the Joint Venture and to
Subsidiaries of the Joint Venture certain information which is ordinarily
kept confidential by the respective Parties. As a condition to furnishing
such information, AWT and CTI are each requiring that AWT, the other AWT
Companies, CTI, the other CTI Companies, the Joint Venture, and any
Subsidiaries agree, as set forth herein, to treat confidentially such
information which the AWT Companies and the CTI Companies or any of their
Representatives (as hereinafter defined) furnishes to the Joint Venture,
any Subsidiary and/or the other party ("Confidential Information").
B. Inclusions. The term "Confidential Information" shall
include, without limitation:
(a) Records and data concerning the assets of the respective
Parties, including without limitation, patents, patent
applications, copyrights, trademarks, trade names,
licenses, technology, know how and other proprietary
rights; and
(b) Information concerning the business of the Parties
including but not limited to market studies, contracts,
customer lists and employee compensation; and
(c) Any Chemfix Intellectual Property.
C. Exceptions. For purposes of this Joint Venture, and
notwithstanding the fact that certain information may be considered by the
respective Parties as confidential and subject to the terms hereof, the term
"Confidential Information" does not include information:
(i) Which, on the date of this Agreement, is generally known
to the public; or
(ii) Which is subsequently published by someone having a right
to do so and which publication does not violate or
breach, and the acquisition of such information was not
derived from a violation or breach of, any
confidentiality or proprietary agreement, or
(iii) Which is received from someone, not referred to in this
Agreement, who is not under any obligation to preserve
its secrecy and who is lawfully in possession of such
information from the date of its receipt; or
(iv) The release of which has been authorized in writing by a
Representative of the Party, having power and authority
to authorize the release, from the date of such
authorization; or
(v) Which is or becomes publicly known without the wrongful
act or breach of this Agreement by either Party or their
Representatives.
For purposes of this Agreement, specific information disclosed shall not be
deemed to be in the public domain or in the prior possession of the AWT
Companies or the CTI Companies merely because it is embraced by more general
information in the public domain or by more general information in the prior
possession of the AWT Companies or the CTI Companies.
D. Need to Know. The AWT Companies and the CTI Companies
agree to transmit the Confidential Information only to their directors,
officers, employees, independent contractors, agents, including, without
limitation, legal counsel (collectively "Representatives") and third parties
who have a good faith need to know such information for the purpose of
carrying out the objectives of this Agreement and who shall be advised of and
be bound by this confidentiality provision. Either Party may request that any
Representative of the other Party agree, in which event such other party shall
cause such Representative to agree, in writing, to be bound by the provisions
of this Section.
E. Permitted Purposes. Confidential Information which is
gathered, disclosed, exchanged or otherwise contributed to the Joint
Venture by the AWT Companies or the CTI Companies during the term of this
Agreement shall be kept confidential and shall not be utilized by the Joint
Venture, by any Subsidiary or by the non-contributing Party except for the
purposes of the Joint Venture. The AWT Companies and the CTI Companies
agree that Confidential Information will not be used in any way for the
benefit of any other person, firm, corporation, association, partnership or
entity other than the Joint Venture or the Subsidiaries under any
circumstances; provided, however, that nothing contained herein shall
prohibit or otherwise hinder a contributing Party from using and/or
disclosing and/or licensing Confidential Information it contributes to the
Joint Venture in the contributing Party's business or any other business
opportunity or venture in which it has been, is or may be involved.
F. Return of Confidential Information. All Confidential
Information shall be returned to its owner or destroyed in a manner
satisfactory to the owner at the owner's direction upon the latter of either:
(i) the conclusion of those matters for which the data was exchanged; or (ii)
the termination of the Joint Venture.
G. Survival of Obligations. The obligations assumed under
this Section shall survive the termination of the Joint Venture.
H. Injunctive Relief. It is understood and agreed that the
information contained in the Confidential Information constitutes a valuable
asset of the CTI Companies or the AWT Companies, as the case may be, and the
unauthorized disclosure and/or improper use of Confidential Information would
cause irreparable damage and harm to the Party contributing such
Confidential Information. Each Party agrees to indemnify and hold harmless
the other party for any losses, liabilities, costs and expenses (including
attorneys' fees incurred with regard to any of the foregoing or with regard
to these obligations) it may incur directly or indirectly by breach of this
Section. Accordingly, it is understood and agreed that money damages would
not be sufficient remedy for any breach of this Section by the AWT
Companies, the CTI Companies or their respective Representatives and that a
non-breaching Party shall be entitled to an injunction restraining a
breaching Party or any of its Representatives from such breach. Such
remedy shall not be deemed to be the exclusive remedy for breach of this
Section, but shall be in addition to all other remedies available at law or
equity to the non-breaching Party. If a non-breaching Party fails or
delays exercising any of its rights hereunder, such failure or delay shall
not operate as a waiver of such right, and any single or partial exercise
of such rights shall not preclude a non-breaching Party from any other or
further exercise of such rights or of any other rights hereunder.
SECTION 13: STOCK OPTIONS
A. Cash Option. CTI grants to AWT an option (the "Cash
Option") to purchase up to 100,000 shares of CTI unissued and unregistered
common stock at a price per share of $4.75 pursuant to the terms of the Option
Agreement attached hereto as Appendix A (the "Option Agreement"). The Cash
Option may be exercised in whole or in part in units of not less than 10,000
shares at any time and from time to time until 11:59 p.m. prevailing Eastern
time on the date five (5) years after the date of this Agreement.
B. Vesting Options. CTI grants to AWT an irrevocable option
to purchase 350,000 shares of CTI unissued and unregistered common stock first
exercisable on those dates as indicated in the table set forth below (the
"Vesting Options") for a purchase price of $4.75 per share unless terminated
as provided below.
First Exercise Date Number of Shares
------------------- ----------------
1st anniversary of Agreement Date 50,000
2nd anniversary of Agreement Date 50,000
3rd anniversary of Agreement Date 75,000
4th anniversary of Agreement Date 75,000
5th anniversary of Agreement Date 100,000
The Vesting Options shall be granted pursuant to the terms of the Option
Agreement applicable to the Vesting Options. The Vesting Options may be
exercised in whole or in part in units of not less than 10,000 shares at any
time and from time to time after the applicable anniversary of the date of
this Agreement as set forth above until 11:59 p.m. prevailing Eastern time on
the date five (5) years after the date of this Agreement; provided, however,
that the Vesting Option for 100,000 shares which first becomes exercisable on
the date five (5) years after the date of this Agreement may be exercised
until 11:59 p.m. prevailing Eastern time on the date five (5) years and thirty
(30) days after the date of this Agreement. The exercise price and period for
AWT's or its Assignee's exercise of all Vesting Options shall change upon the
termination of this Agreement as follows:
All Vesting Options not exercisable on the date of termination
shall become exercisable upon termination of this Agreement.
These Vesting Options shall then have an exercise price
equal to 90% of the then existing market price of CTI stock
(herein defined) and have a term of exercise of 25 days from
the time notice is sent by CTI to the holder thereof.
Market price is defined as the average of the closing bid
and asked price of CTI as determined by the NASDAQ on the
date of termination.
C. Earn in Options. In addition to the Cash Option
described in Subsection 13A and the Vesting Option described in Subsection
13B, CTI shall grant AWT additional options (the "Earn In Options") pursuant
to the terms of the Option Agreement to purchase up to that number of shares
which, together with the shares issued or issuable to AWT and its Assignees
pursuant to the Cash Option, the Vesting Options and any Earn In Options
already issued at such time, would enable AWT and its Assignees to hold, after
the issuance of the shares issuable pursuant to such options, up to ten
percent (10%) of the Voting Shares of CTI (the "Earn In Maximum"); provided,
however, that the issuance of such Earn In Options are contingent upon AWT
meeting the performance criteria described in Subsection 13D. Earn In Options
shall be granted within one hundred and twenty (120) days following the end of
each fiscal year of CTI, commencing with the fiscal year ending August 31,
1990 and ending with the fiscal year ending August 31, 1994. No later than
ninety (90) days after the end of each such fiscal year, CTI shall determine
the total number of Earn In Options earned by AWT since the commencement of
the Initial Term (the "Aggregate Earn In Options") and shall grant to AWT that
number of whole Earn In Options, if any, (the "Additional Earn In Options")
that equals the difference between the Aggregate Earn In Options and the
number of Earn In Options previously granted to AWT; provided, however, that
in no event shall the number of CTI common shares issuable or held upon the
exercise of the Additional Earn In Options, together with the number of CTI
common shares issuable upon the exercise of all Earn In Options previously
granted to AWT and its Assignees and the number of CTI common shares issuable
or held by AWT and its Assignees pursuant to the exercise of the Cash Option
and Vesting Options, exceed the Earn In Maximum. Each Earn In Option shall
cover 1,000 CTI common shares and may be exercised at any time during a
five-year period following the date of issuance ending at 11:59 P.M.,
prevailing Eastern time, on the date prior to the fifth anniversary of the
date of issuance. CTI's obligation to grant AWT Earn In Options will
terminate with respect to any Earn In Options not already earned and granted
upon termination of this Agreement.
D. Performance Criteria for Earn In Options. The price per
share for the shares issuable upon the exercise of each Earn In Option for any
fiscal year shall be equal to the average closing market price of CTI common
stock for each day of the last calendar month of CTI's fiscal year and each
day of the first calendar month of CTI's new fiscal year. AWT shall be
granted on a prorated basis an option to purchase 1,000 shares of CTI Common
Stock for each $22,500 of (a) that portion of the aggregate Net Profits, if
any, of the Joint Venture and all Subsidiaries allocable to CTI determined at
the end of each fiscal year, to the extent that such Net Profits have been
recognized by CTI, plus (b) a percentage of the revenues, if any, which any
CTI Companies earn during the applicable fiscal year pursuant to any agreement
by such CTI Company to provide analytical, sampling or testing services
directly to any AWT Companies during the Initial Term or any Extension Term of
this Agreement (an "Analytical Services Agreement"), which percentage shall be
agreed upon by CTI and AWT prior to the commencement of such Analytical
Services Agreement and shall be an estimate of the Net Profits which the CTI
Company is expected to earn under such Analytical Services Agreement, plus (c)
the Net Profits of any CTI Companies earned during the applicable fiscal year
pursuant to any agreements by any CTI Companies to provide services directly
to any AWT Companies, including, without being limited to, remediation
services or hazardous waste treatment services. If either Party shall
request, the Net profits of the Joint Venture and/or any Subsidiary shall be
audited and certified to by a certified public accounting firm selected by the
Steering Committee.
E. Restrictions. Notwithstanding anything in this Agreement
to the contrary, at no time from the date of this Agreement until the
latter of (a) the expiration or termination of this Agreement or (b) the
exercise or issuance of all Options issued pursuant to this Agreement: (i)
shall AWT or any of the AWT Companies alone or in combination own, acquire
or control by any means, including without being limited to open market
purchases, legally or equitably, directly or indirectly, such aggregate
number of CTI common shares as equals more than fifteen percent (15%) of
the issued and outstanding common shares of CTI, excluding from the
calculation of such fifteen percent (15%) any shares of the common stock of
CTI issued pursuant to the exercise of the Cash Option, the Vesting Options
or any of the Earn In Options; (ii) shall AWT, any of the AWT Companies or
any Assignees alone or in combination own, acquire or control by any means,
including without being limited to open market purchases, legally or
equitably, directly or indirectly, such aggregate number of CTI common
shares as equal more than twenty-five percent (25%) of the issued and
outstanding common shares of CTI; (iii) shall AWT or any of the AWT
Companies alone or in combination own, acquire or control by any means,
including without being limited to open market purchases, legally or
equitably, directly or indirectly, more than five percent (5%) of the
shares of capital stock, options, warrants or convertible securities of
National Environmental Controls, Inc.; and (iv) shall AWT or any of the
other AWT Companies or any Assignee alone or in combination participate,
directly or indirectly, in any acquisition, take-over or other effort to
secure control of the Board of Directors of CTI or any of the CTI Companies
by any means whatsoever without the prior written consent of CTI; provided,
however, that AWT, the other AWT Companies or any Assignee may not tender
shares of CTI stock in a tender offer without offering a right of first
refusal to CTI as set forth in the Option Agreement.
For the purposes of this Subsection, financial institutions
which own shares of common stock of AWT shall not be deemed to be the legal or
beneficial owners of shares of common stock of CTI by virtue of their
ownership of such shares of common stock of AWT; provided, however, that any
such financial institutions shall be deemed to be the legal and beneficial
owners of any Cash Options, Vesting Options or Earn In Options or Option
Shares assigned to such financial institutions by AWT or any Assignee, any
shares of common stock issued pursuant to such Options or any shares of common
stock issued pursuant to such Options sold or otherwise transferred to such
financial institutions by AWT or any Assignee.
F. Injunctive Relief. AWT and the AWT Companies acknowledge
and agree that, in the event of a breach or a threatened breach of the
provisions of Subsection 13E by AWT, the other AWT Companies or any Assignee,
monetary damages would be an inadequate remedy at law and that both
preliminary and permanent equitable injunctive relief is necessary to protect
the rights of CTI. CTI will have no obligation to issue or register transfers
of Options or stock made in contravention of Subsection 13E.
G. Survival of Obligations. The provisions of Subsection
13E shall survive the expiration or termination of this Agreement until all
Options have been exercised or expired.
SECTION 14: JOINT VENTURE BOOKS OF ACCOUNT, AUDITS
AND ACCOUNTING
A. Responsibility for Records. The Steering Committee shall
have the primary responsibility for maintaining the official business records
and books of account of the Joint Venture, including the management,
collection and disbursement of funds, the maintenance of bank accounts in the
name of the Joint Venture, and the preparation and filing of any tax and other
business returns and statements. All such records and books shall be subject
to inspection by either Party during regular business hours.
B. Audits. Appropriate audits shall be made by independent
certified public accountants engaged by the Steering Committee at the
termination of this Agreement, or at such other times as the Steering
Committee may direct.
C. Right of Inspection. Each party and its representatives
shall have the right at reasonable times and intervals to have access to, and
to inspect and copy, any of the books of account or other records maintained
by the other Party which relate to services or materials which such Party has
contributed or is contributing to the Joint Venture or any Subsidiary,
including, without being limited to, any books or records which would be
useful in verifying whether services or materials which were to be contributed
at Cost or estimated Cost have in fact been contributed at Cost or estimated
Cost.
D. Presentation of Records. Records of the Joint Venture
which are required to be kept subsequent to termination of this Agreement
shall be kept at such place or places as shall be determined by the Steering
Committee.
SECTION 15: COMPLIANCE WITH LAW
Each Party represents and warrants to the other that any contract
made by the Joint Venture or a Subsidiary with a Municipality or other third
party shall be obtained without violation of any law.
SECTION 16: TERM OF AGREEMENT AND TERMINATION
A. Term. This Agreement shall continue in full force and
effect to the end of the Initial Term and automatically thereafter for each
Extension Term unless earlier terminated by either Party in accordance with
Subsection B of this Section.
B. Termination. This Agreement may be terminated by either
Party or CTI alone in the case of Subsection B3 below upon thirty (30) days
notice to the other Party solely for the reasons set forth below:
1. By mutual written agreement of the Parties.
2. By the non-breaching Party, upon breach of any material
term, covenant or condition of this Agreement, in the event the breaching
Party has been given written notice of the alleged breach by the non-breaching
Party and such breach has not been cured thirty (30) days after receipt of
such notice.
3. (a) By CTI only, upon the failure of the CTI Companies
to realize pre-tax Aggregate Net Profits from the Joint Venture and the
Subsidiaries as of the end of each fiscal year of the Joint Venture and the
Subsidiaries at least equal to those amounts set forth below:
DOLLAR
FISCAL YEAR ENDING AMOUNT
------------------ ------
1990 $ -0-
1991 2,500,000
1992 5,000,000
1993 7,500,000
1994 11,000,00
(b) Not later than ninety (90) days following the end of the
Joint Venture's fiscal year, CTI shall notify AWT in writing as to the pre-tax
Aggregate Net Profits for such fiscal year. AWT shall have ten (10) business
days following its receipt of such notice to notify CTI in writing that it
disputes such calculation (the "Dispute Notice"). If the Parties cannot
resolve their differences with respect to such calculation within thirty (30)
days following the receipt of the Dispute Notice, then the Parties shall
engage any accounting firm mutually agreeable to the Parties which is not then
engaged by either the CTI Companies or the AWT Companies (the "Neutral
Accountants") to resolve the dispute. The Parties shall direct the Neutral
Accountants to promptly render a decision as to the proper pre-tax Aggregate
Net Profits figure for the fiscal year in dispute, which decision shall be
binding upon the Parties. The Neutral Accountants shall be given reasonable
access to all of the books and records of the Joint Venture, the Subsidiaries
and CTI as deemed necessary by the Neutral Accountants in preparing their
decision. Unless otherwise agreed, the expenses of the Neutral Accountants
shall be borne by the Parties on an equal basis.
C. Effect of Termination. Upon termination of this
Agreement:
1. No further business of the Joint Venture will be
transacted other than winding up the Joint Venture's affairs, including, but
not limited to, the fulfillment of any existing contracts of the Joint
Venture, collection of any outstanding accounts and payment of any outstanding
liabilities.
2. Each Subsidiary shall continue in existence with all
appropriate powers and authority as may be necessary to complete the purpose
for which it was organized. Any and all agreements, including but not limited
to licenses, between CTI and the Subsidiary and/or between AWT and the
Subsidiary shall similarly continue in full force and effect notwithstanding
any termination of this Agreement or the Joint Venture.
3. If the Joint Venture owns the stock of or any other
interest in any Subsidiary, the Joint Venture shall transfer the stock of such
Subsidiary in such a manner as to provide each Party with equal value of the
stock of or other interest in such Subsidiaries, unless the Steering Committee
votes otherwise.
4. Any business entities other than the Subsidiaries formed
by the Joint Venture shall remain in the ownership of the Parties as set forth
in the Certificate of Incorporation, Partnership Agreement or other applicable
documents relating to the formation of that entity.
5. Any and all Municipal Sludge Projects which the Steering
Committee has voted to pursue prior to termination shall be pursued to
completion pursuant to the terms of this Agreement, including the formation of
an appropriate Subsidiary and licensing thereof.
6. Any assets remaining in the Joint Venture shall be
distributed to each Party on an equal basis or retained in joint ownership as
agreed between the Parties, unless otherwise mutually agreed upon by the
Parties.
D. Bankruptcy. The interests and obligations of a Bankrupt
party are of a personal and non-delegable nature and shall not be sold,
assigned or otherwise transferred by the Bankrupt Party as debtor in
possession and/or by any trustee appointed in any bankruptcy proceeding.
Notwithstanding this provision, however, in the event a court of competent
jurisdiction should hold that the Bankrupt Party as debtor in possession or a
trustee appointed in any bankruptcy proceeding may assume and assign the
Bankrupt Party's interest in the Joint Venture pursuant to a bona fide offer
of a third party in accordance with the provisions of the Bankruptcy Code,
then:
1. The Non-Bankrupt Party shall have a right of first
refusal to purchase and/or succeed to and/or assume as assignee all of the
right, title and interest of the Bankrupt Party in and to the Joint Venture
upon the same terms and conditions and for the same consideration, if any, as
the bona fide offer made by such third party. The Non-Bankrupt Party shall
exercise its right of first refusal, if at all, within ten (10) days of
receipt of written notice from the debtor in possession and/or trustee of any
such bona fide offer. Said notice shall set forth with particularity the
terms and conditions of such bona fide offer as well as a description of the
third party.
2. If the Non-Bankrupt Party does not exercise its right of
first refusal to purchase and/or succeed to and/or assume the rights of the
Bankrupt Party as set forth above, the Bankrupt Party as debtor in possession
or any trustee appointed in the bankruptcy proceeding may assume and assign
all of the right, title and interest of the Bankrupt Party in the Joint
Venture to a bona fide third party with the prior written consent of the
Non-Bankrupt Party. The Non-Bankrupt Party shall consent to the assumption
and assignment of the Bankrupt Party's interest to said third party provided
that the third party provides "adequate assurance" to the Non-Bankrupt Party
of such assignee's future performance under the Joint Venture, including,
without limitation, "adequate assurances" as that term is referred to in any
applicable provision of the Bankruptcy Code. This "adequate assurance" to be
provided to the Non-Bankrupt Party to assure the assignee's future performance
under the Joint Venture shall include, without limitation:
(a) a written demonstration that the assignee meets all
reasonable financial and technical criteria of the Non-Bankrupt Party as did
the Bankrupt Party and its business at the time of the execution of this Joint
Venture, including without limitation, the production of the most recently
audited financial statement of the assignee prepared by a certified public
accountant; and
(b) assurances in form acceptable to the Non-Bankrupt Party
as to all matters identified in any applicable provision of the Bankruptcy
Code.
SECTION 17: DISPUTES
A. Resolution of Disputes. In order to resolve disputes
between the Parties effectively, efficiently, and at the least cost and
inconvenience, the parties agree to resolve all disputes relating to or
arising out of this Agreement or its subject matter as set forth in this
Section.
B. Notice of Meeting. Notice of a demand for a meeting of
the Parties to discuss and settle a dispute(s) ("Notice of Meeting") may be
given by either Party. Such notice shall be in writing. The Notice of
Meeting shall set a date at least five (5) business days but no more than ten
(10) business days from the date of the Notice of Meeting on which the Parties
shall meet during normal business hours at the Joint Venture's offices in
Branchburg, New Jersey. If within five (5) days after the date of the meeting
the Parties have not resolved their dispute(s), then the Parties shall proceed
pursuant to Subsection C. Notwithstanding anything in this Section to the
contrary, in the event a Party suffers irreparable harm or injury, such party
shall have the ability to seek provisional remedies in any state or federal
court in New Jersey, including but not limited to injunctive relief and other
equitable remedies.
C. Act Governs. Any dispute not resolved pursuant to
Subsection B shall be resolved by means of alternative dispute resolution, as
provided in the New Jersey Alternative Procedure for Dispute Resolution Act,
N.J.S.A. 2A:23A-1 et seq. (the "Act"). The Parties expressly waive the right
to resolve all claims, disputes and issues arising out of or relating to this
Agreement by means of traditional litigation, including the right to appeal,
except as provided in the Act or in Subsection B.
D. Notice of Dispute. Notice of demand for resolution of a
dispute under the Act (a "Notice of Dispute") shall be given by either Party.
Such notice shall be in writing.
E. Selection of Umpire.
(a) Within fifteen (15) days after a Notice of Dispute is
given, each party shall select four (4) prospective umpires from among the
persons listed in paragraphs (i) through (iv) below. In addition to meeting
the requirements of paragraphs (i), (ii), (iii) or (iv) below, each
prospective umpire must also satisfy the requirements described in Subsection
E below. Prospective umpires are:
(i) any retired judge of the United States District Court for
the District of New Jersey;
(ii) any retired judge of the New Jersey Superior or Supreme
Court;
(iii) any attorney licensed to practice in the State of New
Jersey who has actually practiced law for more than fifteen (15)
years and has specialized in environmental litigation or contracts
dealing primarily with environmental issues; and
(iv) other persons with such qualifications upon which the
Parties agree.
(b) Within fifteen (15) days after each Party has selected
its prospective umpires, the Parties shall agree to one (1) umpire from among
the eight (8) prospective umpires to hear the dispute.
(c) In addition to the requirements described in Subsection E
above, each prospective umpire selected must:
(i) be free of any potential for bias or conflict of interest
with respect to either of the Parties, directly or indirectly, or by
virtue of any direct or indirect financial interest, family
relationship or close friendship; and
(ii) be in a position to immediately hear the dispute and
render resolution within the time specified in Subsection I below.
(d) If an umpire is not selected within the period of time
specified in Subsection E(a) or E(b) above, an umpire shall be selected within
fifteen (15) days by the Chief Judge of the United States District Court for
the District of New Jersey or, if the Chief Judge is unable or unwilling to
act, by the President of the New Jersey State Bar Association. Such
selection shall be in accordance with the requirements of Subsection E(a)
and E(c) above.
F. Proceeding. The proceeding for the alternative
resolution of a dispute (the "ADR Proceeding") shall be held at a location
within the State of New Jersey selected by the Umpire. The ADR Proceeding
shall commence no later than forty (40) days after the Notice of Dispute is
given.
G. Fees. All fees and expenses associated with the ADR
Proceeding shall be divided equally between the Parties; provided, however,
that each Party shall be responsible for its own attorneys' fees and
disbursements. The fees payable to the umpire shall be the usual hourly rate
of such umpire for consulting or dispute resolution services.
H. Provisional Relief. Where appropriate under applicable
New Jersey substantive and procedural law, the umpire shall have full and
complete authority to award provisional relief, whether on an ex parte
basis or otherwise, upon the commencement of an ADR Proceeding, in
accordance with the provisions of the Act.
I. Timing of Decision. The umpire shall render a decision
within a reasonable time, but in no event later than sixty (60) days after the
final oral testimony is taken or the final briefs are filed. Notwithstanding
the foregoing, any decision must be rendered within six (6) months from the
date of the Notice of Dispute.
J. Act Governs Proceedings. Except as otherwise provided in
this Agreement, the Act shall govern the procedures and methods for any ADR
Proceeding.
K. Counsels. In order to facilitate the expeditious
resolution of disputes, the Parties agree that no Party shall object to the
other Party being represented by counsel of its choice, whether or not such
counsel is admitted to practice law in New Jersey.
L. Extensions. If the Parties mutually agree in writing to
extend any deadline set forth in this Section, all other deadlines shall be
extended correspondingly.
SECTION 18: INDEMNITY
CTI and AWT shall each be responsible for and shall indemnify
and hold harmless the Joint Venture, any Subsidiary and the other Party
from and against such indemnitor Party's own grossly negligent or willfully
wrongful acts or omissions and for such indemnitor Party's acts and
omissions which are in breach of such indemnitor Party's representations,
warranties and/or obligations hereunder ("Obligations"). Neither Party
shall be liable to the Joint Venture or to the other Party for any loss or
damage arising out of any activities, not in breach of such Party's
Obligations unless caused by such Party's gross negligence or willful
misconduct. Except to the extent that a Party incurs loss or damage caused
by its gross negligence or willful misconduct, or for its acts and
omissions which are beyond the scope of its authority hereunder or which
are in breach of its Obligations, the Joint Venture shall, out of Joint
Venture assets (but not the assets of either Party), indemnify and hold the
Parties harmless from and against any personal loss or damage incurred by
them arising from any act performed by them for and on behalf of the Joint
Venture or arising out of any business of the Joint Venture. The
agreements of indemnity set forth in this Section shall survive the
dissolution of the Joint Venture and the complete winding up of its
business and affairs. Any provision herein to the contrary
notwithstanding, no indemnified Party shall be entitled to indemnification
for lost or prospective profits, good will or other special, incidental or
consequential damages, but shall be entitled to reasonable attorneys' fees
in enforcing this indemnity.
SECTION 19: ASSIGNMENT
A. Permitted Assignees. Either AWT or CTI may, without the
consent of the other and without limitation to its obligations hereunder,
assign all of its rights, title and interest in and to this Agreement and its
obligations hereunder except as otherwise expressly provided herein, to a
wholly-owned subsidiary of AWT or CTI, as the case may be. Any such
subsidiary shall perform all of the terms, covenants and conditions to be
performed by AWT or CTI, as the case may be pursuant to this Agreement.
B. Effect of Assignment. Upon an assignment to a
wholly-owned subsidiary pursuant to this Section, for all purposes of this
Agreement, such assignee shall be entitled to all rights and benefits inuring
to AWT or CTI, as the case may be, hereunder; however, AWT or CTI, as the case
may be, shall not be released or discharged from any of its obligations
hereunder, including, but not limited to, its obligations under any
transactions accompanying or related to this Agreement.
SECTION 20: MISCELLANEOUS
A. Force Majeure. Any delays in or failure by either Party
in its performance hereunder shall be excused if and to the extent caused by
occurrences beyond the Party's reasonable control including, but not limited
to, acts, omissions, decrees or restraints of federal, state or local
governments, acts of God, strikes or other labor disturbances, war, vandalism,
inability to obtain necessary equipment, facilities or supplies at reasonable
cost and shortages or absence of energy or utility requirements. The Party
claiming to be affected by any such event shall give prompt notice to the
other Party, specifying the full particulars thereof.
B. Maintenance and Access to Records. Both Parties shall
maintain financial records in a manner consistent with past practices and/or
generally accepted accounting practices and shall permit for the sole purpose
of determining such Party's compliance with their respective obligations under
this Agreement any authorized representative designated by the other Party to
visit and inspect any of the records of such Party (including, without
limitation, books of account, records, correspondence and other papers and to
make copies thereof and extracts therefrom), on reasonable notice and at
reasonable times, and to discuss the affairs, finances and accounts of such
Party with such Party's officers and independent certified public accountants
or other parties preparing financial statements for or on behalf of such
Party. All such financial records will be maintained by each Party for a
period of at least three (3) years from the time they came into existence.
C. Obligations. CTI and AWT agree and acknowledge that it
is their intention that obligations which CTI or AWT have assumed pursuant to
the terms of this Agreement will actually be performed in whole or in part by
CTI Companies or AWT Companies other than CTI or AWT, as the case may be, and
that the CTI Companies and AWT Companies will comply with the provisions of
this Agreement and not act in a manner inconsistent with the transactions
contemplated by this Agreement. CTI and AWT further acknowledge that neither
Party would have entered into this Agreement without the understanding set
forth in the preceding sentence.
Therefore, as CTI enters into this Agreement on behalf of
itself and the other CTI Companies, CTI agrees and acknowledges that it is
agreeing to exercise all means available to CTI (including, without being
limited to, its direct or indirect voting control over the stock of the other
CTI Companies so long as it owns such stock) to cause such other CTI Companies
to perform, where necessary or appropriate, the duties and obligations assumed
by CTI under this Agreement, to comply with the terms of this Agreement and to
not act in any manner which is inconsistent with the transactions contemplated
by this Agreement. Similarly, as AWT enters into this Agreement on behalf of
itself and the other AWT Companies, AWT agrees and acknowledges that it is
agreeing to exercise all means available to AWT (including, without being
limited to, its direct or indirect voting control over the stock of the other
AWT Companies so long as its owns such stock) to cause such other AWT
Companies to perform, where necessary or appropriate, the duties and
obligations assumed by AWT under this Agreement, to comply with the terms of
this Agreement and to not act in any manner which is inconsistent with the
transactions contemplated by this Agreement.
Any failure by CTI or AWT to cause the other CTI Companies or
the other AWT Companies, as the case may be, to and any failure by such other
CIT Companies or other AWT Companies to perform obligations under this
Agreement, comply with the terms of this Agreement or not act in a manner
inconsistent with the transactions contemplated by this Agreement (including,
without being limited to, any failure by any CTI Company or AWT Company to
comply with the non-compete provisions of Section 4 of this Agreement or the
confidentiality provisions of Section 12 of this Agreement) would constitute a
material breach of this Agreement by CTI or AWT, as the case may be, and would
entitle the non-breaching Party to terminate this Agreement and recover
monetary damages. In the event of a breach of this Agreement, AWT or CTI, as
the case may be, hereby agrees to assume responsibility for and pay on demand
all damages, whether direct or consequential, suffered by the other Party by
reason of the breach, and neither AWT nor CTI shall be required to make any
prior demand for payment directly on any AWT Company or CTI Company which may
have caused such breach. Further, CTI and AWT acknowledge that monetary
damages would be an inadequate remedy at law and that specific performance
and/or both preliminary and permanent injunctive relief is necessary to
protect the rights of the Parties.
Nothing contained in this Agreement shall be deemed to (a)
obligate CTI or AWT to cause any other CTI Company or AWT Company,
respectively, to be bound to or to comply with the terms of this Agreement
following a transfer of the controlling interest in such CTI Company or AWT
Company by CTI or AWT, respectively, to a third party, or (b) bind any CTI
Company other than CTI or AWT Company other than AWT to the terms of this
Agreement following a transfer of the interest in such CTI Company or AWT
Company by CTI or AWT, respectively, to a third party. Notwithstanding the
foregoing, AWT is not entering into this Agreement as the agent of Metcalf &
Eddy Companies, Inc. ("MECI") or any of MECI's subsidiaries.
D. Publicity. Unless otherwise required by law, neither
Party shall release any written publicity or other formal public statements
concerning this Agreement, the Joint Venture formed hereunder, and a specific
contract or Municipal Sludge Project, without obtaining the prior consent of
the other Party, which consent shall not be unreasonably withheld.
E. Further Assurances. AWT and CTI hereby covenant to
execute and deliver any instruments, documents or agreements, and to take all
other actions and do all things reasonable, necessary and desirable to fully
and promptly effectuate the general intentions and purposes of the Parties as
set forth in this Agreement.
F. Full Agreement of the Parties. (1) This Agreement
constitutes the entire understanding and agreement between AWT and CTI with
respect to the subject matter hereof and supersedes all prior or
contemporaneous representations, understandings or agreements of any kind,
whether verbal or written.
(2) This Agreement shall not be modified except by a written
amendment duly executed by authorized representatives of both Parties.
(3) Failure of a Party to insist upon strict and punctual
performance of any terms or conditions of this Agreement shall not be
construed to constitute a waiver of, or estoppel against, asserting the right
to require such performance.
(4) If any term or provision hereof is or becomes invalid or
unenforceable, both Parties shall, in good faith, negotiate a replacement term
or provision which is valid and enforceable and which comes as close as
possible to expressing the intention of the invalid or unenforceable term or
provision. Declaration of a term or provision as invalid or unenforceable
shall not, however, affect any other term or provision of this Agreement. The
Agreement shall continue to bind and be effective between the Parties to the
maximum extent possible.
(5) The captions in this Agreement are for the convenience of
the Parties in identification of the several provisions and shall not
constitute a part of this Agreement nor be considered interpretive hereof.
G. Notices. All notices under this Agreement shall be in
writing and delivered as appropriate to an officer of a Party, deposited in
the United States mails, certified, post prepaid or by telecopy or overnight
courier, addressed as follows:
If to AWT: E. Chris Beck
President
Air & Water Technologies Corporation
Route 22 West & Station Road
Somerville, New Jersey 08856
Copy to: General Counsel
If to CTI: Mr. Daniel N. Silverman, III
President
Chemfix Technologies, Inc.
2424 Edenborn Avenue, Suite 620
Metairie, Louisiana 70001
Copy to: General Counsel
or to such other person or address as the Party to receive the communication
shall designate in writing.
H. Agency Limitation. No person shall be authorized to
legally bind the Joint Venture by entering into any contractual or other
business relationship purporting to bind the Joint Venture in any way absent
the prior written approval of the Steering Committee.
I. Schedules and Appendices. All Schedules and Appendices
attached hereto are incorporated herein by reference. All references in this
Agreement shall be deemed to include this Agreement and all such Schedules and
Appendices.
J. Applicable Law. This Agreement shall be construed and
interpreted in accordance with, and all questions under or pertaining to it
shall be governed by, the law of the State of New Jersey; with respect to any
dispute arising out of or pursuant to the terms of this Agreement, both
parties irrevocably consent and submit to the jurisdiction of the federal
courts situated in New Jersey.
K. Successors and Assigns. This Agreement shall be binding
upon and inure to the benefit of Parties and their respective successors and
assigns.
L. Counterparts. This Agreement may be executed in one or
more counterparts each of which shall be deemed to be an original.
IN WITNESS WHEREOF, CTI and AWT have caused this Agreement to
be signed by their duly authorized officers, to be effective as of the date
first above written.
ATTEST AIR & WATER TECHNOLOGIES CORPORATION
By:/s/ E. Chris Beck
---------------------------------
E. Chris Beck
President
CHEMFIX TECHNOLOGIES, INC.
By:/s/ Daniel N. Silverman, III
---------------------------------
Daniel N. Silverman, III
President
SCHEDULE 1
CHEMFIX INTELLECTUAL PROPERTY
Patents
U.S. Patent No. 3,837,872 "Method of Making Wastes Non-Polluting
and Disposable" September 24, 1974
U.S. Patent No. 3,841,102 "Method of Improving the Quality of
Leachate from Sanitary Landfills" dated
October 15, 1974
U.S. Patent No. 4,012,320 "Method of Improving the Quality of
Contaminated Waste Water" dated March
15, 1977
U.S. Patent No. 4,471,916 "Apparatus for Treating Liquid and
Semi-Solid Organic Waste Materials"
dated September 18, 1984
U.S. Patent No. 4,474,479 "Apparatus for Treating Liquid and
Semi-Solid Organic Waste Materials"
dated October 2, 1984
U.S. Patent No. 4,509,696 "Method for Treating Liquid and
Semi-Solid Organic Waste Materials"
dated April 9, 1985
U.S. Patent No. 3,893,656 "Mobile Unit for Treating Liquid Waste"
dated July 8, 1975
U.S. Patent No. 4,793,927 "Method of Treating Sewage" dated
December 27, 1988
U.S. Patent No. 4,793,208 "Method of Binding Metals in Alkaline
Matrix" dated August 1, 1989
Trademarks
(attached)
CHEMFIX TECHNOLOGIES, INC.
UNITED STATES
TRADEMARKS AND SERVICE MARKS
REGISTRATION TERM OF
MARK NUMBER ISSUED REGISTRATION
- --------------------------------------------------------------------------
Chemfix 1,043,119 7/6/76 20 years
* Chemfix Round Logo 939,081 7/25/72 20 years
(Service Mark)
* Chemfix Block Logo 955,966 3/20/73 20 years
(Service Mark)
Chemset 59,950 3/11/87 10 years
(Trademark)
"C" Logo 1,497,115 7/19/88 20 years
(Service Mark)
"From Hazardous to 1,497,116 7/19/88 20 years
Harmless ... it takes
just the right
chemistry"
(Service Mark)
"In Partnership with 1,338,413 5/28/85 20 years
the Environment"
(Service Mark)
Naturfil 1,447,016 7/14/87 20 years
(Trademark)
Naturite 1,278,481 5/22/84 20 years
(Trademark)
"The Solid Solution" 1,420,481 12/9/86 20 years
(Service Mark)
Chemfix & Design 1,511,267 11/1/88 20 years
(Service Mark)
* Service marks not in use at this time
SCHEDULE 4D
CTI EXISTING MUNICIPALITIES
Agreements
A. CTI/National Environmental Controls, Inc., Naturite Purchase Option
Agreement
B. CTI/AgOrganic Joint Venture in Naturite, Inc.
CTI Existing Municipalities
C. South Essex Sewerage District, Salem, Massachusetts
D. Greater Lawrence Sanitary District, North Andover, Massachusetts
E. Springfield, Massachusetts
F. Los Angeles, California
G. Orange County Sanitation District, California
H. Cities of Ventura and Oxnard, California
I. Sunnyvale, California
J. Gloucester, Massachusetts
K. Delaware County Regional Water Quality Control Authority,
Pennsylvania
L. City of San Diego/San Diego North County Treatment District,
California
M. Camden County Utility Authority, New Jersey
N. Gloucester County Utilities Authority, New Jersey
SCHEDULE 4F
AWT ALTERNATE TECHNOLOGY ENGINEERING PROJECT MUNICIPALITIES
A. Baltimore Composting Facility, Baltimore, Maryland
B. Leroy, New York
C. Ellington, Connecticut
D. Los Angeles County, Composting Facility
SCHEDULE 11 A (7)
PATENTS, LICENSES AND AGREEMENTS
(i) 1. All items on Schedule 1
(ii) 1. License Agreement between Chemfix, Inc. and
Browning-Ferris Industries, Inc. dated October 1, 1974.
2. License and Assignment Agreement dated January 27, 1976
between Chemfix, Inc. and The Carborundum Company.
3. License Agreement between the Carborundum Company and
Delaware Custom Material, Inc. dated March 1, 1976 - non-exclusive license for
the nuclear industry only.
4. The Agreement between CTI and AgOrganics, Inc. dated
September 20, 1988.
5. The Patent License Agreement between CTI and Tulane
Medical Center of Tulane University dated March 3, 1988, and Patent License
Agreement between CTI and Tulane Medical Center of Tulane University dated
January 6, 1987.
6. Licensing Agreement between Chemfix Technologies, Inc.
and Chemfix of Massachusetts, Inc., a wholly-owned subsidiary of CTI.
7. Licensing Agreement dated March 27, 1985 between CTI and
VenVirotek, a wholly-owned subsidiary of CTI.
8. Agreement between National Environmental Controls, Inc.
and Envirotech Corporation dated August 7, 1977 for the Treatment of Waste and
Sludge in the Field of Fixed Treatment Units at a customer's site. This
license was subsequently re-purchased.
[APPENDIX A]
[FORM OF STOCK OPTION]
[All bracketed language is for inclusion in Vesting Options only]
No. of Shares
________________
THIS OPTION AND THE SHARES UNDERLYING THE SAME ARE NOT
REGISTERED UNDER THE SECURITIES ACT OF 1933
AND ARE SUBJECT TO THE PROVISIONS OF
SECTION 5 OF THIS OPTION
OPTION
to Purchase Common Stock
of
CHEMFIX TECHNOLOGIES, INC.
(A Delaware Corporation)
Expiring on _______________ [unless earlier terminated
pursuant to Section 12 hereof]
THIS CERTIFIES THAT, for value received, Air & Water
Technologies Corporation, a corporation organized and existing under the laws
of Delaware ("AWT"), or its permitted and registered Assignee as provided in
Section 5 hereof, is entitled to purchase from Chemfix Technologies, Inc., a
corporation organized and existing under the laws of the State of Delaware
("CTI"), at any time [from _________] until the expiration of this Option on
_________________ [, unless earlier terminated pursuant to Section 12 hereof,]
_______( ) shares of the $0.01 par value Common Stock of CTI at a Purchase
Price (as hereinafter defined) of $__________ per share [or the Adjusted
Market Price if earlier terminated pursuant to Section 12 hereof] in lawful
money of the United States of America. The number of shares of Common Stock
purchasable hereunder, and the Purchase Price therefor, are subject to
adjustment as hereinafter set forth in Section 7.
SECTION 1. Definitions. For all purposes of this Option, the
following terms shall have the meanings indicated:
["Adjusted Market Price" shall mean ninety percent (90%) of the
average of the closing bid and asked price as determined by the NASDAQ on the
Early Termination Date.]
"Assignee" shall mean the permitted assignee of AWT as provided
in Section 5 hereof.
"AWT Companies" shall mean AWT and its wholly-owned
subsidiaries, whether now existing or hereinafter formed, and Metcalf and Eddy
Companies, Inc. and its wholly-owned subsidiaries, whether now existing or
hereinafter formed.
"Commission" shall mean the Securities and Exchange Commission,
or any other Federal Agency then administering the securities laws of the
United States.
"Common Stock" shall mean and include CTI's authorized $0.01
par value Common Stock and shall also include any capital stock of any class
of CTI hereafter authorized which shall not be limited to a fixed sum or
percentage of par value in respect of the rights of the holders thereof to
participate in dividends and in the distribution of assets upon the voluntary
or involuntary liquidation, dissolution or winding up of CTI, and shall
include any Common Stock of any class or classes resulting from any
reclassification or reclassifications thereof.
"Exchange Act" shall mean the Securities and Exchange Act of
1934, or any similar Federal statute, and the rules and regulations of the
Commission thereunder, all as the same shall be in effect at the time.
"Initial Purchase Price" shall mean the initial purchase price
of _______________ ($__________) per share of Common Stock as set forth in
Section 2 hereof.
"Joint Venture and Option Agreement" shall mean the Joint
Venture Agreement between CTI and AWT dated September 1, 1989.
"Option" shall mean this Option.
"Option Shares" shall mean __________ shares of Common Stock,
as adjusted from time to time pursuant to the terms hereof, purchased or
purchasable by the registered holder of this Option upon the exercise thereof
pursuant to Section 3.
"Purchase Price" shall mean the Initial Purchase price or such
Initial Purchase price as adjusted from time to time pursuant to the
provisions hereof [or the Adjusted Market Price if terminated pursuant to
Section 12 hereof].
"Securities Act" shall mean the Securities Act of 1933, or any
similar Federal statute, and the rules and regulations of the Commission
thereunder, all as the same shall be in effect at the time.
"Transfer" as used in Section 5 shall include any disposition
of any Option or Option Shares, or of any interest in either thereof which
would constitute a sale thereof within the meaning of the Securities Act.
All capitalized terms used herein and not defined herein shall
have the meanings assigned to such terms in the Joint Venture and Option
Agreement.
SECTION 2. Determination of Purchase Price. [Unless
terminated pursuant to Section 12 hereof,] the Initial Purchase Price at which
a holder may exercise this Option shall be a price equal to
dollars ($ ) per share of Common Stock and shall be subject to
adjustment from time to time pursuant to the provisions hereof.
SECTION 3.
A. Exercise of Option. [This Option may not be exercised
prior to except pursuant to Section 12.] In order to exercise this
Option in whole or in part, the registered holder hereof shall complete the
Subscription Form attached hereto, and deliver to CTI this Option and cash or
a certified check in an amount equal to the then aggregate Purchase Price of
the shares of Common Stock being purchased at CTI's principal office at 2424
Edenborn Avenue, Metairie, Louisiana (or at such office or agency of CTI as
CTI may designate by notice in writing to the holder of this Option). Upon
receipt thereof, CTI shall, as promptly as practicable, and in any event
within twenty (20) business days thereafter, execute or cause to be executed
and deliver to such holder a certificate or certificates representing the
aggregate number of shares of Common Stock specified in said Subscription
Form. Each stock certificate so delivered shall be in the denomination of
1,000 shares or such other denomination as may reasonably be requested by the
registered holder thereof and shall be registered in the name of such holder
or such other name as shall be designated by any such holder. If this Option
shall have been exercised only in part, CTI shall, at the time of delivery of
said stock certificate or certificates, deliver to such holder a new Option
evidencing the rights of such holder to purchase the remaining shares of
Common Stock covered by this Option. CTI shall pay all expenses, taxes and
other charges payable in connection with the preparation, execution and
delivery of stock certificates pursuant to this Section, except that, in case
such stock certificates shall be registered in a name or names other than the
name of the registered holder of this Option, funds sufficient to pay all
stock transfer taxes which shall be payable upon the execution and delivery of
such stock certificate or certificates shall be paid by the registered holder
hereof to CTI at the time of delivery of this Option to CTI as mentioned
above.
B. Acknowledgement of Continuing Obligation. CTI, at the
time of the exercise of this Option, in whole or in part, upon request of the
holder hereof, shall acknowledge in writing its continuing obligation to such
holder in respect of any rights (including, without limitation, any right to
registration of the shares of Common Stock issued upon such exercise) to which
such holder shall continue to be entitled after such exercise in accordance
with this Option; provided, however, that the failure of such holder to make
any such request shall not affect the continuing obligation of CTI to such
holder in respect of such rights.
C. Character of Option Shares. All shares of Common Stock
issuable upon the exercise of this Option shall be duly authorized, validly
issued, fully paid and non-assessable; and, without limiting the generality of
the foregoing, CTI covenants and agrees that it will from time to time take
all such action as may be requisite to assure that the par value, if any, per
share of Common Stock is at all times equal to or less than the then effective
Purchase Price.
SECTION 4.
A. Ownership of this Option. CTI may deem and treat the
person in whose name this Option is registered as the holder and owner hereof
(notwithstanding any negotiations of ownership or writing hereon made by
anyone other than CTI) for all purposes and shall not be affected by any
notice to the contrary, until presentation of this Option for registration of
transfer as provided in this Section 4.
B. Exchange, Transfer and Replacement. This Option is
exchangeable upon the surrender hereof by the registered holder to CTI at its
office or the agency described in Section 3, for new Options of like tenor and
date representing in the aggregate the right to purchase the number of shares
purchasable hereunder, each of such new Options to represent the right to
purchase such number of shares as shall be designated by said registered
holder at the time of such surrender. Subject to the conditions and
restrictions contained in Section 5 hereof, this Option and all rights
hereunder are transferable in whole or in part upon the books of CTI by the
registered holder hereof in person or by such holder's duly authorized
attorney, and a new Option shall be made and delivered by CTI, of the same
tenor and date as this Option but registered in the name of the transferee,
upon surrender of this Option duly endorsed, at said office or agency of CTI.
Upon receipt by CTI of evidence reasonably satisfactory to it of the loss,
theft, destruction or mutilation of this Option, and, in case of loss, theft
or destruction, of indemnity or security reasonably satisfactory to it, and
upon surrender and cancellation of this Option, if mutilated, CTI will make
and deliver a new Option of like tenor, in lieu of this Option. This Option
shall be promptly canceled by CTI upon the surrender hereof in connection with
any exchange, transfer or replacement. CTI shall pay all expenses, taxes,
(other than stock transfer taxes) and other charges payable in connection with
the preparation, execution and delivery of Options pursuant to this Section 4.
SECTION 5. Transfer of Options or Option Shares.
A. Restrictions on Exercise and Transfer. Notwithstanding
any provisions contained in this Option to the contrary, this Option shall not
be exercisable or transferable and the related Option Shares shall not be
transferable except upon the conditions specified in this Section 5, which
conditions are intended, among other things, to ensure compliance with the
provisions of the Securities Act in respect of the exercise or transfer of
this Option or transfer of such Option Shares. The holder of this Option
agrees that such holder will not, prior to delivery to CTI of (a) an opinion
of the holder of this Option's counsel satisfactory to CTI, pursuant to clause
(1) of subsection B of this Section 5, or until registration of such Option
Shares under the Securities Act has become effective, and (b) the delivery of
the certificate provided for in clause (2) of subsection C of this Section 5,
(i) transfer this Option or (ii) transfer such Option Shares.
B. Notice of Intention to Exercise; Opinion of Counsel. The
holder of this Option agrees that prior to any transfer of this Option or any
transfer of the related Option Shares, such holder will give written notice to
CTI of its intention to effect such transfer, together with a copy of the
opinion of the holder of this Option's counsel specified in subsection A of
this Section 5 as to the necessity or non-necessity for registration under the
Securities Act in connection with such transfer. The following provisions
shall then apply:
(1) If, in the opinion of such counsel, the proposed transfer
of this Option and/or the proposed transfer of such Option Shares may be
effected without registration under the Securities Act of this Option and/or
such Option Shares, the holder of this Option shall be entitled to transfer
this Option and/or transfer such Option Shares in accordance with the intended
method of disposition specified in the notice delivered by such holder to CTI.
(2) If, in the opinion of such counsel, the proposed transfer
of this Option and/or the proposed transfer of such Option Shares may not be
effected without registration under the Securities Act of this Option and/or
such Option Shares, this Option or Option Shares shall not be transferred
until such registration is effective or until such time as in the opinion of
such counsel such proposed transfer may be effected without registration under
the Securities Act.
C. Other Restrictions. (1) Notwithstanding anything in
this Option to the contrary, at no time from the date of this Option until the
latter of (a) the expiration or termination of the Joint Venture and Option
Agreement or (b) the issuance of all Option Shares issuable pursuant to this
Option, shall CTI be obligated to register the transfer of this Option or
issue any Option Shares to AWT or its Assignees if, as a result of such
transfer or issuance, (i) AWT or any of the AWT Companies alone or in
combination would own, acquire or control by any means, including without
being limited to open market purchases, legally or equitably, directly or
indirectly, such aggregate number of Common Stock shares as equals more than
fifteen percent (15%) of the Common Stock, excluding from the calculation of
such fifteen percent (15%) any shares of the Common Stock issued to AWT or any
of the AWT Companies pursuant to the exercise of this Option or any other
option for shares of Common Stock or (ii) AWT, any of the AWT Companies or any
Assignees alone or in combination with one another would own, acquire or
control by any means, including without being limited to open market
purchases, legally or equitably, directly or indirectly, such aggregate number
of shares of Common Stock as equals more than twenty-five percent (25%) of the
Common Stock.
(2) As a condition precedent to the transfer of this Option,
the transferor shall be required to deliver to CTI a certificate executed by
both the transferor and transferee stating that all conditions and
restrictions in Section 5.C.(1) hereof have been met at the time of the
proposed transfer.
(3) For the purposes of this Section, financial institutions
which own shares of common stock of AWT shall not be deemed to be the legal or
beneficial owners of shares of Common Stock by virtue of their ownership of
such shares of common stock of AWT; provided, however, that any such financial
institutions shall be deemed to be the legal and beneficial owners of any Cash
Options, Vesting Options or Earn in Options or Option Shares assigned to such
financial institutions by AWT or any Assignee, any shares of Common Stock
issued pursuant to such Options or any shares of Common Stock issued pursuant
to such Options sold or otherwise transferred to such financial institutions
by AWT or any Assignee.
SECTION 6. Registration Rights.
A. (1) At any time after August 31, 1991, AWT (but not its
Assignees) may request CTI to file a registration statement under the
Securities Act covering all or any portion of the Common Stock issued pursuant
to any Option issued to AWT or its Assignees. Promptly following receipt of
such a request, CTI shall use its best efforts to effect the registration
under the Securities Act of all Common Stock specified in the request in
accordance with the manner of disposition specified therein and to cause the
registration statement covering such Common Stock to remain effective until
all Common Stock included in the registration statement is sold or until three
months after the registration statement is declared effective, whichever comes
first.
(2) Notwithstanding the foregoing, (i) CTI shall not be
obligated to effect a registration pursuant to this Section during the period
starting with the date 60 days before CTI's estimated date of filing of, and
ending on a date three months following the effective date of, any
registration statement pertaining to an underwritten public offering of
securities for the account of CTI, if CTI is actively employing in good faith
all reasonable efforts to cause such registration statement to become
effective and CTI's estimate of the date of filing such registration statement
is made in good faith; (ii) if CTI furnishes to AWT a certificate signed by
the President of CTI stating that in the good faith judgment of the Board of
Directors of CTI it would be seriously detrimental to CTI or its shareholders
for a registration statement to be filed in the near future, then CTI's
obligation pursuant to this Section to use its best efforts to effect the
registration of any shares shall be deferred for a reasonable period not to
exceed one hundred and eighty (180) days; and (iii) CTI shall not be obligated
to effect more than one registration at the request of AWT irrespective of the
number of separate Options or shares which may be issued to AWT or its
Assignees.
(3) If the method of disposition specified in AWT's request
is an underwritten public offering, CTI may designate the managing underwriter
for such offering, subject to the approval of AWT, which approval shall not be
withheld unreasonably.
(4) CTI shall be entitled to include in any registration
statement filed pursuant to AWT's right of registration under this Section,
for sale in accordance with the method of disposition specified by AWT, (i)
shares of Common Stock to be sold by CTI for its own account except as and to
the extent that, in the opinion of the managing underwriter (if such method of
disposition shall be an underwritten public offering), such inclusion would
adversely affect the marketing of the shares to be sold, and (ii) shares of
Common Stock to be sold by any other shareholder of CTI who, before the date
of this Option, acquired rights to have such shares included in such
registration statement, but CTI shall not be entitled to include such shares
in excess of the largest number of shares derived by multiplying (x) the
number of shares of Common Stock then held by the other shareholder by (y) for
each selling shareholder, a fraction, the numerator of which is the number of
shares of Common Stock included in the registration statement for such
shareholder and the denominator of which is the number of all shares of Common
Stock held by such shareholder.
(5) It shall be a condition precedent to the obligations of
CTI to take any action pursuant to this Section to effect the registration of
any shares under the Securities Act that AWT shall furnish to CTI such
information regarding AWT and the Common Stock held by AWT and the intended
method of disposition of the shares to be sold as CTI shall reasonably request
and as shall be required in connection with the action to be taken by CTI.
(6) Except as otherwise specifically provided herein, all
expenses incurred in connection with a demand registration shall be borne by
AWT and CTI in proportion to the number of shares registered by AWT or by or
on behalf of CTI.
B. (1) If CTI at any time proposes to register any of its
Common Stock under the Securities Act on a form which will allow for
registration of the stock of AWT and/or its Assignees, CTI will at each such
time give written notice to AWT and/or its Assignees of its intention so to
do. Upon the written request of AWT and/or its Assignees given within 30 days
after receipt of any such notice, CTI will use its best efforts to cause the
Option Shares which CTI has been requested to register by AWT or its Assignees
to be registered under the Securities Act, all to the extent requisite to
permit the sale or other disposition by AWT or its Assignee of the Common
Stock so registered.
(2) This subsection 6.B. shall not be applicable to any
registration statement or prospectus filed by CTI to register any shares
previously issued or to be issued to any employee or Director or prior
employee or Director of CTI or any of the other CTI Companies in connection
with such person's employment or previous employment by CTI or the other CTI
Companies, and AWT and its Assignees shall not be entitled to any "piggyback"
registration in regard to any such registration statement.
(3) In connection with any offering involving an underwriting
of securities being issued by CTI, CTI shall not be required under this
subsection 3 to include any of AWT's or its Assignees' shares in such
underwriting unless they accept the terms of the underwriting as agreed upon
between CTI and the underwriters selected by it. If the total amount of
securities requested by AWT and/or its Assignees to be included in such
offering exceeds the amount of securities that the underwriters reasonably
believe compatible with the success of the offering, then CTI shall be
required to include in the offering only that aggregate number of securities
requested by AWT and/or its Assignees which the underwriters believe will not
jeopardize the success of the offering, selected in the following order from
those securities requested to be included in the offering: (i) first, the
shares which are requested to be included by holders of options, warrants or
agreements regarding registration rights issued prior to the date of this
Option, which options, warrants or agreements contain a provision that
obligates CTI to give shares issued or to be issued to such holders pursuant
to such options, warrants or agreements priority in any such offering; and
(ii) second, pro rata among the holders (including AWT and its Assignees) of
any other securities requested to be included in the offering according to the
total amount of securities entitled to be included therein owned by each such
holder or in such other proportions as shall mutually be agreed by any of such
holders.
(4) Except as otherwise specifically provided for herein, all
expenses incurred in connection with a "piggy-back" registration shall be
borne by CTI.
C. If and whenever CTI is obligated by the provisions of this
Section to effect the registration of the shares under the Securities Act, as
expeditiously as possible CTI will, or will use its best efforts to, as the
case may be:
(1) prepare and file with the Commission a registration
statement with respect to the shares issuable thereunder and cause such
registration statement to become and remain effective for a period not to
exceed ninety (90) days;
(2) prepare and file with the Commission such amendments and
supplements to such registration statement and the prospectus used in
connection therewith as may be necessary to keep such registration statement
effective and to comply with the provisions of the Securities Act with respect
to the disposition of all shares that are covered by such registration
statement whenever AWT and/or any Assignee shall desire to dispose of the
same;
(3) furnish to AWT and any Assignee for whom such shares are
registered or are to be registered, such numbers of copies of a prospectus,
including a preliminary prospectus, in conformity with the requirements of the
Securities Act, and such other documents as AWT and any Assignee may
reasonably request in order to facilitate the disposition of such options
and/or shares;
(4) register or qualify the shares covered by such
registration statement under such securities or blue sky laws of such
reasonable number of jurisdictions as AWT and/or any Assignees to whom such
options and/or shares issuable thereunder are registered shall reasonably
request, and do any and all other acts and things which may be reasonably
necessary or advisable to enable AWT and/or any Assignee to consummate the
disposition in such jurisdictions of such options and/or shares; provided,
however, that CTI shall not be obligated, by reason thereof, to qualify as a
foreign corporation or file any general consent to service of process under
the laws of any such jurisdiction or subject itself to taxation as doing
business in such jurisdiction;
(5) furnish to AWT and/or any Assignees to whom such shares
issuable thereunder are registered or are to be registered at the time of the
disposition of such shares by AWT and/or any Assignees an opinion of counsel
for CTI acceptable to AWT and/or any Assignees to the effect that a
registration statement covering such shares has been filed with the Commission
under the Securities Act and has been made effective by order of the
Commission, that a prospectus complying as to form with the requirements of
the Securities Act is available for delivery, that no stop order has been
issued by the Commission suspending the effectiveness of such registration
statement and that, to the best of such counsel's knowledge, no proceedings
for the issuance of such a stop order are threatened or contemplated, and that
the shares have been registered or qualified under the securities or blue sky
laws of each state in which CTI shall be required pursuant to clause (d) above
to register or qualify such shares.
(6) Except as otherwise provided in this Section 6 with
respect to demand registration, the costs and expenses of all registrations
under the Securities Act, and of all other actions which CTI is required to
take or effect, shall be paid by CTI (including, without limitation, all
registration and filing fees, printing expenses, fees and disbursements of
counsel for CTI), except that, if AWT or its Assignees request the
registration statement to be kept effective more than 90 days, all such
expenses in connection with any amendment or supplement to the registration
statement or the prospectus used in connection therewith required to be filed
to keep such registration statement effective for more than ninety (90) days
after the date on which such registration statement becomes effective under
the Securities Act because AWT or its Assignees have not effected the
disposition of the shares covered by such registration statement shall be
borne by AWT and such Assignees in such proportions as they may agree;
(7) Notices and requests delivered by AWT or its Assignee to
CTI pursuant to this subsection B shall contain (a) such information regarding
the Options and/or the Option Shares and the intended method of disposition
thereof as reasonably shall be required in connection with the action to be
taken and (b) AWT's or the Assignee's, as the case may be, agreement to the
terms of the underwriting agreement, if any.
(8) In the event of any registration under the Securities Act
of any Option Shares pursuant to this Section 6, to the extent permitted by
law, CTI hereby agrees to indemnify and hold harmless AWT and any Assignee and
each other person, if any, who controls AWT and/or such Assignee within the
meaning of the Securities Act and each other person (including each
underwriter, and each other person, if any, who controls such underwriter) who
participates in the offering of such Option Shares, against any losses,
claims, damages or liabilities, joint or several (including attorney fees and
expenses, including attorney fees and expenses in connection with the
enforcement of CTI's obligations hereunder), to which AWT and/or such Assignee
or controlling person or participating person may become subject under the
Securities Act or otherwise, insofar as such losses, claims, damages or
liabilities (or proceedings in respect thereof) arise out of or are based upon
any untrue statement or alleged untrue statement of any material fact
contained, on the effective date thereof, in any registration statement under
which such Option or Option Shares were registered under the Securities Act,
in any preliminary prospectus or final prospectus contained therein, or in any
amendment or supplement thereto, or arise out of or are based upon the
omission or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein not misleading, and
will reimburse AWT and/or such Assignee and each such controlling person or
participating person in connection with investigating or defending any such
loss, claim, damage, liability or proceeding; provided, however, that CTI will
not be liable in any such case to the extent that any such loss, claim, damage
or liability arises out of or is based upon an untrue statement or alleged
untrue statement or omission or alleged omission made in such registration
statement, such preliminary or final prospectus or such amendment or
supplement in reliance upon and in conformity with written information
furnished to CTI by an instrument duly executed by AWT and/or such Assignee or
such controlling or participating person, as the case may be, specifically for
use in the preparation thereof, and AWT and/or such Assignee similarly agrees
to indemnify and hold CTI and its officers, directors, agents, controlling
persons and employees harmless with respect to any data supplied by AWT, such
Assignee, or its controlling person, as the case may be, which is contained
in the registration statement.
SECTION 7. Anti-Dilution Provisions.
A. The Initial Purchase Price, as well as the number of shares
issuable upon exercise of the Option, shall be subject to adjustment from
time to time as hereinafter provided. Upon each adjustment of the Purchase
Price, AWT and its assignees shall thereafter be entitled to purchase, at
the Purchase Price resulting from such adjustment, the number of shares
(calculated to the nearest whole share) obtained by multiplying the
Purchase Price in effect immediately prior to such adjustment by the number
of shares purchasable pursuant thereto immediately prior to such adjustment
and dividing the product thereof by the Purchase price resulting from such
adjustment.
B. If and whenever after CTI shall issue or sell any shares of
its Common Stock for a consideration per share less than the Purchase Price in
effect immediately prior to such issue or sale (excluding any options or
shares of its Common Stock to be issued or which have been issued to then
former or present employees or directors), then forthwith the Purchase Price
shall be reduced to the price (calculated to the nearest cent) determined as
follows:
by dividing (a) an amount equal to the sum of the number of shares of
Common Stock outstanding immediately prior to such issue or sale
multiplied by the then existing Purchase Price, and the
consideration, if any, received and deemed received by CTI upon such
issue or sale, by (b) the total number of shares of Common Stock
outstanding and deemed outstanding immediately after such issue or
sale.
No adjustment of the Purchase Price, however, shall be made in an amount less
then $0.05 per share, but any such lesser adjustment shall be carried forward
and shall be made at the time and together with the next subsequent adjustment
which together with any adjustment so carried forward shall amount to $0.05
per share or more.
C. For the purposes of this Section 7, the following
provisions (1) through (4), inclusive, shall also be applicable:
(1) In case at any time CTI shall declare a dividend or make
any other distribution on any stock of CTI payable in Common Stock, any Common
Stock issuable in payment of such dividend or distribution shall be deemed to
have been issued or sold without consideration.
(2) In case at any time any shares of Common Stock shall be
issued or sold for cash, the consideration received therefor shall be deemed
to be the amount payable to CTI therefor, without deduction therefrom of any
expenses incurred or any underwriting commissions or concessions or discounts
paid or allowed by CTI in connection therewith. In case any shares of Common
Stock shall be issued or sold for a consideration other than cash, the amount
of the consideration other than cash payable to CTI shall be deemed to be the
fair value of such consideration as reasonably determined by the Board of
Directors of CTI, without deduction therefrom of any expenses incurred or any
underwriting commissions or concessions or discounts paid or allowed by CTI in
connection therewith. In case any shares of Common Stock shall be issued in
connection with any merger of another corporation into CTI, the amount of
consideration therefor shall be deemed to be the fair value as reasonably
determined by the Board of Directors of CTI of such portion of the assets of
such merged corporation as such Board shall determine to be attributable to
such Common Stock, convertible securities, rights or options, as the case may
be.
(3) In case at any time CTI shall take a record of the holders
of its Common Stock for the purpose of entitling them (i) to receive a
dividend or other distribution payable in Common Stock, or (ii) to subscribe
for or purchase Common Stock, then such record date shall be deemed to be the
date of the issue or sale of the shares of Common Stock deemed to be issued or
sold upon the declaration of such dividend or the making of such other
distribution or the date of the granting of such right of subscription or
purchase, as the case may be.
(4) The number of shares of Common Stock outstanding at any
given time shall not include shares owned or held by or for the account of
CTI, but any disposition of any such shares other than the same being canceled
or designated as treasury stock shall be considered an issue or sale of Common
Stock.
D. In case at any time or from time to time conditions arise
by reason of action taken by CTI which are not adequately covered by the
provisions of this Section 7, and which might materially and adversely
affect the exercise rights of the holders of the Option, the Board of
Directors of CTI shall appoint a firm of independent certified public
accountants of recognized standing, who may be the firm regularly retained
by CTI, who shall give their opinion upon the adjustment, if any, on a
basis consistent with the standards established in the other provisions of
this Section 7 necessary with respect to the Purchase Price so as to
preserve, without dilution, the exercise rights of the holders of the
Option. Upon receipt of such opinion, the Board of Directors shall
immediately make the adjustments described therein.
E. Effect of Certain Dividends. In case at any time CTI shall
declare a dividend upon its Common Stock (other than a dividend payable in
Common Stock) payable otherwise than out of net earnings after taxes during
the prior fiscal year, the Purchase Price in effect immediately prior to the
declaration of such dividend shall be reduced by an amount equal, in the case
of a dividend in cash, to the amount thereof payable per share of Common Stock
or, in the case of any other dividend, to the fair value thereof per share of
Common stock as determined by the Board of Directors of CTI. Such reductions
shall take effect as of the date on which a record is taken for the purpose of
such dividend, or if a record is not taken, the date as of which the holders
of record of Common Stock of record entitled to such dividend are to be
determined. As used in this subsection E, the term "dividend" shall mean any
distribution to the holders of Common Stock as such.
F. Stock Splits and Reverse Splits. In case at any time CTI
shall subdivide its outstanding shares of Common Stock into a greater number
of shares, the Purchase Price in effect immediately prior to such subdivision
shall be proportionately reduced and the number of shares purchasable pursuant
to such Option immediately prior to such subdivision shall be proportionately
increased, and conversely, in case at any time CTI shall combine its
outstanding shares of Common Stock into a smaller number of shares, the
Purchase Price in effect immediately prior to such combination shall be
proportionately increased and the number of shares issuable upon exercise of
such Option shall be proportionately reduced. Except as provided in this
Section 7F no adjustment in the Purchase Price and no change in the number of
shares purchasable upon exercise of such Option shall be made as a result of
or by reason of any such subdivision or combination.
G. Effect of Reorganization and Asset Sales. If any capital
reorganization or reclassification of the capital stock of CTI, or
consolidation or merger of CTI with another corporation, or the sale of all
or substantially all of its assets to another corporation, shall be
effected in such a way that holders of Common Stock shall be entitled to
receive stock, securities or assets with respect to or in exchange for
Common Stock, then, as a condition of such reorganization,
reclassification, consolidation, merger or sale, lawful and adequate
provision shall be made whereby AWT and its Assignees shall thereafter have
the right to receive upon the basis and upon the terms and conditions
specified herein and in lieu of the shares of the Common Stock of CTI
immediately theretofore receivable upon the exercise of such Options, such
shares of stock, securities or assets as may be issued or payable with
respect to or in exchange for a number of outstanding shares of such Common
Stock equal to the number of shares of such Common Stock immediately
theretofore so receivable had such reorganization, reclassification,
consolidation, merger or sale not taken place, and in any such case
appropriate provision shall be made with respect to the rights and
interests of AWT and such Assignees to the end that the provisions of this
Option (including, without limitation, provisions for adjustment of the
Purchase Price and of the number of shares issuable upon exercise and for
the registration of the Option Shares) shall thereafter be applicable, as
nearly as may be, in relation to any shares of stock, securities or assets
thereafter deliverable upon the exercise of such Options. CTI shall not
effect any such consolidation, merger or sale unless prior to or
simultaneously with the consummation thereof the successor corporation (if
other than CTI) resulting from such consolidation or merger or the
corporation purchasing such assets shall assume by written instrument
executed and mailed or delivered to AWT and any Assignee, the obligation to
deliver to AWT and any Assignee such shares of stock, securities or assets
as, in accordance with the foregoing provisions, AWT and any Assignee may
be entitled to receive, and containing the express assumption of such
successor corporation of the due and punctual performance and observance of
every provision of this Option to be performed and observed by CTI and of
all liabilities and obligations of CTI under this Option.
H. Accountants' Certificates. In the event that during any
fiscal year of CTI there is a change in the number of shares of Common Stock
issuable upon the exercise of this Option, or any change in the rights of the
holder of this Option by reason of other events herein set forth, then CTI
shall, within ninety (90) days after the end of such fiscal year or, at any
time upon the request of AWT and/or its Assignees in connection with an
exercise or a proposed exercise of such Options, obtain a certificate of the
firm of independent certified public accountants of recognized standing
selected by CTI's Board of Directors (who may be the regular auditors of CTI),
stating the adjusted Purchase Price and the number of Option Shares so
issuable, or specifying the other shares of stock, securities or assets and
the amount thereof receivable as a result of such change in rights, and
setting forth in reasonable detail the method of calculation and facts upon
which such calculation is based. CTI will promptly mail a copy of such
accountants' certificate to AWT and its Assignees. The certificate of such
firm of independent public accountants shall be conclusive evidence of the
correctness of the computation with respect to any such adjustment of the
Purchase Price and any such change in the number of such shares so issuable.
All charges or expenses incurred in connection with a request for an
accountants' certificate by AWT and/or any Assignee shall be borne by AWT
and/or any Assignee, as the case may be.
SECTION 8. Covenants. CTI covenants and agrees that:
A. CTI will reserve and set apart and have at all times, free
from preemptive rights, a number of shares of authorized but unissued Common
Stock deliverable upon the exercise of the Option, and CTI will have at all
times such other rights or privileges which are sufficient to enable it at any
time to fulfill all of its obligations hereunder.
B. CTI will not, by amendment of its Certificate of
Incorporation or through any reorganization, transfer of assets,
consolidation, merger, issue or sale of securities or otherwise, avoid or take
any action which would have the effect of avoiding the observance or
performance of any of the terms to be observed or performed under this Option
by CTI, but will at all times in good faith assist in carrying out all of the
provisions of this Option and in taking all of such action as may be necessary
or appropriate in order to protect the rights of AWT and its Assignees under
this Option against dilution or other impairment.
C. If any shares of Common Stock required to be reserved for
the purposes of exercise of the Option, require registration with or approval
of any governmental authority under any federal law (other than the Securities
Act) or under any state law before such Option Shares may be issued upon
exercise of such Option, CTI will, at its expense, as expeditiously as
possible, use its best efforts to cause such Option Shares to be duly
registered or approved, as the case may be.
D. If, and so long as, CTI's Common Stock shall be listed on
any securities exchange (as defined in the Exchange Act), it will, at its
expense, obtain and maintain the approval for listing upon official notice of
issuance of all registered shares of Common Stock receivable upon the exercise
of the Option at the time outstanding and maintain the listing of such Option
Shares after their issuance; and CTI will so list on such securities exchange,
will register under the Exchange Act (or any similar statute then in effect)
and will maintain such listing of, any other registered securities that at any
time are issuable upon exercise of such Options, if and at the time that any
securities of the same class shall be listed on such securities exchange by
CTI.
SECTION 9. Notification by CTI. In case at any time:
(1) CTI shall pay any dividend payable in stock upon Common
Stock or make any distribution (other than cash dividends which are not in a
greater amount per share than the most recent cash dividend) to the holders of
the Common Stock;
(2) CTI shall make an offer for subscription pro rata to the
holders of its Common Stock of any additional shares of stock of any class or
other rights;
(3) there shall be any capital reorganization,
reclassification of the capital stock of CTI, consolidation or merger of CTI
with, or sale of all or substantially all of its assets to, another
corporation; or
(4) there shall be a voluntary or involuntary dissolution,
liquidation or winding-up of CTI.
Then, in any one or more of such cases, CTI shall give written
notice to AWT and/or its Assignees of the date on which (x) the books of
CTI shall close, or a record shall be taken for such dividend, distribution
or subscription rights, or (y) such reorganization, reclassification,
consolidation, merger, sale, dissolution, liquidation or winding-up shall
take place, as the case may be. Such notice shall also specify the date as
of which the holders of Common Stock of record shall participate in such
dividend, distribution or subscription rights, or shall be entitled to
exchange their Common Stock for securities or other property deliverable
upon such reorganization, reclassification, consolidation, merger, sale,
dissolution, liquidation, or winding-up, as the case may be. Such written
notice shall be given not less than 30 and not more than 90 days prior to
the action in question and not less than 30 days and not more than 90 days
prior to the record date or date on which CTI's transfer books are closed
in respect thereto, and such notice may state that the record date is
subject to the effectiveness of a registration statement under the
Securities Act, or to a favorable vote of stockholders, if either is
required.
SECTION 10. Right of First Refusal With Respect to Shares to
be Issued. In the event that AWT or any of its Assignees exercise the Option,
AWT and/or its Assignees, as the case may be, agree thereafter not to sell,
assign, or otherwise transfer the Option Shares in any private transaction
(including tender offers) without first offering to CTI a right of first
refusal to purchase such shares on the same terms. AWT and/or its Assignees
agree to notify CTI as soon as any of them becomes aware of any proposed
private transaction. CTI may exercise its right of first refusal for a period
commencing upon such notification by AWT or its Assignees and ending
twenty-four (24) hours prior to the time that a transfer or tender of Common
Stock by AWT or its Assignees is due (including any extensions which may be
granted). If CTI either declines to exercise its right of first refusal or
does not do so within the applicable time period, AWT or its Assignee, as the
case may be, may transfer such stock on the terms and to the party indicated
in the notice provided to CTI, but not otherwise, without once again extending
to CTI a right of first refusal as provided herein. For purposes of the
foregoing, "private transaction" shall mean any transactions other than
transfers made if the Option Shares are then registered pursuant to the
Securities Act or transfers made pursuant to Rule 144.
SECTION 11. Restrictive Legend. All Option Shares shall bear
a restrictive legend providing that:
"The shares represented by this stock certificate have
not been registered pursuant to the Securities Act of 1933, as
amended (the "Act") and may not be sold or transferred unless
registered pursuant to the Act or subject to an exemption
therefrom. In addition, the shares represented by this
certificate are issued pursuant to and or subject to certain
restrictions on transfer contained in an Option Agreement
between _______ and Chemfix Technologies, Inc., dated _______
and may not be sold or transferred except in accordance with
the terms contained therein.
Any certificate issued at any time in exchange or substitution for any
certificate bearing such legend (except a new certificate issued upon
completion of a public distribution under a registration statement of the
securities represented thereby) shall also bear such legend unless, in the
opinion of counsel specified in subsection A of Section 5, the securities
represented thereby need no longer be subject to the restrictions contained in
Section 5. The provisions of said Section 5 shall be binding upon all
subsequent holders of certificates bearing the above legend, and shall also be
applicable to all subsequent holders of certificates bearing the above legend,
and shall also be applicable to all subsequent holders of this Option.
SECTION 12. Termination. [A.] This Option shall terminate as
of the date set forth on the cover page hereof.
[B. Early Termination. If the Joint Venture and Option Agreement is
terminated or expires prior to the exercise of this Option, then CTI will send
notice to the holder of this Option at the address specified pursuant to
Section 14 hereof of such event within five (5) days of such termination or
expiration and shall set forth the Adjusted Market Price in such notice.
Notwithstanding anything to the contrary contained in this Option, upon the
sending of such notice, the holder of this Option will have a period of
twenty-five (25) days to tender this Option to CTI as provided for in Section
3A hereof to purchase the Option Shares at the Adjusted Market Price. This
Option will expire and be of no further force and effect on the twenty-fifth
(25th) day subsequent to the sending of such notice.]
SECTION 13. Successors. This Option shall be binding upon any
corporation succeeding to CTI by merger, consolidation or acquisition of all
or substantially all of CTI's assets.
SECTION 14. Notices. Any notice or other document required or
permitted to be given or delivered to AWT or any Assignee shall be delivered
at, or sent by certified or registered mail, overnight courier or
hand-delivery to AWT or any Assignee at the address shown in CTI's option
ledger upon issuance or transfer or to such other address as shall have been
furnished to CTI in writing by AWT or any Assignee. Any notice or other
document required or permitted to be given or delivered to CTI shall be
delivered at, or sent by certified or registered mail, overnight courier or
hand-delivery to the principal office of CTI at 2424 Edenborn Avenue,
Metairie, Louisiana, Attention: President, or such other address as shall
have been furnished to AWT or any Assignee.
SECTION 15. No Rights as Shareholder; Limitation of Liability.
This Option shall not entitle any holder hereof to any of the rights of a
shareholder of CTI. No provision hereof, in the absence of affirmative action
by the holder hereof to purchase shares of Common Stock, and no mere
enumeration herein of rights or privileges of the holder hereof, shall give
rise to any liability of such holder for the Purchase Price or as a
shareholder of CTI, whether such liability is asserted by CTI or by creditors
of CTI.
SECTION 16. Miscellaneous. The Option shall be governed by,
and construed and enforced in accordance with, the laws of the State of
Delaware. This Option and any provision hereof may be changed, waived,
discharged or terminated only by an instrument in writing signed by the party
(or any predecessor in interest thereof) against which enforcement of the same
is sought. The headings in this Option are for the purposes of reference only
and shall not affect the meaning or construction of any of the provisions
hereof.
IN WITNESS WHEREOF, CTI has caused this Option to be signed by
its duly authorized officer under its corporate seal, attested by its duly
authorized officer, and to be dated as of ________________.
CHEMFIX TECHNOLOGIES, INC.
By___________________________
(Corporate Seal)
Attest:
____________________________
Gloria J. Newbern, Secretary
ASSIGNMENT
To Be Executed by the Registered Holder if It Desires
to Transfer the Within Option.
FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers unto
_________________________
(Name)
_________________________
(Address)
_________________________
_________________________
(Social Security or Federal Identification Number)
the Option to purchase _____________ shares of Common Stock covered by the
within Option, as said shares were constituted at the date of said Option, and
does hereby irrevocably constitute and appoint ________________________
______________, Attorney, to make such transfer on the books of Chemfix
Technologies, Inc. maintained for that purpose with full power of
substitution.
Signature_________________________
Dated, ____________, 19__.
In the presence of
______________________________
NOTICE
The signature to the foregoing Assignment must correspond to
the name as written upon the face of the within Option in every particular,
without alteration or enlargement or any change whatsoever.
FULL SUBSCRIPTION FORM
To Be Executed by the Registered Holder if It Desires
to Exercise in Full the Within Option
The undersigned hereby exercises the right to purchase the
_________________ shares of Common Stock covered by the within Option at the
date of this subscription and herewith makes payment of the sum of $_________
representing the Purchase Price of $_________ per share in effect at this
date. Certificates for such shares shall be issued in the name of and
delivered to the undersigned, unless otherwise specified by written
instructions, signed by the undersigned and accompanying this subscription.
Dated, _____________, 19__.
Signature___________________________
Address_____________________________
____________________________________
____________________________________
Social Security or Federal I.D. Number
AGREEMENT AND PLAN OF MERGER AND REORGANIZATION
between AIR & WATER TECHNOLOGIES CORPORATION,
FALCON ACQUISITION CORP.,
FALCON ASSOCIATES, INC.
and JEFFREY J. CANTWELL
This AGREEMENT AND PLAN OF MERGER AND REORGANIZATION, dated
October 27, 1989 (the "Agreement"), between AIR & WATER TECHNOLOGIES
CORPORATION, a Delaware corporation ("AWT'), FALCON ACQUISITION CORP., a
Pennsylvania corporation and a wholly-owned subsidiary of AWT ("FAC"), JEFFREY
J. CANTWELL (the "Stockholder"), and FALCON ASSOCIATES, INC., a Pennsylvania
corporation wholly-owned by the Stockholder (the "Company").
WHEREAS, the Stockholder and the Boards of Directors of AWT, FAC
and the Company have deemed it advisable and in their respective mutual
benefit that the Company be acquired by AWT through a merger of FAC with and
into the Company (the "Merger") in accordance with the terms and conditions of
this Agreement and the Plan of Merger attached hereto as Exhibit A (the
"Merger Agreement"); and
WHEREAS, in contemplation of the delivery of the merger
consideration set forth in Article III hereof and closing of the Transactions
contemplated by this Agreement, including the consummation of the Merger in
accordance with the Pennsylvania Business Corporation Law of 1988, the parties
agree, effective as of the date of this Agreement, to consummate the Merger
subject to the terms and conditions hereof.
NOW, THEREFORE, the parties hereby agree as follows:
ARTICLE I
REPRESENTATIONS AS TO CAPITALIZATION
SECTION 1.1 Capitalization of AWT. AWT represents and warrants
that the authorized capital stock of AWT consists of (i) 30,000,000 shares of
Common Stock, $.001 par value per share, of which 13,577,000 shares of Class A
Common Stock ("AWT Common Stock"), and 1,010,000 shares of Class B Common Stock
are issued and outstanding, and (ii) 649,350 shares of Common Stock are
reserved for issuance pursuant to outstanding options. All such outstanding
shares of Common Stock have been duly authorized, validly issued and are fully
paid and nonassessable. All shares of AWT Common Stock which will be
delivered at the Closing (as defined herein) (a) are duly authorized by AWT's
Certificate of Incorporation, (b) will have been duly authorized by AWT's
Board of Directors to be issued and delivered in accordance with the terms of
this Agreement, (c) will at the Time of Merger (as hereinafter defined) be
validly issued, fully paid and nonassessable.
SECTION 1.2 Capitalization of FAC. AWT and FAC represent
and warrant that the authorized capital stock of FAC consists of 100 shares
of common stock, without par value ("FAC Common Stock"), all of which are
outstanding and are duly authorized, validly issued, fully paid and
nonassessable, and are owned of record and beneficially by AWT free and clear
of all liens, charges, pledges, security interests or other encumbrances.
There are no outstanding subscriptions, options, warrants, rights or
commitments of any character relating to or entitling any person to purchase
or otherwise acquire any stock of FAC. There are no preemptive rights or
similar rights to subscribe for or purchase any stock of FAC.
SECTION 1.3 Capitalization of The Stockholder and the
Company. AWT and FAC represent and warrant that the authorized capital
stock of the Company consists of 100 shares of Common Stock, without par
value ("Company Common Stock"), all of which are issued and outstanding. All
such outstanding shares have been, and at the Closing will be, duly authorized,
validly issued, fully paid and nonassessable, and are, and will be at the
Closing, owned of record and beneficially by the Stockholder. At the Closing,
all of such shares will be free and clear of all liens, charges, pledges,
security interests or other encumbrances, and not subject to any restrictions
on transfer or sale except as provided by applicable federal and state
securities laws. There are no shares authorized, issued or outstanding of any
other class of stock or equity interest in the Company. There are no
outstanding subscriptions, options, warrants, rights or commitments of any
character relating to or entitling any person to purchase or otherwise
acquire any stock of the Company. There are no preemptive rights or similar
rights to subscribe for or purchase any stock of the Company.
ARTICLE II
THE MERGER
SECTION 2.1 Constituent Corporations. The Company and FAC shall
be the constituent corporations to the Merger. The Merger shall be
consummated at such time (the "Time of Merger") as all documents necessary to
effect the Merger in accordance with the Pennsylvania Business Corporation Law
of 1988, including, but not limited to, the Merger Agreement, have been filed
with the Department of State of the Commonwealth of Pennsylvania. At the Time
of Merger, FAC shall be merged with and into the Company in accordance with
such law. The Company shall be the surviving corporation of the merger (herein
sometimes called the ("Surviving Corporation"). The name, identity,
existence, rights, privileges, powers, franchises, properties and assets of
the Company shall continue unaffected and unimpaired by the Merger. At the
Time of Merger, the identity and separate existence of FAC shall cease, and
all of the rights, privileges, powers, franchises, properties and assets of
FAC shall be vested in the Company.
SECTION 2.2 Conversion -- of FAC's Common Stock. At the
Time of Merger, the shares of FAC Common Stock outstanding immediately prior
to the Time of Merger shall, by virtue of the Merger and without any action
on the part of the holder thereof, be converted into a number of shares of
Common Stock, without par value, of the Surviving Corporation equal to the
number of shares of Company Common Stock outstanding immediately prior to
the Time of Merger.
SECTION 2.3 Certificate of Incorporation and Bylaws of
Surviving Corporation. The Certificate of Incorporation and Bylaws of FAC, as
in effect immediately prior to the Time of Merger, shall be the Certificate of
Incorporation and Bylaws of the Surviving Corporation until the same shall be
amended.
SECTION 2.4 Directors. At the Time of Merger, the directors
of the Company immediately prior to the Time of Merger shall cease to be
directors; each director of FAC immediately prior to the Time of Merger shall
become a director of the Surviving Corporation and, subject to the Bylaws of
the Surviving Corporation and the laws of the Commonwealth of Pennsylvania,
shall serve until his successor is elected and appointed or qualified or until
his earlier death, resignation or removal.
SECTION 2.5 Rights Prior to Exchange. From and after the
Time of Merger, until so surrendered, each certificate theretofore
representing shares of issued and outstanding Company Common Stock shall be
deemed for all corporate purposes to evidence the right to receive one
one-hundredth (1/100) of the merger Consideration into which such shares of
Company Common Stock are converted pursuant to Section 2.6.
SECTION 2.6 Conversion of Company Common Stock. At the Time
of Merger, each share of Company Common Stock issued and outstanding
immediately prior to the Time of Merger shall, by virtue of the Merger and
without any action on the part of the holder thereof, be converted into the
right to receive one one-hundredth (1/100) of the Merger Consideration set
forth in Section 3.1 hereof.
ARTICLE III
DETERMINATION OF MERGER CONSIDERATION
SECTION 3.1 Merger Consideration. The Merger Consideration
shall consist of and be payable as set forth in this Article III:
(a) On the Closing Date, the Stockholder shall receive from AWT
the number of shares of AWT Common Stock equal to the quotient of (x)
25,000,000 divided by (y) the AWT Common Price (subject to Section 3.1(b)
below, the "Merger Consideration"). The "AWT Common Price" is the average of
the daily closing sale prices of AWT Common Stock on the American Stock
Exchange ("AMEX") for the business days of the AMEX during the Valuation
Period as reported in the The Wall Street Journal, being $17.575 per share.
The "Valuation Period" is the period of 10 AMEX trading days ending on the
fifth day prior to the Time of Merger, or, if such date shall not be an AMEX
trading day, the next preceding AMEX trading day.
(b) Notwithstanding the foregoing Section 3.1(a), in the event
the AWR Common Price is less than or equal to $16.00, the Merger Consideration
shall equal 1,562,500 shares of AWT Common Stock, and (ii) in the event the
AWT Common Price is $19.00 or more, the Merger Consideration shall equal
1,315,789 shares of AWT Common Stock.
(c) The Stockholder hereby agrees that at the Closing, and upon
receipt of the Merger Consideration, the Stockholder shall deposit with Howard
Lawson & Co., as escrow agent, ten percent (10%) of the shares of AWT Common
Stock so received (the "Escrow Shares"), which Escrow Shares shall be held in
escrow by such escrow agent in accordance with the Escrow Agreement attached
as Exhibit B hereto.
SECTION 3.2 No Fractional Shares. No fractional shares or scrip
representing fractional shares of AWT Common Stock will be issued to the
Stockholder as a part of the Merger Consideration. Instead, AWT will pay to
the Stockholder a cash adjustment equal to the product of (A) the AWT Common
Price multiplied by (B) the fraction of one share of AWT Common Stock which
would otherwise have been issued as part of the Merger Consideration.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF
THE STOCKHOLDER AND THE COMPANY
In addition to the representations as to capitalization set forth
in Article I hereof, the Stockholder and the Company, jointly and severally,
hereby represent and warrant to AWT and FAC as follows:
SECTION 4.1 Organization. The Company is a corporation duly
organized, validly existing and in good standing under the laws of its
jurisdiction of incorporation, and has all requisite power and authority,
corporate and otherwise, to own, operate and lease its properties and to carry
on its business substantially as they are being owned, operated and conducted
on the date of this Agreement. The Company is duly qualified and in good
standing in each of the jurisdictions listed in Schedule 4.1, which are all of
the jurisdictions in which the nature of the property owned, leased or
operated by it or the nature of the business conducted by it requires such
qualification and in which its failure so to qualify and be in good standing
would materially and adversely affect the condition (financial or otherwise),
business, net worth, properties, operations or prospects of the Company.
SECTION 4.2 Subsidiaries. Except as set forth in Schedule 4.2,
the Company has no subsidiaries and does not own of record or beneficially any
capital stock or equity interest or investment in any corporation, partnership
association or business entity.
SECTION 4.3 Authority Relative to this Amendment. (a) The
Company has full corporate power and authority to execute and deliver this
Agreement and to consummate the transactions contemplated hereby. The
execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby have been, or, at the time of execution or
consummation, will be, duly and validly authorized by the Board of Directors
of the Company and have or will have been approved by the Stockholder and no
other corporate proceedings on the part of the Company or the Stockholder are
or will be necessary to authorize, Agreement or to consummate the transactions
contemplated hereby. This Agreement has been, and each of the agreements to
be executed by the Company pursuant hereto will be, at the time of execution,
duly and validly executed and delivered by the Company and constitute or will
constitute a valid and binding obligation of the Company enforceable in
accordance with their respective terms except as may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium or other similar laws now or
hereafter in effect, or by legal or equitable principles, relating to or
limiting creditors' rights and that the remedy of specific performance and
injunctive and other forms of equitable relief are subject to certain
equitable defenses and to the discretion of the court before which any
proceeding therefor may be brought.
(b) The Stockholder has full legal capacity to execute and
deliver this Agreement and to consummate the transactions contemplated hereby.
This Agreement constitutes, and each of the agreements to be executed by the
Stockholder pursuant hereto will, upon execution and delivery thereof,
constitute a valid and binding obligation of the Stockholder enforceable in
accordance with their respective terms except as may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium or other similar laws now or
hereafter in effect, or by legal or equitable principles relating to or
limiting creditors rights and except that the remedy of specific performance
and injunctive and other forms of equitable relief are subject to certain
equitable defenses and to the discretion of the court before which any
proceeding therefor may be brought.
SECTION 4.4 Except as set forth in Second delivery of this
Agreement contemplated any violation of, or create a benefit under, or permit
the acceleration of (whether after the giving of notice or the lapse of time
or both) any obligation under, or result in the creation or imposition of any
Lien (as defined in Section 4.19) upon the Company or any of its properties
or the shares of Company Common Stock owned by the Stockholder, under any
provision of the Certificate of Incorporation or By-laws of the Company or
any Permit (as defined in Section 4.21), note, bond, mortgage, indenture,
bonding agreement, loan agreement, insurance policy or binder of insurance,
license, agreement or lease, or other instrument to which the Company or the
Stockholder is a party, or by which the Company or the Stockholder or any of
their respective properties is bound (including, with respect to the
Stockholder, the shares of Company Common Stock owned by the Stockholder),
other than any such conflicts, breaches, violations or defaults which
individually and in the aggregate (i) do not and will not have a material
adverse effect on the Company or (ii) will be cured (such cure not having a
material adverse effect on the Company) or waived by AWT in writing prior to
the Closing Date. Except as set forth in Schedule 4.4, no consent, approval,
order or authorization of, or registration, declaration or filing with, any
federal, state, municipal, territorial or foreign governmental authority (or
any other public body or authority, domestic or foreign) is required by or
with respect to the Company or the Stockholder in connection with the
execution and delivery of this Agreement or the consummation by the Company
and the Stockholder of the transactions contemplated hereby, except in those
instances where the failure to obtain such consent or approval or the failure
to make such filing, declaration or registration would not in the aggregate
have a material adverse effect upon the Company.
SECTION 4.5 Financial Statements. The Company has heretofore
delivered to A (i) the audited balance sheets of the Company as at December
31, 1988, 1987, 1986 and 1985, respectively, and the related statements of
operations and changes in financial position or cash flows, as appropriate,
for the fiscal years ended December 31, 1988, 1987, 1986 and 1985,
respectively, together with the reports thereon of Karpac Baca & Co. or its
predecessor, the Company's independent certified accountants for those fiscal
years and (ii) an unaudited balance sheet of the Company as at August 31, 1989
(the "Interim Balance Sheet"), and unaudited statements of operations and
cash flows for the eight-month period then ended (all of the foregoing are
sometimes hereinafter referred to collectively as the "Financial
Statements"). The Financial Statements, together with the notes thereto,
present fairly the financial condition of the Company as at the respective
dates thereof, and such statements of operations and changes in financial
position or cash flows and the notices thereto fairly present the results of
operations for the periods therein referred to, all in accordance with
generally accepted accounting principles ("GAAP") consistently applied
throughout the periods involved, except as otherwise noted therein and except
that the Interim Balance Sheet and related statements of operations and cash
flows are subject to adjustments, including normal recurring accruals, which
are, in the opinion of management, necessary for a fair presentation, of the
results for the interim period.
SECTION 4.6 Absence of Undisclosed Liabilities. Except as
set forth in Schedule 4.6, at the date of this Agreement the Company has no
material liabilities or obligations, known or unknown, secured or unsecured
(whether absolute, accrued, fixed, contingent or otherwise, and whether due or
to become due), of a nature required by generally accepted accounting
principles to be reflected in a corporate balance sheet or disclosed in the
notes thereto, except such liabilities and obligations which are accrued or
reserved against in the Interim Balance Sheet and disclosed in the notes
thereto or which were incurred after the date of the interim Balance Sheet in
the ordinary course of business.
SECTION 4.7 Absence of Certain Changes or Events. Except as
set forth in Schedule 4.7 or in the notes to the Interim Balance Sheet and
related financial statements of the Company and except as otherwise
contemplated by this Agreement, between December 31, 1988 and the date of
this Agreement: (A) there has not occurred (i) any change which materially
and adversely affects, nor any event which, so far as the Company can
reasonably foresee, would result in any material adverse change in the
business, financial condition, operations or prospects of the Company, or
(ii) any event, circumstance or combination thereof, whether arising prior to
or after December 31, 1988, which might reasonably be expected to result in any
material adverse change in the business, financial condition, properties,
operations or prospects of the Company before or after the Closing Date; (B)
and the Company has not (i) purchased, redeemed, issued, sold or otherwise
acquired or disposed of, directly or indirectly, any shares of its capital
stock or any other of its securities, or granted any options, warrants or
other rights to purchase or convert any obligation into any shares of its
capital stock or into any of its securities, (ii) incurred any obligation or
liability, absolute or contingent, except normal trade or business obligations
or liabilities incurred in the ordinary course of business, or mortgaged,
pledged or subjected to any Lien any of its assets or properties, except in
the ordinary course of business, (iii) incurred, assumed or guaranteed any
indebtedness for borrowed money, (iv) suffered any damage, destruction or
loss, whether covered by insurance or not, materially and adversely affecting
the business, financial condition or operations of the Company, (v) made any
declaration, payment or setting aside for payment of any dividend (whether in
cash, stock or property) with respect to the capital stock of the Company,
(vi) made any acquisition or disposition of assets except in accordance with
past practice, in the ordinary course of business, (vii) transferred or
granted any concessions, leases, licenses or agreements with respect to any
Proprietary Rights as defined in Section 4.11 hereof, (viii) introduced any
material change with respect to the operation of its business, including,
without limitation, its method of accounting, (ix) entered into any material
commitment or transaction (including without limitation any borrowing or
capital expenditure) which is not, in accordance with past practice, in the
ordinary course of business, or (x) entered into or agreed to enter into any
agreement or other arrangement to take any action described in this Schedule
4.7, including, without limitation, any agreement or arrangement granting any
preferential right to purchase any of its assets, properties or rights or
requiring the consent of any party to the transfer and assignment of any such
assets, properties or rights.
SECTION 4.8 Management and Employees. Set forth in Schedule
4.8 is a true and complete list of (a) all directors and officers of the
Company, specifying their names, titles and compensation, and (b) all other
employees or consultants of the Company whose total compensation for the
fiscal year ended December 31, 1988 exceeded $50,000, specifying their names
and job designations, and the basis of such compensation, whether fixed or
commission or a combination thereof. Except as disclosed in Schedule 4.8,
since December 31,1988 there has been no material change, other than in the
ordinary and usual course of business, in the compensation payable, by means
of wages, salaries, bonuses, gratuities or otherwise, to any such director,
officer, employee or consultant of the Company, or any change in compensation,
either material in amount or other than in the ordinary and usual course of
business, to any other employee or consultant of the Company.
SECTION 4.9 Contracts. Schedule 4.9 constitutes a full and
complete list (identifying in each case the name of the document, the date
thereof and parties thereto and the name, date of and parties to any
amendment, supplement or other modification thereof), as of the date of this
Agreement, of each partially or totally executory contract, agreement,
commitment, option or understanding, whether written or oral, of the following
types, to which the Company is a party or by which any of its properties are
bound ("Contracts"):
(a) All loan agreements, trust agreements, indentures,
mortgages, promissory notes and other agreements or instruments creating
or evidencing indebtedness of the Company other than trade debt payable
in the ordinary course of business;
(b) All employment, commission, profit sharing, consulting,
management, advisory, non-competition and other similar agreements or
understandings;
(c) All collective bargaining agreements;
(d) All partnership or joint venture agreements of any kind;
(e) All real property or equipment leases which are material to
the conduct of the business operations of the Company;
(f) Each other contract or commitment involving the future
payment or receipt by the Company of more than $250,000 or which is
material to the business, operations or financial condition of the
Company; and
(g) All powers of attorney and similar authorizations (whether
revocable or irrevocable) to any person, or corporation that is or may
hereafter be in force for any purpose whatsoever. Correct and complete
copies of all those written Contracts described in Schedule 4.9 have
been delivered prior to or concurrently with the date hereof. Except as
set forth in Schedule 4.9, the Company is not a party to, nor is it
bound by, any Contract that the Company can reasonably foresee will
result in any loss upon the performance thereof (including any material
liability for penalties or damages, whether liquidated, direct,
indirect, incidental or consequential, or down-time charges), which loss
would be material to the financial condition of the Company. Except as
set forth in Schedule 4.9, no third party has raised any material
claim, dispute or controversy with respect to any Contract of the
Company nor has the Company received notice or warning of alleged
material non-performance, material claim, dispute or controversy with
respect to material obligations under any such Contract; nor are there
any facts which, to the best knowledge of the Company and the
Stockholder, exist indicating that any such Contract may be totally or
partially terminated or suspended by any party thereto, which
termination or suspension, individually or in the aggregate, would be
material to the condition (financial or otherwise), business, net worth,
assets, properties, operations or prospects of the Company. Except as
set forth in Schedule 4.9, the Company is not a party nor is it bound by
any Contract which in any manner limits or restricts the Company from
competing in any line of business or carrying on or expanding the
mature or geographical scope of its business anywhere in the world.
SECTION 4.10 No Default. Except as set forth in Schedule 4.10,
the Company has in all material respects performed, or is now performing, the
obligations of, and is not in default (and would not by the lapse of time
and/or the giving of, notice be in default) in respect of, any note, debt
instrument, security agreement, option to purchase, lease, deed of trust or
mortgage, or any other contract binding upon the Company, or the assets or
properties thereof, which failure of performance or default, individually or
in the aggregate, would be material to the condition (financial or otherwise),
business, net worth, assets, properties, operations or prospects of the
Company. Except as set forth in Schedule 4.10, to the Company's and the
Stockholder's knowledge, no party with which the Company has a contract that
is of material importance to the condition (Alimancial or otherwise),
business, net worth, assets, properties, operations or prospects of the
Company, is in default thereunder (or would by the lapse of time and/or the
giving of notice be in default) or has breached or indicated any intention to
breach any terms or provisions thereof.
SECTION 4.11 Proprietary Rights. Except as set forth in
Schedule 4.11, the Company does not own or license or have any other
proprietary interest in any United States or foreign registered trademark,
service marks or trade names; unregistered trademarks, service marks or trade
names; trademark, service mark or trade name applications; product
designations or model numbers; unexpired patents; pending or filed patent
applications; current or active invention disclosures; inventions on which
disclosures are to be prepared; trade secrets; registered copyrights; or
unregistered copyrights which are material to the business of the Company
(collectively, (the "Proprietary Rights"). Except as set forth in Schedule
4.11, Proprietary Rights are necessary or material to the conduct of the
business of the Company. To the best knowledge of the Stockholder and the
Company, the operations of the Company do not conflict with or infringe upon,
and no one has asserted to the Company that such operations conflict with or
infringe upon, any Proprietary Rights owned, possessed or used by any third
party.
SECTION 4.12 Litigation. Except as set forth in Schedule
4.12, there is no claim, dispute, investigation, action, proceeding, suit or
appeal (collectively "Actions"), at law or in equity, pending against the
Stockholder or the Company, or involving any of their respective assets or
properties, before any court, agency, authority, arbitration panel or other
tribunal, other than those, if any, with respect to which service of process
or similar notice has not yet been made on the Stockholder or the Company,
which would be likely to have a material adverse effect on the condition
(financial or other- wise), business, net worth, assets, properties,
operations or prospects of the Company or which would have an adverse effect
on the Company's or the Stockholder's ability to perform their respective
obligations hereunder to consummate the transactions contemplated hereby, and
no such Actions have been threatened against the Stockholder or the Company.
Except as set forth in Schedule 4.12, neither the Stockholder nor the Company
is subject to, in violation of, or in default under, and no event has occurred
which, with the lapse of time or the giving of notice or both, could result in
the violation of, or default under the terms of any judgment, decree, order,
writ or injunction of any court or any federal, state, local or other
governmental department, commission, board, bureau, agency, authority,
arbitration panel, tribunal or other instrumentality. Schedule 4.12 also
contains a true and complete list of all Actions (whether or not covered by
insurance) to which the Stockholder or the Company is a party in which the
amount in controversy exceeds $100,000.
SECTION 4.13 Compliance with Laws and Orders. Except as set
forth in Schedule 4.13 and excluding all matters otherwise covered by Section
4.26, the Company has controlled and [?."s] operations have been conducted in
accordance with, all laws, regulations and orders (including, without
limitation, securities, zoning ordinances, building codes, civil rights and
occupational health and safety laws and regulations) applicable thereto and to
the conduct of its business, except where the failure to so comply would not
have a material adverse effect on the transactions contemplated hereby or on
the condition (financial or otherwise), business, net worth, assets,
properties, operations or prospects of the Company.
SECTION 4.14 Tax Matters. For purposes of this Agreement
"Taxes" or "Tax" means all net income, capital gains, gross income, gross
receipts, sales, use, ad valorem, franchise, profits, license, withholding,
payroll, employment, excise, severance, stamp, occupation, premium, property,
or windfall profit taxes, customs duties, or other taxes, fees, assessments,
or charges of any kind whatsoever, together with any interest and any
penalties, additions to tax, or additional amounts imposed by any taxing
authority, ("Taxing Authority") upon the Company.
(i) Except as set forth on Schedule 4.14, the Company has filed
all federal, foreign, state and local tax returns, tax information
returns, reports, and estimates for all years and periods (and portions
thereof) ending on or before the Closing Date for which any such
returns, reports or estimates were due. All such returns, reports,
and estimates were prepared in the manner required by applicable law,
and all Taxes shown thereby to be payable and all tax payments which are
due, regardless of the making of any filing, have been paid.
(ii) Schedule 4.14 sets forth all jurisdictions in which the
Company has filed or will file income or franchise tax returns for each
taxable period, or portion thereof, ending on or before the Closing
Date.
(iii) Except as set forth on Schedule 4.14, the Company has
withheld or will withhold amounts from its respective employees and has
filed or will file all federal, foreign, state, and local returns and
reports with respect to employee income tax withholding and social
security and unemployment taxes for all periods (or portions thereof)
ending on or before the Closing Date, in compliance with the provisions
of the Internal Revenue Code of 1986, as amended and currently in
effect (the "Code"), and other applicable federal, foreign, state, and
local laws.
(iv) The Company has paid, or provided a sufficient reserve on
the Interim Balance Sheet or the Company's books, for the payment of,
all federal, state, local, and foreign Taxes with respect to all
periods, or portions thereof, up to and including the Closing Date.
(v) None of the federal, foreign, state and local tax returns of
the Company have been examined by the appropriate taxing authority and,
except as set forth in Schedule 4.14, there are no material claims or
investigations by any Taxing Authority or, to the best knowledge of the
Stockholder and the Company, threatened, against the Company for any
past due Taxes; and there has been no waiver of any applicable statute
of limitations or extension of the time for the assessment of any tax
against the Company except as set forth on Schedule 4.14.
(vi) The Company has not made, signed, or filed, nor will it
make, sign or file any consent under Section 341(f) of the Code with
respect to any taxable period ending on or before the Closing Date.
(vii) The Stockholder is not a foreign person within the meaning
of Section 1445(b)(2) of the Code.
(viii) The Company has never been, nor is it currently, a party to
any agreement relating to the sharing of any liability for, or payment
of, taxes with any other person or entity.
(ix) The Company has delivered to AWT before the date hereof,
correct and complete copies of all tax returns, tax information returns
and estimates filed with any federal, foreign, state or local tax
authority for the Company's fiscal years ending December 31, 1985 through
and inclusive of 1988.
SECTION 4.15 Corporation Status. The Company is a "small
business corporation" within the meaning of Section 1361(b) of the Code. The
Company, the Stockholder and all former stockholders of the Company have taken
all necessary corporate action to authorize the Company to elect under
Section 1362 of the Code to be an "S corporation" for federal income tax
purposes. The election to be an S corporation for federal income tax
purposes was validly made by timely filing in the appropriate office of the
Internal Revenue Service a properly executed Form 2553. All required
consents to such election by all former stockholders of the Company and the
Stockholder have been obtained and were filed with the Form 2553. Such
election has been in effect throughout the Company's current taxable year,
has not been revoked or terminated, and will not be revoked or terminated
prior to the Closing. Similar elections or consents have been executed and
filed in every state in which the Company does business if such state
recognizes S corporation status and requires similar consents or elections.
SECTION 4.16 Leased Real Property.
(i) Schedule 4.16 is a list, true and correct, of all leases and
subleases (collectively, the "Real Property Leases"), with respect to
real property leased by the Company (the "Leased Real Property"). The
Stockholder has delivered to AWT true and correct copies of each of the
Real Property Leases at least five (5) business days before the date
hereof.
(ii) Neither the Company nor the Stockholder owes any money to
any architect, contractor, subcontractor or materialman for labor
performed or materials supplied in connection with Leased Real Property.
SECTION 4.17 Real Property. (i) Schedule 4.17 is a list,
true and correct, of all property of which the Company is the record or
beneficial owner (the "Real Property"). Except for the Real Property and any
easements or rights-of-way for the benefit of the Company which are
appurtenant thereto and the Leased Real Property and any easements or
rights-of-way for the benefit of the Company which are appurtenant thereto,
there are no real property interests used in the business of the Company. The
Stockholder has delivered to AWT true and correct copies of all deeds or other
instruments of title conveying the Real Property to the Company.
(ii) Schedule 4.17 is a list, true and correct, of all easements,
and other instruments in the nature of easements, including, without
limitation, agreements, indentures, franchise agreements and license
agreements, in each case with respect to real property and to which the
Company is a party (all such easements and/or other agreements are
hereinafter collectively referred to as "Easements.") The Stockholder
has delivered to AWT true and correct copies of all Easements.
(iii) As to the Real Property, neither the Company nor the
Stockholder has received notice of, or has knowledge of, any pending or
threatened condemnation proceedings.
(iv) To the Stockholder's best knowledge, all components and
systems of all buildings, structures and other improvements included
within the Real Property are in good working order, adequate for the
Company to operate its business in accordance with good industry
standards and to enable the Real Property to be used and operated,
except to the extent construction is incomplete thereon, as it is
currently being used and operated.
(v) There are presently no mechanics or materialmen's liens
recorded against the Real Property.
SECTION 4.18 Tenancies. Except for the Real Property
Leases, and except as set forth in Schedule 4.18, there are no leases or
tenancies for any part of the Real Property or the Leased Real Property that
shall remain in effect after the Time of Merger, nor shall any third party have
any rights to the purchase, use or possession of all or any part of the Real
Property or the Leased Real Property at the Time of Merger.
SECTION 4.19 Title and Related Matters. (a) The Company
has, and, after giving effect to the transactions contemplated hereby, the
Surviving Corporation will have, (A) good and marketable title to, or a valid
leasehold interest in, as the case may be, all of the Real Property, Leased
Real Property, and Easements, with all rights under applicable state laws to
maintain ownership, leasehold status and/or Easement holder status, as
applicable, and to maintain the use and benefit of such property as it is
being used and enjoyed on the date hereof, and (B) good and marketable title
to, or a valid leasehold interest in, (i) all other properties and assets
(whether personal or fixed, tangible or intangible) reflected in the Company's
Interim Balance Sheet or acquired after August 31, 1989 by the Company, (ii)
all properties or assets held by the Company which are subject to operating
leases as defined in accordance with GAAP and are not reflected in the
Company's Balance Sheet, and (iii) all other properties and assets used by the
Company and material to the conduct of its business, except for, in each such
case, any of such properties or assets sold or otherwise disposed of for fair
value, as determined in the good faith judgment of the Board of Directors of
the Company, or with respect to which the lease has expired or has been
terminated since August 31, 1989, in the ordinary course of business. All
properties, Easements, and assets referred to in the preceding sentence are
presently owned, [he"d] under lease or held under easement by the Company,
and immediately after the Time of Merger, will be owned, held under lease or
held under easement by the Surviving Corporation, free and clear of all
mortgages, liens, pledges, charges, security interests, options to purchase
or other encumbrances of any kind or character except (i) liens for taxes,
assessments and governmental charges or levies imposed upon it or upon its
income or profits, or upon any of its property, real or personal, or upon any
part thereof if the same shall not at the time be due and payable, or are being
contested in good faith by appropriate proceedings and (ii) liens imposed by
law, such as those of carriers, warehousemen and mechanics, for sums not yet
due or being contested in good faith by appropriate proceedings
(collectively, "Liens" and individually, a "Lien") and with respect to the
Real Property, except Liens listed on Schedule 4.17. The Real Property Leases
and all other documents and agreements pursuant to which the Company has
obtained the right enforceable, except as enforceability thereof may be
limited by applicable bankruptcy, reorganization, insolvency, moratorium, or
other similar laws now or hereafter in effect, or by legal or equitable
principles, relating to or limiting creditors' rights generally and except
that the remedy of specific performance and injunctive and other forms of
equitable relief are subject to certain equitable defenses and to the
discretion of the court before which any proceeding therefor may be brought;
all Easements, licenses, permits and authorizations in any manner related to
the operation of the business on the Real Property, the Leased Real Property
and the Easements are in good standing, valid and enforceable in accordance
with their respective terms; and there is not, under any of the foregoing
instruments, documents or agreements, any existing default or event which with
notice or lapse of time, or both, would constitute a default the effect of
which would have a material adverse effect on the Company. To the best
knowledge of the Stockholder and the Company, all improvements on the Real
Property and the Leased Real Property conform in all material respects to
applicable state and local zoning and other land use ordinances and building
codes.
(b) Title to Company and Common Stock. The Stockholder is now,
and shall at the Time of Merger be, the sole record and beneficial owner of
all of the issued and outstanding shares of the Company Common Stock, which
shall, at the Time of Merger, be free and clear of any and all Liens, and
subject to no options, proxies, contracts, calls, commitments or rights of
third parties of any kind whatsoever.
SECTION 4.20 Insurance. The Company's tangible real and personal
property and assets, whether owned or leased, are insured against and Schedule
4.20 is a true, correct and complete schedule of all casualty, property
damage, general liability and other policies or binders of insurance or
programs of self insurance which relate to the Company's business. The
coverage under each such policy and binder is in full force and effect, and no
notice of cancellation or nonrenewal with respect to, or disallowance of any
claim under, any such policy or binder has been received by the Company.
Neither the Stockholder nor the Company has knowledge of any facts or the
occurrence of any even, which reasonably might form the basis of any claim
against the Company relating to its business or operations or any of its
assets or properties covered by the policies or binders set forth in Schedule
4.20, which claim the Stockholder or the Company has reason to believe will
increase the insurance premiums payable under any such policy or binder.
Notwithstanding the foregoing, neither the Company nor the Stockholder is
making any representation or warranty regarding the capitalization or
condition (financial or otherwise) with respect to American Safety Risk
Retention Group or American Safety Insurance Group.
SECTION 4.21 Authorizations. The Company has complied with
and has made all filings required pursuant to all federal, state, municipal or
local constitutional provisions, laws, ordinances, rules, regulations and
orders in connection with the conduct of the business of the Company, except
where the failure to comply would not have a material adverse effect on the
Company. Except as set forth on Schedule 4.21, the Company has all
governmental licenses, permits and authorizations necessary for the conduct of
its business as currently conducted (the "Permits"), and all such Permits are
and, as of the Closing Date, will be, in full force and effect, and no
violations exist in respect of any such Permits, and no proceeding is pending
or, to the best knowledge of the Stockholder or the Company, threatened, to
revoke or limit any provision thereof. All such Permits are set forth on
Schedule 4.21. The Company has not violated nor has the Stockholder or the
Company any knowledge of any alleged or potential violation of any
constitutional provisions, laws, ordinances, rules, regulations or orders,
cured or not, or any injunction or governmental order or decree, except those
violations the existence of which would not have a material adverse effect on
the Company. There are no proceedings pending or threatened that may result in
the revocation, cancellation or suspension, or any adverse modification of,
any of such Permits.
SECTION 4.22 Pension and Other Benefit Plans.
(a) Schedule 4.22 contains a true and complete list and
description of, and the Stockholder has delivered to AWT true and complete
copies of, each pension, retirement, profit-sharing, stock purchase, stock
option, vacation, severance, deferred compensation, bonus or other incentive
plan, or other employee benefit program, arrangement, agreement or
understanding, or medical, vision, dental or other health plan, or life
insurance or disability plan, or any other employee benefit plans, including,
without limitation, any "employee benefit plan" as defined in Section 3(3) of
the Employee Retirement Income Security Act of 1974, as amended ("ERISA"), to
which the Company contributes or is a party or is bound or under which it may
have liability and under which employees or former employees of the Company
(or their beneficiaries) are eligible to participate or derive a benefit.
Except as described in Schedule 4.22, each employee benefit plan which is a
"group health plan" as such term is defined in Section 162(i)(2) of the Code
satisfies the applicable requirements of Section 4980B of the Code. Except as
described on Schedule 4.22, the Stockholder and the Company have no intention
or commitment, whether legally binding or not, to create any additional plan,
practice or agreement or modify or change any existing plan, practice or
agreement that would affect any employee or terminated employee of the Company
and the benefits under all employee benefit plans are as represented and have
not been and will not be increased subsequent to the date documents have been
provided.
(b) Except as disclosed on Schedule 4.22, the Company does not
sponsor, maintain or contribute to any employee benefit plans within the
meaning of Section 3(3) of ERISA, which are subject to Title I of ERISA (the
"ERISA Plans") for the benefit of employees or former employees of the
Company. Each pension plan within the meaning of Section 3(2) of ERISA
("Pension Plan") is identified on Schedule 4.22. The following
representations are made with regard to the ERISA Plans or the Pension Plans,
if so limited:
(1) except as set forth on Schedule 4.22, the Company does
not contribute to or have an obligation to contribute to or has at any
time contributed to or had an obligation to contribute to, sponsor or
maintain nor at any time has sponsored or maintained a multiemployer plan
within the meaning of Section 3(37) of ERISA and the Company has not
incurred any withdrawal liability, or suffered a "complete withdrawal"
or a "partial withdrawal" with respect to a multiemployer plan,
including any liability attributable to a current or former member of
the Company's "controlled group" (as defined in Section 4001(a)(14) of
ERISA);
(2) the Pension Plans and related trusts have been
determined by the Internal Revenue Service ("IRS") to be qualified under
the Code, the IRS has taken no action to revoke such determination or
qualification and the Company has not acted or has not failed to act in
such a way which would adversely affect the qualified status of the
Pension Plans;
(3) the Company has, in all material respects, performed
all obligations, whether arising by operation of law or contract,
required to be performed under or in connection with the ERISA Plans,
and the Stockholder has no knowledge of any default or violation by any
other party with respect to the ERISA Plans;
(4) the Company has complied in all material respects with
ERISA, and, where applicable, the Code, regarding the ERISA Plans;
(5) except as disclosed on Schedule 4.22, all resorts and
disclosures relating to the ERISA Plans required to be filed with or
furnished to governmental agencies, plan participants or plan
beneficiaries have been or will be filled or furnished in accordance with
applicable law in a timely manner;
(6) there are no actions, claims or proceedings pending
(other than routine claims for benefits) or, to the best knowledge of
the Stockholder, threatened, against any ERISA Plan or against the
assets funding any ERISA Plan;
(7) full payment has been or will be made, in accordance
with Section 404(a)(6) of the Code, of all amounts which the Company is
required to pay under the terms of the Pension Plans as contributions to
the Pension Plans as of the last day of the most recent plan year of the
Pension Plans ended prior to the date of this Agreement or with respect
to Section 412(m) of the Code, and neither the Pension Plans nor the
trusts established thereunder have incurred any "accumulated funding
deficiency" (as defined in Section 302 of ERISA and Section 412 of the
Code), whether or not waived, as of the last day of the most recent plan
year of the Pension Plans ended prior to the date of this Agreement and
the Company has fulfilled its obligations under minimum funding
standards of ERISA and the Code;
(8) the Company maintains adequate accruals on its books
to reflect accrued contributions to each of the Pension Plans for the
current plan year and to reflect accrued medical and dental claims
incurred, but not yet paid, under the terms of any ERISA Plan which is a
welfare plan within the meaning of Section 3(1) of ERISA (a "Welfare
Plan");
(9) no transactions have occurred with respect to the
Pension Plans or the assets thereof which could result in the imposition
on the Company or the administrators or trustees under the Pension
Plans, either directly or indirectly, of taxes or penalties imposed
under Section 4975 of the Code or Section 502(i) of ERISA;
(10) with respect to the Pension Plans, regardless of
whether such plans are subject to Title IV of ERISA, no termination or
reportable event, as defined in Section 4043(b) of ERISA, has occurred
or is anticipated to occur;
(11) other than applications for determination, no action
is pending with respect to the Pension Plans before the IRS, the
Department of Labor, the Pension Benefit Guaranty Company ("PBGC') or
before any state or local governmental agency;
(12) no act or omission constituting a breach of fiduciary
duties has occurred with respect to the ERISA Plans or the assets
thereof which could subject the Company or AWT, either directly or
indirectly, to any liability;
(13) no liability under Title IV of ERISA has been incurred
by the Company since the effective date of ERISA, other than liability
for premiums due to the PBGC which has been satisfied in full and
neither the Stockholder nor the Company knows of any facts or
circumstances which might give rise to any liability of the Company
under Title IV of ERISA which could reasonably be anticipated to result
in any claims being made against AWT by the PBGC, including any
liability attributable to a current or former member of the Company's
"controlled group" within the meaning of Section 414(b), (c), (m) or (o)
of the Code;
(14) except as set forth in Schedule 4.22, the fair market
value of the assets of each of the Pension Plans which is a "defined
benefit plan" as defined in Section 3(35) of ERISA equals or exceeds the
present value of accrued benefits under each such plan computed on a
projected benefit obligation basis, based upon actuarial assumptions set
forth in the plans and which are reasonable in the aggregate;
(15) the PBGC has not instituted any proceedings to
terminate any of the Pension Plans;
(16) no security is required to be provided pursuant to
Section 401(a)(29) of the Code with respect to any employee benefit
pension plan;
(17) any bonding required by applicable provisions of ERISA
with respect to any of the ERISA Plans has been obtained and is in full
force and effect;
(18) each Welfare Plan is intended to meet currently
applicable requirements for tax favored treatment under Subchapter B of
Chapter 1 of the Code, is in compliance with such requirements and, if
applicable, with the requirements of Sections 419 and 419A of the Code
and there is no disqualified benefit (as such term is defined in Section
4976(b) of the Code) which would subject the Stockholder, the Company or
AWT to a tax under Section 4976;
(19) the Company neither maintains nor contributes to any
Welfare Plan which provides any benefits to retirees;
(20) the transactions contemplated by this Agreement will
not result in liability for severance pay or any similar payment to the
employees of the Company;
(21) except as disclosed on Schedule 4.22, there are no
employment, consulting, severance or similar agreements in effect with
respect to the Company; and
(22) except as disclosed on Schedule 4.22, the terminations
of the Falcon Associates, Inc. Pension Plan, the Falcon Associates, Inc.
Deferred Benefit Pension Plan and the Falcon Associates, Inc. Money
Purchase Plan (the "Terminated Plans") do not affect their qualified
status.
(c) The Stockholder has delivered to AWT and its counsel true
and complete copies of (i) all documents governing the ERISA Plans, including
all amendments thereto which will become effective at a later date; (ii) the
latest IRS determination letter obtained with respect to each of the Pension
Plans; (iii) Form 5500 for the most recent completed plan year for each of the
ERISA Plans, together with all schedules forming a part thereof; (iv) the most
recent actuarial valuation for any Defined Benefit Plan; (v) any form, other
than Form 5500, required to be filed for the most recently completed plan year
for any Defined Benefit Plan with any governmental agency; (vi) all summary
plan descriptions, if any, and insurance policies or contracts relating to the
ERISA Plans; (vii) the annuity contracts funding obligations of any Defined
Benefit Plan; (viii) all employment manuals and (ix) all documentation
relating to the termination of the Terminated Plans.
SECTION 4.23 Finders or Brokers. Neither the Company nor the
Stockholder has employed any investment banker, broker, finder or intermediary
in connection with the transactions contemplated hereby who is entitled to a
fee or any commission in connection with the execution of this Agreement or
any transaction contemplated under this Agreement other than Howard, Lawson &
Co. ("Broker"). The Company has not and, at the Closing Date, will not have
incurred transaction costs or fees greater than $1,050,000, including but not
limited to the fees, expenses and costs of the Broker.
SECTION 4.24 Certain Interests. Except as set forth in Schedule
4.24 and except as set forth in the Interim Balance Sheet or the notes
thereto, to the best knowledge of the Stockholder and the Company, since
December 31, 1988 no officer or director of the Company or any relative (by
blood, marriage or adoption) of such officer or director, except in the
ordinary course of business, (a) has acquired any interest in any property of
the Company (except as a stockholder of the Company) or (b) has entered into
any business relationship with the Company (except as an officer, director or
stockholder thereof), in the case of either (a) or (b) of a nature which would
be required to be disclosed in a proxy statement relating to the election of
directors filed under the Securities Exchange Act of 1934, as amended (the
"Exchange Act").
SECTION 4.25 Employees. To Stockholder's and the Company's
knowledge, as of the date hereof no employee of the Company is, or is now
expected to be, in violation of any term of any employment contract, patent
disclosure agreement, non-competition agreement, or any other contract or
agreement or any restrictive covenant or any other common law obligation to a
former employer relating to the right of any such employee to be employed by
the Company because of the nature of the business conducted or to be conducted
by the Company or to the use of trade secrets or proprietary information of
others, and the employment by the Company of its employees does not subject
the Company to any such liability. There is neither pending nor threatened
any action, suit, proceeding or claim, or threat thereof with respect to any
contract, agreement, covenant or obligation referred to in the preceding
sentence.
SECTION 4.26 Compliance with Environmental Laws. Except as set
forth in Schedule 4.26, here are no present or past Environmental Conditions
in any way relating to the business of the Company. For purposes of this
Agreement, "Environmental Condition" means (i) any environmental pollution,
including without limitation any contaminant, irritant or pollutant, from any
spill, discharge, leak, emission, escape, injection, dumping or release of any
kind whatsoever in any work places or to any medium, including without
limitation air, land, surface waters or ground waters or from any generation,
transportation, treatment, discharge, storage or disposal of waste materials,
hazardous materials, toxic materials or from the storage, use or handling of
any waste, hazardous or toxic materials, except in all cases for any
environmental pollution occurring in the ordinary course of the business of
the Company and in accordance in all material respects with all applicable
laws and regulations relating thereto, or (ii) any violation of any foreign,
federal, state or local environmental law, rule, regulation or order as a
result of or in connection with any of the foregoing, except those violations
the existence of which would not have a material adverse effect on the
Company. Except as set forth on Schedule 4.26, the operation of the business
of the Company does not violate, and has not in the past violated, in any
material respect, any applicable law, rule, regulation or order, whether
foreign, state, federal or local, relating to air, water, or noise pollution,
employee health and safety, or the production, storage, labeling,
transportation or disposition of waste or hazardous or toxic substances.
Neither the Stockholder nor the Company, nor, to the best knowledge of the
Stockholder and the Company, any other person has stored any chemical
substances, including, without limitation, any waste materials, petroleum,
crude oil, PCB'S, asbestos or any "Hazardous Substances," "Pollutants" or
"Contaminants," (collectively, the "Contaminants") as such terms are defined in
the Comprehensive Environmental Response Compensation and Liability Act of
1980, as amended ("CERCLA"), on, beneath or about any of the respective
properties of the Company, except in compliance in all material respects with
all applicable laws, rules and regulations. The Company has not received any
notice advising the Company that it is potentially responsible for response
costs with respect to a release or threatened release of Contaminants.
Neither the Stockholder nor the Company nor, to the best knowledge of the
Stockholder and the Company, any other person, has transported, buried, dumped
or otherwise disposed of any Contaminants on, beneath or about any of the
respective properties of the Company, or on, beneath or about any other
property, except in compliance in all material respects with all applicable
laws, rules and regulations. Neither the Stockholder nor the Company has
violated any environmental, zoning or land use ordinance, law, rule,
regulation or order relating to the operation of the business of the Company,
or any of the processes followed or products made thereby, including, but not
limited to, CERCLA, the Toxic Substances Control Act of 1976, as amended, the
Clean Air Act, as amended, the Federal Water Pollution Control Act, as
amended, the Occupational Safety and Health Act of 1970, as amended, or the
Asbestos Hazard Emergency Response Act of 1986, except those violations the
existence of which would not have a material adverse effect on the Company.
SECTION 4.27 Accounts Receivable. The Company's accounts
receivable constitute only legally enforceable obligations of third parties in
connection with the sale of goods and/or services, are good and collectible at
the aggregate recorded amounts thereof (subject to no defense, counterclaim or
setoff) in the ordinary course of business, subject to the allowance for
doubtful accounts (the "Accounts Allowance") of the Company with respect
thereto stated in the Interim Balance Sheet, represent the full invoice value
of all accounts included therein and have not been sold or encumbered.
SECTION 4.28 Inventories. The inventories of the Company are, in
the aggregate, of a quality usable or saleable in the ordinary course of
business, net of the aggregate reserves (the "Inventory Reserves") of the
Company with respect thereto stated in the Financial Statements. The Inventory
Reserves have been established, and through the Closing Date will be
maintained, in a manner consistent with accounting practices of the Company
followed at December 31, 1988.
SECTION 4.29 Banks. Schedule 4.29 contains a correct and
complete list of every bank, savings and loan, or other financial including,
but not limited to, cash contribution accounts, or safe deposit boxes or lock
boxes, and the corresponding account identification number, in any, and the
names of every person authorized to draw on such accounts or have access to
such boxes.
SECTION 4.30 Labor. Except as set forth in Schedule 4.30, there
are no agreements with, or pending petitions for recognition of, a labor union
or association as the exclusive bargaining agent for any or all of the
Company's employees; no such petitions have been pending at any time within
two (2) years of the date of this Agreement, and, to the best knowledge of the
Stockholder and the Company, there has been no organized effort by any union
or other group seeking to represent any employees of the Company as their
exclusive bargaining agent at any time within two (2) years of the date of
this Agreement. There are no labor strikes, work stoppages or other labor
troubles, other than routine grievance matters, now pending, or, to the best
knowledge of the Stockholder and the Company, threatened, against the Company,
nor have there been any such labor strikes, work stoppages or other labor
troubles, other than routine grievance matters, at any time within two (2)
years of the date of this Agreement.
SECTION 4.31 Transfer Taxes. No sales taxes, other property
transfer taxes, nor any other tax, including but not limited to corporation
income and franchise taxes, are required to be paid by the Company solely in
connection with or as a direct result of the transactions contemplated by this
Agreement except for corporate income taxes which will be payable as a result
of the termination of the Company's S-corporation election under the Code and
under applicable state laws.
SECTION 4.31 Customers. Schedule 4.32 sets forth a true and
correct list of the ten largest customers of the Company in terms of sales or
services during the fiscal year ended December 31, 1988 and during the eight
(8) months ended August 31, 1989. To the best knowledge of the Stockholder and
the Company, there has not been any material adverse change in the business
relationship of the Company with any customer named in Schedule 4.32. Except
for the customers named in Schedule 4.32, the Company did not have any
customer who accounted for more than 5% of its sales during the period from
January 1, 1988 to August 31, 1989.
SECTION 4.32 Distribution of Earnings. The Stockholder has not
received distributions from the Company during the period from January 1, 1988
through the Closing Date, which, when aggregated with the dividends described
in Section 6.3(c) hereof, would exceed the aggregate amount of the Company's
earnings for such period.
SECTION 4.33 Unlawful Payment. Neither the Stockholder nor the
Company nor any officer or director of the Company, or, to the best knowledge
of the Stockholder and the Company, any employee, agent or representative of
the Company has made, directly or indirectly, with respect to the business of
the Company, any illegal political, charitable or other contributions or
payments from corporate funds.
SECTION 4.34 Stock Held for Investment. All of the shares of AWT
Common Stock to be received by the Stockholder pursuant to the Merger are
being acquired for the purpose of investment and not with a view to the
distribution or resale thereof in violation of the Securities Act of 1933, as
amended (the "Securities Act").
SECTION 4.35 The Company has obtained all bonds necessary under
the terms of the Contracts to which it is a party or under applicable laws,
rules or regulations, and such bonds are adequate under the terms of such
Contracts and laws, rules and regulations.
SECTION 4.36 Full Disclosure. The statements contained in this
Agreement, the Schedules delivered concurrently herewith and in any other
certificates or documents executed and delivered by or on behalf of the Company
or the Stockholder pursuant to this Agreement are true and correct in all
material respects and do not omit any material fact necessary to make the
statements therein not misleading. All copies of documents furnished by or on
behalf of the Stockholder or the Company to AWT or its officers, attorneys,
accountants or other representatives under any provision of this Agreement are
true and correct copies of such documents, and there are no amendments or
modifications thereto except as set forth in such documents. The minute books
of the Company submitted for inspection by AWT contain full, complete and
accurate records of all meetings and other actions taken by its directors and
stockholders.
ARTICLE I
REPRESENTATIONS AND WARRANTIES OF AWT AND FAC
SECTION 5. Representations and Warranties of AWT and FAC. In
addition to the representations as to capitalization set forth in Article I
hereof, AWT and FAC, jointly and severally, represent and warrant to the
Stockholder and the Company as follows:
SECTION 5.1 Organization. Each of AWT and FAC is a corporation
duly organized, validly existing and in good standing under the laws of its
jurisdiction of incorporation, and has all requisite power and authority,
corporate and otherwise, to own, operate and lease its properties and to carry
on its business substantially as they are being owned, operated and conducted
on the date of this Agreement. Each of AWT and FAC is duly qualified and in
good standing in each of the jurisdictions listed in Schedule 5.1, which are
all of the jurisdictions in which the nature of the property owned, leased or
operated by or the nature of the business conducted by it requires such
qualification and in which its failure so to qualify and be in good standing
would materially and adversely affect the condition (financial or otherwise),
business, net worth, properties, operations or prospects of AWT or FAC, as the
case may be.
SECTION 5.2 Authority Relative to this Agreement. (a) Each of
AWT and FAC gas full corporate power and authority to execute and deliver this
Agreement and to consummate the transactions contemplated hereby. The
execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby have been, or, at the time of execution or
consummation, will be, duly and validly authorized by the Boards of Directors
of AWT and FAC and no other corporate proceedings on the part of either AWT or
FAC are or will be necessary to authorize this Agreement or to consummate the
transactions contemplated hereby. This Agreement has been, and each of the
agreements to be executed pursuant hereto, will be, at the time of execution,
duly and validly executed and delivered by AWT and/or FAC, as applicable, and
constitutes or will constitute a valid and binding obligation of AWT and/or
FAC, as applicable, enforceable in accordance with their respective terms
except as may be limited by applicable bankruptcy, insolvency, reorganization,
moratorium or other similar laws now or hereafter in effect, or by legal or
equitable principles, relating to or limiting creditors' rights and except
that the remedy of specific performance and injunctive and other forms of
equitable relief are subject, to certain equitable defenses and to the
discretion of the court before which any proceeding therefor may be brought.
SECTION 5.3 Consents and Approvals; No Violation. Except as set
forth in Schedule 5.3, neither the execution and delivery of this Agreement
nor the consummation of the transactions contemplated hereby will conflict
with or result in any violation of, or create a default or loss of a material
benefit under, or permit the acceleration of (whether after the giving of
notice or the lapse of time or both) any obligation under, or result in the
creation or imposition of any Lien upon AWT or FAC or any of their properties
under any provision of the Certificate of Incorporation or By-Laws of AWT or
FAC or any note, bond, mortgage, indenture, bonding agreement, loan agreement,
insurance policy or binder of insurance, license, agreement or lease, or other
instrument to which AWT or FAC is a party, or by which it or any of their
properties is bound, other than any such conflicts, breaches, violations or
defaults which individually and in the aggregate (i) do not and will not have
a material adverse effect on AWT or FAC or (ii) will be cured (such cure not
having a material adverse effect on AWT or FAC) or waived by the Company in
writing prior to the Closing Date. Except as set forth in Schedule 5.3, no
consent, approval, order or authorization of, or registration, declaration or
filing with, any federal, state, municipal, territorial or foreign
governmental authority (or any other public body or authority, domestic or
foreign) is required by or with respect to AWT or FAC in connection with the
execution and delivery of this Agreement or the consummation by AWT or FAC of
the transactions contemplated hereby, except in those instances where the
failure to obtain such consent or approval or the failure to make such filing,
declaration or registration would not in the aggregate have a material adverse
effect upon AWT or FAC.
SECTION 5.4 Business. FAC has not engaged in any activities
other than those incident to its organization or as contemplated by the terms
of this Agreement.
SECTION 5.5 Litigation. There is no Action pending, or, to the
best knowledge of AWT or FAC, threatened, against or related to the respective
properties or business of AWT or FAC which might adversely affect or restrict
the ability of any of them to consummate the transactions contemplated hereby.
SECTION 5.6 Financial Statements and Other Data. AWT has
delivered to the Stockholder copies of AWT's audited consolidated financial
statements as of and for the fiscal year ended October 31, 1988, and its
unaudited balance sheet and related statements of operations and cash flow for
the nine month period ended July 31, 1989. These financial statements,
including the notes thereto, present fairly the financial condition and
results of operations of AWT at the dates of and for the periods covered
thereby, in accordance with GAAP consistently applied throughout the periods
involved except as otherwise noted therein and except that the unaudited
financial statements do not contain all required footnote disclosure and are
subject to normal year end adjustments. AWT also has delivered to the
Stockholder copies of AWT's most recent annual report on Form 10-K and
quarterly report on Form 10-Q, proxy statements and other periodic reports
filed with the Securities and Exchange Commission (the "Commission"), pursuant
to the Securities Exchange Act of 1934 since January 31, 1989. Such reports
were filed in a timely manner and complied in all material respects with the
applicable requirements of the Exchange Act and the rules and regulations
promulgated thereunder. There are no material events relating to the business
of AWT required to be disclosed by AWT on a Form 8-K Report which have not
been disclosed to the Stockholder.
SECTION 5.7 Absence of Certain Changes, Events or Conditions.
Since the date of the last quarterly report on Form 10-Q filed by AWT with the
Commission, there has not been, nor (other than events due to changes in
general market or economic conditions) has any event occurred, which could
reasonably be expected to have any material adverse change in AWT's
consolidated financial position, results of operations or business or
prospects; and, except as disclosed in Schedule 5.7, AWT has not (i)
purchased, redeemed, issued, sold or otherwise acquired or disposed of,
directly or indirectly, any shares of its capital stock or any other of its
securities, or granted any options, warrants or other rights to purchase or
convert any obligation into any shares of its capital stock or into any of its
securities or (ii) incurred any obligation or liability, absolute or
contingent, except normal trade or business obligations or liabilities
incurred in the ordinary course of business, or mortgaged, pledged or
subjected to any Lien, any of its assets or properties, except in the ordinary
course of business.
SECTION 5.8 Accuracy of Information Furnished. No statement by
AWT or FAC contained in this Agreement, or in any Schedule hereto, and no
statement contained in any certificate or other instrument or document
furnished or to be furnished by or on behalf of any of them to the Stockholder
and the Company pursuant hereto, or in connection with the transactions
contemplated hereby, contains or will contain any untrue statement of a
material fact, or omits or will omit to state any material fact which is
required to be stated herein or therein or which is necessary to make the
statements contained herein or therein in light of the circumstances under
which they were made, not misleading.
5.9 Brokers. Neither AWT or FAC has employed any investment
banker, broker, finder or intermediary in connection with the transactions
contemplated hereby who is entitled to a fee or any commission in connection
with the execution of this Agreement or any transaction contemplated under
this Agreement.
5.10 Compliance with Laws. AWT has complied in all material
respects with all laws, regulations and orders (including, without limitation,
securities, zoning ordinances, building codes, civil rights and occupational,
health and safety laws and regulations) applicable to its business except
where the failure to so comply would not have a material adverse effect on the
transactions contemplated hereby or on the consolidated financial position of
the Company or its results of operations.
5.11 Legal Proceedings. There are no (i) Actions pending against
AWT or (ii) disputes pending between AWT (including any of its subsidiaries)
with any Taxing Authority, which would, if the party adverse to AWT were
successful, in the judgment of management, have a material adverse effect on
AWT's consolidated financial position or results of operations, other than
those Actions which have previously been disclosed in a report or other
statement filed with the Securities and Exchange Commission.
ARTICLE II
COVENANTS OF THE STOCKHOLDER AND THE COMPANY
6.1 Notification. The Stockholder shall give prompt notice to
AWT of (i) any notice of, or other communication received by the Stockholder
or the Company subsequent to the date of this Agreement and prior to the
Closing Date, relating to a default or event which, with notice or lapse of
time or both, would become a default, or which would cause any warranty or
representation of the Stockholder or the Company to be untrue or misleading in
any material respect under this Agreement and (ii) any notice or other
communication from any third party alleging that the consent of such third
party is or may be required in connection with the transactions contemplated
by this Agreement.
6.2 Additional Summaries of Accounts Receivables. Prior to the
Closing Date, the Stockholder will deliver to AWT, as soon as practicable, for
each successive monthly period ending after August 31, 1989, a true and
correct summary of all accounts receivable of the Company as at the end of
each such monthly period.
6.3 Conduct of Business; Certain Covenants. From and after the
execution and delivery of this Agreement and until the Closing Date, the
Stockholder and the Company will conduct the business and operations of the
Company in the ordinary and usual course of business, and will use their
respective best efforts to preserve intact the business, organization,
licenses, Permits, relationships and employees, agents, customers and others
having business dealings with the Company. Except as contemplated by the
terms of this Agreement, prior to the Closing Date, the Company will not, nor
will the Stockholder, cause or permit the Company to, without the prior
written consent of AWT:
(a) amend its Articles of Incorporation or Bylaws;
(b) issue any stock options, warrants or other rights calling for or
permitting the issue, transfer, sale or delivery of its capital stock;
(c) pay or declare any cash dividend or other dividend or
distribution with respect to its capital stock except that the parties
acknowledge that the Board of Directors of the Company has declared a
dividend, payable to shareholders of record on October 20, 1989, which
dividend shall, subject to Section 4.33 hereof be equal to the
undistributed earnings of the Company from January 1, 1988 through the
Closing Date (the "Dividend Amount") and which dividend shall be payable
in three installments as follows: (i) the first installment in the
amount of $2,050,000, which was paid on October 20, 1989, (ii) the
second installment in the amount of $2,000,000, which will be paid prior
to the Closing Date and (iii) the third installment, which shall be
equal to the Dividend amount less $4,050,000, and which shall be payable
on December 31, 1989, provided, however, that notwithstanding the
foregoing, in no event shall the Dividend Amount exceed $4,750,000;
(d) issue, transfer, sell or deliver any shares of its capital
stock, or securities convertible into or exchangeable for, with or
without additional consideration, such capital stock;
(e) redeem, purchase or otherwise acquire for any consideration any
outstanding shares of its capital stock or securities carrying the right
to acquire, or which are, convertible into or exchangeable for, with or
without additional consideration, such capital stock;
(f) incur any indebtedness for borrowed money, except in the
ordinary course of business from third parties or make any loans or
advances to any parent, subsidiary or affiliate or other third person,
except that the Company may borrow such funds, as may be necessary to
facilitate the payment of the dividend referred to in subsection (c)
above, and the payment of all expenses incurred by it in connection with
this Agreement or the transactions contemplated hereby, all on such
terms and conditions as shall be reasonably satisfactory to AWT;
(g) permit the occurrence or continuance of any default under any
agreement for funded debt;
(h) make any acquisition of stock or all or substantially all of the
assets or any entity;
(i) merge or consolidate with any corporation;
(j) other than the Employment Agreement between the Company and the
Stockholder in the Form of Exhibit B hereto, enter into any employment
or similar contract with, or increase the compensation payable to, any
officer or employee, except in a manner consistent with past practices;
(k) adopt, amend in any material respect or terminate any Employee
Plan, severance plan or collective bargaining agreement or make awards
or distributions under any Employee Plan not consistent with past
practice or custom;
(l) sell, enter into any contract of sale with respect to, or grant
any option to purchase, any of its assets other than in the ordinary
course of business;
(m) create, assume or permit to exist any Lien;
(n) enter into any contract including but not limited to
assignments, licenses, transfers of exclusive rights, "work for hire"
agreements, special commissions, employment contracts, purchase orders,
sales orders, mortgages and security agreements which (A) contain a
grant or other transfer, whether present, retroactive, prospective, or
contingent, by the Company, of any rights in any patented or unpatented
invention, trade secret, proprietary information, technical assistance,
trademark, service mark, trade name, copyright, product designation or
model number, or other intellectual property by whatever name designated
or (B) contain a promise made by or to the Company, to pay any lump sum
or royalty or other payment or consideration in respect to the
acquisition, practice or use of any rights in any patented or unpatented
intention, trade secret, proprietary information, technical assistance
trademark, service mark, trade name, copyright, product designation or
model number, or other intellectual property by whatever name designated;
(o) initiate any legal proceedings, including suits and
administrative proceedings except normal collection proceedings;
(p) enter into any agreement, whether written or oral, agreeing to
do any of the things described in clauses (a) through (o) of this
Section; and
(q) make any plan termination distributions under the Terminated
Plans to plan participants until the IRS has issued favorable
determination letters in connection with the termination of the
Terminated Plans, and unless all distributions in connection therewith
are in compliance with applicable law, including Treasury Reg. 5
1.401-4(c).
Prior to the Closing Date, the Stockholder, with the cooperation
of AWT where appropriate, will, and will cause the Company to:
(r) promptly comply with all filing requirements which foreign,
federal or state law may impose on the Stockholder or the Company with
respect to the Merger and the transactions contemplated hereby,
including, but not limited to, those under the Hart-Scott-Rodino
Antitrust Improvements Act of 1976, as amended (the "HSR Act") and
respond promptly to requests to file such additional information and
documentary materials as may be requested pursuant to the HSR Act
sufficiently in advance of the Closing to allow the period specified by
the HSR Act and rules, and any extensions thereof to expire prior to
Closing;
(s) use its best efforts to obtain any consent, authorization or
approval of, or exemption by, any governmental authority or agency, or
any customer, including without limitation, those necessary to transfer
all licenses or Permits of the Company to the Surviving Corporation, or
other third party, including without limitation, those persons (other
than the Stockholder or the Company) who are parties to the agreements
described on Schedule 4.4, required to be obtained or made by it in
connection with the Merger or the taking of any action in connection
with the consummation thereof, including without limitation, any
consent, authorization or approval necessary to waive any default under
any of the agreements described in Schedule 4.4 hereto;
(t) make full and timely payment of, or accrue, all amounts which
are required under the terms of the ERISA Plans that are employee
pension benefit plans and each multiemployer plan listed in Schedule
4.22 to be paid as a contribution to each such Plan with respect to the
period from the beginning of the 1989 plan year to the Closing Date,
calculated based on the data available as if the plan year ended on the
Closing Date and such contribution, when made with respect to each such
ERISA Plan that is an employee pension benefit plan, will be sufficient
to prevent an accumulated funding deficiency from occurring and will be
determined in accordance with the actuarial assumptions and cost methods
applicable to the 1989 plan year of the ERISA Plans that are employee
pension benefit plans; and
(u) use its best efforts to maintain and make full and timely
payment of all fees and annuities and take all other action appropriate
to maintain in force and effect all Permits, as well as all United
States and foreign patents, patent applications, trademark and service
mark registrations and applications for registration set forth in
Schedule 4.11 or otherwise owned or controlled by the Company and
subject to this Agreement.
6.4 Key Employees. Each of the Stockholder and the Company
agrees that from the date hereof through the Time of Merger it shall use its
best efforts to assure that the key employees of the Company remain in the
employ of the Company.
6.5 Proposals Regarding The Stockholder and the Company. Prior
to the Closing Date, each of the Stockholder and the Company (i) will not,
directly or indirectly, whether through any of its officers, employees,
representatives or otherwise, solicit, initiate or encourage any inquiries,
proposals or offers, or participate in any negotiations for discussions with
respect to or leading to any proposals or offers, for the acquisition of stock
of, or all or substantially all of the assets or the business of, or any
merger, consolidation or business combination with, the Company and (ii) will
promptly advise AWT orally and in writing of any inquiry or proposal for the
acquisition of any stock of, or all or substantially all of, the assets or
business of, or any merger, consolidation or business combination with the
Company.
6.6 Right to Investigate. Each of the Stockholder and the
Company shall afford to the officers and authorized representatives of AWT
free and full access, during normal business hours and upon reasonable prior
notice, to the offices, plants, properties, books and records of the Company
in order that AWT may have full opportunity to make such investigations as it
shall desire of the affairs of the Company, and each of the Stockholder and
the Company shall furnish AWT with such additional financial and operating data
and other information relating to the assets, property and business of the
Company as AWT shall from time to time reasonably request. Prior to the
Closing Date or at all times if this Agreement shall be terminated prior to
the consummation of the Merger, AWT shall, except as may be otherwise required
by applicable law, hold confidential all information obtained pursuant to this
Section 6.6 with respect to the Stockholder and the Company in accordance with
the Confidentiality Agreement, dated August 7, 1989. The representations,
warranties and agreements of each of the parties hereto shall be effective
regardless of any investigation that any party has undertaken or failed to
undertake.
6.7 Cooperation.
(a) The Stockholder and the Company shall cooperate with AWT in
taking any steps that may be reasonably required in order to ensure that the
transactions contemplated by this Agreement and the Plan of Merger may
properly be accounted for as a "pooling of interests" in accordance with GAAP.
(b) The Stockholder shall, from and after the Time of Merger,
cooperate with AWT and use his best efforts to provide AWT with such
information and other materials as AWT may reasonably request in the
preparation and filing, with the Securities and Exchange Commission, of any
reports or statements.
6.8 No Transfer. The Stockholder shall not sell, transfer, or
otherwise dispose, whether by sale, gift (other than to his spouse, his
children or any trust maintained for the benefit of his minor children), by
operation of law or otherwise, of the AWT Common Stock received by him
pursuant to the merger until March 19, 1990.
6.9 Payment of Loans. On or before November 30, 1989, the
Stockholder shall cause Joseph Connelly to repay, or shall, on behalf of Mr.
Connelly, repay to the Company the amount of any and all loans by the Company
to Mr. Connelly outstanding on the Closing Date, including accrued and unpaid
interest thereon.
ARTICLE III
COVENANTS OF AWT
7.1 Notification. AWT shall give prompt notice to the
Stockholder of (1) any notice of, or other communication received by AWT
subsequent to the date of this Agreement and prior to the Closing Date,
relating to a default or event which, with notice or lapse of time or both,
would become a default, or which would cause any warranty or representation of
AWT to be untrue or misleading, under this Agreement, and (ii) any notice or
other communication of any third party alleging that the consent of such third
party is or may be required in connection with the transactions contemplated
by this Agreement.
7.2 Delivery of Financial Statements. AWT shall deliver promptly
to the Stockholder copies of any of its reports on Form 10-K or Form 10-Q that
are filed with the Securities and Exchange Commission.
7.3 Hart-Scott-Rodino Filing. AWT shall promptly comply with all
filing requirements under the HSR Act and respond promptly to requests to file
such additional information and documentary materials as may be requested
pursuant to the HSR Act sufficiently in advance of the Closing to allow the
period specified by the HSR Act and rules, and any extensions thereof to
expire prior to Closing.
7.4 Compliance with Securities Laws. AWT shall take all actions
necessary to comply with the Exchange Act and the Securities Act.
7.5 Stock Issuances. Except as expressly contemplated herein,
the Company shall not, prior to the Time of Merger, issue or sell, or
authorize, commit to or propose the issuance or sale of additional shares of
AWT Common Stock or any other securities convertible into or exchangeable for
any such shares, or any rights, warrants or options to acquire any such shares
or other convertible securities.
7.6 338 Election. AWT shall not make an election under Section
338 of the Code with respect to the transactions contemplated hereby.
ARTICLE VIII
JOINT COVENANT OF THE STOCKHOLDER, THE COMPANY AND AWT
8.1 Best Efforts. Subject to the terms and conditions herein
provided, each of the Stockholder, the Company and AWT will 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 cause the Time of Merger to occur and the
transactions contemplated by this Agreement to be consummated at the earliest
practicable date, and not to undertake any course of action inconsistent with
such intended result.
ARTICLE IX
CLOSING AND TERMINATION
9.1 Closing. The closing ("Closing") of the
transactions contemplated by this Agreement shall be held on October 26, 1989
or on the date (the "Closing Date") that follows as promptly as practicable
the satisfaction of the conditions set forth i.n Section 10.3(a). Unless
otherwise agreed by the parties hereto, the Closing shall take place at the
offices of Richards & O'Neil at 885 Third Avenue, New York, New York.
9.2 Time of the Merger. Subject to the further terms hereof, the
parties hereto agree to use their best efforts to take, on or prior to the
Closing, all such actions and to execute and deliver all such instruments and
documents, as may be necessary or advisable, on the advice of counsel, to
cause the Time of Merger to occur as soon as practicable.
9.3 Termination. This Agreement may be terminated, and the
Merger contemplated hereby may be abandoned prior to the Time of Merger:
(a) by mutual written consent of the Stockholder and the
Company, on the one hand, and AWT and FAC, on the other hand; or
(b) notwithstanding anything herein to the contrary, by AWT and
FAC, if the Closing shall not have taken place prior to or on October 31,
1989.
9.4 Effect of Termination. In the event of the termination and
abandonment of this Agreement pursuant to Section 9.3 hereof, this Agreement
shall forthwith become void and have no effect, without any liability on the
part of any of the directors, officers or stockholders of any party, except
that termination pursuant to Section 9.3 shall not relieve any party from (a)
liability for any intentional breach of any representation, warranty or
covenant contained in this Agreement, and (b) any obligation under Section
6.7 and Article XI.
ARTICLE X
CONDITIONS TO CONSUMMATION OF THE MERGER
10.1 Conditions to Obligations of AWT and FAC. The
obligation of AWT and FAC to effect the Merger is subject to the satisfaction
at the Time of Merger of the following conditions unless waived in writing by
AWT:
(a) Representations and Warranties. The representations and
warranties of the Stockholder and the Company set forth in this Agreement
shall be true, accurate and complete in all material respects as of the date
hereof and as of the Time of merger, with the same force and effect as if such
representations and warranties were made anew at and as of the Time of merger
(except for the effect of transactions contemplated in this Agreement). AWT
shall have received on the Closing Date a certificate of the Stockholder and
the Chairman of the Board or President and Treasurer of the Company dated the
Closing Date to the foregoing effect.
(b) Performance of Obligations of the Stockholder and the
Company. Each of the Stockholder and the Company shall have performed in all
material respects all obligations required to be performed by him or it under
this Agreement at or prior to the Closing Date, and AWT shall have received
certificates of the Stockholder and of the Chairman of the Board or President
and Treasurer of the Company dated the Closing Date to the foregoing effect.
(c) Opinion of the Stockholder's Counsel. AWT shall have
received from Bolger, Picker & Weiner an opinion, dated the Closing Date, in
form and substance satisfactory to counsel for AWT, substantially to the
effect set forth in Exhibit D hereto.
(d) No Order, Etc. As of the Closing Date, no order, judgment
or decree by any court or governmental body shall have been entered
restraining, prohibiting or otherwise interfering with, or the effect of which
would be to restrain or prohibit or otherwise interfere with either the
transactions contemplated herein or the operation of the assets and businesses
of the Company after the Effective Date.
(e) Litigation. As of the Closing Date, there shall be no
actions pending or threatened against AWT or FAC, or any of their respective
directors or officers, or involving the assets or properties of either of
them, for the purpose of enjoining or preventing the consummation of the
Merger or otherwise claiming that such consummation is improper.
(f) Consents and Approvals. There shall have been received by
the Stockholder all consents, amendments, modifications and regulatory
approvals referred to in Sections 4.4 and 6.4(r) of this Agreement and there
shall be no agreement, contract, license, lease, franchise, permit or other
instrument of the Company, material to the business of the Company, as to
which the interest of the Company will be impaired by the Merger.
(g) No Material Adverse Change. Notwithstanding the disclosure
thereof pursuant to the provisions of this Agreement, between the date hereof
and the Closing Date, there shall have been no material adverse change, or
discovery of a condition or the occurrence of an event which has resulted or
can reasonably be expected to result in such change, in the financial
condition, business, property or prospects of the Company other than changes
expressly permitted under or contemplated by this Agreement.
(h) Employment Agreement. The Stockholder shall execute and
deliver to AWT an Employment Agreement, substantially in the form of Exhibit C
hereto.
(i) Permits. The Company shall have all Permits in the states
where it currently conducts or, as of the Closing Date, will conduct business.
(j) Connelly Shares. The Stockholder shall have delivered to AWT
evidence, satisfactory to AWT and its counsel, that all shares of Company
Common Stock transferred by Joseph Connelly to the Stockholder have been
released from escrow and are, at the Time of Merger, held beneficially and of
record by the Stockholder free and clear of all claims and restrictions on
transfer or otherwise.
(k) Repayment of Loans. Subject to Section 6.10 hereof, the
Stockholder shall have delivered to AWT evidence, satisfactory to AWT and its
counsel, that the outstanding amount of any loans by the Company to the
Stockholder or to any affiliate of the Stockholder (as such term is defined in
Rule 12b-2 of the Exchange Act), have been repaid in full, including all
accrued interest thereon, if any.
(l) The Stockholder shall have executed and delivered to AWT the
Escrow Agreement in the Form of Exhibit B hereto.
10.2 Conditions to Obligations of the Stockholder and the
Company. The obligation of the Stockholder and the Company to effect the
Merger is subject to the satisfaction at the time of merger of the following
conditions unless waived in writing by the Stockholder:
(a) Representations and warranties. The representations and
warranties of AWT and FAC set forth in this Agreement shall be true and
correct in all material respects as of the date of this Agreement and as of
the Time of Merger, with the same force and effect as if such representations
and warranties were made anew at and as of the Time of Merger (except for the
effect of transactions contemplated in this Agreement). The Stockholder
shall have received on the Closing Date a certificate signed by the Chairman
of the Board or the President and the Treasurer of AWT dated the Closing Date
to the foregoing effect.
(b) Performance and Obligations of AWT and FAC. Each of AWT and
FAC shall have performed in all material respects all obligations required to
be performed by it under this Agreement at or prior to the Closing Date, and
the Stockholder shall have received certificates signed by the Chairman of the
Board or the President and the Treasurer of AWT and FAC dated the Closing Date
to the foregoing effect.
(c) Opinion of Counsel for AWT. The Stockholder shall have
received from Richards & O'Neil an opinion, dated the Closing Date, in form
and substance satisfactory to counsel for the Stockholder, substantially to
the effect set forth in Exhibit E hereto.
(d) No Material Adverse Change. Notwithstanding the disclosure
thereof pursuant to the provisions of this Agreement, between the date hereof
and the Closing Date, there shall have been no material adverse change, or
discovery of a condition or the occurrence of an event which has resulted or
can reasonably be expected to result in such change, in the financial
condition, business, property or prospects of AWT or FAC, other than changes
expressly permitted under or contemplated by the Agreement.
(e) Registration Rights Agreement. AWT shall execute and
deliver to the Stockholder a Registration Rights Agreement, substantially in
the form of Exhibit F hereto.
(f) No order, Etc. As of the Closing Date, no order judgment or
decree by any court or governmental body shall have been entered restraining,
prohibiting or otherwise interfering with the consummation of the transactions
contemplated hereby.
(g) Employment Agreement. AWT shall execute and deliver to the
Stockholder an Employment Agreement substantially in the form attached hereto
as Exhibit C.
10.3 Conditions to Obligations of Both AWT and the Stockholder.
In addition to the provisions of Sections 10.1 and 10.2 hereof, the
obligations of the Stockholder and AWT to effect the Merger shall be subject
to the satisfaction of the following condition at or before the Time of Merger:
(a) Regulatory Approvals. The parties hereto shall have
received all necessary regulatory approvals of the transactions contemplated
by this Agreement, and each of such approvals shall be in full force and
effect at the Time of Merger, and not subject to any condition which, in the
judgment of either party reasonably exercised, requires the taking of or
refraining from taking any action which from an economic standpoint is
unreasonable or unduly burdensome. All applicable waiting periods under the
HSR Act shall have expired or been waived and there shall not be issued and in
effect any injunction restraining consummation of the transactions
contemplated herein, nor shall the Department of Justice of the Federal Trade
Commission have threatened or commenced a proceeding seeking such an
injunction or other relief or advised any party or its attorneys in writing of
its probable intention to do so.
ARTICLE XI
INDEMNIFICATION
11.1 Indemnification by the Stockholder. From and
after the Closing Date, the Stockholder shall indemnify and save AWT and the
Surviving Corporation, and any director, officer, employee agent or
representative of any of the foregoing (for purposes of this Section 11.1, the
aforementioned persons and entities are referred to individually and
collectively as "AWT") harmless from and against any and all loss, cost,
damage (including consequential damages), punitive damages, civil and criminal
penalties or expense (including reasonable attorneys' fees) whatsoever
(collectively, "Damages") resulting from, arising out of or in connection with:
(i) any breach of this Agreement or of any representation or
warranty of the Stockholder or the Company (other than the representations and
warranties provided in Sections 4.14 (tax matters), 4.15 (S Corporation
Status), 4.22 (Pension and Other Benefit Plans) (other than 4.22(b)(7), (8)
or (14)), 4.26 (Compliance with Environmental Laws), 4.5 (Financial
Statements), 4.22(b)(7), (8) and (14) (Pension and other Benefit Plans), 4.27
(Accounts Receivable), 4.28 (Inventories) or 4.33 (Earnings) hereof or of any
covenant or obligation of the Stockholder or the Company (other than the
covenant contained in Section 6.10 (Repayment of Loans)) contained herein,
provided ,-hat no claim may be made under this subsection (i) more than
eighteen (18) months from the Time of Merger;
(ii) any breach of the representations and warranties set
forth in Sections 4.14 and 4.15 hereof, for which a claim may be made at any
time;
(iii) any breach of the representations and warranties contained
in Section 4.22 (other than Section 4.22(b)(7), (8) or (14)) or any of the
information disclosed on Schedule 4.22 hereto, including, without limitation,
Damages arising out of or in connection with the termination of the Terminated
Plans; provided no claim may be made under this subsection (iii) more than
three (3) years from the Time of Merger;
(iv) any breach of the representations and warranties set forth
in Section 4.26 hereof; provided no claim may be made under this subsection
(iv) more than five (5) years from the Time of Merger, and further provided
that if any liability or claim shall arise from Contaminants stored, disposed
of, transported, created, generated or, otherwise dealt with by the Company,
both before and after the Closing Date, liability shall be shared between the
Stockholder and AWT based on the Stockholder's and the Company's (prior to the
Closing) on the one hand, and the Surviving Corporation's, on the other hand,
relative culpability, taking into consideration such factors as their relative
knowledge or ability to investigate, time period during which such
Contaminants were subject to such party's control and such other factors which
may reasonably be related to such determination of relative culpability;
(v) any breach of the covenant of the Stockholder contained in
Section 6.10 hereof; provided that no claim may be made under this subsection
(v) until the date audited financial statements for the combined entity
resulting from the merger are first published;
(vi) any breach of any representations and warranties set forth
in sections 4.5, 4.22(b)(7), (8) or (14), 4.27 or 4.28; provided, however,
that no claim may be made under this subsection (vi) until the date audited
financial statements for the combined entity resulting from the Merger are
first published; and
(vii) any breach of the representations and warranties set forth
in Section 4.33; provided, however, that no claim may be made under this
subsection (vii) until the date audited financial statements for the combined
entity resulting from the Merger and first published.
The indemnification rights of AWT under this Section shall not be
affected in any way if the liability or claim for which indemnity is sought
arises by reason of strict liability.
11.2 Indemnification by AWT. From and after the Closing Date
AWT shall indemnify and save the Stockholder, in his capacity as such,
harmless from and against any and all loss, cost, damage or expense (including
reasonable attorneys' fees) whatsoever resulting from, arising out of or in
connection with (i) the operation by AWT of the Company subsequent to the
Closing, and (ii) any breach of any representation or warranty of AWT or FAC
or any breach of any covenant or obligation of AWT or FAC contained herein,
provided that no claim may be made under this Section 11.2(ii) more than
eighteen (18) months from the Time of Merger.
11.3 Claims. In the event AWT or the Stockholder (the
"Claimant") desires to make a claim against the other (the "Indemnitor") under
Section 11.1 or 11.2, the Claimant shall give prompt notice to the Indemnitor
of the institution of any actions, suits or proceedings and demands at any
time instituted against or made upon Claimant or any state of facts known to
Claimant in connection with which the Claimant would claim indemnification
under Section 11.1 or 11.2; provided, however, that failure of any Claimant
to give notice as provided herein shall not relieve the Indemnitor of its
obligations under Section 11.1 or 11.2. Indemnitor shall have the right, but
not the obligation, without prejudice to the Indemnitor's right to contest its
obligation to indemnify the Claimant in respect of such claim, to assume the
defense of any action, suit or proceeding for which there is a claim for
indemnification hereunder. If Indemnitor does not assume the defense of any
such action, suit or proceeding before the earlier to occur of (i) the
thirtieth (30) day after receipt of notice, or (ii) five (5) business days
before the date an answer or similar response to an initiation of judicial
proceedings is due, the Claimant shall, upon further notice to the Indemnitor,
have the right to undertake, at the expense of the Indemnitor, the defense,
compromise, or settlement of such claim on behalf of and for the account and
risk of the Indemnitor, subject to the right of the Indemnitor to assume the
defense of such claim at any time prior to settlement, compromise or final
determination thereof. Anything in this Article XI to the contrary
notwithstanding, (i) if there is a reasonable probability that such an action,
suit or proceeding may materially and adversely affect the Claimant despite the
indemnity of the Indemnitor, the Claimant shall have the right to defend, at
its own cost and expense, and to compromise or settle such action, suit or
proceeding; provided, however, that the Indemnitor shall have given written
consent for such compromise or settlement, which consent may not be
unreasonably withheld or delayed, and (ii) the Indemnitor shall not, without
the written consent of the Claimant, which consent may not be unreasonably
withheld or delayed, settle or compromise any such action, suit or proceeding
or consent to the entry of any judgment. The Indemnitor shall remain fully
liable for its obligation of indemnity despite any action by the Claimant
under the preceding sentence. With respect to liquidated claims, if within
thirty (30) days the Indemnitor has not contested said claim in writing, the
Indemnitor will pay the full amount hereof in cash within ten (10) days after
the expiration of such period. Each party shall be responsible for its own
expenses in any arbitration or litigation between the parties hereto, and any
expenses not attributable to either party, such as the cost of a third
arbitrator (in the event that the parties agree to arbitration) shall be
shared equally by the parties.
11.4 Limitation on Claims. Notwithstanding the provisions of
Section 11.1, the Indemnitor shall not be liable to the Claimant for any
breach of a representation or warranty pursuant to Sections ll.l(i), (ii),
(iii), (iv), (vi) or (vii), unless and until the aggregate amount of all
Damages shall exceed $500,000, at which time the Indemnitor shall be obligated
to indemnify the Claimant with respect to the aggregate amount of all such
liabilities. Notwithstanding anything herein to the contrary, the foregoing
limitations on claims shall not apply to any claim by AWT pursuant to
subsection (v) of Section 11.1 hereof.
11.5 Limitation on Pension Plan Indemnification.
Notwithstanding the foregoing, the Stockholder shall not be liable to AWT
under this Article XI for (i) Damages incurred by the Company to adequately
fund the Defined Benefit Pension Plan and (ii) expenses incurred by the
Company to terminate any of the Terminated Plans, but such limitation on
indemnification shall apply only to the extent of the Overfunded Amount. The
'Overfunded Amount" shall mean, for purposes of this Section 11.5, the amount
of funds that the Company receives as a result of the termination of the
Pension Plan due to any overfunding of such plan, less any excise or income
taxes payable in respect of such amount.
ARTICLE XII
MISCELLANEOUS
12.1 Survival of Representations and Warranties.
The representations and warranties contained in this Agreement, and in any
Schedule or Exhibit delivered pursuant hereto, shall survive the Merger to the
extent set forth in Article XI.
12.2 Entire Agreement; Assignment. This Agreement, including
the Schedules and Exhibits hereto, constitutes the entire agreement among the
parties with respect to the subject matter hereof and supersedes all other
prior agreements and understandings, both written and oral, among the parties
or any of them with respect to the subject matter hereof, and shall not be
assigned by operation of law or otherwise.
12.3 Validity. The invalidity or unenforceability of any
provision of this Agreement shall not affect the validity or enforceability of
any other provisions of this Agreement, which shall remain in full force and
effect.
12.4 Notices. All notices, requests, claims, demands and other
communications hereunder shall be in writing and shall be deemed to have been
duly given when delivered in person, by cable, telegram or telex, or the third
day following registered or certified mail (postage prepaid, return receipt
requested) to the respective parties as follows:
To the Company or the Stockholder:
Falcon Associates, Inc.
416 Green Lane
Bristol, Pennsylvania 19007
Attention: Mr. Jeffrey J. Cantwell,
President
with a copy to:
Richard N. Weiner, Esq.
Bolger, Picker & Weiner
1800 Kennedy Boulevard
Philadelphia, Pennsylvania 19103
To AWT:
Air & Water Technologies Corporation
P.O. Box 1500
Somerville, New Jersey 08876
Attention: Eckardt C. Beck, Chairman
with a copy to:
Douglas A. Satzger, Esq.
Richards & O'Neil
885 Third Avenue
New York, New York 10022
or to such other address as the person to whom notice is given may have
previously furnished to the others in writing in the manner set forth above
(provided that notice of any change of address shall be effective only upon
receipt thereof.)
12.5 Amendment. This Agreement may not be amended except by an
instrument in writing signed on behalf of all the parties hereto.
12.6 Extension; Waiver. At any time prior to the Time of
Merger, the parties may (i) waive any inaccuracies in the representations and
warranties contained herein or in any document, certificate or writing
delivered pursuant hereto or (ii) waive compliance with any of the agreements
or conditions contained herein, provided, however, that no failure or delay
of any party hereto in exercising any right hereunder shall operate as a
waiver thereof nor shall any single or partial exercise thereof preclude any
other or further exercise thereof. Any agreement on the part of any party to
any such extension or waiver shall be valid only if set forth in an instrument
in writing signed on behalf of such party.
12.7 Governing Law. This Agreement shall be governed by and
construed in accordance with the internal substantive laws of the State of New
York regardless of the laws that might otherwise govern under applicable
principles of conflicts of laws.
12.8 Descriptive Headings. The descriptive headings herein are
inserted for convenience of reference only and are not intended to be part of
or to affect the meaning or interpretation of this Agreement.
12.9 Parties in Interest. This Agreement shall be binding upon
and inure solely to the benefit of each party hereto, and nothing in this
Agreement, express or implied, is intended to confer upon any other person any
rights, remedies, obligations or liabilities of any nature whatsoever under or
by reason of this Agreement.
12.10 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 shall constitute one and the same agreement.
12.11 Expenses. All costs and expenses incurred in connection
with the transactions contemplated by this Agreement shall be paid by the
party incurring such expenses except that it is agreed among the parties that
no expense was incurred by the Stockholder.
12.12 Specific Performance. The parties hereto acknowledge that
damages would be an inadequate remedy for breach of this Agreement and that
the obligations of the parties shall be specifically enforceable.
IN WITNESS WHEREOF, each of the parties has caused this Agreement
to be executed on its behalf by its officers thereunto duly authorized, all
as of the day and year first above written.
AIR & WATER TECHNOLOGIES CORPORATION
By: /s/ Joseph Feldstein
Joseph Feldstein,
Senior Vice President
FALCON ACQUISITION CORP.
By: /s/ Paul Alderdice
Paul Alderdice, President
FALCON ASSOCIATES, INC.
By: /s/ Jeffrey J. Cantwell
Jeffrey J. Cantwell, President
The Stockholder:
By: /s/ Jeffrey J. Cantwell
Jeffrey J. Cantwell
SCHEDULE 4.1
Qualification to Do Business
The Company is qualified as a foreign corporation and in good
standing in the following jurisdictions:
Connecticut*(1)
Kentucky*
Maryland*(2)
Massachusetts
New Jersey*
North Carolina
South Carolina*(3)
Texas*
Virginia*
(1) Company may be liable for approximately $4,000 for failure to qualify
previously.
(2) Company will pay $200 as fine for failure to qualify previously.
Qualification is being processed under the name "AWT/Falcon, Inc."
(3) Qualification is being made under name "Falcon Associates of
Pennsylvania, Inc." Company may be liable for fine for failure to
qualify previously.
* Filing has been made with the Secretary of State for qualification to do
business as a foreign corporation.
Company must organize a corporation in Delaware in lieu of qualifying
to do business as a foreign corporation because the name "Falcon Associates,
Inc." is not available and fictitious names are not permitted.
Notwithstanding the disclosures set forth in this Schedule 4.1 or
anything to the contrary contained in the Agreement, the Stockholder hereby
indemnifies AWT in accordance with the provisions of Article XI of the
Agreement, including, without limitation, Section 11.4 thereof, for any Damages
incurred by AWT arising out of or in connection with the matters disclosed in
Footnotes 1, 2 and 3 on the foregoing page.
SCHEDULE 4.2
Subsidiaries and Equity Interests
The Company owns one share of Class A Common Stock and twenty (20)
shares of Class B Common Stock, each having $2,000 par value, of American
Safety Risk Retention Group, Inc., a Vermont insurance company ("ASRRG").
The share of Class A Common Stock was acquired for a purchase price of
$10,000. The shares of Class B Common Stock were acquired in exchange for
agreeing to provide an irrevocable letter of credit to the Vermont Insurance
Commissioner in the amount of $200,000 for the benefit of ASRRG. ASRRG is a
captive insurer organized pursuant to the Federal Liability Risk Retention Act
of 1986.
SCHEDULE 4.4
Consents and Approvals
The consummation of the transactions contemplated by this Agreement
and Plan of Merger may constitute a breach or default or cause acceleration
under the following agreements (except as indicated all necessary consents or
waivers will be obtained prior to closing):
1. The following agreements between Company and First Fidelity
Bank, N.A., South Jersey ("Bank"):
-- Mortgage (collateral), dated December 16, 1988
-- Commercial Grid Note-Secured, dated December 16, 1988, in
principal amount of $2,000,000
-- Commercial Grid Note-Secured, dated December 16, 1988,
in principal amount of $500,000
-- Commercial Grid Note-Secured, dated August 16, 1989, in
principal amount of $2,000,000
-- General Security Agreement, dated December 16, 1988
-- Time or Demand Note - Secured, dated October 25, 1989, in
principal amount of $1,500,000.
In addition, the Subordinate Mortgages between Stockholder and
Bank, dated December 16, 1988, covering the following
properties:
14 Elder Lane, Willingboro, NJ
7900 Dune Drive, Avalon, NJ #120
803 Joshua Ct., Moorestown, NJ
7900 Dune Drive, Avalon, NJ #118
16 N. Maple Avenue, Marlton, NJ (Evesham)
In lieu of a consent, the Company has obtained and
provided to AWT a letter, dated October 26, 1989, from an
officer of the Bank with regard to its intention to
require the repayment of outstanding loans owing to it by
the Company. The Bank has not consented to or waived
its rights with respect to the transactions contemplated
by the Agreement and has stated that it does not intend
to do so.
The parties hereby acknowledge that the Company will not
obtain from First Fidelity Bank, N.A., South Jersey a
consent to, or waiver of default with respect to, the
transactions contemplated by the Agreement, and AWT
agrees that it shall not be entitled to recover any
Damages from the Stockholder incurred by AWT or Falcon
arising out of or in connection with such failure.
2. Lease for office space in Midtown Office Gallery,
Charlotte, North Carolina. In view of Company's plans to
terminate this lease, it will not seek the lessor's
approval of this transaction. See Schedule 4.16(1).
3. Pursuant to Section II, Subsection (a)(5) of the
Company's Commercial General Liability Policy (Occurrence
Form) issued by American Safety Risk Retention Group, the
Company must notify the insurer of its merger with Falcon
Acquisition Corp. and reaffirm its status as a named
insured "under such terms and conditions as the (insurer]
may, in its sole discretion, require." Pursuant to
Section IV, Subsection 22 of the same policy, if the
named insured (the Company) ceases to be under the same
ownership, the Company must notify the insurer "and the
coverage under the policy shall automatically terminate as
to the affected Named Insured." Coverage may be
reinstated upon term agreed upon by the Company and its
insurer.
A filing under the Hart-Scott-Rodino Antitrust Improvements Act
of 1976, as-amended, was made with the Federal Trade Commission and the
Department of Justice. Early termination of the waiting period has been
received.
The Company may be required to notify one or more government
agencies in states where they have permits or licenses for asbestos removal of
the changes resulting from the transactions contemplated by this Agreement and
Plan of Merger. See Schedule 4.21. The Company will begin to prepare such
notifications, but will not complete or file such notifications until after
Closing. The Company does not believe that failure to make filings prior to
Closing or obtain consent or approval will in the aggregate have a material
adverse effect upon the Company.
SCHEDULE 4.6
Liabilities Not Reflected in
Interim Balance Sheet
1. The Company plans to terminate its current lease for
office space in North Carolina. See Schedule 4.16(1).
2. The Company is a party to a lease which permits another
company the use of space at the rear of the 416 Green Lane property. It is
possible the use of the property under this lease violates the local fire
code. See Schedule 4.18(2).
3. The Company is involved in litigation as set forth in
Schedule 4.12.
4. Certain vacation accruals, accrued bonuses, commissions
and accrued sick leave of employees of the Company are not reflected in the
Interim Balance Sheet.
5. Certain state income, franchise and capital stock taxes
which are owed or will be owed by the Company are not reflected in the Interim
Balance Sheet.
6. Unbilled amounts accrued which will be owing to
subcontractors when billed.
Notwithstanding the disclosures set forth in this Schedule 4.6
or anything to the contrary contained in the Agreement, the Stockholder hereby
indemnifies AWT in accordance with Article XI of the Agreement, including
without limitation, Section 11.4 thereof, for any Damages incurred by AWT
arising out of or in connection with the matters disclosed in Items 2 and 5 of
this Schedule 4.6.
SCHEDULE 4.7
Subsequent Changes and Events
The Company has reevaluated and significantly increased its
accounts receivable reserve since December 31, 1988. In addition, the Company
has written off approximately $192,000 in accounts receivable during that same
period.
SCHEDULE 4.8
Management, Employees, Compensation
Company Directors and Officers
Annual
Compensation
Name Title for 1988
---- ----- -------------
Jeffrey J. Cantwell Director, President $156,975.00(1)
and Secretary-Treasurer
Joseph E. Connelly Vice-President 78,187.50(2)
Susanne J. Crossman Assistant Secretary, 51,070.85
Bookkeeper & Office Manager
Other Employees or Consultants
Whose Total Fiscal Year
1988 Compensation Exceeded $50,000
Total Basis of
Name Designation Compensation Compensation
---- ----------- ------------ ------------
Ernest M. DeCaro Chief 170,750.00 combination(3)
Estimator
David R. Borranann Insulation 61,404.67 fixed
Foreman
David R. Bookholdt Field 130,600.00 combination
Operations
[Continued on next page)
- -------------
(1) Does not include compensation or benefits paid to Kimber Cantwell,
Mr. Cantwell's spouse. Does not include value of automobiles used by
Mr. and Mrs. Cantwell.
(2) Paid under an Employment Contract. Does not include payments under a
Restrictive Covenant Agreement or insurance benefits to which he is
entitled. See Schedule 4.9(b)(2) and (3).
(3) Combination of fixed salary and bonus.
Total Basis of
Name Designation Compensation Compensation
---- ----------- ------------ ------------
Thomas McCoog Outside 129,460.00 combination(3)
Operations
Thomas Richter Foreman 57,397.82 fixed
Michael David Foreman 54,499.56 fixed
Joseph Romano Foreman 63,014.75 fixed
Harry Kohlhaas Foreman 56,831.63 fixed
Julius Edwards Insulator 56,946.21 fixed
Scott Brown Foreman 71,852.48 fixed
Joseph McConnell Foreman 66,448.54 fixed
Wesley Johnson Foreman 50,250.56 fixed
Stephen Cantwell Insulator 50,383.51 fixed
Kenneth Juliano Worker 50,164.40 fixed
Frank Briggs Foreman 76,869.91 fixed
William Schmidt Estimator 104,276.00 combination(4)
Stacy Lagakos Worker/ 50,861.00 combination(4)
Sales Manager
Commission Program
Commission Arrangement
Name (% of Gross)
---- ----------------------
Estimator
- ---------
Ernest DeCaro 2% up to $3 million
William Schmidt 2% up to $3 million
1.5% in excess of $3
million
Gregory Obert 1.5% in excess of $3
million
Joseph Mannion 2% up to $3 million
1.5% in excess of $3
million
William Townsend 2% between $500,000
and $3 million 1.5% in
excess of $3 million
Thomas Bieri 2% between $1-3
million
James Arnott 2% between $500,000
and $3 million 1% in
excess of $3 million
Richard Ryniak 1.5% in excess of $3.5
million
James Wright 2% up to $3 million
1.5% in excess of $3
million
Sales
- -----
Stacy Lagakos 1%
William Shelby 1/2 of 1%
Operations
- ----------
David Bookholdt Discretionary
Thomas McCoog Discretionary
- -------
(3) Combination of fixed salary and bonus.
(4) Combination of fixed salary and commissions.
No Withholding
Prior to 1989, the Company issued a Form 1099 to each estimator
with respect to the payment of a bonus to him, rather than withholding and
reflecting the same on the Form W-2 issued to the estimator.
Automobiles
Employees have use of automobiles and other vehicles for
business purposes without having to account for other use. The Company leases
trucks from Michael David and Joseph Romano for $200/month. The trucks are
owned by Messrs. David and Romano and used for the Company's business.
Notwithstanding the disclosures set forth in this Schedule 4.8 or
anything to the contrary contained in the Agreement, the Stockholder hereby
indemnifies AWT in accordance with Article XI of the Agreement, including,
without limitation, Section 11.4 thereof, for any Damages incurred by AWT
arising out of or in connection with the matters disclosed under the caption
"No Withholding" in this Schedule 4.8.
SCHEDULE 4.9
Contracts
(a) 1. Agreements between Company and First Fidelity Bank,
N.A., South Jersey:
-- Mortgage (collateral) - $2,500,000 on 416
Green Lane property Mortgagor: Falcon
Associates, Inc.
Mortgagee: Fidelity Bank N.A.
South Jersey Date: 12/16/88
-- Commercial Grid Note-Secured, dated December
16, 1988, in principal amount of $2,000,000
-- Commercial Grid Note-Secured, dated December
16, 1988, in principal amount of $500,000
-- Commercial Grid Note-Secured, dated August
16, 1989, in principal amount of $2,000,000
-- Time or Demand Note - Secured, dated October
25, 1989, in principal amount of $1,500,000.
Stockholder is guarantor under this note. The
note is secured by a $1,500,000 Certificate
of Deposit which has been purchased from
First Fidelity Bank, N.A., South Jersey
2. Mortgage - $400,000 on 416 Green Lane property
Mortgagor: Falcon Associates, Inc.
Mortgagee: Robert U. Monti and Dorothy
I. Monti
Date: 12/31/86
3. Installment Sales Contract for 1988 Chevrolet
Corvette Convertible
Lender: Reedman Chevrolet Inc.
Borrower: Company
Date: 7/21/88
(b) 1. Consulting Agreement between Company and Howard,
Lawson & Co., dated May 26,1989.
2. Employment Agreement, dated September 30, 1987,
between Falcon Associates and Joseph Connelly.
3. Agreement for Restrictive Covenant and Covenant of
Non-competition, dated September 30, 1987, between
Falcon Associates, Inc. and Joseph E. Connelly.
4. Commission Agreements - See Schedule 4.8.
(c) 1. Agreement between Company and Local Union No. 42,
International Association of Heat and Frost
Insulators and Asbestos Workers, dated July 14, 1989
(d) None.
(e) 1. See Schedules 4.16 and 4.18 for real property leases
2. Lease for 1986 Mercury Grand Marquis
Lessor: Ford Motor Credit
Lessee: Company
Date: January 28, 1986
3. Lease for 1989 BMW 750IL
Lessor: GE Capital Auto Lease, Inc.
Lessee: Company
Date: November 11, 1988
(f) Contracts and commitments involving future payment or
receipt of more than $250,000:
1. Contract between Company and Rouse Management,
Inc. for asbestos removal and abatement, dated
June 28, 1988. Individual work sites are scheduled
on an ongoing basis by agreement of the parties.
2. Solicitation, Offer and Award, dated October 17,
1988, awarding Contract No. GS-03P-89- DXC-0297 for
asbestos removal and related work by Company for
U.S. General Services Administration, Region 3,
pursuant to Company's sealed bid in response to
Solicitation No. GS-03P-88-DXC-0097, issued June
13, 1988, as amended on June 23, 1988 and July 8,
1988.
3. Purchase Orders from James Craft & Son, Inc. for
work by Company for which $250,000 may be paid or
received in the aggregate in the future:
Purchase Order No. 6338, dated July 21,
1986, for asbestos removal, abatement,
reinsulation and related work at V.A. Medical
Center, Coatesville, PA;
Purchase Order No. 6847, dated June 6, 1988,
for insulation of Penn State University Wiley
Laboratory;
Purchase Order No. 6958, dated December 8,
1988, for equipment insulating at Penn State
University, Agriculture, Science & Industries
Building.
4. Various agreements with New Jersey Bell Telephone
Company for work by Company for which $250,000 may
be paid or received in the aggregate in the future:
Standard Form of Agreement between Owner and
Contractor (AIA Document A101, 1987 Edition),
dated October 11, 1989, for boiler room
asbestos removal at New Jersey Bell
Headquarters Building. Note: copy in Company
files has not been signed by New Jersey Bell;
New Jersey Bell Telephone Company Building
Construction Contract, dated September 14,
1989, for asbestos removal at Swedesboro
Central Office Building;
Purchase Order No. 570141, dated October 10,
1989, for asbestos repairs in Trenton, New
Jersey
New Jersey Bell Telephone Company Building
Construction Contract, dated September 25,
1989, for asbestos abatement in Atlantic
City, New Jersey.
5. Various agreements for work by Company at
Mobil Oil Corporation facilities for which
$250,000 may be paid or received individually
or in the aggregate in the future:
Standard Form of Agreement Between Contractor
and Subcontractor (AIA Document A401, 1987
Edition), dated September 8, 1989, between
Geppert Bros., Inc. and Company for asbestos
removal and demolition at Paulsboro Refinery,
Paulsboro, New Jersey
Two oral time and materials contracts between
Joule Maintenance and Company for asbestos
removal and maintenance at Paulsboro
Refinery, Paulsboro, New Jersey.
Asbestos Removal Term Contract, dated March
1, 1989, between Mobil Research and
Development Corporation and Company for
asbestos removal.
Purchase Order No. 20463, dated October,
1989, between Joule Maintenance and Company
for asbestos removal at Mobil Sulphur Unit.
Purchase Order No. 157054JHN9, dated August
4, 1989, for asbestos removal at Mobil
facility at Rt. 1 and Farber, Princeton, New
Jersey.
6. Asbestos Removal Disposal Agreement A-2022,
dated April 24, 1989, between Company and
E.I. du Pont de Nemours and Company, Inc. for
asbestos abatement, amended by Modifications
1 through 6, dated June 15, 1989, June 28,
1989, July 20, 1989, July 31, 1989, August
16, 1989 and September 15, 1989.
7. U.S. Postal Service Construction Contract,
359986-89-B-0029, between Company and U.S.
Postal Service (New York Facilities Service
Office), dated November 21, 1988, for
asbestos removal at New Jersey International
Bulk Mail Center, as amended by Request,
Proposal and Acceptances, dated April 10,
1989, April 13, 1989, April 15, 1989 and
August 18, 1989.
8. Standard Form of Agreement between Owner and
Contractor (AIA Document, A101 1987 Edition)
between Company and Board of Trustees of
Clemson University, dated May 15, 1989, for
asbestos removal.
9. Various agreements with Kohler Brothers, Inc.
for work by Company for which $250,000 may be
paid or received individually or in the
aggregate in the future:
Purchase Order No. 0279, dated
December 14, 1988, for insulation work
at Lionville Junior High School, as
amended.
Purchase Order No. 0280, dated
December 14, 1988, for insulation work
at Blue Bell Elementary School.
10. Letter, dated October 31, 1986, awarding to
Company Projects Nos. 81-109 and 659-021, to
remove asbestos and install sprinklers at the
Veterans Administration Medical Center,
Salisbury, North Carolina, pursuant to
Solicitation No. 659-17-86, issued 7/21/86,
as amended.
11. Solicitation, Offer and Award, dated November
1, 1988, for insulation work by Company,
awarded by the Naval Air Propulsion Center.
12. Agreement between Owner and Contractor, dated
September 28, 1988, between Interboro School
District and Company for asbestos removal.
In addition to the foregoing agreements which by
their terms and current status involve future
performance or payment of more than $250,000, the
following agreements involve future performance or
payment of significant amounts. In the aggregate,
they might be deemed material, and, based on
previous company experience with these types of
contracts, it is possible that one or more may be
modified or amended so that aggregate future
performance or payment would exceed $250,000.
13. Contract between the State of New Jersey and
the Company, dated March 3, 1988, for removal
of asbestos at Ancora Psychiatric Hospital.
14. Agreement, dated July 5, 1989, between
Company and Montclair State College for
asbestos removal.
Company uses the following subcontractors on a
regular basis but does not currently (and would not
ordinarily) have contract commitments outstanding
with any one of them involving more than $250,000:
Atlas Acoustical Ceiling (ceiling work)
Box 48A Route 77
Mullica Hill, New Jersey 08062
609-478-4000
AACE Associates (air monitoring)
Dept. Box #38
Hainesport, New Jersey 08036
609-265-1680
Marty Tillia (electrical)
#139 Junewood Drive
Levittown, PA 19055
215-949-1878
Dowell Corporation (electrical)
9647 James Street
Philadelphia, PA 19114
215-824-2580
Patton Insulation (insulation)
1489 Baltimore Pike
Springfield, PA 19064
215-543-4151
Probe Environmental (air monitoring)
P. 0. Box 764
Moorestown, New Jersey 08057
609-779-3333
Professional Insulators (insulation)
P. 0. Box 2773
West Lawn, PA 19609
215-678-2345
Asbestos Management Consulting (air monitoring)
531 York Street
Burlington, New Jersey 08016
609-386-1077
(g) The Company has no powers of attorney in effect.
For description of litigation involving West Shore School
District, see Schedule 4.12.
SCHEDULE 4.10
No Default
The Company plans to terminate its current lease for office
space in North Carolina. See Schedule 4.16.
SCHEDULE 4.11
Proprietary Rights
In 1987 and 1988 the Company licensed the use of a patented
negative air process under U.S. Patent No. 4,604,111. The License Agreement
between the Company and GPAC, Inc. is dated October 4, 1986 and grants a
non-exclusive, non-transferable, indivisible license in the United States,
its territories and possessions. The license is evidenced by Certificate
Number: GN-87010009, dated January 1, 1987. The agreement is terminable by
Company on six months' notice. The Company did not make a 1989 royalty payment
for the license. By letter, dated April 11, 1989, GPAC, Inc. has advised the
Company that the license is currently effective, that all unpaid royalties for
prior usage are waived and the Company is not required to make a royalty
payment until July 1990.
SCHEDULE 4.12
Litigation
1. Falcon Associates, Inc. v. West Shore School District, Civil
Action No. 429 (Common Pleas, Cumberland City., PA 1988).
2. Leon J. Lesniewski, Jr. vs. Falcon Associates, Inc. and
Professional Insulators, Inc., Civil Action No. 89-06479
(Common Pleas, Montgomery Co., PA 1989).
For environmental and occupational safety and health law and
regulation citations, all of which have been settled or resolved, see Section
4.26.
SCHEDULE 4.13
Laws and Orders
For prior violations of environmental and occupational health and
safety laws and regulations, all of which have been resolved, see Schedule
4.26.
SCHEDULE 4.14
Tax Matters
(i) Prior to 1985, the Company allocated all income to
Pennsylvania, regardless of where its services were performed.
(ii) The Company has filed or will file income or franchise tax
returns in the following jurisdictions: United States (all taxable periods
since inception)
Arkansas (1988)
Connecticut (1988)
Delaware (1988, 1987, 1986)
Georgia (1988)
Iowa (1988)
Kentucky (1988)
Maryland (1988)
Massachusetts (1988)
New Jersey (1988, 1987, 1986)
New York (1988)
North Carolina (1988, 1987)
Ohio (1988)
Pennsylvania (all taxable periods since inception)
Texas (1988, 1987)
Virginia (1988, 1987)
The Company expects to file income or franchise tax returns for
1989 in all of the above jurisdictions except Arkansas and Massachusetts, and
expects to file a 1989 income tax return in South Carolina.
(iii) Prior to 1989, the Company did not withhold from bonuses
paid to its estimators.
Notwithstanding the disclosures set forth in this Schedule, 4.14 or
anything to the contrary contained in the Agreement, the Stockholder hereby
indemnifies AWT in accordance with the provisions of Article XI of the
Agreement, including, without limitation, Section 11.4 thereof, for any
Damages incurred by AWT arising out of or in connection with the matters
disclosed in this Schedule 4.14, but only to the extent that such Damages
arise out of or in connection with the failure to properly or timely file any
return, pay any tax, penalty, interest or other assessment or withhold any
amount, including all interest, penalties and other assessments arising
therefrom.
SCHEDULE 4.16
Leased Real Property
1. Lease for 235 square feet of office space in Midtown Square office
Gallery, Midtown Square Shopping Center, Charlotte, North Carolina.
Lessor: Charlottetown, Inc.
Lessee: Company
Date: 7/5/89
Term: 6/1/89-5/31/90
Company plans to terminate this lease when new lease (see below) becomes
effective. North Carolina employee is handling negotiations. Assignment or
sublet requires written consent of lessor. Liquidated damages for breach of
lease are monthly rent ($.958 per square foot/month plus pro rata share of
operating costs and real estate taxes), less rent received by lessor in
reletting. There is no security deposit under the lease.
2. Lease for 2400 square feet (800 office, 1600 warehouse) at 1801 H
Cross Beam Drive, Charlotte, NC 28217.
Lessor: Chartwell Limited Partnership II
Lessee:
Company
Date: 10/89
Term: 3-1/2 years beginning 11/1/89.
Security Deposit: $1,040
SCHEDULE 4.17
Real Property
The Company owns property and an office and
warehouse building at 416 Green Lane, Bristol, Pennsylvania. The
property was acquired subject to conditions for a 20 foot wide macadam drive
extending through the property and a 50 foot wide easement to Green Lane for
ingress and egress, easements or rights-of-way granted to Philadelphia
Electric Company and certain other restrictions, all of which are referred to
in the Title Report. See Schedule 4.19.
The Company is currently constructing additional office space on the
property.
The Company has entered into a lease for use of the rear portion of
its property at 416 Green Lane. See Schedule 4.18(2).
The Company has indicated its willingness to permit an easement
through the 416 Green Lane property to Lumber Products property. The
requesting parties have not requested a formal agreement.
SCHEDULE 4.18
Tenancies
1. In addition to the Real Property Leases, the
Company's property at 416 Green Lane is subject to certain easements. See
Schedule 4.17.
2. The Company has entered into a lease for use of the rear
portion of the property at 416 Green Lane for parking and storing construction
equipment.
Lessor: Company
Lessee: Harrah, Inc.
Date: 5/6/89
Term: 1 year with option to renew one-half the
leased land for 1 year
Rental: $200/month
SCHEDULE 4.19
Title
See Title Report, effective October 5, 1989, a
copy of which has been delivered to AWT.
Howard Savings Bank liens have been satisfied. Some
termination statements must still be obtained.
Improvements to the Company's headquarters building at 416
Green Lane are being conducted pursuant to Permit No. 89-138, issued May 31,
1989, by the Borough of Bristol. See also Schedule 4.9 (a).
SCHEDULE 4.20
Insurance
(a) Insurance Coverage
American Safety Risk Retention Group, Inc., Policy No.
CGL89_101- 002, asbestos special liability
Commercial Inland Marine, Policy No. 3AT574342-02, business equipment at 416
Green Lane, and contractor's equipment
Excelsior Insurance, Policy No. CPP3130338, general liability covering
property at 416 Green Lane
Pennsylvania State Workers Compensation, Policy No. 00265578
Travelers Insurance Company, Policy No. 6UB-4975292-5-89, workers compensation
for Michigan
Continental Insurance Company, Policy No. 2BC871569089W, workers compensation
for New Jersey
Travelers Insurance Company, Policy No. 6UB-115J603-7-88, workers compensation
for North Carolina
Continental Assurance Company, Policy No. 2P46837AlAA, workers compensation
for New York
Excelsior Insurance Company, Policy No. BA3501323, automobile liability
The Company is in the process of obtaining tenant's insurance for leased
property in North Carolina.
(b) Surety Bonds
Bonding Company Open Bid Bonds
- --------------- --------------
National American Insurance Northampton County/Government Center
National American Insurance Northampton County/Gracedale
National American Insurance U.S. Coast Guard, Fort Macon
Indiana Lumbermens Mutual Chatham Hall Girls School
Insurance Company
National American Insurance Borough of Pottstown-City Hall
National American Insurance Council Rock School District
National American Insurance Council Rock School District
* Prudential Property Co.
* PA Dept. of General
Services/E. Stroudsburg
* PA Dept. of General Services/Muncy
Correctional Institute
* PA Turnpike Commission
* Federal Bureau of Prisons
* DE, Del. State Hospital
* MD, Maryland Dept. of Trans.
* Bonds requested, but not yet received.
Bonding Company Open Performance Bonds
- --------------- ----------------------
Universal Bonding Company NJ, Montclair St. College
Southeastern Casualty Indemnity NJ, Ancora Psychiatric and Hospital
Insurance Company
Indiana Lumbermens Mutual East Brunswick Board of Education
Insurnace Company
Southeastern Casualty Cape May County Board of
and Indemnity Insurance Chosen Freeholders
Company
Indiana Lumbermens Mutual Dept. of Admin.
Insurance Company
Indiana Lumbermens Mutual Watson V. Britton Training
Insurance Company Center
Indiana Lumbermens Mutual VA Medical Center, Salisbury, NC
Insurance Company
Indiana Lumbermens Mutual GSA, Various Federal Bldgs.
Insurance Company
National American Insurance Columbia Borough School District
Indiana Lumbermens Mutual Holy County School District
Insurance Company
Indiana Lumbermens Mutual NC, Broughton Hospital
Insurance Company
National American Insurance Budco Theaters/Andorra Co.
National American Insurance Farfield Company/Brookdale Comm.
College
Indiana Lumbermens Mutual Naval Air Propulsion Center
Insurance Company
SCHEDULE 4.21
Licenses and permits currently held:
State of New York, Asbestos Handling License No. AC-89-0044, expires 1/31/90
State of New Jersey, Asbestos License No. 00002 (expired 6/21/88) (Letter
from Supervisor of Licensing allowing asbestos license to continue in effect
while backlog of renewals is processed.)
State of Delaware, Asbestos Abatement Contractors Certification
No. C-0018, expires 5/02/90. City of Wilmington Business License No. 009965
State of Maryland, Asbestos Removal/Encapsulation License No. 39-00-019,
expires 11/20/89. City of Baltimore, Certificate of Prequalification No.
02287, expires 05/31/90. Commonwealth of Massachusetts, Contractors
License *AC 00018, for Asbestos Abatement Program, expires 10/17/89.
(Renewal application was filed 10/11/89.) Commonwealth of Massachusetts,
Certificate of Eligibility #88-0896, expires 12/02/89.
Commonwealth of Virginia, Asbestos License, and Contractors License No.
000068, expires 7/31/90
State of Washington, Construction Contractors Specialty License #CCEXBU
FALCOA1123NN, expires 2/15/90.
State of South Carolina Bidders License B13032, expires 12/31/89. State of
South Carolina General Contractors License #G23127, expires 12/31/89. South
Carolina Dept. Health and Environmental Control Asbestos Abatement License No.
255, expires 4/11/90.
North Carolina General Contracting Classification for Interior Construction
License No. 24599, expires 12/31/89.
State of Iowa License #326 to Remove/Encapsulate Asbestos, expires 10/20/89.
(Renewal application was filed 10/12/89.)
State of Ohio, Licensed as an Asbestos Contractor, License No. 1240, effective
until 11/14/89.
State of Georgia, Asbestos Licensing Board, License No. 8BL-264,
Beginning date 11/88, Expires 11/89. (Renewal application was filed 10/25/89).
State of Arkansas, Asbestos Abatement Contractor License No. 090, expires
12/31/89.
Texas Department of Health, Asbestos Abatement Contractor
Certification Number 80-0100, expires 10/31/89. (Renewal
application was filed 10/12/89).
Commonwealth of Kentucky, Asbestos Abatement Certificate No. C89-02-005M2,
expires 2/12/90.
Minnesota Department of Health, Asbestos Abatement Contractor License Number
279, 7/01/89 - 6/30/90.
Allegheny County Health Department, Asbestos Abatement Contractor License,
Certificate No. ACAL-89-4074, expires December, 1989.
State of Missouri letter certifying Asbestos Registration No. 90-08-0261,
expiration date 8/15/90.
States for which Company is preparing applications:
Florida License
Michigan License
Illinois License
Tennessee License
California License
See Schedule 4.4.
The Company is qualifying as "AWT/Falcon, Inc." in Maryland, and "Falcon
Associates of Pennsylvania, Inc." in South Carolina because the name "Falcon
Associates, Inc." was previously reserved or used by other companies. It will
have to change the name in which its licenses are issued in those states and
in Delaware where it will organize a new corporation.
SCHEDULE 4.22
Pension and Other Benefit Plans
(a) Retirement Plans
Falcon Associates, Inc. currently maintains four
retirement plans as follows:
1) Frozen Defined Benefit Pension Plan.
2) Deferred Salary Savings (401(k)) Plan.
3) Money Purchase Plan.
4) Defined Benefit Pension Plan
Benefit accruals under plans 1, 3, and 4 have ceased and such plans
have been terminated as of December 31, 1988. The Company must amend these
plans to comply with the Tax Reform Act of 1986. In addition, terminations of
these plans must be filed with the IRS, and, in the case of Plan 1, with the
PBGC. All are ERISA plans.
See also item (b)(1)
(b) (1) As of July, 1989, the Company contributes to Local Union No. 42,
International Association of Heat and Frost Insulators and Asbestos Worker
Pension Plan.
(3) and (4) See above.
(5) Some Form 5500's have been filed late, including Form
5500 for the Money Purchase Plan for the 1988 Plan Year, which was filed
several days late.
(6) The Money Purchase Plan contribution for the 1988 Plan
Year was made late, and Form 5330 will be filed with respect to the applicable
excise tax.
(7) See item (b)(14)
(14) Both defined benefit plans have been frozen and
participants are entitled to no further benefit accruals. The actuary has
advised that Pension Plan No. 1 is overfunded by approximately $85,000. The
underfunded amount for Defined Benefit Pension Plan No. 4 has been satisfied
prior to closing.
B. Other Plans
Agreement, dated October 1, 1983, between
Independence Blue Cross/Blue Shield and
Company, Group No. A-20593, including
hospitalization, major medical, dental and
prescription
UNUM, Policy No. LAD050201, disability coverage for the
Stockholder
Great West Life Assurance Company, disability
coverage for Susanne Crossman (Policy No.
H-529472), and Ernest DeCaro (Policy No.
H-529475)
Great Western Life & Annuity Insurance Co.,
Agreement, dated December 16, 1987, for an
annuity for Stockholder under Money Purchase
Pension Plan
Executive Life Insurance Company, Policy Nos.
C41599057B, C1158972GL and C11506147L, life
insurance for the Stockholder (one of these
policies has been pledged to First Fidelity
Bank, N.A. as security for outstanding Company
indebtedness)
CIGNA, Policy No. 1011216573, life insurance
for the Stockholder
Aetna, Policy No. G1122243, life insurance
for the Stockholder
Confederation Life, Policy Nos. 05711032 and
5120354, life insurance for the Stockholder
Confederation Life, Policy Nos. 05711031 and
5726753, life insurance for Joseph Connelly.
Executive Life Insurance Company, Policy No.
C41599056B, life insurance for Joseph Connelly
The rights under these life insurance policies may be
acquired by Mr. Connelly for $1.00 at the time of termination of his
employment agreement. (See Schedule 4.9(b)(2)).
CIGNA, Policy No. 1011216572, life insurance
for Joseph Connelly
Aetna, Policy No. R25553960, life insurance
for Joseph Connelly
Company is in the process of satisfying the applicable
requirements of Section 4980B of the Code with respect to each group health
plan.
The rights under these life insurance policies may be
acquired by Mr. Connelly for $1.00 at the time of termination of his
employment agreement. (See Schedule 4.9(b)(2)).
SCHEDULE 4.24
Certain Interests
1. Stockholder owns common stock of ASIG, which is
the reinsurer of ASRRG.
2. Stockholder transferred 1988 Chevrolet Astro Van
used by his spouse, Kimber, to himself, subject to
the outstanding balance owing thereon to First Fidelity
Bank, N.A. on account of a loan, dated April 6, 1988.
3. In 1989, the Company sold two vehicles to H. & M.
Insulation, Inc. ("H. & M.") for amounts less than
their respective fair market values. Mr. Cantwell
owns all of the outstanding capital stock of H. & M.
4. The employment by the Company of Kimber Cantwell,
the Stockholder's spouse, will continue until the
Closing, at which time it will be terminated. All
compensation to the date of termination will be
paid to her at current rates.
5. The Company has engaged in a series of transactions
with Gull Enterprises, Inc. ("Gull"), a
Pennsylvania corporation, which has been solely
owned by the Stockholder since December 31, 1987.
Gull has been engaged in insulation work. Falcon
has paid Gull for consulting services provided to
Falcon by certain employees of Gull. On October
24 and October 25, 1989, Falcon paid Gull $5,705
and $24,825, respectively, on account of such
services which satisfied all outstanding
obligtions owed by Falcon to Gull. $11,850 of the
latter amount is reflected on the Interim Balance
Sheet because it was accrued in September 1989.
None of the payments by Falcon to Gull involved a
profit to Gull or the Stockholder. On October 26,
1989, Gull paid Falcon $8,891 to satisfy indebtedness
owed by it to Falcon, as shown on the Interim
Balance Sheet.
SCHEDULE 4.26
Compliance with Environmental Laws
The Company has received the following citations.
All have been resolved.
1. Air Pollution Control District, Jefferson County,
Kentucky, Violation No. 890054, Violation of Reg. 5.13
Section 5 (and its state rule counterpart); Citation
dated May 1, 1989; $250.00 civil assessment for using
supervisor lacking Kentucky certification.
2. Air Pollution Control District, Jefferson County,
Kentucky, Order #006-88, dated July 20, 1988; Falcon
cited for violation of District Regulation 5.04 (re:
storage of asbestos); administrative settlement of
$3,500.00.
3. Philadelphia Dept. of Public Health, Air Management
Services, Violation of Health Code S 6-402-9(a);
Citation dated August 4, 1988; clean air filter was
stored in a bag labeled with asbestos warning labels.
4. New Jersey Office of Asbestos Control & Licensing;
$250.00 Citation for violation of New Jersey Asbestos
Control and Licensing Act, dated July 6, 1988, for
allowing employees to work without a permit.
5. New Jersey Office of Asbestos Control & Licensing;
$600.00 Citation, dated November 23, 1987, for
violation of New Jersey Asbestos Control & Licensing
Act, for failure to post sign and have license
available at work site.
6. OSHA Citation S9144#043, issued 10/4/82, for
failure to post OSHA Notice, maintain an on-site log of
injuries and illnesses and establish respirator program
at job site.
7. OSHA Citation J7434-162, issued 4/4/85, for
failure to make regulations readily available to
employees.
8. OSHA Citation B7421-050, issued 3/7/85, for failure to
establish respirator program at job site.
SCHEDULE 4.26 CONTINUOUS
9. OSHA Letter, dated 10/2/85, re Complaint No.
71419428 complaining that Company failed to
provide medical records at employee's
request.
10. Letter from State of New Jersey, Department of Labor,
dated January 24, 1986, re failure to disclose previous
OSHA citations.
11. Letter from State of New Jersey, Department of Labor,
dated March 10, 1986, for failure to display license and
provide supervision; $250.00 penalty.
12. OSHA Citations E9645-601 and E9645-598 in total amount of
$8,800.00; letter of contest dated September 8, 1987 from
Falcon; settled on February 5, 1988.
SCHEDULE 4.29
Banks
1. First Fidelity Bank Cash Management Account No.
006-000011-5
2. First Fidelity Bank, payroll account, Account No.
00050512-7
3. Howard Savings Bank Account No. 520-7019300-131
4. Philadelphia National Bank, Falcon Associates, Inc.
Deferred Salary Savings Plan, Account No. 0120-5200
5. Howard Savings Bank, Falcon Associates, Inc.
Defined Benefit Pension Trust, Account No. 716953-1
6. First Fidelity Bank, Falcon Associates, Inc. Money
Purchase Plan, Account No. 001-078372-0
There are no safe deposit or lock boxes.
The Stockholder and Susanne Crossman are authorized to draw on
each of these accounts, except for Howard Savings Bank Account No.
520-7019300-131, as to which the Stockholder is the sole signatory.
SCHEDULE 4.30
Labor
See Schedule 4.9 (c).
SCHEDULE 4.32
Customers
Ten largest customers (by sales or services) for fiscal
year ended December 31, 1988:
Rouse Management, Inc. and affiliates $3,445,000
Veterans Administration Medical Center -
Salisbury, North Carolina 1,748,000
School District of Philadelphia 1,647,000
Colonial School District 735,000
Marple Newtown School District 492,000
State of New Jersey/Ancora
Psychiatric Hospital 477,000
Wallingford/Swarthmore School District 471,000
James Craft & Son Inc./VA Medical Center -
Coatesville 376,000
Interboro School District 324,000
CPC International 314,000
Ten largest customers (by sales or services) for the eight (8)
month period ended August 31, 1989:
Rouse Management, Inc. and affiliates $1,650,532
Veterans Administration Medical Center -
Salisbury, North Carolina 1,021,050
Clemson University 988,818
Central Bucks School District 726,000
Department of the Army/Fort Dix 645,860
James Craft & Son Inc./VA Medical
Center - Coatesville 461,545
Mobil Oil and/or Joule Maintenance 396,510
E.I. Du Pont de Nemours & Co. 351,060
U.S. General Services Administration
(Region 3) 314,814
Toms River School District 313,200
There are no customers other than named above which account for
more than five (S%) percent of Company sales during the period January 1, 1988
through August 31, 1989.
Schedule 5.1
New Jersey
Massachussetts
Schedule 5.3
None, other than the filings required by the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended, which filings have been completed.
Schedule 5.7
AWT redeemed, effective as of October 12, 1989, all shares of its Series A
Preferred Stock, par value $1.00 per share outstanding on such date.
March 18, 1994
Air & Water Technologies Corporation
U.S. Highway 22 West and Station Road
Branchburg, New Jersey 08876
Ladies and Gentlemen:
This letter agreement confirms the understanding between Air &
Water Technologies Corporation, a Delaware corporation ("AWT" or the
"Company"), and Compagnie Generale des Eaux, a French corporation ("Generale
des Eaux"), to effect the transactions set forth herein. As further described
below, AWT and Generale des Eaux have agreed to enter into a closer
relationship designed to strengthen the Company's competitive and financial
position. Both parties believe that these arrangements will enhance the
overall value of AWT and its ability to achieve its objectives.
Subject to the terms and conditions set forth herein, the
parties will enter into an Investment Agreement (the "Investment Agreement")
which consists of the following (see Exhibit A hereto for further details):
bullet Generale des Eaux would purchase for cash $60,000,000 of the
Company's Series A Convertible Exchangeable Preferred Stock, having
the terms set forth on Exhibit B hereto (the "Series A Preferred");
bullet Generale des Eaux would exchange on a tax-free basis all of
the outstanding capital stock of Professional Service Group, Inc., a
Michigan corporation ("PSG"), for 6,500,000 shares of the Company's
Class A Common Stock, par value $.01 per share (the "Class A Common
Stock");
bullet Upon execution of this letter agreement, Generale des Eaux
shall enter into the financial undertakings set forth on Exhibit C
hereto; and
bullet Generale des Eaux will agree in the Investment Agreement
that AWT shall become Generale des Eaux's exclusive vehicle in the
United States, its possessions and its territories for its water and
waste water management and air pollution activities. Generale des
Eaux will also assist AWT in developing its water and waste water
management and air pollution activities in both Canada and Mexico,
subject to existing contractual agreements and taking into account
the respective interests of both companies.
Upon execution of this letter agreement, Generale des Eaux will
purchase 500,000 shares of Class A Common Stock for an aggregate purchase
price of $5,000,000. AWT represents and warrants that all such shares of
Class A Common Stock have been duly authorized, and upon issuance will be
validly issued, fully-paid and non-assessable, and such issuance is not
subject to any pre-emptive or similar rights.
AWT and Generale des Eaux will (a) cooperate with each other in
good faith in the preparation of definitive documentation providing for the
transactions contemplated by the Investment Agreement, the making of all
required governmental filings and the obtaining at the earliest practicable
date of all necessary approvals and consents from governmental entities and
third parties and (b) negotiate in good faith towards reaching agreement on the
definitive documentation providing for such transactions at the earliest
practicable date.
The obligations of AWT and Generale des Eaux to consummate the
transactions contemplated by this letter agreement (other than those set forth
on Exhibit C hereto) will be subject to satisfaction of the following
conditions, and as otherwise set forth in the Investment Agreement:
(a) approval of the issuance to Generale des Eaux of the
Series A Preferred Stock and the Class A Common Stock by the
stockholders of AWT pursuant to the rules and regulations of the
American Stock Exchange;
(b) receipt of all necessary governmental and regulatory
approvals under the Hart-Scott-Rodino Antitrust Improvements Act of
1976 ("HSR") and the provisions of Section 5021 of the Omnibus Trade
and Competitiveness Act of 1988, as amended ("Exon-Florio"),
containing no condition or restriction which, in such party's
reasonable opinion, would materially diminish such party's rights and
protections, taken as a whole, under the Investment Agreement;
(c) in the case of AWT only, the receipt by AWT of a written
opinion from Allen & Co., AWT's independent financial advisors, to
the effect that the transactions contemplated by the Investment
Agreement are fair, from a financial point of view, to the
shareholders of AWT (other than Generale des Eaux); and
(d) the absence of any injunctions or order prohibiting
consummation of the transactions contemplated by the Investment
Agreement.
Each of AWT and Generale des Eaux represent and warrant that
such party has or has caused to be taken any necessary corporate action to
authorize the execution, delivery and performance of this letter agreement and
that this letter agreement is a valid and binding agreement of such party.
AWT represents and warrants that the unaudited consolidated
financial statements for the quarter ended January 31, 1994 of the Company
included in the Form 10-Q as filed with the Securities and Exchange Commission
(the "Commission") will fairly present, in conformity with generally accepted
accounting principles applied on a consistent basis (except as may be
indicated in the notes thereto and except for normal year-end adjustments), the
consolidated financial position of the Company and its consolidated
subsidiaries as of January 31, 1994 and the consolidated results of operations
and statement of cash flows for the quarter then ended. Other than liabilities
disclosed, or provided for, in the Form 10-Q or otherwise disclosed to
Generale des Eaux in writing, as of such date, (i) there existed no
liabilities of the Company or its consolidated subsidiaries of any kind
whatsoever, whether accrued, contingent, absolute or otherwise and (ii) there
was no existing condition, situation or set of circumstances which would
result in such a liability, except in the case of each of clauses (i) and (ii)
for liabilities that, individually or in the aggregate, have not had and would
not reasonably be expected to have a material adverse effect in the business,
properties or condition (financial or otherwise) of the Company. Since
January 31, 1994, there has been no material adverse change in the business,
properties or condition (financial or otherwise) of the Company.
The Company shall cause a meeting of its stockholders to be
duly called and held as soon as reasonably practicable for the purpose of
voting on the approval of the transactions contemplated by this letter
agreement. The Directors of the Company shall, subject to their fiduciary
duties as advised by counsel, recommend approval by the Company's stockholders
of the transactions contemplated by this Agreement. In connection with such
meeting, the Company (i) will promptly prepare and file with the Commission,
will use its best efforts to have cleared by the Commission and will
thereafter mail to its stockholders as promptly as practicable the proxy
statement of the Company and all other proxy materials for such meeting, (ii)
will, subject to the provisions of the immediately preceding sentence, use its
best efforts to obtain the necessary approvals by its stockholders of the
transactions contemplated hereby and (iii) will otherwise comply with all
legal requirements applicable to such meeting. Generale des Eaux agrees to
vote all of its shares in favor of the transactions contemplated by this
letter agreement at such meeting of stockholders.
AWT agrees to increase the size of the Board of Directors
promptly after execution of this letter agreement by two Directors and shall
appoint as Directors of the Company (with terms expiring at the next annual
meeting of the Company's stockholders) such persons designated by Generale des
Eaux. AWT further agrees to place the two Directors designated by Generale
des Eaux on the Executive Committee of the Board promptly after execution of
this letter agreement.
AWT and Generale des Eaux shall agree on the form and content
of any public announcements which shall be made concerning this letter
agreement or the transactions contemplated hereby and neither AWT nor Generale
des Eaux shall make any such public announcement without the consent of the
other, except with respect to any public announcement or other public
disclosure, to the extent either party determines, in good faith and with the
advice of counsel, such announcement or disclosure is required by law or the
rules or regulations of any exchange on which such party's securities are
listed or to avoid undue risk that the transactions contemplated hereby will
be enjoined or that such party, its officers, directors or representatives will
be liable for damages as a result thereof.
In connection with the preparation of the Investment Agreement
and subject to the terms of the Confidentiality Agreement dated October 22,
1992 between the parties, AWT will and Generale des Eaux will cause PSG to,
and each will cause its respective officers, directors, employees and agents
to, afford Generale des Eaux and AWT, as the case may be, and their respective
officers, employees, advisors and agents reasonable access at all reasonable
times to AWT's and PSG's respective officers, employees, agents, properties,
books, records and contracts and will furnish to AWT and Generale des Eaux and
their respective advisors all financial, operating and other data and
information as each of AWT and Generale des Eaux or their respective advisors
may reasonably request.
AWT shall not nor shall AWT permit any of its subsidiaries or
any of its or their respective officers, directors, employees, agents or
advisers to initiate, solicit or encourage, or take any other action to
facilitate (including by way of furnishing nonpublic information, except to
the extent determined in good faith by the Board of Directors of AWT (the
"Board") based on the advice of counsel to be legally required for the
discharge by the Board of its fiduciary duties), any inquiries or the making
of any proposal which constitutes, or may reasonably be expected to lead to,
any takeover proposal (as defined below) or, except to the extent determined
in good faith by the Board based on the advice of counsel to be legally
required for the discharge by the Board of its fiduciary duties, agree to or
endorse any takeover proposal, or participate in any discussions or
negotiations, or provide third-parties with any nonpublic information,
relating to any such inquiry or proposal. AWT shall promptly inform Generale
des Eaux orally and in writing of any such inquiry or proposal. As used
herein, "takeover proposal" shall mean any tender or exchange offer, proposal
for a merger, consolidation or other business combination involving AWT or any
of its subsidiaries (other than that involving solely an acquisition of a
business or assets by AWT or any of its subsidiaries) or any proposal or offer
to acquire in any manner a significant (i.e., more than 10% of the then
outstanding shares of AWT) equity interest in, or a significant (i.e., more
than 10% of the consolidated total assets of AWT) portion of the assets of
(including the stock or assets of subsidiaries) AWT, but excluding the
transactions contemplated by the Investment Agreement.
AWT agrees not to (i) adopt any stockholder rights plan (or any
arrangement which is designed to disadvantage Generale des Eaux on the basis
of the size of its shareholding), (ii) make any material change in the
Company's capital structure or issue any capital stock except as provided
herein or (iii) modify or enter into any employee benefit arrangements or any
agreements with employees or grant any severance or termination compensation
rights to employees. The foregoing restrictions shall terminate in the event
that (i) Generale des Eaux materially breaches any of its obligations or
representations contained herein, in Exhibit C hereto or in the Investment
Agreement or (ii) Generale des Eaux commences a tender offer for or acquires
more than 1% of the outstanding shares of Class A Common Stock (except as
contemplated by this letter agreement) or commences any solicitation of
proxies from the Company's stockholders not approved by the Company's Board
of Directors. Generale des Eaux will give the Company two days' prior written
notice of any acquisition of more than 1% of the outstanding shares.
In the event that Generale des Eaux materially breaches any of
its obligations or representations contained herein, in Exhibit C or in the
Investment Agreement, Generale des Eaux agrees that the provisions of Article
VI of the Stock Purchase Agreement dated May 13, 1990 shall be reinstated for
an additional three year period from the date hereof.
The parties hereto will be responsible for all of their own
costs incurred by them with respect to the investigation and negotiation of
this letter agreement and the transactions contemplated hereby.
This letter agreement may be terminated and the transactions
contemplated hereby may be abandoned or terminated by written notice to that
effect given by either party to the other on or after July 31, 1994, if by such
date the parties hereto shall not have executed definitive documentation to
effect the transactions contemplated by the Investment Agreement. Except as
expressly provided herein, upon any such termination, the parties shall each be
released from all further obligations and liabilities hereunder; provided that
each party shall remain liable for any breach or violation of the terms hereof
by such party prior to such termination.
This letter agreement may be executed in one or more
counterparts.
This letter agreement, which shall be governed by and construed
in accordance with the internal laws of the State of New York, is binding upon
the parties hereto and any of its terms may only be modified, waived or
supplemented in a written agreement executed by authorized representatives of
each of AWT and Generale des Eaux.
Sincerely,
COMPAGNIE GENERALE DES EAUX
By: /s/ J-H David
------------------------
Title:
Acknowledged and agreed:
AIR & WATER TECHNOLOGIES CORPORATION
By /s/ E.C. Beck
--------------------------
Title:
Exhibit A
Term Sheet for Investment Agreement
1. Board of Directors Representation
Generale des Eaux will have representation on the Board (and all Committees
thereof other than any Special Committee of independent directors) that is
proportionate to the aggregate number of shares of Class A Common Stock (the
"Shares") owned by Generale des Eaux on a fully diluted basis (rounded down to
the next whole number if Generale des Eaux owns in the aggregate less than 50%
of the outstanding shares on a fully diluted basis or, if otherwise, rounded up
to the next whole number).
Immediately after closing of the transactions contemplated by the Investment
Agreement, the Board shall initially consist of eleven Directors, with three
directors who are employees of Generale des Eaux or its affiliates as
designated by Generale des Eaux, two Independent Directors (as defined below)
designated by Generale des Eaux, five Directors consisting of Messrs. Beck,
Costle, Dowd, Morris and Senior and an additional Independent Director
satisfactory to Generale des Eaux. The Board shall have at least three
Directors who are not employees of the Company or Generale des Eaux or any of
their respective affiliates ("Independent Directors"). All Independent
Directors shall be satisfactory to Generale des Eaux. The Chairman of the
Board shall be designated by Generale des Eaux.
2. Management
Generale des Eaux shall have the right to designate the Chief Executive
Officer and the Chief Financial Officer of the Company. Current AWT
management would participate in the transition as mutually agreed upon. It is
Generale des Eaux's current intention to work with as many members of current
management as possible. Mr. Beck shall continue as Chairman and Chief
Executive Officer until the closing of the transactions contemplated by the
letter agreement. All agreements of AWT with employees will be honored.
3. Affiliate Transactions
Any transactions (or series of related transactions in a chain) between AWT
and any of its subsidiaries and Generale des Eaux or any of its subsidiaries
shall be on an arms length basis, and (i) any such transaction (or such series
of transactions) having an aggregate value in excess of $1,000,000 and (ii)
any settlement of the PRASA litigation must be approved by a majority of the
Independent Directors or a Special Committee thereof. After closing of the
transactions contemplated by the Investment Agreement, all actions by AWT with
respect to the Investment Agreement shall be taken by majority approval of
such Independent Directors.
4. Joint Efforts
Generale des Eaux will agree in the Investment Agreement that AWT shall become
Generale des Eaux's exclusive vehicle in the United States, its possessions
and its territories for its water and waste water management and air pollution
activities. Generale des Eaux will also assist AWT in developing its water
and waste water management and air pollution activities in both Canada and
Mexico, subject to existing contractual agreements and taking into account the
respective interest of both companies. AWT shall be offered an active
participation in any new water management investments by Generale des Eaux in
the United States which are too capital intensive for AWT to undertake on a
stand-alone basis. In addition, Generale des Eaux and AWT will establish a
privileged commercial relationship for the development of air pollution
activities in Europe.
5. Representations
AWT and Generale des Eaux (including with respect to PSG) will make
representations and warranties to each other in connection with the
transactions contemplated hereby which are customary for transactions of this
nature, subject to standard materiality qualifications, which representations
(including, in the case of AWT and with respect to PSG, with regard to the
absence of any material adverse change in the business, financial condition
and results of operations of AWT and PSG and their respective subsidiaries,
taken as a whole) will be brought down to closing but will not survive the
closing.
6. Covenants
The transactions contemplated by the Investment Agreement will be dependent
upon performance of customary pre-closing covenants for similar transactions,
including:
(a) operation of the businesses of AWT and PSG in the ordinary
course consistent with past practice; and
(b) AWT would agree to the "no-shop" and other covenants
substantially similar to those contained in the letter agreement of
which this Exhibit A forms a part.
7. Purchase Price Adjustment
The purchase price for the capital stock of PSG shall be adjusted in cash
upwards or downwards, as the case may be, to the extent the consolidated net
worth (excluding any intercompany debt) of PSG as of closing of the
transactions contemplated by the Investment Agreement is greater or lower, as
the case may be, than the consolidated net worth (excluding any intercompany
debt) of PSG as of December 31, 1993.
8. Access
For so long as Generale des Eaux beneficially owns at least 26% of the
outstanding Shares on a fully diluted basis, it will have access on reasonable
terms to the books, records and employees of AWT and its subsidiaries and
provision by AWT of all information reasonably requested by such party,
subject to confidentiality obligations that at the time may be owed by AWT to
third parties, to appropriate confidentiality arrangements and requirements of
law.
9. Registration Rights
Four demand and unlimited piggyback registration rights for the Class A
Convertible Exchangeable Preferred Stock and the Shares held by Generale des
Eaux, subject to reasonable limits regarding the frequency of exercises,
blackout periods, and clawbacks and restriction on the size of the offerings
by underwriters.
Exhibit B
Term Sheet for Series A Preferred Stock
1. Securities Offered. . . . . Series A Convertible Exchangeable
Preferred Stock ("Series A
Preferred") exchangeable into
Convertible Subordinated Debt
with a maturity of 10 years from
the date of issuance of the Series
A Preferred ("Convertible Debt").
2. Dividends . . . . . . . . . The amount of the Series A
Preferred dividend will be equal
to 5 1/2% per annum. If the
Series A Preferred is exchanged
into Convertible Debt, the
interest rate will be 5 1/2% per
annum. Annual cumulative
dividends or interest, accruing
from the date of issue, will be
payable in cash semi-annually.
3. Liquidation Preference. . . $50.00 per share, plus accrued
and unpaid dividends.
4. Exchange Provisions . . . . The Series A Preferred is
exchangeable, in whole or in
part, into Convertible Debt, at
the option of the Company at any
time after June 30, 1997, on not
less than 30 nor more than 60
days prior written notice. Each
$50.00 liquidation value of
Series A Preferred is
exchangeable for $50.00 face
amount of Convertible Debt.
5. Conversion Rights . . . . . The Series A Preferred and
Convertible Debt are convertible,
in whole or in part, at the
option of the Holder at any time
into the Company's Class A Common
Stock at a conversion price equal
to $12.50 per share of Class A
Common Stock, subject to
adjustment as provided below.
6. Anti-dilution . . . . . . . Customary provisions, including
adjustments (using a weighted
average in the case of items
(iii), (iv), (v) and (vi) so as
to preserve the fully diluted
percentage of Common Stock into
which the Series A Preferred
Stock is convertible) in the
event of:
(i) stock dividends, stock
reclassifications or
recapitalizations, stock
splits, reverse stock
splits and the like;
(ii) dividends or other
distributions of cash or
assets or evidence of
indebtedness;
(iii) dividends or other
distributions of securities
or rights convertible into
or exercisable for shares of
any class of common stock
of the Company at a
purchase price less than
the conversion price of
such common stock;
(iv) issuance of shares of any
class of common stock of
the Company at a price less
than the conversion price
of such common stock;
(v) issuance of securities or
rights convertible into or
exercisable for shares of
any class of common stock
of the Company at a
purchase price less than
the conversion price of
such common stock; and
(vi) repurchase by the Company,
directly or indirectly, of
shares of any class of
common stock at a price in
excess of the conversion
price of such common stock.
7. Redemption at Option of
the Company. . . . . . . . The Series A Preferred is not
redeemable before June 30, 1997.
Between June 30, 1997 and June
30, 2000, the Series A Preferred
will be redeemable at the option
of the Company, on not less than
30 nor more than 60 days prior
written notice. The Company may
exercise this option during such
time period only if for 20
trading days within any period of
30 consecutive trading days,
including the last trading day of
such period, the closing price of
the Common Stock exceeds $18.75,
subject to adjustments. After
June 30, 2000, the Series A
Preferred will be redeemable at
any time. The same redemption
provisions apply to the
Convertible Debt. The redemption
price will be 103.85% after June
30, 1997 and will decrease by
.55% each year until it reaches
100% where it will remain fixed.
8. Voting Rights. . . . . . . On all matters the Holders of the
Series A Preferred will have one
vote (voting as a class with the
Common Stock) for each share of
Common Stock that their Series A
Preferred represents. In
addition, the Series A Preferred
will vote separately as a class
on (i) any amendments to the
Certificate of Designation of the
terms of the Series A Preferred
and (ii) any merger,
consolidation, reclassification
or similar transaction which will
adversely affect the rights and
preferences of the Series A
Preferred.
9. Ranking . . . . . . . . . . The Series A Preferred will rank
(1) with respect to the payment
of amounts upon liquidation,
dissolution or winding up, senior
to the Common Stock, and
pari-passu with any other
Preferred Stock and (2) with
respect to the payment of
dividends, senior to the Common
Stock and pari-passu with any
other Preferred Stock. The
Convertible Debt will be
subordinated to the Company's
senior debt and senior
subordinated debt.
10. Maturity . . . . . . . . . . Perpetual
Exhibit C
March 18, 1994
The Board of Directors
Air & Water Technologies Corporation
U.S. Highway 22 West and Station Road
Branchburg, New Jersey 08876
Gentlemen:
As an inducement to Air & Water Technologies Corporation
("AWT") entering into with us that certain letter agreement of even date
herewith (the "Letter Agreement"), Compagnie Generale des Eaux undertakes the
following:
1. If the transactions contemplated by such letter agreement
are not consummated on or before June 14, 1994 and AWT has not theretofore
been able to obtain up to $125,000,000 of debt financing to repay the Senior
Note held by The Prudential Insurance Company of America (the "Prudential
Note"), and subject to there not having occurred any material adverse change
or any event which would reasonably be expected to result in a material
adverse change in the business, properties or condition (financial or
otherwise) of AWT and subject to AWT not being in material breach of its
obligations or of any representation under the Letter Agreement or the
Investment Agreement, and provided that the shareholders of AWT shall not have
voted against approval of the transactions contemplated by the aforementioned
letter agreement, Generale des Eaux will provide any assistance and support
necessary for a bank or other financial institution to provide bridge
financing to AWT for up to $125,000,000 on a senior basis at a rate equal to 3
month LIBOR + 325 basis points, any such loans to be repaid as promptly as
practicable, and in any event within six months, by AWT, it being understood
that such bridge financing would contain customary covenants and events of
default for loans of this type. Furthermore, should such bridge financing not
be repaid within 6 months, Generale des Eaux will have the right to cause (i)
the entire outstanding principal amount (plus accrued interest) of such bridge
debt to be exchanged for shares of AWT or (ii) if any approval of the
stockholders of AWT is required for the issuance of such shares, and has not
been obtained, an amount of bridge debt to be exchanged for the maximum number
of shares permitted to be issued without stockholder approval, in each case
such shares shall be valued at the average of the closing bid price for such
shares over the 20 trading days prior to any such exchange.
2. After consummation of the transactions contemplated by
the Letter Agreement, CGE will provide any assistance and support necessary to
enable AWT to obtain up to $125,000,000 of permanent bank debt financing on an
unsecured basis to repay the Prudential Note at an interest rate not in excess
of the market rate for a seven year fixed rate swap against 3 month LIBOR +
125 basis points with a covenant package restriction on AWT's assets and
permits normal working capital borrowing by AWT.
3. After consummation of the transactions contemplated by
the Letter Agreement, Generale des Eaux will co-sign on a case by case basis
with AWT, applications for letters of credit of AWT's water and waste water
management and air pollution projects, subject to approval by Generale des
Eaux, in accordance with its usual business practices of such water and waste
water management or air pollution projects. CGE acknowledges (without thereby
intending to imply a limitation) that its support of letters of credit could
reach or exceed the level of letters of credit currently carried by AWT.
This letter is intended for the sole benefit of Air & Water
Technologies Corporation and not for the benefit of any other person,
including without limitation any creditor or shareholder of AWT.
Very truly yours,
COMPAGNIE GENERALE DES EAUX
By
------------------------------
CREDIT AGREEMENT
CREDIT AGREEMENT dated as of June 14, 1994 between AIR & WATER
TECHNOLOGIES CORPORATION, a corporation organized under the laws of Delaware
(the "Borrower"), and COMPAGNIE GENERALE DES EAUX, a corporation organized
under the laws of France (together with its successors and assigns, the
"Lender").
R E C I T A L:
The Borrower has requested the Lender to extend credit to the
Borrower in an aggregate principal amount not exceeding $125,000,000 for (i)
the prepayment of the $100,000,000 aggregate principal amount of the 11.8%
Senior Notes of the Borrower held by The Prudential Insurance Company of
America, and any prepayment penalties in connection with such prepayment, and
(ii) general corporate purposes, and the Lender is willing to make such credit
available to the Borrower, upon the terms and subject to the conditions set
forth in this Agreement.
NOW, THEREFORE, The parties hereto, agree as follows:
ARTICLE I
DEFINITIONS AND ACCOUNT TERMS
SECTION 1.01 Certain Defined Terms. As used in this Agreement,
the following terms shall have the following meanings (such meanings to be
equally applicable to both the singular and plural forms of the terms defined):
"Agreement" means this Credit Agreement, as amended, supplemented
or otherwise modified from time to time.
"Bankruptcy Code" means Title 11 of the United States Code
entitled "Bankruptcy", as amended from time to time.
"Business Day" means a day of the year other than a Saturday or
Sunday on which banks in New York City are not required or authorized by law
to close.
"CGE" means Compagnie Generale des Eaux, a corporation organized
under the laws of the Republic of France.
"Closing Date" means the date upon which the conditions precedent
to the initial Eurodollar Loans herewith set forth in Section 6.01 have been
satisfied.
"Commitment" shall have the meaning attributed to it in Section
2.01 of this Agreement.
"Dollar" and the sign $ shall mean lawful money of the United
States of America.
"Eurodollar Loan" means each borrowing under this Agreement
(collectively, the "Eurodollar Loans").
"Eurodollar Rate" applicable to any Interest Period, means the
interbank offered rate quoted by the Reference Bank to prime banks in the
London interbank Eurodollar market for deposits in Eurodollars in immediately
available funds at 11:00 A.M. (London time) two Business Days before the first
day of such Interest Period in an amount equal to the amount of the Eurodollar
Loan to which such Interest Period is to apply and for a period of time
comparable to such Interest Period.
"Event of Default" has the meaning set forth in Section 9.01.
"Federal Funds Rate" means the rate for overnight Federal Funds,
as published by the Federal Reserve Bank of New York.
"Final Maturity Date" means June 15, 2001.
"GAAP" means generally accepted accounting principles in the
United States of America, consistently applied.
"Governmental Approvals" means any authorization, consent, order,
approval, license, lease, ruling, permit, tariff, rate, certification,
validation, exemption, filing or registration by or with, or notice to, any
Governmental Authority.
"Governmental Authority" means any federal, state, municipal or
other governmental department, commission, boards, bureau, agency, court,
tribunal or other instrumentality, domestic or foreign, and any arbitrator.
"Guarantee" by any Person means any obligation, contingent or
otherwise, of such Person directly or indirectly guaranteeing any Indebtedness
or other obligation of any other Person and, without limiting the generality
of the foregoing, any obligation, direct or indirect, contingent or otherwise,
of such Person (i) to purchase or pay (or advance or supply funds for the
purchase or payment of) such Indebtedness or other obligation (whether arising
by virtue of partnership arrangements, by agreement to keep-well, to purchase
assets, goods, securities or services, to take-or-pay, or to maintain
financial statement conditions or otherwise) or (ii) entered into for the
purpose of assuring in any other manner the obligee of such Indebtedness or
other obligation of the payment thereof or to protect such obligee against
loss in respect thereof (in whole or in part), provided that the term
Guarantee shall not include endorsements
for collection or deposit in the ordinary course of business. The term
"Guarantee" used as a verb has a corresponding meaning.
"Indebtedness" of any Person means at any date, without
duplication, (i) all obligations of such Person for borrowed money, (ii) all
obligations of such Person evidenced by bonds, debentures, notes or other
similar instruments, (iii) all obligations of such Person to pay the deferred
purchase price of property or services, except trade accounts payable arising
in the ordinary course of business, (iv) all obligations of such Person as
lessee which are capitalized in accordance with generally accepted accounting
principles, (v) all non-contingent obligations of such Person to reimburse
any bank or other Person in respect of amounts paid under a letter of credit
or similar instrument, (vi) all Indebtedness secured by a Lien on any asset
of such Person, whether or not such Indebtedness is otherwise an obligation of
such Person, and (vii) all Indebtedness of others Guaranteed by such Person.
"Interest Period" means with respect to any Eurodollar Loan a
period of either one, two, three or six months, as the Borrower may elect, and
if the Borrower fails to make an election, a period of three months; provided,
however, that (i) any Interest Period which would otherwise end on a day which
is not a Business Day shall be extended to the next succeeding Business Day,
unless, such succeeding Business Day falls in another calendar month, in which
case such Interest Period shall end on the next preceding Business Day, (ii)
any Interest Period which would otherwise end on a day for which there is no
numerically corresponding day in the relevant calendar month shall end on the
last day of such calendar month and (iii) any Interest Period which would
otherwise end after the Final Maturity Date shall end on the Final Maturity
Date.
"Lien" means, with respect to any asset, any mortgage, lien,
pledge, charge, security interest or encumbrance of any kind, or any other
type of preferential arrangement that has the practical effect of creating a
security interest, in respect of such asset. For the purposes of this
Agreement, the Borrower or any Subsidiary shall be deemed to own subject to a
Lien any asset which it has acquired or holds subject to the interest of a
vendor or lessor under any conditional sale agreement, capital lease or other
title retention agreement relating to such asset.
"Loan Documents" means this Agreement, the Note and all other
agreements, instruments, opinions, certificates and documents executed and
delivered pursuant to or in connection therewith.
"Material Adverse Change" means, with respect to any Person, a
material adverse change in the consolidated business operations, assets,
liabilities, condition (financial or otherwise) or prospects, of such Person,
taken as a whole.
"Note" has the meaning specified in Section 2.05(a).
"Person" means an individual, partnership, corporation (including
a business trust), limited liability company, joint stock company, trust,
unincorporated association, joint venture or other entity, or a government or
any political subdivision or agency thereof.
"Prime Rate" means the rate of interest announced by the Reference
Bank from time to time as its Prime Rate. The Prime Rate is a reference rate
and does not necessarily represent the lowest or best rate actually charged by
the Reference Bank to any customer. The Reference Bank may make commercial or
other loans at rates of interest at, above or below the Prime Rate. In the
event that for any reason the Federal Funds Rate is greater than the Prime
Rate for any day, then the Prime Rate for such day shall be equal to the
Federal Funds Rate for such day plus one and one-half percent (1-1/2%).
"Reference Bank" means the London Branch of Societe Generale.
"Subsidiary" of any Person means a corporation or other entity of
which a majority of the outstanding shares of stock of each class having
ordinary voting power is owned by such Person, by one or more Subsidiaries of
such Person, or by such Person and one or more of its Subsidiaries.
"Substitute Interest Rate" has the meaning specified in Section
5.01 (a).
SECTION 1.02 Computation of Time Periods. In this Agreement in
the computation of periods of time from a specified date to a later specified
date, the word "from" means "from and including" and words "to" and "until"
each means "to but excluding".
SECTION 1.03 Accounting Terms. All accounting terms not
specifically defined here shall be construed in accordance with GAAP
consistent with those applied in the preparation of the financial statements
referred to in Sections 7.05 and 8.02.
ARTICLE II
COMMITMENT; AMOUNT AND TERMS OF THE LOANS
SECTION 2.01 Commitment. The Lender agrees, on the terms of this
Agreement, to make Eurodollar Loans to the Borrower during the period from and
including the Closing Date to and including the Final Maturity Date in an
aggregate principal amount up to but not exceeding One Hundred and Twenty-five
Million Dollars ($125,000,000) at any one time outstanding (the "Commitment").
Subject to the terms of this Agreement, prior to the Final Maturity Date,
the Borrower may borrow, repay and reborrow the amount of the Commitment. The
Commitment shall expire if the Closing Date has not occurred on or before June
15, 1994.
SECTION 2.02 Procedure for Eurodollar Loans. The Borrower shall
give the Lender notice in writing, or by telephone to be confirmed promptly
thereafter in writing, no later than 11:00 a.m. (New York City time) three
Business Days prior to the day of a proposed Eurodollar Loan specifying (i)
the requested date of such Eurodollar Loan; (ii) the Interest Period for the
Eurodollar Loan; and (iii) the amount of such Eurodollar Loan. Subject to the
terms and conditions of this Agreement, the amount of any Eurodollar Loan
shall be made available to the Borrower by depositing the same, in immediately
available funds, in an account of the Borrower maintained with the Lender or
by wiring the same to any account of the Borrower maintained at another bank
in the United States as specified in the relevant notice of borrowing.
SECTION 2.03 Change in Commitment.
(a) The amount of the Commitment shall be automatically reduced
to zero at the close of business on the Final Maturity Date.
(b) The Borrower shall have the right at any time or from time to
time upon at least three Business Days prior written notice to the Lender (i)
so long as no Eurodollar Loans are outstanding, to terminate the Commitment
and (ii) to reduce the aggregate unused amount of the Commitment.
(c) The Commitment once terminated or reduced may not be
reinstated.
SECTION 2.04 Commitment Fee. The Borrower shall pay to the
Lender a commitment fee on the daily average unused amount of the Commitment,
for the period from and including the Closing Date to but not including the
earlier of the date the Commitment is terminated pursuant to Section 2.03 or
9.02 hereof and the Final Maturity Date, at a rate of 0.45% per annum. The
amount of the accrued commitment fee shall be payable in arrears on the last
Business Day of each calendar quarter and on the earlier of the date the
Commitment is terminated pursuant to Section 2.03 or 9.02 hereof and the Final
Maturity Date.
SECTION 2.05 Note.
(a) The Eurodollar Loans made by the Lender to the Borrower shall
be evidenced by a single promissory note of the Borrower substantially in the
form of Exhibit A hereto (as the same may be amended, supplemented or modified
from time to time, the "Note"), dated the date hereof, payable to the Lender
in a principal amount equal to the amount of the Commitment as originally in
effect and otherwise duly completed.
(b) The date, amount, interest rate and duration of each Interest
Period (if applicable) of each Eurodollar Loan made by the Lender to the
Borrower, and each payment made on account of the principal thereof, shall be
recorded by the Lender on its books and prior to any transfer of the Note,
endorsed by the Lender on the schedule attached to the Note or any continuation
thereof; provided that the failure of the Lender to make any such recordation
or endorsement shall not affect the obligations of the Borrower to make a
payment when due of any amount owing under the Note.
SECTION 2.06 Repayment of Eurodollar Loans. The Borrower hereby
promises to pay to the Lender the principal of, and any accrued and unpaid
interest on, the Eurodollar Loans outstanding at the close of business on the
Final Maturity Date.
SECTION 2.07 Optional Prepayments and Failure to Borrow. The
Borrower shall have the right to prepay the unpaid principal and accrued
interest of any outstanding Eurodollar Loan on the last day of an Interest
Period for such Eurodollar Loan, provided that the Borrower shall give the
Lender at least three Business Days prior written notice of such prepayment.
In the event that the Borrower makes any repayment or prepayment in respect of
any Eurodollar Loan other than on the last day of an Interest Period relative
to the amount being so repaid or prepaid or the Borrower fails to borrow after
a notice of borrowing has been given pursuant to Section 2.02 hereof, the
Borrower shall forthwith on demand from the Lender pay to the Lender such
additional amount as shall be necessary to compensate the Lender for any loss
or expense reasonably sustained or incurred by reason of the liquidation or
reemployment of deposits or other funds acquired or to be acquired by the
Lender in order to fund such Eurodollar Loan then being repaid or prepaid or
which the Borrower has failed to borrow.
ARTICLE III
INTEREST AND OVERDUE INTEREST
SECTION 3.01 Interest. The Borrower hereby promises to pay to
the Lender interest on the unpaid principal amount of each Eurodollar Loan
made by the Lender for the period from and including the date of such
Eurodollar Loan to and excluding the date such Eurodollar Loan shall be paid
in full for each Interest Period relating thereto at a rate per annum equal to
the Eurodollar Rate applicable thereto, plus one and one-quarter percent
(1-1/4%). Interest shall be payable on the last day of each Interest Period;
provided that if any Interest Period exceeds three months, interest shall be
payable at the end of each three month period during such Interest Period and
on the last day of such Interest Period.
SECTION 3.02 Overdue Interest. Any amount of principal (whether
at stated maturity, by acceleration or otherwise) and interest which is not
paid when due shall bear interest, from the date on which such amount is due
until such amount is paid in full, payable on demand, at a rate per annum
equal at all times to two percent (2%) per annum above the Prime Rate.
ARTICLE IV
METHOD OF PAYMENT AND COMPUTATIONS
SECTION 4.01 Method of Payments and Computations.
(a) The Borrower shall make each payment hereunder and under the
Note not later than 11:00 A.M. (New York City time) on the day when due in
dollars to the Lender in immediately available funds without set-off,
deduction or counterclaim.
(b) The Borrower hereby authorizes the Lender, if and to the
extent payment owed to the Lender is not made when due hereunder or under the
Note held by the Lender, to charge from time to time against any or all of the
Borrower's accounts with the Lender any amount so due.
(c) All computations of interest and of overdue interest shall be
made by the Lender, on the basis of a year of 360 days, for the actual number
of days (including the first day but excluding the last day) elapsed in the
period for which such interest is payable. Each determination by the Lender
of an interest rate hereunder shall be conclusive and binding for all
purposes, absent manifest error.
(d) Whenever any payment hereunder or under the Note shall be
stated to be due on a day other than a Business Day, such payment shall be
made on the next succeeding Business Day, and interest for such Interest
Period shall be payable to and excluding such next succeeding Business Day;
provided that if such extension would cause payment of interest or principal of
the Eurodollar Loan to be made in the next following calendar month, such
payment shall be made on the next preceding Business Day.
ARTICLE V
YIELD PROTECTION; ILLEGALITY; TAXES; SUBSTITUTION
SECTION 5.01 Substitute Basis.
(a) If the Lender determines from time to time that the
Eurodollar Rate will not adequately reflect the cost to the Lender of funding
or maintaining a Eurodollar Loan for the applicable Interest Period, the
Lender shall give notice thereof to the Borrower. Within 15 days following
the date of any such notice by the Lender, the Lender and the Borrower shall
enter into negotiations in good faith with a view to agreeing to an
alternative basis acceptable to the Borrower and the Lender for determining
the interest rate (the "Substitute Interest Rate") which shall be applicable
to such Eurodollar Loan for such Interest Period from alternative sources.
If, at the expiration of 20 days from the giving of such notice by the Lender,
the Lender and the Borrower have agreed to such Substitute Interest Rate, and
all governmental approvals in connection therewith have been obtained, such
Substitute Interest Rate shall take effect with respect to the Interest Period
from the beginning of the Interest Period.
(b) If, at the expiration of 20 days from the giving of any
notice by the Lender provided for in subsection (a) of this Section 5.01, the
Lender and the Borrower shall not have agreed to any Substitute Interest Rate,
or any necessary governmental approvals in connection therewith shall not have
been obtained, the Lender shall give notice to the Borrower of that rate of
interest at which the Lender is prepared to lend an amount equal to the unpaid
amount of the Eurodollar Loan. Such notice shall set forth the computations
made by the Lender in determining such rate of interest, which computations
shall reflect the cost to the Lender of funding such Eurodollar Loan for the
period from the date of the disbursement of such Eurodollar Loan to the date
of payment pursuant to this subsection (b), and any amounts required to
compensate the Lender for any duly substantiated additional losses, costs or
expenses which the Lender may reasonably incur as a result of such payment.
Upon receipt of such notice, the Borrower may prepay the Eurodollar Loan, such
prepayment to be made within ten (10) Business Days of the Borrower's receipt
of the Lender's notice. If the Borrower does not so elect to prepay, the rate
of interest applicable to such Eurodollar Loan shall be the rate as determined
pursuant to the first sentence of this subsection (b) plus a margin of
one-and-one-quarter percent (1 1/4%).
SECTION 5.02 Illegality; Increased Costs; Capital Adequacy.
(a) Notwithstanding any other provision of this Agreement, if the
introduction of or any change in or in the interpretation of any law or
regulation applicable to the Lender shall make it unlawful, or any central
bank or other Governmental Authority shall assert that it is unlawful, for the
Lender to perform its obligations hereunder to make a Eurodollar Loan or to
continue to fund or maintain Eurodollar Loans hereunder, then, on notice
thereof and demand therefor by the Lender to the Borrower, (i) the obligation
of the Lender to make Eurodollar Loans shall terminate and (ii) the Borrower
shall forthwith prepay in full all Eurodollar Loans then outstanding, together
with interest accrued thereon.
(b) If, due to either (i) the introduction of or any change (or
by way of imposition or increase of reserve requirements) in or in the
interpretation of any law or regulation or (ii) the compliance with any
guideline or request from any central bank or other Governmental Authority
(whether or not having the force of law), there shall be any increase in the
cost to the Lender of agreeing to make or making, funding or maintaining a
Eurodollar Loan, then the Borrower shall from time to time, upon demand by the
Lender, pay to the Lender additional amounts sufficient to compensate the
Lender for such increased cost. A certificate as to the amount of such
increased cost, submitted to the Borrower by the Lender, shall be conclusive
and binding for all purposes, absent manifest error.
(c) If the Lender is a regulated financial institution and if
either (i) the introduction of or any change in or in the interpretation of
any law or regulation or (ii) compliance by the Lender with any guideline or
request from any central bank or other Governmental Authority (whether or not
having the force of law and whether or not the failure to comply therewith
would be unlawful) affects or would affect the amount of capital required or
expected to be maintained by the Lender or any corporation controlling the
Lender and the Lender reasonably determines that the amount of such capital is
increased by or based upon the existence of the Commitment and other
commitments of this type or upon Eurodollar Loans then, upon demand by the
Lender, the Borrower shall immediately pay to the Lender, from time to time
as specified by the Lender, additional amounts sufficient to compensate the
Lender in the light of such circumstances to the extent that the Lender
reasonably determines such increase in capital to be allocable to the
existence of the Commitment. A certificate as to such amounts submitted to
the Borrower by the Lender shall be conclusive and binding for all purposes,
absent manifest error.
SECTION 5.03 Taxes.
(a) Any and all payments by the Borrower hereunder or under the
Note shall be made free and clear of and without deduction for any and all
present or future taxes, levies, imposts, deductions, charges or withholdings,
and all liabilities with respect thereto, excluding (i) taxes imposed on the
Lender's income, and franchise taxes imposed on the Lender by the jurisdiction
under the laws of which the Lender is organized or any political subdivision
thereof and (ii) taxes imposed on the Lender's income, and franchise taxes
imposed on it, by the United States of America or of any political subdivision
thereof (all such non-excluded taxes, levies, imposts, deductions, charges,
withholdings and liabilities being hereinafter referred to as "Taxes"). If
the Borrower shall be required by law to deduct any Taxes from or in respect
of any sum payable hereunder or under the Note to the Lender, (i) the sum
payable shall be increased as may be necessary so that after making all
required deductions (including deductions applicable to additional sums
payable under this Section 5.03) the Lender receives an amount equal to the sum
it would have received had no such deductions been made, (ii) the Borrower
shall make such deductions, and (iii) the Borrower shall pay the full amount
deducted to the relevant taxation authority or other authority in accordance
with applicable law.
(b) In addition, the Borrower agrees to pay any present or future
stamp or documentary taxes or any other excise or property taxes, mortgage
recording taxes, charges or similar levies which arise from any payment made
hereunder or under the Note or from the execution, delivery or registration
of, or otherwise with respect to, this Agreement or the Note (hereinafter
referred to as "Other Taxes").
(c) The Borrower will indemnify the Lender for the full amount of
Taxes or Other Taxes (including, without limitation, any Taxes or Other Taxes
imposed by any jurisdiction on amounts payable under this Section 5.03) paid
by the Lender and any liability (including penalties, interest and expenses)
arising therefrom or with respect thereto, whether or not such Taxes or Other
Taxes were correctly or legally asserted. This indemnification shall be made
within 30 days from the date the Lender makes written demand therefor.
(d) Within 30 days after the date of any payment of Taxes or, in
the case of any taxes referred to in clause (a) of this Section 5.03, when
such receipt is available the Borrower will furnish to the Lender, at its
address referred to in Section 10.02, the original or a certified copy of a
receipt evidencing payment thereof. If no Taxes are payable in respect of any
payment hereunder or under the Note, the Borrower will furnish to the Lender,
at such address, a certificate from each appropriate taxing authority, or an
opinion of counsel acceptable to the Lender, in either case stating that such
payment is exempt from or not subject to Taxes.
(e) Without prejudice to the survival of any other agreement of
the Borrower hereunder, the agreements and obligations of the Borrower
contained in this Section 5.03 shall survive the payment in full of principal
and interest and other amounts due hereunder and under the Note.
(f) The Lender agrees that it will deliver to the Borrower two
duly completed copies of United States Internal Revenue Service Form 1001 or
successor applicable form, as the case may be. The Lender also agrees to
deliver to the Borrower two further copies of said Form 1001, or successor
applicable form or other manner of certification, as the case may be, on or
before the date that any such form expires or becomes obsolete or after the
occurrence of any event requiring a change in the most recent form previously
delivered by it to the Borrower, and such extensions or renewals thereof as
may reasonably be requested by the Borrower, unless in any such case an event
(including, without limitation, any change in treaty, law or regulation) has
occurred prior to the date on which any such delivery would otherwise be
required which renders such form inapplicable or which would prevent the
Lender from duly completing and delivering any such form with respect to it
and the Lender so advises the Borrower. The Lender represents that as of the
date hereof under applicable law and treaties no taxes are required to be
withheld with respect to any payments to be made to the Lender in respect of
the Eurodollar Loans and shall certify by means of a Form 1001, that it is
entitled to receive payments under this Agreement without deduction or
withholding of any United States Federal income taxes.
ARTICLE VI
CONDITIONS OF LENDING
SECTION 6.01 Condition Precedent to the Initial Eurodollar Loan.
The obligation of the Lender to make the initial Eurodollar Loan hereunder is
subject to the satisfaction of the following conditions precedent:
(a) Loan Documents. The Lender shall have received the Loan
Documents in form and substance satisfactory to the Lender, duly executed by
the parties thereto.
(b) Proceedings. The Lender shall have received a copy of the
resolutions of the Board of Directors of the Borrower approving the Loan
Documents to be executed by it and of all documents evidencing other necessary
corporate action, if any, with respect to the Loan Documents to be executed by
it, certified by the Secretary or similar officer of the Borrower and in form
and substance satisfactory to the Lender.
(c) Charter Documents. The Lender shall have received (i) a copy
of the Certificate of Incorporation (or equivalent documents) of the Borrower
as amended, modified or supplemented to date, certified to be true, correct,
and complete by the Secretary of State or other appropriate official of the
jurisdiction of incorporation of the Borrower and (ii) a copy of the By-Laws
of the Borrower certified by the Secretary or similar officer of the Borrower
to be true, correct, and complete.
(d) Officers' Certificates. The Lender shall have received a
certificate of the Secretary or similar officer of the Borrower certifying the
names and true signatures of the officers of the Borrower authorized to sign
the Loan Documents and the other documents to be delivered by the Borrower
hereunder and to give notices of borrowings hereunder.
(e) Approvals. The Lender shall have received copies of all
Governmental Approvals or approvals of any other Person or group of Persons,
in each case which are required to authorize, or are required in connection
with (i) the execution, delivery of performance of any Loan Document by the
Borrower or the consummation of any of the transactions contemplated hereby or
thereby or (ii) the legality, validity, binding effect or enforceability of
any Loan Document.
(f) Opinion. The Lender shall have received a legal opinion of
counsel to the Borrower in the form of Exhibit B attached hereto.
(g) Officers' Certificate. The Lender shall have received a
certificate of the chief financial officer of the Borrower certifying that (i)
the conditions set forth in subsections (a) and (b) of Section 6.02 of this
Agreement are satisfied on the Closing Date and that no Material Adverse Change
has occurred in the Borrower's condition (financial or otherwise) after
October 31, 1993, except as set forth in the Borrower's Quarterly Report on
Form 10-Q for the quarters ended January 31, 1994 and April 30, 1994, in each
case as filed with the Securities and Exchange Commission and (iii) that the
proceeds of such Eurodollar Loans have been or are to be used by the Borrower
for the purpose specified in the recital of this Agreement.
(h) Other Documents. The Lender shall have received all such
other statements, certificates, documents and other information with respect
to the matters contemplated by this Agreement and the other Loan Documents as
the Lender reasonably may request.
SECTION 6.02 Conditions Precedent to all Eurodollar Loans. The
obligation of the Lender to make all Eurodollar Loans shall be subject to the
satisfaction of the following conditions precedent on the date of the making
of each such Eurodollar Loan, both before and after giving effect thereto and
to the application of the proceeds therefrom:
(a) Accuracy of Representations and Warranties. The
representations and warranties contained in Article VII of this Agreement and
in each other Loan Document are true and correct on and as of the date of the
Eurodollar Loan as though made on and as of such date.
(b) No Default. No event has occurred and is continuing, or
would result from the making of the Eurodollar Loan or the application of the
proceeds thereof, which constitutes a Default.
ARTICLE VII
REPRESENTATIONS AND WARRANTIES
The Borrower represents and warrants to the Lender as follows:
SECTION 7.01 Existence; Compliance With Law. The Borrower (i) is
a corporation duly organized, validly existing and in good standing under the
laws of its jurisdiction of incorporation, (ii) has the power and authority to
own its property and assets and to transact the business in which it is
engaged, (iii) has duly qualified and is authorized to do business and is in
good standing as a foreign corporation in every jurisdiction in which the
failure to so qualify could result in a Material Adverse Change with respect
to the Borrower or affects the ability of the Borrower to perform its
obligations under any Loan Document, and (iv) is in full compliance with its
Certificate of Incorporation (or equivalent document) and By-Laws, all
contractual obligations and all laws, except to the extent that the failure to
comply therewith would not result in a Material Adverse Change with respect to
the Borrower or affects the ability of the Borrower to perform its obligations
under any Loan Document.
SECTION 7.02 Power; Authority; No Violation. The execution,
delivery and performance by the Borrower of the Loan Documents and the
consummation of the transactions contemplated hereby or thereby are within the
Borrower's corporate powers, have been duly authorized by all necessary
corporate action, and do not and will not contravene (i) the Certificate of
Incorporation (or equivalent document) and By-Laws of the Borrower or (ii) any
law, regulation, judgment, injunction, order, decree, or other instrument or
any contractual obligation binding on or affecting the Borrower, and do not
and will not conflict with or be inconsistent with or result in any breach of
any of the terms, covenants, conditions or provisions of, or constitute a
default under, or result in the creation or imposition of (or the obligation
to create or impose) any Lien upon any of the property or assets of the
Borrower, except for any conflict, misunderstanding, breach, default or other
consequence which would not result in a Material Adverse Change with respect
to the Borrower.
SECTION 7.03 Approvals. No Governmental Approval or approval of
any other Person (except such as have been duly obtained, made or given, and
is in full force and effect) is required to authorize, or is required in
connection with (i) the execution, delivery or performance of any Loan
Document by the Borrower, or the consummation of any of the transactions
contemplated hereby or thereby or (ii) the legality, validity, binding effect
or enforceability of any Loan Document.
SECTION 7.04 Binding Effect. The Borrower has duly executed and
delivered each Loan Document. Each Loan Document constitutes the legal, valid
and binding obligation of the Borrower thereto, enforceable against the
Borrower in accordance with its terms.
SECTION 7.05 Financial Condition. The Borrower has furnished to
the Lender prior to the date hereof a balance sheet of the Borrower and its
Subsidiaries as of October 31, 1993. All such financial statements fairly
present the financial condition of the respective entities covered thereby on
the date and for the periods covered thereby in accordance with GAAP. As of
the date hereof, no material contingent liabilities exist. Since the date of
such balance sheet, there has been no Material Adverse Change in the Borrower
and its Subsidiaries taken as a whole, except as set forth in the Borrower's
Quarterly Report on Form 10-Q for the quarters ended January 31, 1994 and
April 30, 1994, in each case as filed with the Securities and Exchange
Commission.
SECTION 7.06 Litigation, Etc. There is no pending or threatened
action, suit, investigation, arbitration or other proceeding affecting the
Borrower before any Governmental Authority which, if adversely determined,
could result in a Material Adverse Change with respect to the Borrower or
affects the ability of the Borrower to perform its obligations under any Loan
Document or any transaction contemplated hereby or thereby.
SECTION 7.07 Taxes. The Borrower has filed all tax returns
required to be filed by it and has paid all taxes and assessments payable by
it which have become due, other than those not yet delinquent and except for
those contested in good faith by appropriate proceedings for which adequate
reserves in conformity with GAAP have been provided. No material tax Liens
have been filed and, to the knowledge of the Borrower, no material claims or
assessments are being asserted or will be asserted with respect to any such
taxes or other charges.
ARTICLE VIII
COVENANTS
SECTION 8.01 Certain Affirmative Covenants. So long as the
Commitment hereunder is outstanding or the Note shall remain unpaid, the
Borrower will:
(a) Corporate Existence, Etc. Preserve and maintain, and cause
each of its Subsidiaries to preserve and maintain, its corporate existence,
and consents, franchises and obtain and maintain in full force and effect all
Government Approvals that are required at any time in connection with the
conduct of its business and the performance of this Agreement or the Note;
(b) Compliance with Laws. Comply, and cause each of its
Subsidiaries to comply, in all material respects, with all applicable laws,
except such non-compliance as could not, individually and in the aggregate,
result in a Material Adverse Change with respect to the Borrower or affect the
ability of the Borrower to perform its obligations under any Loan Document;
(c) Payment of Taxes and Claims, Etc. Pay, and cause each of its
Subsidiaries to pay, all tax assessments and governmental charges imposed upon
it or upon its property unless, in each case, the validity or amount thereof
is being contested in good faith by appropriate proceedings and the Borrower
has maintained adequate reserves with respect thereto;
(d) Keeping of Books. Keep, and cause each of its Subsidiaries
to keep, proper books of record and account, containing complete and accurate
entries of all financial and business transactions of the Borrower and each
Subsidiary;
(e) Visitation, Inspection, Etc. Permit any representative of
the Lender to visit and inspect any of its property, to examine its books and
records and to make copies and take extracts therefrom, and to discuss its
affairs, finances and accounts with its officers and employees and its
independent accountants, all at such reasonable times and as often as the
Lender may reasonably request;
(f) Insurance. Maintain or cause to be maintained with
financially sound and reputable insurers, insurance with respect to its
properties and business, and the properties and business of its Subsidiaries,
against loss or damage of the kinds customarily insured against by reputable
companies in the same or similar businesses, such insurance to be of such
types and in such amounts (with such deductible amounts) as is customary for
such companies under similar circumstances;
(g) Minimum Equity. Maintain at all times a minimum
shareholders' equity on a consolidated basis of at least $200,000,000;
(h) Leverage. Ensure that the ratio of its Indebtedness to
shareholders equity on a consolidated basis does not exceed 1.5 to 1 at any
time; and
(i) Pari-Passu Status. Ensure that all of the Borrower's
obligations under this Agreement and the Note rank at least pari-passu in
right of payment and security with all of the Borrower's other unsecured
obligations for borrowed money.
SECTION 8.02 Reporting Covenants. So long as,the Commitment
hereunder remains outstanding or the Note shall remain unpaid, the Borrower
will furnish to the Lender:
(a) Annual Financial Statements. As soon as available and in any
event within ninety (90) days after the end of each fiscal year of the
Borrower, a balance sheet of the Borrower and its Subsidiaries as at the end
of such year and the related statements of income and retained earnings and of
cash flows of the Borrower and its Subsidiaries for such fiscal year, setting
forth in each case in comparative form the figures for the previous fiscal
year, all in reasonable detail and accompanied by a report thereon of
independent public accountants reasonably acceptable to the Lender, which
report shall be unqualified as to scope of audit and shall state that such
financial statements present fairly the financial condition as at the end of
such fiscal year, and the results of operations and of cash flows for such
fiscal year, of the Borrower and its Subsidiaries in accordance with GAAP;
(b) Quarterly Financial Statements. As soon as available and in
any event within sixty (60) days after the end of the first three fiscal
quarters of each fiscal year of the Borrower, a consolidated balance sheet of
the Borrower and its Subsidiaries as at the end of such quarter and the related
statements of income, retained earnings, financial position and cash flow of
the Borrower and its Subsidiaries for such fiscal quarter, setting forth in
each case in comparative form the figures of the previous fiscal year, all in
reasonable detail and certified by the chief executive officer or chief
financial officer of the Borrower that they are complete and correct and that
they fairly present the financial condition as at the end of such fiscal
quarter of the Borrower and its Subsidiaries, in accordance with GAAP (subject
to normal, year-end audit adjustments); (each submission of the financial
information required by subsections (a) and (b) of this Section 8.02 shall
constitute a representation and warranty by the Borrower as of the date of
such submission of financial information, that such financial information is
complete and correct and fairly presents the financial condition of the
Borrower and its Subsidiaries as of the date thereof and as at the end of the
fiscal period reported on therein);
(c) Compliance with Financial Covenants. Concurrently with the
delivery of financial statements referred to in paragraphs (a) and (b) of this
Section 8.02, a certificate, stating the amount of the Borrower's total
consolidated Indebtedness and shareholders equity as of the end of such
period, such certificate to be duly executed by the Borrower's chief financial
officer;
(d) Notice of Event of Default. Promptly and in any event within
two Business Days after the occurrence of an Event of Default, a certificate
of the chief financial officer of the Borrower specifying the nature thereof
and the Borrower's proposed response thereto;
(e) Litigation. Promptly after (i) the occurrence thereof,
notice of the institution of or any material adverse development in any
action, suit or proceeding or any governmental investigation or any
arbitration, before any Governmental Authority against the Borrower, any
Subsidiary thereof or any material property of any thereof, in each case which
involves uninsured claimed damages in excess of $1,000,000 or (ii) actual
knowledge thereof, notice of the threat of any such action, suit, proceeding,
investigation or arbitration; and
(f) Other Information. With reasonable promptness, such other
information about the Borrower or its subsidiaries as the Lender may
reasonably request from time to time.
SECTION 8.03 Certain Negative Covenants. So long as the
Commitment hereunder remains outstanding or the Note shall remain unpaid, the
Borrower and its Subsidiaries will not:
(a) Mergers, Sales, Etc. The Borrower will not consolidate with
or merge into any other Person or permit any other Person to consolidate with
or merge into the Borrower or acquire all of the assets of any Person, firm,
joint venture or corporation (except a merger or consolidation with or between
the Borrower and one of the Borrower's direct or indirect subsidiaries or a
Person in which Compagnie Generale des Eaux ("CGE") owns at least 51% of the
outstanding equity) without the Lender's prior written consent, which consent
shall not be unreasonably withheld;
(b) Dividends, Etc. Declare, set aside or pay any dividend or
make any other distribution in respect of any shares of its capital stock or
the capital stock of its Subsidiaries or directly or indirectly redeem,
purchase or acquire any such stock of the Borrower if the Borrower is not in
compliance with subsections (g) and (h) of Section 8.01;
(c) Guarantees. Guarantee any obligation, liability or
Indebtedness of any other Person without the Lender's prior consent, except
(i) for the benefit of the Borrower's direct or indirect Subsidiaries or
affiliates in the ordinary course of business, (ii) by the endorsement of
negotiable instruments for deposit or collection or similar transactions
otherwise in the ordinary course of business or (iii) otherwise in the ordinary
course of business; or
(d) Sale of Assets. Sell, lease, assign, transfer or otherwise
dispose of all or a substantial portion of its assets, whether now owned or
hereafter acquired, except sales in the ordinary course of business and except
for the sale of assets to the Borrower's direct or indirect Subsidiaries or
other sales where the terms and conditions thereof are satisfactory to the
Lender.
ARTICLE IX
EVENTS OF DEFAULT
SECTION 9.01 Events. The following specified events shall
constitute events of default (each an "Event of Default") under this Agreement:
(a) Payments of Principal. The Borrower shall fail to pay when
due (including, without limitation, by mandatory prepayment) any principal of
the Note; or
(b) Payments of Interest. The Borrower shall fail to pay when
due (including, without limitation, by mandatory prepayment) any interest on
the Note or any other amount due under this Agreement (other than principal
payments) within the later of (i) five (5) days after the date when due or
(ii) three (3) days after notice by the Lender to the Borrower of the
occurrence thereof; or
(c) Covenants. The Borrower shall fail to observe or perform any
other material covenant or agreement contained in any Loan Document, and, if
capable of being remedied, such failure shall remain unremedied for thirty
(30) days after written notice thereof shall have been given to the Borrower
by the Lender; or
(d) Representations. Any representation, warranty or statement
made or deemed to be made by the Borrower under or in connection with any Loan
Document shall have been incorrect in any material respect when made or deemed
to be made; or
(e) Non-Payments of Other Indebtedness. The Borrower shall fail
to make any payment of principal of or premium or interest on any of its
outstanding Indebtedness in excess of $2,000,000 aggregate principal amount
(other than under the Note or any Indebtedness under this Agreement) when due
(whether at stated maturity, by acceleration, by required prepayment, on
demand or otherwise) after giving effect to any applicable grace period,
unless such obligation is being contested in good faith pursuant to
appropriate proceedings; or
(f) Defaults Under Other Agreements. The Borrower shall fail to
observe or perform any covenant or agreement contained in any agreement or
instrument relating to any of its Indebtedness in excess of $2,000,000
aggregate principal amount (other than under the Note or any indebtedness
under this Agreement) after giving effect to any applicable grace period, or
any other event shall occur if the effect of such failure or other event is to
accelerate, or to permit the holder of such Indebtedness or any other Person
acting on such holder's behalf to accelerate (with notice and/or upon the lapse
of time), the maturity of such Indebtedness; or any such indebtedness shall be
required to be prepaid (other than by a regularly scheduled required
prepayment) in whole or in part prior to its stated maturity; or
(g) Bankruptcy.
(i) The Borrower or any Subsidiary shall commence a voluntary
case or other proceeding seeking liquidation, reorganization or other
relief with respect to itself or its debts under any bankruptcy,
insolvency or other similar law now or hereafter in effect or seeking
the appointment of a trustee, receiver, liquidator, custodian or other
similar official of it or any substantial part of its property, or shall
consent to any such relief or to the appointment of or taking possession
by any such official in an involuntary case or other proceeding
commenced against it, or shall make a general assignment for the benefit
of creditors, or shall fail generally to pay its debts as they become
due, or shall take any corporate action to authorize any of the
foregoing; or
(ii) An involuntary case or other proceeding shall be commenced
against the Borrower or any Subsidiary seeking liquidation,
reorganization or other relief with respect to it or its debts under any
bankruptcy, insolvency or other similar law now or hereafter in effect
or seeking the appointment of a trustee, receiver, liquidator, custodian
or other similar official of it or any substantial part of its property,
and such involuntary case or other proceeding shall remain undismissed
and unstayed for a period of 60 days; or an order for relief shall be
entered against the Borrower or any Subsidiary under the federal
bankruptcy laws as now or hereafter in effect; or
(h) Money Judgment. A judgment or order for the payment of money
in excess of $1,000,000 shall be rendered against the Borrower or any
Subsidiary and such judgment or order shall continue unsatisfied (in the case
of a money judgment) and in effect for a period of ten (10) days during which
execution shall not be effectively stayed or deferred (whether by action of
a court, by agreement or otherwise); or
(i) Dissolution. Any order, judgment or decree shall be entered
against the Borrower or any Subsidiary decreeing its involuntary dissolution
or split up and such order shall remain undischarged and unstayed for a period
in excess of thirty (30) days; or the Borrower or any Subsidiary shall, except
as permitted by this Agreement, otherwise dissolve or cease to exist; or
(j) Ownership. If CGE shall cease to be the largest shareholder
of the Borrower or shall cease to own or control at least 26% of the voting
power of the shares of the Borrower's outstanding common stock at any time.
SECTION 9.02 Remedies. Upon the occurrence of an Event of
Default and at any time thereafter, if such Event of Default shall then be
continuing, the Lender may by notice to the Borrower, take any or all of the
following actions: (i) declare the Commitment terminated, whereupon the
Commitment shall terminate immediately; or (ii) declare the principal of and
any accrued interest on the Eurodollar Loans, and all other obligations owing
hereunder, to be, whereupon the same shall become, forthwith due and payable
without presentment, demand, protest or other notice of any kind, all of which
are hereby waived by the Borrower; provided, that, if any Event of Default
specified in Section 9.01(f) shall occur, the result which would occur upon
the giving of notice by the Lender to the Borrower, as specified in clauses
(i) and (ii) above, shall occur automatically without the giving of any such
notice.
ARTICLE X
MISCELLANEOUS
SECTION 10.01 Amendments, Etc. No amendment or waiver of any
provision of this Agreement or any other Loan Document, or consent to any
departure by the Borrower therefrom, shall in any event be effective unless
the same shall be in writing and signed by the Lender, and then such waiver or
consent shall be effective only in the specific instance and for the specific
purpose for which given.
SECTION 10.02 Notices, Etc. All notices, demands or other
communications pursuant hereto shall be in writing. All notices shall be sent
by certified mail (return receipt requested) or by telex or telecopy (each of
which shall constitute a writing). All notices shall be deemed to have been
given or made when received at, in the case of notice by mail, or when sent
to, in the case of notice by telex or telecopy, the respective address of the
addressee set forth on the signature pages hereof, as they may be changed from
time to time by notice by one party to the other parties.
SECTION 10.03 No Waiver; Remedies Cumulative. No failure on the
part of the Lender to exercise, and no delay in exercising, any right
hereunder or under the Note shall operate as a waiver thereof; nor shall any
single or partial exercise of any such right preclude any other or further
exercise thereof or the exercise of any other right. The remedies herein
provided are cumulative and not exclusive of any remedies provided by law.
SECTION 10.04 Costs, Expenses and Breakage.
(a) The Borrower agrees to pay on demand all reasonable costs and
expenses (including, without limitation, reasonable counsel fees,
disbursements and expenses), in connection with (i) the preparation of this
Agreement and the other Loan Documents, any waiver or consent hereunder or
thereunder or any amendment hereof or thereof or any Event of Default or
alleged Event of Default, and (ii) the enforcement (whether through
negotiations, legal or bankruptcy proceedings or otherwise) of this Agreement,
and the other Loan Documents to be delivered hereunder.
(b) If any payment of principal of the Eurodollar Loans is made
other than on the last day of the Interest Period for the Eurodollar Loans, as
a result of a prepayment pursuant to Section 5.01, a payment pursuant to
Section 5.02(a) or acceleration of the maturity of the Note pursuant to
Section 9.02 or for any other reason, the Borrower shall, upon demand by the
Lender pay to the Lender any amounts required to compensate the Lender for any
additional losses, costs or expenses which it may reasonably incur as a result
of such payment, including, without limitation, any loss (including loss of
anticipated profits), cost or expense incurred by reason of the liquidation or
reemployment of deposits or other funds acquired or to be acquired by the
Lender to fund or maintain the Eurodollar Loans.
SECTION 10.05 Right of Set Off. Upon the occurrence and during
the continuance of any Event of Default, the Lender is hereby authorized at
any time and from time to time, to the fullest extent permitted by law, to set
off and apply any and all deposits (general or special, time or demand,
provisional or final) at any time held and other indebtedness at any time owing
to the Lender to or for the credit or the account of the Borrower against any
and all of the obligations of the Borrower now or hereafter existing under
this Agreement and the other Loan Documents, irrespective of whether or not
the Lender shall have made any demand under this Agreement or such other Loan
Documents, and although such obligations may be unmatured. The Lender agrees
promptly to notify the Borrower after any such set-off and application made by
the Lender, provided that the failure to give such notice shall not affect the
validity of such set-off and application. The rights of the Lender under this
Section are in addition to other rights and remedies (including, without
limitation, other rights of set-off) which the Lender may have.
SECTION 10.06 Binding Effect.
(a) This Agreement shall become effective when it shall have been
executed and delivered by the Borrower and the Lender and thereafter shall be
binding upon and inure to the benefit of the Borrower and the Lender and their
respective successors and assigns, except that the Borrower shall not have the
right to assign its rights hereunder or any interest herein without the prior
written consent of the Lender.
(b) The Lender may sell or assign participations in all or any
part of the Eurodollar Loans made by it or any other interest of the Lender
herein or in its Note to a bank or other financial institution, in which event
the purchaser of such participation shall, to the fullest extent permitted by
law, and except as otherwise set forth in the agreement executed between the
Lender and such participant, have the same rights and benefits hereunder and
under the Note (including, without limitation, rights to certain additional
payments under Sections 2.07, 3.02, 5.01, 5.02, 5.03 and 10.04) as it would
have if it were the Lender hereunder. The Lender may furnish any information
concerning the Borrower in the possession of the Lender from time to time to
assignees and participants (including prospective assignees and participants).
SECTION 10.07 Governing Law. This Agreement and the rights and
obligations of the parties hereunder and under the Note shall be construed in
accordance with and be governed by the law of the State of New York (without
giving effect to the conflict of law principles thereof).
SECTION 10.08 Submission to Jurisdiction.
(a) Any legal action or proceeding with respect to this Agreement
or the Note or any document related thereto may be brought in the courts of
the State of New York or of the United States of America for the Southern
District of New York, and, by execution and delivery of this Agreement, the
Borrower hereby accepts for itself and in respect of its property, generally
and unconditionally, the jurisdiction of the aforesaid courts. The Borrower
consents that personal jurisdiction may be obtained over it by mailing a
summons by registered mail or certified mail, return receipt requested, within
or without such court's jurisdiction, or by personal service, provided a
reasonable time for appearance is allowed. The Borrower hereby irrevocably
waives any objection, including, without limitation, any objection to the
laying of venue based on the grounds of forum non conveniens, which it may now
or hereafter have to the bringing of any such action or proceeding in such
jurisdictions.
(b) Nothing herein shall affect the right of the Lender, any bank
or any holder of a Note to serve process in any manner other than as set forth
in Section 10.08(a), as permitted by law or to commence legal proceedings or
otherwise proceed against the Borrower in any other jurisdiction.
SECTION 10.09 Waiver of Jury Trial. The Borrower and the Lender
expressly waive any right to trial by jury of any action, claim, demand, or
proceeding arising under or with respect to this Agreement, or in any way
connected with, related to, or incidental to the dealings between them with
respect to this Agreement, or the transactions related thereto, in each case
whether now existing or hereafter arising, and whether sounding in contract,
tort or otherwise.
SECTION 10.10 Severability. Any provision of this Agreement that
is prohibited or unenforceable in any jurisdiction shall be ineffective only
in such jurisdiction to the extent of such prohibition or unenforceability
without invalidating the remaining provisions of this Agreement.
IN WITNESS WHEREOF, the parties hereto have caused this agreement
to be executed by their respective officers thereunto duly authorized, as of
the date first above written.
Address for Notices: AIR & WATER TECHNOLOGIES
CORPORATION
AIR & WATER TECHNOLOGIES By:/s/ Douglas A. Satzger
CORPORATION --------------------------------
U.S. Highway 22 West Name: Douglas A. Satzger
and Station Road Title: Senior Vice President
Branchburg, NJ 08876
Attention: Chief Financial Officer
Telecopier: (908) 685-4181
Address for Notices: COMPAGNIE GENERALE DES EAUX
COMPAGNIE GENERALE
DES EAUX By:/s/ J-H David
52 rue D'Anjou --------------------------------
75384 Paris Cedex 08 Name: Jacques-Henri David
France Title: Directeur General
Attention: Chief Financial Officer
Telecopier: 011-33-1-49-24-69-99
EXHIBIT A
PROMISSORY NOTE
$125,000,000 June 14, 1994
New York, New York
FOR VALUE RECEIVED, the undersigned, AIR & WATER TECHNOLOGIES
CORPORATION (the "Borrower"), hereby unconditionally promises to pay to the
order of COMPAGNIE GENERALE DES EAUX (together with its successors and
assigns, the "Lender"), at the Lender's office located at 52, rue D'Anjou,
75384 Paris, Cedex 08, France, in immediately available funds, the principal
sum of One Hundred and Twenty-five Million Dollars ($125,000,000) or the
unpaid principal amount of all Eurodollar Loans made by the Borrower from the
Lender pursuant to the Agreement (as hereinafter defined), whichever is less,
and interest on the unpaid principal amount of each such Eurodollar Loan in
United States Dollars for the period commencing on the date of each such
Eurodollar Loan until repaid in full, at the rates per annum, in the manner
and on the dates specified in the Agreement.
The Lender is authorized to make notations of all Eurodollar Loans
made by the Borrower from the Lender pursuant to the Agreement and all
repayments of the outstanding principal amounts and accrued interest on such
Eurodollar Loans on the schedule attached to and made a part of this Note.
Such notations, if made, will be presumed correct unless the contrary is
established.
This Note is the note referred to in that certain Credit Agreement
dated as of June 14, 1994 (the "Agreement") between the Borrower and the
Lender, which provides for the prepayment of this Note on certain events, the
acceleration of its maturity and other terms and conditions relating to this
Note, all of which are herein incorporated by reference.
In addition to all principal and accrued interest on this Note,
the Borrower agrees to pay (a) all reasonable costs and expenses incurred by
all of the holders of this Note in collecting this Note, whether through
probate, reorganization, bankruptcy, insolvency or other proceedings; and (b)
reasonable attorneys' fees relating thereto.
Presentment, demand, protest and notices of any kind with respect
to this Note are hereby expressly waived by the Borrower.
Capitalized terms used but not defined in this Note shall have the
meanings attributed to them in the Agreement.
This Note and the obligations of the Borrower under this Note
shall be governed by, and construed and interpreted in accordance with, the
law of the State of New York (without giving effect to the conflict of law
principles thereof).
AIR & WATER TECHNOLOGIES
CORPORATION
By: SPECIMEN ONLY-DO NOT SIGN
--------------------------------
Name:
Title:
Schedule to Promissory Note of
Air & Water Technologies Corporation dated June 14, 1994
Date of Principal Interest Interest Notation
Borrowing Amount Rate Period Made By
- ------------- ----------- ---------- ---------- ----------
EXHIBIT B
FORM OF LEGAL OPINION OF BORROWER'S COUNSEL
June __, 1994
Compagnie Generale des Eaux
52, rue D'Anjou
75384 Paris Cedex 08
France
Dear Sirs:
We have acted as counsel for Air & Water Technologies Corporation
(the "Borrower") in connection with the Credit Agreement (the "Credit
Agreement") dated as of June 14, 1994 among the Borrower and Compagnie
Generale des Eaux. Terms defined in the Credit Agreement are used herein as
therein defined. This opinion is being rendered to you at the request of our
client pursuant to Section 6.01(f) of the Credit Agreement.
We have examined originals or copies, certified or otherwise
identified to our satisfaction, of such documents, corporate records,
certificates of public officials and other instruments and have conducted such
other investigations of fact and law as we have deemed necessary or advisable
for purposes of this opinion.
Upon the basis of the foregoing, we are of the opinion that:
1. The Borrower is a corporation duly incorporated, validly
existing and in good standing under the laws of the State of Delaware, and has
all corporate powers and all material governmental licenses, authorizations,
consents and approvals required to carry on its business as now conducted.
2. The execution, delivery and performance by the Borrower of the
Credit Agreement and the Note are within the Borrower's corporate powers, have
been duly authorized by all necessary corporate action, require no action by
or in respect of, or filing with, any governmental body, agency or official and
do not contravene, or constitute a default under, any provision of applicable
law or regulation or of the certificate of incorporation or by-laws of the
Borrower or of any agreement, judgment, injunction, order, decree or other
instrument binding upon the Borrower or any of its Subsidiaries or result in
the creation or imposition of any Lien on any asset of the Borrower or any of
its Subsidiaries.
3. The Credit Agreement constitutes a valid and binding agreement
of the Borrower and the Note constitutes a valid and binding obligation of the
Borrower, in each case enforceable in accordance with its terms, except as the
same may be limited by bankruptcy, insolvency or similar laws affecting
creditors' rights generally and by general principles of equity.
4. There is no action, suit or proceeding pending against, or to
the best of our knowledge threatened against or affecting, the Borrower or any
of its Subsidiaries before any court or arbitrator or any governmental body,
agency or official, in which there is a reasonable possibility of an adverse
decision which could materially adversely affect the business, consolidated
financial position or consolidated results of operations of the Borrower and
its Consolidated Subsidiaries, considered as a whole or which in any manner
draws into question the validity of the Credit Agreement or the Note.
5. Each of the Borrower's corporate Subsidiaries is a corporation
validly existing and in good standing under the laws of its jurisdiction of
incorporation, and has all corporate powers and all material governmental
licenses, authorizations, consents and approvals required to carry on its
business as now conducted.
Very truly yours,
ASSET PURCHASE AGREEMENT
by and between
ASBESTOS CONTROL SERVICES, INC.
and
ASBESTOS CONTAINMENT SERVICES, INC.
DATED AS OF
May 27, 1994
ASSET PURCHASE AGREEMENT
THIS ASSET PURCHASE AGREEMENT is made and entered into as of the 27th day of
May, 1994 by and between Asbestos Control Services, Inc. a Delaware
corporation (the "Seller"), and Asbestos Containment Services, Inc., a New
York corporation (the "Purchaser").
RECITALS
WHEREAS, the Seller desires to sell to the Purchaser, and the Purchaser
desires to purchase from the Seller, certain of the assets, properties and
rights which constitute the asbestos abatement business of the Seller (the
"Business"), and the Purchaser desires to assume from the Seller, and the
Seller agrees to transfer to the Purchaser, certain liabilities relating to
the Business all as hereinafter set forth.
NOW, THEREFORE, for and in consideration of the premises and mutual covenants
and agreements contained herein, and intending to be legally bound hereby, the
parties hereby agree as follows:
ARTICLE I
PURCHASE AND SALE OF ASSETS
AND ASSUMPTION OF LIABILITIES; PURCHASE PRICE
1.01. Purchase and Sale of Assets. Subject to the terms and
conditions of this Agreement and on the basis of the
representations, warranties, covenants and agreements herein
contained, on the Closing Date (as defined in Section 2.01) the
Seller shall sell, transfer, convey, assign, deliver and/or
cause to be assigned ("Transfer") to the Purchaser, and the
Purchaser shall purchase, acquire and accept from the Seller,
all of the Seller's right, title and interest in and to all of
the inventory, equipment, contracts, agreements, purchase
orders, sales orders and leases wherever located, relating to
the Business that are listed on Schedule A annexed hereto,
except the Excluded Assets (as defined in Section 1.02) (after
giving effect to the exclusion of the Excluded Assets, such
assets are hereinafter collectively referred to as the
"Transferred Assets"), free and clear of all Liens (as defined
in Section 3.05(d)).
1.02. Excluded Assets. Notwithstanding anything in Section 1.01 to
the contrary, the Seller shall retain all of its right, title
and interest in and to all of, and shall not Transfer to the
Purchaser any of the assets, rights and properties that are
listed on Schedule B hereto, including, but not limited to, the
following specific assets (collectively, the "Excluded Assets"):
(a) all Federal, state, local and foreign income tax deposits
(to the extent not refunded) paid by the Seller in
connection with the income or operations of the Business,
with respect to any period ending on or before the
Closing Date;
(b) any proceeds paid or payable in accordance with this
Agreement;
(c) all minute books, stock books, financial books and
similar corporate records of the Seller;
(d) any rights of the Seller in, to or under any collective
bargaining agreement or union contract (collectively, the
"Union Contracts") to which the Seller is a party or by
which the Seller, and any of its employees or the
Business are bound;
(e) any cash or cash equivalents of the Seller;
(f) any loan receivables from officers or Affiliates (as
defined in the Securities Act of 1933, as amended) of the
Seller; and
(g) all licenses for the performance of asbestos-related work
which by law may not be transferred;
(h) all policies of insurance owned by Seller; and
(i) all accounts receivable of the Business, including
without limitation, trade accounts receivable evidencing
or representing indebtedness or obligations or other
rights to payment due to the Seller for or on account of
products sold or services rendered by the Business prior
to the Closing Date;
(j) any deferred costs or prepaid expenses or other
receivables of the Seller as of the Closing Date;
(k) all licenses of the Seller which are non-transferable;
(1) all permits of the Seller which are non-transferable;
(m) all mechanics liens filed by the Seller, but not the
proceeds from such liens; and
(n) all rights of the Seller under or in connection with any
non-competition agreement.
1.03. Assumption of Liabilities. Subject to the terms and conditions
of this Agreement and on the basis of the representations,
warranties, covenants and agreements herein contained, on the
Closing Date, the Purchaser shall assume and agree to pay,
perform and discharge when due certain of the liabilities and
obligations of the Seller but only to the extent such
liabilities are listed on Schedule C annexed hereto (the
"Assumed Liabilities").
1.04. Excluded Liabilities.
(a) The Purchaser shall not assume, and shall have no
liability for, any of the following debts, liabilities,
obligations, expenses, taxes, contracts or commitments of
the Seller or the Business of any kind, character or
description, whether accrued, absolute, contingent or
otherwise, arising out of any act or omission occurring
or state of facts existing (except as expressly provided
below) prior to, on or after the Closing Date
(collectively, the "Excluded Liabilities"):
(i) any liability of the Seller under any
non-competition, consulting or employment
agreements, Union Contracts, or similar agreements,
commitments or arrangements, whether the same are
written or oral;
(ii) any liability of the Seller or the Business for any
Federal, state, local or foreign taxes (other than
sales and use taxes), including, without
limitation, any income, capital gains, withholding,
payroll taxes, real or personal property taxes or
franchise taxes or any taxes on capital (including,
without limitation, any deferred income tax
liability) and any penalties and interest thereon
attributable to the period ending on and including
the Closing Date;
(iii) any liability for expenses incurred by, or for
claims made against, the Seller in connection with
or resulting from or attributable to this Agreement
or the transactions contemplated hereby;
(iv) any liability for any investment banking,
brokerage, finder's or similar charge or
commission, or any attorneys' or accountants' fees
and expenses payable or incurred by the Seller in
connection with the preparation, negotiation,
execution or delivery of this Agreement or the
transactions contemplated hereby;
(v) except as provided in Article VII below, any
liability arising out of activities undertaken by
the Seller or any Affiliate of Seller after the
Closing Date;
(vi) any liability for any personal injury or property
damage claim which arose prior to or on the Closing
Date; such excluded liability not to include
however, liability for breach of contract, breach
of warranty or product liability claims to the
extent that they arise out of any Incomplete
Portion of any contract, purchase order and/or
agreement which is part of the Transferred Assets.
For purposes of this Section 1.04, an Incomplete
Portion of a contract is one for which work
performed thereunder by Seller has not proceeded to
a point where final air clearance has been received
and the owner has taken back the subject work area
for its own use;
(vii) any liability for breach of warranty, breach of
contract or other claims to the extent they arise
from any contract, purchase order, and/or agreement
which is not part of the Transferred Assets or to
the extent they arise prior to or on the Closing
Date from any contract, purchase order and/or
agreement which is part of the Transferred Assets;
(viii) any liability arising out of or allegedly arising
out of any tortious or unlawful conduct of the
Seller unrelated to the Transferred Assets;
(ix) any liability (including, without limitation, costs
of response, removal, remediation, investigation,
corrective action, property damage, personal
injury, economic loss, damage to natural resources,
health assessments and health studies, settlement,
interest accruing on recoverable amounts, penalties
and attorneys' fees) arising under Federal, state
or local environmental laws and under common law
for any transportation, disposal, management,
release or threatened release of the Seller's or
the Business's hazardous substances, including, but
not limited to, asbestos and asbestos-containing
materials, whether on the Seller's property, the
property of a customer or client of Seller, or at
an off-site location to which the Seller or others
sent Seller's hazardous substances, including, but
not limited to, asbestos and asbestos-containing
materials, and whether or not released or
threatened to be released in a reportable quantity,
resulting from or allegedly resulting from any
action or omission or state of facts existing prior
to the Closing Date except to the extent that such
liability arises in connection with any Incomplete
Portion of any contract, purchase order and/or
agreement which is part of the Transferred Assets;
(x) any liability for any group life or health
insurance, property damage or personal injury claim
for employees of the Seller and their eligible
dependents in connection with any accident or event
occurring prior to or on the Closing Date;
(xi) any liability arising out of any workers'
compensation claims or proceedings, discrimination
claims or proceedings, benefits or severance or
other liabilities or obligations in connection with
any accident or incident occurring prior to or on
the Closing Date to employees or former employees of
the Seller;
(xii) any liability or obligation under any "employee
benefit plan" (as defined in Section 3(3) of the
Employee Retirement Income Security Act of 1974, as
amended ("ERISA")) or any other plans, programs or
arrangements of any kind relating to employee
benefits sponsored or maintained by the Seller or
others for the benefit of the employees of the
Business;
(xiii) any liability or obligation of the Business owing
to any shareholder or any Affiliate of the Seller;
(xiv) any liability of Seller under or in connection with
any union pension plan (including any
multi-employer plan) for the benefit of Seller's
employees arising on or prior to the Closing Date;
and
(xv) all accounts payable of Seller from any source for
which bills were rendered to and recorded by Seller
prior to the Closing Date.
(xvi) any liability or obligation not set forth on
Schedule C hereto.
(xvii) all liability for workmen's compensation or other
insurance premiums or expenses which arose in
connection with work or services performed prior to
the Closing Date.
The Seller and Purchaser expressly agree that the Seller shall remain
fully liable for the satisfaction and payment of the Excluded
Liabilities.
1.05. Purchase Price. The aggregate purchase price (the "Purchase
Price") to be paid for the Transferred Assets shall be equal to
the assumption by the Purchaser of the Assumed Liabilities.
The parties mutually agree that the Seller will establish a
credit facility (the "Credit Facility") pursuant to which the
Purchaser may from time to time borrow funds for working capital
as set forth more fully below; provided, however, that (i) the
total amount of funds borrowed by the Purchaser shall not
exceed $2,500,000 prior to September 30, 1994; $2,200,000
thereafter but prior to October 31, 1994; $1,900,000 thereafter
but prior to November 30, 1994; $1,700,000 thereafter but prior
to December 31, 1994; $1,500,000 thereafter but prior to
January 31, 1995; $1,300,000 thereafter but prior to February
28, 1995; $1,100,000 thereafter but prior to March 31, 1995;
$900,000 thereafter but prior to April 30, 1995; and $700,000
thereafter but prior to May 31, 1995 (said list of amounts
hereinafter referred to as the "Maximum Amount") (ii) no
borrowing shall be in an amount of less than $25,000 at any one
time and (iii) there shall be no more than one borrowing per
week.
Interest will be paid monthly, in arrears by the Purchaser on
the amount borrowed at a rate of two percent (2%) per annum in
excess of the Prime Rate in effect from time to time. (The
"Prime Rate" shall be the rate published from time to time, by
the Wall Street Journal, in the "Money Rates" section of such
publication, calculated on the basis of a 365 day year and
actual days elapsed.) Interest for amounts outstanding during a
month shall be due on the fifth day following the end of each
calendar month. The amounts borrowed by the Purchaser under
this Section 1.05 shall be repaid by Purchaser so that the
Maximum Amount is never exceeded. Further, all remaining
amounts borrowed by Purchaser shall be due on May 31, 1995, with
principal and all accrued interest thereon being due on such
date. As security for the Credit Facility (i) the Purchaser
shall execute (1) a revolving promissory note in the maximum
amount of $2,500,000 and (2) a security agreement in favor of
the Seller providing for a first priority lien on the
inventory, equipment and accounts receivable of the Purchaser
and (ii) Michael R. Adams and his wife shall execute a
guarantee of payment secured by a mortgage on their home. The
Purchaser and the Seller hereby agree that prior to the
Completion Date (as defined in Section 2.01), the Purchaser
borrowed approximately $1,563,140.09 (the "Initial Amount")
from the Seller, said Initial Amount being subject to further
review and adjustment by Purchaser and Seller. The Initial
Amount shall be deemed to be the initial borrowing by the
Purchaser under the Credit Facility, but interest shall accrue
thereon but not be payable until August 5, 1994.
Seller has the right to receive directly from the bank or banks
of Purchaser duplicate bi-weekly bank statements for all of the
operating accounts of the Business. Additionally, Seller shall
have the right to review the books and records of the Purchaser
on a bi-weekly basis and review all such other documentation
(e.g., billings, contracts, backlog, disbursements, etc.) as
necessary to establish the on-going financial condition and
viability of the Business. Purchaser shall fully cooperate
with the Seller during such reviews.
1.06. Allocation of Purchase Price. Promptly after the Closing Date,
the Purchaser shall prepare an allocation of the Purchase Price
among the Transferred Assets which must be mutually
satisfactory to the parties hereto in accordance with Section
1060 of the Internal Revenue Code of 1986, as amended (the
"Code"). The parties shall cooperate to comply with all
substantive and procedural requirements of Section 1060 of the
Code and any regulations thereunder, and the allocation shall
be adjusted if, and to the extent, necessary to comply with the
requirements of Section 1060 of the Code. Neither the
Purchaser nor the Seller shall take any position for purposes
of Federal, state or local income tax respecting the
allocation of the Purchase Price which is inconsistent with the
allocation so agreed upon by the parties. Each of the Seller
and the Purchaser hereby agrees that it shall attach to its tax
returns for the tax year in which the Closing shall occur an
information statement on Form 8594, which shall be completed
in accordance with allocations set forth herein.
ARTICLE II
CLOSING
2.01. Closing.
(a) The closing (the "Closing") of the transactions
contemplated by this Agreement will be held as of May 27,
1994 (the "Closing Date") at 12:01 a.m. at the offices of
Haythe & Curley, counsel for the Seller, located at 237
Park Avenue, New York, New York 10017, although the
actual event may take place at such other time, date or
location as the parties hereto may mutually agree upon.
The date of the actual event shall be referred to as the
"Completion Date".
2.02. Instruments of Conveyance and Transfer.
(a) At the Closing, the Seller shall deliver to the Purchaser:
(i) such bills of sale, endorsements, assignments and
other good and sufficient instruments of conveyance
and transfer, in form reasonably satisfactory to
the Purchaser and its counsel, as shall be
effective to vest in the Purchaser all of the
Seller's right, title and interest in and to the
Transferred Assets except as set forth in Article
VII; and
(ii) such copies of the Seller's financial books and
records relating to the Transferred Assets and the
Business as Purchaser may reasonably request (except
the stock books, minute books or similar corporate
records of the Seller).
(b) Simultaneously with such deliveries, the Seller shall
take such steps as may be necessary to put the Purchaser
in actual possession and operating control of the
Transferred Assets and the Business.
(c) At the Closing, the Purchaser shall deliver to the Seller
an instrument of assumption, in form reasonably
satisfactory to the Seller and its counsel, as shall be
effective to cause the assumption of the Assumed
Liabilities by the Purchaser.
2.03. Further Assurances. From time to time after the Closing, and
without further consideration, (a) the Seller shall execute and
deliver such other deeds, instruments of conveyance, assignment,
transfer and delivery and take such other actions as the
Purchaser may reasonably request in order more effectively to
Transfer to the Purchaser, and to place the Purchaser in
possession or control of, all of the rights, properties, assets
and businesses intended to be Transferred hereunder, to assist
in the collection of any and all such rights, properties and
assets, and to enable the Purchaser to exercise and enjoy all
of the rights and benefits of the Seller with respect thereto,
and (b) the Purchaser shall take such actions as the Seller may
reasonably request in order to assure the assumption of the
Assumed Liabilities by the Purchaser.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE SELLER
The Seller hereby represents and warrants to the Purchaser as follows:
3.01. Corporate Existence; Shareholders. The Seller is a corporation
duly organized, validly existing and in good standing under the
laws of the State of Delaware and has full corporate power and
authority to conduct its business as it is now being conducted
and to own or lease its properties and assets. The Seller has
previously delivered to the Purchaser true and complete copies
of its certificate of incorporation and by-laws as in effect on
the date hereof.
3.02. Corporate Authority. The Seller has full corporate power and
authority to enter into this Agreement, perform its obligations
hereunder, Transfer the Transferred Assets and carry out the
transactions contemplated hereby. The execution and delivery
of this Agreement, the performance by the Seller of its
obligations hereunder and the consummation of the transactions
contemplated hereby have been duly authorized by all corporate,
shareholder and other actions on the part of the Seller
required by applicable law, its certificate of incorporation or
by-laws, or otherwise. This Agreement constitutes the legal,
valid and binding obligation of the Seller, enforceable against
it in accordance with its terms, except (i) as the same may be
limited by bankruptcy, insolvency, reorganization, moratorium
or similar laws now or hereafter in effect relating to
creditors' rights generally and (ii) that the remedy of specific
performance and injunctive and other forms of equitable relief
may be subject to equitable defenses and to the discretion of
the court before which any proceeding therefor may be brought.
3.03. No Violation. Neither the execution and delivery of this
Agreement nor the performance by the Seller of its obligations
hereunder nor the consummation of the transactions contemplated
hereby will (a) contravene any provision of the certificate of
incorporation or by-laws of the Seller; (b) except as set forth
in Schedule 3.03 to the best of the Seller's knowledge,
violate, be in conflict with, constitute a default under,
permit the termination of, cause the acceleration of the
maturity of any debt or obligation of the Seller under,
constitute a breach of, create a loss of a material benefit
under, or result in the creation or imposition of any Lien (as
defined in Section 3.05(d)), upon any property or assets of the
Seller or the Business under, any mortgage, indenture, lease,
contract, agreement, instrument or commitment to which the
Seller is a party or by which it, any of its assets or
properties, or the Business may be bound; or (c) violate any
statute or law or any judgment, decree, order, regulation or
rule of any court or governmental authority to which the Seller
or the Business is subject or by which the Seller, any of its
assets or properties, or the Business are bound.
3.04. Consents and Approvals of Governmental Authorities. Except as
set forth in Schedule 3.04, no consent, approval or
authorization of, or declaration, filing or registration with,
any governmental or regulatory authority is required to be made
or obtained by or on behalf of the Seller in connection with
the execution, delivery or performance of this Agreement by the
Seller.
3.05. Title to Properties; Encumbrances.
(a) The Seller has good and marketable title to all of its
properties and assets (real, personal or mixed, tangible
or intangible) constituting all or part of the Transferred
Assets (except for assets leased under leases set forth
in Schedule 3.06, or inventory and other assets sold or
retired since May 27, 1994 in the ordinary course of
business consistent with past practices). None of the
Transferred Assets are subject to any Lien (as defined in
subsection (d) below), except Liens for taxes not yet
delinquent or the validity of which are being contested
in good faith and as set forth in Schedule 3.05.
(b) All material property and assets (real, personal or
mixed, tangible or intangible) constituting part of the
Transferred Assets are owned by the Seller or leased to
the Seller pursuant to a lease listed on Schedule 3.06.
(c) The Seller does not own or hold, and is not obligated
under or a party to, any option, right of first refusal
or other contractual right to acquire any real property or
interest therein.
(d) When used in this Agreement, "Lien" or "Liens" shall mean
any mortgage, pledge, security interest, conditional sale
or other title retention agreement, encumbrance, lien,
easement, claim, right, covenant, restriction, right of
way, warrant, option or charge of any kind but shall in
no event include mechanic's and materialmen's liens or
any rights under Lien Law Trust Fund Statutes.
3.06. Leases.
(a) Schedule 3.06 contains a true and complete list of the
following leases constituting a part of the Transferred
Assets:
(i) all leases pursuant to which the Seller leases any
real property interests, whether as lessor or
lessee;
(ii) all leases pursuant to which the Seller leases any
type of personal property (other than computer
equipment and related hardware or software) which
provide, individually, for rental payments in
excess of $2,500 per annum;
(iii) all leases pursuant to which the Seller leases any
computer equipment and related hardware or software;
(iv) all leases pursuant to which the Seller leases any
vehicles or related equipment; and
(v) all leases pursuant to which the Seller leases to
others any type of property which provide,
individually, for rental payments in excess of
$5,000 per annum or which have a term in excess of
one year.
(b) Each such lease described in Schedule 3.06 is the legal,
valid and binding obligation of the Seller and, to the
best of the Seller's knowledge, the other parties thereto,
enforceable in accordance with its respective terms, and
is in full force and effect. The Seller is not in
material default under any such lease, and the Seller has
not received any notice from any person or entity
asserting that the Seller is in default under any such
lease, nor does the Seller have any knowledge of a
material default by it under any such lease.
(c) Each such lease may be assigned by the Seller without the
consent or approval of any other person or entity, or if
such consent or approval shall be necessary to assign such
lease, such consent or approval shall have been obtained
prior to the Closing Date except as set forth on Schedule
3.06.
3.07. Litigation. There are no actions or proceedings pending, or,
to the best of the Seller's knowledge, threatened, against the
Seller or any of the Transferred Assets before any court,
arbitrator or administrative governmental body which questions
or challenges the validity of this Agreement or any action
taken or proposed to be taken by the Seller pursuant to this
Agreement or in connection with the transactions contemplated
hereby or except as set forth on Schedule 3.07, which
materially impairs the value of the Transferred Assets.
3.08. Contracts and Commitments.
(a) Insofar as they constitute a portion of the Transferred
Assets, Schedule 3.08, together with the leases set forth
in Schedule 3.06, contains a true and complete list and
description (stated without duplication) of:
(i) all contracts (including, without limitation,
letters of credit) and commitments of the Seller
which are material to the operations, business
prospects or condition (financial or otherwise) of
the Seller or the Business;
(ii) all other contracts, commitments and instruments of
the Seller relating to the Business (excluding, for
purposes of this clause (ii), leases) reflecting
obligations for borrowed money or for other
indebtedness or guarantees thereof;
(iii) all purchase orders issued by or sales orders
received by the Business in excess of $20,000 each
and any purchase or sales order which calls for
delivery or performance on a date more than three
months from the date of this Agreement;
(iv) all contracts relating to construction- in-progress
of capital assets in excess of $1,000; and
(v) all joint venture or similar agreements or
arrangements to which the Seller is a party in any
way providing for the manufacture, marketing, sale
or distribution of any services of the Seller.
(b) The Seller has delivered to the Purchaser true and
complete copies of all of the documents identified on
Schedule 3.08 (collectively, the "Material Contracts") and
shall deliver true and complete copies of all such other
agreements, instruments and documents as the Purchaser
may reasonably request.
(c) The Seller is not a party to any written agreement that
would restrict it from carrying on the Business anywhere
in the world.
(d) Each of the Material Contracts has been entered into in
the ordinary course of business and is valid and binding
and the Seller has not received notice of any asserted
claim of material default by the Seller or by any other
party under, or a material breach or violation of, any of
the Material Contracts.
(e) Except to the extent indicated on Schedule 3.08 each of
the Material Contracts may be assigned to Purchaser
without action or consent of anyone other than the Seller.
3.09. Employment Law Matters.
(a) The Seller has not at any time since November 23, 1992
had, nor to the Seller's knowledge, is there now
threatened, a strike, picket, work stoppage, work
slowdown or other labor trouble, against or directly
affecting the Business that has had or may have a
material adverse effect on the Business or the
Transferred Assets.
(b) The Seller will deliver to the Purchaser copies of all
labor and collective bargaining agreements (whether
written or oral) to which the Seller is a party or by
which the Seller is bound relating to the Business. The
Seller is not in material default in any respect with
regard to any of such agreements, plans or contracts.
(c) To the best knowledge of the Seller, there are no
controversies or disputes (including any union grievances
or arbitration proceedings) pending, or, to the best of
the Seller's knowledge, threatened, between the Seller
and any employees of the Business (or any union or other
representative of such employees). No unfair labor
practice complaints have been filed against the Business
or the Seller on behalf of the Business with the National
Labor Relations Board, and the Seller has not received any
written notice or communication reflecting an intention
or a threat to file any such complaint.
3.10. Environmental Matters. To the best of Seller's knowledge, it
is in substantial compliance with all Federal, state and local
environmental laws, rules, regulations, standards and
requirements, including, without limitation, those respecting
hazardous materials. Except as set forth on Schedule 3.10,
there is no action pending before any court, governmental
agency or board or other forum or to the best of the Seller's
knowledge threatened by any person or entity for (i)
noncompliance by the Seller with any environmental law, rule or
regulation, (ii) personal injury, wrongful death or other
tortious conduct relating to materials, commodities or products
used, sold, transferred, processed or manufactured by the
Seller or (iii) relating to the release into the environment by
the Seller of any pollutant, toxic or hazardous material or
waste generated by the Seller, whether or not occurring at or
on a site owned, leased or operated by the Seller.
3.11. Compliance with Laws. Except as set forth on Schedule 3.11,
the Seller has not been charged with any violation of any
provision of any Federal, state, local or foreign law,
regulation, ordinance, order or administrative ruling affecting
the Business or Transferred Assets, and the Seller is not in
default with respect to any order, writ, injunction or decree
of any court, agency or instrumentality affecting the Business
or the Transferred Assets. To the best of its knowledge, the
Seller is not in material violation of any Federal, state,
local or foreign law, ordinance or regulation or any other
requirement of any governmental or regulatory body, court or
arbitrator applicable to the Business or the Transferred
Assets. Without limiting the generality of the foregoing, the
Seller is in compliance with all rules and regulations
promulgated by the Occupational Safety and Health
Administration ("OSHA").
3.12. Licenses, Permits and Authorizations. To the best of the
Seller's knowledge, the Seller has all material licenses,
permits, authorizations, approvals, consents, franchises and
orders (collectively, the "Permits") required for the conduct
and operation of the Business and the use and ownership or
leasing of its properties and assets as currently operated,
used, owned or leased. All of the Permits are valid, in full
force and effect and in good standing. Except as set forth on
Schedule 3.12, no material violations have been recorded in
respect of any such Permit. There is no claim or action
pending, or, to the best of the Seller's knowledge, threatened,
which disputes the validity of any such Permit or threatens to
revoke, cancel, suspend or limit any such Permit.
3.13. Inventory. The net inventories included among the Transferred
Assets shall be taken by the Purchaser "as is" and "where is".
3.14. Equipment, Etc. All of the machinery, equipment, vehicles,
furniture and other tangible personal property owned by the
Seller as of May 27, 1994 and included in the Transferred
Assets shall be taken by the Purchaser "as is" and "where is".
3.15. Tax Returns and Payments. All of the tax returns and reports
of the Seller required by law to be filed have been duly filed
and all taxes shown as due thereon have been paid. There are
in effect no waivers of the applicable statutes of limitation
for any Federal, state, local or foreign taxes for any period.
The provisions of this Section 3.15 shall include, without
limiting the generality of this Section 3.15, all reports,
returns and payments due under all Federal, state, local or
foreign laws or regulations relating to income, sales, use,
payroll, franchise, withholding, real property or personal
property taxes, unemployment insurance, social security,
worker's compensation and other obligations of the same or of a
similar nature. Except as set forth on Schedule 3.15, Seller
has no liability for any unpaid Federal, State or Local taxes
of any sort for any period ending on or before the Closing Date
other than liabilities for taxes incurred in the ordinary
course of business which have not yet become due and payable.
3.16. Backlog. Schedule 3.16 contains a true and complete list of
all contracts of Seller constituting a part of the Transferred
Assets that have been signed by and awarded to Seller but on
which Seller has not yet started working.
3.17. Disclosure. No schedule or Exhibit hereto contains or will
contain any untrue statement of a material fact or omits or
will omit to state any material fact necessary to make the
statements therein not misleading.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE PURCHASER
The Purchaser hereby represents and warrants to the Seller as follows:
4.01. Corporate Existence; Shareholders. The Purchaser is a
corporation duly organized, validly existing and in good
standing under the laws of the State of New York and has full
corporate power and authority to conduct its business as it is
now being conducted and to own or lease its properties and
assets. The Purchaser has previously delivered to the Seller
true and complete copies of its certificate of incorporation
and by-laws as in effect on the date hereof.
4.02. Corporate Power and Authority. The Purchaser has full
corporate power and authority to enter into this Agreement,
perform its obligations hereunder, acquire the Transferred
Assets and carry out the transactions contemplated hereby. The
execution and delivery of this Agreement, the performance by
the Purchaser of its obligations hereunder and the consummation
of the transactions contemplated hereby have been duly
authorized by all corporate, shareholder and other actions on
the part of the Purchaser required by applicable law, its
certificate of incorporation or by-laws, or otherwise. This
Agreement constitutes the legal, valid and binding obligation
of the Purchaser, enforceable against it in accordance with its
terms, except (i) as the same may be limited by bankruptcy,
insolvency, reorganization, moratorium or similar laws now or
hereafter in effect relating to creditors' rights generally and
(ii) that the remedy of specific performance and injunctive and
other forms of equitable relief may be subject to equitable
defenses and to the discretion of the court before which any
proceeding therefor may be brought.
4.03. No Violation. Neither the execution and delivery of this
Agreement nor the performance by the Purchaser of its
obligations hereunder nor the consummation of the transactions
contemplated hereby will (a) contravene any provision of the
certificate of incorporation or by-laws of the Purchaser; (b)
violate, be in conflict with, constitute a default under,
permit the termination of, cause the acceleration of the
maturity of any debt or obligation of the Purchaser, require the
consent of any other party to, constitute a breach of, create a
loss of a material benefit under, or result in the creation or
imposition of any Lien upon any property or assets of the
Purchaser under, any mortgage, indenture, lease, contract,
agreement, instrument or commitment to which the Purchaser is a
party or by which it or any of its assets or properties, may be
bound; or (c) violate any statute or law or any judgment,
decree, order, regulation or rule of any court or governmental
authority to which the Purchaser is subject or by which the
Purchaser or any of its assets or properties are bound.
4.04. Consents and Approvals of Governmental Authorities. Except as
set forth on Schedule 4.04, no consent, approval or
authorization of, or declaration, filing or registration with,
any governmental or regulatory authority is required to be made
or obtained by or on behalf of the Purchaser in connection with
the execution, delivery or performance of this Agreement by the
Purchaser.
4.05. Litigation. There is no action or proceeding pending, or, to
the best of the Purchaser's knowledge, threatened, against the
Purchaser or any of its assets, properties or rights, before
any court, arbitrator or administrative or governmental body,
which questions or challenges the validity of this Agreement or
any action taken or proposed to be taken by the Purchaser
pursuant to this Agreement or in connection with the
transactions contemplated hereby.
4.06. Broker's and Finder's Fees. The Purchaser is not a party to,
nor in any way obligated to make any payment relating to, any
contract or outstanding claim for the payment of any broker's
or finder's fee in connection with the origin, negotiation,
execution or performance of this Agreement.
4.07. Disclosure. No representation or warranty by the Purchaser in
this Agreement contains or will contain any untrue statement of
a material fact or omits or will omit to state any material fact
necessary to make the statements herein not misleading.
ARTICLE V
CONDITIONS TO THE PURCHASER'S OBLIGATIONS
Each and every obligation of the Purchaser under this
Agreement to be performed on or before the Closing Date shall
be subject to the satisfaction, on or before the Closing Date,
of each of the following conditions:
5.01. Representations and Warranties True. The representations and
warranties of the Seller contained herein, in any Schedules and
Exhibits hereto and in all certificates and other documents
delivered by the Seller to the Purchaser pursuant hereto or in
connection with the transactions contemplated hereby shall be
in all material respects true and accurate as of the date of
this Agreement and as of the Closing Date with the same effect
as if made on and as of the Closing Date.
5.02. Performance. The Seller shall have performed and complied in
all material respects with all agreements, obligations and
conditions required by this Agreement to be performed or
complied with by it on or prior to the Closing Date, including,
without limitation, any referred to in this Article V.
5.03. Consents. All filings with and consents from government
agencies and third parties (except as provided for in Section
7.05 below) required to consummate the transactions
contemplated hereby shall have been obtained, unless the
failure to obtain any such consent or make any such filing
would not have a material adverse effect on the assets,
properties, business or condition (financial or otherwise) of
the Business or the Transferred Assets, or except to the extent
that Seller and Purchaser have mutually agreed to waive the
obtaining of any such consent by agreeing in writing at the
Closing to operate the Business subsequent to the Closing Date
pending the receipt of such consents.
5.04. Transfer Instruments. The Seller shall have delivered to the
Purchaser such instruments of conveyance and transfer as are
contemplated by Section 2.02 (a) and (b).
5.05. Opinion of Counsel to the Seller. The Seller shall have
delivered to the Purchaser an opinion of Haythe & Curley,
counsel to the Seller, dated as of the Closing Date, in the
form annexed hereto as Schedule E.
5.06. Certificates. The Seller shall have furnished such
certificates of its President or Vice President to evidence
compliance with the conditions set forth in this Article V and
any other certificates to evidence compliance with the
conditions set forth in this Article V as may be reasonably
requested by the Purchaser.
5.07. Resolutions. The Seller shall have furnished a copy of the
resolutions adopted by the Board of Directors of the Seller
authorizing this Agreement and the transactions contemplated
hereby, certified by a Secretary or Assistant Secretary.
5.08. Proceedings. All corporate and other proceedings, including
any required action on the part of Seller's shareholders, in
connection with the transactions contemplated by this
Agreement, and all documents incident thereto, shall be in form
and substance satisfactory to the Purchaser and its counsel,
and the Purchaser shall have received all such originals or
certified or other copies of such documents as it may
reasonably request.
5.09. Absence of Litigation. There shall be no action or proceeding
pending or threatened before any Federal, state or local court,
governmental agency or regulatory body which seeks to
invalidate or set aside, in whole or in part, this Agreement, to
restrain, prohibit, invalidate or set aside, in whole or in
part, the consummation of the transactions contemplated hereby
or to obtain substantial damages in connection therewith.
5.10. Payables Current. Seller shall have brought current the
accounts payable of the Business by paying all those which
arose more than sixty (60) days prior to the Completion Date.
ARTICLE VI
CONDITIONS TO THE SELLER'S OBLIGATIONS
Each and every obligation of the Seller under this
Agreement to be performed on or before the Closing Date shall
be subject to the satisfaction, on or before the Closing Date,
of each of the following conditions:
6.01. Representations and Warranties True. The representations and
warranties of the Purchaser contained herein and in all
certificates and other documents delivered by the Purchaser to
the Seller pursuant hereto or in connection with the
transactions contemplated hereby shall be in all material
respects true and accurate as of the date of this Agreement and
as of the Closing Date with the same effect as if made on and
as of the Closing Date.
6.02. Performance. The Purchaser shall have performed and complied
in all material respects with all agreements, obligations and
conditions required by this Agreement to be performed or
complied with by it on or prior to the Closing Date, including
without limitation, any referred to in this Article VI.
6.03. Consents. All filings with and consents from government
agencies and third parties (except as provided for in Section
7.05 below) required to consummate the transactions
contemplated hereby shall have been obtained, unless the
failure to obtain any such consent or make any such filing
would not have a material adverse effect on the assets,
properties, business or condition (financial or otherwise) of
the Business or the transactions contemplated hereby, or except
to the extent that making any such filing or obtaining any
such consent has been waived in writing by the Seller.
6.04. Opinion of Counsel to the Purchaser. The Purchaser shall have
delivered to the Seller an opinion of Sacks Montgomery, P.C.,
counsel to the Purchaser, dated the Closing Date, in form
annexed hereto as Schedule G.
6.05. Assumption Agreement. The Purchaser shall have delivered to
the Seller an instrument of assumption as contemplated by
Section 2.02(c).
6.06. Certificates. The Purchaser shall have furnished a
certificate of its President or Vice President certifying
compliance with the conditions set forth in this Article VI and
any other certificates to evidence compliance with the
conditions set forth in this Article VI as may be reasonably
requested by the Seller.
6.07. Absence of Litigation. There shall be no action or proceeding
pending or threatened before any Federal, state or local court,
governmental agency or regulatory body which seeks to
invalidate or set aside, in whole or in part, this Agreement, to
restrain, prohibit, invalidate or set aside, in whole or in
part, the consummation of the transactions contemplated hereby
or to obtain substantial damages in connection therewith.
6.08. Release of Employment Agreement. Purchaser shall have
delivered to Seller an agreement in the form annexed hereto as
Schedule 6.08 signed by Michael Adams and cancelling his
employment agreement with Air and Water Technologies Corp.
("AWT") dated November 23, 1992. Seller shall thereupon have
such agreement executed by AWT and return a copy thereof to
Purchaser.
6.09. Guarantee. Purchaser shall have delivered to Seller the
limited guarantee of the Credit Facility executed by Michael
Adams and his wife along with a mortgage securing such
guarantee, each in the form annexed as Schedules H and I.
6.10. Resolutions. The Purchaser shall have furnished a copy of the
resolutions adopted by the Board of Directors of the Purchaser
authorizing this Agreement and the transactions contemplated
hereby, certified by a Secretary or Assistant Secretary.
6.11. Proceedings. All corporate and other proceedings, including
any required action on the part of the Purchaser's
shareholders, in connection with the transactions contemplated
by this Agreement, and all documents incident thereto, shall be
in form and substance satisfactory to the Seller and its
counsel, and the Seller shall have received all such originals
or certified or other copies of such documents as it may
reasonably request.
6.12. Security for Credit Facility. The Purchaser shall have
delivered to the Seller a Security Agreement securing the
Credit Facility, which Security Agreement shall be in the form
annexed as Schedule J and shall provide for a first priority
lien on the inventory, equipment and accounts receivable of the
Purchaser.
6.13. The Purchaser shall have delivered to the Seller a note
evidencing its obligations under the Credit Facility in the
form annexed hereto as Exhibit L.
ARTICLE VII
CERTAIN POST-CLOSING COVENANTS
7.01. Non-competition; Confidentiality.
(a) The Purchaser and the Seller acknowledge and understand
that the Purchase Price was fixed on the basis that the
Transfer of the Transferred Assets to the Purchaser would
provide the Purchaser with the full benefit of the
Business. The Seller acknowledges that it is proper for
the Purchaser to have assurances that the value of the
Business will not be diminished by acts of the Seller
after the Closing Date. Accordingly, for a period of
three (3) years from and after the Closing Date, the
Seller and its ultimate parent company Air & Water
Technologies Corporation ("AWT") shall not anywhere within
the States of New York, Connecticut, Massachusetts and
Rhode Island and the northern half of New Jersey engage
in the business of providing asbestos abatement services
(including, without limitation, any of the following to
the extent relating to asbestos abatement: consulting
services, inspection services, estimating services,
project or program management services, business
development services, air monitoring services or training
services), or (ii) solicit employment of any of the
employees, consultants, agents or independent contractors
of the Purchaser or its Affiliates (for this purpose the
terms "employees," "consultants," "agents" and
"independent contractors" shall include any persons
having such status with regard to the Purchaser or its
Affiliates at any time during the six (6) months
preceding any solicitation in question). The foregoing
provisions shall not apply to (i) engaging in the
business or performing services of installation of
insulation, reinsulation, fireproofing, transportation of
asbestos and/or disposal of asbestos, (ii) performing
work as a general contractor (but not an asbestos
abatement contractor) on any project so long as no more
than thirty (30%) percent by value of the original
project scope consists of asbestos abatement work
otherwise prohibited by this section; or (iii)
investments in shares of stock traded on a national
securities exchange or on the national over-the-counter
market which shall, at the time of acquisition,
constitute less than five percent of the outstanding
shares of such stock. If the Seller and/or AWT do desire
to perform work as a general contractor as set forth in
subsection (ii) above, then any asbestos abatement work
included in the scope of any project which they undertake
shall be offered to Purchaser to perform provided the
Purchaser shall at least meet the lowest price obtained
at any time from any other qualified asbestos contractor
for that work. In the event the Purchaser does not
perform such asbestos abatement work, it must then be
performed by a third party qualified asbestos contractor.
Notwithstanding the foregoing, if the Seller and/or AWT
do desire to perform work as a general contractor for
jobs which contain more than thirty (30%) percent of
value of asbestos abatement work, then they shall first
offer to have the Purchaser perform such abatement work
and mutually agree upon a price for the asbestos
abatement portion of such work, and only if the Purchaser
shall then decline to perform, such work may they retain
another asbestos contractor to perform such work and may
act as general contractor themselves.
(b) If the Seller or AWT commits a breach of any of the
provisions of this Section 7.01, the Purchaser shall have
the right and remedy (in addition to any others) to have
the provisions of this Section 7.01 specifically enforced
by any court having equity jurisdiction, together with an
accounting therefor, it being acknowledged and understood
by the Seller and AWT that any such breach will cause
irreparable injury to the Purchaser and that money
damages will not provide an adequate remedy therefor to
Purchaser.
7.02. Accounts Receivable.
The Accounts Receivable of Seller as of the Closing Date (the
"Accounts Receivable") are set forth on Schedule 7.02. The
Accounts Receivable shall be handled as follows:
(a) From and after the Closing Date, the Seller shall, with
the assistance of the Purchaser, collect the Accounts
Receivable. From and after the Closing Date, the
Purchaser shall, upon receipt by it of payment of any
amounts in respect of any Account Receivable of the
Seller promptly deliver to the Seller the full amount of
any such payment. From and after the Closing Date the
Seller shall, upon receipt by it of payment of any
amounts in respect of any Account Receivable of the
Purchaser, promptly deliver to the Purchaser the full
amount of any such payment.
(b) Purchaser shall at all times use its best efforts to
collect the Accounts Receivable of the Seller. Purchaser
in no way, however, guarantees collection of such Accounts
Receivable.
(c) Purchaser may not sell, discount, compromise or settle
any of the Accounts Receivable without the prior written
consent of Seller. Seller hereby designates George C.
Mammola and Michael McCloskey individually as having
authority to agree on its behalf to any such sale,
discount, compromise or settlement. Should Seller fail
to answer any written request to agree to such actions
within five days after receipt thereof, such agreement
shall be conclusively deemed to have been granted.
(d) Should the Purchaser take any action after the Closing
Date in completing the contracts included in the
Transferred Assets which is (1) negligent, unreasonable,
willful, in breach of this Agreement or in breach of any
contract included among the Transferred Assets and (2)
which results in a debtor of one of the Accounts
Receivable offsetting against or reducing the amount paid
upon such Account Receivable or refusing completely to
pay such Account Receivable, then such Account Receivable
shall be deemed to have been the obligation of the
Purchaser and the Purchaser shall pay to the Seller the
amount of any such discount or offset.
(e) In order to effectuate all of the provisions regarding
Accounts Receivable, Purchaser and Seller shall each
maintain a record of each payment received on an Account
Receivable such record to include the date of receipt,
method, amount, and payor of each payment and copies of
each check or other evidence of payment and supporting
documentation adequate for auditing purposes. Seller and
Purchaser shall at all times have access to such records
and documentation of the other and shall notify each
other weekly in writing of any payments received on
Accounts Receivable.
(f) All Accounts Receivable generated after the Closing Date
for work, labor or services of the Business which are not
reflected on Schedule K hereto belong to Purchaser.
Should Seller ever have any such accounts, it shall
immediately transfer them to Purchaser.
(g) Should Seller take any action after the Closing Date
which is (1) negligent, unreasonable, willful, in breach
of this Agreement or in breach of any contract included
among the Transferred Assets and (2) which results in a
party to one of the contracts included among the
Transferred Assets offsetting against or reducing the
amount paid to Purchaser under such contract or refusing
completely to pay thereunder, then such debt to the
extent of such discount or offset shall be deemed to have
been the obligation of Seller and Seller shall pay to
Purchaser the amount of any such discount or offset.
Similarly should any party to a contract included among
the Transferred Assets determine that Seller has been
overpaid for work performed before the Closing Date and
offset the amount of such overpayment against amounts due
to Purchaser for work performed after the Closing Date,
then Seller shall pay to Purchaser the amount of any such
offset.
7.03. Warranty Services. Since after the Closing, Purchaser will be
liable for Warranty Services under the contracts, agreements
and purchase orders which are part of the Transferred Assets,
with respect to any work performed after the Closing Date, and
since Seller will be responsible for Warranty Services on the
other portions of such contracts, agreements or purchase orders
and on contracts completed prior to the Closing, Purchaser
covenants and agrees with Seller that on and after the Closing
Date, should Seller so request, Purchaser, provided that if it
so requests, Purchaser receives reasonable assurances that it
will be paid for the work promptly, will perform warranty
services for which Seller is responsible for a fee equal to
Purchaser's cost plus ten percent at Purchaser's labor rates as
then in effect. For its part, Seller shall have such warranty
services performed commencing no later than fifteen (15) days
after the request therefor is received from the customer and
Seller receives Notice thereof, and, should Seller fail to so
commence work, Purchaser may perform such work and charge
Seller therefor at cost plus ten percent. Should warranty
services relate to work which is not totally included in the
time of responsibility of Purchaser or of Seller, then the cost
for such work shall be split in proportion to the percentage of
completion as of May 27, 1994 of the contract under which it
arises.
7.04. Post Closing Transfers and Licensing of Purchaser. Purchaser
and Seller recognize that in order for Purchaser to perform
asbestos abatement work it will need appropriate licenses
issued by certain states which licenses it does not now have.
As a result, at the Closing, notwithstanding anything herein to
the contrary, none of the contracts, purchase orders,
subcontracts, or agreements which pertain to asbestos abatement
work (hereafter the "Unassigned Contracts") in states where
purchaser lacks a license shall be transferred to Purchaser by
Seller. Purchaser shall diligently seek to obtain the required
licenses and when each such license is so obtained, Purchaser
shall notify Seller. Seller shall promptly thereafter take all
required steps to effectuate the assignment to Purchaser of
each of the Unassigned Contracts within the state for which the
license was so obtained. The date upon which the last of the
Unassigned Contracts is so assigned shall be called the "Final
Transfer Date".
Between the Closing Date and the Final Transfer Date, Seller
will continue to carry out its obligations under the Unassigned
Contracts except to the extent any of same are assigned to
Purchaser. Such activity by Seller shall be carried out by
Seller's licensed personnel under the direction and control of
Michael Adams. Purchaser shall not, however, have access to or
control over the Excluded Assets except for Seller's union
contracts and licenses, and Purchaser must supply all financing
or capital required for such activity. Purchaser shall cause
separate books of account to be maintained for all such
activity by Seller duplicate originals of which shall be
available at all times to Purchaser and Seller and delivered to
each within ten (10) days after the Final Transfer Date. All
payments, profits and other assets and liabilities generated
by Seller's continuing to perform the Unassigned Contracts
shall also be retained by Purchaser or delivered by Seller to
Purchaser immediately upon receipt.
Purchaser shall defend, indemnify, hold harmless and reimburse
Seller, its officers, its directors, its shareholders, its
employees and its Affiliates from and against any and all
claims, demands, debts, liabilities, fines, penalties, losses,
expenses, taxes of any nature, costs, consequential or punitive
damages, judgments and/or the like to the extent that they
arise from any action taken or omitted to be taken under, on
or in connection with the Unassigned Contracts during the
period between the Closing Date and the Final Transfer Date.
Such indemnity by Purchaser is not limited to costs relating to
Transferred Assets or by any other provision of this Agreement.
7.05. Assignment of Contracts. Seller and Purchaser recognize that
Seller may be unable to obtain all required consents to the
assignment to Purchaser of some contracts which constitutes
part of the Transferred Assets prior to the date when such
contracts are to be assigned pursuant to Section 7.04 hereof.
In such event, Seller shall engage Purchaser as a subcontractor
on any such contract, Purchaser shall fully perform the work
pursuant to the terms of such contract as if it were the prime
contractor, and Seller shall immediately pass through the gross
revenues on any such contract directly to Purchaser. Nothing
contained herein shall relieve Seller from its obligations to
use its best efforts to promptly obtain the consent of each
third party to the assignment of each contract constituting
part of the Transferred Assets. Seller also hereby authorizes
Purchaser to act in Seller's name with the other party or
parties to such contracts and Seller will take no action which
hinders, disrupts, delays or adversely affects Purchaser's
performance of its obligations under such contracts.
7.06. Allocation of Uncompleted Contracts. (a) As of the Closing
Date certain contracts constituting a part of the Transferred
Assets shall be uncompleted (the "Uncompleted Contracts"). The
Uncompleted Contracts as of the Closing Date are set forth on
Schedule K, which also lists (i) the percentage of completion
of each such Uncompleted Contract, (ii) the total amount billed
by Seller through the Closing Date with respect to such
contract and (iii) the total price for such contract.
Except as modified by paragraphs (b) and (c) below, the
revenues earned by the Seller with respect to each Uncompleted
Contract shall be the percentage completion for such Uncompleted
Contract multiplied by the total price for such contract. The
Seller shall be entitled to all revenues earned through the
Closing Date for the percentage of completion of each
Uncompleted Contract whether billed or unbilled and whether
payment is received before or after the Closing Date. The
Purchaser shall be entitled to the revenues earned on such
Uncompleted Contracts following the Closing Date, whether
billed or unbilled and whether payment is received before or
after the Closing Date. The Seller shall be responsible for
all costs of work performed on the Uncompleted Contracts prior
to the Closing Date, and the Purchaser shall be responsible for
all costs of work performed on the Uncompleted Contracts after
the Closing Date. Based upon these rules, the parties agree
that as of the Closing Date, the Uncompleted Contracts were
overbilled or underbilled by the amounts set forth on Schedule
K. To the extent of any underbilling, Purchaser shall pay
Seller said amount out of the next payments received on such
contracts. To the extent of any overbilling, Seller shall pay
Purchaser said amount out of the next payment received on such
contracts.
(b) The Seller shall use its best efforts to assist the
Purchaser in the submission and approval of change orders for
work performed on Uncompleted Contracts prior to the Closing
Date and in the collection of revenues with respect to such
change orders. Except as set forth in paragraph (c) below, the
Seller shall be entitled to a portion of such revenues equal to
the percentage of completion of the relevant Uncompleted
Contract multiplied by the total revenue for the Change Order
despite the fact that the change orders have not been included
on Schedule K hereto.
(c) Notwithstanding anything herein to the contrary, Seller
shall remain liable for and pay all amounts due for Workmen's
Compensation insurance costs for the period prior to the
Closing Date and Seller shall receive all reimbursements or
payments from owners or others for such costs even if such
costs and payments are not included on Schedule K. Purchaser
shall assist Seller in the presentation, approval and
processing any change orders required to receive such
reimbursement or payment for Workmen's Compensation insurance.
7.07. Default by Purchaser, Acceleration of Payment. In the event
that Purchaser (a) fails to make any payment as required by
this Agreement and does not cure such failure to pay within ten
(10) days after Seller gives Notice of such failure; (b)
breaches the terms of this Agreement and fails to cure such
breach within twenty (20) days after Seller gives Notice of
such breach; or (c) is declared a bankrupt, makes an assignment
for the benefit of creditors and/or seeks the protection of the
bankruptcy laws; then, without limiting Seller's other rights
or remedies, any borrowing under the Credit Facility which
remains unpaid shall be immediately due and payable by Purchaser
to Seller.
7.08. Payment of Liabilities. As of the Closing Date, Seller shall
pay all of its accounts payable which pertain to the
Transferred Assets and which as of that time will have been
outstanding for sixty days or more. Thereafter, Seller shall
pay the remaining accounts payable which pertain to the
Transferred Assets no later than sixty (60) days after the date
each was received. Seller shall send Purchaser weekly its list
of payments of accounts payable which predate the Closing Date
and which indicate payments made by Seller.
7.09. Insurance. Each of Purchaser and Seller shall cooperate to
arrange their insurances with regard to the Transferred Assets,
the Excluded Assets, the Transferred Liabilities and the
Excluded Liabilities in a manner which will give the widest
coverage to both, provided there are not additional costs
resulting therefrom. Thus, for example but without limitation,
if Purchaser could name Seller as an additional named insured
on its policies for no cost, it shall do so. Seller shall
maintain its insurance policies for the Business in effect at
least through the Completion Date and shall defend and hold
Purchaser harmless from and against any claim, demand, suit,
damage, judgment or the like to the extent that they arise in
connection with the Business between the Closing Date and
Completion Date and are covered by insurance. Purchaser shall
reimburse Seller for the direct cost of such insurance to the
extent that Seller's maintenance of such insurance between the
Closing Date and the Completion Date causes Seller to actually
pay additional charges for such insurance. In this regard, if
Seller could have cancelled any such insurance as of the
Closing Date (i.e., the policy was able to be cancelled and no
remaining activities of Seller or its affiliates were covered)
then Purchaser shall pay Seller the difference between the
cancellation refund, available on the Closing Date and on the
Completion Date.
7.10. Office space. After the Closing Date, Purchaser may use
Seller's current office space in New York, New York and Boston,
Massachusetts through July 31, 1994 while it arranges for an
alternate location and the Purchaser shall pay to the Seller
the prevailing rate plus all additional charges for such office
space.
7.11. After the Closing, Seller shall continue to maintain health
insurance for the current employees of Seller who become
employees of Purchaser through July 31, 1994 and the Purchaser
shall reimburse the Seller for all such costs.
7.12. After the Closing Date, Seller shall diligently defend each of
the litigations listed on Schedule 3.07 and shall defend and
indemnify Purchaser from and against any losses, costs,
damages, suits or actions which arise out of or in connection
with said litigations. Purchaser shall use its best efforts to
assist Seller in the defense and resolution of the actions or
proceedings set forth on Schedule 3.07, including but not
limited to the worker's compensation dispute with New York State
and the insurance carrier for such insurance.
7.13. Seller and Purchaser shall endeavor to obtain the consents
listed on Schedule 3.06 within 120 days of the Completion Date.
Should any such consent not be obtained, Seller and Purchaser
shall equitably adjust the Purchase Price to reflect such
failure to obtain consent.
7.14. Falcon. Seller will cause Falcon Associates, Inc. to give a
right of first refusal to Purchaser regarding that certain
contract for asbestos abatement held by Falcon Associates Inc.
for work to be performed on Boston City Hall.
ARTICLE VIII
SURVIVAL OF REPRESENTATIONS AND
WARRANTIES; INDEMNIFICATION
8.01. Survival of Representations and Warranties. Notwithstanding (a)
the making of this Agreement, (b) any examination made by or on
behalf of the parties hereto and (c) the Closing hereunder, (x)
the representations and warranties of the Seller and the
Purchaser contained in this Agreement, or in any document
delivered pursuant to the provisions of this Agreement, shall
survive the Closing for a period of two years, except for the
representations and warranties made in Section 3.10
(Environmental Matters), Section 3.11 (Compliance with Laws)
and 3.18 (Taxes) which in each case shall survive the
expiration of the applicable statute of limitations for the
underlying cause of action and (y) the covenants and agreements
required to be performed after the Closing or as conditions to
the Closing or by Section 9.03 (unless noncompliance with those
covenants was waived in writing at the Closing) shall survive
until fully performed or fulfilled.
8.02. Indemnification.
(a) Subject to Section 8.01 above, from and after the
Closing, the Seller and the Purchaser each shall
indemnify and save harmless, after giving effect to all
deductible expenses incurred by such party and all
reportable income received by such party in connection
with such Damages (as defined below), the party seeking
indemnification and its officers, directors, partners,
shareholders, successors and assigns (the "Indemnified
Party") from and against any loss, claim, liability,
expense (including its reasonable attorneys' fees
including but not limited to those for enforcing this
obligation) or other damage of any kind or nature
(collectively, the "Damages") caused to such party (or, if
the Purchaser shall be the Indemnified Party, to the
Business) by or arising out of (i) the failure by the
party against which indemnification is sought (the
"Indemnifying Party") to perform any covenant or agreement
required to be performed by it in this Agreement, after
the Closing or as conditions to the Closing (unless
noncompliance with those covenants was waived in writing
at the Closing); (ii) in the case of the Seller, the
failure to pay, perform or satisfy any Excluded
Liability; (iii) in the case of the Purchaser, the
failure to pay, perform or satisfy any Assumed Liability;
(iv) in the case of the Seller, the failure to pay
promptly any Federal, state, local or foreign taxes of
the Seller including, without limitation, all taxes of
any kind or nature (whether based on income, sales, use or
withholding) and all interest, additions to tax and
penalties thereon claimed or assessed for any taxable
period ended on or prior to the Closing Date; or (v) any
breach of warranty or misrepresentation in this Agreement
(including the Schedules and Exhibits hereto) made by or
on behalf of the Indemnifying Party and not waived in
writing by the Indemnified Party.
(b) The Indemnified Party, as a condition to recovery of any
sort for Damages, shall notify the Indemnifying Party
within a reasonable period of time after becoming aware
of, and shall provide to the Indemnifying Party as soon
as practicable thereafter all information and
documentation necessary to support and verify, any Damages
which the Indemnified Party shall have determined has
given or could give rise to a claim for indemnification
hereunder, and the Indemnifying Party shall be given
access to all books and records in the possession or
under the control of the Indemnified Party which the
Indemnifying Party reasonably determines to be related to
such claim.
(c) All claims for indemnity under this Article VIII shall be
paid by the Indemnifying Party on demand in immediately
available funds in U.S. dollars after such claim and
liability for Damages thereunder have been finally
determined. A claim and the liability for Damages
thereunder shall be deemed to be "finally determined" for
purposes of this Section 8.02 when the parties have so
determined by mutual agreement or, if disputed, when a
final order of a court of competent jurisdiction or a
final award of an arbitrator having competent
jurisdiction has been entered.
(d) The Indemnified Party shall notify the Indemnifying Party
with reasonable promptness of its discovery of any matter
giving rise to a claim of indemnity pursuant to this
Agreement. With respect to any third party claim or
action that could give rise to indemnity under this
Agreement, the Indemnifying Party shall be entitled to
assume the defense thereof with counsel satisfactory to
the Indemnified Party, provided that, upon the request of
the Indemnified Party, the Indemnifying Party provides
reasonable evidence of its ability to perform its
obligation under this Section 8.02; and after notice from
the Indemnifying Party to the Indemnified Party under the
foregoing indemnity agreement the Indemnifying Party
promptly pays all costs for any legal or other expenses
subsequently incurred by the Indemnified Party in
connection with the defense thereof other than (i) those
relating to investigation or the furnishing of documents
or witnesses and (ii) all reasonable fees and expenses of
separate counsel retained by such Indemnified Party if
(A) the Indemnifying Party and the Indemnified Party
shall have agreed to the retention of such counsel or (B)
counsel to the Indemnified Party shall have concluded
reasonably that the representation of the Indemnifying
Party and the Indemnified Party by the same counsel would
be inappropriate due to actual or potential differing
interests between them in the conduct of the defense of
such action. Promptly after receipt by an Indemnified
Party of notice of the commencement of any action to
which the Indemnifying Party is not a party, such
Indemnified Party shall, if such claim in respect thereof
is to be made against the Indemnifying Party pursuant to
this Agreement, notify the Indemnifying Party in writing
of the commencement thereof, but the failure or delay in
so notifying the Indemnifying Party shall not relieve the
Indemnifying Party of its obligations to indemnify
pursuant to the terms of this Agreement. The Indemnified
Party shall keep the Indemnifying Party informed of the
progress of any such action and shall not enter into any
settlement of any such action without the prior written
consent of the Indemnifying Party.
8.04. Seller's Shareholders and Directors. The Purchaser shall
indemnify, defend and save harmless the Seller's officers,
directors, shareholders and affiliates jointly and severally
with respect to Damages (as defined in Section 8.02) which
arise due to the Purchaser's failure to satisfy any of the
Assumed Liabilities. The rights to such indemnification shall
be governed by Section 8.02 with the indemnified party standing
in the place of the Seller. By reason of this provision, each
of such indemnified parties is a third-party beneficiary of
this Agreement.
8.05. Validity. The parties understand that Michael R. Adams,
President of the Purchaser, has operated the Business during
the entire period which the Seller has owned the Business, and
he is fully informed as to the assets and operations of the
Business. To the extent that the Purchaser or Seller has
knowledge of a breach of the representations and warranties of
the other contained herein (including without limitation, all
of the representations and warranties set forth in Article III
hereof) which knowledge was obtained prior to the Completion
Date, the Purchaser or Seller, as the case may be, shall not
be entitled to indemnification pursuant to the provisions of
this Article VIII for such breach. It is understood and agreed
that the knowledge of the accountants or legal counsel of a
party shall be deemed the knowledge of that party. As used in
this Section 8.05, "knowledge" of Purchaser shall mean the
knowledge or awareness of the directors and officers of the
Purchaser, including Michael R. Adams, the Purchaser's
accountants or legal counsel, as applicable. As used in this
Section 8.05, "knowledge" of Seller shall mean the knowledge or
awareness of George C. Mammola, Michael McCloskey, the
directors and officers of AWT, Seller's accountants or legal
counsel.
ARTICLE IX
MISCELLANEOUS PROVISIONS
9.01. Amendment; Waiver. Neither this Agreement, nor any of the
terms or provisions hereof, may be amended, modified,
supplemented or waived, except by a written instrument signed
by the parties hereto (or, in the case of a waiver, by the party
granting such waiver). No waiver of any of the provisions of
this Agreement shall be deemed or shall constitute a waiver of
any other provision hereof (whether or not similar), nor shall
such waiver constitute a continuing waiver. No failure of
either party hereto to insist upon strict compliance by the
other party with any obligation, covenant, agreement or
condition contained in this Agreement shall operate as a waiver
of, or estoppel with respect to, any subsequent or other
failure. Whenever this Agreement requires or permits consent
by or on behalf of any party hereto, such consent shall be
given in a manner consistent with the requirements for a waiver
of compliance as set forth in this Section 9.01.
9.02. Fees and Expenses. Except as otherwise provided in this
Agreement, each of the parties hereto shall bear and pay its
own costs and expenses incurred in connection with the origin,
preparation, negotiation, execution and delivery of this
Agreement and the agreements, instruments, documents and
transactions referred to in or contemplated by this Agreement
(whether or not such transactions are consummated) including,
without limitation, any fees, expenses or commissions of any of
its advisors, agents, finders or brokers. The Purchaser shall
indemnify the Seller against any claims of third parties for
any brokerage, finder's, agent's or similar fees or commissions
in connection with the transactions contemplated hereby insofar
as such claims are alleged to be based on arrangements or
contacts made by, to or with the Purchaser or its Advisors or
representatives. The Seller shall indemnify the Purchaser
against all such claims insofar as they are alleged to be based
on arrangements or contacts made by, to or with the Seller or
its advisors or representatives.
9.03. Bulk Transfers Law. The Purchaser hereby waives compliance by
the Seller with the provisions of the Bulk Transfers Law of the
State of New York. Nevertheless, in addition to any other
indemnities provided in this Agreement, the Seller shall
indemnify and hold the Purchaser harmless from and against any
and all liens claimed against any of the Transferred Assets by
any creditor of Seller arising for any reason prior to the
Closing Date.
9.04. Worker's Compensation Claims. Personnel of the Purchaser and
Seller, including but not limited to Michael R. Adams and Brian
Evans shall fully cooperate with each other in connection with
the investigation and resolution of any workmen's compensation
payment claims made by any governmental authority or insurance
company against the Seller or the Purchaser.
9.05. Access to Records.
(a) After the Closing, Purchaser shall retain a copy of the
employee records including current physicals and OSHA
medical questionnaires currently located at the office of
Seller at the World Trade Center. Seller shall receive
the originals of such records after they are copied.
Copies of sign-in logs for all contracts transferred
under this Agreement shall also be held by Purchaser.
Seller shall receive the originals of such records after
they are copied. Seller shall also keep sign-in logs for
jobs previously performed by Seller or its predecessor.
Each party shall maintain the records addressed in this
paragraph for thirty years, unless a shorter period is
allowed by law, and then, for such shorter period.
(b) Purchaser shall retain all other records currently
located at the World Trade Center office of Seller for 90
days after the Completion Date during which time Purchaser
may copy any of those records as it chooses. Thereafter,
Seller may remove all such records except for those
pertaining to contracts to be assigned or transferred
hereunder which records shall be kept by Purchaser until
six months after the completion of work under each
contract and final payment thereof. Such records shall
remain the property of Seller, however, and Seller shall
have full access to these records upon reasonable notice
to Purchaser.
9.06. Notices.
(a) All notices, requests, demands and other communications
required or permitted under this Agreement shall be in
writing (including telefax, telegraphic, telex or cable
communication) and mailed, telefaxed, telegraphed,
telexed, cabled or delivered:
(i) If to the Purchaser, to:
Asbestos Containment Services, Inc.
One World Trade Center
Suite 2537
New York, New York 10048
(after July 1, 1994 - Suite changes to 2469)
with a copy to:
Sacks Montgomery, P.C.
800 Third Avenue
New York, NY 10022
Telefax: (212) 593-7257
Attention: Jeffrey A. Aronson, Esq.
(ii) If to the Seller to:
Air & Water Technologies Corporation
US Highway 22 West and Station Road
Branchburg, NJ 08876
Telefax: (908) 685-4482
Attention: George C. Mammola
with a copy to:
Air & Water Technologies Corporation
US Highway 22 West and Station Road
Branchburg, NJ 08876
Telefax: (908) 685-4482
Attention: Douglas A. Satzger, Esq.
(b) All notices and other communications required or
permitted under this Agreement which are addressed as
provided in this Section 9.07(i) if delivered personally
against proper receipt or by confirmed telefax or telex,
shall be effective upon delivery and (ii) if delivered
(A) by certified or registered mail with postage prepaid,
(B) by Federal Express or similar courier service with
courier fees paid by the sender or (C) by telegraph or
cable, shall be effective two business days following the
date when mailed, couriered, telegraphed or cabled, as
the case may be. Either party may from time to time
change its address for the purpose of notices to that
party by a similar notice specifying a new address, but
no such change shall be deemed to have been given until
it is actually received by the party sought to be charged
with its contents.
9.07. Assignment. This Agreement and all of the provisions hereof
shall be binding upon and inure to the benefit of the parties
hereto and their respective successors and permitted assigns,
but neither this Agreement nor any of the rights, interests or
obligations hereunder may be assigned by the parties hereto
without the prior written consent of the other party. Any
assignment which contravenes this Section 9.08 shall be void ab
initio.
9.08. Governing Law; Arbitration.
(a) This Agreement and the legal relations between the
parties hereto shall be governed by and construed in
accordance with the internal laws of the State of New
York, without giving effect to the conflicts of laws
principles thereof.
(b) Any controversy or claim arising out of or relating to
this Agreement or the breach thereof, shall be settled by
arbitration in New York City in accordance with the
Construction Industry Arbitration Rules of the American
Arbitration Association, and judgment upon the award of
the arbitrator(s) may be entered in any court having
jurisdiction thereof. Except as set forth herein to the
contrary, in determining any such controversy or claim,
the arbitrator(s) may not award and no party shall be
liable for consequential and/or exemplary damages, and
the Purchaser and Seller hereby waive any right to claim
or to recover consequential and/or exemplary damages in
connection with this Agreement.
9.09. Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original, but
all of which taken together shall constitute one and the same
instrument.
9.10. Headings. The headings contained in this Agreement are for
convenience of reference only and shall not constitute a part
hereof or define, limit or otherwise affect the meaning of any
of the terms or provisions hereof.
9.11. Entire Agreement. This Agreement (which defined term includes
the Schedules and Exhibits to this Agreement) embodies the
entire agreement and understanding among the parties hereto with
respect to the subject matter of this Agreement and supersedes
all prior agreements, commitments, arrangements, negotiations
or understandings, whether oral or written, between the parties
with respect thereto. There are no agreements, covenants,
undertakings, representations or warranties with respect to the
subject matters of this Agreement other than those expressly set
forth or referred to herein.
9.12. Severability. Each term and provision of this Agreement
constitutes a separate and distinct undertaking, covenant, term
and/or provision hereof. In the event that any term or
provision of this Agreement shall be determined to be
unenforceable, invalid or illegal in any respect, such
unenforceability, invalidity or illegality shall not affect any
other term or provision of this Agreement, but this Agreement
shall be construed as if such unenforceable, invalid or illegal
term or provision had never been contained herein. Moreover,
if any term or provision of this Agreement shall for any reason
be held to be excessively broad as to time, duration, activity
or subject, it shall be construed, by limiting and reducing it,
so as to be enforceable to the extent permitted under
applicable law as it shall then exist.
9.13. No Third Party Beneficiaries. Except as expressly stated,
nothing in this Agreement is intended, nor shall anything in
this Agreement be construed, to confer any rights, legal or
equitable, in any Person (other than the parties hereto and the
Shareholders and their respective heirs, distributees,
beneficiaries, executors, successors and assigns), including,
without limitation, any employee of the Seller or any
beneficiary of such employee.
9.14. Miscellaneous. The persons executing this Agreement in behalf
of the parties hereto are duly authorized to execute,
acknowledge and deliver this Agreement. Time is of the essence
of this Agreement.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly
executed as of the day and year first above written.
ASBESTOS CONTROL SERVICES, INC.
By:______________________________
Name:
Title:
ASBESTOS CONTAINMENT SERVICES, INC.
By:______________________________
Name:
Title:
CONSENT
In consideration of Purchaser's executing this Asset Purchase
Agreement and carrying out all of the obligations called for by such
Agreement, the undersigned hereby consents to the terms of Section 7.01 of such
Agreement and agree to be bound thereby. Such consent and agreement to
Section 7.01 does not bind the undersigned in any way with regard to any other
portion of said Agreement nor constitute any of the undersigned as surety or
guarantor of Seller under said Agreement. In addition, the consent and
agreement expressed herein is for the benefit of Purchaser and its permitted
assigns only; no other person is intended to benefit by or may rely hereon.
AIR & WATER TECHNOLOGIES CORPORATION
By:______________________________
Name:
Title:
ASSET PURCHASE AGREEMENT
THIS AGREEMENT is entered into by and between Stewart & Stevenson Power,
Inc., a Delaware corporation ("S&S Power"), and Stewart & Stevenson Realty
Corporation, a Texas corporation ("S&S Realty" and together with S&S Power,
the "Purchasers" or each individually a "Purchaser") and Power and
Application & Mfg. Co., a Delaware corporation ("Seller"), and Air & Water
Technologies Corporation, a Delaware corporation ("AWT"), on November 8,
1994.
W I T N E S S E T H :
WHEREAS, Seller wishes to sell to Purchasers, and Purchasers wish to purchase
from Seller, certain portions of Seller's business and assets subject to the
terms and conditions set forth herein.
NOW, THEREFORE, in consideration of the mutual covenants set forth herein and
other good and valuable consideration, the receipt and sufficiency of which is
acknowledged, the parties agree as follows:
ARTICLE I
SALE OF ASSETS AND ASSIGNMENT OF CONTRACTS
1.1 Sale of Certain Assets. Subject to S&S Power's rights under Section
1.5, Seller agrees to sell, transfer, assign, convey and deliver to
S&S Power, and S&S Power agrees to purchase and acquire from Seller,
on the Closing Date (as defined in Section 6.1), all of Seller's
right, title and interest in and to the following assets
(collectively, the "PAMCO Assets"), wherever situated on the Closing
Date:
a) All machinery, tools, equipment, computer software, furniture,
molds, patterns, fixtures, motor vehicles and other personal
property used by Seller in the ordinary course of business (the
"Personal Property");
b) All corporate names, logos, patents, patent applications,
service marks, trademarks, trademark and service mark
applications, copyrights, franchises, licenses, permits and
other authorizations used by Seller in the ordinary course of
business (the "Rights");
c) All security deposits, advance payments and other prepaid
expenses made by Seller with respect to any PAMCO Asset, the
Real Estate (as defined in Section 1.2) or under the Contracts
(as defined in Section 1.3) (the "Advanced Payments");
d) All inventories of raw materials, parts, finished goods,
work-in-process, used equipment, remanufactured equipment, and
other personal property held for resale or consumption by
Seller in the ordinary course of business (the "Inventory");
e) All drawings, manuals, parts lists, bills of material, unit
histories, sales files, purchase order files, contract files,
credit files, vendor lists, customer lists, schedules of
assets, databases and other business records created or used by
Seller in the ordinary course of business (the "Records");
f) All memberships, agencies, business licenses, approvals,
accreditations, certifications, permits, telephone numbers,
lock boxes and the contents thereof, Waukesha performance and
merchandising allowances, and postal addresses owned by Seller
and used by Seller in the ordinary course of business (the
"Miscellaneous Assets");
g) All accounts receivable, notes and other rights to receive
money or other things of value from any source, other than from
a present or former employee of Seller, which are either
Contingent Accounts Receivable or Collectable Accounts
Receivable (as defined in Sections 5.13(b) and 5.13(c),
respectively) (the "Accounts Receivables"); and
h) All of Seller's unbilled sales (the "Unbilled Sales").
1.2 Sales of Certain Real Estate. Subject to Purchaser's rights under
Section 1.5, Seller agrees to sell, transfer, assign, convey and
deliver, on the Closing Date, to (a) S&S Realty, and S&S Realty
agrees, to purchase, acquire and, subject to Sections 2.1 and 2.3,
assume from Seller all of Seller's rights, title and interests in and
obligations in connection with the real property owned by Seller (the
"owned Real Estate") and (b) S&S Power, and S&S Power agrees to
purchase, acquire and, subject to Section 2.1 and 2.3, assume from
Sellar all of Seller's rights, title and interests in and obligations
under the real property leased by Seller, as lessee, (the "leased
Real Estate" and together with the owned Real Estate, the "Real
Estate"). The Real Estate is described on Schedule 1.2 attached
hereto.
1.3 Assignment of Contracts. Seller agrees to assign to S&S Power all of
Seller's interest, benefits and rights in, to and under the following
contracts (collectively, the "Contracts"):
a) Bids, proposals, offers and contracts for the future purchase
of goods or for the future performance of services by a third
person which are (i) described on Schedule 1.3(a) attached
hereto, (ii) made or entered into in the ordinary course of
business and individually expected to be for less than $5,000
per annum, or (iii) made or entered into in the ordinary course
of business after the date of the Schedule (collectively, the
"Purchase Orders");
b) Bids, proposals, offers and contracts for the future sale of
goods to or for the future performance of services in favor of
a third person which are (i) described on Schedule 1.3(b)
attached hereto, (ii) made or entered into in the ordinary
course of business and individually expected to be for less
than $5,000 per annum, or (iii) made or entered into in the
ordinary course of business after the date of the Schedule
(collectively, the "Sales Orders"); and
c) Conditional sales agreements or leases of goods under which
Seller is either the seller, purchaser, lessor or lessee
described on Schedule 1.3(c) attached hereto or which were made
or entered into in the ordinary course of business after the
date of the Schedule (the "Leases");
provided, however, that nothing herein shall be construed as (i) an
attempt to assign any Contract which is non-assignable without the
consent of the other party or parties unless such consent shall have
been given or (ii) a guarantee by Seller of the performance by any
third party of such party's obligations under any Contract. In the
event Seller is unable to obtain any required consent to the
assignment of a Contract, (i) Seller shall continue to be bound
thereby; (ii) S&S Power shall perform and discharge all obligations
thereunder that are to be performed by Seller after the Closing Date
and shall hold Seller harmless from any costs of such performance;
(iii) S&S Power shall indemnify and hold Seller harmless for any
losses, costs, damages or liabilities incurred by Seller as a result
of S&S Power's failure to perform or discharge such obligations or
resulting from any act or failure to act on the part of S&S Power
under any Contract; and (iv) Seller shall, without further
consideration, pay to S&S Power all moneys and deliver to S&S Power
possession of all property, rights and other considerations received
in respect of such performance.
1.4 Instruments of Conveyance. Seller shall, on the Closing Date and at
any time thereafter upon request of S&S Power or S&S Realty after the
Closing Date, execute, acknowledge and deliver the deeds, bills of
sale, endorsements, assignments, drafts, checks or other instruments
as S&S Power or S&S Realty reasonably requests to assign, transfer or
convey the PAMCO Assets and Contracts to S&S Power and the Real
Estate to S&S Realty, in such reasonable and customary form and
containing such warranties as are contained in this Agreement as
shall be requested by S&S Power or S&S Realty, in each case free and
clear of all Claims (as defined in Section 9.1) other than the Assumed
Liabilities and the Permitted Encumbrances (as defined in Section
9.1).
1.5 Excluded Assets. At any time up to and including the Closing Date,
Purchasers shall have the right to exclude from this Agreement (a) any
PAMCO Asset, Real Estate or Contract which, if acquired by Purchasers,
would result in Seller or AWT's breach of this Agreement or (b) any
Inventory related to any manufacturer for whom Seller is now a
distributor and who has not given, as of the Closing Date, its
written consent to Seller's assignment of its distributorship to S&S
Power (collectively, the "Excluded Assets"). The Excluded Assets
shall not be sold by Seller to Purchasers and the value thereof shall
not be considered in calculating the Net Asset Value.
ARTICLE II
ASSUMPTION OF LIABILITIES
2.1 Assumed Liabilities. On the Closing Date, Purchasers shall assume, be
responsible for, pay, perform and otherwise discharge or cause the
discharge of, and indemnify, defend and hold Seller harmless against
all obligations and liabilities (collectively, the "Assumed
Liabilities"):
a) that arise under the Contracts after the Closing Date,
including, without limitation, all warranties relating to
products or services delivered by Purchasers after the Closing
Date;
b) for unused vacation time for those employees of Seller that
become employees of Purchasers after the Closing in the
aggregate amount, but not more than the amount, set forth in
the Closing Statement (as defined in Section 6.3(c));
c) the accounts payable incurred by Seller in the ordinary course
of business prior to the Closing in the aggregate amount, but
not more than the amount, set forth in the Closing Statement;
d) arising from or relating to written warranties made by Sellers
for products or services delivered by Seller on or prior to the
Closing Date in the aggregate amount, but not more than the
amount, set forth in the Closing Statement;
e) for accrued and unpaid commissions relating to sales of
products or services payable to those employees of Seller that
become employees of Purchasers after the Closing in the
aggregate amount, but not more than the amount, set forth in
the Closing Statement;
f) that arise in connection with the Real Estate after the Closing
Date; and
g) arising from costs incurred after Closing in connection with the
installation and start up of equipment in the aggregate amount,
but not more than the amount, set forth in the Closing
Statement.
2.2 Taxes.
a) All property taxes paid or to be paid for 1994 with respect to
the Real Estate shall be prorated as of the Closing Date. Upon
demand and presentation of paid tax receipts by Seller or
Purchasers (the "Paying Party"), the Seller or Purchasers, as
the case may be, shall reimburse the Paying Party for the
portion of such taxes that relate to the period of time Seller
or Purchasers owned the Real Estate.
b) All sales taxes, use taxes, transfer taxes, documentary stamps,
recording fees and other charges imposed in connection with the
sale of the PAMCO Assets or the Real Estate shall be paid by
Purchasers. Any such amounts which are required to be
collected by Seller at Closing, including, without limitation,
any sales taxes payable in connection with the transfer or the
PAMCO Assets, shall be paid by Purchasers to Seller on the
Closing Date, in addition to the Purchase Price.
2.3 Other Liabilities Not to be Assumed. Purchasers shall not assume,
and Seller and AWT shall indemnify, defend and hold Purchasers
harmless from any liability or obligation of Seller other than the
Assumed Liabilities. Without limiting the generality of the
foregoing, the Assumed Liabilities shall not include:
a) Except to the extent included in Assumed Liabilities,
obligations and liabilities for accrued commissions, wages,
salaries, bonuses, federal or state withholding taxes, social
security taxes, unemployment insurance, medicare taxes,
contributions to pension plans or obligations or liabilities
pursuant to employment contracts, with respect to periods prior
to the Closing Date;
b) Any of Seller's Employee Benefit Plans, as defined in Section
3(3) of the Employee Retirement Income Security Act of 1974, as
amended ("ERISA") or any liabilities or obligations associated
therewith, whether such liabilities or obligations accrued
before or after the Closing Date or pursuant to any plan,
policy, program or other arrangement providing for deferred
compensation, stock options, stock appreciation rights or other
forms of incentive or contingent compensation, or
post-retirement insurance, compensation or benefits whether or
not such benefits become payable, or a claim for any such
benefits is made, before or after the Closing;
c) Declared and unpaid dividends, redemptions or other payments
relating to equity securities, or sinking fund payments,
installments of principal or interest or other payments
pursuant to any loan, note payable, or other obligation for
money borrowed;
d) Except to the extent included in Assumed Liabilities,
obligations and liabilities arising under any Contract (i)
which are required to be performed prior to the Closing Date,
(ii) for which payment has been received by Seller, (iii) which
arise out of a breach by Seller prior to the Closing Date, or
(iv) except as set forth in Section 2.2(b), as a result of the
transactions contemplated by this Agreement;
e) Liabilities or obligations arising from a violation by Seller
or its officers, employees or agents of any statute, rule,
regulation, permit or allowance of the United States government
or any political subdivision thereof or of any foreign
government or from the breach or violation of any injunction,
judgment, writ, order, decree, indenture, loan, promissory
note, contract or agreement;
f) Income taxes, excise taxes, value added taxes, payroll taxes,
sales taxes, use taxes or other tax liabilities to the United
States government or any political subdivision thereof or any
foreign government that arise prior to the Closing Date or
relate to products or services delivered by Seller on or before
the Closing Date;
g) Liabilities or obligations for any cause of action including,
without limitation, breach of contract, tort, strict liability
in tort or product liability arising from or relating to acts
or omissions of Seller on or before the Closing Date;
h) Liabilities or obligations which arise from facts or
circumstances the existence of which are a breach of any
representation or warranty contained in this Agreement;
i) Except to the extent included in Assumed Liabilities,
liabilities or obligations arising from or relating to
warranties made by Seller for products or services delivered by
Seller on or before the Closing Date.
2.4 Instruments of Assumption. Purchasers shall, on the Closing Date and
at any time thereafter upon the request of Seller, execute,
acknowledge and deliver one or more instruments as Seller reasonably
requests to assume and become responsible for the Assumed Liabilities
in such reasonable and customary form as shall be requested by Seller.
2.5 No Expansion of Rights. Nothing in this Agreement or any instrument
relating to the assumption of the Assumed Liabilities shall, and the
assumption of the Assumed Liabilities by S&S Power shall not, create,
extend, increase or otherwise expand any right in a third person of a
right against Purchasers, and S&S Power shall be entitled to dispute
in good faith any obligations or liabilities included in the Assumed
Liabilities.
ARTICLE III
PURCHASE PRICE, PAYMENT AND ADJUSTMENT
3.1 Purchase Price. As consideration for the transfer of the PAMCO
Assets to S&S Power, and the transfer of the Real Estate to S&S
Realty, Purchasers shall pay to Seller in cash on the Closing Date,
but subject to Section 6.3, $14,391,120.52 (such amount, including
any adjustments thereto pursuant to the terms of this Agreement, is
referred to herein as the "Purchase Price"). The Purchase Price is
equal to the difference between (a) the Net Asset Value (as defined
in Section 3.2) as of September 23, 1994, and (b) the Assumed
Liabilities as of September 23, 1994, both as set forth on the
preliminary closing statement attached hereto as Exhibit I (the
"Preliminary Closing Statement").
3.2 Net Asset Value. The term "Net Asset Value", as of any date, shall
mean the net book value on such date of the PAMCO Assets and the Real
Estate, determined in accordance with generally accepted accounting
principles consistently applied, except that:
a) Net Asset value shall not include any amount relating to
research and development expenses, patents, licenses,
trademarks, service marks, patent or trademark or service mark
applications, expenses incurred in the formation of Seller or
in public or private financing, costs incurred in obtaining any
tax abatement agreements or other incentive arrangements, the
value of any goodwill paid in the acquisition of a company or
assets and other intangible items which have been capitalized
in accordance with generally accepted accounting principles;
provided that nothing in this Section 3.2(a) shall affect
Seller's obligation to transfer such items to S&S Power;
b) Net Asset Value shall include the differences between (i) all
amounts relating to recoverable costs and accrued profits not
yet billed in accordance with the percentage of completion
method of accounting, consistently applied and (ii) all amounts
relating to billings on uncompleted contracts in excess of
incurred costs in accordance with the percentage of completion
method of accounting, consistently applied.
c) Net Asset Value shall include the values set forth on Schedule
3.2(c) with respect to any Inventories of new engines,
transmissions, pumps, compressors or other equipment described
on such schedule, owned by Seller on the date of determination.
Inventories of new engines, transmissions, pumps, compressors
and other equipment that are owned by Seller on the date of
determination but are not listed on such Schedule shall be
included in Net Asset Value at its acquisition cost, including
freight. Inventories of used or rebuilt engines, transmissions,
pumps and compressors that are owned by Seller on the Closing
Date but are not listed on such Schedule shall be included in
Net Asset Value at a value that is agreed by Seller and S&S
Power on or prior to the Closing Date.
d) Net Asset Value shall exclude any amount in excess of an
aggregate amount of $150,000 (based on average cost, including
freight) relating to Inventories which exceed the quantity of
similar goods sold or consumed by Seller within 24 months
preceding the date of determination and which is not assigned
to a specific contract.
e) Net Asset Value shall not include the value of any Excluded
Asset.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
4.1 Representations and Warranties of Seller. Seller and AWT, jointly and
severally, represent and warrant to Purchasers as follows:
a) Corporate Organization and Qualification. Each is duly
organized, validly existing, and in good standing under the
laws of its state of incorporation and is good standing as a
foreign entity in each jurisdiction where the properties owned,
leased, or operated, or the business conducted, by it require
such qualification, except where the failure to be so qualified
or be in good standing would not have a material adverse effect
on it. Seller and AWT shall each deliver to Purchasers
complete and correct copies of its certificate or articles or
incorporation and bylaws or similar governing instruments, as
amended to the date hereof (the "Governing Instruments"). The
Governing Instruments are in full force and effect.
b) Corporate Authority. Each has the requisite corporate power and
authority and has taken all corporate action necessary in order
to execute and deliver this Agreement and to consummate the
transactions contemplated hereby. This Agreement is valid and
binding on Seller and AWT, enforceable against them in
accordance with its terms except as limited by bankruptcy,
insolvency, moratorium, and other laws affecting creditors'
rights generally.
c) No Conflicts. Schedule 4.1(c) contains a complete list of all
Claims affecting any PAMCO Asset, Real Estate or Contract.
Except as set forth on Schedule 4.1(c), the execution and
delivery of this Agreement by Seller and AWT does not, and the
consummation for the transactions contemplated hereby will not,
constitute or result in (i) a breach or violation of, or a
default under the Governing Instruments, or (ii) a breach or
violation of, or a default under, the acceleration of or the
creation of a Claim on the PAMCO Assets, Real Estate or
Contracts pursuant to (with or without the giving of notice or
the lapse of time) any provision of any agreement, lease,
contract, note, mortgage, letter of credit, indenture,
arrangement, or other obligation, written or oral, of Seller,
except for such breaches, violations, defaults, or
accelerations which, alone or in the aggregate, would have no
material adverse effect on any PAMCO Asset, Real Estate or
Contract, or on the consummation of the transactions
contemplated by this Agreement.
d) Government Approvals. Seller has filed a premerger
notification report pursuant to the Hart-Scott-Rodin Antitrust
Improvements Act of 1976, 15 U.S.C. Section 18a, as amended
(the "HSR Act"), requested early termination of the applicable
waiting period thereunder, and taken all reasonable action
required in connection with such filing. Other than the
premerger notification requirement, no other notices, reports,
or other filings are required to be made by Seller or AWT with,
and no consents, registrations, approvals, permits, or
authorization are required to be obtained by Seller or AWT
from, any governmental or regulatory authorities of the United
States or any foreign government, or any political subdivision
of either thereof, having jurisdiction in connection with the
execution and delivery of this Agreement or the consummation of
the transactions contemplated hereby by Seller, the failure to
make or obtain any or all of which would have a material
adverse affect on any PAMCO Asset, Real Estate or Contract, or
which would prevent the consummation of the transactions
contemplated by this Agreement.
e) No Default. Seller is not in default or violation (and no
event has occurred which, with notice or the lapse of time or
both, would constitute a default or violation) of any term,
condition or provision of (i) the Governing Instruments or (ii)
except as set forth on Schedule 4.1(c), any agreement, lease,
contract, note, mortgage, letter of credit, indenture,
arrangement, or other obligation, written or oral, to which it
is a party, except for such defaults or violations which, alone
or in the aggregate do not and will not have a material adverse
effect on any PAMCO Asset, Real Estate or Contracts, or on the
consummation of the transactions contemplated by this Agreement.
f) Compliance with Law. To Seller's knowledge, Seller's use and
occupancy of its assets and properties wherever located, are,
in all material respects, in compliance with all, and not in
violation of any, and Seller has not received any claim or
notice that it is not in compliance with, or that it is in
violation of any applicable foreign, federal, state, local or
other governmental laws or ordinances, or any order, rule or
regulation of any foreign, federal, state, local or other
governmental agency or body, to which Seller or its businesses,
operations, agents, employees, assets or properties is subject
(including, without limitation, all record keeping and
reporting requirements thereof) which noncompliance or
violation could reasonably be expected to have a material
adverse effect on any PAMCO Asset, Real Estate or Contract, or
on the consummation of the transactions contemplated by this
Agreement. Neither Seller nor its shareholder, directors,
officers, agents or employees has, directly or indirectly, on
behalf of, or with respect to, Seller or its affiliates (i)
made any unlawful domestic or foreign political contributions,
(ii) made any unlawful payment to a domestic or foreign
official, (iii) made any illegal payment or illegally provided
services, (iv) received any illegal payments or services, (v)
engaged in any transaction or payments which are not recorded
in its accounting books and records or disclosed in its
financial statements, or (vi) maintained any off-book bank or
cash accounts or funds maintained for the purpose of making
payments of the types referred to above.
g) Financial Statements. Seller has previously delivered to
Purchasers (i) balance sheets as October 31, 1991, 1992 and
1993 and as of September 23, 1994 (collectively, the "Financial
Statements"). The Financial Statements have been prepared in
accordance with generally accepted accounting principles,
consistently applied, except that they do not contain all of
the notes required thereby. The Financial Statements fairly
and accurately present the financial condition of the Seller as
of their respective dates.
h) Litigation. There is no litigation, at law or in equity,
pending or, to Seller's knowledge, threatened before any court,
agency or authority seeking to prevent Seller from continuing
to use any PAMCO Asset or Real Estate in the manner in which
the assets are used on the date hereof, or seeking to prevent
Seller from conducting its business in the manner that the
business was conducted prior to the date of this Agreement
which in either case could reasonably be expected to have a
material adverse effect on the value of the PAMCO Assets or Real
Estate, taken as a whole. There is no suit, action, proceeding
or investigation pending or, to Seller's knowledge, threatened
against Seller which could reasonably be expected to have a
material adverse effect on the financial condition or business
of Seller, the value of the PAMCO Assets, Real Estate or
Contracts taken as a whole or prevent the consummation of the
transactions contemplated by this Agreement.
i) Insurance. Seller has insurance coverage pursuant to policies
issued by reputable insurance companies as is necessary to
conduct its business. All premiums and other payments due from
Seller under or on account of any such policy have been paid in
a timely manner, subject to adjustment in the case of policies
subject to audit, and all the policies are in full force and
effect. Seller does not know of any act or fact (including the
consummation of the transactions contemplated by this
Agreement) or failure to act which has or might cause any such
policy or coverage thereunder relating to Seller to be
canceled, terminated or not renewed, and all notices have been
given, and all claims relating to Seller have been presented,
and any other required or appropriate action with respect
thereto has been taken in due and timely fashion under the
provisions of the policies.
j) Contingent Liabilities. Schedule 4.1(j) contains a complete
list of all performance bonds, bid bonds, guaranties, letters
of credit or other contingent obligations of Seller with
respect of the Contracts. Seller has not received notice of
any claim pursuant to any bond or guaranty and is not aware of
any fact or circumstance which (with or without notice or lapse
of time or both) may be the basis of any claim pursuant to any
bond or guaranty.
k) PAMCO Assets.
(1) Schedule 4.1(k)(1) contains a complete list of the
Personal Property as of September 23, 1994. The Personal
Property is in good operating condition and repair,
subject to ordinary wear and tear, suitable for the
purposes for which it is used by Seller.
(2) Schedule 4.1(k)(2) contains a complete list of the Rights
as of September 23, 1994. All Rights are in good
standing, valid and effective in accordance with their
respective terms. Seller has not infringed, is not
infringing, and has not received any notice of
infringement of, the asserted rights of other;there is no
basis for any claim of infringement to be made against
Seller; and, to Seller's knowledge, no others have
infringed or are infringing the Rights. Seller is not in
default under, or has received any notice of any claim of
default under or any other claim or proceeding relating
to, any Right. No event has occurred which permits, or
after the giving of notice or lapse of time or both would
permit, the revocation or termination of any Rights or the
imposition of any restrictions of such a nature as may
limit the use of the Rights by Purchasers. No third
person has indicated to Seller that it intends not to
renew any Right upon expiration or that any Right which
is an application will not be favorably acted upon.
(3) Schedule 4.1(k)(3) contains a complete list of the Advance
Payments as of September 23, 1994 with respect to the
PAMCO Assets, Real Estate or under the Contracts. All
Advance Payments represent actual payments made by Seller
in the amounts set forth on Schedule 4.1(k)(3) and are
either (i) applicable in full against obligations
accruing with respect to the PAMCO Assets or the Real
Estate, or pursuant to the Contract to which it relates
or (ii) refundable in full upon the termination or
completion of the Contract to which it relates.
(4) Schedule 4.1(k)(4) contains a complete list of the
Accounts Receivable as of September 23, 1994. All
Accounts Receivable arose in the ordinary course of
Seller's business.
(5) Schedule 4.1(k)(5) contains a complete list of the
Inventory owned by Seller as of September 23, 1994.
(6) Except as set forth on Schedule 4.1(c), Seller has and
will have on the Closing Date good and indefeasible title
to the PAMCO Assets. No stockholder, director, officer,
employee or former employee of any Seller or any
affiliates thereof, or any other person, firm or
corporation, has possession of (except as set forth on
Schedule 4.1(k)(6)) or owns or has any proprietary,
financial or other interest, direct or indirect, in any
PAMCO Asset. Except as set forth on Schedule 4.1(c),
there are no Claims affecting any PAMCO Asset, and no
PAMCO Assets are subject to, and the execution of this
Agreement and consummation of the transactions
contemplated herein will not create, any covenant or
other restriction which may prevent or limit the right of
Seller to sell the PAMCO Assets or of S&S Power to use
the PAMCO Assets.
(7) Schedule 4.1(k)(7) contains a complete list of Sellers'
Unbilled Sales as of September 23, 1994.
1) Real Estate. Schedule 1.2 contains a complete list of the Real
Estate (including legal descriptions of the owned Real Estate
and a complete listing of the lease agreements relating to the
leased Real Estate). Seller, subject to any Permitted
Encumbrances, (i) has good and indefeasible title in fee simple
to all owned Real Estate and owns outright all the facilities
and structures referred to as owned by it, in each case free
and clear of any Claim or any covenant or other restriction
preventing or limiting the right of Seller in the use of any
such property, (ii) enjoys quiet possession of the property,
facilities, structures and other improvements purported to be
leased to it,under valid leases with respect thereto, and (iii)
is the holder and enjoys the benefit of the easements and
similar rights which Seller purports to hold or to which Seller
purports to have any rights, and the rights of Seller with
respect to each the easement or similar right, to the knowledge
of Seller, have not been challenged by any third party. The
Real Estate (including all facilities, structure and other
improvements) is in good condition and repair, subject to
ordinary wear and tear, suitable for use by Seller in the
ordinary course of business. The location, construction,
occupancy, operation, condition and use of the owned Real
Estate and, to Seller's knowledge, the leased Real Estate, the
facilities or improvements located thereon, and the operations
and practices of Seller are in compliance in all material
respects with any restrictive covenant or deed restriction
(recorded or otherwise) affecting the Real Estate including,
without limitation, all applicable zoning ordinances and
building codes, flood, disaster and occupational health and
safety laws, except where such noncompliance would not have a
material adverse effect on such Real Estate.
m) Contracts.
(1) Seller has not reason to believe that any Contract is
invalid and unenforceable according to its terms. To the
best of Seller's knowledge, no Contract contains a
contractual requirement with which Seller or the other
party thereto will be unable to comply, or the compliance
with which will have a material adverse effect on Seller,
and neither Seller nor, to Seller's knowledge, any other
party to any Contract has defaulted in its obligations
under any Contract.
(2) All Purchase Orders ar for goods or services purchased by
Seller in the ordinary course of Seller's business; are
for quantities of the goods and services reasonable
expected to be consumed within time frames that are
consistent with Seller's practice at the time such
Purchase Orders were placed; are at prices not more than
the market prices for such goods and services at the time
such Purchase Orders were placed; and are with persons
normally engaged in the business of supplying the goods
and services covered thereby and presently capable of
supplying such goods and services.
(3) All Sales Orders are for goods or services sold by Seller
in the ordinary course of Seller's business; are for
quantities of the goods and services which Seller is able
to provide within the time specified in the Sales Orders;
and, to Seller's knowledge, are for prices not less than
the costs that will be reasonably incurred to complete
the sales within the time specified.
(4) All Leases relate to personal property used by Seller in
the ordinary course of Seller's business and Seller
enjoys quiet possession of the properties covered
thereby. All properties subject to the Leases are in
good operating condition and repair, subject to ordinary
wear and tear, and suitable for the purposes for which
they are used by Seller.
n) Environmental Matters.
(1) Except as set forth on Schedule 4.1(n)(l), with respect
to the Real Estate, Seller is not subject to any existing
liability under any environmental Law (as define din
Section 9.1) or the common law with respect to Hazardous
Materials (as defined in Section 9.1), relating to (i)
environmental conditions including, without limitation,
the air, soil, surface water and groundwater conditions;
or (ii) the use, management, handling, transport,
treatment, generation, storage, disposal, release or
discharge of any Hazardous Material.
(2) No portion of the Real Estate is being used, nor has been
used by Seller or, to Seller's knowledge,by any other
person for the generation, storage, treatment,
processing, release, discharge, transportation,
management, disposal or other handling of any Hazardous
Material, except to the extent that the generation,
storage, treatment, processing, release, discharge,
transportation, management, disposal or handling was (a)
performed in connection with Seller's normal business and
(b) complied with all applicable Environmental Laws at
the time in all material respects.
(3) Except as set forth in Schedule 4.1(n)(3), Seller has not
received any written notice and is not aware of any
existing condition (including the condition of the Real
Estate whether or nor caused by Seller) or the practice
of the businesses conducted by Seller which forms or
could form the basis of any claim, action, suit,
proceeding, administrative consent or agreement,
litigation or settlement, hearing or investigation,
arising out of the manufacture, processing, distribution,
use, treatment, storage, spill, disposal, transport, or
handling, or the emission, discharge, release or
threatened release into the environment of any Hazardous
Material.
(4) Seller has listed and described in Schedule 4.1(n)(4) all
treatment, storage and disposal facilities, as defined in
the Resource Conservation and Recovery Act of 1976, 42
U.S.C. Section 1601, et seq., as amended or under any
Environmental Law that are located on the owned Real
Estate or, to the best of Seller's knowledge, the leased
Real Estate. Except as set forth in Schedule 4.1(n)(4),
to Seller's knowledge, there are no underground storage
tanks on any Real Estate. Seller has provided S&S Realty
with a complete list of all underground storage tanks
removed by Seller from the Real Estate. Seller has
completely moved or remediated any Hazardous Material
that escaped from storage tanks that were removed by
Seller.
(5) Seller has obtained or applied for all material permits,
licenses, registrations, notifications and similar
authorizations required under any Environmental Law for
the conduct of Seller's business or relating to the Real
Estate, the facilities, improvements, or equipment
located thereon. Schedule 4.1(n)(5) includes a list of
all such permits. Seller is in compliance in all
material respects with all terms and conditions of all
permits and no proceeding is pending for the revocation of
any permit.
(6) No portion of the owned Real Estate or, to Seller's
knowledge, the leased Real Estate, has been made subject
to any environmental lien pursuant to any Environmental
Law.
o) Tax Matters. Seller has (1), to the extent due and payable,
paid all federal, state, local and foreign taxes, duties or
other assessments owed by Seller as a result of its ownership,
use, or occupancy of the PAMCO Assets, Real Estate or contracts
or Seller's conduct of its business, except to the extent that
such failure to pay would not have a material adverse effect on
the PAMCO Assets, Real Estate or the Contracts, taken as a
whole; (2) no pending disputes with the Internal Revenue
Service or any taxing authority of any foreign, state or local
government; and (3) not receive notice of any deficiency or
assessment.
p) Investment Company. Seller is not an "investment company" as
defined in the Investment Company Act of 1940.
q) Brokers' Fees. Seller has not employed any broker, finder, or
financial advisor or incurred any liability for any brokerage
fees or commissions, finders' fees, or financial advisors' fees
in connection with the transactions contemplated herein.
r) Permits and Licenses. Seller has obtained and possesses all
permits, licenses, certificates and authorizations required to
own, use or operate the PAMCO Assets or Real Estate or
otherwise conduct Seller's business, except where the failure
to obtain or possess such permits, licenses, certificates and
authorizations would not have a material adverse effect on the
PAMCO Assets or the Real Estate.
s) Personnel. Except as set forth on Schedule 4.1(s), all persons
employed by Seller as of the Date of this Agreement are
presently actively employed, and none is on leave of absence or
other type leave. Seller has not made any agreement with, or
offer or promise to, any person to employ, rehire or keep or
make a position available, at any time in the future. Seller
has no employment or consultant agreement with any person or
entity.
t) Subsidiaries. Seller has no subsidiaries nor any interest in
any other corporation, firm, partnership or other legal entity
Other than "Power Application & Mfg. Co." and "PAMCO", Seller
does not conduct its business under any assumed or other name.
4.2 Representations and Warranties of Purchasers. Purchasers, jointly and
severally, represent and warrant to Seller and AWT as follows:
a) Corporate Organization and Qualification. Each Purchaser is
duly organized, validly existing, and in good standing under
the laws of its state of incorporation and is in good standing
as a foreign entity in each jurisdiction where (i) the
properties owned, leased, or operated, or the business
conducted, by it or (ii) the consummation of the transactions
contemplated by this Agreement, require such qualification,
except where the failure to be so qualified or in good standing
would not have a material adverse effect on it.
b) Corporate Authority. Each Purchaser has the requisite
corporate power and authority and has taken all corporate
action necessary in order to execute and deliver this Agreement
and to consummate the transactions contemplated hereby. This
Agreement is valid and binding on each Purchaser, enforceable
against each Purchaser in accordance with its terms except as
limited by bankruptcy, insolvency, moratorium, and other laws
affecting creditors' rights generally.
c) No Conflicts. The execution and delivery of this Agreement by
each Purchaser does not, and the consummation of the
transactions contemplated hereby will not, constitute or result
in (i) a breach or violation of, or a default under, the
articles or certificate of incorporation by bylaws of any
Purchaser; or (ii) a breach or violation of, a default under,
the acceleration of or the creation of a Claim on assets
pursuant to (with or without the giving of notice or the lapse
of time) any provision of any agreement, lease, contract, note,
mortgage, letter of credit, indenture, arrangement, or other
obligation, written or oral, of the Purchasers, except for such
breaches, violations, defaults, or accelerations which, alone
or in the aggregate, would have no material adverse effect on
the consummation of the transactions contemplated by this
Agreement.
d) Government Approvals. S&S Power has filed a premerger
notification report pursuant to the HSR Act, requested early
termination of the applicable waiting period thereunder, and
taken all reasonable action required in connection with such
filing. Other than the premerger notification requirement, no
other notices, reports, or other filings are required to be
made by any Purchasers with, and no consents, registrations,
approvals, permits, or authorizations are required to be
obtained by any Purchaser from, any governmental or regulatory
authorities of the United States or any foreign government, or
any political subdivision of either thereof, having
jurisdiction in connection with the execution and delivery of
this Agreement or the consummation of the transactions
contemplated hereby by Purchasers, the failure to make or
obtain any or all of which would prevent the consummation of
the transactions contemplated by this Agreement.
e) Investment Company. Neither Purchaser is an "investment
company" as defined in the Investment Company Act of 1940.
f) Brokers' Fees. Neither Purchaser has employed a broker,
finder, or financial advisor or incurred any liability for any
brokerage fees or commissions, finders' fees or financial
advisors' fees in connection with the transactions contemplated
herein.
g) Litigation. There is no suit, action, proceeding or
investigation pending or, to Purchasers' knowledge, threatened
against Purchasers or either of them which could reasonably be
expected to have a material adverse effect upon the financial
condition or business of the Purchasers or prevent the
consummation of the transactions contemplated by this Agreement.
ARTICLE V
COVENANTS
5.1 Interim Operations of Seller. Seller covenants and agrees that prior
to the Closing Date:
a) Sellers' business shall be conducted only in the ordinary and
usual course and Seller shall use all reasonable efforts to
preserve its business organization intact and maintain or
improve its existing relations with customers, governmental
agencies,suppliers, employees and distributors.
b) Seller shall not (i) increase the amount or change the type of
compensation payable to any individuals employed by Seller, or
(ii) establish, adopt, enter into, or amend any collective
bargaining agreement for the benefit of any employee, in each
case without the consent of Purchasers.
c) Seller shall not modify, amend, or terminate any contracts or
waive, release, or assign any material rights or claims, except
in the ordinary course of business.
d) Seller shall not purchase, sell or lease (as a lessor or
lessee) any assets or services, except for the purchase or sale
of inventory or supplies or contracting of services in the
ordinary course of business.
e) Seller shall not enter into an agreement to do any of the
foregoing.
5.2 Filings; Other Action. Subject to the terms and conditions set forth
herein, Seller and Purchasers shall use all reasonable efforts to
promptly take, or cause to be taken, all action and do, or cause to
be done, all things necessary, proper, or appropriate under the
applicable laws and regulations to consummate and make effective the
transactions contemplated by this Agreement, as soon as practicable.
5.3 Access.
a) Seller shall afford Purchaser's officers, employees, counsel,
accountants, and other authorized representatives (the
"Representatives") reasonable access, during normal business
hours throughout the period prior to the Closing Date, to
inspect, investigate and audit Seller's properties, books,
contracts, business.operations, financial data, tax work
papers, and records and, during such period, Seller shall
furnish promptly to Purchasers information concerning its
business, properties, and personnel as Purchasers may reasonably
request, provided that no investigation pursuant to this
Section 5.3 shall affect or be deemed to modify any
representation or warranty made by Seller. Purchasers will
not, and will cause their Representatives not to, use any
information obtained pursuant to this Agreement for any purpose
unrelated to this Agreement. Subject to the requirements of
law pending consummation of the transactions herein
contemplated, Purchasers will keep confidential, and will cause
their Representatives to keep confidential, all information and
documents obtained pursuant to this Section 5.3.
b) During normal business hours from the date hereof until the
Closing Date, Seller shall permit Purchasers and their
Representatives to conduct a complete assessment of all
substances on, in or under the Real Estate. The assessment may
include, but shall not be limited to, taking samples of soil,
air, water and other substances for later analysis; review of
all permits, licenses or approvals to discharge substances into
the environment; and review of all documentation regarding
receipt, storage, use, transportation, discharge and disposal
of Hazardous Materials. Neither Seller nor AWT shall have any
liability for any injury, loss or damage sustained by
Purchasers or their Representatives as result of such sampling,
unless such injury, loss or damage shall result from the
negligence, gross negligence or willful misconduct of Seller or
AWT. Purchasers shall perform any sampling and dispose of the
samples pursuant to and in compliance with all Environmental
Laws. Purchasers shall provide split samples to Seller upon
Seller's request and shall provide copies of all sampling
results to Seller promptly upon Purchasers' (or their
Representatives') receipt of the same.
5.4 Notification of Certain Matters.
a) Seller shall give prompt notice to Purchasers of:
(1) any notice of, or other communication relating to, a
default or event which, with notice or lapse of time or
both, would become a default under any Contract, received
by Seller subsequent to the date of this Agreement and
prior to the Closing Date.
(2) the occurrence of any event which has a material adverse
effect on the PAMCO Assets, contracts and Real Estate,
taken as a whole, or the occurrence of any event which,
so far as reasonably can be foreseen at the time of its
occurrence, is reasonably likely to result in any such
change; and
(3) any actions, suits, proceedings, or investigations,
filed, pending, or threatened against or affecting
Seller, at law or in equity, before any foreign, federal,
state, county, municipal, or other governmental court,
department, commission, board, bureau, agency, or
instrumentality or before any arbitrator of any kind, in
each case domestic or foreign, which affect, or challenge
this Agreement or the transactions contemplated hereby or
which may have a material adverse effect on the PAMCO
Assets, Contracts or Real Estate, taken as a whole.
b) Purchasers shall give prompt notice to Seller of any actions,
suits, proceedings, or investigations, filed, pending, or
threatened against or affecting Purchasers, before any foreign,
federal, state, county, municipal, or other governmental court,
department, commission, board, bureau, agency, or
instrumentality or before any arbitrator of any kind, in each
case domestic or foreign, which affects or challenges, or may
affect or challenge, this Agreement or the transactions
contemplated hereby.
c) Seller and Purchasers shall give prompt notice to the other
parties of any notice or other communication from any third
party alleging that the consent of the third party is or may be
required in connection with the transactions contemplated by
this Agreement.
5.5 Announcement. Seller and Purchasers shall promptly consult with each
other before issuing any press releases or otherwise making public
statements or statements designed to or reasonably likely to be
published or publicly disseminated with respect to the transactions
contemplated hereby, and shall not issue any press release or make
any such statements without the consent of the other party, which
consent shall not be unreasonably withheld, except as may be required
by law.
5.6 Change of Names. Within thirty (30) days after the Closing Date,
Seller shall adopt an amendment to its Governing Instruments to
eliminate any reference to "Power Application & Mfg. Co.", "PAMCO" or
similar name in its corporate name. From and after the Closing Date,
Seller shall cease doing business under any name that includes "Power
Application & Mfg. Co.", "PAMCO" or similar name.
5.7 Consents to Assignment of Contracts. Seller shall use all reasonable
efforts to obtain from each party to the Sales Orders listed on
Schedule 5.7, in form and content reasonably acceptable to S&S Power,
the party's (a) consent to the assignment thereof to S&S Power, (b)
acknowledgment that, to such party's knowledge, no default exists
under the Sales Order, and (c) agreement to make all future payments
under the Sales Order to S&S Power.
5.8 Availability of Business Records and Employees. After the Closing
Date, Purchasers shall permit Seller and its representatives to have
reasonable access to the Records and to make and retain copies
thereof for any purpose relating to Seller's business or legal
affairs, including, without limitation, the preparation of the
Closing Statement. Purchasers further agree to make available to
Seller those employees of Purchaser that were previously employed by
Seller for any purpose relating to Seller's business or legal
affairs. Such access to the Records or Purchasers' employees shall
not unreasonably interfere with the use of the Records or the
performance of the employees' responsibilities to Purchasers. Seller
agree to reimburse Purchasers for any out-of-pocket costs incurred by
Purchasers.
5.9 Bulk Transfer Indemnity. In the event that the bulk transfer
statutes of one or more states apply to this transaction, the parties
agree that in lieu of complying with the bulk transfer statutes,
Seller will, and hereby agrees to, indemnify and hold Purchasers, and
their respective officers, directors, agents and employees harmless
from and against any and all losses, costs, damages, expenses and
liabilities of whatever nature or kind (including, but not limited
to, reasonably attorney's fees, litigation and court costs) incurred
by Purchaser arising out of or relating to the parties' failure to
comply with the bulk transfer statutes.
5.10 Payment of Non-Assumed Liabilities. Purchasers and Seller
acknowledge that certain amounts set forth in the Closing Statement
with respect to the Assumed Liabilities are accruals and may not
accurately reflect the actual liabilities of Seller. To the extent
that Seller's actual liabilities for unused vacation time, accounts
payable, new unit start up, warranties or accrued commissions exceed
the amounts set forth in the Closing Statement, S&S Power shall pay
such excess amounts on behalf of Seller and Seller and shall promptly
reimburse S&S Power for any such amounts paid by S&S Power that are
not set forth in the schedules attached to, or are in excess of the
amounts set forth in the Closing Statement. For three (3) years
following the Closing Date, S&S Power shall provide Seller with
quarterly reports of the type and amount of all payments made in
connection with the Assumed Liabilities.
5.11 Employment of Certain Individuals. Purchasers will review the
employment history, obtain employment applications, perform
pre-employment screening procedures and otherwise determine, in their
sole discretion, which employees of Seller will be offered employment
with Purchasers after the Closing. All employees of Sellers that are
offered employment by Purchasers shall be entitled to participate in
all health, profit sharing, savings, and other similar plans offered
by Purchasers to the same extent as other new employees of
Purchasers, except as set forth on Schedule 5.11 attached hereto.
Nothing herein shall create any employment obligation on the part of
Purchasers.
5/12 Inventory. On October 28,1 994, Seller performed, at its expense, a
physical inventory of the PAMCO Assets. Seller and Purchasers agree
the inventory as set forth in the Closing Statement shall reflect a
roll forward of such inventory as of the Closing Date. Purchasers
shall have the right to have their representatives review any work
papers relating to the inventory or to the adjustment thereof and
otherwise verify the accuracy of such inventory and the adjustment
thereof.
5.13 Accounts Receivable.
a) Effective as of the Closing Date, Seller shall constitute and
appoint Purchasers as its true and lawful attorneys-in-fact
with full power of substitution to collect the Accounts
Receivable due or to become due under any Contract or otherwise
and to endorse, either in the name of Seller or one or both of
the Purchasers, any check or draft made payable to Seller or
any assumed business name of Seller. It is understood and
agreed that this power will be coupled with an interest and
cannot be revoked.
b) Schedule 5.13(b) includes the list of the Accounts Receivable
as of September 23, 1994 the payment of which is contingent
upon the occurrence of certain future events set forth on such
schedule (the "Contingent Accounts Receivable"). Seller and
AWT agree to purchase from S&S Power at full face value any
Contingent Accounts Receivable which remains uncollected after
the earlier of (i) 90 days after the later of (x) the
occurrence of such events or (y) the Closing Date, or (ii) the
first anniversary of the Closing Date.
c) Except for the Contingent Accounts Receivable which are included
therein, Schedule 4,(k)(4) includes the list of Accounts
Receivable as of September 23, 1994 which are now due and
payable (the "Collectable Accounts Receivable"). Seller and
AWT agree to purchase from S&S Power any Collectable Accounts
Receivable which remains uncollected 90 days after the Closing
Date for an aggregate amount equal to the difference between
(1) the total amount owing on such purchased Collectable
Accounts Receivable and (2) the amount reserved on the Closing
Statement for bad debt. If the aggregate amount due on the
Collectable Accounts Receivables to be purchased by Seller and
AWT is less than the amount reserved on the Closing Statement
for bad debt, S&S Power shall promptly pay such difference to
Seller and the purchase price of the Collectable Accounts
receivable to be purchased by Seller and AWT shall be $1.00.
d) Any payment made to S&S Power after the Closing Date (including
after Seller or AWT's purchase of any Accounts Receivable) by
any debtor who is liable for any Accounts Receivable shall be
credited first towards the payment of the account(s) receivable
which it expressly identifies. If the identified account
receivable is not the account receivable due Seller or S&S
Power with the oldest date, S&S Power shall contact such debtor
and attempt to establish the debtor's reason for not satisfying
the oldest account receivable, including any dispute as to such
debtor's liability to pay the same. In such instances, S&S
Power shall use reasonable best efforts to obtain from any such
debtor, in writing, its reasons for not satisfying any such
older Accounts Receivable. To the extent any payment is
received by S&S Power identifying an Accounts Receivable that
has been purchased by Seller or AWT, S&S Power shall remit such
payment to Seller as promptly as practicable and, in any event,
within 30 days of receipt. If at any time after an Accounts
receivable is purchased from S&S Power by Seller or AWT, S&S
Power receives a payment which is not specifically identified
by the debtor as payable towards a purchased Account Receivable
(either through contacts with the debtor or as indicated with
the payment), then S&S Power shall have the right to apply the
monies to S&S Power's accounts receivable without further
obligation to Seller or AWT.
e) S&S Power shall use its best efforts to collect the Accounts
Receivable, consistent with the manner and procedures employed
by S&S Power to collect their own accounts receivable.
f) During the 18 month period following the Closing Date, Seller
and its agents shall have a reasonable opportunity to audit the
books and records of S&S Power relating to the collection of
the Accounts Receivable.
5.14 Assignment of Leases. Seller shall use its reasonable best efforts
to obtain from each of the lessors of the leased Real Estate its
consent to Seller's assignment of its lease to S&S Power, provided
that, such efforts need not include the payment of any amounts to any
lessor or the incurrence of any costs (other than internal costs),
the payment or incurrence of which is not expressly provided for in
the related lease between Seller and such lessor.
5.15 Contingent Liabilities. Seller will terminate as of the Closing Date
the performance bonds, bid bonds, guarantees, letters of credit or
other contingent liabilities listed on Schedule 4.1(j) and Purchasers
will cause new performance bonds, bid bonds, guarantees or letters of
credit to take effect and replace the same on the day following the
Closing Date.
5.16 Title Insurance and Survey. Seller agrees to provide, at its
expense, a survey or, and title insurance on, any Real Estate owned
by it and conveyed to S&S Realty. The title insurance shall be
underwritten by companies reasonably acceptable to S&S Realty and
shall contain only such reservations and exceptions to the title of
the Real Estate as are Permitted Encumbrances.
ARTICLE VI
CLOSING AND CONDITIONS
6.1 Closing. The sale of the PAMCO Assets and Real Estate and assignment
and assumption of the rights and obligations under the Contracts and
delivery of the Purchase Price (the "Closing") shall take place at
9:00 a.m. on Friday, November 18, 1994, (the "Closing Date") at the
offices of Dufford & Brown, P.C., 1700 Broadway, Suite 1700, Denver,
Colorado 80290-1701, or at such other time and at such other place as
shall be agreed by the parties.
6.2 Effective Date. The acquisition of the PAMCO Assets and Real Estate
assignment and assumption of the rights and obligations under the
Contracts shall be effective as between the Seller and Purchasers at
12:01 a.m. on the day following the Closing Date, regardless of
whether any instruments of conveyance, assumption or assignment are
later executed with respect thereto. All documents executed at the
Closing shall become effective simultaneously regardless of the order
in which they are executed or delivered.
6.3 Closing Valuation and Adjustment.
a) At the Closing, Purchasers shall pay to the creditors of
Seller, in immediately available funds, the outstanding
principal, accrued interest and penalties, if any, relating to
indebtedness secured by a Claim on any PAMCO Asset, Real Estate
or Contract set forth on Schedule 4.1(c) and deliver to Seller
by wire transfer a portion of the Purchase Price equal to an
amount which, together with amounts paid by Purchasers to
Seller's creditors for the discharge of indebtedness, equals
the difference between (i) the Purchase Price and (ii) the sum
of (A) the estimated cost to correct any violation of
Environmental Laws and (B) $1,500,000. The aggregate of the
amounts (1) paid by Purchasers to Seller at the Closing, (2)
deducted to correct any violation of Environmental Laws and (3)
paid by Purchasers to Seller's creditors at the Closing, shall
be referred to as the "Closing Payment."
b) At Closing, $1,500,000 of the Purchase Price (the "Escrow
Funds") shall be deposited into escrow pursuant to an escrow
agreement (the Escrow Agreement") substantially in the form
attached hereto as Exhibit II.
c) As promptly as practicable following the Closing Date (but not
later than 15 days after the Closing Date), Seller shall
prepare and deliver to Purchasers a closing statement,
including schedules, setting forth, as of the Closing Date, the
Net Asset Value of the PAMCO Assets and the Real Estate and the
amount and obligee of each Assumed Liability (the "Closing
Statement"). The values ascribed to the PAMCO Assets, Real
Estate and Assumed Liabilities on the Closing Statement shall be
computed in a manner consistent with the accounting principles
used in the Preliminary Closing Statement and set forth in
Section 3.2 of this Agreement. The Closing Statement shall set
forth a summary of all adjustments to the values of the PAMCO
Assets, Real Estate and Assumed Liabilities from those set
forth on the Preliminary Closing Statement.
d) Within fifteen (15) days following receipt of the Closing
Statement, Purchasers may deliver to Seller a certificate
setting forth their objections to the Closing Statement,
together with a summary of the reasons therefor and
calculations which, in their view, are necessary to eliminate
such objections. In the event Purchasers do not object within
such 15-day period, the Closing Statement shall be final and
binding as to all matters set forth therein or, in the event
any objections are made, the Closing Statement shall be binding
as to any matters not so objected to.
e) In the event Purchasers object within such 15-day period,
Purchasers and Seller shall use their reasonable efforts to
resolve by written agreement (the "Agreed Adjustments") any
differences between the Closing Statement and the Preliminary
Closing Statement and, in the event Purchasers and Seller
resolve any such differences, the Closing Statement as adjusted
by the Agreed Adjustments shall be final and binding as to all
matters set forth therein. In the event any objections raised
by Purchasers are not resolved by the Agreed Adjustments within
the 15-day period next following such 15-day period, then
Purchasers and Seller shall jointly select a national "Big Six"
accounting firm acceptable to both Purchasers and Seller (or if
they cannot agree on such selection, a national "Big Six"
accounting firm not used or retained by Purchasers or Seller at
any time during the three year period immediately preceding the
date of such selection) and the firm so selected (the
"Accounting Firm") shall be directed by Purchases and Seller to
review and resolve any remaining differences and to deliver
written notice to each Purchaser and Seller setting forth (i)
its resolution of such remaining differences, and (ii) the
adjustments to the Closing Statement necessary to reflect such
resolution (the "Accounting Firm Adjustments"). The Closing
Statement, as so determined but after giving effect to the
Agreed Adjustments and to the Accounting Firm Adjustments shall
be final and binding as to all matters set forth therein.
f) The parties hereto shall make available to each other and, if
applicable, the Accounting Firm, such books, records and other
information (including work papers) as they may reasonable
request to audit or review the Closing Statement hereunder.
The fees and expenses of the Accounting Firm shall be paid 50%
by Seller and 50% by Purchasers.
g) Ninety (90) days following the Closing, Purchasers shall
prepare and deliver to Seller an adjusted closing statement
(the "Adjusted Closing Statement") showing the Net Asset Value
and Assumed Liabilities as set forth on the Closing Statement,
as adjusted by the Agreed Adjustments and the Accounting Firm
Adjustments, if any, and the full face value of the Collectable
Accounts Receivable which remain uncollected and have not been
repurchased by Seller or AWT as of the date of the Adjusted
Closing Statement.
(i) If the difference between (A) the Net Asset Value as of
the Closing Date and (B) the sum of (1) full face value
of the Collectable Accounts Receivable which remain
uncollected and have not been repurchased by Seller or
AWT from Purchasers as of the date of the Adjusted
Closing Statement and (2) Assumed Liabilities as of the
Closing Date exceeds the amount of the Closing Payment,
Purchases shall, pursuant to the escrow agreement,
authorize the escrow agent to release to Seller Escrow
Funds in the amount of such excess; provided, however,
that the Escrow Funds shall not be reduced below the
amount of the Contingent Accounts Receivable which remain
outstanding as of such date.
(ii) If the amount of the Closing Payment exceeds the
difference between (A) the Net Asset Value as of the
Closing Date and (B) the sum of (1) full face value of
the Collectable Accounts Receivable which remain
uncollected and have not been repurchased by Seller or
AWT from Purchaser as of the date of the Adjusted Closing
Statement and (2) Assumed Liabilities as of the Closing
Date, Seller shall, pursuant to the escrow agreement,
authorize the escrow agent to release to Purchasers
Escrow Funds in the amount of such excess; provided,
however, that the Escrow Funds shall not be reduced below
the amount of the Contingent Accounts Receivable which
remain outstanding as of such date.
(iii) If the amounts required to be distributed pursuant to
either paragraph (i) or (ii) above exceed the amount of
Escrow Funds available for distribution, then Purchasers
shall immediately pay to Seller the amount of any
shortage under paragraph (i) and Seller shall immediately
pay to Purchasers the amount of any shortage under
paragraph (ii).
6.4 Taxation. Neither Purchasers nor Seller shall file any tax return,
declaration or other document that contains any statement or value of
any PAMCO Asset or Real Estate that is different from the values
assigned to such asset in the Closing Statement as adjusted for the
Agreed Adjustments and the Accounting Firm Adjustments.
6.5 Conditions to Purchasers' Obligations. Purchasers' obligation to
consummate the purchase of the PAMCO Assets and Real Estate,
assignment of the Contracts and assumption of the Assumed Liabilities
is subject to the fulfillment of each of the following conditions,
any or all of which may be waived in whole or in part by Purchasers
to the extent permitted by applicable law.
a) Litigation. There shall be in effect no preliminary or
permanent injunction or other order of a court or governmental
or regulatory agency of competent jurisdiction directing that
any of the transactions contemplated herein not be consummated
or imposing material burdens on Seller or Purchasers in
connection with consummation of such transactions
(collectively, "Order").
b) Accuracy of Representations. The representations and warranties
contained in Article IV made by Seller and AWT shall be true in
all material respects as of the Closing Date though made at and
as of the Closing Date. All covenants required to be performed
by Seller and AWT prior to the Closing shall have been
performed in all material respects.
c) Legal Opinion. Purchasers shall have received opinions from the
General Counsel of AWT and from Holland & Hart as to the
matters, and in substantially the form, set forth in Exhibits
III and IV, respectively.
d) Bankruptcy. Seller shall not have filed for protection under
the federal bankruptcy laws or any similar law (the "Insolvency
Laws") nor shall have there been an involuntary petition under
any Insolvency Law filed against Seller.
e) Manufacturers' Consent to Assignment. Ariel Corporation and KHD
Deutz Corporation shall have given their written consent to
assignment of Seller's distributorships to S&S Power.
f) Government Approvals. Any applicable waiting period under the
HSR Act shall have expired or terminated.
g) Agreement on Environmental Concerns. Seller and Purchasers
shall have agreed in writing to resolve all issues relating to
the violation of any Environmental Law.
h) Consent to Assignments. Seller shall have obtained from each
of the lessors of the leased Real Estate set forth in Schedule
6.5(h), its consent to Seller's assignment of its lease to S&S
Power.
6.6 Conditions to Seller's Obligations. Seller's obligations to
consummate the sale of the PAMCO Assets and Real Estate and
assignment of the Contracts are subject to the fulfillment of each of
the following conditions, any or all of which may be waived in whole
or in part by Seller to the extent permitted by applicable law.
a) Order. There shall not be in effect an Order.
b) Accuracy of Representations. The representations and warranties
contained in Article IV of this Agreement made by Purchasers
shall be true in all material respects as of the Closing Date
as though made at and as of the Closing Date. All covenants
required to be performed by the Purchasers prior to the Closing
shall have been performed in all material respects.
c) Government Approvals. Any applicable waiting period under the
HSR Act shall have expired or terminated.
d) Agreement on Environmental Concerns. Seller and Purchasers
shall have agreed in writing to resolve all issues relating to
the violation of any Environmental Law.
ARTICLE VII
INDEMNIFICATION
7.1 Indemnification by Seller and AWT.
a) Indemnification by Seller. Seller and AWT agree to indemnify
and hold Purchasers, their respective officers, directors,
agents and employees (each, a "Purchaser Indemnified Party")
harmless from and against any and all losses, costs, damages,
expenses and liabilities of whatever nature or kind (including
but not limited to reasonable attorney's fees, litigation and
court costs) incurred by a Purchaser Indemnified Party, net of
insurance proceeds received by a Purchaser Indemnified Party,
resulting from, arising out of, or relating to (i) a breach by
Seller or AWT of this Agreement or any of the representations,
warranties, covenants or agreements made by Seller or AWT to
the Purchaser contained in this Agreement or any other document
or certificate delivered by them in connection with the
Closing, except for any breaches of representations, warranties,
covenants or agreements which are waived in writing by
Purchasers prior to the Closing Date, or (ii) liabilities of
Seller other than Assumed Liabilities. Seller and AWT shall
have no obligation to indemnify a Purchaser Indemnified Party
under this section for any breach of the Seller's or AWT's
representations and warranties made in this Agreement, until
such time, if any, as the aggregate amount of the liabilities,
losses, damages, claims, costs and expenses (other than those
relating to Contingent Accounts Receivable or Collectable
Accounts Receivable which remain uncollected by Purchasers as
of the dates set forth in Section 5.13) arising out of such
breach exceeds $50,000; provided, however, that once the
aggregate amount of such claims exceed $50,000, the indemnity
obligation shall include such amount.
b) Method of Asserting Claims. All claims for indemnification
under this Article VII shall be asserted and resolved as
follows:
(i) In the event that any claim or demand for which a Seller
would be liable to a Purchaser Indemnified Party
hereunder is asserted against or sought to be collected
from a Purchaser Indemnified Party by a third party, the
Purchaser Indemnified Party shall, within 10 days, notify
the Seller or AWT of the claim or demand, specifying the
nature of the claim or demand and the amount or the
estimated amount thereof to the extent then feasible
(which estimate shall not be conclusive of the final
amount of such claim or demand) (the "Claim Notice").
Seller and AWT shall have 10 days from their receipt of
the Claim Notice (the "Notice Period") to notify the
Purchaser Indemnified Party (A) whether or not they
dispute their liability to the Purchaser Indemnified
Party hereunder with respect to the claim or demand, and
(B) whether or not they desire, at their sole cost and
expense, to defend the Purchaser Indemnified Party against
the claim or demand. In the event that the Seller and AWT
notify the Purchaser Indemnified Party within the Notice
Period that they desire to defend the Purchaser
Indemnified Party against the claim or demand, except as
hereinafter provided, Seller and AWT shall have the right
to defend the Purchaser Indemnified Party by appropriate
proceedings, which proceedings shall be promptly settled
or prosecuted by Seller and AWT to a final conclusion in
such a manner as to avoid any risk of the Purchaser
Indemnified Party becoming subject to liability for any
other matter. If the Purchaser Indemnified Party desires
to participate in, but not control, any such defense or
settlement, it may do so at its sole cost and expense.
If, in the reasonable opinion of the Purchaser
Indemnified Party, any claim or demand involves an issue
or matter which could have a material adverse effect on
the business, operations, properties, assets or prospects
of the Purchaser Indemnified Party, the Purchaser
Indemnified Party shall have the right, at its sole cost
and expense, to control the defense or settlement of any
claim or demand. If the Purchaser Indemnified Party
should elect to exercise such right, the Seller and AWT
shall have the right to participate in, but not control,
the defense or settlement of the claim or demand at the
sole cost and expense of the Seller and AWT. If Seller
and AWT elect not to defend the Purchaser Indemnified
Party against the claim or demand, whether by not giving
the Purchaser Indemnified Party timely notice as provided
above or otherwise, then the amount of any claim or
demand, or, if the same be contested by Seller, AWT or by
the Purchaser Indemnified Party (but the Purchaser
Indemnified Party shall have no obligation to contest any
claim or demand), then that portion thereof as to which
such defense is unsuccessful shall be conclusively deemed
to be a liability of the Seller and AWT hereunder.
(ii) In the event a Purchaser Indemnified Party should have a
claim against Seller or AWT hereunder which does not
involve a claim or demand being asserted against or
sought to be collected from it by a third party, the
Purchaser Indemnified Party shall promptly send a Claim
Notice with respect to such claim to Seller and AWT. If
Seller and AWT do not notify the Purchaser Indemnified
Party within the Notice Period that Seller or AWT
disputes such claim, it shall be conclusively deemed a
liability of the Seller and AWT hereunder.
(iii) In no event shall Seller's or AWT's aggregate liability
under this Article VII (treating Seller and AWT as a
single entity for such purpose) exceed the sum of
$12,500,000.
7.2 Indemnification by Purchasers. Purchasers agree to indemnify and
hold Seller and AWT and their respective officers, directors, agents
and employees (each, a "Seller Indemnified Party") harmless from and
against any and all losses, costs, damages, expenses and liabilities
of whatever nature or kind (including but not limited to reasonable
attorney's fees, litigation and court costs) incurred by a Seller
Indemnified Party, net of insurance proceeds received by a Seller
Indemnified Party, resulting from, arising out of, or relating to (i)
a breach by Purchasers of this Agreement or any of the
representations, warranties, covenants or agreements made by
Purchasers to Seller or AWT contained in this Agreement or any other
document or certificate delivered by Purchasers in connection with
the Closing, except for any breaches of representations, warranties,
covenants or agreements which are waived in writing by Seller or AWT
prior to the Closing Date, or (ii) liabilities of Purchasers arising
after the Closing Date or at the Closing. Included in such
indemnification are any costs or expenses, including reasonable
attorneys' fees, incurred by a Seller Indemnified Party for
successfully defending a suit or claim. All claims for
indemnification by a Seller Indemnified Party under this Agreement
shall be asserted and resolved under the procedures set forth under
Section 7.1(b) above, substituting in the appropriate place "Seller
Indemnified Party" for "Purchaser Indemnified Party" and variations
thereof and "Purchasers" for "Seller and AWT".
7.3 No Other Rights and Remedies. The indemnification rights of the
parties under this Article VII are and shall be the sole remedy of
the parties hereunder for any breach of this Agreement, the claim for
which is brought after the Closing.
ARTICLE VIII
TERMINATION AND AMENDMENT
8.1 Termination by Mutual Consent; Termination Date. This Agreement may
be terminated and the transactions contemplated hereby may be
abandoned at any time prior to the Closing Date by the mutual consent
of Purchasers and Seller.
8.2 Termination by Purchasers. This Agreement may be terminated by
Purchasers and the transactions contemplated hereby may be abandoned
at any time prior to the Closing Date if (i) at any time prior to the
Closing Date, Seller or AWT shall have failed to comply in any
material respect with any of the covenants or agreements contained in
Article V to be complied with or performed by Seller or AWT at or
prior to such date of termination, (ii) any representation or
warranty of Seller or AWT is not true and accurate in all material
respects at the Closing Date or (iii), as of the Closing Date, any of
the conditions set forth in Section 6.5 shall have not been met.
8.3 Termination by Seller and AWT. This Agreement may be terminated by
Seller and AWT and the transactions contemplated hereby may be
abandoned at any time prior to the Closing Date, if (i) Purchasers
shall have failed to comply in any material respect with any of the
covenants or agreements contained in Article V to be complied with or
performed by Purchasers at or prior to such date of termination, (ii)
any representation or warranty of Purchasers is not true and accurate
in all material respects at the Closing Date or (iii), as of the
Closing Date, any of the conditions set forth in Section 6.6 shall
have not been met.
8.4 Effect of Termination and Abandonment. In the event of termination
of this Agreement and abandonment of the transactions contemplated
hereby pursuant to this Article, none of the parties hereto (or any
of its directors or officers) shall have any liability or further
obligation to the other parties to this Agreement, except that
nothing herein will relieve a party from liability for any breach of
this Agreement.
ARTICLE XI
MISCELLANEOUS AND GENERAL
9.1 Definitions. As used herein, the following terms have the meanings
indicated:
a) "CERCLA" shall mean the Comprehensive Environmental Response
Compensation and Liability Act of 1980, 42 U.S.C.Section 9601,
et seq., as amended.
b) "Claims" shall mean all security interests, liens, pledges,
claims, charges, escrows, encumbrances, options, rights of
first refusal, mortgages, indentures, security agreements or
other agreements, arrangements, contracts, commitments,
understandings, obligations, whether written or oral, and
whether or not relating in any way to credit or the borrowing
of money, voting agreements or proxies.
c) "Environmental Laws" shall mean any and all laws, subsequent
enactments, modifications, and amendments, including, without
limitation, any foreign, federal, state and local laws,
statutes, ordinances, rules, regulations, permits, licenses,
approvals, administrative consent orders or agreements,
interpretations, orders and decrees of courts or Governmental
Authorities relating to the protection of human health or the
environment, including, but not limited to, requirements
pertaining to the manufacture, processing, distribution, use,
treatment, storage, disposal, transportation, handling,
reporting, licensing, permitting, investigation or remediation
of Hazardous Materials. Environmental Laws include, without
limitation, CERCLA; the Hazardous Materials Act, 49 U.S.C.
Section 1801, et seq.; the Clean Water Act, 33 U.S.C. Section
1251, et seq.; the Toxic Substances Control Act, 15 U.S.C.
Section 2601, et seq.; the Safe Drinking Water Act, 42 U.S.C.
Paragraph 300f, et seq.; the Emergency Planning and Community
Right-to-Know Act, 42 U.S.C. Section 11001, et seq.; the United
States Environmental Agency's underground storage tank
regulations, 40 C.F.R. Parts 280 and 281, all as amended and
modified.
d) "Governmental Authority" shall mean the United States, any
foreign country, state, county, city or other political
subdivision, agency or instrumentality exercising executive,
legislative, judicial, regulatory or administrative
jurisdiction over Seller, the PAMCO Assets, Real Estate or
Contracts.
e) "Hazardous Material" shall mean any substance or material (i)
which is, at the time of Closing, defined or characterized as a
hazardous waste, hazardous substance, pollutant, contaminant or
toxic substance under any Environmental Law; (ii) which is
toxic, explosive, corrosive, flammable, infectious,
radioactive, mutagenic or otherwise hazardous and is regulated
at the time of Closing by any Governmental Authority; (iii) the
presence of which requires investigation or remediation under
any Environmental Law or the common law; or (iv) the presence of
which is deemed to constitute a nuisance, a trespass or pose a
health or safety hazard to persons or neighboring properties.
f) "Permitted Encumbrances" shall mean (i) real estate taxes, fees,
assessments and similar charges imposed by a taxing authority
that are not in default or delinquent, (ii) covenants,
restrictions and easements of record, if any, provided that the
same are not violated by the existing improvements or the
current use thereof, (iii) rights of parties in possession, and
(iv) any encroachments which are visible as of the Closing Date
by a visual inspection of the owned Real Estate or any other
matters, the existence of which would not otherwise result in
Seller's breach of this Agreement, that are revealed by a survey
delivered by Seller to Purchasers pursuant to Section 5.16. The
allowance of the Permitted Encumbrances shall not be considered
a waiver by Purchasers of any of their rights to challenge, nor
shall it estop Purchaser from challenging, the legality or
enforceability of any such Permitted Encumbrances.
9.2 Payment of Expenses. Whether or not the transactions contemplated by
this Agreement shall be consummated, each party hereto shall pay its
own expenses incident to preparing for, entering into and carrying
out this Agreement and the consummation thereof.
9.3 Survival. The agreements of Seller and Purchasers contained in
Sections 5.6, 5.8 and 6.4 and any claims asserted by a party pursuant
to Article VII, but only in connection with a breach of Sections 5.6,
5.8 and 6.4, shall indefinitely survive the consummation of the
transactions contemplated by this Agreement. The agreements of
Seller and Purchasers contained in the last two sentences of Section
5.3(a) shall survive the termination of this Agreement. All other
representations, warranties, agreements, and covenants in this
Agreement shall survive the consummation of the transactions
contemplated by this Agreement or the termination of this Agreement
for a period of three (3) years.
9.4 Modification or Amendment. This Agreement may be modified or amended
only by written agreement of the parties.
9.5 Waiver of Conditions. The conditions to the parties' obligations to
consummate the purchase and sale of the PAMCO Assets and Real Estate
and the assignment of the Contracts are for the sole benefit of such
party and may be waived by such party in whole or in part, either
before or after the vote of Seller' stockholders, to the extent
permitted by applicable law.
9.6 Counterparts. For the convenience of the parties hereto, this
Agreement may be executed in any number of counterparts, each such
counterpart being deemed to be an original instrument, and all such
counterparts shall together constitute the same agreement.
9.7 GOVERNING LAW. THE AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF COLORADO.
9.8 Notices. Any notice, request, instruction or other document to be
given hereunder by any party to the others shall be in writing and
delivered personally or sent by registered or certified mail, postage
prepaid, if to S&S Power, P.O. 220, Commerce City, Colorado 80037; if
to S&S Realty, P.O.Box 1637, Houston, Texas 77251-1637; and if to
Seller or AWT, P.O. Box 1500, Somerville, New Jersey 08876 or to such
other persons or addresses as may be designated in writing by the
party to receive such notice.
9.9 Entire Agreement. This Agreement (a) constitutes the entire
agreement and supersedes all other prior agreements and
understandings, both written and oral, among the parties with respect
to the subject matter hereof, and (b) shall not be assignable by
operation of law or otherwise and is not intended to create any
obligations to, or rights in respect of, any persons other than the
parties hereto.
9.10 Captions. The Article, Section and paragraph captions herein are for
convenience of reference only, do not constitute part of this
Agreement and shall not be deemed to limit or otherwise affect any of
the provisions hereof.
9.11 Arbitration.
a) Binding Arbitration. Notwithstanding any provisions of this
Agreement to the contrary other than Section 6.3(d), (e) and
(f) upon the request of any party, whether made before or after
the institution of any legal proceeding, any action, dispute,
claim or controversy of any kind (e.g., whether in contract or
in tort, statutory or common law, legal or equitable) now
existing or hereafter arising between the parties in any way
arising out of, pertaining to or in connection with this
Agreement or any related agreements, documents, or instruments
(the "Documents"), shall be resolved by binding arbitration in
accordance with the terms of this Section 9.11. The foregoing
matters shall be collectively referred to as a "Dispute". Any
party to this Agreement may bring an action in court to compel
arbitration of any Dispute.
b) Government Rules. A Dispute between the parties shall be
resolved by binding arbitration administered by the American
Arbitration Association (the "AAA") in accordance with the
terms of this Section 9.11 and, unless otherwise specified
herein, the Commercial Arbitration Rules of the AAA (the "AAA
Rules"). In the event of any inconsistency between this
Section 9.11 and the AAA Rules, this Section 9.11 shall
control. Judgment upon the award rendered by the arbitrators
may be rendered by any court of competent jurisdiction.
c) No Waiver, Preservation of Remedies. No provision or exercise
of any rights under this Section 9.11 shall limit the right of
any party, and the parties shall have the right during any
Dispute to seek, use, and employ ancillary or preliminary
remedies, judicial or otherwise, for the purposes of realizing
upon, serving, protecting, or foreclosing upon any property,
real or personal, which is involved in a Dispute, or which is
subject to, or described in, the Documents, including, without
limitation, rights and remedies relating to (i) foreclosing
against any real or personal property collateral or other
security by the exercise of a power of sale under a deed of
trust, mortgage, or other security agreement or instrument, or
applicable law; (ii) exercising self-help remedies (including
setoff rights); or (iii) obtaining provisional or ancillary
remedies such as injunctive relief, sequestration, attachment,
garnishment, or the appointment of a receiver from a court
having jurisdiction before, during, or after the pendency of
any arbitration. The institution and maintenance of any action
for judicial relief or pursuit of provisional or ancillary
remedies or exercise of self-help remedies shall not constitute
a waiver of the right of any party, including the plaintiff, to
submit the Dispute to arbitration nor render inapplicable the
compulsory arbitration provisions hereof.
d) Statutes of Limitation. All statutes of limitation that would
otherwise be applicable to any Dispute shall apply to any
arbitration proceeding.
e) Scope of Award; Modification or Vacation of Award
Qualifications. The arbitrators shall resolve all Disputes in
accordance with the applicable substantive law of the state of
Colorado and all evidentiary and procedural matters shall be
decided under the Federal Rules of Evidence and the Federal
Rules of Civil Procedure, respectively. All arbitrators shall
be practicing attorneys licensed to practice law in the State
of Colorado and shall be knowledgeable in the subject matter of
the Dispute. Each Dispute shall be decided by a majority vote
of three arbitrators. One arbitrator shall be selected by
Seller and/or AWT, as the case may be, and one by S&S Power
and/or S&S Realty, as the case may be. The third arbitrator
shall be selected by the other two arbitrators, without giving
effect to the AAA Rules. The arbitrators may grant any remedy
or relief that the arbitrators deem just and equitable and
within the scope of this Section 9.11. The arbitrators may
also grant such ancillary relief as is necessary to make
effective the award. In all arbitration proceedings in which
the amount in controversy exceeds $250,000 in aggregate, the
arbitrators shall make specific, written findings of fact and
conclusions of law. In all arbitration proceedings in which
the amount in controversy exceeds $250,000 in aggregate, the
parties shall have, in addition to the limited statutory right
to seek vacation or modification of an award pursuant to
applicable law, the right to seek vacation or modification of
any award that is based in whole or part on a manifest
disregard of the law by appeal to a court of competent
jurisdiction; provided, however, that any such application for
vacation or modification of an award based on a manifest
disregard of the law must be filed in a court having
jurisdiction over the Dispute within 15 days from the date the
award is rendered. The arbitrators' findings of fact shall be
binding on all parties and shall not be subject to further
review except as otherwise allowed by applicable law.
f) Other Matters and Miscellaneous. To the maximum extent
practicable, an arbitration proceeding hereunder shall be
concluded within 160 days of the filing of the Dispute with
AAA. Arbitration proceedings hereunder shall be conducted in
Denver, Colorado. Arbitrators shall be empowered to impose
sanctions and to take such other actions as the arbitrators
deem necessary to the same extent a judge could do so pursuant
to the federal Rules of Civil Procedure, the Colorado Rules of
Civil Procedure and applicable law. To the extent permitted by
applicable law, the arbitrators shall have the power to award
recovery of all costs and fees (including reasonable attorneys'
fees, administrative fees, and arbitrators' fees) to the
prevailing party, as determined by the arbitrators. Each party
agrees to keep all Disputes and arbitration proceedings
strictly confidential, except for disclosures of information
required to be disclosed in the ordinary course of business of
the parties, in any court proceeding permitted under this
Agreement, in compliance with any order or judgment of any
court or by applicable law or regulation.
IN WITNESS WHEREOF, this Agreement has been duly executed and
delivered by the duly authorized officers of the parties hereto on the date
first hereinabove written.
STEWART & STEVENSON POWER, INC.
By:/s/ Mike Conine
------------------------
Name: Mike Conine
Title: President
STEWARD & STEVENSON REALTY CORPORATION
By:/s/ Ronald L. Coker, Jr.
--------------------------
Name: Ronald L. Coker, Jr.
Title: Division Counsel, as attorney-in-fact
POWER APPLICATION & MFG. CO.
By:/s/ F.H. Olinger
-------------------------
Name: F.H. Olinger
Title: Vice President and General Manager
AIR & WATER TECHNOLOGIES CORPORATION
By:/s/ Claudio Elia
-------------------------
Name: Claudio Elia
Title: Chairman and CEO
EXECUTIVE RETENTION AGREEMENT
AGREEMENT, dated as of March 17, 1994, by and between Joseph M. Morena
("Executive"), residing at 30 Coventry Road, Mendham, New Jersey 07945, and
Air & Water Technologies Corporation, a Delaware corporation (the "Company").
W I T N E S E T H:
WHEREAS, Executive is a skilled and dedicated employee who has important
management responsibilities and talents which benefit the Company and the
Company desires to ensure that it will continue to have the benefit of
Executive's services, and Executive desires to continue to be employed by the
Company;
WHEREAS, the Company has determined that Executive's ability to perform
Executive's responsibilities and utilize Executive's talents for the benefit
of the Company, and the Company's ability to retain Executive as a valued
employee, will be significantly enhanced if Executive is provided with fair
and reasonable protection from the risks of a Change of Control of the Company;
NOW, THEREFORE, in consideration of the foregoing and the mutual covenants,
understandings, and agreements herein contained, the parties hereby agree as
follows:
1. General Definitions.
As used in this Agreement:
(a) "Board" means the Board of Directors of the Company.
(b) "Change of Control" means and includes the occurrence of any one
or more of the following:
(i) Continuing Directors no longer constitute at least
two-thirds of the Directors constituting the Board;
(ii) Any person or group of persons (as defined in Rule 13d-5
under the Exchange Act) becomes the beneficial owner,
directly or indirectly, of 25% or more of the Company's
then outstanding Common Stock or 25% or more of the voting
power of the Company's then outstanding securities entitled
generally to vote for the election of Directors;
(iii) The approval by the Company's stockholders of the merger
or consolidation of the Company with any other Entity, the
sale of all or substantially all of the assets of the
Company, or the liquidation or dissolution of the Company,
unless, in the case of a merger or consolidation, the
Continuing Directors in office immediately prior to the
merger or consolidation will constitute at least
two-thirds of the directors constituting the board of
directors of the surviving Entity of the merger or
consolidation and any parent (as that term is defined in
Rule 12b-2 under the Exchange Act) of that Entity; or
(iv) At least two-thirds of the Continuing Directors in office
immediately prior to any other action taken or proposed to
be taken by the Company's stockholders or by the Board
determines that such action constitutes, or that the
proposed action, if taken, would constitute, a Change of
Control of the Company and the action is taken.
(c) "Claim" or "Claims" means and includes one or more charges,
complaints, claims, grievances (including grievances filed
pursuant to a collective bargaining agreement), liabilities,
obligations, promises, covenants, agreements, controversies,
damages, injuries, actions, causes of action, suits, rights,
demands, deficiencies, levies, assessments, attachments,
executions, judgments, awards, recoveries, costs, losses,
debts, and expenses (including attorneys' fees and costs
actually incurred) of any kind or nature whatsoever, whether
known or unknown, suspected or unsuspected, contingent or not
contingent, liquidated or unliquidated.
(d) "Common Stock" means the Class A Common Stock of the Company.
(e) "Companies" means and includes the Company and all of its
affiliated Entities, including, but not limited to, parent and
subsidiary companies (whether wholly or partially owned and
whether direct or indirect), partnerships, and joint ventures.
(f) "Confidential Information" means and includes, without limitation,
business and proprietary information and technology, trade
secrets, patented processes, research and development data,
know-how, methods of doing business, and technical information of
the Companies; financial information not previously recorded in
public releases or filings; information regarding costs, profits,
markets, sales, products, market studies and forecasts, pricing
policies, key personnel, other business affairs and methods,
customers and customer prospects, business plans, competitive
analyses, and prospects and opportunities (such as possible
expansions or contractions of business operations) which have been
discussed or considered by the Companies' management; the
substance of agreements with customers and others, marketing and
dealership arrangements, servicing and training programs and
arrangements, and customer lists; and information concerning
operational strengths or weaknesses of the Companies' operating
units, all to the extent not previously revealed to the public or
to the trade by the Companies' management.
(g) "Continuing Director" means any person who either (i) is a
Director on the date of this Agreement or (ii) was designated as a
Continuing Director by a majority of the Continuing Directors.
(h) "Director" means a member of the Board.
(i) "Entity" or "Entities" means and includes one or more
organizations of any kind or nature whatsoever, including, without
limitation, corporations, companies, partnerships, joint ventures,
sole proprietorships, and divisions.
(j) "Exchange Act" means the Securities Exchange Act of 1934, as
amended.
2. Employment.
The Company hereby employs Executive and Executive hereby accepts such
employment for the term set forth in Paragraph 4 below, subject to
and in accordance with all of the terms and conditions of this
Agreement. Executive shall initially hold the position of Treasurer
of the Company and shall report to the Company's President; provided,
however, that the President, with the approval of the Company's Chief
Executive Officer, may change Executive's title and Executive's
responsibilities in the best interests of the Company and its
organizational development.
3. Duties and Responsibilities.
(a) Executive shall perform such duties and functions for the
Companies as are customarily performed by the Treasurer, or such
other duties or functions as the Company's President, with the
approval of the Company's Chief Executive Officer, shall assign
Executive from time to time in the best interest of the Company to
maximize its growth and development. In the performance of his
duties, Executive shall comply with the policies and procedures of
the Company (presently in effect or as may be reasonably modified
or established hereafter) and be subject to the direction of the
Chief Executive Officer, the President, and the Board.
(b) Executive agrees to devote his entire normal working time,
attention, and energies to the performance of his duties.
Executive shall not directly or indirectly, alone or as a member
of any partnership, or as an officer, director, employee, or agent
of any Entity, be actively engaged in or concerned with any other
duties or pursuits (whether or not for gain, profit, or other
pecuniary advantage) which interfere with the performance of his
duties hereunder, or which may be inimical to or contrary to the
best interests of the Company. Nothing in this subparagraph (b)
shall be construed as preventing Executive from investing
Executive's personal assets in any way that does not either
require the rendering of services by Executive to or on behalf of
the Entities in which the investments are made or result in any
other conflict of Executive's interest or time.
(c) Executive shall use his best efforts, skills, and abilities to
promote the Company's best interests.
4. Term.
(a) Except as provided in subparagraph (b) immediately below,
Executive's employment under this Agreement shall commence on the
date of the occurrence of a Change of Control and shall continue
for a period of two (2) years from and after such date (the
"Initial Term"), subject, however, to prior termination as
provided in Paragraphs 7 and 8 of this Agreement. This Agreement
may be renewed or extended upon such terms and conditions as the
parties shall mutually agree to in a written instrument signed by
each of the parties hereto, but neither party hereto shall be
under any obligation to renew this Agreement.
(b) Executive's employment under this Agreement will not commence on
the date of the occurrence of a Change of Control if on the day
immediately prior to the Change of Control Executive is no longer
employed by the Company, unless Executive's employment by the
Company is terminated prior to the Change of Control at the request
of the individual or individuals or Entity or Entities acquiring
control of the Company.
5. Compensation.
During the Initial Term of Executive's employment under this Agreement,
Executive shall be paid by the Company an annual salary of at least
$160,000.00. The salary paid to Executive may be reviewed by the Board
and may be increased at the sole and unreviewable discretion of the
Board, which shall take into account the earnings and overall
productivity of the Company, available resources, the performance of
Executive, the cost of living, and such other factors as it deems
relevant. The Board shall have no obligation to make any adjustments in
the salary of Executive. The salary to be paid to Executive under this
Agreement shall be payable in equal monthly installments in accordance
with the Company's customary payroll practices.
6. Other Benefits.
(a) During the Initial Term of Executive's employment under this
Agreement, Executive shall be entitled to such vacations, and to
participate in any other fringe benefits provided by the Company
to its key employees (including any bonus, profit sharing,
pension, and health insurance plans in accordance with and subject
to the terms of such plans), as may be determined from time to
time by the Board.
(b) During the Initial Term of Executive's employment under this
Agreement, there shall be established an Incentive Bonus Program
for Fiscal Years 1994 and 1995. In each such fiscal year,
Executive shall be eligible to earn up to $30,000.00 in bonuses,
calculated as follows:
(i) if Executive meets or exceeds the fiscal-year new orders
target for Executive's Operating Group, as set forth in
the approved business plan, Executive shall earn
$10,000.00;
(ii) if Executive meets or exceeds the fiscal-year contribution
margin target for Executive's Operating Group, as set
forth in the approved business plan, Executive shall earn
$10,000.00; and
(iii) if Executive meets or exceeds the fiscal-year cash flow
target for Executive's Operating Group, as set forth in
the approved business plan, Executive shall earn
$10,000.00.
Any Incentive Bonus earned during a fiscal year will be paid
during the first half of the following fiscal year and is subject
to reduction in accordance with subparagraph (c) immediately
below. The three targets applicable to Executive for Fiscal Year
1994 are set forth in Exhibit A to this Agreement. The three
targets applicable to Executive for Fiscal Year 1995 will be
established by the President of the Company, with the approval of
the Chief Executive Officer of the Company, after completion of
the Fiscal Year 1995 business plan and submission of the business
plan to the Board, and the President shall provide Executive a
written statement, in a form similar to Exhibit A, of the Fiscal
Year 1995 targets.
(c) If Executive is entitled to receive compensation under the
Company's Fiscal Year 1994 or 1995 Management Incentive Plan (or
such similar plan by whatever name it shall be known as), the
Incentive Bonus that Executive may be eligible for under
subparagraph (b) immediately above in Fiscal Year 1994 or 1995
shall be reduced as follows:
(i) if the actual total compensation payable to Executive
under the Management Incentive Plan is less than or equal
to thirty (30) percent of Executive's annual salary, then
Executive shall receive one hundred (100) percent of the
total Incentive Bonus earned in accordance with
subparagraph (b) immediately above;
(ii) if the actual total compensation payable to Executive
under the management Incentive Plan is greater than thirty
(30) percent but less than forty (40) percent of
Executive's annual salary, then Executive shall receive
only two-thirds of the total Incentive Bonus earned in
accordance with subparagraph (b) immediately above; or
(iii) if the actual total compensation payable to Executive
under the Management Incentive Plan is equal to or greater
than forty (40) percent of Executive's annual salary, then
Executive shall receive only one-third of the total
Incentive Bonus earned in accordance with subparagraph (b)
immediately above.
7. Termination of Employment by the Company for Death, Dis-ability, or
Justifiable Cause, or by Executive Without Good Reason, or Upon
Expiration of the Initial Term .
(a) The Company shall have the right to terminate the Executive's
employment under this Agreement upon the occurrence any one or
more of the following events:
(i) the death of Executive (in which case said employment
terminates immediately upon death);
(ii) the "disability" of Executive (as hereinafter defined); or
(iii) the Board determines in its sole and unreview-able
discretion (acting reasonably and in good faith) that
"justifiable cause" (as hereinafter defined) exists for
the termination of Executive's employment.
Executive shall have the right to terminate Executive's employment
under this Agreement without "good reason" (as defined in
Paragraph 8 below) upon sixty (60) days' prior written notice to
the President of the Company. No such termination by Executive
shall be effective unless that notice has been given.
Except as provided in subparagraph (b) immediately below, upon
termination of the employment of Executive under any of the
circumstances set forth in this subparagraph (a), Executive's
entitlement to further compensation or other benefits under
Paragraphs 5 and 6 of this Agreement shall immediately cease.
(b) For the purposes of this Agreement, the term "disability" shall
mean the inability of Executive, due to illness, accident, or any
other physical or mental incapacity, to perform his duties or
fulfill his obligations under this Agreement in a normal manner for
a period of any three (3) consecutive months or for a total of six
(6) months (whether or not consecutive) in any twelve (12) month
period during the Initial Term of this Agreement, it being
understood that, notwithstanding any such inability to perform his
duties, Executive shall be entitled to receive his compensation as
provided herein until the termination of his employment for
disability. The Company shall provide Executive ten days' prior
written notice of any determination by the Board that Executive is
disabled.
(c) For purposes of this Agreement, "justifiable cause" for
termination by the Company of Executive's employment shall means
any one or more of the following:
(i) any intentional breach by Executive of the performance of
any of his duties pursuant to this Agreement;
(ii) any intentional or negligent disclosure by Executive to
any person or Entity (other than the Companies) and other
than in the ordinary course of business of any Confidential
Information of the Companies;
(iii) any knowing violation or reckless disregard by Executive
of any law, governmental regulation, or judicial decree
which has caused substantial injury to the Companies,
financial or otherwise;
(iv) Executive's interference with or
endeavor to entice away from the Companies any client or
customer, or solicitation of employment of any of the
Companies' officers, directors, employees, or agents;
(v) Executive's conviction of a felony, as evidenced by a
binding and final judgment, order, or decree of a court of
competent jurisdiction, in effect after exhaustion or
lapse of all rights of appeal;
(vi) the commission by Executive of any act of fraud, or
material act of malfeasance, disloyalty, or breach of
trust against the Companies;
(vii) any attempt by Executive to secure any personal profit
(other than authorized compensation paid to Executive by
the Company) or convert any corporate opportunity to his
benefit in connection with the business of the Companies;
(viii) any failure by Executive to devote his entire normal
working time to the affairs of the Companies;
(ix) any activities of Executive that are determined to be
inimical to or contrary to the best interests of the
Companies; or
(x) the conduct or involvement by Executive in any business
other than the businesses of the Companies.
The Company shall provide Executive ten (10) days' prior written
notice of termination for justifiable cause; provided, however,
that the Company shall not be required to furnish any such prior
written notice in the event that the Board reasonably determines
in its sole and unreviewable discretion that immediate termination
of Executive without such prior written notice is necessary to
protect the best interests of the Companies. The written notice
shall set forth in reasonable detail the facts and circumstances
that are the basis for the termination for justifiable cause.
(d) If Executive is still employed under this Agreement at the end of
the Initial Term of this Agreement and if the parties hereto have
failed to reach a written agreement (signed by each of the parties
hereto) as to the continuation of Executive's employment,
Executive's employment under this Agreement will automatically
terminate upon expiration of the Initial Term. In such case:
(i) Executive's entitlement to further compensation or other
benefits under Paragraphs 5 and 6 of this Agreement shall
immediately cease upon expiration of the Initial Term; and
(ii) such termination shall be deemed a triggering event
entitling Executive to severance pay under the Company's
severance pay policy, but in no event shall the severance
pay due and payable to Executive be less than a total of
six (6) weeks' salary; provided, however, that Executive
shall not be entitled to any severance pay if (A)
Executive is provided by the Company, at least sixty (60)
days prior to the expiration of the Initial Term, a
written offer to renew this Agreement for at least an
additional one (1) year and Executive does not accept in
writing that offer at least thirty (30) days prior to the
expiration of the Initial Term, or (B) Executive remains
employed by any of the Companies.
8. Termination of Employment Under Other Circumstances.
(a) If (i) the Company terminates Executive's employment under this
Agreement other than for death, "disability", or "justifiable
cause", or Executive terminates Executive's employment under this
Agreement for "good reason" (as hereinafter defined), and (ii)
Executive does not remain employed by any of the Companies,
Executive shall:
(i) receive from the Company, within two (2) business days
after the termination, an amount in cash equal to the sum
of:
(A) all salary due and payable to Executive as of the
date of termination;
(B) pay for all accrued, but unused, vacation and sick
days through the date of termination;
(C) all salary that would have been due and payable to
Executive over the remaining period of the Initial
Term of this Agreement if Executive's employment had
not been terminated, based on Executive's annual
salary in effect at the date of termination. By way
of illustration, if Executive's annual salary at the
date of termination was $200,000.00 and the
termination occurred at the end of the seventh (7th)
month of the Initial Term, Executive would be
entitled to receive 17/24 x $400,000.00, or
$283,333.33; and
(D) all severance pay due and payable to Executive under
the Company's severance pay policy, but in no event
less than a total of six (6) weeks' salary, it being
understood that a termination under this
subparagraph (a), whether by the Company or
Executive, shall be deemed a triggering event
entitling Executive to severance pay under the
Company's severance pay policy;
(ii) receive from the Company all other benefits which
executive employees of the Company normally receive when
their employment is terminated by the Company without
"justifiable cause", which in no event shall be less than
the benefits such executive employees would have received
had their terminations occurred on the day immediately
preceding the Change of Control; and
(iii) with respect to any stock options for shares of the
Company's stock that Executive has been or may be
hereafter awarded, and notwithstanding the terms of the
Long-Term Incentive Compensation Plans under which these
options were or may be hereafter granted, be entitled to
fully exercise said stock options at any time up to and
including the ninetieth day after the expiration of the
remaining period of the Initial Term of this Agreement.
(b) For purposes of this Agreement, "good reason" for Executive to
terminate Executive's employment under this Agreement shall mean
any one or more of the following:
(i) both (A) without Executive's prior written consent, (1)
the assignment by the Company to Executive of duties and
responsibilities that are not at least substantially
equivalent to Executive's duties and responsibilities with
the Company immediately prior to the date of the Change of
Control, except in connection with the termination of
Executive's employment under this Agreement pursuant to
Paragraph 7 of this Agreement, or (2) the failure by the
Company to continue Executive in a position that is at
least substantially equivalent to the position held by
Executive with the Company immediately prior to the date
of the Change of Control, except in connection with the
termination of Executive's employment under this Agreement
pursuant to Paragraph 7 of this Agreement, and (B) the
continuance thereof for a period of twenty (20) days after
written notice thereof to the Company from Executive;
(ii) a failure by the Company to pay, or a reduction by the
Company of, the annual salary required to be paid to
Executive under Paragraph 5 of this Agreement;
(iii) a failure by the Company to pay any Incentive Bonus
required to be paid to Executive under Paragraph 6 of this
Agreement;
(iv) a failure by the Company to provide Executive with (A) the
opportunity to participate, on terms no less favorable
than those in effect for other executives holding a
similar position, in all of the Company's benefit and
executive compensation plans and programs or their
equivalent or (B) all other fringe benefits, or their
equivalent, from time to time in effect for the benefit of
other executives holding a similar position;
(v) without Executive's prior written consent, (A) the
relocation by the Company of the principal place of
Executive's employment to a location that is more than 100
miles from Executive's principal place of employment
immediately prior to the date of the Change of Control or
(B) the imposition by the Company of travel requirements
on Executive which are not substantially consistent with
the travel requirements applicable to Executive
immediately prior to the date of the Change of Control; or
(vi) any breach of Paragraph 15 of this Agreement by the
Company.
(c) If the Company terminates Executive's employment under this
Agreement other than for death, "disability", or "justifiable
cause", the Company shall provide Executive at least ten (10)
days' prior written notice of that termination, and no such
termination shall be effective unless that notice has been given.
The notice shall set forth in reasonable detail the facts and
circumstances that are the basis for the termination.
(d) At least sixty (60) days prior to the termination by Executive of
Executive's employment under this Agreement for "good reason",
Executive shall provide the President of the Company with written
notice of Executive's intention to terminate Executive's
employment, and no such termination shall be effective unless that
notice has been given. The notice shall set forth in reasonable
detail the facts and circumstances that are the basis for the
termination.
(e) If Executive's employment by the Company is terminated prior to a
Change of Control at the request of the individual or individuals
or Entity or Entities acquiring control of the Company, the
provisions of this Paragraph 8 shall apply as if a Change of
Control had occurred just prior to the date of termination.
9. No Mitigation.
Executive shall not be required to mitigate damages or the amount of any
payment provided for under this Agreement by seeking other employment or
otherwise, and payments and benefits due Executive under Paragraph 8(a)
of this Agreement shall not be subject to offset in respect of any
Claims which the Company has or may have against Executive. Without
limiting the generality of the foregoing, no payment otherwise required
under this Agreement shall be reduced because of any payment received by
Executive in connection with other employment of or other services
rendered by Executive after the date of termination of Executive's
employment under this Agreement.
10. Inventions, Discoveries, Etc.
(a) Executive shall promptly and fully disclose to the Company (with all
necessary detail for a complete understanding of the same) all
developments, know-how, discoveries, inventions, improvements,
concepts, ideas, writings, formulae, processes, and methods (whether
copyrightable, patentable, or otherwise) made, received, conceived,
acquired, or written by Executive (whether or not at the request of
or upon the suggestion of the Company) during the period of his
employment with any of the Companies, solely or jointly with others
(whether or not during working hours), in connection with or relating
to any activities of the Companies or any of their customers known
to him as a consequence of his employment (collectively referred to
as the "Subject Matter").
(b) Executive hereby assigns and transfers, and agrees to assign and
transfer, to the Company, all his right, title, and interest in and
to the Subject Matter. Executive further agrees to deliver to the
Company any and all drawings, notes, specifications, and data
relating to the Subject Matter and to execute, acknowledge, and
deliver all such further papers, including applications for
copyrights, patents, and similar protected ownership rights, as may
be necessary to obtain copyrights, patents, and similar protected
ownership rights with respect to the Subject Matter in any and all
countries and to vest title to any such copyrights, patents, and
similar protected ownership rights in the Company. Executive shall
assist the Company in obtaining such copyrights, patents, or similar
protected ownership rights during the period of his employment with
any of the Companies and any time thereafter and agrees to assist
the Company and to testify in its behalf in any prosecution or
litigation involving any of the Subject Matter during the period of
his employment with any of the Companies, and at any time
thereafter, in accordance with the provisions of subparagraph (c)
immediately below.
(c) At any time subsequent to the termination of Executive's employment
with any of the Companies or the expiration or termination of this
Agreement, if the Company requests in writing that Executive assist
the Company with respect to obtaining any patents, copyrights, or
similar protected ownership rights, or that Executive assist the
Company or testify in its behalf in connection with any prosecution
or litigation relating to the Subject Matter, the Company shall
reimburse Executive for Executive's reasonable out-of-pocket
expenses in connection with such assistance or testimony. In the
event the Company shall request Executive's assistance or testimony
as set forth hereunder, the Company agrees to use its best efforts to
assure that such assistance or testimony will neither require a
major or unreasonable portion of Executive's time nor substantially
interfere with his then current employment or business activities.
11. Non-Disclosure of Confidential Information.
(a) Executive shall not during his employment with any of the Companies
(nor at any time following termination of such employment or
expiration or termination of this Agreement), directly or
indirectly, intentionally or negligently disclose to or permit to be
known by any person or Entity any Confidential Information acquired
by him during the course of or in connection with his employment by
any of the Companies relating to (i) the Companies, (ii) the
officers, directors, employees, or agents of the Companies, (iii)
any client or customer of the Companies, or (iv) any Entity owned or
controlled, directly or indirectly, by any of the foregoing, or in
which any of the foregoing has a beneficial interest.
(b) All Confidential Information, regardless of how recorded, relating
to the Companies shall be the exclusive property of the Companies,
and Executive shall use his best efforts to prevent any publication
or disclosure thereof. Upon termination of Executive's employment
with any of the Companies or the expiration or termination of this
Agreement, all documents, records, reports, writings, and other
similar documents containing Confidential Information (including any
and all copies thereof) then in Executive's possession or control
shall be returned and left with the Company.
12. Right to Injunctive and Other Relief.
Executive recognizes that the services to be rendered by him to any of
the Companies are of special, unique, unusual, extraordinary, and
intellectual character, involving skill of the highest order, and that
such services are of special and particular value, the loss of which
cannot be adequately compensated for in damages. Executive further
agrees and declares that, because of his important role with the
Companies to date, clients' or customers' association of Executive with
the Companies, and the personal relationships Executive has with many of
such clients or customers, Executive's services to the Companies are
unique and extraordinary. In the event of a breach of any provision of
Paragraph 10 or 11 of this Agreement by Executive, the Companies shall
be entitled to injunctive relief and any other legal or equitable
remedies from a court of competent jurisdiction. Executive acknowledges
and agrees that any such breach will cause irreparable injury to the
Companies and that money damages will not provide an adequate remedy to
the Companies. In any action for injunctive relief, Executive shall not
be entitled to interpose a defense that the Companies have an adequate
remedy in a court of law. Executive agrees that the Companies may
recover by appropriate action the amount of the actual damages caused
the Companies by any failure, refusal, or neglect of Executive to
perform his agreements, representations, and warranties contained in
this Agreement. The remedies provided in this Agreement shall be deemed
cumulative and the exercise of one shall not preclude the exercise of
any other remedy at law or in equity for the same event or any other
event.
13. No Conflicting Agreements.
Executive represents and warrants that he is not a party to any
agreement, contract, or understanding, whether of employment or
otherwise, which would in any way restrict or prohibit him from
undertaking or performing his employment and other obligations in
accordance with the terms and conditions of this Agreement. Executive
further agrees to indemnify and hold harmless the Companies and their
past and present officers, directors, employees, agents, owners,
stockholders, representatives, and attorneys from and against and in
respect of any and all Claims alleging that (a) Executive is so
restricted or prohibited or (b) the Companies have committed a wrongful
act in negotiating with, and employing the services of, Executive.
14. Notices and Calendar Days.
All notices, requests, demands, and other communications provided for by
this Agreement shall be in writing and shall be personally delivered or
mailed (by registered or certified mail, return receipt requested,
postage prepaid) to the address of the party to whom intended as
specified below or to such different address as such party may have
fixed by a notice sent in accordance with this Paragraph.
(a) If to the Company, at:
Air & Water Technologies Corporation
P.O. Box 1500
Somerville, NJ 08876
Attention: President
with a copy to: General Counsel
(b) If to Executive, at:
30 Coventry Road
Mendham, NJ 07945
Any such notices shall be effective upon receipt, if personally
delivered, or three business days after mailing, if mailed.
Unless otherwise expressly provided, all references in this Agreement to
"days" mean "calendar days".
15. Assignability and Binding Effect.
(a) This Agreement shall inure to the benefit of and shall be binding
upon the heirs, executors, administrators, successors, and legal
representatives of Executive, and shall inure to the benefit of
and be binding upon the Company and its successors, assigns, and
legal representatives, but the obligations of Executive may not be
delegated and Executive may not assign, transfer, pledge,
encumber, hypothecate, or otherwise dispose of this Agreement, or
any of his rights under this Agreement, and any such attempted
delegation or disposition shall be null and void and without
effect. This Agreement shall also inure to the benefit of the
Companies and the Other Defendants (as defined in Paragraph 19
below) and their respective heirs, executors, administrators,
successors, assigns, and legal representatives.
(b) If the Company shall be merged into or consolidated with another
Entity, the provisions of this Agreement shall be binding upon and
inure to the benefit of the Entity surviving the merger or
resulting from the consolidation. The Company shall require any
successor, whether direct or indirect, by purchase, merger,
consolidation, or otherwise, to all or substantially all of the
business or assets of the Company, by agreement in form and
substance satisfactory to Executive, expressly to assume and agree
to perform this Agreement in the same manner and to the same
extent that the Company would have been required to perform this
Agreement if no succession had taken place. The provisions of
this Paragraph 15 shall continue to apply to each subsequent
employer of Executive bound by this Agreement in the event of any
merger, consolidation, or transfer of all or substantially all of
the business or assets of that subsequent employer.
16. Complete Understanding.
This Agreement constitutes the complete understanding between the
parties with respect to the employment of Executive hereunder, and no
statement, representation, warranty or covenant has been made by either
party with respect thereto except as expressly set forth herein. This
Agreement shall not be altered, modified, amended, or terminated except
by written instrument signed by each of the parties hereto.
17. Governing Law.
This Agreement and all provisions hereof shall be governed by and
construed in accordance with the laws of the State of New Jersey.
18. Severability.
Should any part, term, or provision of this Agreement be declared or be
determined by any court or tribunal of competent jurisdiction to be
illegal, invalid, or unenforceable, the legality, validity, and
enforceability of the remaining parts, terms, or provisions shall not be
affected thereby, and said illegal, unenforceable, or invalid part,
term, or provision shall be deemed not to be a part of this Agreement.
19. Arbitration.
(a) Except as provided in subparagraph (b) immediately below, any and
all Claims arising out of or relating to (i) this Agreement, (ii)
any breach of any provision of this Agreement, (iii) Executive's
employment at any time with any of the Companies, and/or (iv) the
termination of Executive's employment with any of the Companies
shall be settled by arbitration. Such arbitration proceeding
shall be conducted pursuant to the Employment Dispute Resolution
Rules of the American Arbitration Association ("AAA") then in
effect, by a single arbitrator, and shall be held in Somerset
County, New Jersey. The arbitrator shall not have the power to
award punitive damages. The cost of the arbitration proceeding
and the reasonable costs and attorneys' fees of the prevailing
party shall be paid by the non-prevailing party, with the dollar
amount of these costs and fees to be fixed by the arbitrator. The
judgment upon the award rendered by the arbitrator may be entered
in any court having competent jurisdiction thereof.
(b) Nothing in subparagraph (a) immediately above shall be construed
or interpreted to preclude the Companies from filing suit in a
court of competent jurisdiction in order to enforce their rights
and remedies under Paragraphs 10, 11 and/or 12 of this Agreement.
In any such suit, the court is empowered to and shall resolve any
dispute as to whether the Claims asserted by any of the Companies
are within the scope of Paragraphs 10, 11, and/or 12 of this
Agreement, and the court shall not refer such dispute to
arbitration under subparagraph (a) immediately above.
(c) With respect to the Claims of Executive that are within the scope
of subparagraph (a) above, if Executive has the same, similar, or
related Claims against any of the Companies' employee benefit
plans, trusts, committees, or boards or against any past or
present officers, directors, employees, agents, owners,
stockholders, trustees, fiduciaries, administrators, sponsors,
representatives, or attorneys of the Companies or the Companies'
employee benefit plans, trusts, committees, or boards
(collectively referred to as the "Other Defendants"), and if
Executive seeks to litigate such Claims against the Other
Defendants in a civil action or any other proceeding (including
before an administrative agency), Executive agrees that any or all
of said Other Defendants may compel Executive to arbitrate his
Claims against them pursuant to the terms of this Paragraph 19.
(d) The arbitrator selected by the parties pursuant to the AAA rules
shall have expertise in private industry employee relations and
shall hear and determine the case promptly. The burden of
persuasion shall at all times be upon the party seeking relief.
(e) In the event Executive files suit in a court of competent
jurisdiction and asserts that certain Claims are not subject to
arbitration under this Paragraph 19 because of the limitation on
the power of the arbitrator to award punitive damages (the
"Limitation"), the parties agree that they will request the court
to resolve that legal issue on an expedited basis, and if the
court rules in favor of Executive on the Limitation issue, the
parties agree as follows:
(i) the arbitration shall proceed as if this Paragraph 19 did
not contain such Limitation;
(ii) the parties will request the court to enter judgment in
favor of Executive on the Limitation issue, at which time
the Company may appeal that ruling;
(iii) in the event the arbitrator determines that Executive is
entitled to punitive damages, the punitive damages aspect
of the arbitrator's award will be stayed pending the
exhaustion or lapse of all rights of appeal of the Company
under subparagraph (e)(ii) immediately above; and
(iv) in the event an appellate court rules in favor of the
Company on the Limitation issue, the arbitrator shall
vacate the award of punitive damages.
The procedures set forth in this subparagraph (e) shall also apply
in the event Executive seeks relief in some other tribunal, such
as an administrative agency, and the Company files a civil action
to compel arbitration.
20. Waiver.
It is agreed that a waiver by either party of a breach of any provision
of this Agreement shall neither operate nor be construed as a waiver of
any subsequent breach hereof, or as a waiver of a breach of any other
provision.
21. Survival.
All representations and warranties herein shall survive any termination
of Executive's employment or termination or expiration of this
Agreement, and the termination of Executive's employment or the
termination or expiration of this Agreement shall not affect the
enforceability of Paragraphs 10, 11, 12, 13, and 19 of this Agreement,
which Paragraphs shall survive the termination or expiration of this
Agreement or the termination of Executive's employment.
22. Other Documents.
The parties agree to execute and deliver all such further instruments
and take such other and further action as may be reasonably necessary or
appropriate to carry out the provisions of this Agreement.
23. Paragraph Headings.
The paragraph headings contained in this Agreement are for reference
purposes only and shall not affect in any way the meaning or
interpretations of this Agreement.
IN WITNESS WHEREOF, the parties hereto set their hands as of the day and year
first above written.
AIR & WATER TECHNOLOGIES CORPORATION
By /s/ Arthur L. Glenn
---------------------------------
Witness:/s/ Linda M. Brady
----------------------------
/s/ Joseph M. Morena
------------------------------------
Joseph M. Morena
Witness:/s/ Douglas A. Satzger
----------------------------
EXHIBIT A
EXECUTIVE RETENTION AGREEMENT
BETWEEN
JOSEPH M. MORENA
AND
AIR & WATER TECHNOLOGIES CORPORATION
For Fiscal Year 1994, the approved business plan targets for purposes of
Paragraph 6 of the Agreement are as follows:
1. New Orders $
2. Contribution Margin $
3. Cash Flow $
EXECUTIVE RETENTION AGREEMENT
AGREEMENT, dated as of March 17, 1994, by and between Ruthanne G. Neely
("Executive"), residing at 1167 Skelp Level Road, Dowington, Pennsylvania
19335, and Air & Water Technologies Corporation, a Delaware corporation (the
"Company").
W I T N E S E T H:
WHEREAS, Executive is a skilled and dedicated employee who has important
management responsibilities and talents which benefit the Company and the
Company desires to ensure that it will continue to have the benefit of
Executive's services, and Executive desires to continue to be employed by the
Company;
WHEREAS, the Company has determined that Executive's ability to perform
Executive's responsibilities and utilize Executive's talents for the benefit
of the Company, and the Company's ability to retain Executive as a valued
employee, will be significantly enhanced if Executive is provided with fair
and reasonable protection from the risks of a Change of Control of the Company;
NOW, THEREFORE, in consideration of the foregoing and the mutual covenants,
understandings, and agreements herein contained, the parties hereby agree as
follows:
1. General Definitions.
As used in this Agreement:
(a) "Board" means the Board of Directors of the Company.
(b) "Change of Control" means and includes the occurrence of any one
or more of the following:
(i) Continuing Directors no longer constitute at least
two-thirds of the Directors constituting the Board;
(ii) Any person or group of persons (as defined in Rule 13d-5
under the Exchange Act) becomes the beneficial owner,
directly or indirectly, of 25% or more of the Company's
then outstanding Common Stock or 25% or more of the voting
power of the Company's then outstanding securities entitled
generally to vote for the election of Directors;
(iii) The approval by the Company's stockholders of the merger
or consolidation of the Company with any other Entity, the
sale of all or substantially all of the assets of the
Company, or the liquidation or dissolution of the Company,
unless, in the case of a merger or consolidation, the
Continuing Directors in office immediately prior to the
merger or consolidation will constitute at least
two-thirds of the directors constituting the board of
directors of the surviving Entity of the merger or
consolidation and any parent (as that term is defined in
Rule 12b-2 under the Exchange Act) of that Entity; or
(iv) At least two-thirds of the Continuing Directors in office
immediately prior to any other action taken or proposed to
be taken by the Company's stockholders or by the Board
determines that such action constitutes, or that the
proposed action, if taken, would constitute, a Change of
Control of the Company and the action is taken.
(c) "Claim" or "Claims" means and includes one or more charges,
complaints, claims, grievances (including grievances filed
pursuant to a collective bargaining agreement), liabilities,
obligations, promises, covenants, agreements, controversies,
damages, injuries, actions, causes of action, suits, rights,
demands, deficiencies, levies, assessments, attachments,
executions, judgments, awards, recoveries, costs, losses,
debts, and expenses (including attorneys' fees and costs
actually incurred) of any kind or nature whatsoever, whether
known or unknown, suspected or unsuspected, contingent or not
contingent, liquidated or unliquidated.
(d) "Common Stock" means the Class A Common Stock of the Company.
(e) "Companies" means and includes the Company and all of its
affiliated Entities, including, but not limited to, parent and
subsidiary companies (whether wholly or partially owned and
whether direct or indirect), partnerships, and joint ventures.
(f) "Confidential Information" means and includes, without limitation,
business and proprietary information and technology, trade
secrets, patented processes, research and development data,
know-how, methods of doing business, and technical information of
the Companies; financial information not previously recorded in
public releases or filings; information regarding costs, profits,
markets, sales, products, market studies and forecasts, pricing
policies, key personnel, other business affairs and methods,
customers and customer prospects, business plans, competitive
analyses, and prospects and opportunities (such as possible
expansions or contractions of business operations) which have been
discussed or considered by the Companies' management; the
substance of agreements with customers and others, marketing and
dealership arrangements, servicing and training programs and
arrangements, and customer lists; and information concerning
operational strengths or weaknesses of the Companies' operating
units, all to the extent not previously revealed to the public or
to the trade by the Companies' management.
(g) "Continuing Director" means any person who either (i) is a
Director on the date of this Agreement or (ii) was designated as a
Continuing Director by a majority of the Continuing Directors.
(h) "Director" means a member of the Board.
(i) "Entity" or "Entities" means and includes one or more
organizations of any kind or nature whatsoever, including, without
limitation, corporations, companies, partnerships, joint ventures,
sole proprietorships, and divisions.
(j) "Exchange Act" means the Securities Exchange Act of 1934, as
amended.
2. Employment.
The Company hereby employs Executive and Executive hereby accepts such
employment for the term set forth in Paragraph 4 below, subject to and
in accordance with all of the terms and conditions of this Agreement.
Executive shall initially hold the position of Senior Vice President
for Business Planning and Communications of the Company and shall
report the President, with the approval of the Company's Chief
Executive Officer, may change Executive's title and Executive's
responsibilities in the best interests of the Company and its
organizational development.
3. Duties and Responsibilities.
(a) Executive shall perform such duties and functions for the
Companies as are customarily performed by the Senior Vice
President for Business Planning and Communications, or such other
duties or functions as the Company's President, with the approval
of the Company's Chief Executive Officer, shall assign Executive
from time to time in the best interest of the Company to maximize
its growth and development. In the performance of his duties,
Executive shall comply with the policies and procedures of the
Company (presently in effect or as may be reasonably modified or
established hereafter) and be subject to the direction of the
Chief Executive Officer, the President, and the Board.
(b) Executive agrees to devote his entire normal working time,
attention, and energies to the performance of his duties.
Executive shall not directly or indirectly, alone or as a member
of any partnership, or as an officer, director, employee, or agent
of any Entity, be actively engaged in or concerned with any other
duties or pursuits (whether or not for gain, profit, or other
pecuniary advantage) which interfere with the performance of his
duties hereunder, or which may be inimical to or contrary to the
best interests of the Company. Nothing in this subparagraph (b)
shall be construed as preventing Executive from investing
Executive's personal assets in any way that does not either
require the rendering of services by Executive to or on behalf of
the Entities in which the investments are made or result in any
other conflict of Executive's interest or time.
(c) Executive shall use his best efforts, skills, and abilities to
promote the Company's best interests.
4. Term.
(a) Except as provided in subparagraph (b) immediately below,
Executive's employment under this Agreement shall commence on the
date of the occurrence of a Change of Control and shall continue
for a period of two (2) years from and after such date (the
"Initial Term"), subject, however, to prior termination as
provided in Paragraphs 7 and 8 of this Agreement. This Agreement
may be renewed or extended upon such terms and conditions as the
parties shall mutually agree to in a written instrument signed by
each of the parties hereto, but neither party hereto shall be
under any obligation to renew this Agreement.
(b) Executive's employment under this Agreement will not commence on
the date of the occurrence of a Change of Control if on the day
immediately prior to the Change of Control Executive is no longer
employed by the Company, unless Executive's employment by the
Company is terminated prior to the Change of Control at the request
of the individual or individuals or Entity or Entities acquiring
control of the Company.
5. Compensation.
During the Initial Term of Executive's employment under this Agreement,
Executive shall be paid by the Company an annual salary of at least
$150,000.00. The salary paid to Executive may be reviewed by the Board
and may be increased at the sole and unreviewable discretion of the
Board, which shall take into account the earnings and overall
productivity of the Company, available resources, the performance of
Executive, the cost of living, and such other factors as it deems
relevant. The Board shall have no obligation to make any adjustments in
the salary of Executive. The salary to be paid to Executive under this
Agreement shall be payable in equal monthly installments in accordance
with the Company's customary payroll practices.
6. Other Benefits.
(a) During the Initial Term of Executive's employment under this
Agreement, Executive shall be entitled to such vacations, and to
participate in any other fringe benefits provided by the Company
to its key employees (including any bonus, profit sharing,
pension, and health insurance plans in accordance with and subject
to the terms of such plans), as may be determined from time to
time by the Board.
(b) During the Initial Term of Executive's employment under this
Agreement, there shall be established an Incentive Bonus Program
for Fiscal Years 1994 and 1995. In each such fiscal year,
Executive shall be eligible to earn up to $30,000.00 in bonuses,
calculated as follows:
(i) if Executive meets or exceeds the fiscal-year new orders
target for Executive's Operating Group, as set forth in
the approved business plan, Executive shall earn
$10,000.00;
(ii) if Executive meets or exceeds the fiscal-year contribution
margin target for Executive's Operating Group, as set
forth in the approved business plan, Executive shall earn
$10,000.00; and
(iii) if Executive meets or exceeds the fiscal-year cash flow
target for Executive's Operating Group, as set forth in
the approved business plan, Executive shall earn
$10,000.00.
Any Incentive Bonus earned during a fiscal year will be paid
during the first half of the following fiscal year and is subject
to reduction in accordance with subparagraph (c) immediately
below. The three targets applicable to Executive for Fiscal Year
1994 are set forth in Exhibit A to this Agreement. The three
targets applicable to Executive for Fiscal Year 1995 will be
established by the President of the Company, with the approval of
the Chief Executive Officer of the Company, after completion of
the Fiscal Year 1995 business plan and submission of the business
plan to the Board, and the President shall provide Executive a
written statement, in a form similar to Exhibit A, of the Fiscal
Year 1995 targets.
(c) If Executive is entitled to receive compensation under the
Company's Fiscal Year 1994 or 1995 Management Incentive Plan (or
such similar plan by whatever name it shall be known as), the
Incentive Bonus that Executive may be eligible for under
subparagraph (b) immediately above in Fiscal Year 1994 or 1995
shall be reduced as follows:
(i) if the actual total compensation payable to Executive
under the Management Incentive Plan is less than or equal
to thirty (30) percent of Executive's annual salary, then
Executive shall receive one hundred (100) percent of the
total Incentive Bonus earned in accordance with
subparagraph (b) immediately above;
(ii) if the actual total compensation payable to Executive
under the management Incentive Plan is greater than thirty
(30) percent but less than forty (40) percent of
Executive's annual salary, then Executive shall receive
only two-thirds of the total Incentive Bonus earned in
accordance with subparagraph (b) immediately above; or
(iii) if the actual total compensation payable to Executive
under the Management Incentive Plan is equal to or greater
than forty (40) percent of Executive's annual salary, then
Executive shall receive only one-third of the total
Incentive Bonus earned in accordance with subparagraph (b)
immediately above.
7. Termination of Employment by the Company for Death, Dis-ability, or
Justifiable Cause, or by Executive Without Good Reason, or Upon
Expiration of the Initial Term .
(a) The Company shall have the right to terminate the Executive's
employment under this Agreement upon the occurrence any one or
more of the following events:
(i) the death of Executive (in which case said employment
terminates immediately upon death);
(ii) the "disability" of Executive (as hereinafter defined); or
(iii) the Board determines in its sole and unreview-able
discretion (acting reasonably and in good faith) that
"justifiable cause" (as hereinafter defined) exists for
the termination of Executive's employment.
Executive shall have the right to terminate Executive's employment
under this Agreement without "good reason" (as defined in
Paragraph 8 below) upon sixty (60) days' prior written notice to
the President of the Company. No such termination by Executive
shall be effective unless that notice has been given.
Except as provided in subparagraph (b) immediately below, upon
termination of the employment of Executive under any of the
circumstances set forth in this subparagraph (a), Executive's
entitlement to further compensation or other benefits under
Paragraphs 5 and 6 of this Agreement shall immediately cease.
(b) For the purposes of this Agreement, the term "disability" shall
mean the inability of Executive, due to illness, accident, or any
other physical or mental incapacity, to perform his duties or
fulfill his obligations under this Agreement in a normal manner for
a period of any three (3) consecutive months or for a total of six
(6) months (whether or not consecutive) in any twelve (12) month
period during the Initial Term of this Agreement, it being
understood that, notwithstanding any such inability to perform his
duties, Executive shall be entitled to receive his compensation as
provided herein until the termination of his employment for
disability. The Company shall provide Executive ten days' prior
written notice of any determination by the Board that Executive is
disabled.
(c) For purposes of this Agreement, "justifiable cause" for
termination by the Company of Executive's employment shall means
any one or more of the following:
(i) any intentional breach by Executive of the performance of
any of his duties pursuant to this Agreement;
(ii) any intentional or negligent disclosure by Executive to
any person or Entity (other than the Companies) and other
than in the ordinary course of business of any Confidential
Information of the Companies;
(iii) any knowing violation or reckless disregard by Executive
of any law, governmental regulation, or judicial decree
which has caused substantial injury to the Companies,
financial or otherwise;
(iv) Executive's interference with or
endeavor to entice away from the Companies any client or
customer, or solicitation of employment of any of the
Companies' officers, directors, employees, or agents;
(v) Executive's conviction of a felony, as evidenced by a
binding and final judgment, order, or decree of a court of
competent jurisdiction, in effect after exhaustion or
lapse of all rights of appeal;
(vi) the commission by Executive of any act of fraud, or
material act of malfeasance, disloyalty, or breach of
trust against the Companies;
(vii) any attempt by Executive to secure any personal profit
(other than authorized compensation paid to Executive by
the Company) or convert any corporate opportunity to his
benefit in connection with the business of the Companies;
(viii) any failure by Executive to devote his entire normal
working time to the affairs of the Companies;
(ix) any activities of Executive that are determined to be
inimical to or contrary to the best interests of the
Companies; or
(x) the conduct or involvement by Executive in any business
other than the businesses of the Companies.
The Company shall provide Executive ten (10) days' prior written
notice of termination for justifiable cause; provided, however,
that the Company shall not be required to furnish any such prior
written notice in the event that the Board reasonably determines
in its sole and unreviewable discretion that immediate termination
of Executive without such prior written notice is necessary to
protect the best interests of the Companies. The written notice
shall set forth in reasonable detail the facts and circumstances
that are the basis for the termination for justifiable cause.
(d) If Executive is still employed under this Agreement at the end of
the Initial Term of this Agreement and if the parties hereto have
failed to reach a written agreement (signed by each of the parties
hereto) as to the continuation of Executive's employment,
Executive's employment under this Agreement will automatically
terminate upon expiration of the Initial Term. In such case:
(i) Executive's entitlement to further compensation or other
benefits under Paragraphs 5 and 6 of this Agreement shall
immediately cease upon expiration of the Initial Term; and
(ii) such termination shall be deemed a triggering event
entitling Executive to severance pay under the Company's
severance pay policy, but in no event shall the severance
pay due and payable to Executive be less than a total of
six (6) weeks' salary; provided, however, that Executive
shall not be entitled to any severance pay if (A)
Executive is provided by the Company, at least sixty (60)
days prior to the expiration of the Initial Term, a
written offer to renew this Agreement for at least an
additional one (1) year and Executive does not accept in
writing that offer at least thirty (30) days prior to the
expiration of the Initial Term, or (B) Executive remains
employed by any of the Companies.
8. Termination of Employment Under Other Circumstances.
(a) If (i) the Company terminates Executive's employment under this
Agreement other than for death, "disability", or "justifiable
cause", or Executive terminates Executive's employment under this
Agreement for "good reason" (as hereinafter defined), and (ii)
Executive does not remain employed by any of the Companies,
Executive shall:
(i) receive from the Company, within two (2) business days
after the termination, an amount in cash equal to the sum
of:
(A) all salary due and payable to Executive as of the
date of termination;
(B) pay for all accrued, but unused, vacation and sick
days through the date of termination;
(C) all salary that would have been due and payable to
Executive over the remaining period of the Initial
Term of this Agreement if Executive's employment had
not been terminated, based on Executive's annual
salary in effect at the date of termination. By way
of illustration, if Executive's annual salary at the
date of termination was $200,000.00 and the
termination occurred at the end of the seventh (7th)
month of the Initial Term, Executive would be
entitled to receive 17/24 x $400,000.00, or
$283,333.33; and
(D) all severance pay due and payable to Executive under
the Company's severance pay policy, but in no event
less than a total of six (6) weeks' salary, it being
understood that a termination under this
subparagraph (a), whether by the Company or
Executive, shall be deemed a triggering event
entitling Executive to severance pay under the
Company's severance pay policy;
(ii) receive from the Company all other benefits which
executive employees of the Company normally receive when
their employment is terminated by the Company without
"justifiable cause", which in no event shall be less than
the benefits such executive employees would have received
had their terminations occurred on the day immediately
preceding the Change of Control; and
(iii) with respect to any stock options for shares of the
Company's stock that Executive has been or may be
hereafter awarded, and notwithstanding the terms of the
Long-Term Incentive Compensation Plans under which these
options were or may be hereafter granted, be entitled to
fully exercise said stock options at any time up to and
including the ninetieth day after the expiration of the
remaining period of the Initial Term of this Agreement.
(b) For purposes of this Agreement, "good reason" for Executive to
terminate Executive's employment under this Agreement shall mean
any one or more of the following:
(i) both (A) without Executive's prior written consent, (1)
the assignment by the Company to Executive of duties and
responsibilities that are not at least substantially
equivalent to Executive's duties and responsibilities with
the Company immediately prior to the date of the Change of
Control, except in connection with the termination of
Executive's employment under this Agreement pursuant to
Paragraph 7 of this Agreement, or (2) the failure by the
Company to continue Executive in a position that is at
least substantially equivalent to the position held by
Executive with the Company immediately prior to the date
of the Change of Control, except in connection with the
termination of Executive's employment under this Agreement
pursuant to Paragraph 7 of this Agreement, and (B) the
continuance thereof for a period of twenty (20) days after
written notice thereof to the Company from Executive;
(ii) a failure by the Company to pay, or a reduction by the
Company of, the annual salary required to be paid to
Executive under Paragraph 5 of this Agreement;
(iii) a failure by the Company to pay any Incentive Bonus
required to be paid to Executive under Paragraph 6 of this
Agreement;
(iv) a failure by the Company to provide Executive with (A) the
opportunity to participate, on terms no less favorable
than those in effect for other executives holding a
similar position, in all of the Company's benefit and
executive compensation plans and programs or their
equivalent or (B) all other fringe benefits, or their
equivalent, from time to time in effect for the benefit of
other executives holding a similar position;
(v) without Executive's prior written consent, (A) the
relocation by the Company of the principal place of
Executive's employment to a location that is more than 100
miles from Executive's principal place of employment
immediately prior to the date of the Change of Control or
(B) the imposition by the Company of travel requirements
on Executive which are not substantially consistent with
the travel requirements applicable to Executive
immediately prior to the date of the Change of Control; or
(vi) any breach of Paragraph 15 of this Agreement by the
Company.
(c) If the Company terminates Executive's employment under this
Agreement other than for death, "disability", or "justifiable
cause", the Company shall provide Executive at least ten (10)
days' prior written notice of that termination, and no such
termination shall be effective unless that notice has been given.
The notice shall set forth in reasonable detail the facts and
circumstances that are the basis for the termination.
(d) At least sixty (60) days prior to the termination by Executive of
Executive's employment under this Agreement for "good reason",
Executive shall provide the President of the Company with written
notice of Executive's intention to terminate Executive's
employment, and no such termination shall be effective unless that
notice has been given. The notice shall set forth in reasonable
detail the facts and circumstances that are the basis for the
termination.
(e) If Executive's employment by the Company is terminated prior to a
Change of Control at the request of the individual or individuals
or Entity or Entities acquiring control of the Company, the
provisions of this Paragraph 8 shall apply as if a Change of
Control had occurred just prior to the date of termination.
9. No Mitigation.
Executive shall not be required to mitigate damages or the amount of any
payment provided for under this Agreement by seeking other employment or
otherwise, and payments and benefits due Executive under Paragraph 8(a)
of this Agreement shall not be subject to offset in respect of any
Claims which the Company has or may have against Executive. Without
limiting the generality of the foregoing, no payment otherwise required
under this Agreement shall be reduced because of any payment received by
Executive in connection with other employment of or other services
rendered by Executive after the date of termination of Executive's
employment under this Agreement.
10. Inventions, Discoveries, Etc.
(a) Executive shall promptly and fully disclose to the Company (with all
necessary detail for a complete understanding of the same) all
developments, know-how, discoveries, inventions, improvements,
concepts, ideas, writings, formulae, processes, and methods (whether
copyrightable, patentable, or otherwise) made, received, conceived,
acquired, or written by Executive (whether or not at the request of
or upon the suggestion of the Company) during the period of his
employment with any of the Companies, solely or jointly with others
(whether or not during working hours), in connection with or relating
to any activities of the Companies or any of their customers known
to him as a consequence of his employment (collectively referred to
as the "Subject Matter").
(b) Executive hereby assigns and transfers, and agrees to assign and
transfer, to the Company, all his right, title, and interest in and
to the Subject Matter. Executive further agrees to deliver to the
Company any and all drawings, notes, specifications, and data
relating to the Subject Matter and to execute, acknowledge, and
deliver all such further papers, including applications for
copyrights, patents, and similar protected ownership rights, as may
be necessary to obtain copyrights, patents, and similar protected
ownership rights with respect to the Subject Matter in any and all
countries and to vest title to any such copyrights, patents, and
similar protected ownership rights in the Company. Executive shall
assist the Company in obtaining such copyrights, patents, or similar
protected ownership rights during the period of his employment with
any of the Companies and any time thereafter and agrees to assist
the Company and to testify in its behalf in any prosecution or
litigation involving any of the Subject Matter during the period of
his employment with any of the Companies, and at any time
thereafter, in accordance with the provisions of subparagraph (c)
immediately below.
(c) At any time subsequent to the termination of Executive's employment
with any of the Companies or the expiration or termination of this
Agreement, if the Company requests in writing that Executive assist
the Company with respect to obtaining any patents, copyrights, or
similar protected ownership rights, or that Executive assist the
Company or testify in its behalf in connection with any prosecution
or litigation relating to the Subject Matter, the Company shall
reimburse Executive for Executive's reasonable out-of-pocket
expenses in connection with such assistance or testimony. In the
event the Company shall request Executive's assistance or testimony
as set forth hereunder, the Company agrees to use its best efforts to
assure that such assistance or testimony will neither require a
major or unreasonable portion of Executive's time nor substantially
interfere with his then current employment or business activities.
11. Non-Disclosure of Confidential Information.
(a) Executive shall not during his employment with any of the Companies
(nor at any time following termination of such employment or
expiration or termination of this Agreement), directly or
indirectly, intentionally or negligently disclose to or permit to be
known by any person or Entity any Confidential Information acquired
by him during the course of or in connection with his employment by
any of the Companies relating to (i) the Companies, (ii) the
officers, directors, employees, or agents of the Companies, (iii)
any client or customer of the Companies, or (iv) any Entity owned or
controlled, directly or indirectly, by any of the foregoing, or in
which any of the foregoing has a beneficial interest.
(b) All Confidential Information, regardless of how recorded, relating
to the Companies shall be the exclusive property of the Companies,
and Executive shall use his best efforts to prevent any publication
or disclosure thereof. Upon termination of Executive's employment
with any of the Companies or the expiration or termination of this
Agreement, all documents, records, reports, writings, and other
similar documents containing Confidential Information (including any
and all copies thereof) then in Executive's possession or control
shall be returned and left with the Company.
12. Right to Injunctive and Other Relief.
Executive recognizes that the services to be rendered by him to any of
the Companies are of special, unique, unusual, extraordinary, and
intellectual character, involving skill of the highest order, and that
such services are of special and particular value, the loss of which
cannot be adequately compensated for in damages. Executive further
agrees and declares that, because of his important role with the
Companies to date, clients' or customers' association of Executive with
the Companies, and the personal relationships Executive has with many of
such clients or customers, Executive's services to the Companies are
unique and extraordinary. In the event of a breach of any provision of
Paragraph 10 or 11 of this Agreement by Executive, the Companies shall
be entitled to injunctive relief and any other legal or equitable
remedies from a court of competent jurisdiction. Executive acknowledges
and agrees that any such breach will cause irreparable injury to the
Companies and that money damages will not provide an adequate remedy to
the Companies. In any action for injunctive relief, Executive shall not
be entitled to interpose a defense that the Companies have an adequate
remedy in a court of law. Executive agrees that the Companies may
recover by appropriate action the amount of the actual damages caused
the Companies by any failure, refusal, or neglect of Executive to
perform his agreements, representations, and warranties contained in
this Agreement. The remedies provided in this Agreement shall be deemed
cumulative and the exercise of one shall not preclude the exercise of
any other remedy at law or in equity for the same event or any other
event.
13. No Conflicting Agreements.
Executive represents and warrants that he is not a party to any
agreement, contract, or understanding, whether of employment or
otherwise, which would in any way restrict or prohibit him from
undertaking or performing his employment and other obligations in
accordance with the terms and conditions of this Agreement. Executive
further agrees to indemnify and hold harmless the Companies and their
past and present officers, directors, employees, agents, owners,
stockholders, representatives, and attorneys from and against and in
respect of any and all Claims alleging that (a) Executive is so
restricted or prohibited or (b) the Companies have committed a wrongful
act in negotiating with, and employing the services of, Executive.
14. Notices and Calendar Days.
All notices, requests, demands, and other communications provided for by
this Agreement shall be in writing and shall be personally delivered or
mailed (by registered or certified mail, return receipt requested,
postage prepaid) to the address of the party to whom intended as
specified below or to such different address as such party may have
fixed by a notice sent in accordance with this Paragraph.
(a) If to the Company, at:
Air & Water Technologies Corporation
P.O. Box 1500
Somerville, NJ 08876
Attention: President
with a copy to: General Counsel
(b) If to Executive, at:
1167 Skelp Level Road
Dowington, PA 19335
Any such notices shall be effective upon receipt, if personally
delivered, or three business days after mailing, if mailed.
Unless otherwise expressly provided, all references in this Agreement to
"days" mean "calendar days".
15. Assignability and Binding Effect.
(a) This Agreement shall inure to the benefit of and shall be binding
upon the heirs, executors, administrators, successors, and legal
representatives of Executive, and shall inure to the benefit of
and be binding upon the Company and its successors, assigns, and
legal representatives, but the obligations of Executive may not be
delegated and Executive may not assign, transfer, pledge,
encumber, hypothecate, or otherwise dispose of this Agreement, or
any of his rights under this Agreement, and any such attempted
delegation or disposition shall be null and void and without
effect. This Agreement shall also inure to the benefit of the
Companies and the Other Defendants (as defined in Paragraph 19
below) and their respective heirs, executors, administrators,
successors, assigns, and legal representatives.
(b) If the Company shall be merged into or consolidated with another
Entity, the provisions of this Agreement shall be binding upon and
inure to the benefit of the Entity surviving the merger or
resulting from the consolidation. The Company shall require any
successor, whether direct or indirect, by purchase, merger,
consolidation, or otherwise, to all or substantially all of the
business or assets of the Company, by agreement in form and
substance satisfactory to Executive, expressly to assume and agree
to perform this Agreement in the same manner and to the same
extent that the Company would have been required to perform this
Agreement if no succession had taken place. The provisions of
this Paragraph 15 shall continue to apply to each subsequent
employer of Executive bound by this Agreement in the event of any
merger, consolidation, or transfer of all or substantially all of
the business or assets of that subsequent employer.
16. Complete Understanding.
This Agreement constitutes the complete understanding between the
parties with respect to the employment of Executive hereunder, and no
statement, representation, warranty or covenant has been made by either
party with respect thereto except as expressly set forth herein. This
Agreement shall not be altered, modified, amended, or terminated except
by written instrument signed by each of the parties hereto.
17. Governing Law.
This Agreement and all provisions hereof shall be governed by and
construed in accordance with the laws of the State of New Jersey.
18. Severability.
Should any part, term, or provision of this Agreement be declared or be
determined by any court or tribunal of competent jurisdiction to be
illegal, invalid, or unenforceable, the legality, validity, and
enforceability of the remaining parts, terms, or provisions shall not be
affected thereby, and said illegal, unenforceable, or invalid part,
term, or provision shall be deemed not to be a part of this Agreement.
19. Arbitration.
(a) Except as provided in subparagraph (b) immediately below, any and
all Claims arising out of or relating to (i) this Agreement, (ii)
any breach of any provision of this Agreement, (iii) Executive's
employment at any time with any of the Companies, and/or (iv) the
termination of Executive's employment with any of the Companies
shall be settled by arbitration. Such arbitration proceeding
shall be conducted pursuant to the Employment Dispute Resolution
Rules of the American Arbitration Association ("AAA") then in
effect, by a single arbitrator, and shall be held in Somerset
County, New Jersey. The arbitrator shall not have the power to
award punitive damages. The cost of the arbitration proceeding
and the reasonable costs and attorneys' fees of the prevailing
party shall be paid by the non-prevailing party, with the dollar
amount of these costs and fees to be fixed by the arbitrator. The
judgment upon the award rendered by the arbitrator may be entered
in any court having competent jurisdiction thereof.
(b) Nothing in subparagraph (a) immediately above shall be construed
or interpreted to preclude the Companies from filing suit in a
court of competent jurisdiction in order to enforce their rights
and remedies under Paragraphs 10, 11 and/or 12 of this Agreement.
In any such suit, the court is empowered to and shall resolve any
dispute as to whether the Claims asserted by any of the Companies
are within the scope of Paragraphs 10, 11, and/or 12 of this
Agreement, and the court shall not refer such dispute to
arbitration under subparagraph (a) immediately above.
(c) With respect to the Claims of Executive that are within the scope
of subparagraph (a) above, if Executive has the same, similar, or
related Claims against any of the Companies' employee benefit
plans, trusts, committees, or boards or against any past or
present officers, directors, employees, agents, owners,
stockholders, trustees, fiduciaries, administrators, sponsors,
representatives, or attorneys of the Companies or the Companies'
employee benefit plans, trusts, committees, or boards
(collectively referred to as the "Other Defendants"), and if
Executive seeks to litigate such Claims against the Other
Defendants in a civil action or any other proceeding (including
before an administrative agency), Executive agrees that any or all
of said Other Defendants may compel Executive to arbitrate his
Claims against them pursuant to the terms of this Paragraph 19.
(d) The arbitrator selected by the parties pursuant to the AAA rules
shall have expertise in private industry employee relations and
shall hear and determine the case promptly. The burden of
persuasion shall at all times be upon the party seeking relief.
(e) In the event Executive files suit in a court of competent
jurisdiction and asserts that certain Claims are not subject to
arbitration under this Paragraph 19 because of the limitation on
the power of the arbitrator to award punitive damages (the
"Limitation"), the parties agree that they will request the court
to resolve that legal issue on an expedited basis, and if the
court rules in favor of Executive on the Limitation issue, the
parties agree as follows:
(i) the arbitration shall proceed as if this Paragraph 19 did
not contain such Limitation;
(ii) the parties will request the court to enter judgment in
favor of Executive on the Limitation issue, at which time
the Company may appeal that ruling;
(iii) in the event the arbitrator determines that Executive is
entitled to punitive damages, the punitive damages aspect
of the arbitrator's award will be stayed pending the
exhaustion or lapse of all rights of appeal of the Company
under subparagraph (e)(ii) immediately above; and
(iv) in the event an appellate court rules in favor of the
Company on the Limitation issue, the arbitrator shall
vacate the award of punitive damages.
The procedures set forth in this subparagraph (e) shall also apply
in the event Executive seeks relief in some other tribunal, such
as an administrative agency, and the Company files a civil action
to compel arbitration.
20. Waiver.
It is agreed that a waiver by either party of a breach of any provision
of this Agreement shall neither operate nor be construed as a waiver of
any subsequent breach hereof, or as a waiver of a breach of any other
provision.
21. Survival.
All representations and warranties herein shall survive any termination
of Executive's employment or termination or expiration of this
Agreement, and the termination of Executive's employment or the
termination or expiration of this Agreement shall not affect the
enforceability of Paragraphs 10, 11, 12, 13, and 19 of this Agreement,
which Paragraphs shall survive the termination or expiration of this
Agreement or the termination of Executive's employment.
22. Other Documents.
The parties agree to execute and deliver all such further instruments
and take such other and further action as may be reasonably necessary or
appropriate to carry out the provisions of this Agreement.
23. Paragraph Headings.
The paragraph headings contained in this Agreement are for reference
purposes only and shall not affect in any way the meaning or
interpretations of this Agreement.
IN WITNESS WHEREOF, the parties hereto set their hands as of the day and year
first above written.
AIR & WATER TECHNOLOGIES CORPORATION
By /s/ Arthur L. Glenn
---------------------------------
Witness:/s/
----------------------------
/s/ Ruthanne G. Neely
-----------------------------------
Ruthanne G. Neely
Witness:/s/ Donna Carherry
----------------------------
EXHIBIT A
EXECUTIVE RETENTION AGREEMENT
BETWEEN
RUTHANNE G. NEELY
AND
AIR & WATER TECHNOLOGIES CORPORATION
For Fiscal Year 1994, the approved business plan targets for purposes of
Paragraph 6 of the Agreement are as follows:
1. New Orders $
2. Contribution Margin $
3. Cash Flow $
EXECUTIVE RETENTION AGREEMENT
AGREEMENT, dated as of March 17, 1994, by and between Douglas A. Satzger
("Executive"), residing at 115 Fourth Avenue, #4-C, New York, NY 10003, and
Air & Water Technologies Corporation, a Delaware corporation (the "Company").
W I T N E S E T H:
WHEREAS, Executive is a skilled and dedicated employee who has important
management responsibilities and talents which benefit the Company and the
Company desires to ensure that it will continue to have the benefit of
Executive's services, and Executive desires to continue to be employed by the
Company;
WHEREAS, the Company has determined that Executive's ability to perform
Executive's responsibilities and utilize Executive's talents for the
benefit of the Company, and the Company's ability to retain Executive as a
valued employee, will be significantly enhanced if Executive is provided
with fair and reasonable protection from the risks of a Change of Control
of the Company;
NOW, THEREFORE, in consideration of the foregoing and the mutual covenants,
understandings, and agreements herein contained, the parties hereby agree as
follows:
1. General Definitions.
As used in this Agreement:
(a) "Board" means the Board of Directors of the Company.
(b) "Change of Control" means and includes the occurrence of any one
or more of the following:
(i) Continuing Directors no longer constitute at least
two-thirds of the Directors constituting the Board;
(ii) Any person or group of persons (as defined in Rule 13d-5
under the Exchange Act) becomes the beneficial owner,
directly or indirectly, of 25% or more of the Company's
then outstanding Common Stock or 25% or more of the voting
power of the Company's then outstanding securities entitled
generally to vote for the election of Directors;
(iii) The approval by the Company's stockholders of the merger
or consolidation of the Company with any other Entity, the
sale of all or substantially all of the assets of the
Company, or the liquidation or dissolution of the Company,
unless, in the case of a merger or consolidation, the
Continuing Directors in office immediately prior to the
merger or consolidation will constitute at least
two-thirds of the directors constituting the board of
directors of the surviving Entity of the merger or
consolidation and any parent (as that term is defined in
Rule 12b-2 under the Exchange Act) of that Entity; or
(iv) At least two-thirds of the Continuing Directors in office
immediately prior to any other action taken or proposed to
be taken by the Company's stockholders or by the Board
determines that such action constitutes, or that the
proposed action, if taken, would constitute, a Change of
Control of the Company and the action is taken.
(c) "Claim" or "Claims" means and includes one or more charges,
complaints, claims, grievances (including grievances filed
pursuant to a collective bargaining agreement), liabilities,
obligations, promises, covenants, agreements, controversies,
damages, injuries, actions, causes of action, suits, rights,
demands, deficiencies, levies, assessments, attachments,
executions, judgments, awards, recoveries, costs, losses,
debts, and expenses (including attorneys' fees and costs
actually incurred) of any kind or nature whatsoever, whether
known or unknown, suspected or unsuspected, contingent or not
contingent, liquidated or unliquidated.
(d) "Common Stock" means the Class A Common Stock of the Company.
(e) "Companies" means and includes the Company and all of its
affiliated Entities, including, but not limited to, parent and
subsidiary companies (whether wholly or partially owned and
whether direct or indirect), partnerships, and joint ventures.
(f) "Confidential Information" means and includes, without limitation,
business and proprietary information and technology, trade
secrets, patented processes, research and development data,
know-how, methods of doing business, and technical information of
the Companies; financial information not previously recorded in
public releases or filings; information regarding costs, profits,
markets, sales, products, market studies and forecasts, pricing
policies, key personnel, other business affairs and methods,
customers and customer prospects, business plans, competitive
analyses, and prospects and opportunities (such as possible
expansions or contractions of business operations) which have been
discussed or considered by the Companies' management; the
substance of agreements with customers and others, marketing and
dealership arrangements, servicing and training programs and
arrangements, and customer lists; and information concerning
operational strengths or weaknesses of the Companies' operating
units, all to the extent not previously revealed to the public or
to the trade by the Companies' management.
(g) "Continuing Director" means any person who either (i) is a
Director on the date of this Agreement or (ii) was designated as a
Continuing Director by a majority of the Continuing Directors.
(h) "Director" means a member of the Board.
(i) "Entity" or "Entities" means and includes one or more
organizations of any kind or nature whatsoever, including, without
limitation, corporations, companies, partnerships, joint ventures,
sole proprietorships, and divisions.
(j) "Exchange Act" means the Securities Exchange Act of 1934, as
amended.
2. Employment.
The Company hereby employs Executive and Executive hereby accepts
such employment for the term set forth in Paragraph 4 below, subject
to and in accordance with all of the terms and conditions of this
Agreement. Executive shall initially hold the position of Senior
Vice President, General Counsel and Secretary of the Company and
shall report to the the President, with the approval of the Company's
Chief Executive Officer, may change Executive's title and Executive's
responsibilities in the best interests of the Company and its
organizational development.
3. Duties and Responsibilities.
(a) Executive shall perform such duties and functions for the
Companies as are customarily performed by the Senior Vice
President, General Counsel and Secretary, or such other duties or
functions as the Company's President, with the approval of the
Company's Chief Executive Officer, shall assign Executive from
time to time in the best interest of the Company to maximize its
growth and development. In the performance of his duties,
Executive shall comply with the policies and procedures of the
Company (presently in effect or as may be reasonably modified or
established hereafter) and be subject to the direction of the
Chief Executive Officer, the President, and the Board.
(b) Executive agrees to devote his entire normal working time,
attention, and energies to the performance of his duties.
Executive shall not directly or indirectly, alone or as a member
of any partnership, or as an officer, director, employee, or agent
of any Entity, be actively engaged in or concerned with any other
duties or pursuits (whether or not for gain, profit, or other
pecuniary advantage) which interfere with the performance of his
duties hereunder, or which may be inimical to or contrary to the
best interests of the Company. Nothing in this subparagraph (b)
shall be construed as preventing Executive from investing
Executive's personal assets in any way that does not either
require the rendering of services by Executive to or on behalf of
the Entities in which the investments are made or result in any
other conflict of Executive's interest or time.
(c) Executive shall use his best efforts, skills, and abilities to
promote the Company's best interests.
4. Term.
(a) Except as provided in subparagraph (b) immediately below,
Executive's employment under this Agreement shall commence on the
date of the occurrence of a Change of Control and shall continue
for a period of two (2) years from and after such date (the
"Initial Term"), subject, however, to prior termination as
provided in Paragraphs 7 and 8 of this Agreement. This Agreement
may be renewed or extended upon such terms and conditions as the
parties shall mutually agree to in a written instrument signed by
each of the parties hereto, but neither party hereto shall be
under any obligation to renew this Agreement.
(b) Executive's employment under this Agreement will not commence on
the date of the occurrence of a Change of Control if on the day
immediately prior to the Change of Control Executive is no
longer employed by the Company, unless Executive's employment
by the Company is terminated prior to the Change of Control at
the request of the individual or individuals or Entity or
Entities acquiring control of the Company.
5. Compensation.
During the Initial Term of Executive's employment under this Agreement,
Executive shall be paid by the Company an annual salary of at least
$200,000.00. The salary paid to Executive may be reviewed by the Board
and may be increased at the sole and unreviewable discretion of the
Board, which shall take into account the earnings and overall
productivity of the Company, available resources, the performance of
Executive, the cost of living, and such other factors as it deems
relevant. The Board shall have no obligation to make any adjustments in
the salary of Executive. The salary to be paid to Executive under this
Agreement shall be payable in equal monthly installments in accordance
with the Company's customary payroll practices.
6. Other Benefits.
(a) During the Initial Term of Executive's employment under this
Agreement, Executive shall be entitled to such vacations, and to
participate in any other fringe benefits provided by the Company
to its key employees (including any bonus, profit sharing,
pension, and health insurance plans in accordance with and subject
to the terms of such plans), as may be determined from time to
time by the Board.
(b) During the Initial Term of Executive's employment under this
Agreement, there shall be established an Incentive Bonus Program
for Fiscal Years 1994 and 1995. In each such fiscal year,
Executive shall be eligible to earn up to $30,000.00 in bonuses,
calculated as follows:
(i) if Executive meets or exceeds the fiscal-year new orders
target for Executive's Operating Group, as set forth in
the approved business plan, Executive shall earn
$10,000.00;
(ii) if Executive meets or exceeds the fiscal-year contribution
margin target for Executive's Operating Group, as set
forth in the approved business plan, Executive shall earn
$10,000.00; and
(iii) if Executive meets or exceeds the fiscal-year cash flow
target for Executive's Operating Group, as set forth in
the approved business plan, Executive shall earn
$10,000.00.
Any Incentive Bonus earned during a fiscal year will be paid
during the first half of the following fiscal year and is subject
to reduction in accordance with subparagraph (c) immediately
below. The three targets applicable to Executive for Fiscal Year
1994 are set forth in Exhibit A to this Agreement. The three
targets applicable to Executive for Fiscal Year 1995 will be
established by the President of the Company, with the approval of
the Chief Executive Officer of the Company, after completion of
the Fiscal Year 1995 business plan and submission of the business
plan to the Board, and the President shall provide Executive a
written statement, in a form similar to Exhibit A, of the Fiscal
Year 1995 targets.
(c) If Executive is entitled to receive compensation under the
Company's Fiscal Year 1994 or 1995 Management Incentive Plan (or
such similar plan by whatever name it shall be known as), the
Incentive Bonus that Executive may be eligible for under
subparagraph (b) immediately above in Fiscal Year 1994 or 1995
shall be reduced as follows:
(i) if the actual total compensation payable to Executive
under the Management Incentive Plan is less than or equal
to thirty (30) percent of Executive's annual salary, then
Executive shall receive one hundred (100) percent of the
total Incentive Bonus earned in accordance with
subparagraph (b) immediately above;
(ii) if the actual total compensation payable to Executive
under the management Incentive Plan is greater than thirty
(30) percent but less than forty (40) percent of
Executive's annual salary, then Executive shall receive
only two-thirds of the total Incentive Bonus earned in
accordance with subparagraph (b) immediately above; or
(iii) if the actual total compensation payable to Executive
under the Management Incentive Plan is equal to or greater
than forty (40) percent of Executive's annual salary, then
Executive shall receive only one-third of the total
Incentive Bonus earned in accordance with subparagraph (b)
immediately above.
7. Termination of Employment by the Company for Death, Dis-ability, or
Justifiable Cause, or by Executive Without Good Reason, or Upon
Expiration of the Initial Term .
(a) The Company shall have the right to terminate the Executive's
employment under this Agreement upon the occurrence any one or
more of the following events:
(i) the death of Executive (in which case said employment
terminates immediately upon death);
(ii) the "disability" of Executive (as hereinafter defined); or
(iii) the Board determines in its sole and unreview-able
discretion (acting reasonably and in good faith) that
"justifiable cause" (as hereinafter defined) exists for
the termination of Executive's employment.
Executive shall have the right to terminate Executive's employment
under this Agreement without "good reason" (as defined in
Paragraph 8 below) upon sixty (60) days' prior written notice to
the President of the Company. No such termination by Executive
shall be effective unless that notice has been given.
Except as provided in subparagraph (b) immediately below, upon
termination of the employment of Executive under any of the
circumstances set forth in this subparagraph (a), Executive's
entitlement to further compensation or other benefits under
Paragraphs 5 and 6 of this Agreement shall immediately cease.
(b) For the purposes of this Agreement, the term "disability" shall
mean the inability of Executive, due to illness, accident, or
any other physical or mental incapacity, to perform his duties
or fulfill his obligations under this Agreement in a normal
manner for a period of any three (3) consecutive months or for
a total of six (6) months (whether or not consecutive) in any
twelve (12) month period during the Initial Term of this
Agreement, it being understood that, notwithstanding any such
inability to perform his duties, Executive shall be entitled to
receive his compensation as provided herein until the
termination of his employment for disability. The Company
shall provide Executive ten days' prior written notice of any
determination by the Board that Executive is disabled.
(c) For purposes of this Agreement, "justifiable cause" for
termination by the Company of Executive's employment shall means
any one or more of the following:
(i) any intentional breach by Executive of the performance of
any of his duties pursuant to this Agreement;
(ii) any intentional or negligent disclosure by Executive to
any person or Entity (other than the Companies) and
other than in the ordinary course of business of any
Confidential Information of the Companies;
(iii) any knowing violation or reckless disregard by Executive
of any law, governmental regulation, or judicial decree
which has caused substantial injury to the Companies,
financial or otherwise;
(iv) Executive's interference with or
endeavor to entice away from the Companies any client or
customer, or solicitation of employment of any of the
Companies' officers, directors, employees, or agents;
(v) Executive's conviction of a felony, as evidenced by a
binding and final judgment, order, or decree of a court of
competent jurisdiction, in effect after exhaustion or
lapse of all rights of appeal;
(vi) the commission by Executive of any act of fraud, or
material act of malfeasance, disloyalty, or breach of
trust against the Companies;
(vii) any attempt by Executive to secure any personal profit
(other than authorized compensation paid to Executive by
the Company) or convert any corporate opportunity to his
benefit in connection with the business of the Companies;
(viii) any failure by Executive to devote his entire normal
working time to the affairs of the Companies;
(ix) any activities of Executive that are determined to be
inimical to or contrary to the best interests of the
Companies; or
(x) the conduct or involvement by Executive in any business
other than the businesses of the Companies.
The Company shall provide Executive ten (10) days' prior written
notice of termination for justifiable cause; provided, however,
that the Company shall not be required to furnish any such prior
written notice in the event that the Board reasonably determines
in its sole and unreviewable discretion that immediate termination
of Executive without such prior written notice is necessary to
protect the best interests of the Companies. The written notice
shall set forth in reasonable detail the facts and circumstances
that are the basis for the termination for justifiable cause.
(d) If Executive is still employed under this Agreement at the end of
the Initial Term of this Agreement and if the parties hereto have
failed to reach a written agreement (signed by each of the parties
hereto) as to the continuation of Executive's employment,
Executive's employment under this Agreement will automatically
terminate upon expiration of the Initial Term. In such case:
(i) Executive's entitlement to further compensation or other
benefits under Paragraphs 5 and 6 of this Agreement shall
immediately cease upon expiration of the Initial Term; and
(ii) such termination shall be deemed a triggering event
entitling Executive to severance pay under the Company's
severance pay policy, but in no event shall the severance
pay due and payable to Executive be less than a total of
six (6) weeks' salary; provided, however, that Executive
shall not be entitled to any severance pay if (A)
Executive is provided by the Company, at least sixty (60)
days prior to the expiration of the Initial Term, a
written offer to renew this Agreement for at least an
additional one (1) year and Executive does not accept in
writing that offer at least thirty (30) days prior to the
expiration of the Initial Term, or (B) Executive remains
employed by any of the Companies.
8. Termination of Employment Under Other Circumstances.
(a) If (i) the Company terminates Executive's employment under this
Agreement other than for death, "disability", or "justifiable
cause", or Executive terminates Executive's employment under this
Agreement for "good reason" (as hereinafter defined), and (ii)
Executive does not remain employed by any of the Companies,
Executive shall:
(i) receive from the Company, within two (2) business days
after the termination, an amount in cash equal to the sum
of:
(A) all salary due and payable to Executive as of the
date of termination;
(B) pay for all accrued, but unused, vacation and sick
days through the date of termination;
(C) all salary that would have been due and payable to
Executive over the remaining period of the Initial
Term of this Agreement if Executive's employment had
not been terminated, based on Executive's annual
salary in effect at the date of termination. By way
of illustration, if Executive's annual salary at the
date of termination was $200,000.00 and the
termination occurred at the end of the seventh (7th)
month of the Initial Term, Executive would be
entitled to receive 17/24 x $400,000.00, or
$283,333.33; and
(D) all severance pay due and payable to Executive under
the Company's severance pay policy, but in no event
less than a total of six (6) weeks' salary, it being
understood that a termination under this
subparagraph (a), whether by the Company or
Executive, shall be deemed a triggering event
entitling Executive to severance pay under the
Company's severance pay policy;
(ii) receive from the Company all other benefits which
executive employees of the Company normally receive when
their employment is terminated by the Company without
"justifiable cause", which in no event shall be less than
the benefits such executive employees would have received
had their terminations occurred on the day immediately
preceding the Change of Control; and
(iii) with respect to any stock options for shares of the
Company's stock that Executive has been or may be
hereafter awarded, and notwithstanding the terms of the
Long-Term Incentive Compensation Plans under which these
options were or may be hereafter granted, be entitled to
fully exercise said stock options at any time up to and
including the ninetieth day after the expiration of the
remaining period of the Initial Term of this Agreement.
(b) For purposes of this Agreement, "good reason" for Executive to
terminate Executive's employment under this Agreement shall mean
any one or more of the following:
(i) both (A) without Executive's prior written consent, (1)
the assignment by the Company to Executive of duties and
responsibilities that are not at least substantially
equivalent to Executive's duties and responsibilities with
the Company immediately prior to the date of the Change of
Control, except in connection with the termination of
Executive's employment under this Agreement pursuant to
Paragraph 7 of this Agreement, or (2) the failure by the
Company to continue Executive in a position that is at
least substantially equivalent to the position held by
Executive with the Company immediately prior to the date
of the Change of Control, except in connection with the
termination of Executive's employment under this Agreement
pursuant to Paragraph 7 of this Agreement, and (B) the
continuance thereof for a period of twenty (20) days after
written notice thereof to the Company from Executive;
(ii) a failure by the Company to pay, or a reduction by the
Company of, the annual salary required to be paid to
Executive under Paragraph 5 of this Agreement;
(iii) a failure by the Company to pay any Incentive Bonus
required to be paid to Executive under Paragraph 6 of this
Agreement;
(iv) a failure by the Company to provide Executive with (A) the
opportunity to participate, on terms no less favorable
than those in effect for other executives holding a
similar position, in all of the Company's benefit and
executive compensation plans and programs or their
equivalent or (B) all other fringe benefits, or their
equivalent, from time to time in effect for the benefit of
other executives holding a similar position;
(v) without Executive's prior written consent, (A) the
relocation by the Company of the principal place of
Executive's employment to a location that is more than 100
miles from Executive's principal place of employment
immediately prior to the date of the Change of Control or
(B) the imposition by the Company of travel requirements
on Executive which are not substantially consistent with
the travel requirements applicable to Executive
immediately prior to the date of the Change of Control; or
(vi) any breach of Paragraph 15 of this Agreement by the
Company.
(c) If the Company terminates Executive's employment under this
Agreement other than for death, "disability", or "justifiable
cause", the Company shall provide Executive at least ten (10)
days' prior written notice of that termination, and no such
termination shall be effective unless that notice has been given.
The notice shall set forth in reasonable detail the facts and
circumstances that are the basis for the termination.
(d) At least sixty (60) days prior to the termination by Executive of
Executive's employment under this Agreement for "good reason",
Executive shall provide the President of the Company with written
notice of Executive's intention to terminate Executive's
employment, and no such termination shall be effective unless that
notice has been given. The notice shall set forth in reasonable
detail the facts and circumstances that are the basis for the
termination.
(e) If Executive's employment by the Company is terminated prior to a
Change of Control at the request of the individual or individuals
or Entity or Entities acquiring control of the Company, the
provisions of this Paragraph 8 shall apply as if a Change of
Control had occurred just prior to the date of termination.
9. No Mitigation.
Executive shall not be required to mitigate damages or the amount of any
payment provided for under this Agreement by seeking other employment or
otherwise, and payments and benefits due Executive under Paragraph 8(a)
of this Agreement shall not be subject to offset in respect of any
Claims which the Company has or may have against Executive. Without
limiting the generality of the foregoing, no payment otherwise required
under this Agreement shall be reduced because of any payment received by
Executive in connection with other employment of or other services
rendered by Executive after the date of termination of Executive's
employment under this Agreement.
10. Inventions, Discoveries, Etc.
(a) Executive shall promptly and fully disclose to the Company (with
all necessary detail for a complete understanding of the same)
all developments, know-how, discoveries, inventions,
improvements, concepts, ideas, writings, formulae, processes, and
methods (whether copyrightable, patentable, or otherwise) made,
received, conceived, acquired, or written by Executive (whether
or not at the request of or upon the suggestion of the Company)
during the period of his employment with any of the Companies,
solely or jointly with others (whether or not during working
hours), in connection with or relating to any activities of the
Companies or any of their customers known to him as a consequence
of his employment (collectively referred to as the "Subject
Matter").
(b) Executive hereby assigns and transfers, and agrees to assign and
transfer, to the Company, all his right, title, and interest in and
to the Subject Matter. Executive further agrees to deliver to the
Company any and all drawings, notes, specifications, and data
relating to the Subject Matter and to execute, acknowledge, and
deliver all such further papers, including applications for
copyrights, patents, and similar protected ownership rights, as may
be necessary to obtain copyrights, patents, and similar protected
ownership rights with respect to the Subject Matter in any and all
countries and to vest title to any such copyrights, patents, and
similar protected ownership rights in the Company. Executive shall
assist the Company in obtaining such copyrights, patents, or similar
protected ownership rights during the period of his employment with
any of the Companies and any time thereafter and agrees to assist
the Company and to testify in its behalf in any prosecution or
litigation involving any of the Subject Matter during the period of
his employment with any of the Companies, and at any time
thereafter, in accordance with the provisions of subparagraph (c)
immediately below.
(c) At any time subsequent to the termination of Executive's employment
with any of the Companies or the expiration or termination of this
Agreement, if the Company requests in writing that Executive assist
the Company with respect to obtaining any patents, copyrights, or
similar protected ownership rights, or that Executive assist the
Company or testify in its behalf in connection with any prosecution
or litigation relating to the Subject Matter, the Company shall
reimburse Executive for Executive's reasonable out-of-pocket
expenses in connection with such assistance or testimony. In the
event the Company shall request Executive's assistance or testimony
as set forth hereunder, the Company agrees to use its best efforts to
assure that such assistance or testimony will neither require a
major or unreasonable portion of Executive's time nor substantially
interfere with his then current employment or business activities.
11. Non-Disclosure of Confidential Information.
(a) Executive shall not during his employment with any of the Companies
(nor at any time following termination of such employment or
expiration or termination of this Agreement), directly or
indirectly, intentionally or negligently disclose to or permit to be
known by any person or Entity any Confidential Information acquired
by him during the course of or in connection with his employment by
any of the Companies relating to (i) the Companies, (ii) the
officers, directors, employees, or agents of the Companies, (iii)
any client or customer of the Companies, or (iv) any Entity owned or
controlled, directly or indirectly, by any of the foregoing, or in
which any of the foregoing has a beneficial interest.
(b) All Confidential Information, regardless of how recorded, relating
to the Companies shall be the exclusive property of the Companies,
and Executive shall use his best efforts to prevent any publication
or disclosure thereof. Upon termination of Executive's employment
with any of the Companies or the expiration or termination of this
Agreement, all documents, records, reports, writings, and other
similar documents containing Confidential Information (including any
and all copies thereof) then in Executive's possession or control
shall be returned and left with the Company.
12. Right to Injunctive and Other Relief.
Executive recognizes that the services to be rendered by him to any of
the Companies are of special, unique, unusual, extraordinary, and
intellectual character, involving skill of the highest order, and that
such services are of special and particular value, the loss of which
cannot be adequately compensated for in damages. Executive further
agrees and declares that, because of his important role with the
Companies to date, clients' or customers' association of Executive with
the Companies, and the personal relationships Executive has with many of
such clients or customers, Executive's services to the Companies are
unique and extraordinary. In the event of a breach of any provision of
Paragraph 10 or 11 of this Agreement by Executive, the Companies shall
be entitled to injunctive relief and any other legal or equitable
remedies from a court of competent jurisdiction. Executive acknowledges
and agrees that any such breach will cause irreparable injury to the
Companies and that money damages will not provide an adequate remedy to
the Companies. In any action for injunctive relief, Executive shall not
be entitled to interpose a defense that the Companies have an adequate
remedy in a court of law. Executive agrees that the Companies may
recover by appropriate action the amount of the actual damages caused
the Companies by any failure, refusal, or neglect of Executive to
perform his agreements, representations, and warranties contained in
this Agreement. The remedies provided in this Agreement shall be deemed
cumulative and the exercise of one shall not preclude the exercise of
any other remedy at law or in equity for the same event or any other
event.
13. No Conflicting Agreements.
Executive represents and warrants that he is not a party to any
agreement, contract, or understanding, whether of employment or
otherwise, which would in any way restrict or prohibit him from
undertaking or performing his employment and other obligations in
accordance with the terms and conditions of this Agreement. Executive
further agrees to indemnify and hold harmless the Companies and their
past and present officers, directors, employees, agents, owners,
stockholders, representatives, and attorneys from and against and in
respect of any and all Claims alleging that (a) Executive is so
restricted or prohibited or (b) the Companies have committed a wrongful
act in negotiating with, and employing the services of, Executive.
14. Notices and Calendar Days.
All notices, requests, demands, and other communications provided for by
this Agreement shall be in writing and shall be personally delivered or
mailed (by registered or certified mail, return receipt requested,
postage prepaid) to the address of the party to whom intended as
specified below or to such different address as such party may have
fixed by a notice sent in accordance with this Paragraph.
(a) If to the Company, at:
Air & Water Technologies Corporation
P.O. Box 1500
Somerville, NJ 08876
Attention: President
with a copy to: General Counsel
(b) If to Executive, at:
115 Fourth Avenue, #4-C
New York, NY 10003
Any such notices shall be effective upon receipt, if personally
delivered, or three business days after mailing, if mailed.
Unless otherwise expressly provided, all references in this Agreement to
"days" mean "calendar days".
15. Assignability and Binding Effect.
(a) This Agreement shall inure to the benefit of and shall be binding
upon the heirs, executors, administrators, successors, and legal
representatives of Executive, and shall inure to the benefit of
and be binding upon the Company and its successors, assigns, and
legal representatives, but the obligations of Executive may not be
delegated and Executive may not assign, transfer, pledge,
encumber, hypothecate, or otherwise dispose of this Agreement, or
any of his rights under this Agreement, and any such attempted
delegation or disposition shall be null and void and without
effect. This Agreement shall also inure to the
benefit of the Companies and the Other Defendants (as defined in
Paragraph 19 below) and their respective heirs, executors,
administrators, successors, assigns, and legal representatives.
(b) If the Company shall be merged into or consolidated with another
Entity, the provisions of this Agreement shall be binding upon and
inure to the benefit of the Entity surviving the merger or
resulting from the consolidation. The Company shall require any
successor, whether direct or indirect, by purchase, merger,
consolidation, or otherwise, to all or substantially all of the
business or assets of the Company, by agreement in form and
substance satisfactory to Executive, expressly to assume and agree
to perform this Agreement in the same manner and to the same
extent that the Company would have been required to perform this
Agreement if no succession had taken place. The provisions of
this Paragraph 15 shall continue to apply to each subsequent
employer of Executive bound by this Agreement in the event of any
merger, consolidation, or transfer of all or substantially all of
the business or assets of that subsequent employer.
16. Complete Understanding.
This Agreement constitutes the complete understanding between the
parties with respect to the employment of Executive hereunder, and no
statement, representation, warranty or covenant has been made by either
party with respect thereto except as expressly set forth herein. This
Agreement shall not be altered, modified, amended, or terminated except
by written instrument signed by each of the parties hereto.
17. Governing Law.
This Agreement and all provisions hereof shall be governed by and
construed in accordance with the laws of the State of New Jersey.
18. Severability.
Should any part, term, or provision of this Agreement be declared or be
determined by any court or tribunal of competent jurisdiction to be
illegal, invalid, or unenforceable, the legality, validity, and
enforceability of the remaining parts, terms, or provisions shall not be
affected thereby, and said illegal, unenforceable, or invalid part,
term, or provision shall be deemed not to be a part of this Agreement.
19. Arbitration.
(a) Except as provided in subparagraph (b) immediately below, any and
all Claims arising out of or relating to (i) this Agreement, (ii)
any breach of any provision of this Agreement, (iii) Executive's
employment at any time with any of the Companies, and/or (iv) the
termination of Executive's employment with any of the Companies
shall be settled by arbitration. Such arbitration proceeding
shall be conducted pursuant to the Employment Dispute Resolution
Rules of the American Arbitration Association ("AAA") then in
effect, by a single arbitrator, and shall be held in Somerset
County, New Jersey. The arbitrator shall not have the power to
award punitive damages. The cost of the arbitration proceeding
and the reasonable costs and attorneys' fees of the prevailing
party shall be paid by the non-prevailing party, with the dollar
amount of these costs and fees to be fixed by the arbitrator. The
judgment upon the award rendered by the arbitrator may be entered
in any court having competent jurisdiction thereof.
(b) Nothing in subparagraph (a) immediately above shall be construed
or interpreted to preclude the Companies from filing suit in a
court of competent jurisdiction in order to enforce their rights
and remedies under Paragraphs 10, 11 and/or 12 of this Agreement.
In any such suit, the court is empowered to and shall resolve any
dispute as to whether the Claims asserted by any of the Companies
are within the scope of Paragraphs 10, 11, and/or 12 of this
Agreement, and the court shall not refer such dispute to
arbitration under subparagraph (a) immediately above.
(c) With respect to the Claims of Executive that are within the scope
of subparagraph (a) above, if Executive has the same, similar, or
related Claims against any of the Companies' employee benefit
plans, trusts, committees, or boards or against any past or
present officers, directors, employees, agents, owners,
stockholders, trustees, fiduciaries, administrators, sponsors,
representatives, or attorneys of the Companies or the Companies'
employee benefit plans, trusts, committees, or boards
(collectively referred to as the "Other Defendants"), and if
Executive seeks to litigate such Claims against the Other
Defendants in a civil action or any other proceeding (including
before an administrative agency), Executive agrees that any or all
of said Other Defendants may compel Executive to arbitrate his
Claims against them pursuant to the terms of this Paragraph 19.
(d) The arbitrator selected by the parties pursuant to the AAA rules
shall have expertise in private industry employee relations and
shall hear and determine the case promptly. The burden of
persuasion shall at all times be upon the party seeking relief.
(e) In the event Executive files suit in a court of competent
jurisdiction and asserts that certain Claims are not subject to
arbitration under this Paragraph 19 because of the limitation on
the power of the arbitrator to award punitive damages (the
"Limitation"), the parties agree that they will request the court
to resolve that legal issue on an expedited basis, and if the
court rules in favor of Executive on the Limitation issue, the
parties agree as follows:
(i) the arbitration shall proceed as if this Paragraph 19 did
not contain such Limitation;
(ii) the parties will request the court to enter judgment in
favor of Executive on the Limitation issue, at which time
the Company may appeal that ruling;
(iii) in the event the arbitrator determines that Executive is
entitled to punitive damages, the punitive damages aspect
of the arbitrator's award will be stayed pending the
exhaustion or lapse of all rights of appeal of the Company
under subparagraph (e)(ii) immediately above; and
(iv) in the event an appellate court rules in favor of the
Company on the Limitation issue, the arbitrator shall
vacate the award of punitive damages.
The procedures set forth in this subparagraph (e) shall also apply
in the event Executive seeks relief in some other tribunal, such
as an administrative agency, and the Company files a civil action
to compel arbitration.
20. Waiver.
It is agreed that a waiver by either party of a breach of any provision
of this Agreement shall neither operate nor be construed as a waiver of
any subsequent breach hereof, or as a waiver of a breach of any other
provision.
21. Survival.
All representations and warranties herein shall survive any termination
of Executive's employment or termination or expiration of this
Agreement, and the termination of Executive's employment or the
termination or expiration of this Agreement shall not affect the
enforceability of Paragraphs 10, 11, 12, 13, and 19 of this Agreement,
which Paragraphs shall survive the termination or expiration of this
Agreement or the termination of Executive's employment.
22. Other Documents.
The parties agree to execute and deliver all such further instruments
and take such other and further action as may be reasonably necessary or
appropriate to carry out the provisions of this Agreement.
23. Paragraph Headings.
The paragraph headings contained in this Agreement are for reference
purposes only and shall not affect in any way the meaning or
interpretations of this Agreement.
IN WITNESS WHEREOF, the parties hereto set their hands as of the day and year
first above written.
AIR & WATER TECHNOLOGIES CORPORATION
By /s/ Eckardt C. Beck
-----------------------------
Witness: /s/ J. Morena
----------------------
/s/ Douglas A. Satzger
--------------------------------
Douglas A. Satzger
Witness: /s/ J. Morena
----------------------
EXHIBIT A
EXECUTIVE RETENTION AGREEMENT
BETWEEN
DOUGLAS A. SATZGER
AND
AIR & WATER TECHNOLOGIES CORPORATION
For Fiscal Year 1994, the approved business plan targets for purposes of
Paragraph 6 of the Agreement are as follows:
1. New Orders $
2. Contribution Margin $
3. Cash Flow $
EXECUTIVE RETENTION AGREEMENT
AGREEMENT, dated as of March 17, 1994, by and between William R. Lewis
("Executive"), residing at 636 Black Rock Road, Bryn Mawr, Pennsylvania 19010,
and Air & Water Technologies Corporation, a Delaware corporation (the
"Company").
W I T N E S E T H:
WHEREAS, Executive is a skilled and dedicated employee who has important
management responsibilities and talents which benefit the Company and the
Company desires to ensure that it will continue to have the benefit of
Executive's services, and Executive desires to continue to be employed by the
Company;
WHEREAS, the Company has determined that Executive's ability to perform
Executive's responsibilities and utilize Executive's talents for the
benefit of the Company, and the Company's ability to retain Executive as a
valued employee, will be significantly enhanced if Executive is provided
with fair and reasonable protection from the risks of a Change of Control
of the Company;
NOW, THEREFORE, in consideration of the foregoing and the mutual covenants,
understandings, and agreements herein contained, the parties hereby agree as
follows:
1. General Definitions.
As used in this Agreement:
(a) "Board" means the Board of Directors of the Company.
(b) "Change of Control" means and includes the occurrence of any one
or more of the following:
(i) Continuing Directors no longer constitute at least
two-thirds of the Directors constituting the Board;
(ii) Any person or group of persons (as defined in Rule 13d-5
under the Exchange Act) becomes the beneficial owner,
directly or indirectly, of 25% or more of the Company's
then outstanding Common Stock or 25% or more of the
voting power of the Company's then outstanding
securities entitled generally to vote for the election
of Directors;
(iii) The approval by the Company's stockholders of the merger
or consolidation of the Company with any other Entity, the
sale of all or substantially all of the assets of the
Company, or the liquidation or dissolution of the Company,
unless, in the case of a merger or consolidation, the
Continuing Directors in office immediately prior to the
merger or consolidation will constitute at least
two-thirds of the directors constituting the board of
directors of the surviving Entity of the merger or
consolidation and any parent (as that term is defined in
Rule 12b-2 under the Exchange Act) of that Entity; or
(iv) At least two-thirds of the Continuing Directors in office
immediately prior to any other action taken or proposed to
be taken by the Company's stockholders or by the Board
determines that such action constitutes, or that the
proposed action, if taken, would constitute, a Change of
Control of the Company and the action is taken.
(c) "Claim" or "Claims" means and includes one or more charges,
complaints, claims, grievances (including grievances filed
pursuant to a collective bargaining agreement), liabilities,
obligations, promises, covenants, agreements, controversies,
damages, injuries, actions, causes of action, suits, rights,
demands, deficiencies, levies, assessments, attachments,
executions, judgments, awards, recoveries, costs, losses,
debts, and expenses (including attorneys' fees and costs
actually incurred) of any kind or nature whatsoever, whether
known or unknown, suspected or unsuspected, contingent or not
contingent, liquidated or unliquidated.
(d) "Common Stock" means the Class A Common Stock of the Company.
(e) "Companies" means and includes the Company and all of its
affiliated Entities, including, but not limited to, parent and
subsidiary companies (whether wholly or partially owned and
whether direct or indirect), partnerships, and joint ventures.
(f) "Confidential Information" means and includes, without limitation,
business and proprietary information and technology, trade
secrets, patented processes, research and development data,
know-how, methods of doing business, and technical information of
the Companies; financial information not previously recorded in
public releases or filings; information regarding costs, profits,
markets, sales, products, market studies and forecasts, pricing
policies, key personnel, other business affairs and methods,
customers and customer prospects, business plans, competitive
analyses, and prospects and opportunities (such as possible
expansions or contractions of business operations) which have been
discussed or considered by the Companies' management; the
substance of agreements with customers and others, marketing and
dealership arrangements, servicing and training programs and
arrangements, and customer lists; and information concerning
operational strengths or weaknesses of the Companies' operating
units, all to the extent not previously revealed to the public or
to the trade by the Companies' management.
(g) "Continuing Director" means any person who either (i) is a
Director on the date of this Agreement or (ii) was designated as a
Continuing Director by a majority of the Continuing Directors.
(h) "Director" means a member of the Board.
(i) "Entity" or "Entities" means and includes one or more
organizations of any kind or nature whatsoever, including, without
limitation, corporations, companies, partnerships, joint ventures,
sole proprietorships, and divisions.
(j) "Exchange Act" means the Securities Exchange Act of 1934, as
amended.
2. Employment.
The Company hereby employs Executive and Executive hereby accepts
such employment for the term set forth in Paragraph 4 below, subject
to and in accordance with all of the terms and conditions of this
Agreement. Executive shall initially hold the position of a Senior
Vice President and Chief Financial Officer and Executive of the
Company and shall report to the Company's President; provided,
however, that the President, with the approval of the Company's Chief
Executive Officer, may change Executive's title and Executive's
responsibilities in the best interests of the Company and its
organizational development.
3. Duties and Responsibilities.
(a) Executive shall perform such duties and functions for the
Companies as are customarily performed by the Chief Financial
Officer of the Company, or such other duties or functions as the
Company's President, with the approval of the Company's Chief
Executive Officer, shall assign Executive from time to time in the
best interest of the Company to maximize its growth and
development. In the performance of his duties, Executive shall
comply with the policies and procedures of the Company (presently
in effect or as may be reasonably modified or established
hereafter) and be subject to the direction of the Chief Executive
Officer, the President, and the Board.
(b) Executive agrees to devote his entire normal working time,
attention, and energies to the performance of his duties.
Executive shall not directly or indirectly, alone or as a member
of any partnership, or as an officer, director, employee, or agent
of any Entity, be actively engaged in or concerned with any other
duties or pursuits (whether or not for gain, profit, or other
pecuniary advantage) which interfere with the performance of his
duties hereunder, or which may be inimical to or contrary to the
best interests of the Company. Nothing in this subparagraph (b)
shall be construed as preventing Executive from investing
Executive's personal assets in any way that does not either
require the rendering of services by Executive to or on behalf of
the Entities in which the investments are made or result in any
other conflict of Executive's interest or time.
(c) Executive shall use his best efforts, skills, and abilities to
promote the Company's best interests.
4. Term.
(a) Except as provided in subparagraph (b) immediately below,
Executive's employment under this Agreement shall commence on the
date of the occurrence of a Change of Control and shall continue
for a period of two (2) years from and after such date (the
"Initial Term"), subject, however, to prior termination as
provided in Paragraphs 7 and 8 of this Agreement. This Agreement
may be renewed or extended upon such terms and conditions as the
parties shall mutually agree to in a written instrument signed by
each of the parties hereto, but neither party hereto shall be
under any obligation to renew this Agreement.
(b) Executive's employment under this Agreement will not commence on
the date of the occurrence of a Change of Control if on the day
immediately prior to the Change of Control Executive is no longer
employed by the Company, unless Executive's employment by the
Company is terminated prior to the Change of Control at the request
of the individual or individuals or Entity or Entities acquiring
control of the Company.
5. Compensation.
During the Initial Term of Executive's employment under this Agreement,
Executive shall be paid by the Company an annual salary of at least
$215,000.00. The salary paid to Executive may be reviewed by the Board
and may be increased at the sole and unreviewable discretion of the
Board, which shall take into account the earnings and overall
productivity of the Company, available resources, the performance of
Executive, the cost of living, and such other factors as it deems
relevant. The Board shall have no obligation to make any adjustments in
the salary of Executive. The salary to be paid to Executive under this
Agreement shall be payable in equal monthly installments in accordance
with the Company's customary payroll practices.
6. Other Benefits.
(a) During the Initial Term of Executive's employment under this
Agreement, Executive shall be entitled to such vacations, and to
participate in any other fringe benefits provided by the Company
to its key employees (including any bonus, profit sharing,
pension, and health insurance plans in accordance with and subject
to the terms of such plans), as may be determined from time to
time by the Board.
(b) During the Initial Term of Executive's employment under this
Agreement, there shall be established an Incentive Bonus Program
for Fiscal Years 1994 and 1995. In each such fiscal year,
Executive shall be eligible to earn up to $30,000.00 in bonuses,
calculated as follows:
(i) if Executive meets or exceeds the fiscal-year new orders
target for Executive's Operating Group, as set forth in
the approved business plan, Executive shall earn
$10,000.00;
(ii) if Executive meets or exceeds the fiscal-year contribution
margin target for Executive's Operating Group, as set
forth in the approved business plan, Executive shall earn
$10,000.00; and
(iii) if Executive meets or exceeds the fiscal-year cash flow
target for Executive's Operating Group, as set forth in
the approved business plan, Executive shall earn
$10,000.00.
Any Incentive Bonus earned during a fiscal year will be paid
during the first half of the following fiscal year and is subject
to reduction in accordance with subparagraph (c) immediately
below. The three targets applicable to Executive for Fiscal Year
1994 are set forth in Exhibit A to this Agreement. The three
targets applicable to Executive for Fiscal Year 1995 will be
established by the President of the Company, with the approval of
the Chief Executive Officer of the Company, after completion of
the Fiscal Year 1995 business plan and submission of the business
plan to the Board, and the President shall provide Executive a
written statement, in a form similar to Exhibit A, of the Fiscal
Year 1995 targets.
(c) If Executive is entitled to receive compensation under the
Company's Fiscal Year 1994 or 1995 Management Incentive Plan (or
such similar plan by whatever name it shall be known as), the
Incentive Bonus that Executive may be eligible for under
subparagraph (b) immediately above in Fiscal Year 1994 or 1995
shall be reduced as follows:
(i) if the actual total compensation payable to Executive
under the Management Incentive Plan is less than or equal
to thirty (30) percent of Executive's annual salary, then
Executive shall receive one hundred (100) percent of the
total Incentive Bonus earned in accordance with
subparagraph (b) immediately above;
(ii) if the actual total compensation payable to Executive
under the management Incentive Plan is greater than thirty
(30) percent but less than forty (40) percent of
Executive's annual salary, then Executive shall receive
only two-thirds of the total Incentive Bonus earned in
accordance with subparagraph (b) immediately above; or
(iii) if the actual total compensation payable to Executive
under the Management Incentive Plan is equal to or greater
than forty (40) percent of Executive's annual salary, then
Executive shall receive only one-third of the total
Incentive Bonus earned in accordance with subparagraph (b)
immediately above.
7. Termination of Employment by the Company for Death, Dis-ability, or
Justifiable Cause, or by Executive Without Good Reason, or Upon
Expiration of the Initial Term .
(a) The Company shall have the right to terminate the Executive's
employment under this Agreement upon the occurrence any one or
more of the following events:
(i) the death of Executive (in which case said employment
terminates immediately upon death);
(ii) the "disability" of Executive (as hereinafter defined); or
(iii) the Board determines in its sole and unreview-able
discretion (acting reasonably and in good faith) that
"justifiable cause" (as hereinafter defined) exists for
the termination of Executive's employment.
Executive shall have the right to terminate Executive's employment
under this Agreement without "good reason" (as defined in
Paragraph 8 below) upon sixty (60) days' prior written notice to
the President of the Company. No such termination by Executive
shall be effective unless that notice has been given.
Except as provided in subparagraph (b) immediately below, upon
termination of the employment of Executive under any of the
circumstances set forth in this subparagraph (a), Executive's
entitlement to further compensation or other benefits under
Paragraphs 5 and 6 of this Agreement shall immediately cease.
(b) For the purposes of this Agreement, the term "disability" shall
mean the inability of Executive, due to illness, accident, or any
other physical or mental incapacity, to perform his duties or
fulfill his obligations under this Agreement in a normal manner for
a period of any three (3) consecutive months or for a total of six
(6) months (whether or not consecutive) in any twelve (12) month
period during the Initial Term of this Agreement, it being
understood that, notwithstanding any such inability to perform his
duties, Executive shall be entitled to receive his compensation as
provided herein until the termination of his employment for
disability. The Company shall provide Executive ten days' prior
written notice of any determination by the Board that Executive is
disabled.
(c) For purposes of this Agreement, "justifiable cause" for
termination by the Company of Executive's employment shall means
any one or more of the following:
(i) any intentional breach by Executive of the performance of
any of his duties pursuant to this Agreement;
(ii) any intentional or negligent disclosure by Executive to
any person or Entity (other than the Companies) and
other than in the ordinary course of business of any
Confidential Information of the Companies;
(iii) any knowing violation or reckless disregard by Executive
of any law, governmental regulation, or judicial decree
which has caused substantial injury to the Companies,
financial or otherwise;
(iv) Executive's interference with or
endeavor to entice away from the Companies any client or
customer, or solicitation of employment of any of the
Companies' officers, directors, employees, or agents;
(v) Executive's conviction of a felony, as evidenced by a
binding and final judgment, order, or decree of a court of
competent jurisdiction, in effect after exhaustion or
lapse of all rights of appeal;
(vi) the commission by Executive of any act of fraud, or
material act of malfeasance, disloyalty, or breach of
trust against the Companies;
(vii) any attempt by Executive to secure any personal profit
(other than authorized compensation paid to Executive by
the Company) or convert any corporate opportunity to his
benefit in connection with the business of the Companies;
(viii) any failure by Executive to devote his entire normal
working time to the affairs of the Companies;
(ix) any activities of Executive that are determined to be
inimical to or contrary to the best interests of the
Companies; or
(x) the conduct or involvement by Executive in any business
other than the businesses of the Companies.
The Company shall provide Executive ten (10) days' prior written
notice of termination for justifiable cause; provided, however,
that the Company shall not be required to furnish any such prior
written notice in the event that the Board reasonably determines
in its sole and unreviewable discretion that immediate termination
of Executive without such prior written notice is necessary to
protect the best interests of the Companies. The written notice
shall set forth in reasonable detail the facts and circumstances
that are the basis for the termination for justifiable cause.
(d) If Executive is still employed under this Agreement at the end of
the Initial Term of this Agreement and if the parties hereto have
failed to reach a written agreement (signed by each of the parties
hereto) as to the continuation of Executive's employment,
Executive's employment under this Agreement will automatically
terminate upon expiration of the Initial Term. In such case:
(i) Executive's entitlement to further compensation or other
benefits under Paragraphs 5 and 6 of this Agreement shall
immediately cease upon expiration of the Initial Term; and
(ii) such termination shall be deemed a triggering event
entitling Executive to severance pay under the Company's
severance pay policy, but in no event shall the severance
pay due and payable to Executive be less than a total of
six (6) weeks' salary; provided, however, that Executive
shall not be entitled to any severance pay if (A)
Executive is provided by the Company, at least sixty (60)
days prior to the expiration of the Initial Term, a
written offer to renew this Agreement for at least an
additional one (1) year and Executive does not accept in
writing that offer at least thirty (30) days prior to the
expiration of the Initial Term, or (B) Executive remains
employed by any of the Companies.
8. Termination of Employment Under Other Circumstances.
(a) If (i) the Company terminates Executive's employment under this
Agreement other than for death, "disability", or "justifiable
cause", or Executive terminates Executive's employment under this
Agreement for "good reason" (as hereinafter defined), and (ii)
Executive does not remain employed by any of the Companies,
Executive shall:
(i) receive from the Company, within two (2) business days
after the termination, an amount in cash equal to the sum
of:
(A) all salary due and payable to Executive as of the
date of termination;
(B) pay for all accrued, but unused, vacation and sick
days through the date of termination;
(C) all salary that would have been due and payable to
Executive over the remaining period of the Initial
Term of this Agreement if Executive's employment had
not been terminated, based on Executive's annual
salary in effect at the date of termination. By way
of illustration, if Executive's annual salary at the
date of termination was $200,000.00 and the
termination occurred at the end of the seventh (7th)
month of the Initial Term, Executive would be
entitled to receive 17/24 x $400,000.00, or
$283,333.33; and
(D) all severance pay due and payable to Executive under
the Company's severance pay policy, but in no event
less than a total of six (6) weeks' salary, it being
understood that a termination under this
subparagraph (a), whether by the Company or
Executive, shall be deemed a triggering event
entitling Executive to severance pay under the
Company's severance pay policy;
(ii) receive from the Company all other benefits which
executive employees of the Company normally receive when
their employment is terminated by the Company without
"justifiable cause", which in no event shall be less than
the benefits such executive employees would have received
had their terminations occurred on the day immediately
preceding the Change of Control; and
(iii) with respect to any stock options for shares of the
Company's stock that Executive has been or may be
hereafter awarded, and notwithstanding the terms of the
Long-Term Incentive Compensation Plans under which these
options were or may be hereafter granted, be entitled to
fully exercise said stock options at any time up to and
including the ninetieth day after the expiration of the
remaining period of the Initial Term of this Agreement.
(b) For purposes of this Agreement, "good reason" for Executive to
terminate Executive's employment under this Agreement shall mean
any one or more of the following:
(i) both (A) without Executive's prior written consent, (1)
the assignment by the Company to Executive of duties and
responsibilities that are not at least substantially
equivalent to Executive's duties and responsibilities with
the Company immediately prior to the date of the Change of
Control, except in connection with the termination of
Executive's employment under this Agreement pursuant to
Paragraph 7 of this Agreement, or (2) the failure by the
Company to continue Executive in a position that is at
least substantially equivalent to the position held by
Executive with the Company immediately prior to the date
of the Change of Control, except in connection with the
termination of Executive's employment under this Agreement
pursuant to Paragraph 7 of this Agreement, and (B) the
continuance thereof for a period of twenty (20) days after
written notice thereof to the Company from Executive;
(ii) a failure by the Company to pay, or a reduction by the
Company of, the annual salary required to be paid to
Executive under Paragraph 5 of this Agreement;
(iii) a failure by the Company to pay any Incentive Bonus
required to be paid to Executive under Paragraph 6 of this
Agreement;
(iv) a failure by the Company to provide Executive with (A) the
opportunity to participate, on terms no less favorable
than those in effect for other executives holding a
similar position, in all of the Company's benefit and
executive compensation plans and programs or their
equivalent or (B) all other fringe benefits, or their
equivalent, from time to time in effect for the benefit of
other executives holding a similar position;
(v) without Executive's prior written consent, (A) the
relocation by the Company of the principal place of
Executive's employment to a location that is more than 100
miles from Executive's principal place of employment
immediately prior to the date of the Change of Control or
(B) the imposition by the Company of travel requirements
on Executive which are not substantially consistent with
the travel requirements applicable to Executive
immediately prior to the date of the Change of Control; or
(vi) any breach of Paragraph 15 of this Agreement by the
Company.
(c) If the Company terminates Executive's employment under this
Agreement other than for death, "disability", or "justifiable
cause", the Company shall provide Executive at least ten (10)
days' prior written notice of that termination, and no such
termination shall be effective unless that notice has been given.
The notice shall set forth in reasonable detail the facts and
circumstances that are the basis for the termination.
(d) At least sixty (60) days prior to the termination by Executive of
Executive's employment under this Agreement for "good reason",
Executive shall provide the President of the Company with written
notice of Executive's intention to terminate Executive's
employment, and no such termination shall be effective unless that
notice has been given. The notice shall set forth in reasonable
detail the facts and circumstances that are the basis for the
termination.
(e) If Executive's employment by the Company is terminated prior to a
Change of Control at the request of the individual or individuals
or Entity or Entities acquiring control of the Company, the
provisions of this Paragraph 8 shall apply as if a Change of
Control had occurred just prior to the date of termination.
9. No Mitigation.
Executive shall not be required to mitigate damages or the amount of any
payment provided for under this Agreement by seeking other employment or
otherwise, and payments and benefits due Executive under Paragraph 8(a)
of this Agreement shall not be subject to offset in respect of any
Claims which the Company has or may have against Executive. Without
limiting the generality of the foregoing, no payment otherwise required
under this Agreement shall be reduced because of any payment received by
Executive in connection with other employment of or other services
rendered by Executive after the date of termination of Executive's
employment under this Agreement.
10. Inventions, Discoveries, Etc.
(a) Executive shall promptly and fully disclose to the Company (with
all necessary detail for a complete understanding of the same)
all developments, know-how, discoveries, inventions,
improvements, concepts, ideas, writings, formulae, processes, and
methods (whether copyrightable, patentable, or otherwise) made,
received, conceived, acquired, or written by Executive (whether
or not at the request of or upon the suggestion of the Company)
during the period of his employment with any of the Companies,
solely or jointly with others (whether or not during working
hours), in connection with or relating to any activities of the
Companies or any of their customers known to him as a consequence
of his employment (collectively referred to as the "Subject
Matter").
(b) Executive hereby assigns and transfers, and agrees to assign and
transfer, to the Company, all his right, title, and interest in and
to the Subject Matter. Executive further agrees to deliver to the
Company any and all drawings, notes, specifications, and data
relating to the Subject Matter and to execute, acknowledge, and
deliver all such further papers, including applications for
copyrights, patents, and similar protected ownership rights, as may
be necessary to obtain copyrights, patents, and similar protected
ownership rights with respect to the Subject Matter in any and all
countries and to vest title to any such copyrights, patents, and
similar protected ownership rights in the Company. Executive shall
assist the Company in obtaining such copyrights, patents, or similar
protected ownership rights during the period of his employment with
any of the Companies and any time thereafter and agrees to assist
the Company and to testify in its behalf in any prosecution or
litigation involving any of the Subject Matter during the period of
his employment with any of the Companies, and at any time
thereafter, in accordance with the provisions of subparagraph (c)
immediately below.
(c) At any time subsequent to the termination of Executive's employment
with any of the Companies or the expiration or termination of this
Agreement, if the Company requests in writing that Executive assist
the Company with respect to obtaining any patents, copyrights, or
similar protected ownership rights, or that Executive assist the
Company or testify in its behalf in connection with any prosecution
or litigation relating to the Subject Matter, the Company shall
reimburse Executive for Executive's reasonable out-of-pocket
expenses in connection with such assistance or testimony. In the
event the Company shall request Executive's assistance or testimony
as set forth hereunder, the Company agrees to use its best efforts to
assure that such assistance or testimony will neither require a
major or unreasonable portion of Executive's time nor substantially
interfere with his then current employment or business activities.
11. Non-Disclosure of Confidential Information.
(a) Executive shall not during his employment with any of the Companies
(nor at any time following termination of such employment or
expiration or termination of this Agreement), directly or
indirectly, intentionally or negligently disclose to or permit to be
known by any person or Entity any Confidential Information acquired
by him during the course of or in connection with his employment by
any of the Companies relating to (i) the Companies, (ii) the
officers, directors, employees, or agents of the Companies, (iii)
any client or customer of the Companies, or (iv) any Entity owned or
controlled, directly or indirectly, by any of the foregoing, or in
which any of the foregoing has a beneficial interest.
(b) All Confidential Information, regardless of how recorded, relating
to the Companies shall be the exclusive property of the Companies,
and Executive shall use his best efforts to prevent any publication
or disclosure thereof. Upon termination of Executive's employment
with any of the Companies or the expiration or termination of this
Agreement, all documents, records, reports, writings, and other
similar documents containing Confidential Information (including any
and all copies thereof) then in Executive's possession or control
shall be returned and left with the Company.
12. Right to Injunctive and Other Relief.
Executive recognizes that the services to be rendered by him to any of
the Companies are of special, unique, unusual, extraordinary, and
intellectual character, involving skill of the highest order, and that
such services are of special and particular value, the loss of which
cannot be adequately compensated for in damages. Executive further
agrees and declares that, because of his important role with the
Companies to date, clients' or customers' association of Executive with
the Companies, and the personal relationships Executive has with many of
such clients or customers, Executive's services to the Companies are
unique and extraordinary. In the event of a breach of any provision of
Paragraph 10 or 11 of this Agreement by Executive, the Companies shall
be entitled to injunctive relief and any other legal or equitable
remedies from a court of competent jurisdiction. Executive acknowledges
and agrees that any such breach will cause irreparable injury to the
Companies and that money damages will not provide an adequate remedy to
the Companies. In any action for injunctive relief, Executive shall not
be entitled to interpose a defense that the Companies have an adequate
remedy in a court of law. Executive agrees that the Companies may
recover by appropriate action the amount of the actual damages caused
the Companies by any failure, refusal, or neglect of Executive to
perform his agreements, representations, and warranties contained in
this Agreement. The remedies provided in this Agreement shall be deemed
cumulative and the exercise of one shall not preclude the exercise of
any other remedy at law or in equity for the same event or any other
event.
13. No Conflicting Agreements.
Executive represents and warrants that he is not a party to any
agreement, contract, or understanding, whether of employment or
otherwise, which would in any way restrict or prohibit him from
undertaking or performing his employment and other obligations in
accordance with the terms and conditions of this Agreement. Executive
further agrees to indemnify and hold harmless the Companies and their
past and present officers, directors, employees, agents, owners,
stockholders, representatives, and attorneys from and against and in
respect of any and all Claims alleging that (a) Executive is so
restricted or prohibited or (b) the Companies have committed a wrongful
act in negotiating with, and employing the services of, Executive.
14. Notices and Calendar Days.
All notices, requests, demands, and other communications provided for by
this Agreement shall be in writing and shall be personally delivered or
mailed (by registered or certified mail, return receipt requested,
postage prepaid) to the address of the party to whom intended as
specified below or to such different address as such party may have
fixed by a notice sent in accordance with this Paragraph.
(a) If to the Company, at:
Air & Water Technologies Corporation
P.O. Box 1500
Somerville, NJ 08876
Attention: President
with a copy to: General Counsel
(b) If to Executive, at:
636 Black Rock Road
Bryn Mawr, PA 19010
Any such notices shall be effective upon receipt, if personally
delivered, or three business days after mailing, if mailed.
Unless otherwise expressly provided, all references in this Agreement to
"days" mean "calendar days".
15. Assignability and Binding Effect.
(a) This Agreement shall inure to the benefit of and shall be binding
upon the heirs, executors, administrators, successors, and legal
representatives of Executive, and shall inure to the benefit of
and be binding upon the Company and its successors, assigns, and
legal representatives, but the obligations of Executive may not be
delegated and Executive may not assign, transfer, pledge,
encumber, hypothecate, or otherwise dispose of this Agreement, or
any of his rights under this Agreement, and any such attempted
delegation or disposition shall be null and void and without
effect. This Agreement shall also inure to the
benefit of the Companies and the Other Defendants (as defined in
Paragraph 19 below) and their respective heirs, executors,
administrators, successors, assigns, and legal representatives.
(b) If the Company shall be merged into or consolidated with another
Entity, the provisions of this Agreement shall be binding upon and
inure to the benefit of the Entity surviving the merger or
resulting from the consolidation. The Company shall require any
successor, whether direct or indirect, by purchase, merger,
consolidation, or otherwise, to all or substantially all of the
business or assets of the Company, by agreement in form and
substance satisfactory to Executive, expressly to assume and agree
to perform this Agreement in the same manner and to the same
extent that the Company would have been required to perform this
Agreement if no succession had taken place. The provisions of
this Paragraph 15 shall continue to apply to each subsequent
employer of Executive bound by this Agreement in the event of any
merger, consolidation, or transfer of all or substantially all of
the business or assets of that subsequent employer.
16. Complete Understanding.
This Agreement constitutes the complete understanding between the
parties with respect to the employment of Executive hereunder, and no
statement, representation, warranty or covenant has been made by either
party with respect thereto except as expressly set forth herein. This
Agreement shall not be altered, modified, amended, or terminated except
by written instrument signed by each of the parties hereto.
17. Governing Law.
This Agreement and all provisions hereof shall be governed by and
construed in accordance with the laws of the State of New Jersey.
18. Severability.
Should any part, term, or provision of this Agreement be declared or be
determined by any court or tribunal of competent jurisdiction to be
illegal, invalid, or unenforceable, the legality, validity, and
enforceability of the remaining parts, terms, or provisions shall not be
affected thereby, and said illegal, unenforceable, or invalid part,
term, or provision shall be deemed not to be a part of this Agreement.
19. Arbitration.
(a) Except as provided in subparagraph (b) immediately below, any and
all Claims arising out of or relating to (i) this Agreement, (ii)
any breach of any provision of this Agreement, (iii) Executive's
employment at any time with any of the Companies, and/or (iv) the
termination of Executive's employment with any of the Companies
shall be settled by arbitration. Such arbitration proceeding
shall be conducted pursuant to the Employment Dispute Resolution
Rules of the American Arbitration Association ("AAA") then in
effect, by a single arbitrator, and shall be held in Somerset
County, New Jersey. The arbitrator shall not have the power to
award punitive damages. The cost of the arbitration proceeding
and the reasonable costs and attorneys' fees of the prevailing
party shall be paid by the non-prevailing party, with the dollar
amount of these costs and fees to be fixed by the arbitrator. The
judgment upon the award rendered by the arbitrator may be entered
in any court having competent jurisdiction thereof.
(b) Nothing in subparagraph (a) immediately above shall be construed
or interpreted to preclude the Companies from filing suit in a
court of competent jurisdiction in order to enforce their rights
and remedies under Paragraphs 10, 11 and/or 12 of this Agreement.
In any such suit, the court is empowered to and shall resolve any
dispute as to whether the Claims asserted by any of the Companies
are within the scope of Paragraphs 10, 11, and/or 12 of this
Agreement, and the court shall not refer such dispute to
arbitration under subparagraph (a) immediately above.
(c) With respect to the Claims of Executive that are within the scope
of subparagraph (a) above, if Executive has the same, similar, or
related Claims against any of the Companies' employee benefit
plans, trusts, committees, or boards or against any past or
present officers, directors, employees, agents, owners,
stockholders, trustees, fiduciaries, administrators, sponsors,
representatives, or attorneys of the Companies or the Companies'
employee benefit plans, trusts, committees, or boards
(collectively referred to as the "Other Defendants"), and if
Executive seeks to litigate such Claims against the Other
Defendants in a civil action or any other proceeding (including
before an administrative agency), Executive agrees that any or all
of said Other Defendants may compel Executive to arbitrate his
Claims against them pursuant to the terms of this Paragraph 19.
(d) The arbitrator selected by the parties pursuant to the AAA rules
shall have expertise in private industry employee relations and
shall hear and determine the case promptly. The burden of
persuasion shall at all times be upon the party seeking relief.
(e) In the event Executive files suit in a court of competent
jurisdiction and asserts that certain Claims are not subject to
arbitration under this Paragraph 19 because of the limitation on
the power of the arbitrator to award punitive damages (the
"Limitation"), the parties agree that they will request the court
to resolve that legal issue on an expedited basis, and if the
court rules in favor of Executive on the Limitation issue, the
parties agree as follows:
(i) the arbitration shall proceed as if this Paragraph 19 did
not contain such Limitation;
(ii) the parties will request the court to enter judgment in
favor of Executive on the Limitation issue, at which time
the Company may appeal that ruling;
(iii) in the event the arbitrator determines that Executive is
entitled to punitive damages, the punitive damages aspect
of the arbitrator's award will be stayed pending the
exhaustion or lapse of all rights of appeal of the Company
under subparagraph (e)(ii) immediately above; and
(iv) in the event an appellate court rules in favor of the
Company on the Limitation issue, the arbitrator shall
vacate the award of punitive damages.
The procedures set forth in this subparagraph (e) shall also apply
in the event Executive seeks relief in some other tribunal, such
as an administrative agency, and the Company files a civil action
to compel arbitration.
20. Waiver.
It is agreed that a waiver by either party of a breach of any provision
of this Agreement shall neither operate nor be construed as a waiver of
any subsequent breach hereof, or as a waiver of a breach of any other
provision.
21. Survival.
All representations and warranties herein shall survive any termination
of Executive's employment or termination or expiration of this
Agreement, and the termination of Executive's employment or the
termination or expiration of this Agreement shall not affect the
enforceability of Paragraphs 10, 11, 12, 13, and 19 of this Agreement,
which Paragraphs shall survive the termination or expiration of this
Agreement or the termination of Executive's employment.
22. Other Documents.
The parties agree to execute and deliver all such further instruments
and take such other and further action as may be reasonably necessary or
appropriate to carry out the provisions of this Agreement.
23. Paragraph Headings.
The paragraph headings contained in this Agreement are for reference
purposes only and shall not affect in any way the meaning or
interpretations of this Agreement.
IN WITNESS WHEREOF, the parties hereto set their hands as of the day and year
first above written.
AIR & WATER TECHNOLOGIES CORPORATION
By /s/ Eckardt C. Beck
-----------------------------
Witness: /s/ Linda M. Brady
----------------------
/s/ William R. Lewis
--------------------------------
William R. Lewis
Witness: /s/ Jacqueline Toombs
----------------------
EXHIBIT A
EXECUTIVE RETENTION AGREEMENT
BETWEEN
WILLIAM R. LEWIS
AND
AIR & WATER TECHNOLOGIES CORPORATION
For Fiscal Year 1994, the approved business plan targets for purposes of
Paragraph 6 of the Agreement are as follows:
1. New Orders $
2. Contribution Margin $
3. Cash Flow $
EXECUTIVE RETENTION AGREEMENT
AGREEMENT, dated as of March 17, 1994, by and between George C. Mammola
("Executive"), residing at 48 Darlington Drive, Wayne, New Jersey 07470, and
Air & Water Technologies Corporation, a Delaware corporation (the "Company").
W I T N E S E T H:
WHEREAS, Executive is a skilled and dedicated employee who has important
management responsibilities and talents which benefit the Company and the
Company desires to ensure that it will continue to have the benefit of
Executive's services, and Executive desires to continue to be employed by the
Company;
WHEREAS, the Company has determined that Executive's ability to perform
Executive's responsibilities and utilize Executive's talents for the benefit
of the Company, and the Company's ability to retain Executive as a valued
employee, will be significantly enhanced if Executive is provided with fair
and reasonable protection from the risks of a Change of Control of the Company;
NOW, THEREFORE, in consideration of the foregoing and the mutual covenants,
understandings, and agreements herein contained, the parties hereby agree as
follows:
1. General Definitions.
As used in this Agreement:
(a) "Board" means the Board of Directors of the Company.
(b) "Change of Control" means and includes the occurrence of any one
or more of the following:
(i) Continuing Directors no longer constitute at least
two-thirds of the Directors constituting the Board;
(ii) Any person or group of persons (as defined in Rule 13d-5
under the Exchange Act) becomes the beneficial owner,
directly or indirectly, of 25% or more of the Company's
then outstanding Common Stock or 25% or more of the voting
power of the Company's then outstanding securities entitled
generally to vote for the election of Directors;
(iii) The approval by the Company's stockholders of the merger
or consolidation of the Company with any other Entity, the
sale of all or substantially all of the assets of the
Company, or the liquidation or dissolution of the Company,
unless, in the case of a merger or consolidation, the
Continuing Directors in office immediately prior to the
merger or consolidation will constitute at least
two-thirds of the directors constituting the board of
directors of the surviving Entity of the merger or
consolidation and any parent (as that term is defined in
Rule 12b-2 under the Exchange Act) of that Entity; or
(iv) At least two-thirds of the Continuing Directors in office
immediately prior to any other action taken or proposed to
be taken by the Company's stockholders or by the Board
determines that such action constitutes, or that the
proposed action, if taken, would constitute, a Change of
Control of the Company and the action is taken.
(c) "Claim" or "Claims" means and includes one or more charges,
complaints, claims, grievances (including grievances filed
pursuant to a collective bargaining agreement), liabilities,
obligations, promises, covenants, agreements, controversies,
damages, injuries, actions, causes of action, suits, rights,
demands, deficiencies, levies, assessments, attachments,
executions, judgments, awards, recoveries, costs, losses,
debts, and expenses (including attorneys' fees and costs
actually incurred) of any kind or nature whatsoever, whether
known or unknown, suspected or unsuspected, contingent or not
contingent, liquidated or unliquidated.
(d) "Common Stock" means the Class A Common Stock of the Company.
(e) "Companies" means and includes the Company and all of its
affiliated Entities, including, but not limited to, parent and
subsidiary companies (whether wholly or partially owned and
whether direct or indirect), partnerships, and joint ventures.
(f) "Confidential Information" means and includes, without limitation,
business and proprietary information and technology, trade
secrets, patented processes, research and development data,
know-how, methods of doing business, and technical information of
the Companies; financial information not previously recorded in
public releases or filings; information regarding costs, profits,
markets, sales, products, market studies and forecasts, pricing
policies, key personnel, other business affairs and methods,
customers and customer prospects, business plans, competitive
analyses, and prospects and opportunities (such as possible
expansions or contractions of business operations) which have been
discussed or considered by the Companies' management; the
substance of agreements with customers and others, marketing and
dealership arrangements, servicing and training programs and
arrangements, and customer lists; and information concerning
operational strengths or weaknesses of the Companies' operating
units, all to the extent not previously revealed to the public or
to the trade by the Companies' management.
(g) "Continuing Director" means any person who either (i) is a
Director on the date of this Agreement or (ii) was designated as a
Continuing Director by a majority of the Continuing Directors.
(h) "Director" means a member of the Board.
(i) "Entity" or "Entities" means and includes one or more
organizations of any kind or nature whatsoever, including, without
limitation, corporations, companies, partnerships, joint ventures,
sole proprietorships, and divisions.
(j) "Exchange Act" means the Securities Exchange Act of 1934, as
amended.
2. Employment.
The Company hereby employs Executive and Executive hereby accepts
such employment for the term set forth in Paragraph 4 below, subject
to and in accordance with all of the terms and conditions of this
Agreement. Executive shall initially hold the position of Senior
Vice President and General Manager, Service & Maintenance Group of
the Company and shall report to the Company's President; provided,
however, that the President, with the approval of the Company's Chief
Executive Officer, may change Executive's title and Executive's
responsibilities in the best interests of the Company and its
organizational development.
3. Duties and Responsibilities.
(a) Executive shall perform such duties and functions for the
Companies as are customarily performed by the Senior Vice
President and General Manager, Service & Maintenance Group, or
such other duties or functions as the Company's President, with
the approval of the Company's Chief Executive Officer, shall
assign Executive from time to time in the best interest of the
Company to maximize its growth and development. In the
performance of his duties, Executive shall comply with the
policies and procedures of the Company (presently in effect or
as may be reasonably modified or established hereafter) and be
subject to the direction of the Chief Executive Officer, the
President, and the Board.
(b) Executive agrees to devote his entire normal working time,
attention, and energies to the performance of his duties.
Executive shall not directly or indirectly, alone or as a member
of any partnership, or as an officer, director, employee, or agent
of any Entity, be actively engaged in or concerned with any other
duties or pursuits (whether or not for gain, profit, or other
pecuniary advantage) which interfere with the performance of his
duties hereunder, or which may be inimical to or contrary to the
best interests of the Company. Nothing in this subparagraph (b)
shall be construed as preventing Executive from investing
Executive's personal assets in any way that does not either
require the rendering of services by Executive to or on behalf of
the Entities in which the investments are made or result in any
other conflict of Executive's interest or time.
(c) Executive shall use his best efforts, skills, and abilities to
promote the Company's best interests.
4. Term.
(a) Except as provided in subparagraph (b) immediately below,
Executive's employment under this Agreement shall commence on the
date of the occurrence of a Change of Control and shall continue
for a period of two (2) years from and after such date (the
"Initial Term"), subject, however, to prior termination as
provided in Paragraphs 7 and 8 of this Agreement. This Agreement
may be renewed or extended upon such terms and conditions as the
parties shall mutually agree to in a written instrument signed by
each of the parties hereto, but neither party hereto shall be
under any obligation to renew this Agreement.
(b) Executive's employment under this Agreement will not commence on
the date of the occurrence of a Change of Control if on the day
immediately prior to the Change of Control Executive is no longer
employed by the Company, unless Executive's employment by the
Company is terminated prior to the Change of Control at the request
of the individual or individuals or Entity or Entities acquiring
control of the Company.
5. Compensation.
During the Initial Term of Executive's employment under this Agreement,
Executive shall be paid by the Company an annual salary of at least
$210,000. The salary paid to Executive may be reviewed by the Board and
may be increased at the sole and unreviewable discretion of the Board,
which shall take into account the earnings and overall productivity of
the Company, available resources, the performance of Executive, the cost
of living, and such other factors as it deems relevant. The Board shall
have no obligation to make any adjustments in the salary of Executive.
The salary to be paid to Executive under this Agreement shall be payable
in equal monthly installments in accordance with the Company's customary
payroll practices.
6. Other Benefits.
(a) During the Initial Term of Executive's employment under this
Agreement, Executive shall be entitled to such vacations, and to
participate in any other fringe benefits provided by the Company
to its key employees (including any bonus, profit sharing,
pension, and health insurance plans in accordance with and subject
to the terms of such plans), as may be determined from time to
time by the Board.
(b) During the Initial Term of Executive's employment under this
Agreement, there shall be established an Incentive Bonus Program
for Fiscal Years 1994 and 1995. In each such fiscal year,
Executive shall be eligible to earn up to $30,000.00 in bonuses,
calculated as follows:
(i) if Executive meets or exceeds the fiscal-year new orders
target for Executive's Operating Group, as set forth in
the approved business plan, Executive shall earn
$10,000.00;
(ii) if Executive meets or exceeds the fiscal-year contribution
margin target for Executive's Operating Group, as set
forth in the approved business plan, Executive shall earn
$10,000.00; and
(iii) if Executive meets or exceeds the fiscal-year cash flow
target for Executive's Operating Group, as set forth in
the approved business plan, Executive shall earn
$10,000.00.
Any Incentive Bonus earned during a fiscal year will be paid
during the first half of the following fiscal year and is subject
to reduction in accordance with subparagraph (c) immediately
below. The three targets applicable to Executive for Fiscal Year
1994 are set forth in Exhibit A to this Agreement. The three
targets applicable to Executive for Fiscal Year 1995 will be
established by the President of the Company, with the approval of
the Chief Executive Officer of the Company, after completion of
the Fiscal Year 1995 business plan and submission of the business
plan to the Board, and the President shall provide Executive a
written statement, in a form similar to Exhibit A, of the Fiscal
Year 1995 targets.
(c) If Executive is entitled to receive compensation under the
Company's Fiscal Year 1994 or 1995 Management Incentive Plan (or
such similar plan by whatever name it shall be known as), the
Incentive Bonus that Executive may be eligible for under
subparagraph (b) immediately above in Fiscal Year 1994 or 1995
shall be reduced as follows:
(i) if the actual total compensation payable to Executive
under the Management Incentive Plan is less than or equal
to thirty (30) percent of Executive's annual salary, then
Executive shall receive one hundred (100) percent of the
total Incentive Bonus earned in accordance with
subparagraph (b) immediately above;
(ii) if the actual total compensation payable to Executive
under the management Incentive Plan is greater than thirty
(30) percent but less than forty (40) percent of
Executive's annual salary, then Executive shall receive
only two-thirds of the total Incentive Bonus earned in
accordance with subparagraph (b) immediately above; or
(iii) if the actual total compensation payable to Executive
under the Management Incentive Plan is equal to or greater
than forty (40) percent of Executive's annual salary, then
Executive shall receive only one-third of the total
Incentive Bonus earned in accordance with subparagraph (b)
immediately above.
7. Termination of Employment by the Company for Death, Dis-ability, or
Justifiable Cause, or by Executive Without Good Reason, or Upon
Expiration of the Initial Term .
(a) The Company shall have the right to terminate the Executive's
employment under this Agreement upon the occurrence any one or
more of the following events:
(i) the death of Executive (in which case said employment
terminates immediately upon death);
(ii) the "disability" of Executive (as hereinafter defined); or
(iii) the Board determines in its sole and unreview-able
discretion (acting reasonably and in good faith) that
"justifiable cause" (as hereinafter defined) exists for
the termination of Executive's employment.
Executive shall have the right to terminate Executive's employment
under this Agreement without "good reason" (as defined in
Paragraph 8 below) upon sixty (60) days' prior written notice to
the President of the Company. No such termination by Executive
shall be effective unless that notice has been given.
Except as provided in subparagraph (b) immediately below, upon
termination of the employment of Executive under any of the
circumstances set forth in this subparagraph (a), Executive's
entitlement to further compensation or other benefits under
Paragraphs 5 and 6 of this Agreement shall immediately cease.
(b) For the purposes of this Agreement, the term "disability" shall
mean the inability of Executive, due to illness, accident, or any
other physical or mental incapacity, to perform his duties or
fulfill his obligations under this Agreement in a normal manner for
a period of any three (3) consecutive months or for a total of six
(6) months (whether or not consecutive) in any twelve (12) month
period during the Initial Term of this Agreement, it being
understood that, notwithstanding any such inability to perform his
duties, Executive shall be entitled to receive his compensation as
provided herein until the termination of his employment for
disability. The Company shall provide Executive ten days' prior
written notice of any determination by the Board that Executive is
disabled.
(c) For purposes of this Agreement, "justifiable cause" for
termination by the Company of Executive's employment shall means
any one or more of the following:
(i) any intentional breach by Executive of the performance of
any of his duties pursuant to this Agreement;
(ii) any intentional or negligent disclosure by Executive to
any person or Entity (other than the Companies) and other
than in the ordinary course of business of any Confidential
Information of the Companies;
(iii) any knowing violation or reckless disregard by Executive
of any law, governmental regulation, or judicial decree
which has caused substantial injury to the Companies,
financial or otherwise;
(iv) Executive's interference with or
endeavor to entice away from the Companies any client or
customer, or solicitation of employment of any of the
Companies' officers, directors, employees, or agents;
(v) Executive's conviction of a felony, as evidenced by a
binding and final judgment, order, or decree of a court of
competent jurisdiction, in effect after exhaustion or
lapse of all rights of appeal;
(vi) the commission by Executive of any act of fraud, or
material act of malfeasance, disloyalty, or breach of
trust against the Companies;
(vii) any attempt by Executive to secure any personal profit
(other than authorized compensation paid to Executive by
the Company) or convert any corporate opportunity to his
benefit in connection with the business of the Companies;
(viii) any failure by Executive to devote his entire normal
working time to the affairs of the Companies;
(ix) any activities of Executive that are determined to be
inimical to or contrary to the best interests of the
Companies; or
(x) the conduct or involvement by Executive in any business
other than the businesses of the Companies.
The Company shall provide Executive ten (10) days' prior written
notice of termination for justifiable cause; provided, however,
that the Company shall not be required to furnish any such prior
written notice in the event that the Board reasonably determines
in its sole and unreviewable discretion that immediate termination
of Executive without such prior written notice is necessary to
protect the best interests of the Companies. The written notice
shall set forth in reasonable detail the facts and circumstances
that are the basis for the termination for justifiable cause.
(d) If Executive is still employed under this Agreement at the end of
the Initial Term of this Agreement and if the parties hereto have
failed to reach a written agreement (signed by each of the parties
hereto) as to the continuation of Executive's employment,
Executive's employment under this Agreement will automatically
terminate upon expiration of the Initial Term. In such case:
(i) Executive's entitlement to further compensation or other
benefits under Paragraphs 5 and 6 of this Agreement shall
immediately cease upon expiration of the Initial Term; and
(ii) such termination shall be deemed a triggering event
entitling Executive to severance pay under the Company's
severance pay policy, but in no event shall the severance
pay due and payable to Executive be less than a total of
six (6) weeks' salary; provided, however, that Executive
shall not be entitled to any severance pay if (A)
Executive is provided by the Company, at least sixty (60)
days prior to the expiration of the Initial Term, a
written offer to renew this Agreement for at least an
additional one (1) year and Executive does not accept in
writing that offer at least thirty (30) days prior to the
expiration of the Initial Term, or (B) Executive remains
employed by any of the Companies.
8. Termination of Employment Under Other Circumstances.
(a) If (i) the Company terminates Executive's employment under this
Agreement other than for death, "disability", or "justifiable
cause", or Executive terminates Executive's employment under this
Agreement for "good reason" (as hereinafter defined), and (ii)
Executive does not remain employed by any of the Companies,
Executive shall:
(i) receive from the Company, within two (2) business days
after the termination, an amount in cash equal to the sum
of:
(A) all salary due and payable to Executive as of the
date of termination;
(B) pay for all accrued, but unused, vacation and sick
days through the date of termination;
(C) all salary that would have been due and payable to
Executive over the remaining period of the Initial
Term of this Agreement if Executive's employment had
not been terminated, based on Executive's annual
salary in effect at the date of termination. By way
of illustration, if Executive's annual salary at the
date of termination was $200,000.00 and the
termination occurred at the end of the seventh (7th)
month of the Initial Term, Executive would be
entitled to receive 17/24 x $400,000.00, or
$283,333.33; and
(D) all severance pay due and payable to Executive under
the Company's severance pay policy, but in no event
less than a total of six (6) weeks' salary, it being
understood that a termination under this
subparagraph (a), whether by the Company or
Executive, shall be deemed a triggering event
entitling Executive to severance pay under the
Company's severance pay policy;
(ii) receive from the Company all other benefits which
executive employees of the Company normally receive when
their employment is terminated by the Company without
"justifiable cause", which in no event shall be less than
the benefits such executive employees would have received
had their terminations occurred on the day immediately
preceding the Change of Control; and
(iii) with respect to any stock options for shares of the
Company's stock that Executive has been or may be
hereafter awarded, and notwithstanding the terms of the
Long-Term Incentive Compensation Plans under which these
options were or may be hereafter granted, be entitled to
fully exercise said stock options at any time up to and
including the ninetieth day after the expiration of the
remaining period of the Initial Term of this Agreement.
(b) For purposes of this Agreement, "good reason" for Executive to
terminate Executive's employment under this Agreement shall mean
any one or more of the following:
(i) both (A) without Executive's prior written consent, (1)
the assignment by the Company to Executive of duties and
responsibilities that are not at least substantially
equivalent to Executive's duties and responsibilities with
the Company immediately prior to the date of the Change of
Control, except in connection with the termination of
Executive's employment under this Agreement pursuant to
Paragraph 7 of this Agreement, or (2) the failure by the
Company to continue Executive in a position that is at
least substantially equivalent to the position held by
Executive with the Company immediately prior to the date
of the Change of Control, except in connection with the
termination of Executive's employment under this Agreement
pursuant to Paragraph 7 of this Agreement, and (B) the
continuance thereof for a period of twenty (20) days after
written notice thereof to the Company from Executive;
(ii) a failure by the Company to pay, or a reduction by the
Company of, the annual salary required to be paid to
Executive under Paragraph 5 of this Agreement;
(iii) a failure by the Company to pay any Incentive Bonus
required to be paid to Executive under Paragraph 6 of this
Agreement;
(iv) a failure by the Company to provide Executive with (A) the
opportunity to participate, on terms no less favorable
than those in effect for other executives holding a
similar position, in all of the Company's benefit and
executive compensation plans and programs or their
equivalent or (B) all other fringe benefits, or their
equivalent, from time to time in effect for the benefit of
other executives holding a similar position;
(v) without Executive's prior written consent, (A) the
relocation by the Company of the principal place of
Executive's employment to a location that is more than 100
miles from Executive's principal place of employment
immediately prior to the date of the Change of Control or
(B) the imposition by the Company of travel requirements
on Executive which are not substantially consistent with
the travel requirements applicable to Executive
immediately prior to the date of the Change of Control; or
(vi) any breach of Paragraph 15 of this Agreement by the
Company.
(c) If the Company terminates Executive's employment under this
Agreement other than for death, "disability", or "justifiable
cause", the Company shall provide Executive at least ten (10)
days' prior written notice of that termination, and no such
termination shall be effective unless that notice has been given.
The notice shall set forth in reasonable detail the facts and
circumstances that are the basis for the termination.
(d) At least sixty (60) days prior to the termination by Executive of
Executive's employment under this Agreement for "good reason",
Executive shall provide the President of the Company with written
notice of Executive's intention to terminate Executive's
employment, and no such termination shall be effective unless that
notice has been given. The notice shall set forth in reasonable
detail the facts and circumstances that are the basis for the
termination.
(e) If Executive's employment by the Company is terminated prior to a
Change of Control at the request of the individual or individuals
or Entity or Entities acquiring control of the Company, the
provisions of this Paragraph 8 shall apply as if a Change of
Control had occurred just prior to the date of termination.
9. No Mitigation.
Executive shall not be required to mitigate damages or the amount of any
payment provided for under this Agreement by seeking other employment or
otherwise, and payments and benefits due Executive under Paragraph 8(a)
of this Agreement shall not be subject to offset in respect of any
Claims which the Company has or may have against Executive. Without
limiting the generality of the foregoing, no payment otherwise required
under this Agreement shall be reduced because of any payment received by
Executive in connection with other employment of or other services
rendered by Executive after the date of termination of Executive's
employment under this Agreement.
10. Inventions, Discoveries, Etc.
(a) Executive shall promptly and fully disclose to the Company (with
all necessary detail for a complete understanding of the same)
all developments, know-how, discoveries, inventions,
improvements, concepts, ideas, writings, formulae, processes, and
methods (whether copyrightable, patentable, or otherwise) made,
received, conceived, acquired, or written by Executive (whether
or not at the request of or upon the suggestion of the Company)
during the period of his employment with any of the Companies,
solely or jointly with others (whether or not during working
hours), in connection with or relating to any activities of the
Companies or any of their customers known to him as a consequence
of his employment (collectively referred to as the "Subject
Matter").
(b) Executive hereby assigns and transfers, and agrees to assign and
transfer, to the Company, all his right, title, and interest in and
to the Subject Matter. Executive further agrees to deliver to the
Company any and all drawings, notes, specifications, and data
relating to the Subject Matter and to execute, acknowledge, and
deliver all such further papers, including applications for
copyrights, patents, and similar protected ownership rights, as may
be necessary to obtain copyrights, patents, and similar protected
ownership rights with respect to the Subject Matter in any and all
countries and to vest title to any such copyrights, patents, and
similar protected ownership rights in the Company. Executive shall
assist the Company in obtaining such copyrights, patents, or similar
protected ownership rights during the period of his employment with
any of the Companies and any time thereafter and agrees to assist
the Company and to testify in its behalf in any prosecution or
litigation involving any of the Subject Matter during the period of
his employment with any of the Companies, and at any time
thereafter, in accordance with the provisions of subparagraph (c)
immediately below.
(c) At any time subsequent to the termination of Executive's
employment with any of the Companies or the expiration or
termination of this Agreement, if the Company requests in writing
that Executive assist the Company with respect to obtaining any
patents, copyrights, or similar protected ownership rights, or
that Executive assist the Company or testify in its behalf in
connection with any prosecution or litigation relating to the
Subject Matter, the Company shall reimburse Executive for
Executive's reasonable out-of-pocket expenses in connection with
such assistance or testimony. In the event the Company shall
request Executive's assistance or testimony as set forth
hereunder, the Company agrees to use its best efforts to assure
that such assistance or testimony will neither require a major or
unreasonable portion of Executive's time nor substantially
interfere with his then current employment or business
activities.
11. Non-Disclosure of Confidential Information.
(a) Executive shall not during his employment with any of the Companies
(nor at any time following termination of such employment or
expiration or termination of this Agreement), directly or
indirectly, intentionally or negligently disclose to or permit to be
known by any person or Entity any Confidential Information acquired
by him during the course of or in connection with his employment by
any of the Companies relating to (i) the Companies, (ii) the
officers, directors, employees, or agents of the Companies, (iii)
any client or customer of the Companies, or (iv) any Entity owned or
controlled, directly or indirectly, by any of the foregoing, or in
which any of the foregoing has a beneficial interest.
(b) All Confidential Information, regardless of how recorded, relating
to the Companies shall be the exclusive property of the Companies,
and Executive shall use his best efforts to prevent any publication
or disclosure thereof. Upon termination of Executive's employment
with any of the Companies or the expiration or termination of this
Agreement, all documents, records, reports, writings, and other
similar documents containing Confidential Information (including any
and all copies thereof) then in Executive's possession or control
shall be returned and left with the Company.
12. Right to Injunctive and Other Relief.
Executive recognizes that the services to be rendered by him to any of
the Companies are of special, unique, unusual, extraordinary, and
intellectual character, involving skill of the highest order, and that
such services are of special and particular value, the loss of which
cannot be adequately compensated for in damages. Executive further
agrees and declares that, because of his important role with the
Companies to date, clients' or customers' association of Executive with
the Companies, and the personal relationships Executive has with many of
such clients or customers, Executive's services to the Companies are
unique and extraordinary. In the event of a breach of any provision of
Paragraph 10 or 11 of this Agreement by Executive, the Companies shall
be entitled to injunctive relief and any other legal or equitable
remedies from a court of competent jurisdiction. Executive acknowledges
and agrees that any such breach will cause irreparable injury to the
Companies and that money damages will not provide an adequate remedy to
the Companies. In any action for injunctive relief, Executive shall not
be entitled to interpose a defense that the Companies have an adequate
remedy in a court of law. Executive agrees that the Companies may
recover by appropriate action the amount of the actual damages caused
the Companies by any failure, refusal, or neglect of Executive to
perform his agreements, representations, and warranties contained in
this Agreement. The remedies provided in this Agreement shall be deemed
cumulative and the exercise of one shall not preclude the exercise of
any other remedy at law or in equity for the same event or any other
event.
13. No Conflicting Agreements.
Executive represents and warrants that he is not a party to any
agreement, contract, or understanding, whether of employment or
otherwise, which would in any way restrict or prohibit him from
undertaking or performing his employment and other obligations in
accordance with the terms and conditions of this Agreement. Executive
further agrees to indemnify and hold harmless the Companies and their
past and present officers, directors, employees, agents, owners,
stockholders, representatives, and attorneys from and against and in
respect of any and all Claims alleging that (a) Executive is so
restricted or prohibited or (b) the Companies have committed a wrongful
act in negotiating with, and employing the services of, Executive.
14. Notices and Calendar Days.
All notices, requests, demands, and other communications provided for by
this Agreement shall be in writing and shall be personally delivered or
mailed (by registered or certified mail, return receipt requested,
postage prepaid) to the address of the party to whom intended as
specified below or to such different address as such party may have
fixed by a notice sent in accordance with this Paragraph.
(a) If to the Company, at:
Air & Water Technologies Corporation
P.O. Box 1500
Somerville, NJ 08876
Attention: President
with a copy to: General Counsel
(b) If to Executive, at:
48 Darlington Drive
Wayne, New Jersey 07470
Any such notices shall be effective upon receipt, if personally
delivered, or three business days after mailing, if mailed.
Unless otherwise expressly provided, all references in this Agreement to
"days" mean "calendar days".
15. Assignability and Binding Effect.
(a) This Agreement shall inure to the benefit of and shall be binding
upon the heirs, executors, administrators, successors, and legal
representatives of Executive, and shall inure to the benefit of
and be binding upon the Company and its successors, assigns, and
legal representatives, but the obligations of Executive may not be
delegated and Executive may not assign, transfer, pledge,
encumber, hypothecate, or otherwise dispose of this Agreement, or
any of his rights under this Agreement, and any such attempted
delegation or disposition shall be null and void and without
effect. This Agreement shall also inure to the
benefit of the Companies and the Other Defendants (as defined in
Paragraph 19 below) and their respective heirs, executors,
administrators, successors, assigns, and legal representatives.
(b) If the Company shall be merged into or consolidated with another
Entity, the provisions of this Agreement shall be binding upon and
inure to the benefit of the Entity surviving the merger or
resulting from the consolidation. The Company shall require any
successor, whether direct or indirect, by purchase, merger,
consolidation, or otherwise, to all or substantially all of the
business or assets of the Company, by agreement in form and
substance satisfactory to Executive, expressly to assume and agree
to perform this Agreement in the same manner and to the same
extent that the Company would have been required to perform this
Agreement if no succession had taken place. The provisions of
this Paragraph 15 shall continue to apply to each subsequent
employer of Executive bound by this Agreement in the event of any
merger, consolidation, or transfer of all or substantially all of
the business or assets of that subsequent employer.
16. Complete Understanding.
This Agreement constitutes the complete understanding between the
parties with respect to the employment of Executive hereunder, and no
statement, representation, warranty or covenant has been made by either
party with respect thereto except as expressly set forth herein. This
Agreement shall not be altered, modified, amended, or terminated except
by written instrument signed by each of the parties hereto.
17. Governing Law.
This Agreement and all provisions hereof shall be governed by and
construed in accordance with the laws of the State of New Jersey.
18. Severability.
Should any part, term, or provision of this Agreement be declared or be
determined by any court or tribunal of competent jurisdiction to be
illegal, invalid, or unenforceable, the legality, validity, and
enforceability of the remaining parts, terms, or provisions shall not be
affected thereby, and said illegal, unenforceable, or invalid part,
term, or provision shall be deemed not to be a part of this Agreement.
19. Arbitration.
(a) Except as provided in subparagraph (b) immediately below, any and
all Claims arising out of or relating to (i) this Agreement, (ii)
any breach of any provision of this Agreement, (iii) Executive's
employment at any time with any of the Companies, and/or (iv) the
termination of Executive's employment with any of the Companies
shall be settled by arbitration. Such arbitration proceeding
shall be conducted pursuant to the Employment Dispute Resolution
Rules of the American Arbitration Association ("AAA") then in
effect, by a single arbitrator, and shall be held in Somerset
County, New Jersey. The arbitrator shall not have the power to
award punitive damages. The cost of the arbitration proceeding
and the reasonable costs and attorneys' fees of the prevailing
party shall be paid by the non-prevailing party, with the dollar
amount of these costs and fees to be fixed by the arbitrator. The
judgment upon the award rendered by the arbitrator may be entered
in any court having competent jurisdiction thereof.
(b) Nothing in subparagraph (a) immediately above shall be construed
or interpreted to preclude the Companies from filing suit in a
court of competent jurisdiction in order to enforce their rights
and remedies under Paragraphs 10, 11 and/or 12 of this Agreement.
In any such suit, the court is empowered to and shall resolve any
dispute as to whether the Claims asserted by any of the Companies
are within the scope of Paragraphs 10, 11, and/or 12 of this
Agreement, and the court shall not refer such dispute to
arbitration under subparagraph (a) immediately above.
(c) With respect to the Claims of Executive that are within the scope
of subparagraph (a) above, if Executive has the same, similar, or
related Claims against any of the Companies' employee benefit
plans, trusts, committees, or boards or against any past or
present officers, directors, employees, agents, owners,
stockholders, trustees, fiduciaries, administrators, sponsors,
representatives, or attorneys of the Companies or the Companies'
employee benefit plans, trusts, committees, or boards
(collectively referred to as the "Other Defendants"), and if
Executive seeks to litigate such Claims against the Other
Defendants in a civil action or any other proceeding (including
before an administrative agency), Executive agrees that any or all
of said Other Defendants may compel Executive to arbitrate his
Claims against them pursuant to the terms of this Paragraph 19.
(d) The arbitrator selected by the parties pursuant to the AAA rules
shall have expertise in private industry employee relations and
shall hear and determine the case promptly. The burden of
persuasion shall at all times be upon the party seeking relief.
(e) In the event Executive files suit in a court of competent
jurisdiction and asserts that certain Claims are not subject to
arbitration under this Paragraph 19 because of the limitation on
the power of the arbitrator to award punitive damages (the
"Limitation"), the parties agree that they will request the court
to resolve that legal issue on an expedited basis, and if the
court rules in favor of Executive on the Limitation issue, the
parties agree as follows:
(i) the arbitration shall proceed as if this Paragraph 19 did
not contain such Limitation;
(ii) the parties will request the court to enter judgment in
favor of Executive on the Limitation issue, at which time
the Company may appeal that ruling;
(iii) in the event the arbitrator determines that Executive is
entitled to punitive damages, the punitive damages aspect
of the arbitrator's award will be stayed pending the
exhaustion or lapse of all rights of appeal of the Company
under subparagraph (e)(ii) immediately above; and
(iv) in the event an appellate court rules in favor of the
Company on the Limitation issue, the arbitrator shall
vacate the award of punitive damages.
The procedures set forth in this subparagraph (e) shall also apply
in the event Executive seeks relief in some other tribunal, such
as an administrative agency, and the Company files a civil action
to compel arbitration.
20. Waiver.
It is agreed that a waiver by either party of a breach of any provision
of this Agreement shall neither operate nor be construed as a waiver of
any subsequent breach hereof, or as a waiver of a breach of any other
provision.
21. Survival.
All representations and warranties herein shall survive any termination
of Executive's employment or termination or expiration of this
Agreement, and the termination of Executive's employment or the
termination or expiration of this Agreement shall not affect the
enforceability of Paragraphs 10, 11, 12, 13, and 19 of this Agreement,
which Paragraphs shall survive the termination or expiration of this
Agreement or the termination of Executive's employment.
22. Other Documents.
The parties agree to execute and deliver all such further instruments
and take such other and further action as may be reasonably necessary or
appropriate to carry out the provisions of this Agreement.
23. Paragraph Headings.
The paragraph headings contained in this Agreement are for reference
purposes only and shall not affect in any way the meaning or
interpretations of this Agreement.
IN WITNESS WHEREOF, the parties hereto set their hands as of the day and year
first above written.
AIR & WATER TECHNOLOGIES CORPORATION
By /s/ Arthur L. Glenn
------------------------
Witness: /s/
-----------------
/s/ George C. Mammola
---------------------------
George C. Mammola
Witness: /s/ Jacqueline
-----------------
EXHIBIT A
EXECUTIVE RETENTION AGREEMENT
BETWEEN
GEORGE C. MAMMOLA
AND
AIR & WATER TECHNOLOGIES CORPORATION
For Fiscal Year 1994, the approved business plan targets for purposes of
Paragraph 6 of the Agreement are as follows:
1. New Orders $
2. Contribution Margin $
3. Cash Flow $
EXECUTIVE RETENTION AGREEMENT
AGREEMENT, dated as of March 17, 1994, by and between John Cirello
("Executive"), residing at 620 Watchung Road, Bound Brook, New Jersey 08805,
and Air & Water Technologies Corporation, a Delaware corporation (the
"Company").
W I T N E S E T H:
WHEREAS, Executive is a skilled and dedicated employee who has important
management responsibilities and talents which benefit the Company and the
Company desires to ensure that it will continue to have the benefit of
Executive's services, and Executive desires to continue to be employed by the
Company;
WHEREAS, the Company has determined that Executive's ability to perform
Executive's responsibilities and utilize Executive's talents for the
benefit of the Company, and the Company's ability to retain Executive as a
valued employee, will be significantly enhanced if Executive is provided
with fair and reasonable protection from the risks of a Change of Control
of the Company;
NOW, THEREFORE, in consideration of the foregoing and the mutual covenants,
understandings, and agreements herein contained, the parties hereby agree as
follows:
1. General Definitions.
As used in this Agreement:
(a) "Board" means the Board of Directors of the Company.
(b) "Change of Control" means and includes the occurrence of any one
or more of the following:
(i) Continuing Directors no longer constitute at least
two-thirds of the Directors constituting the Board;
(ii) Any person or group of persons (as defined in Rule 13d-5
under the Exchange Act) becomes the beneficial owner,
directly or indirectly, of 25% or more of the Company's
then outstanding Common Stock or 25% or more of the
voting power of the Company's then outstanding
securities entitled generally to vote for the election
of Directors;
(iii) The approval by the Company's stockholders of the merger
or consolidation of the Company with any other Entity, the
sale of all or substantially all of the assets of the
Company, or the liquidation or dissolution of the Company,
unless, in the case of a merger or consolidation, the
Continuing Directors in office immediately prior to the
merger or consolidation will constitute at least
two-thirds of the directors constituting the board of
directors of the surviving Entity of the merger or
consolidation and any parent (as that term is defined in
Rule 12b-2 under the Exchange Act) of that Entity; or
(iv) At least two-thirds of the Continuing Directors in office
immediately prior to any other action taken or proposed to
be taken by the Company's stockholders or by the Board
determines that such action constitutes, or that the
proposed action, if taken, would constitute, a Change of
Control of the Company and the action is taken.
(c) "Claim" or "Claims" means and includes one or more charges,
complaints, claims, grievances (including grievances filed
pursuant to a collective bargaining agreement), liabilities,
obligations, promises, covenants, agreements, controversies,
damages, injuries, actions, causes of action, suits, rights,
demands, deficiencies, levies, assessments, attachments,
executions, judgments, awards, recoveries, costs, losses,
debts, and expenses (including attorneys' fees and costs
actually incurred) of any kind or nature whatsoever, whether
known or unknown, suspected or unsuspected, contingent or not
contingent, liquidated or unliquidated.
(d) "Common Stock" means the Class A Common Stock of the Company.
(e) "Companies" means and includes the Company and all of its
affiliated Entities, including, but not limited to, parent and
subsidiary companies (whether wholly or partially owned and
whether direct or indirect), partnerships, and joint ventures.
(f) "Confidential Information" means and includes, without limitation,
business and proprietary information and technology, trade
secrets, patented processes, research and development data,
know-how, methods of doing business, and technical information of
the Companies; financial information not previously recorded in
public releases or filings; information regarding costs, profits,
markets, sales, products, market studies and forecasts, pricing
policies, key personnel, other business affairs and methods,
customers and customer prospects, business plans, competitive
analyses, and prospects and opportunities (such as possible
expansions or contractions of business operations) which have been
discussed or considered by the Companies' management; the
substance of agreements with customers and others, marketing and
dealership arrangements, servicing and training programs and
arrangements, and customer lists; and information concerning
operational strengths or weaknesses of the Companies' operating
units, all to the extent not previously revealed to the public or
to the trade by the Companies' management.
(g) "Continuing Director" means any person who either (i) is a
Director on the date of this Agreement or (ii) was designated as a
Continuing Director by a majority of the Continuing Directors.
(h) "Director" means a member of the Board.
(i) "Entity" or "Entities" means and includes one or more
organizations of any kind or nature whatsoever, including, without
limitation, corporations, companies, partnerships, joint ventures,
sole proprietorships, and divisions.
(j) "Exchange Act" means the Securities Exchange Act of 1934, as
amended.
2. Employment.
The Company hereby employs Executive and Executive hereby accepts
such employment for the term set forth in Paragraph 4 below, subject
to and in accordance with all of the terms and conditions of this
Agreement. Executive shall initially hold the position of Senior
Vice President and General Manager, Contract Operations Group of the
Company and shall report to the Company's President; provided,
however, that the President, with the approval of the Company's Chief
Executive Officer, may change Executive's title and Executive's
responsibilities in the best interests of the Company and its
organizational development.
3. Duties and Responsibilities.
(a) Executive shall perform such duties and functions for the
Companies as are customarily performed by the Senior Vice
President and General Manager, Contract Operations Group of the
Company, and President and Chief Executive Officer of Metcalf &
Eddy Service, Inc., or such other duties or functions as the
Company's President, with the approval of the Company's Chief
Executive Officer, shall assign Executive from time to time in the
best interest of the Company to maximize its growth and
development. In the performance of his duties, Executive shall
comply with the policies and procedures of the Company (presently
in effect or as may be reasonably modified or established
hereafter) and be subject to the direction of the Chief Executive
Officer, the President, and the Board.
(b) Executive agrees to devote his entire normal working time,
attention, and energies to the performance of his duties.
Executive shall not directly or indirectly, alone or as a member
of any partnership, or as an officer, director, employee, or agent
of any Entity, be actively engaged in or concerned with any other
duties or pursuits (whether or not for gain, profit, or other
pecuniary advantage) which interfere with the performance of his
duties hereunder, or which may be inimical to or contrary to the
best interests of the Company. Nothing in this subparagraph (b)
shall be construed as preventing Executive from investing
Executive's personal assets in any way that does not either
require the rendering of services by Executive to or on behalf of
the Entities in which the investments are made or result in any
other conflict of Executive's interest or time.
(c) Executive shall use his best efforts, skills, and abilities to
promote the Company's best interests.
4. Term.
(a) Except as provided in subparagraph (b) immediately below,
Executive's employment under this Agreement shall commence on the
date of the occurrence of a Change of Control and shall continue
for a period of two (2) years from and after such date (the
"Initial Term"), subject, however, to prior termination as
provided in Paragraphs 7 and 8 of this Agreement. This Agreement
may be renewed or extended upon such terms and conditions as the
parties shall mutually agree to in a written instrument signed by
each of the parties hereto, but neither party hereto shall be
under any obligation to renew this Agreement.
(b) Executive's employment under this Agreement will not commence on
the date of the occurrence of a Change of Control if on the day
immediately prior to the Change of Control Executive is no longer
employed by the Company, unless Executive's employment by the
Company is terminated prior to the Change of Control at the request
of the individual or individuals or Entity or Entities acquiring
control of the Company.
5. Compensation.
During the Initial Term of Executive's employment under this Agreement,
Executive shall be paid by the Company an annual salary of at least
$210,000. The salary paid to Executive may be reviewed by the Board and
may be increased at the sole and unreviewable discretion of the Board,
which shall take into account the earnings and overall productivity of
the Company, available resources, the performance of Executive, the cost
of living, and such other factors as it deems relevant. The Board shall
have no obligation to make any adjustments in the salary of Executive.
The salary to be paid to Executive under this Agreement shall be payable
in equal monthly installments in accordance with the Company's customary
payroll practices.
6. Other Benefits.
(a) During the Initial Term of Executive's employment under this
Agreement, Executive shall be entitled to such vacations, and to
participate in any other fringe benefits provided by the Company
to its key employees (including any bonus, profit sharing,
pension, and health insurance plans in accordance with and subject
to the terms of such plans), as may be determined from time to
time by the Board.
(b) During the Initial Term of Executive's employment under this
Agreement, there shall be established an Incentive Bonus Program
for Fiscal Years 1994 and 1995. In each such fiscal year,
Executive shall be eligible to earn up to $30,000.00 in bonuses,
calculated as follows:
(i) if Executive meets or exceeds the fiscal-year new orders
target for Executive's Operating Group, as set forth in
the approved business plan, Executive shall earn
$10,000.00;
(ii) if Executive meets or exceeds the fiscal-year contribution
margin target for Executive's Operating Group, as set
forth in the approved business plan, Executive shall earn
$10,000.00; and
(iii) if Executive meets or exceeds the fiscal-year cash flow
target for Executive's Operating Group, as set forth in
the approved business plan, Executive shall earn
$10,000.00.
Any Incentive Bonus earned during a fiscal year will be paid
during the first half of the following fiscal year and is subject
to reduction in accordance with subparagraph (c) immediately
below. The three targets applicable to Executive for Fiscal Year
1994 are set forth in Exhibit A to this Agreement. The three
targets applicable to Executive for Fiscal Year 1995 will be
established by the President of the Company, with the approval of
the Chief Executive Officer of the Company, after completion of
the Fiscal Year 1995 business plan and submission of the business
plan to the Board, and the President shall provide Executive a
written statement, in a form similar to Exhibit A, of the Fiscal
Year 1995 targets.
(c) If Executive is entitled to receive compensation under the
Company's Fiscal Year 1994 or 1995 Management Incentive Plan (or
such similar plan by whatever name it shall be known as), the
Incentive Bonus that Executive may be eligible for under
subparagraph (b) immediately above in Fiscal Year 1994 or 1995
shall be reduced as follows:
(i) if the actual total compensation payable to Executive
under the Management Incentive Plan is less than or equal
to thirty (30) percent of Executive's annual salary, then
Executive shall receive one hundred (100) percent of the
total Incentive Bonus earned in accordance with
subparagraph (b) immediately above;
(ii) if the actual total compensation payable to Executive
under the management Incentive Plan is greater than thirty
(30) percent but less than forty (40) percent of
Executive's annual salary, then Executive shall receive
only two-thirds of the total Incentive Bonus earned in
accordance with subparagraph (b) immediately above; or
(iii) if the actual total compensation payable to Executive
under the Management Incentive Plan is equal to or greater
than forty (40) percent of Executive's annual salary, then
Executive shall receive only one-third of the total
Incentive Bonus earned in accordance with subparagraph (b)
immediately above.
7. Termination of Employment by the Company for Death, Dis-ability, or
Justifiable Cause, or by Executive Without Good Reason, or Upon
Expiration of the Initial Term .
(a) The Company shall have the right to terminate the Executive's
employment under this Agreement upon the occurrence any one or
more of the following events:
(i) the death of Executive (in which case said employment
terminates immediately upon death);
(ii) the "disability" of Executive (as hereinafter defined); or
(iii) the Board determines in its sole and unreview-able
discretion (acting reasonably and in good faith) that
"justifiable cause" (as hereinafter defined) exists for
the termination of Executive's employment.
Executive shall have the right to terminate Executive's employment
under this Agreement without "good reason" (as defined in
Paragraph 8 below) upon sixty (60) days' prior written notice to
the President of the Company. No such termination by Executive
shall be effective unless that notice has been given.
Except as provided in subparagraph (b) immediately below, upon
termination of the employment of Executive under any of the
circumstances set forth in this subparagraph (a), Executive's
entitlement to further compensation or other benefits under
Paragraphs 5 and 6 of this Agreement shall immediately cease.
(b) For the purposes of this Agreement, the term "disability" shall
mean the inability of Executive, due to illness, accident, or any
other physical or mental incapacity, to perform his duties or
fulfill his obligations under this Agreement in a normal manner for
a period of any three (3) consecutive months or for a total of six
(6) months (whether or not consecutive) in any twelve (12) month
period during the Initial Term of this Agreement, it being
understood that, notwithstanding any such inability to perform his
duties, Executive shall be entitled to receive his compensation as
provided herein until the termination of his employment for
disability. The Company shall provide Executive ten days' prior
written notice of any determination by the Board that Executive is
disabled.
(c) For purposes of this Agreement, "justifiable cause" for
termination by the Company of Executive's employment shall means
any one or more of the following:
(i) any intentional breach by Executive of the performance of
any of his duties pursuant to this Agreement;
(ii) any intentional or negligent disclosure by Executive to
any person or Entity (other than the Companies) and other
than in the ordinary course of business of any Confidential
Information of the Companies;
(iii) any knowing violation or reckless disregard by Executive
of any law, governmental regulation, or judicial decree
which has caused substantial injury to the Companies,
financial or otherwise;
(iv) Executive's interference with or
endeavor to entice away from the Companies any client or
customer, or solicitation of employment of any of the
Companies' officers, directors, employees, or agents;
(v) Executive's conviction of a felony, as evidenced by a
binding and final judgment, order, or decree of a court of
competent jurisdiction, in effect after exhaustion or
lapse of all rights of appeal;
(vi) the commission by Executive of any act of fraud, or
material act of malfeasance, disloyalty, or breach of
trust against the Companies;
(vii) any attempt by Executive to secure any personal profit
(other than authorized compensation paid to Executive by
the Company) or convert any corporate opportunity to his
benefit in connection with the business of the Companies;
(viii) any failure by Executive to devote his entire normal
working time to the affairs of the Companies;
(ix) any activities of Executive that are determined to be
inimical to or contrary to the best interests of the
Companies; or
(x) the conduct or involvement by Executive in any business
other than the businesses of the Companies.
The Company shall provide Executive ten (10) days' prior written
notice of termination for justifiable cause; provided, however,
that the Company shall not be required to furnish any such prior
written notice in the event that the Board reasonably determines
in its sole and unreviewable discretion that immediate termination
of Executive without such prior written notice is necessary to
protect the best interests of the Companies. The written notice
shall set forth in reasonable detail the facts and circumstances
that are the basis for the termination for justifiable cause.
(d) If Executive is still employed under this Agreement at the end of
the Initial Term of this Agreement and if the parties hereto have
failed to reach a written agreement (signed by each of the parties
hereto) as to the continuation of Executive's employment,
Executive's employment under this Agreement will automatically
terminate upon expiration of the Initial Term. In such case:
(i) Executive's entitlement to further compensation or other
benefits under Paragraphs 5 and 6 of this Agreement shall
immediately cease upon expiration of the Initial Term; and
(ii) such termination shall be deemed a triggering event
entitling Executive to severance pay under the Company's
severance pay policy, but in no event shall the severance
pay due and payable to Executive be less than a total of
six (6) weeks' salary; provided, however, that Executive
shall not be entitled to any severance pay if (A)
Executive is provided by the Company, at least sixty (60)
days prior to the expiration of the Initial Term, a
written offer to renew this Agreement for at least an
additional one (1) year and Executive does not accept in
writing that offer at least thirty (30) days prior to the
expiration of the Initial Term, or (B) Executive remains
employed by any of the Companies.
8. Termination of Employment Under Other Circumstances.
(a) If (i) the Company terminates Executive's employment under this
Agreement other than for death, "disability", or "justifiable
cause", or Executive terminates Executive's employment under this
Agreement for "good reason" (as hereinafter defined), and (ii)
Executive does not remain employed by any of the Companies,
Executive shall:
(i) receive from the Company, within two (2) business days
after the termination, an amount in cash equal to the sum
of:
(A) all salary due and payable to Executive as of the
date of termination;
(B) pay for all accrued, but unused, vacation and sick
days through the date of termination;
(C) all salary that would have been due and payable to
Executive over the remaining period of the Initial
Term of this Agreement if Executive's employment had
not been terminated, based on Executive's annual
salary in effect at the date of termination. By way
of illustration, if Executive's annual salary at the
date of termination was $200,000.00 and the
termination occurred at the end of the seventh (7th)
month of the Initial Term, Executive would be
entitled to receive 17/24 x $400,000.00, or
$283,333.33; and
(D) all severance pay due and payable to Executive under
the Company's severance pay policy, but in no event
less than a total of six (6) weeks' salary, it being
understood that a termination under this
subparagraph (a), whether by the Company or
Executive, shall be deemed a triggering event
entitling Executive to severance pay under the
Company's severance pay policy;
(ii) receive from the Company all other benefits which
executive employees of the Company normally receive when
their employment is terminated by the Company without
"justifiable cause", which in no event shall be less than
the benefits such executive employees would have received
had their terminations occurred on the day immediately
preceding the Change of Control; and
(iii) with respect to any stock options for shares of the
Company's stock that Executive has been or may be
hereafter awarded, and notwithstanding the terms of the
Long-Term Incentive Compensation Plans under which these
options were or may be hereafter granted, be entitled to
fully exercise said stock options at any time up to and
including the ninetieth day after the expiration of the
remaining period of the Initial Term of this Agreement.
(b) For purposes of this Agreement, "good reason" for Executive to
terminate Executive's employment under this Agreement shall mean
any one or more of the following:
(i) both (A) without Executive's prior written consent, (1)
the assignment by the Company to Executive of duties and
responsibilities that are not at least substantially
equivalent to Executive's duties and responsibilities with
the Company immediately prior to the date of the Change of
Control, except in connection with the termination of
Executive's employment under this Agreement pursuant to
Paragraph 7 of this Agreement, or (2) the failure by the
Company to continue Executive in a position that is at
least substantially equivalent to the position held by
Executive with the Company immediately prior to the date
of the Change of Control, except in connection with the
termination of Executive's employment under this Agreement
pursuant to Paragraph 7 of this Agreement, and (B) the
continuance thereof for a period of twenty (20) days after
written notice thereof to the Company from Executive;
(ii) a failure by the Company to pay, or a reduction by the
Company of, the annual salary required to be paid to
Executive under Paragraph 5 of this Agreement;
(iii) a failure by the Company to pay any Incentive Bonus
required to be paid to Executive under Paragraph 6 of this
Agreement;
(iv) a failure by the Company to provide Executive with (A) the
opportunity to participate, on terms no less favorable
than those in effect for other executives holding a
similar position, in all of the Company's benefit and
executive compensation plans and programs or their
equivalent or (B) all other fringe benefits, or their
equivalent, from time to time in effect for the benefit of
other executives holding a similar position;
(v) without Executive's prior written consent, (A) the
relocation by the Company of the principal place of
Executive's employment to a location that is more than 100
miles from Executive's principal place of employment
immediately prior to the date of the Change of Control or
(B) the imposition by the Company of travel requirements
on Executive which are not substantially consistent with
the travel requirements applicable to Executive
immediately prior to the date of the Change of Control; or
(vi) any breach of Paragraph 15 of this Agreement by the
Company.
(c) If the Company terminates Executive's employment under this
Agreement other than for death, "disability", or "justifiable
cause", the Company shall provide Executive at least ten (10)
days' prior written notice of that termination, and no such
termination shall be effective unless that notice has been given.
The notice shall set forth in reasonable detail the facts and
circumstances that are the basis for the termination.
(d) At least sixty (60) days prior to the termination by Executive of
Executive's employment under this Agreement for "good reason",
Executive shall provide the President of the Company with written
notice of Executive's intention to terminate Executive's
employment, and no such termination shall be effective unless that
notice has been given. The notice shall set forth in reasonable
detail the facts and circumstances that are the basis for the
termination.
(e) If Executive's employment by the Company is terminated prior to a
Change of Control at the request of the individual or individuals
or Entity or Entities acquiring control of the Company, the
provisions of this Paragraph 8 shall apply as if a Change of
Control had occurred just prior to the date of termination.
9. No Mitigation.
Executive shall not be required to mitigate damages or the amount of any
payment provided for under this Agreement by seeking other employment or
otherwise, and payments and benefits due Executive under Paragraph 8(a)
of this Agreement shall not be subject to offset in respect of any
Claims which the Company has or may have against Executive. Without
limiting the generality of the foregoing, no payment otherwise required
under this Agreement shall be reduced because of any payment received by
Executive in connection with other employment of or other services
rendered by Executive after the date of termination of Executive's
employment under this Agreement.
10. Inventions, Discoveries, Etc.
(a) Executive shall promptly and fully disclose to the Company (with
all necessary detail for a complete understanding of the same)
all developments, know-how, discoveries, inventions,
improvements, concepts, ideas, writings, formulae, processes, and
methods (whether copyrightable, patentable, or otherwise) made,
received, conceived, acquired, or written by Executive (whether
or not at the request of or upon the suggestion of the Company)
during the period of his employment with any of the Companies,
solely or jointly with others (whether or not during working
hours), in connection with or relating to any activities of the
Companies or any of their customers known to him as a consequence
of his employment (collectively referred to as the "Subject
Matter").
(b) Executive hereby assigns and transfers, and agrees to assign and
transfer, to the Company, all his right, title, and interest in and
to the Subject Matter. Executive further agrees to deliver to the
Company any and all drawings, notes, specifications, and data
relating to the Subject Matter and to execute, acknowledge, and
deliver all such further papers, including applications for
copyrights, patents, and similar protected ownership rights, as may
be necessary to obtain copyrights, patents, and similar protected
ownership rights with respect to the Subject Matter in any and all
countries and to vest title to any such copyrights, patents, and
similar protected ownership rights in the Company. Executive shall
assist the Company in obtaining such copyrights, patents, or similar
protected ownership rights during the period of his employment with
any of the Companies and any time thereafter and agrees to assist
the Company and to testify in its behalf in any prosecution or
litigation involving any of the Subject Matter during the period of
his employment with any of the Companies, and at any time
thereafter, in accordance with the provisions of subparagraph (c)
immediately below.
(c) At any time subsequent to the termination of Executive's
employment with any of the Companies or the expiration or
termination of this Agreement, if the Company requests in writing
that Executive assist the Company with respect to obtaining any
patents, copyrights, or similar protected ownership rights, or
that Executive assist the Company or testify in its behalf in
connection with any prosecution or litigation relating to the
Subject Matter, the Company shall reimburse Executive for
Executive's reasonable out-of-pocket expenses in connection with
such assistance or testimony. In the event the Company shall
request Executive's assistance or testimony as set forth
hereunder, the Company agrees to use its best efforts to assure
that such assistance or testimony will neither require a major or
unreasonable portion of Executive's time nor substantially
interfere with his then current employment or business
activities.
11. Non-Disclosure of Confidential Information.
(a) Executive shall not during his employment with any of the Companies
(nor at any time following termination of such employment or
expiration or termination of this Agreement), directly or
indirectly, intentionally or negligently disclose to or permit to be
known by any person or Entity any Confidential Information acquired
by him during the course of or in connection with his employment by
any of the Companies relating to (i) the Companies, (ii) the
officers, directors, employees, or agents of the Companies, (iii)
any client or customer of the Companies, or (iv) any Entity owned or
controlled, directly or indirectly, by any of the foregoing, or in
which any of the foregoing has a beneficial interest.
(b) All Confidential Information, regardless of how recorded, relating
to the Companies shall be the exclusive property of the Companies,
and Executive shall use his best efforts to prevent any publication
or disclosure thereof. Upon termination of Executive's employment
with any of the Companies or the expiration or termination of this
Agreement, all documents, records, reports, writings, and other
similar documents containing Confidential Information (including any
and all copies thereof) then in Executive's possession or control
shall be returned and left with the Company.
12. Right to Injunctive and Other Relief.
Executive recognizes that the services to be rendered by him to any of
the Companies are of special, unique, unusual, extraordinary, and
intellectual character, involving skill of the highest order, and that
such services are of special and particular value, the loss of which
cannot be adequately compensated for in damages. Executive further
agrees and declares that, because of his important role with the
Companies to date, clients' or customers' association of Executive with
the Companies, and the personal relationships Executive has with many of
such clients or customers, Executive's services to the Companies are
unique and extraordinary. In the event of a breach of any provision of
Paragraph 10 or 11 of this Agreement by Executive, the Companies shall
be entitled to injunctive relief and any other legal or equitable
remedies from a court of competent jurisdiction. Executive acknowledges
and agrees that any such breach will cause irreparable injury to the
Companies and that money damages will not provide an adequate remedy to
the Companies. In any action for injunctive relief, Executive shall not
be entitled to interpose a defense that the Companies have an adequate
remedy in a court of law. Executive agrees that the Companies may
recover by appropriate action the amount of the actual damages caused
the Companies by any failure, refusal, or neglect of Executive to
perform his agreements, representations, and warranties contained in
this Agreement. The remedies provided in this Agreement shall be deemed
cumulative and the exercise of one shall not preclude the exercise of
any other remedy at law or in equity for the same event or any other
event.
13. No Conflicting Agreements.
Executive represents and warrants that he is not a party to any
agreement, contract, or understanding, whether of employment or
otherwise, which would in any way restrict or prohibit him from
undertaking or performing his employment and other obligations in
accordance with the terms and conditions of this Agreement. Executive
further agrees to indemnify and hold harmless the Companies and their
past and present officers, directors, employees, agents, owners,
stockholders, representatives, and attorneys from and against and in
respect of any and all Claims alleging that (a) Executive is so
restricted or prohibited or (b) the Companies have committed a wrongful
act in negotiating with, and employing the services of, Executive.
14. Notices and Calendar Days.
All notices, requests, demands, and other communications provided for by
this Agreement shall be in writing and shall be personally delivered or
mailed (by registered or certified mail, return receipt requested,
postage prepaid) to the address of the party to whom intended as
specified below or to such different address as such party may have
fixed by a notice sent in accordance with this Paragraph.
(a) If to the Company, at:
Air & Water Technologies Corporation
P.O. Box 1500
Somerville, NJ 08876
Attention: President
with a copy to: General Counsel
(b) If to Executive, at:
620 Watchung Road
Bound Brook, NJ 08805
Any such notices shall be effective upon receipt, if personally
delivered, or three business days after mailing, if mailed.
Unless otherwise expressly provided, all references in this Agreement to
"days" mean "calendar days".
15. Assignability and Binding Effect.
(a) This Agreement shall inure to the benefit of and shall be binding
upon the heirs, executors, administrators, successors, and legal
representatives of Executive, and shall inure to the benefit of
and be binding upon the Company and its successors, assigns, and
legal representatives, but the obligations of Executive may not be
delegated and Executive may not assign, transfer, pledge,
encumber, hypothecate, or otherwise dispose of this Agreement, or
any of his rights under this Agreement, and any such attempted
delegation or disposition shall be null and void and without
effect. This Agreement shall also inure to the
benefit of the Companies and the Other Defendants (as defined in
Paragraph 19 below) and their respective heirs, executors,
administrators, successors, assigns, and legal representatives.
(b) If the Company shall be merged into or consolidated with another
Entity, the provisions of this Agreement shall be binding upon and
inure to the benefit of the Entity surviving the merger or
resulting from the consolidation. The Company shall require any
successor, whether direct or indirect, by purchase, merger,
consolidation, or otherwise, to all or substantially all of the
business or assets of the Company, by agreement in form and
substance satisfactory to Executive, expressly to assume and agree
to perform this Agreement in the same manner and to the same
extent that the Company would have been required to perform this
Agreement if no succession had taken place. The provisions of
this Paragraph 15 shall continue to apply to each subsequent
employer of Executive bound by this Agreement in the event of any
merger, consolidation, or transfer of all or substantially all of
the business or assets of that subsequent employer.
16. Complete Understanding.
This Agreement constitutes the complete understanding between the
parties with respect to the employment of Executive hereunder, and no
statement, representation, warranty or covenant has been made by either
party with respect thereto except as expressly set forth herein. This
Agreement shall not be altered, modified, amended, or terminated except
by written instrument signed by each of the parties hereto.
17. Governing Law.
This Agreement and all provisions hereof shall be governed by and
construed in accordance with the laws of the State of New Jersey.
18. Severability.
Should any part, term, or provision of this Agreement be declared or be
determined by any court or tribunal of competent jurisdiction to be
illegal, invalid, or unenforceable, the legality, validity, and
enforceability of the remaining parts, terms, or provisions shall not be
affected thereby, and said illegal, unenforceable, or invalid part,
term, or provision shall be deemed not to be a part of this Agreement.
19. Arbitration.
(a) Except as provided in subparagraph (b) immediately below, any and
all Claims arising out of or relating to (i) this Agreement, (ii)
any breach of any provision of this Agreement, (iii) Executive's
employment at any time with any of the Companies, and/or (iv) the
termination of Executive's employment with any of the Companies
shall be settled by arbitration. Such arbitration proceeding
shall be conducted pursuant to the Employment Dispute Resolution
Rules of the American Arbitration Association ("AAA") then in
effect, by a single arbitrator, and shall be held in Somerset
County, New Jersey. The arbitrator shall not have the power to
award punitive damages. The cost of the arbitration proceeding
and the reasonable costs and attorneys' fees of the prevailing
party shall be paid by the non-prevailing party, with the dollar
amount of these costs and fees to be fixed by the arbitrator. The
judgment upon the award rendered by the arbitrator may be entered
in any court having competent jurisdiction thereof.
(b) Nothing in subparagraph (a) immediately above shall be construed
or interpreted to preclude the Companies from filing suit in a
court of competent jurisdiction in order to enforce their rights
and remedies under Paragraphs 10, 11 and/or 12 of this Agreement.
In any such suit, the court is empowered to and shall resolve any
dispute as to whether the Claims asserted by any of the Companies
are within the scope of Paragraphs 10, 11, and/or 12 of this
Agreement, and the court shall not refer such dispute to
arbitration under subparagraph (a) immediately above.
(c) With respect to the Claims of Executive that are within the scope
of subparagraph (a) above, if Executive has the same, similar, or
related Claims against any of the Companies' employee benefit
plans, trusts, committees, or boards or against any past or
present officers, directors, employees, agents, owners,
stockholders, trustees, fiduciaries, administrators, sponsors,
representatives, or attorneys of the Companies or the Companies'
employee benefit plans, trusts, committees, or boards
(collectively referred to as the "Other Defendants"), and if
Executive seeks to litigate such Claims against the Other
Defendants in a civil action or any other proceeding (including
before an administrative agency), Executive agrees that any or all
of said Other Defendants may compel Executive to arbitrate his
Claims against them pursuant to the terms of this Paragraph 19.
(d) The arbitrator selected by the parties pursuant to the AAA rules
shall have expertise in private industry employee relations and
shall hear and determine the case promptly. The burden of
persuasion shall at all times be upon the party seeking relief.
(e) In the event Executive files suit in a court of competent
jurisdiction and asserts that certain Claims are not subject to
arbitration under this Paragraph 19 because of the limitation on
the power of the arbitrator to award punitive damages (the
"Limitation"), the parties agree that they will request the court
to resolve that legal issue on an expedited basis, and if the
court rules in favor of Executive on the Limitation issue, the
parties agree as follows:
(i) the arbitration shall proceed as if this Paragraph 19 did
not contain such Limitation;
(ii) the parties will request the court to enter judgment in
favor of Executive on the Limitation issue, at which time
the Company may appeal that ruling;
(iii) in the event the arbitrator determines that Executive is
entitled to punitive damages, the punitive damages aspect
of the arbitrator's award will be stayed pending the
exhaustion or lapse of all rights of appeal of the Company
under subparagraph (e)(ii) immediately above; and
(iv) in the event an appellate court rules in favor of the
Company on the Limitation issue, the arbitrator shall
vacate the award of punitive damages.
The procedures set forth in this subparagraph (e) shall also apply
in the event Executive seeks relief in some other tribunal, such
as an administrative agency, and the Company files a civil action
to compel arbitration.
20. Waiver.
It is agreed that a waiver by either party of a breach of any provision
of this Agreement shall neither operate nor be construed as a waiver of
any subsequent breach hereof, or as a waiver of a breach of any other
provision.
21. Survival.
All representations and warranties herein shall survive any termination
of Executive's employment or termination or expiration of this
Agreement, and the termination of Executive's employment or the
termination or expiration of this Agreement shall not affect the
enforceability of Paragraphs 10, 11, 12, 13, and 19 of this Agreement,
which Paragraphs shall survive the termination or expiration of this
Agreement or the termination of Executive's employment.
22. Other Documents.
The parties agree to execute and deliver all such further instruments
and take such other and further action as may be reasonably necessary or
appropriate to carry out the provisions of this Agreement.
23. Paragraph Headings.
The paragraph headings contained in this Agreement are for reference
purposes only and shall not affect in any way the meaning or
interpretations of this Agreement.
IN WITNESS WHEREOF, the parties hereto set their hands as of the day and year
first above written.
AIR & WATER TECHNOLOGIES CORPORATION
By /s/ Arthur L. Glenn
---------------------------
Witness:
--------------------
/s/ John Cirello
------------------------------
John Cirello
Witness: /s/ Deanna Lineen
--------------------
EXHIBIT A
EXECUTIVE RETENTION AGREEMENT
BETWEEN
JOHN CIRELLO
AND
AIR & WATER TECHNOLOGIES CORPORATION
For Fiscal Year 1994, the approved business plan targets for purposes of
Paragraph 6 of the Agreement are as follows:
1. New Orders $
2. Contribution Margin $
3. Cash Flow $
EXECUTIVE RETENTION AGREEMENT
AGREEMENT, dated as of March 17, 1994, by and between Donald A. Deieso
("Executive"), residing at 9 Nottingham Road, Edison, New Jersey 08820, and
Air & Water Technologies Corporation, a Delaware corporation (the "Company").
W I T N E S E T H:
WHEREAS, Executive is a skilled and dedicated employee who has important
management responsibilities and talents which benefit the Company and the
Company desires to ensure that it will continue to have the benefit of
Executive's services, and Executive desires to continue to be employed by the
Company;
WHEREAS, the Company has determined that Executive's ability to perform
Executive's responsibilities and utilize Executive's talents for the benefit
of the Company, and the Company's ability to retain Executive as a valued
employee, will be significantly enhanced if Executive is provided with fair
and reasonable protection from the risks of a Change of Control of the Company;
NOW, THEREFORE, in consideration of the foregoing and the mutual covenants,
understandings, and agreements herein contained, the parties hereby agree as
follows:
1. General Definitions.
As used in this Agreement:
(a) "Board" means the Board of Directors of the Company.
(b) "Change of Control" means and includes the occurrence of any one
or more of the following:
(i) Continuing Directors no longer constitute at least
two-thirds of the Directors constituting the Board;
(ii) Any person or group of persons (as defined in Rule 13d-5
under the Exchange Act) becomes the beneficial owner,
directly or indirectly, of 25% or more of the Company's
then outstanding Common Stock or 25% or more of the voting
power of the Company's then outstanding securities entitled
generally to vote for the election of Directors;
(iii) The approval by the Company's stockholders of the merger
or consolidation of the Company with any other Entity, the
sale of all or substantially all of the assets of the
Company, or the liquidation or dissolution of the Company,
unless, in the case of a merger or consolidation, the
Continuing Directors in office immediately prior to the
merger or consolidation will constitute at least
two-thirds of the directors constituting the board of
directors of the surviving Entity of the merger or
consolidation and any parent (as that term is defined in
Rule 12b-2 under the Exchange Act) of that Entity; or
(iv) At least two-thirds of the Continuing Directors in office
immediately prior to any other action taken or proposed to
be taken by the Company's stockholders or by the Board
determines that such action constitutes, or that the
proposed action, if taken, would constitute, a Change of
Control of the Company and the action is taken.
(c) "Claim" or "Claims" means and includes one or more charges,
complaints, claims, grievances (including grievances filed
pursuant to a collective bargaining agreement), liabilities,
obligations, promises, covenants, agreements, controversies,
damages, injuries, actions, causes of action, suits, rights,
demands, deficiencies, levies, assessments, attachments,
executions, judgments, awards, recoveries, costs, losses,
debts, and expenses (including attorneys' fees and costs
actually incurred) of any kind or nature whatsoever, whether
known or unknown, suspected or unsuspected, contingent or not
contingent, liquidated or unliquidated.
(d) "Common Stock" means the Class A Common Stock of the Company.
(e) "Companies" means and includes the Company and all of its
affiliated Entities, including, but not limited to, parent and
subsidiary companies (whether wholly or partially owned and
whether direct or indirect), partnerships, and joint ventures.
(f) "Confidential Information" means and includes, without limitation,
business and proprietary information and technology, trade
secrets, patented processes, research and development data,
know-how, methods of doing business, and technical information of
the Companies; financial information not previously recorded in
public releases or filings; information regarding costs, profits,
markets, sales, products, market studies and forecasts, pricing
policies, key personnel, other business affairs and methods,
customers and customer prospects, business plans, competitive
analyses, and prospects and opportunities (such as possible
expansions or contractions of business operations) which have been
discussed or considered by the Companies' management; the
substance of agreements with customers and others, marketing and
dealership arrangements, servicing and training programs and
arrangements, and customer lists; and information concerning
operational strengths or weaknesses of the Companies' operating
units, all to the extent not previously revealed to the public or
to the trade by the Companies' management.
(g) "Continuing Director" means any person who either (i) is a
Director on the date of this Agreement or (ii) was designated as a
Continuing Director by a majority of the Continuing Directors.
(h) "Director" means a member of the Board.
(i) "Entity" or "Entities" means and includes one or more
organizations of any kind or nature whatsoever, including, without
limitation, corporations, companies, partnerships, joint ventures,
sole proprietorships, and divisions.
(j) "Exchange Act" means the Securities Exchange Act of 1934, as
amended.
2. Employment.
The Company hereby employs Executive and Executive hereby accepts
such employment for the term set forth in Paragraph 4 below, subject
to and in accordance with all of the terms and conditions of this
Agreement. Executive shall initially hold the position of Executive
Vice President and General Manager, Professional Services Group of
the Company, and President and Chief Executive Officer of Metcalf &
Eddy Inc., and shall report to the Company's President; provided, the
President, with the approval of the Company's Chief Executive
Officer, may change Executive's title and Executive's
responsibilities in the best interests of the Company and its
organizational development.
3. Duties and Responsibilities.
(a) Executive shall perform such duties and functions for the
Companies as are customarily performed by the Executive Vice
President and General Manager, Professional Group of the Company
and President and Chief Executive Officer of Metcalf & Eddy, Inc.,
or such other duties or functions as the Company's President, with
the approval of the Company's Chief Executive Officer, shall
assign Executive from time to time in the best interest of the
Company to maximize its growth and development. In the
performance of his duties, Executive shall comply with the
policies and procedures of the Company (presently in effect or as
may be reasonably modified or established hereafter) and be
subject to the direction of the Chief Executive Officer, the
President, and the Board.
(b) Executive agrees to devote his entire normal working time,
attention, and energies to the performance of his duties.
Executive shall not directly or indirectly, alone or as a member
of any partnership, or as an officer, director, employee, or agent
of any Entity, be actively engaged in or concerned with any other
duties or pursuits (whether or not for gain, profit, or other
pecuniary advantage) which interfere with the performance of his
duties hereunder, or which may be inimical to or contrary to the
best interests of the Company. Nothing in this subparagraph (b)
shall be construed as preventing Executive from investing
Executive's personal assets in any way that does not either
require the rendering of services by Executive to or on behalf of
the Entities in which the investments are made or result in any
other conflict of Executive's interest or time.
(c) Executive shall use his best efforts, skills, and abilities to
promote the Company's best interests.
4. Term.
(a) Except as provided in subparagraph (b) immediately below,
Executive's employment under this Agreement shall commence on the
date of the occurrence of a Change of Control and shall continue
for a period of two (2) years from and after such date (the
"Initial Term"), subject, however, to prior termination as
provided in Paragraphs 7 and 8 of this Agreement. This Agreement
may be renewed or extended upon such terms and conditions as the
parties shall mutually agree to in a written instrument signed by
each of the parties hereto, but neither party hereto shall be
under any obligation to renew this Agreement.
(b) Executive's employment under this Agreement will not commence on
the date of the occurrence of a Change of Control if on the day
immediately prior to the Change of Control Executive is no longer
employed by the Company, unless Executive's employment by the
Company is terminated prior to the Change of Control at the request
of the individual or individuals or Entity or Entities acquiring
control of the Company.
5. Compensation.
During the Initial Term of Executive's employment under this Agreement,
Executive shall be paid by the Company an annual salary of at least
$210,000. The salary paid to Executive may be reviewed by the Board and
may be increased at the sole and unreviewable discretion of the Board,
which shall take into account the earnings and overall productivity of
the Company, available resources, the performance of Executive, the cost
of living, and such other factors as it deems relevant. The Board shall
have no obligation to make any adjustments in the salary of Executive.
The salary to be paid to Executive under this Agreement shall be payable
in equal monthly installments in accordance with the Company's customary
payroll practices.
6. Other Benefits.
(a) During the Initial Term of Executive's employment under this
Agreement, Executive shall be entitled to such vacations, and to
participate in any other fringe benefits provided by the Company
to its key employees (including any bonus, profit sharing,
pension, and health insurance plans in accordance with and subject
to the terms of such plans), as may be determined from time to
time by the Board.
(b) During the Initial Term of Executive's employment under this
Agreement, there shall be established an Incentive Bonus Program
for Fiscal Years 1994 and 1995. In each such fiscal year,
Executive shall be eligible to earn up to $30,000.00 in bonuses,
calculated as follows:
(i) if Executive meets or exceeds the fiscal-year new orders
target for Executive's Operating Group, as set forth in
the approved business plan, Executive shall earn
$10,000.00;
(ii) if Executive meets or exceeds the fiscal-year contribution
margin target for Executive's Operating Group, as set
forth in the approved business plan, Executive shall earn
$10,000.00; and
(iii) if Executive meets or exceeds the fiscal-year cash flow
target for Executive's Operating Group, as set forth in
the approved business plan, Executive shall earn
$10,000.00.
Any Incentive Bonus earned during a fiscal year will be paid
during the first half of the following fiscal year and is subject
to reduction in accordance with subparagraph (c) immediately
below. The three targets applicable to Executive for Fiscal Year
1994 are set forth in Exhibit A to this Agreement. The three
targets applicable to Executive for Fiscal Year 1995 will be
established by the President of the Company, with the approval of
the Chief Executive Officer of the Company, after completion of
the Fiscal Year 1995 business plan and submission of the business
plan to the Board, and the President shall provide Executive a
written statement, in a form similar to Exhibit A, of the Fiscal
Year 1995 targets.
(c) If Executive is entitled to receive compensation under the
Company's Fiscal Year 1994 or 1995 Management Incentive Plan (or
such similar plan by whatever name it shall be known as), the
Incentive Bonus that Executive may be eligible for under
subparagraph (b) immediately above in Fiscal Year 1994 or 1995
shall be reduced as follows:
(i) if the actual total compensation payable to Executive
under the Management Incentive Plan is less than or equal
to thirty (30) percent of Executive's annual salary, then
Executive shall receive one hundred (100) percent of the
total Incentive Bonus earned in accordance with
subparagraph (b) immediately above;
(ii) if the actual total compensation payable to Executive
under the management Incentive Plan is greater than thirty
(30) percent but less than forty (40) percent of
Executive's annual salary, then Executive shall receive
only two-thirds of the total Incentive Bonus earned in
accordance with subparagraph (b) immediately above; or
(iii) if the actual total compensation payable to Executive
under the Management Incentive Plan is equal to or greater
than forty (40) percent of Executive's annual salary, then
Executive shall receive only one-third of the total
Incentive Bonus earned in accordance with subparagraph (b)
immediately above.
7. Termination of Employment by the Company for Death, Dis-ability, or
Justifiable Cause, or by Executive Without Good Reason, or Upon
Expiration of the Initial Term .
(a) The Company shall have the right to terminate the Executive's
employment under this Agreement upon the occurrence any one or
more of the following events:
(i) the death of Executive (in which case said employment
terminates immediately upon death);
(ii) the "disability" of Executive (as hereinafter defined); or
(iii) the Board determines in its sole and unreview-able
discretion (acting reasonably and in good faith) that
"justifiable cause" (as hereinafter defined) exists for
the termination of Executive's employment.
Executive shall have the right to terminate Executive's employment
under this Agreement without "good reason" (as defined in
Paragraph 8 below) upon sixty (60) days' prior written notice to
the President of the Company. No such termination by Executive
shall be effective unless that notice has been given.
Except as provided in subparagraph (b) immediately below, upon
termination of the employment of Executive under any of the
circumstances set forth in this subparagraph (a), Executive's
entitlement to further compensation or other benefits under
Paragraphs 5 and 6 of this Agreement shall immediately cease.
(b) For the purposes of this Agreement, the term "disability" shall
mean the inability of Executive, due to illness, accident, or any
other physical or mental incapacity, to perform his duties or
fulfill his obligations under this Agreement in a normal manner for
a period of any three (3) consecutive months or for a total of six
(6) months (whether or not consecutive) in any twelve (12) month
period during the Initial Term of this Agreement, it being
understood that, notwithstanding any such inability to perform his
duties, Executive shall be entitled to receive his compensation as
provided herein until the termination of his employment for
disability. The Company shall provide Executive ten days' prior
written notice of any determination by the Board that Executive is
disabled.
(c) For purposes of this Agreement, "justifiable cause" for
termination by the Company of Executive's employment shall means
any one or more of the following:
(i) any intentional breach by Executive of the performance of
any of his duties pursuant to this Agreement;
(ii) any intentional or negligent disclosure by Executive to
any person or Entity (other than the Companies) and other
than in the ordinary course of business of any Confidential
Information of the Companies;
(iii) any knowing violation or reckless disregard by Executive
of any law, governmental regulation, or judicial decree
which has caused substantial injury to the Companies,
financial or otherwise;
(iv) Executive's interference with or endeavor to entice away
from the Companies any client or customer, or
solicitation of employment of any of the Companies'
officers, directors, employees, or agents;
(v) Executive's conviction of a felony, as evidenced by a
binding and final judgment, order, or decree of a court of
competent jurisdiction, in effect after exhaustion or
lapse of all rights of appeal;
(vi) the commission by Executive of any act of fraud, or
material act of malfeasance, disloyalty, or breach of
trust against the Companies;
(vii) any attempt by Executive to secure any personal profit
(other than authorized compensation paid to Executive by
the Company) or convert any corporate opportunity to his
benefit in connection with the business of the Companies;
(viii) any failure by Executive to devote his entire normal
working time to the affairs of the Companies;
(ix) any activities of Executive that are determined to be
inimical to or contrary to the best interests of the
Companies; or
(x) the conduct or involvement by Executive in any business
other than the businesses of the Companies.
The Company shall provide Executive ten (10) days' prior written
notice of termination for justifiable cause; provided, however,
that the Company shall not be required to furnish any such prior
written notice in the event that the Board reasonably determines
in its sole and unreviewable discretion that immediate termination
of Executive without such prior written notice is necessary to
protect the best interests of the Companies. The written notice
shall set forth in reasonable detail the facts and circumstances
that are the basis for the termination for justifiable cause.
(d) If Executive is still employed under this Agreement at the end of
the Initial Term of this Agreement and if the parties hereto have
failed to reach a written agreement (signed by each of the parties
hereto) as to the continuation of Executive's employment,
Executive's employment under this Agreement will automatically
terminate upon expiration of the Initial Term. In such case:
(i) Executive's entitlement to further compensation or other
benefits under Paragraphs 5 and 6 of this Agreement shall
immediately cease upon expiration of the Initial Term; and
(ii) such termination shall be deemed a triggering event
entitling Executive to severance pay under the Company's
severance pay policy, but in no event shall the severance
pay due and payable to Executive be less than a total of
six (6) weeks' salary; provided, however, that Executive
shall not be entitled to any severance pay if (A)
Executive is provided by the Company, at least sixty (60)
days prior to the expiration of the Initial Term, a
written offer to renew this Agreement for at least an
additional one (1) year and Executive does not accept in
writing that offer at least thirty (30) days prior to the
expiration of the Initial Term, or (B) Executive remains
employed by any of the Companies.
8. Termination of Employment Under Other Circumstances.
(a) If (i) the Company terminates Executive's employment under this
Agreement other than for death, "disability", or "justifiable
cause", or Executive terminates Executive's employment under this
Agreement for "good reason" (as hereinafter defined), and (ii)
Executive does not remain employed by any of the Companies,
Executive shall:
(i) receive from the Company, within two (2) business days
after the termination, an amount in cash equal to the sum
of:
(A) all salary due and payable to Executive as of the
date of termination;
(B) pay for all accrued, but unused, vacation and sick
days through the date of termination;
(C) all salary that would have been due and payable to
Executive over the remaining period of the Initial
Term of this Agreement if Executive's employment had
not been terminated, based on Executive's annual
salary in effect at the date of termination. By way
of illustration, if Executive's annual salary at the
date of termination was $200,000.00 and the
termination occurred at the end of the seventh (7th)
month of the Initial Term, Executive would be
entitled to receive 17/24 x $400,000.00, or
$283,333.33; and
(D) all severance pay due and payable to Executive under
the Company's severance pay policy, but in no event
less than a total of six (6) weeks' salary, it being
understood that a termination under this
subparagraph (a), whether by the Company or
Executive, shall be deemed a triggering event
entitling Executive to severance pay under the
Company's severance pay policy;
(ii) receive from the Company all other benefits which
executive employees of the Company normally receive when
their employment is terminated by the Company without
"justifiable cause", which in no event shall be less than
the benefits such executive employees would have received
had their terminations occurred on the day immediately
preceding the Change of Control; and
(iii) with respect to any stock options for shares of the
Company's stock that Executive has been or may be
hereafter awarded, and notwithstanding the terms of the
Long-Term Incentive Compensation Plans under which these
options were or may be hereafter granted, be entitled to
fully exercise said stock options at any time up to and
including the ninetieth day after the expiration of the
remaining period of the Initial Term of this Agreement.
(b) For purposes of this Agreement, "good reason" for Executive to
terminate Executive's employment under this Agreement shall mean
any one or more of the following:
(i) both (A) without Executive's prior written consent, (1)
the assignment by the Company to Executive of duties and
responsibilities that are not at least substantially
equivalent to Executive's duties and responsibilities with
the Company immediately prior to the date of the Change of
Control, except in connection with the termination of
Executive's employment under this Agreement pursuant to
Paragraph 7 of this Agreement, or (2) the failure by the
Company to continue Executive in a position that is at
least substantially equivalent to the position held by
Executive with the Company immediately prior to the date
of the Change of Control, except in connection with the
termination of Executive's employment under this Agreement
pursuant to Paragraph 7 of this Agreement, and (B) the
continuance thereof for a period of twenty (20) days after
written notice thereof to the Company from Executive;
(ii) a failure by the Company to pay, or a reduction by the
Company of, the annual salary required to be paid to
Executive under Paragraph 5 of this Agreement;
(iii) a failure by the Company to pay any Incentive Bonus
required to be paid to Executive under Paragraph 6 of this
Agreement;
(iv) a failure by the Company to provide Executive with (A) the
opportunity to participate, on terms no less favorable
than those in effect for other executives holding a
similar position, in all of the Company's benefit and
executive compensation plans and programs or their
equivalent or (B) all other fringe benefits, or their
equivalent, from time to time in effect for the benefit of
other executives holding a similar position;
(v) without Executive's prior written consent, (A) the
relocation by the Company of the principal place of
Executive's employment to a location that is more than 100
miles from Executive's principal place of employment
immediately prior to the date of the Change of Control or
(B) the imposition by the Company of travel requirements
on Executive which are not substantially consistent with
the travel requirements applicable to Executive
immediately prior to the date of the Change of Control; or
(vi) any breach of Paragraph 15 of this Agreement by the
Company.
(c) If the Company terminates Executive's employment under this
Agreement other than for death, "disability", or "justifiable
cause", the Company shall provide Executive at least ten (10)
days' prior written notice of that termination, and no such
termination shall be effective unless that notice has been given.
The notice shall set forth in reasonable detail the facts and
circumstances that are the basis for the termination.
(d) At least sixty (60) days prior to the termination by Executive of
Executive's employment under this Agreement for "good reason",
Executive shall provide the President of the Company with written
notice of Executive's intention to terminate Executive's
employment, and no such termination shall be effective unless that
notice has been given. The notice shall set forth in reasonable
detail the facts and circumstances that are the basis for the
termination.
(e) If Executive's employment by the Company is terminated prior to a
Change of Control at the request of the individual or individuals
or Entity or Entities acquiring control of the Company, the
provisions of this Paragraph 8 shall apply as if a Change of
Control had occurred just prior to the date of termination.
9. No Mitigation.
Executive shall not be required to mitigate damages or the amount of any
payment provided for under this Agreement by seeking other employment or
otherwise, and payments and benefits due Executive under Paragraph 8(a)
of this Agreement shall not be subject to offset in respect of any
Claims which the Company has or may have against Executive. Without
limiting the generality of the foregoing, no payment otherwise required
under this Agreement shall be reduced because of any payment received by
Executive in connection with other employment of or other services
rendered by Executive after the date of termination of Executive's
employment under this Agreement.
10. Inventions, Discoveries, Etc.
(a) Executive shall promptly and fully disclose to the Company (with all
necessary detail for a complete understanding of the same) all
developments, know-how, discoveries, inventions, improvements,
concepts, ideas, writings, formulae, processes, and methods (whether
copyrightable, patentable, or otherwise) made, received, conceived,
acquired, or written by Executive (whether or not at the request of
or upon the suggestion of the Company) during the period of his
employment with any of the Companies, solely or jointly with others
(whether or not during working hours), in connection with or relating
to any activities of the Companies or any of their customers known
to him as a consequence of his employment (collectively referred to
as the "Subject Matter").
(b) Executive hereby assigns and transfers, and agrees to assign and
transfer, to the Company, all his right, title, and interest in and
to the Subject Matter. Executive further agrees to deliver to the
Company any and all drawings, notes, specifications, and data
relating to the Subject Matter and to execute, acknowledge, and
deliver all such further papers, including applications for
copyrights, patents, and similar protected ownership rights, as may
be necessary to obtain copyrights, patents, and similar protected
ownership rights with respect to the Subject Matter in any and all
countries and to vest title to any such copyrights, patents, and
similar protected ownership rights in the Company. Executive shall
assist the Company in obtaining such copyrights, patents, or similar
protected ownership rights during the period of his employment with
any of the Companies and any time thereafter and agrees to assist
the Company and to testify in its behalf in any prosecution or
litigation involving any of the Subject Matter during the period of
his employment with any of the Companies, and at any time
thereafter, in accordance with the provisions of subparagraph (c)
immediately below.
(c) At any time subsequent to the termination of Executive's
employment with any of the Companies or the expiration or
termination of this Agreement, if the Company requests in writing
that Executive assist the Company with respect to obtaining any
patents, copyrights, or similar protected ownership rights, or
that Executive assist the Company or testify in its behalf in
connection with any prosecution or litigation relating to the
Subject Matter, the Company shall reimburse Executive for
Executive's reasonable out-of-pocket expenses in connection with
such assistance or testimony. In the event the Company shall
request Executive's assistance or testimony as set forth
hereunder, the Company agrees to use its best efforts to assure
that such assistance or testimony will neither require a major or
unreasonable portion of Executive's time nor substantially
interfere with his then current employment or business
activities.
11. Non-Disclosure of Confidential Information.
(a) Executive shall not during his employment with any of the Companies
(nor at any time following termination of such employment or
expiration or termination of this Agreement), directly or
indirectly, intentionally or negligently disclose to or permit to be
known by any person or Entity any Confidential Information acquired
by him during the course of or in connection with his employment by
any of the Companies relating to (i) the Companies, (ii) the
officers, directors, employees, or agents of the Companies, (iii)
any client or customer of the Companies, or (iv) any Entity owned or
controlled, directly or indirectly, by any of the foregoing, or in
which any of the foregoing has a beneficial interest.
(b) All Confidential Information, regardless of how recorded, relating
to the Companies shall be the exclusive property of the Companies,
and Executive shall use his best efforts to prevent any publication
or disclosure thereof. Upon termination of Executive's employment
with any of the Companies or the expiration or termination of this
Agreement, all documents, records, reports, writings, and other
similar documents containing Confidential Information (including any
and all copies thereof) then in Executive's possession or control
shall be returned and left with the Company.
12. Right to Injunctive and Other Relief.
Executive recognizes that the services to be rendered by him to any of
the Companies are of special, unique, unusual, extraordinary, and
intellectual character, involving skill of the highest order, and that
such services are of special and particular value, the loss of which
cannot be adequately compensated for in damages. Executive further
agrees and declares that, because of his important role with the
Companies to date, clients' or customers' association of Executive with
the Companies, and the personal relationships Executive has with many of
such clients or customers, Executive's services to the Companies are
unique and extraordinary. In the event of a breach of any provision of
Paragraph 10 or 11 of this Agreement by Executive, the Companies shall
be entitled to injunctive relief and any other legal or equitable
remedies from a court of competent jurisdiction. Executive acknowledges
and agrees that any such breach will cause irreparable injury to the
Companies and that money damages will not provide an adequate remedy to
the Companies. In any action for injunctive relief, Executive shall not
be entitled to interpose a defense that the Companies have an adequate
remedy in a court of law. Executive agrees that the Companies may
recover by appropriate action the amount of the actual damages caused
the Companies by any failure, refusal, or neglect of Executive to
perform his agreements, representations, and warranties contained in
this Agreement. The remedies provided in this Agreement shall be deemed
cumulative and the exercise of one shall not preclude the exercise of
any other remedy at law or in equity for the same event or any other
event.
13. No Conflicting Agreements.
Executive represents and warrants that he is not a party to any
agreement, contract, or understanding, whether of employment or
otherwise, which would in any way restrict or prohibit him from
undertaking or performing his employment and other obligations in
accordance with the terms and conditions of this Agreement. Executive
further agrees to indemnify and hold harmless the Companies and their
past and present officers, directors, employees, agents, owners,
stockholders, representatives, and attorneys from and against and in
respect of any and all Claims alleging that (a) Executive is so
restricted or prohibited or (b) the Companies have committed a wrongful
act in negotiating with, and employing the services of, Executive.
14. Notices and Calendar Days.
All notices, requests, demands, and other communications provided for by
this Agreement shall be in writing and shall be personally delivered or
mailed (by registered or certified mail, return receipt requested,
postage prepaid) to the address of the party to whom intended as
specified below or to such different address as such party may have
fixed by a notice sent in accordance with this Paragraph.
(a) If to the Company, at:
Air & Water Technologies Corporation
P.O. Box 1500
Somerville, NJ 08876
Attention: President
with a copy to: General Counsel
(b) If to Executive, at:
9 Nottingham Road
Edison, NJ 08820
Any such notices shall be effective upon receipt, if personally
delivered, or three business days after mailing, if mailed.
Unless otherwise expressly provided, all references in this Agreement to
"days" mean "calendar days".
15. Assignability and Binding Effect.
(a) This Agreement shall inure to the benefit of and shall be
binding upon the heirs, executors, administrators, successors,
and legal representatives of Executive, and shall inure to the
benefit of and be binding upon the Company and its successors,
assigns, and legal representatives, but the obligations of
Executive may not be delegated and Executive may not assign,
transfer, pledge, encumber, hypothecate, or otherwise dispose
of this Agreement, or any of his rights under this Agreement,
and any such attempted delegation or disposition shall be null
and void and without effect. This Agreement shall also inure
to the benefit of the Companies and the Other Defendants (as
defined in Paragraph 19 below) and their respective heirs,
executors, administrators, successors, assigns, and legal
representatives.
(b) If the Company shall be merged into or consolidated with another
Entity, the provisions of this Agreement shall be binding upon and
inure to the benefit of the Entity surviving the merger or
resulting from the consolidation. The Company shall require any
successor, whether direct or indirect, by purchase, merger,
consolidation, or otherwise, to all or substantially all of the
business or assets of the Company, by agreement in form and
substance satisfactory to Executive, expressly to assume and agree
to perform this Agreement in the same manner and to the same
extent that the Company would have been required to perform this
Agreement if no succession had taken place. The provisions of
this Paragraph 15 shall continue to apply to each subsequent
employer of Executive bound by this Agreement in the event of any
merger, consolidation, or transfer of all or substantially all of
the business or assets of that subsequent employer.
16. Complete Understanding.
This Agreement constitutes the complete understanding between the
parties with respect to the employment of Executive hereunder, and no
statement, representation, warranty or covenant has been made by either
party with respect thereto except as expressly set forth herein. This
Agreement shall not be altered, modified, amended, or terminated except
by written instrument signed by each of the parties hereto.
17. Governing Law.
This Agreement and all provisions hereof shall be governed by and
construed in accordance with the laws of the State of New Jersey.
18. Severability.
Should any part, term, or provision of this Agreement be declared or be
determined by any court or tribunal of competent jurisdiction to be
illegal, invalid, or unenforceable, the legality, validity, and
enforceability of the remaining parts, terms, or provisions shall not be
affected thereby, and said illegal, unenforceable, or invalid part,
term, or provision shall be deemed not to be a part of this Agreement.
19. Arbitration.
(a) Except as provided in subparagraph (b) immediately below, any and
all Claims arising out of or relating to (i) this Agreement, (ii)
any breach of any provision of this Agreement, (iii) Executive's
employment at any time with any of the Companies, and/or (iv) the
termination of Executive's employment with any of the Companies
shall be settled by arbitration. Such arbitration proceeding
shall be conducted pursuant to the Employment Dispute Resolution
Rules of the American Arbitration Association ("AAA") then in
effect, by a single arbitrator, and shall be held in Somerset
County, New Jersey. The arbitrator shall not have the power to
award punitive damages. The cost of the arbitration proceeding
and the reasonable costs and attorneys' fees of the prevailing
party shall be paid by the non-prevailing party, with the dollar
amount of these costs and fees to be fixed by the arbitrator. The
judgment upon the award rendered by the arbitrator may be entered
in any court having competent jurisdiction thereof.
(b) Nothing in subparagraph (a) immediately above shall be construed
or interpreted to preclude the Companies from filing suit in a
court of competent jurisdiction in order to enforce their rights
and remedies under Paragraphs 10, 11 and/or 12 of this Agreement.
In any such suit, the court is empowered to and shall resolve any
dispute as to whether the Claims asserted by any of the Companies
are within the scope of Paragraphs 10, 11, and/or 12 of this
Agreement, and the court shall not refer such dispute to
arbitration under subparagraph (a) immediately above.
(c) With respect to the Claims of Executive that are within the scope
of subparagraph (a) above, if Executive has the same, similar, or
related Claims against any of the Companies' employee benefit
plans, trusts, committees, or boards or against any past or
present officers, directors, employees, agents, owners,
stockholders, trustees, fiduciaries, administrators, sponsors,
representatives, or attorneys of the Companies or the Companies'
employee benefit plans, trusts, committees, or boards
(collectively referred to as the "Other Defendants"), and if
Executive seeks to litigate such Claims against the Other
Defendants in a civil action or any other proceeding (including
before an administrative agency), Executive agrees that any or all
of said Other Defendants may compel Executive to arbitrate his
Claims against them pursuant to the terms of this Paragraph 19.
(d) The arbitrator selected by the parties pursuant to the AAA rules
shall have expertise in private industry employee relations and
shall hear and determine the case promptly. The burden of
persuasion shall at all times be upon the party seeking relief.
(e) In the event Executive files suit in a court of competent
jurisdiction and asserts that certain Claims are not subject to
arbitration under this Paragraph 19 because of the limitation on
the power of the arbitrator to award punitive damages (the
"Limitation"), the parties agree that they will request the court
to resolve that legal issue on an expedited basis, and if the
court rules in favor of Executive on the Limitation issue, the
parties agree as follows:
(i) the arbitration shall proceed as if this Paragraph 19 did
not contain such Limitation;
(ii) the parties will request the court to enter judgment in
favor of Executive on the Limitation issue, at which time
the Company may appeal that ruling;
(iii) in the event the arbitrator determines that Executive is
entitled to punitive damages, the punitive damages aspect
of the arbitrator's award will be stayed pending the
exhaustion or lapse of all rights of appeal of the Company
under subparagraph (e)(ii) immediately above; and
(iv) in the event an appellate court rules in favor of the
Company on the Limitation issue, the arbitrator shall
vacate the award of punitive damages.
The procedures set forth in this subparagraph (e) shall also apply
in the event Executive seeks relief in some other tribunal, such
as an administrative agency, and the Company files a civil action
to compel arbitration.
20. Waiver.
It is agreed that a waiver by either party of a breach of any provision
of this Agreement shall neither operate nor be construed as a waiver of
any subsequent breach hereof, or as a waiver of a breach of any other
provision.
21. Survival.
All representations and warranties herein shall survive any termination
of Executive's employment or termination or expiration of this
Agreement, and the termination of Executive's employment or the
termination or expiration of this Agreement shall not affect the
enforceability of Paragraphs 10, 11, 12, 13, and 19 of this Agreement,
which Paragraphs shall survive the termination or expiration of this
Agreement or the termination of Executive's employment.
22. Other Documents.
The parties agree to execute and deliver all such further instruments
and take such other and further action as may be reasonably necessary or
appropriate to carry out the provisions of this Agreement.
23. Paragraph Headings.
The paragraph headings contained in this Agreement are for reference
purposes only and shall not affect in any way the meaning or
interpretations of this Agreement.
IN WITNESS WHEREOF, the parties hereto set their hands as of the day and year
first above written.
AIR & WATER TECHNOLOGIES CORPORATION
By /s/ Arthur L. Glenn
--------------------------------
Witness:
-------------------------
/s/ Donald A. Deieso
-----------------------------------
Donald A. Deieso
Witness: /s/ Joanne F. Krauter
-------------------------
EXHIBIT A
EXECUTIVE RETENTION AGREEMENT
BETWEEN
DONALD A. DEIESO
AND
AIR & WATER TECHNOLOGIES CORPORATION
For Fiscal Year 1994, the approved business plan targets for purposes of
Paragraph 6 of the Agreement are as follows:
1. New Orders $
2. Contribution Margin $
3. Cash Flow $
EXECUTIVE RETENTION AGREEMENT
AGREEMENT, dated as of March 17, 1994, by and between Arthur L. Glenn
("Executive"), residing at 728 Governor Circle, Newtown Square, Pennsylvania
19073, and Air & Water Technologies Corporation, a Delaware corporation (the
"Company").
W I T N E S E T H:
WHEREAS, Executive is a skilled and dedicated employee who has important
management responsibilities and talents which benefit the Company and the
Company desires to ensure that it will continue to have the benefit of
Executive's services, and Executive desires to continue to be employed by the
Company;
WHEREAS, the Company has determined that Executive's ability to perform
Executive's responsibilities and utilize Executive's talents for the benefit
of the Company, and the Company's ability to retain Executive as a valued
employee, will be significantly enhanced if Executive is provided with fair
and reasonable protection from the risks of a Change of Control of the Company;
NOW, THEREFORE, in consideration of the foregoing and the mutual covenants,
understandings, and agreements herein contained, the parties hereby agree as
follows:
1. General Definitions.
As used in this Agreement:
(a) "Board" means the Board of Directors of the Company.
(b) "Change of Control" means and includes the occurrence of any one
or more of the following:
(i) Continuing Directors no longer constitute at least
two-thirds of the Directors constituting the Board;
(ii) Any person or group of persons (as defined in Rule 13d-5
under the Exchange Act) becomes the beneficial owner,
directly or indirectly, of 25% or more of the Company's
then outstanding Common Stock or 25% or more of the voting
power of the Company's then outstanding securities entitled
generally to vote for the election of Directors;
(iii) The approval by the Company's stockholders of the merger
or consolidation of the Company with any other Entity, the
sale of all or substantially all of the assets of the
Company, or the liquidation or dissolution of the Company,
unless, in the case of a merger or consolidation, the
Continuing Directors in office immediately prior to the
merger or consolidation will constitute at least
two-thirds of the directors constituting the board of
directors of the surviving Entity of the merger or
consolidation and any parent (as that term is defined in
Rule 12b-2 under the Exchange Act) of that Entity; or
(iv) At least two-thirds of the Continuing Directors in office
immediately prior to any other action taken or proposed to
be taken by the Company's stockholders or by the Board
determines that such action constitutes, or that the
proposed action, if taken, would constitute, a Change of
Control of the Company and the action is taken.
(c) "Claim" or "Claims" means and includes one or more charges,
complaints, claims, grievances (including grievances filed
pursuant to a collective bargaining agreement), liabilities,
obligations, promises, covenants, agreements, controversies,
damages, injuries, actions, causes of action, suits, rights,
demands, deficiencies, levies, assessments, attachments,
executions, judgments, awards, recoveries, costs, losses,
debts, and expenses (including attorneys' fees and costs
actually incurred) of any kind or nature whatsoever, whether
known or unknown, suspected or unsuspected, contingent or not
contingent, liquidated or unliquidated.
(d) "Common Stock" means the Class A Common Stock of the Company.
(e) "Companies" means and includes the Company and all of its
affiliated Entities, including, but not limited to, parent and
subsidiary companies (whether wholly or partially owned and
whether direct or indirect), partnerships, and joint ventures.
(f) "Confidential Information" means and includes, without limitation,
business and proprietary information and technology, trade
secrets, patented processes, research and development data,
know-how, methods of doing business, and technical information of
the Companies; financial information not previously recorded in
public releases or filings; information regarding costs, profits,
markets, sales, products, market studies and forecasts, pricing
policies, key personnel, other business affairs and methods,
customers and customer prospects, business plans, competitive
analyses, and prospects and opportunities (such as possible
expansions or contractions of business operations) which have been
discussed or considered by the Companies' management; the
substance of agreements with customers and others, marketing and
dealership arrangements, servicing and training programs and
arrangements, and customer lists; and information concerning
operational strengths or weaknesses of the Companies' operating
units, all to the extent not previously revealed to the public or
to the trade by the Companies' management.
(g) "Continuing Director" means any person who either (i) is a
Director on the date of this Agreement or (ii) was designated as a
Continuing Director by a majority of the Continuing Directors.
(h) "Director" means a member of the Board.
(i) "Entity" or "Entities" means and includes one or more
organizations of any kind or nature whatsoever, including, without
limitation, corporations, companies, partnerships, joint ventures,
sole proprietorships, and divisions.
(j) "Exchange Act" means the Securities Exchange Act of 1934, as
amended.
2. Employment.
The Company hereby employs Executive and Executive hereby accepts
such employment for the term set forth in Paragraph 4 below, subject
to and in accordance with all of the terms and conditions of this
Agreement. Executive shall initially hold the position of President
and Chief Operating Officer of the Company and shall report to the
Company's President; the President, with the approval of the
Company's Chief Executive Officer, may change Executive's title and
Executive's responsibilities in the best interests of the Company and
its organizational development.
3. Duties and Responsibilities.
(a) Executive shall perform such duties and functions for the
Companies as are customarily performed by the President and Chief
Operating Officer, or such other duties or functions as the
Company's President, with the approval of the Company's Chief
Executive Officer, shall assign Executive from time to time in the
best interest of the Company to maximize its growth and
development. In the performance of his duties, Executive shall
comply with the policies and procedures of the Company (presently
in effect or as may be reasonably modified or established
hereafter) and be subject to the direction of the Chief Executive
Officer, the President, and the Board.
(b) Executive agrees to devote his entire normal working time,
attention, and energies to the performance of his duties.
Executive shall not directly or indirectly, alone or as a member
of any partnership, or as an officer, director, employee, or agent
of any Entity, be actively engaged in or concerned with any other
duties or pursuits (whether or not for gain, profit, or other
pecuniary advantage) which interfere with the performance of his
duties hereunder, or which may be inimical to or contrary to the
best interests of the Company. Nothing in this subparagraph (b)
shall be construed as preventing Executive from investing
Executive's personal assets in any way that does not either
require the rendering of services by Executive to or on behalf of
the Entities in which the investments are made or result in any
other conflict of Executive's interest or time.
(c) Executive shall use his best efforts, skills, and abilities to
promote the Company's best interests.
4. Term.
(a) Except as provided in subparagraph (b) immediately below,
Executive's employment under this Agreement shall commence on the
date of the occurrence of a Change of Control and shall continue
for a period of two (2) years from and after such date (the
"Initial Term"), subject, however, to prior termination as
provided in Paragraphs 7 and 8 of this Agreement. This Agreement
may be renewed or extended upon such terms and conditions as the
parties shall mutually agree to in a written instrument signed by
each of the parties hereto, but neither party hereto shall be
under any obligation to renew this Agreement.
(b) Executive's employment under this Agreement will not commence on
the date of the occurrence of a Change of Control if on the day
immediately prior to the Change of Control Executive is no longer
employed by the Company, unless Executive's employment by the
Company is terminated prior to the Change of Control at the request
of the individual or individuals or Entity or Entities acquiring
control of the Company.
5. Compensation.
During the Initial Term of Executive's employment under this Agreement,
Executive shall be paid by the Company an annual salary of at least
$250,000. The salary paid to Executive may be reviewed by the Board and
may be increased at the sole and unreviewable discretion of the Board,
which shall take into account the earnings and overall productivity of
the Company, available resources, the performance of Executive, the cost
of living, and such other factors as it deems relevant. The Board shall
have no obligation to make any adjustments in the salary of Executive.
The salary to be paid to Executive under this Agreement shall be payable
in equal monthly installments in accordance with the Company's customary
payroll practices.
6. Other Benefits.
(a) During the Initial Term of Executive's employment under this
Agreement, Executive shall be entitled to such vacations, and to
participate in any other fringe benefits provided by the Company
to its key employees (including any bonus, profit sharing,
pension, and health insurance plans in accordance with and subject
to the terms of such plans), as may be determined from time to
time by the Board.
(b) During the Initial Term of Executive's employment under this
Agreement, there shall be established an Incentive Bonus Program
for Fiscal Years 1994 and 1995. In each such fiscal year,
Executive shall be eligible to earn up to $30,000.00 in bonuses,
calculated as follows:
(i) if Executive meets or exceeds the fiscal-year new orders
target for Executive's Operating Group, as set forth in
the approved business plan, Executive shall earn
$10,000.00;
(ii) if Executive meets or exceeds the fiscal-year contribution
margin target for Executive's Operating Group, as set
forth in the approved business plan, Executive shall earn
$10,000.00; and
(iii) if Executive meets or exceeds the fiscal-year cash flow
target for Executive's Operating Group, as set forth in
the approved business plan, Executive shall earn
$10,000.00.
Any Incentive Bonus earned during a fiscal year will be paid
during the first half of the following fiscal year and is subject
to reduction in accordance with subparagraph (c) immediately
below. The three targets applicable to Executive for Fiscal Year
1994 are set forth in Exhibit A to this Agreement. The three
targets applicable to Executive for Fiscal Year 1995 will be
established by the President of the Company, with the approval of
the Chief Executive Officer of the Company, after completion of
the Fiscal Year 1995 business plan and submission of the business
plan to the Board, and the President shall provide Executive a
written statement, in a form similar to Exhibit A, of the Fiscal
Year 1995 targets.
(c) If Executive is entitled to receive compensation under the
Company's Fiscal Year 1994 or 1995 Management Incentive Plan (or
such similar plan by whatever name it shall be known as), the
Incentive Bonus that Executive may be eligible for under
subparagraph (b) immediately above in Fiscal Year 1994 or 1995
shall be reduced as follows:
(i) if the actual total compensation payable to Executive
under the Management Incentive Plan is less than or equal
to thirty (30) percent of Executive's annual salary, then
Executive shall receive one hundred (100) percent of the
total Incentive Bonus earned in accordance with
subparagraph (b) immediately above;
(ii) if the actual total compensation payable to Executive
under the management Incentive Plan is greater than thirty
(30) percent but less than forty (40) percent of
Executive's annual salary, then Executive shall receive
only two-thirds of the total Incentive Bonus earned in
accordance with subparagraph (b) immediately above; or
(iii) if the actual total compensation payable to Executive
under the Management Incentive Plan is equal to or greater
than forty (40) percent of Executive's annual salary, then
Executive shall receive only one-third of the total
Incentive Bonus earned in accordance with subparagraph (b)
immediately above.
7. Termination of Employment by the Company for Death, Dis-ability, or
Justifiable Cause, or by Executive Without Good Reason, or Upon
Expiration of the Initial Term .
(a) The Company shall have the right to terminate the Executive's
employment under this Agreement upon the occurrence any one or
more of the following events:
(i) the death of Executive (in which case said employment
terminates immediately upon death);
(ii) the "disability" of Executive (as hereinafter defined); or
(iii) the Board determines in its sole and unreview-able
discretion (acting reasonably and in good faith) that
"justifiable cause" (as hereinafter defined) exists for
the termination of Executive's employment.
Executive shall have the right to terminate Executive's employment
under this Agreement without "good reason" (as defined in
Paragraph 8 below) upon sixty (60) days' prior written notice to
the President of the Company. No such termination by Executive
shall be effective unless that notice has been given.
Except as provided in subparagraph (b) immediately below, upon
termination of the employment of Executive under any of the
circumstances set forth in this subparagraph (a), Executive's
entitlement to further compensation or other benefits under
Paragraphs 5 and 6 of this Agreement shall immediately cease.
(b) For the purposes of this Agreement, the term "disability" shall
mean the inability of Executive, due to illness, accident, or any
other physical or mental incapacity, to perform his duties or
fulfill his obligations under this Agreement in a normal manner for
a period of any three (3) consecutive months or for a total of six
(6) months (whether or not consecutive) in any twelve (12) month
period during the Initial Term of this Agreement, it being
understood that, notwithstanding any such inability to perform his
duties, Executive shall be entitled to receive his compensation as
provided herein until the termination of his employment for
disability. The Company shall provide Executive ten days' prior
written notice of any determination by the Board that Executive is
disabled.
(c) For purposes of this Agreement, "justifiable cause" for
termination by the Company of Executive's employment shall means
any one or more of the following:
(i) any intentional breach by Executive of the performance of
any of his duties pursuant to this Agreement;
(ii) any intentional or negligent disclosure by Executive to
any person or Entity (other than the Companies) and other
than in the ordinary course of business of any Confidential
Information of the Companies;
(iii) any knowing violation or reckless disregard by Executive
of any law, governmental regulation, or judicial decree
which has caused substantial injury to the Companies,
financial or otherwise;
(iv) Executive's interference with or endeavor to entice
away from the Companies any client or customer, or
solicitation of employment of any of the Companies'
officers, directors, employees, or agents;
(v) Executive's conviction of a felony, as evidenced by a
binding and final judgment, order, or decree of a court of
competent jurisdiction, in effect after exhaustion or
lapse of all rights of appeal;
(vi) the commission by Executive of any act of fraud, or
material act of malfeasance, disloyalty, or breach of
trust against the Companies;
(vii) any attempt by Executive to secure any personal profit
(other than authorized compensation paid to Executive by
the Company) or convert any corporate opportunity to his
benefit in connection with the business of the Companies;
(viii) any failure by Executive to devote his entire normal
working time to the affairs of the Companies;
(ix) any activities of Executive that are determined to be
inimical to or contrary to the best interests of the
Companies; or
(x) the conduct or involvement by Executive in any business
other than the businesses of the Companies.
The Company shall provide Executive ten (10) days' prior written
notice of termination for justifiable cause; provided, however,
that the Company shall not be required to furnish any such prior
written notice in the event that the Board reasonably determines
in its sole and unreviewable discretion that immediate termination
of Executive without such prior written notice is necessary to
protect the best interests of the Companies. The written notice
shall set forth in reasonable detail the facts and circumstances
that are the basis for the termination for justifiable cause.
(d) If Executive is still employed under this Agreement at the end of
the Initial Term of this Agreement and if the parties hereto have
failed to reach a written agreement (signed by each of the parties
hereto) as to the continuation of Executive's employment,
Executive's employment under this Agreement will automatically
terminate upon expiration of the Initial Term. In such case:
(i) Executive's entitlement to further compensation or other
benefits under Paragraphs 5 and 6 of this Agreement shall
immediately cease upon expiration of the Initial Term; and
(ii) such termination shall be deemed a triggering event
entitling Executive to severance pay under the Company's
severance pay policy, but in no event shall the severance
pay due and payable to Executive be less than a total of
six (6) weeks' salary; provided, however, that Executive
shall not be entitled to any severance pay if (A)
Executive is provided by the Company, at least sixty (60)
days prior to the expiration of the Initial Term, a
written offer to renew this Agreement for at least an
additional one (1) year and Executive does not accept in
writing that offer at least thirty (30) days prior to the
expiration of the Initial Term, or (B) Executive remains
employed by any of the Companies.
8. Termination of Employment Under Other Circumstances.
(a) If (i) the Company terminates Executive's employment under this
Agreement other than for death, "disability", or "justifiable
cause", or Executive terminates Executive's employment under this
Agreement for "good reason" (as hereinafter defined), and (ii)
Executive does not remain employed by any of the Companies,
Executive shall:
(i) receive from the Company, within two (2) business days
after the termination, an amount in cash equal to the sum
of:
(A) all salary due and payable to Executive as of the
date of termination;
(B) pay for all accrued, but unused, vacation and sick
days through the date of termination;
(C) all salary that would have been due and payable to
Executive over the remaining period of the Initial
Term of this Agreement if Executive's employment had
not been terminated, based on Executive's annual
salary in effect at the date of termination. By way
of illustration, if Executive's annual salary at the
date of termination was $200,000.00 and the
termination occurred at the end of the seventh (7th)
month of the Initial Term, Executive would be
entitled to receive 17/24 x $400,000.00, or
$283,333.33; and
(D) all severance pay due and payable to Executive under
the Company's severance pay policy, but in no event
less than a total of six (6) weeks' salary, it being
understood that a termination under this
subparagraph (a), whether by the Company or
Executive, shall be deemed a triggering event
entitling Executive to severance pay under the
Company's severance pay policy;
(ii) receive from the Company all other benefits which
executive employees of the Company normally receive when
their employment is terminated by the Company without
"justifiable cause", which in no event shall be less than
the benefits such executive employees would have received
had their terminations occurred on the day immediately
preceding the Change of Control; and
(iii) with respect to any stock options for shares of the
Company's stock that Executive has been or may be
hereafter awarded, and notwithstanding the terms of the
Long-Term Incentive Compensation Plans under which these
options were or may be hereafter granted, be entitled to
fully exercise said stock options at any time up to and
including the ninetieth day after the expiration of the
remaining period of the Initial Term of this Agreement.
(b) For purposes of this Agreement, "good reason" for Executive to
terminate Executive's employment under this Agreement shall mean
any one or more of the following:
(i) both (A) without Executive's prior written consent, (1)
the assignment by the Company to Executive of duties and
responsibilities that are not at least substantially
equivalent to Executive's duties and responsibilities with
the Company immediately prior to the date of the Change of
Control, except in connection with the termination of
Executive's employment under this Agreement pursuant to
Paragraph 7 of this Agreement, or (2) the failure by the
Company to continue Executive in a position that is at
least substantially equivalent to the position held by
Executive with the Company immediately prior to the date
of the Change of Control, except in connection with the
termination of Executive's employment under this Agreement
pursuant to Paragraph 7 of this Agreement, and (B) the
continuance thereof for a period of twenty (20) days after
written notice thereof to the Company from Executive;
(ii) a failure by the Company to pay, or a reduction by the
Company of, the annual salary required to be paid to
Executive under Paragraph 5 of this Agreement;
(iii) a failure by the Company to pay any Incentive Bonus
required to be paid to Executive under Paragraph 6 of this
Agreement;
(iv) a failure by the Company to provide Executive with (A) the
opportunity to participate, on terms no less favorable
than those in effect for other executives holding a
similar position, in all of the Company's benefit and
executive compensation plans and programs or their
equivalent or (B) all other fringe benefits, or their
equivalent, from time to time in effect for the benefit of
other executives holding a similar position;
(v) without Executive's prior written consent, (A) the
relocation by the Company of the principal place of
Executive's employment to a location that is more than 100
miles from Executive's principal place of employment
immediately prior to the date of the Change of Control or
(B) the imposition by the Company of travel requirements
on Executive which are not substantially consistent with
the travel requirements applicable to Executive
immediately prior to the date of the Change of Control; or
(vi) any breach of Paragraph 15 of this Agreement by the
Company.
(c) If the Company terminates Executive's employment under this
Agreement other than for death, "disability", or "justifiable
cause", the Company shall provide Executive at least ten (10)
days' prior written notice of that termination, and no such
termination shall be effective unless that notice has been given.
The notice shall set forth in reasonable detail the facts and
circumstances that are the basis for the termination.
(d) At least sixty (60) days prior to the termination by Executive of
Executive's employment under this Agreement for "good reason",
Executive shall provide the President of the Company with written
notice of Executive's intention to terminate Executive's
employment, and no such termination shall be effective unless that
notice has been given. The notice shall set forth in reasonable
detail the facts and circumstances that are the basis for the
termination.
(e) If Executive's employment by the Company is terminated prior to a
Change of Control at the request of the individual or individuals
or Entity or Entities acquiring control of the Company, the
provisions of this Paragraph 8 shall apply as if a Change of
Control had occurred just prior to the date of termination.
9. No Mitigation.
Executive shall not be required to mitigate damages or the amount of any
payment provided for under this Agreement by seeking other employment or
otherwise, and payments and benefits due Executive under Paragraph 8(a)
of this Agreement shall not be subject to offset in respect of any
Claims which the Company has or may have against Executive. Without
limiting the generality of the foregoing, no payment otherwise required
under this Agreement shall be reduced because of any payment received by
Executive in connection with other employment of or other services
rendered by Executive after the date of termination of Executive's
employment under this Agreement.
10. Inventions, Discoveries, Etc.
(a) Executive shall promptly and fully disclose to the Company (with all
necessary detail for a complete understanding of the same) all
developments, know-how, discoveries, inventions, improvements,
concepts, ideas, writings, formulae, processes, and methods (whether
copyrightable, patentable, or otherwise) made, received, conceived,
acquired, or written by Executive (whether or not at the request of
or upon the suggestion of the Company) during the period of his
employment with any of the Companies, solely or jointly with others
(whether or not during working hours), in connection with or relating
to any activities of the Companies or any of their customers known
to him as a consequence of his employment (collectively referred to
as the "Subject Matter").
(b) Executive hereby assigns and transfers, and agrees to assign and
transfer, to the Company, all his right, title, and interest in and
to the Subject Matter. Executive further agrees to deliver to the
Company any and all drawings, notes, specifications, and data
relating to the Subject Matter and to execute, acknowledge, and
deliver all such further papers, including applications for
copyrights, patents, and similar protected ownership rights, as may
be necessary to obtain copyrights, patents, and similar protected
ownership rights with respect to the Subject Matter in any and all
countries and to vest title to any such copyrights, patents, and
similar protected ownership rights in the Company. Executive shall
assist the Company in obtaining such copyrights, patents, or similar
protected ownership rights during the period of his employment with
any of the Companies and any time thereafter and agrees to assist
the Company and to testify in its behalf in any prosecution or
litigation involving any of the Subject Matter during the period of
his employment with any of the Companies, and at any time
thereafter, in accordance with the provisions of subparagraph (c)
immediately below.
(c) At any time subsequent to the termination of Executive's
employment with any of the Companies or the expiration or
termination of this Agreement, if the Company requests in writing
that Executive assist the Company with respect to obtaining any
patents, copyrights, or similar protected ownership rights, or
that Executive assist the Company or testify in its behalf in
connection with any prosecution or litigation relating to the
Subject Matter, the Company shall reimburse Executive for
Executive's reasonable out-of-pocket expenses in connection with
such assistance or testimony. In the event the Company shall
request Executive's assistance or testimony as set forth
hereunder, the Company agrees to use its best efforts to assure
that such assistance or testimony will neither require a major or
unreasonable portion of Executive's time nor substantially
interfere with his then current employment or business
activities.
11. Non-Disclosure of Confidential Information.
(a) Executive shall not during his employment with any of the Companies
(nor at any time following termination of such employment or
expiration or termination of this Agreement), directly or
indirectly, intentionally or negligently disclose to or permit to be
known by any person or Entity any Confidential Information acquired
by him during the course of or in connection with his employment by
any of the Companies relating to (i) the Companies, (ii) the
officers, directors, employees, or agents of the Companies, (iii)
any client or customer of the Companies, or (iv) any Entity owned or
controlled, directly or indirectly, by any of the foregoing, or in
which any of the foregoing has a beneficial interest.
(b) All Confidential Information, regardless of how recorded, relating
to the Companies shall be the exclusive property of the Companies,
and Executive shall use his best efforts to prevent any publication
or disclosure thereof. Upon termination of Executive's employment
with any of the Companies or the expiration or termination of this
Agreement, all documents, records, reports, writings, and other
similar documents containing Confidential Information (including any
and all copies thereof) then in Executive's possession or control
shall be returned and left with the Company.
12. Right to Injunctive and Other Relief.
Executive recognizes that the services to be rendered by him to any of
the Companies are of special, unique, unusual, extraordinary, and
intellectual character, involving skill of the highest order, and that
such services are of special and particular value, the loss of which
cannot be adequately compensated for in damages. Executive further
agrees and declares that, because of his important role with the
Companies to date, clients' or customers' association of Executive with
the Companies, and the personal relationships Executive has with many of
such clients or customers, Executive's services to the Companies are
unique and extraordinary. In the event of a breach of any provision of
Paragraph 10 or 11 of this Agreement by Executive, the Companies shall
be entitled to injunctive relief and any other legal or equitable
remedies from a court of competent jurisdiction. Executive acknowledges
and agrees that any such breach will cause irreparable injury to the
Companies and that money damages will not provide an adequate remedy to
the Companies. In any action for injunctive relief, Executive shall not
be entitled to interpose a defense that the Companies have an adequate
remedy in a court of law. Executive agrees that the Companies may
recover by appropriate action the amount of the actual damages caused
the Companies by any failure, refusal, or neglect of Executive to
perform his agreements, representations, and warranties contained in
this Agreement. The remedies provided in this Agreement shall be deemed
cumulative and the exercise of one shall not preclude the exercise of
any other remedy at law or in equity for the same event or any other
event.
13. No Conflicting Agreements.
Executive represents and warrants that he is not a party to any
agreement, contract, or understanding, whether of employment or
otherwise, which would in any way restrict or prohibit him from
undertaking or performing his employment and other obligations in
accordance with the terms and conditions of this Agreement. Executive
further agrees to indemnify and hold harmless the Companies and their
past and present officers, directors, employees, agents, owners,
stockholders, representatives, and attorneys from and against and in
respect of any and all Claims alleging that (a) Executive is so
restricted or prohibited or (b) the Companies have committed a wrongful
act in negotiating with, and employing the services of, Executive.
14. Notices and Calendar Days.
All notices, requests, demands, and other communications provided for by
this Agreement shall be in writing and shall be personally delivered or
mailed (by registered or certified mail, return receipt requested,
postage prepaid) to the address of the party to whom intended as
specified below or to such different address as such party may have
fixed by a notice sent in accordance with this Paragraph.
(a) If to the Company, at:
Air & Water Technologies Corporation
P.O. Box 1500
Somerville, NJ 08876
Attention: President
with a copy to: General Counsel
(b) If to Executive, at:
728 Governor Circle
Newtown Square, PA 19073
Any such notices shall be effective upon receipt, if personally
delivered, or three business days after mailing, if mailed.
Unless otherwise expressly provided, all references in this Agreement to
"days" mean "calendar days".
15. Assignability and Binding Effect.
(a) This Agreement shall inure to the benefit of and shall be
binding upon the heirs, executors, administrators, successors,
and legal representatives of Executive, and shall inure to the
benefit of and be binding upon the Company and its successors,
assigns, and legal representatives, but the obligations of
Executive may not be delegated and Executive may not assign,
transfer, pledge, encumber, hypothecate, or otherwise dispose
of this Agreement, or any of his rights under this Agreement,
and any such attempted delegation or disposition shall be null
and void and without effect. This Agreement shall also inure
to the benefit of the Companies and the Other Defendants (as
defined in Paragraph 19 below) and their respective heirs,
executors, administrators, successors, assigns, and legal
representatives.
(b) If the Company shall be merged into or consolidated with another
Entity, the provisions of this Agreement shall be binding upon and
inure to the benefit of the Entity surviving the merger or
resulting from the consolidation. The Company shall require any
successor, whether direct or indirect, by purchase, merger,
consolidation, or otherwise, to all or substantially all of the
business or assets of the Company, by agreement in form and
substance satisfactory to Executive, expressly to assume and agree
to perform this Agreement in the same manner and to the same
extent that the Company would have been required to perform this
Agreement if no succession had taken place. The provisions of
this Paragraph 15 shall continue to apply to each subsequent
employer of Executive bound by this Agreement in the event of any
merger, consolidation, or transfer of all or substantially all of
the business or assets of that subsequent employer.
16. Complete Understanding.
This Agreement constitutes the complete understanding between the
parties with respect to the employment of Executive hereunder, and no
statement, representation, warranty or covenant has been made by either
party with respect thereto except as expressly set forth herein. This
Agreement shall not be altered, modified, amended, or terminated except
by written instrument signed by each of the parties hereto.
17. Governing Law.
This Agreement and all provisions hereof shall be governed by and
construed in accordance with the laws of the State of New Jersey.
18. Severability.
Should any part, term, or provision of this Agreement be declared or be
determined by any court or tribunal of competent jurisdiction to be
illegal, invalid, or unenforceable, the legality, validity, and
enforceability of the remaining parts, terms, or provisions shall not be
affected thereby, and said illegal, unenforceable, or invalid part,
term, or provision shall be deemed not to be a part of this Agreement.
19. Arbitration.
(a) Except as provided in subparagraph (b) immediately below, any and
all Claims arising out of or relating to (i) this Agreement, (ii)
any breach of any provision of this Agreement, (iii) Executive's
employment at any time with any of the Companies, and/or (iv) the
termination of Executive's employment with any of the Companies
shall be settled by arbitration. Such arbitration proceeding
shall be conducted pursuant to the Employment Dispute Resolution
Rules of the American Arbitration Association ("AAA") then in
effect, by a single arbitrator, and shall be held in Somerset
County, New Jersey. The arbitrator shall not have the power to
award punitive damages. The cost of the arbitration proceeding
and the reasonable costs and attorneys' fees of the prevailing
party shall be paid by the non-prevailing party, with the dollar
amount of these costs and fees to be fixed by the arbitrator. The
judgment upon the award rendered by the arbitrator may be entered
in any court having competent jurisdiction thereof.
(b) Nothing in subparagraph (a) immediately above shall be construed
or interpreted to preclude the Companies from filing suit in a
court of competent jurisdiction in order to enforce their rights
and remedies under Paragraphs 10, 11 and/or 12 of this Agreement.
In any such suit, the court is empowered to and shall resolve any
dispute as to whether the Claims asserted by any of the Companies
are within the scope of Paragraphs 10, 11, and/or 12 of this
Agreement, and the court shall not refer such dispute to
arbitration under subparagraph (a) immediately above.
(c) With respect to the Claims of Executive that are within the scope
of subparagraph (a) above, if Executive has the same, similar, or
related Claims against any of the Companies' employee benefit
plans, trusts, committees, or boards or against any past or
present officers, directors, employees, agents, owners,
stockholders, trustees, fiduciaries, administrators, sponsors,
representatives, or attorneys of the Companies or the Companies'
employee benefit plans, trusts, committees, or boards
(collectively referred to as the "Other Defendants"), and if
Executive seeks to litigate such Claims against the Other
Defendants in a civil action or any other proceeding (including
before an administrative agency), Executive agrees that any or all
of said Other Defendants may compel Executive to arbitrate his
Claims against them pursuant to the terms of this Paragraph 19.
(d) The arbitrator selected by the parties pursuant to the AAA rules
shall have expertise in private industry employee relations and
shall hear and determine the case promptly. The burden of
persuasion shall at all times be upon the party seeking relief.
(e) In the event Executive files suit in a court of competent
jurisdiction and asserts that certain Claims are not subject to
arbitration under this Paragraph 19 because of the limitation on
the power of the arbitrator to award punitive damages (the
"Limitation"), the parties agree that they will request the court
to resolve that legal issue on an expedited basis, and if the
court rules in favor of Executive on the Limitation issue, the
parties agree as follows:
(i) the arbitration shall proceed as if this Paragraph 19 did
not contain such Limitation;
(ii) the parties will request the court to enter judgment in
favor of Executive on the Limitation issue, at which time
the Company may appeal that ruling;
(iii) in the event the arbitrator determines that Executive is
entitled to punitive damages, the punitive damages aspect
of the arbitrator's award will be stayed pending the
exhaustion or lapse of all rights of appeal of the Company
under subparagraph (e)(ii) immediately above; and
(iv) in the event an appellate court rules in favor of the
Company on the Limitation issue, the arbitrator shall
vacate the award of punitive damages.
The procedures set forth in this subparagraph (e) shall also apply
in the event Executive seeks relief in some other tribunal, such
as an administrative agency, and the Company files a civil action
to compel arbitration.
20. Waiver.
It is agreed that a waiver by either party of a breach of any provision
of this Agreement shall neither operate nor be construed as a waiver of
any subsequent breach hereof, or as a waiver of a breach of any other
provision.
21. Survival.
All representations and warranties herein shall survive any termination
of Executive's employment or termination or expiration of this
Agreement, and the termination of Executive's employment or the
termination or expiration of this Agreement shall not affect the
enforceability of Paragraphs 10, 11, 12, 13, and 19 of this Agreement,
which Paragraphs shall survive the termination or expiration of this
Agreement or the termination of Executive's employment.
22. Other Documents.
The parties agree to execute and deliver all such further instruments
and take such other and further action as may be reasonably necessary or
appropriate to carry out the provisions of this Agreement.
23. Paragraph Headings.
The paragraph headings contained in this Agreement are for reference
purposes only and shall not affect in any way the meaning or
interpretations of this Agreement.
IN WITNESS WHEREOF, the parties hereto set their hands as of the day and year
first above written.
AIR & WATER TECHNOLOGIES CORPORATION
By /s/ Douglas A. Satzger
---------------------------------
Witness: /s/ Anthony DiMichele
--------------------------
/s/ Arthur L. Glenn
------------------------------------
Arthur L. Glenn
Witness: /s/
--------------------------
EXHIBIT A
EXECUTIVE RETENTION AGREEMENT
BETWEEN
ARTHUR L. GLENN
AND
AIR & WATER TECHNOLOGIES CORPORATION
For Fiscal Year 1994, the approved business plan targets for purposes of
Paragraph 6 of the Agreement are as follows:
1. New Orders $
2. Contribution Margin $
3. Cash Flow $
EXECUTIVE RETENTION AGREEMENT
AGREEMENT, dated as of March 17, 1994, by and between Joseph L. Boren
("Executive"), residing at 5 Sullivan Terrace, Framingham, MA 01701, and Air &
Water Technologies Corporation, a Delaware corporation (the "Company").
W I T N E S E T H:
WHEREAS, Executive is a skilled and dedicated employee who has important
management responsibilities and talents which benefit the Company and the
Company desires to ensure that it will continue to have the benefit of
Executive's services, and Executive desires to continue to be employed by the
Company;
WHEREAS, the Company has determined that Executive's ability to perform
Executive's responsibilities and utilize Executive's talents for the benefit
of the Company, and the Company's ability to retain Executive as a valued
employee, will be significantly enhanced if Executive is provided with fair
and reasonable protection from the risks of a Change of Control of the Company;
NOW, THEREFORE, in consideration of the foregoing and the mutual covenants,
understandings, and agreements herein contained, the parties hereby agree as
follows:
1. General Definitions.
As used in this Agreement:
(a) "Board" means the Board of Directors of the Company.
(b) "Change of Control" means and includes the occurrence of any one
or more of the following:
(i) Continuing Directors no longer constitute at least
two-thirds of the Directors constituting the Board;
(ii) Any person or group of persons (as defined in Rule 13d-5
under the Exchange Act) becomes the beneficial owner,
directly or indirectly, of 25% or more of the Company's
then outstanding Common Stock or 25% or more of the voting
power of the Company's then outstanding securities entitled
generally to vote for the election of Directors;
(iii) The approval by the Company's stockholders of the merger
or consolidation of the Company with any other Entity, the
sale of all or substantially all of the assets of the
Company, or the liquidation or dissolution of the Company,
unless, in the case of a merger or consolidation, the
Continuing Directors in office immediately prior to the
merger or consolidation will constitute at least
two-thirds of the directors constituting the board of
directors of the surviving Entity of the merger or
consolidation and any parent (as that term is defined in
Rule 12b-2 under the Exchange Act) of that Entity; or
(iv) At least two-thirds of the Continuing Directors in office
immediately prior to any other action taken or proposed to
be taken by the Company's stockholders or by the Board
determines that such action constitutes, or that the
proposed action, if taken, would constitute, a Change of
Control of the Company and the action is taken.
(c) "Claim" or "Claims" means and includes one or more charges,
complaints, claims, grievances (including grievances filed
pursuant to a collective bargaining agreement), liabilities,
obligations, promises, covenants, agreements, controversies,
damages, injuries, actions, causes of action, suits, rights,
demands, deficiencies, levies, assessments, attachments,
executions, judgments, awards, recoveries, costs, losses,
debts, and expenses (including attorneys' fees and costs
actually incurred) of any kind or nature whatsoever, whether
known or unknown, suspected or unsuspected, contingent or not
contingent, liquidated or unliquidated.
(d) "Common Stock" means the Class A Common Stock of the Company.
(e) "Companies" means and includes the Company and all of its
affiliated Entities, including, but not limited to, parent and
subsidiary companies (whether wholly or partially owned and
whether direct or indirect), partnerships, and joint ventures.
(f) "Confidential Information" means and includes, without limitation,
business and proprietary information and technology, trade
secrets, patented processes, research and development data,
know-how, methods of doing business, and technical information of
the Companies; financial information not previously recorded in
public releases or filings; information regarding costs, profits,
markets, sales, products, market studies and forecasts, pricing
policies, key personnel, other business affairs and methods,
customers and customer prospects, business plans, competitive
analyses, and prospects and opportunities (such as possible
expansions or contractions of business operations) which have been
discussed or considered by the Companies' management; the
substance of agreements with customers and others, marketing and
dealership arrangements, servicing and training programs and
arrangements, and customer lists; and information concerning
operational strengths or weaknesses of the Companies' operating
units, all to the extent not previously revealed to the public or
to the trade by the Companies' management.
(g) "Continuing Director" means any person who either (i) is a
Director on the date of this Agreement or (ii) was designated as a
Continuing Director by a majority of the Continuing Directors.
(h) "Director" means a member of the Board.
(i) "Entity" or "Entities" means and includes one or more
organizations of any kind or nature whatsoever, including, without
limitation, corporations, companies, partnerships, joint ventures,
sole proprietorships, and divisions.
(j) "Exchange Act" means the Securities Exchange Act of 1934, as
amended.
2. Employment.
The Company hereby employs Executive and Executive hereby accepts
such employment for the term set forth in Paragraph 4 below, subject
to and in accordance with all of the terms and conditions of this
Agreement. Executive shall initially hold the position of a Member
of the Board of the Company and Chairman of Metcalf & Eddy Services,
Inc. and shall report to the President, with the approval of the
Company's Chief Executive Officer, may change Executive's title and
Executive's responsibilities in the best interests of the Company and
its organizational development.
3. Duties and Responsibilities.
(a) Executive shall perform such duties and functions for the
Companies as are customarily performed by a Member of the Board of
the Company and Chairman of Metcalf & Eddy Services, Inc., or such
other duties or functions as the Company's President, with the
approval of the Company's Chief Executive Officer, shall assign
Executive from time to time in the best interest of the Company to
maximize its growth and development. In the performance of his
duties, Executive shall comply with the policies and procedures of
the Company (presently in effect or as may be reasonably modified
or established hereafter) and be subject to the direction of the
Chief Executive Officer, the President, and the Board.
(b) Executive agrees to devote his entire normal working time,
attention, and energies to the performance of his duties.
Executive shall not directly or indirectly, alone or as a member
of any partnership, or as an officer, director, employee, or agent
of any Entity, be actively engaged in or concerned with any other
duties or pursuits (whether or not for gain, profit, or other
pecuniary advantage) which interfere with the performance of his
duties hereunder, or which may be inimical to or contrary to the
best interests of the Company. Nothing in this subparagraph (b)
shall be construed as preventing Executive from investing
Executive's personal assets in any way that does not either
require the rendering of services by Executive to or on behalf of
the Entities in which the investments are made or result in any
other conflict of Executive's interest or time.
(c) Executive shall use his best efforts, skills, and abilities to
promote the Company's best interests.
4. Term.
(a) Except as provided in subparagraph (b) immediately below,
Executive's employment under this Agreement shall commence on the
date of the occurrence of a Change of Control and shall continue
for a period of two (2) years from and after such date (the
"Initial Term"), subject, however, to prior termination as
provided in Paragraphs 7 and 8 of this Agreement. This Agreement
may be renewed or extended upon such terms and conditions as the
parties shall mutually agree to in a written instrument signed by
each of the parties hereto, but neither party hereto shall be
under any obligation to renew this Agreement.
(b) Executive's employment under this Agreement will not commence on
the date of the occurrence of a Change of Control if on the day
immediately prior to the Change of Control Executive is no longer
employed by the Company, unless Executive's employment by the
Company is terminated prior to the Change of Control at the request
of the individual or individuals or Entity or Entities acquiring
control of the Company.
5. Compensation.
During the Initial Term of Executive's employment under this Agreement,
Executive shall be paid by the Company an annual salary of at least
$175,000. The salary paid to Executive may be reviewed by the Board and
may be increased at the sole and unreviewable discretion of the Board,
which shall take into account the earnings and overall productivity of
the Company, available resources, the performance of Executive, the cost
of living, and such other factors as it deems relevant. The Board shall
have no obligation to make any adjustments in the salary of Executive.
The salary to be paid to Executive under this Agreement shall be payable
in equal monthly installments in accordance with the Company's customary
payroll practices.
6. Other Benefits.
(a) During the Initial Term of Executive's employment under this
Agreement, Executive shall be entitled to such vacations, and to
participate in any other fringe benefits provided by the Company
to its key employees (including any bonus, profit sharing,
pension, and health insurance plans in accordance with and subject
to the terms of such plans), as may be determined from time to
time by the Board.
(b) During the Initial Term of Executive's employment under this
Agreement, there shall be established an Incentive Bonus Program
for Fiscal Years 1994 and 1995. In each such fiscal year,
Executive shall be eligible to earn up to $30,000.00 in bonuses,
calculated as follows:
(i) if Executive meets or exceeds the fiscal-year new orders
target for Executive's Operating Group, as set forth in
the approved business plan, Executive shall earn
$10,000.00;
(ii) if Executive meets or exceeds the fiscal-year contribution
margin target for Executive's Operating Group, as set
forth in the approved business plan, Executive shall earn
$10,000.00; and
(iii) if Executive meets or exceeds the fiscal-year cash flow
target for Executive's Operating Group, as set forth in
the approved business plan, Executive shall earn
$10,000.00.
Any Incentive Bonus earned during a fiscal year will be paid
during the first half of the following fiscal year and is subject
to reduction in accordance with subparagraph (c) immediately
below. The three targets applicable to Executive for Fiscal Year
1994 are set forth in Exhibit A to this Agreement. The three
targets applicable to Executive for Fiscal Year 1995 will be
established by the President of the Company, with the approval of
the Chief Executive Officer of the Company, after completion of
the Fiscal Year 1995 business plan and submission of the business
plan to the Board, and the President shall provide Executive a
written statement, in a form similar to Exhibit A, of the Fiscal
Year 1995 targets.
(c) If Executive is entitled to receive compensation under the
Company's Fiscal Year 1994 or 1995 Management Incentive Plan (or
such similar plan by whatever name it shall be known as), the
Incentive Bonus that Executive may be eligible for under
subparagraph (b) immediately above in Fiscal Year 1994 or 1995
shall be reduced as follows:
(i) if the actual total compensation payable to Executive
under the Management Incentive Plan is less than or equal
to thirty (30) percent of Executive's annual salary, then
Executive shall receive one hundred (100) percent of the
total Incentive Bonus earned in accordance with
subparagraph (b) immediately above;
(ii) if the actual total compensation payable to Executive
under the management Incentive Plan is greater than thirty
(30) percent but less than forty (40) percent of
Executive's annual salary, then Executive shall receive
only two-thirds of the total Incentive Bonus earned in
accordance with subparagraph (b) immediately above; or
(iii) if the actual total compensation payable to Executive
under the Management Incentive Plan is equal to or greater
than forty (40) percent of Executive's annual salary, then
Executive shall receive only one-third of the total
Incentive Bonus earned in accordance with subparagraph (b)
immediately above.
7. Termination of Employment by the Company for Death, Disability, or
Justifiable Cause, or by Executive Without Good Reason, or Upon
Expiration of the Initial Term .
(a) The Company shall have the right to terminate the Executive's
employment under this Agreement upon the occurrence any one or
more of the following events:
(i) the death of Executive (in which case said employment
terminates immediately upon death);
(ii) the "disability" of Executive (as hereinafter defined); or
(iii) the Board determines in its sole and unreviewable
discretion (acting reasonably and in good faith) that
"justifiable cause" (as hereinafter defined) exists for
the termination of Executive's employment.
Executive shall have the right to terminate Executive's employment
under this Agreement without "good reason" (as defined in
Paragraph 8 below) upon sixty (60) days' prior written notice to
the President of the Company. No such termination by Executive
shall be effective unless that notice has been given.
Except as provided in subparagraph (b) immediately below, upon
termination of the employment of Executive under any of the
circumstances set forth in this subparagraph (a), Executive's
entitlement to further compensation or other benefits under
Paragraphs 5 and 6 of this Agreement shall immediately cease.
(b) For the purposes of this Agreement, the term "disability" shall
mean the inability of Executive, due to illness, accident, or any
other physical or mental incapacity, to perform his duties or
fulfill his obligations under this Agreement in a normal manner for
a period of any three (3) consecutive months or for a total of six
(6) months (whether or not consecutive) in any twelve (12) month
period during the Initial Term of this Agreement, it being
understood that, notwithstanding any such inability to perform his
duties, Executive shall be entitled to receive his compensation as
provided herein until the termination of his employment for
disability. The Company shall provide Executive ten days' prior
written notice of any determination by the Board that Executive is
disabled.
(c) For purposes of this Agreement, "justifiable cause" for
termination by the Company of Executive's employment shall means
any one or more of the following:
(i) any intentional breach by Executive of the performance of
any of his duties pursuant to this Agreement;
(ii) any intentional or negligent disclosure by Executive to
any person or Entity (other than the Companies) and other
than in the ordinary course of business of any Confidential
Information of the Companies;
(iii) any knowing violation or reckless disregard by Executive
of any law, governmental regulation, or judicial decree
which has caused substantial injury to the Companies,
financial or otherwise;
(iv) Executive's interference with or
endeavor to entice away from the Companies any client or
customer, or solicitation of employment of any of the
Companies' officers, directors, employees, or agents;
(v) Executive's conviction of a felony, as evidenced by a
binding and final judgment, order, or decree of a court of
competent jurisdiction, in effect after exhaustion or
lapse of all rights of appeal;
(vi) the commission by Executive of any act of fraud, or
material act of malfeasance, disloyalty, or breach of
trust against the Companies;
(vii) any attempt by Executive to secure any personal profit
(other than authorized compensation paid to Executive by
the Company) or convert any corporate opportunity to his
benefit in connection with the business of the Companies;
(viii) any failure by Executive to devote his entire normal
working time to the affairs of the Companies;
(ix) any activities of Executive that are determined to be
inimical to or contrary to the best interests of the
Companies; or
(x) the conduct or involvement by Executive in any business
other than the businesses of the Companies.
The Company shall provide Executive ten (10) days' prior written
notice of termination for justifiable cause; provided, however,
that the Company shall not be required to furnish any such prior
written notice in the event that the Board reasonably determines
in its sole and unreviewable discretion that immediate termination
of Executive without such prior written notice is necessary to
protect the best interests of the Companies. The written notice
shall set forth in reasonable detail the facts and circumstances
that are the basis for the termination for justifiable cause.
(d) If Executive is still employed under this Agreement at the end of
the Initial Term of this Agreement and if the parties hereto have
failed to reach a written agreement (signed by each of the parties
hereto) as to the continuation of Executive's employment,
Executive's employment under this Agreement will automatically
terminate upon expiration of the Initial Term. In such case:
(i) Executive's entitlement to further compensation or other
benefits under Paragraphs 5 and 6 of this Agreement shall
immediately cease upon expiration of the Initial Term; and
(ii) such termination shall be deemed a triggering event
entitling Executive to severance pay under the Company's
severance pay policy, but in no event shall the severance
pay due and payable to Executive be less than a total of
six (6) weeks' salary; provided, however, that Executive
shall not be entitled to any severance pay if (A)
Executive is provided by the Company, at least sixty (60)
days prior to the expiration of the Initial Term, a
written offer to renew this Agreement for at least an
additional one (1) year and Executive does not accept in
writing that offer at least thirty (30) days prior to the
expiration of the Initial Term, or (B) Executive remains
employed by any of the Companies.
8. Termination of Employment Under Other Circumstances.
(a) If (i) the Company terminates Executive's employment under this
Agreement other than for death, "disability", or "justifiable
cause", or Executive terminates Executive's employment under this
Agreement for "good reason" (as hereinafter defined), and (ii)
Executive does not remain employed by any of the Companies,
Executive shall:
(i) receive from the Company, within two (2) business days
after the termination, an amount in cash equal to the sum
of:
(A) all salary due and payable to Executive as of the
date of termination;
(B) pay for all accrued, but unused, vacation and sick
days through the date of termination;
(C) all salary that would have been due and payable to
Executive over the remaining period of the Initial
Term of this Agreement if Executive's employment had
not been terminated, based on Executive's annual
salary in effect at the date of termination. By way
of illustration, if Executive's annual salary at the
date of termination was $200,000.00 and the
termination occurred at the end of the seventh (7th)
month of the Initial Term, Executive would be
entitled to receive 17/24 x $400,000.00, or
$283,333.33; and
(D) all severance pay due and payable to Executive under
the Company's severance pay policy, but in no event
less than a total of six (6) weeks' salary, it being
understood that a termination under this
subparagraph (a), whether by the Company or
Executive, shall be deemed a triggering event
entitling Executive to severance pay under the
Company's severance pay policy;
(ii) receive from the Company all other benefits which
executive employees of the Company normally receive when
their employment is terminated by the Company without
"justifiable cause", which in no event shall be less than
the benefits such executive employees would have received
had their terminations occurred on the day immediately
preceding the Change of Control; and
(iii) with respect to any stock options for shares of the
Company's stock that Executive has been or may be
hereafter awarded, and notwithstanding the terms of the
Long-Term Incentive Compensation Plans under which these
options were or may be hereafter granted, be entitled to
fully exercise said stock options at any time up to and
including the ninetieth day after the expiration of the
remaining period of the Initial Term of this Agreement.
(b) For purposes of this Agreement, "good reason" for Executive to
terminate Executive's employment under this Agreement shall mean
any one or more of the following:
(i) both (A) without Executive's prior written consent, (1)
the assignment by the Company to Executive of duties and
responsibilities that are not at least substantially
equivalent to Executive's duties and responsibilities with
the Company immediately prior to the date of the Change of
Control, except in connection with the termination of
Executive's employment under this Agreement pursuant to
Paragraph 7 of this Agreement, or (2) the failure by the
Company to continue Executive in a position that is at
least substantially equivalent to the position held by
Executive with the Company immediately prior to the date
of the Change of Control, except in connection with the
termination of Executive's employment under this Agreement
pursuant to Paragraph 7 of this Agreement, and (B) the
continuance thereof for a period of twenty (20) days after
written notice thereof to the Company from Executive;
(ii) a failure by the Company to pay, or a reduction by the
Company of, the annual salary required to be paid to
Executive under Paragraph 5 of this Agreement;
(iii) a failure by the Company to pay any Incentive Bonus
required to be paid to Executive under Paragraph 6 of this
Agreement;
(iv) a failure by the Company to provide Executive with (A) the
opportunity to participate, on terms no less favorable
than those in effect for other executives holding a
similar position, in all of the Company's benefit and
executive compensation plans and programs or their
equivalent or (B) all other fringe benefits, or their
equivalent, from time to time in effect for the benefit of
other executives holding a similar position;
(v) without Executive's prior written consent, (A) the
relocation by the Company of the principal place of
Executive's employment to a location that is more than 100
miles from Executive's principal place of employment
immediately prior to the date of the Change of Control or
(B) the imposition by the Company of travel requirements
on Executive which are not substantially consistent with
the travel requirements applicable to Executive
immediately prior to the date of the Change of Control; or
(vi) any breach of Paragraph 15 of this Agreement by the
Company.
(c) If the Company terminates Executive's employment under this
Agreement other than for death, "disability", or "justifiable
cause", the Company shall provide Executive at least ten (10)
days' prior written notice of that termination, and no such
termination shall be effective unless that notice has been given.
The notice shall set forth in reasonable detail the facts and
circumstances that are the basis for the termination.
(d) At least sixty (60) days prior to the termination by Executive of
Executive's employment under this Agreement for "good reason",
Executive shall provide the President of the Company with written
notice of Executive's intention to terminate Executive's
employment, and no such termination shall be effective unless that
notice has been given. The notice shall set forth in reasonable
detail the facts and circumstances that are the basis for the
termination.
(e) If Executive's employment by the Company is terminated prior to a
Change of Control at the request of the individual or individuals
or Entity or Entities acquiring control of the Company, the
provisions of this Paragraph 8 shall apply as if a Change of
Control had occurred just prior to the date of termination.
9. No Mitigation.
Executive shall not be required to mitigate damages or the amount of any
payment provided for under this Agreement by seeking other employment or
otherwise, and payments and benefits due Executive under Paragraph 8(a)
of this Agreement shall not be subject to offset in respect of any
Claims which the Company has or may have against Executive. Without
limiting the generality of the foregoing, no payment otherwise required
under this Agreement shall be reduced because of any payment received by
Executive in connection with other employment of or other services
rendered by Executive after the date of termination of Executive's
employment under this Agreement.
10. Inventions, Discoveries, Etc.
(a) Executive shall promptly and fully disclose to the Company (with all
necessary detail for a complete understanding of the same) all
developments, know-how, discoveries, inventions, improvements,
concepts, ideas, writings, formulae, processes, and methods (whether
copyrightable, patentable, or otherwise) made, received, conceived,
acquired, or written by Executive (whether or not at the request of
or upon the suggestion of the Company) during the period of his
employment with any of the Companies, solely or jointly with others
(whether or not during working hours), in connection with or relating
to any activities of the Companies or any of their customers known
to him as a consequence of his employment (collectively referred to
as the "Subject Matter").
(b) Executive hereby assigns and transfers, and agrees to assign and
transfer, to the Company, all his right, title, and interest in and
to the Subject Matter. Executive further agrees to deliver to the
Company any and all drawings, notes, specifications, and data
relating to the Subject Matter and to execute, acknowledge, and
deliver all such further papers, including applications for
copyrights, patents, and similar protected ownership rights, as may
be necessary to obtain copyrights, patents, and similar protected
ownership rights with respect to the Subject Matter in any and all
countries and to vest title to any such copyrights, patents, and
similar protected ownership rights in the Company. Executive shall
assist the Company in obtaining such copyrights, patents, or similar
protected ownership rights during the period of his employment with
any of the Companies and any time thereafter and agrees to assist
the Company and to testify in its behalf in any prosecution or
litigation involving any of the Subject Matter during the period of
his employment with any of the Companies, and at any time
thereafter, in accordance with the provisions of subparagraph (c)
immediately below.
(c) At any time subsequent to the termination of Executive's employment
with any of the Companies or the expiration or termination of this
Agreement, if the Company requests in writing that Executive assist
the Company with respect to obtaining any patents, copyrights, or
similar protected ownership rights, or that Executive assist the
Company or testify in its behalf in connection with any prosecution
or litigation relating to the Subject Matter, the Company shall
reimburse Executive for Executive's reasonable out-of-pocket
expenses in connection with such assistance or testimony. In the
event the Company shall request Executive's assistance or testimony
as set forth hereunder, the Company agrees to use its best efforts to
assure that such assistance or testimony will neither require a
major or unreasonable portion of Executive's time nor substantially
interfere with his then current employment or business activities.
11. Non-Disclosure of Confidential Information.
(a) Executive shall not during his employment with any of the Companies
(nor at any time following termination of such employment or
expiration or termination of this Agreement), directly or
indirectly, intentionally or negligently disclose to or permit to be
known by any person or Entity any Confidential Information acquired
by him during the course of or in connection with his employment by
any of the Companies relating to (i) the Companies, (ii) the
officers, directors, employees, or agents of the Companies, (iii)
any client or customer of the Companies, or (iv) any Entity owned or
controlled, directly or indirectly, by any of the foregoing, or in
which any of the foregoing has a beneficial interest.
(b) All Confidential Information, regardless of how recorded, relating
to the Companies shall be the exclusive property of the Companies,
and Executive shall use his best efforts to prevent any publication
or disclosure thereof. Upon termination of Executive's employment
with any of the Companies or the expiration or termination of this
Agreement, all documents, records, reports, writings, and other
similar documents containing Confidential Information (including any
and all copies thereof) then in Executive's possession or control
shall be returned and left with the Company.
12. Right to Injunctive and Other Relief.
Executive recognizes that the services to be rendered by him to any of
the Companies are of special, unique, unusual, extraordinary, and
intellectual character, involving skill of the highest order, and that
such services are of special and particular value, the loss of which
cannot be adequately compensated for in damages. Executive further
agrees and declares that, because of his important role with the
Companies to date, clients' or customers' association of Executive with
the Companies, and the personal relationships Executive has with many of
such clients or customers, Executive's services to the Companies are
unique and extraordinary. In the event of a breach of any provision of
Paragraph 10 or 11 of this Agreement by Executive, the Companies shall
be entitled to injunctive relief and any other legal or equitable
remedies from a court of competent jurisdiction. Executive acknowledges
and agrees that any such breach will cause irreparable injury to the
Companies and that money damages will not provide an adequate remedy to
the Companies. In any action for injunctive relief, Executive shall not
be entitled to interpose a defense that the Companies have an adequate
remedy in a court of law. Executive agrees that the Companies may
recover by appropriate action the amount of the actual damages caused
the Companies by any failure, refusal, or neglect of Executive to
perform his agreements, representations, and warranties contained in
this Agreement. The remedies provided in this Agreement shall be deemed
cumulative and the exercise of one shall not preclude the exercise of
any other remedy at law or in equity for the same event or any other
event.
13. No Conflicting Agreements.
Executive represents and warrants that he is not a party to any
agreement, contract, or understanding, whether of employment or
otherwise, which would in any way restrict or prohibit him from
undertaking or performing his employment and other obligations in
accordance with the terms and conditions of this Agreement. Executive
further agrees to indemnify and hold harmless the Companies and their
past and present officers, directors, employees, agents, owners,
stockholders, representatives, and attorneys from and against and in
respect of any and all Claims alleging that (a) Executive is so
restricted or prohibited or (b) the Companies have committed a wrongful
act in negotiating with, and employing the services of, Executive.
14. Notices and Calendar Days.
All notices, requests, demands, and other communications provided for by
this Agreement shall be in writing and shall be personally delivered or
mailed (by registered or certified mail, return receipt requested,
postage prepaid) to the address of the party to whom intended as
specified below or to such different address as such party may have
fixed by a notice sent in accordance with this Paragraph.
(a) If to the Company, at:
Air & Water Technologies Corporation
P.O. Box 1500
Somerville, NJ 08876
Attention: President
with a copy to: General Counsel
(b) If to Executive, at:
5 Sullivan Terrace
Framingham, MA 01701
Any such notices shall be effective upon receipt, if personally
delivered, or three business days after mailing, if mailed.
Unless otherwise expressly provided, all references in this Agreement to
"days" mean "calendar days".
15. Assignability and Binding Effect.
(a) This Agreement shall inure to the benefit of and shall be
binding upon the heirs, executors, administrators, successors,
and legal representatives of Executive, and shall inure to the
benefit of and be binding upon the Company and its successors,
assigns, and legal representatives, but the obligations of
Executive may not be delegated and Executive may not assign,
transfer, pledge, encumber, hypothecate, or otherwise dispose
of this Agreement, or any of his rights under this Agreement,
and any such attempted delegation or disposition shall be null
and void and without effect. This Agreement shall also inure
to the benefit of the Companies and the Other Defendants (as
defined in Paragraph 19 below) and their respective heirs,
executors, administrators, successors, assigns, and legal
representatives.
(b) If the Company shall be merged into or consolidated with another
Entity, the provisions of this Agreement shall be binding upon and
inure to the benefit of the Entity surviving the merger or
resulting from the consolidation. The Company shall require any
successor, whether direct or indirect, by purchase, merger,
consolidation, or otherwise, to all or substantially all of the
business or assets of the Company, by agreement in form and
substance satisfactory to Executive, expressly to assume and agree
to perform this Agreement in the same manner and to the same
extent that the Company would have been required to perform this
Agreement if no succession had taken place. The provisions of
this Paragraph 15 shall continue to apply to each subsequent
employer of Executive bound by this Agreement in the event of any
merger, consolidation, or transfer of all or substantially all of
the business or assets of that subsequent employer.
16. Complete Understanding.
This Agreement constitutes the complete understanding between the
parties with respect to the employment of Executive hereunder, and no
statement, representation, warranty or covenant has been made by either
party with respect thereto except as expressly set forth herein. This
Agreement shall not be altered, modified, amended, or terminated except
by written instrument signed by each of the parties hereto.
17. Governing Law.
This Agreement and all provisions hereof shall be governed by and
construed in accordance with the laws of the State of New Jersey.
18. Severability.
Should any part, term, or provision of this Agreement be declared or be
determined by any court or tribunal of competent jurisdiction to be
illegal, invalid, or unenforceable, the legality, validity, and
enforceability of the remaining parts, terms, or provisions shall not be
affected thereby, and said illegal, unenforceable, or invalid part,
term, or provision shall be deemed not to be a part of this Agreement.
19. Arbitration.
(a) Except as provided in subparagraph (b) immediately below, any and
all Claims arising out of or relating to (i) this Agreement, (ii)
any breach of any provision of this Agreement, (iii) Executive's
employment at any time with any of the Companies, and/or (iv) the
termination of Executive's employment with any of the Companies
shall be settled by arbitration. Such arbitration proceeding
shall be conducted pursuant to the Employment Dispute Resolution
Rules of the American Arbitration Association ("AAA") then in
effect, by a single arbitrator, and shall be held in Somerset
County, New Jersey. The arbitrator shall not have the power to
award punitive damages. The cost of the arbitration proceeding
and the reasonable costs and attorneys' fees of the prevailing
party shall be paid by the non-prevailing party, with the dollar
amount of these costs and fees to be fixed by the arbitrator. The
judgment upon the award rendered by the arbitrator may be entered
in any court having competent jurisdiction thereof.
(b) Nothing in subparagraph (a) immediately above shall be construed
or interpreted to preclude the Companies from filing suit in a
court of competent jurisdiction in order to enforce their rights
and remedies under Paragraphs 10, 11 and/or 12 of this Agreement.
In any such suit, the court is empowered to and shall resolve any
dispute as to whether the Claims asserted by any of the Companies
are within the scope of Paragraphs 10, 11, and/or 12 of this
Agreement, and the court shall not refer such dispute to
arbitration under subparagraph (a) immediately above.
(c) With respect to the Claims of Executive that are within the scope
of subparagraph (a) above, if Executive has the same, similar, or
related Claims against any of the Companies' employee benefit
plans, trusts, committees, or boards or against any past or
present officers, directors, employees, agents, owners,
stockholders, trustees, fiduciaries, administrators, sponsors,
representatives, or attorneys of the Companies or the Companies'
employee benefit plans, trusts, committees, or boards
(collectively referred to as the "Other Defendants"), and if
Executive seeks to litigate such Claims against the Other
Defendants in a civil action or any other proceeding (including
before an administrative agency), Executive agrees that any or all
of said Other Defendants may compel Executive to arbitrate his
Claims against them pursuant to the terms of this Paragraph 19.
(d) The arbitrator selected by the parties pursuant to the AAA rules
shall have expertise in private industry employee relations and
shall hear and determine the case promptly. The burden of
persuasion shall at all times be upon the party seeking relief.
(e) In the event Executive files suit in a court of competent
jurisdiction and asserts that certain Claims are not subject to
arbitration under this Paragraph 19 because of the limitation on
the power of the arbitrator to award punitive damages (the
"Limitation"), the parties agree that they will request the court
to resolve that legal issue on an expedited basis, and if the
court rules in favor of Executive on the Limitation issue, the
parties agree as follows:
(i) the arbitration shall proceed as if this Paragraph 19 did
not contain such Limitation;
(ii) the parties will request the court to enter judgment in
favor of Executive on the Limitation issue, at which time
the Company may appeal that ruling;
(iii) in the event the arbitrator determines that Executive is
entitled to punitive damages, the punitive damages aspect
of the arbitrator's award will be stayed pending the
exhaustion or lapse of all rights of appeal of the Company
under subparagraph (e)(ii) immediately above; and
(iv) in the event an appellate court rules in favor of the
Company on the Limitation issue, the arbitrator shall
vacate the award of punitive damages.
The procedures set forth in this subparagraph (e) shall also apply
in the event Executive seeks relief in some other tribunal, such
as an administrative agency, and the Company files a civil action
to compel arbitration.
20. Waiver.
It is agreed that a waiver by either party of a breach of any provision
of this Agreement shall neither operate nor be construed as a waiver of
any subsequent breach hereof, or as a waiver of a breach of any other
provision.
21. Survival.
All representations and warranties herein shall survive any termination
of Executive's employment or termination or expiration of this
Agreement, and the termination of Executive's employment or the
termination or expiration of this Agreement shall not affect the
enforceability of Paragraphs 10, 11, 12, 13, and 19 of this Agreement,
which Paragraphs shall survive the termination or expiration of this
Agreement or the termination of Executive's employment.
22. Other Documents.
The parties agree to execute and deliver all such further instruments
and take such other and further action as may be reasonably necessary or
appropriate to carry out the provisions of this Agreement.
23. Paragraph Headings.
The paragraph headings contained in this Agreement are for reference
purposes only and shall not affect in any way the meaning or
interpretations of this Agreement.
IN WITNESS WHEREOF, the parties hereto set their hands as of the day and year
first above written.
AIR & WATER TECHNOLOGIES CORPORATION
By /s/ Arthur L. Glenn
---------------------------------
Witness:
--------------------------
/s/ Joseph L. Boren
------------------------------------
Joseph L. Boren
Witness: /s/ Margaret Freebeck
-------------------------
EXHIBIT A
EXECUTIVE RETENTION AGREEMENT
BETWEEN
JOSEPH L. BOREN
AND
AIR & WATER TECHNOLOGIES CORPORATION
For Fiscal Year 1994, the approved business plan targets for purposes of
Paragraph 6 of the Agreement are as follows:
1. New Orders $
2. Contribution Margin $
3. Cash Flow $
EXECUTIVE RETENTION AGREEMENT
AGREEMENT, dated as of March 16, 1994, by and between Robert H. Cardell
("Executive"), residing at R.D. Drive 4, Box 278B, Washington, New Jersey
07882, and Air & Water Technologies Corporation, a Delaware corporation (the
"Company").
W I T N E S E T H:
WHEREAS, Executive is a skilled and dedicated employee who has important
management responsibilities and talents which benefit the Company and the
Company desires to ensure that it will continue to have the benefit of
Executive's services, and Executive desires to continue to be employed by the
Company;
WHEREAS, the Company has determined that Executive's ability to perform
Executive's responsibilities and utilize Executive's talents for the benefit
of the Company, and the Company's ability to retain Executive as a valued
employee, will be significantly enhanced if Executive is provided with fair
and reasonable protection from the risks of a Change of Control of the Company;
NOW, THEREFORE, in consideration of the foregoing and the mutual covenants,
understandings, and agreements herein contained, the parties hereby agree as
follows:
1. General Definitions.
As used in this Agreement:
(a) "Board" means the Board of Directors of the Company.
(b) "Change of Control" means and includes the occurrence of any one
or more of the following:
(i) Continuing Directors no longer constitute at least
two-thirds of the Directors constituting the Board;
(ii) Any person or group of persons (as defined in Rule 13d-5
under the Exchange Act) becomes the beneficial owner,
directly or indirectly, of 25% or more of the Company's
then outstanding Common Stock or 25% or more of the voting
power of the Company's then outstanding securities entitled
generally to vote for the election of Directors;
(iii) The approval by the Company's stockholders of the merger
or consolidation of the Company with any other Entity, the
sale of all or substantially all of the assets of the
Company, or the liquidation or dissolution of the Company,
unless, in the case of a merger or consolidation, the
Continuing Directors in office immediately prior to the
merger or consolidation will constitute at least
two-thirds of the directors constituting the board of
directors of the surviving Entity of the merger or
consolidation and any parent (as that term is defined in
Rule 12b-2 under the Exchange Act) of that Entity; or
(iv) At least two-thirds of the Continuing Directors in office
immediately prior to any other action taken or proposed to
be taken by the Company's stockholders or by the Board
determines that such action constitutes, or that the
proposed action, if taken, would constitute, a Change of
Control of the Company and the action is taken.
(c) "Claim" or "Claims" means and includes one or more charges,
complaints, claims, grievances (including grievances filed
pursuant to a collective bargaining agreement), liabilities,
obligations, promises, covenants, agreements, controversies,
damages, injuries, actions, causes of action, suits, rights,
demands, deficiencies, levies, assessments, attachments,
executions, judgments, awards, recoveries, costs, losses,
debts, and expenses (including attorneys' fees and costs
actually incurred) of any kind or nature whatsoever, whether
known or unknown, suspected or unsuspected, contingent or not
contingent, liquidated or unliquidated.
(d) "Common Stock" means the Class A Common Stock of the Company.
(e) "Companies" means and includes the Company and all of its
affiliated Entities, including, but not limited to, parent and
subsidiary companies (whether wholly or partially owned and
whether direct or indirect), partnerships, and joint ventures.
(f) "Confidential Information" means and includes, without limitation,
business and proprietary information and technology, trade
secrets, patented processes, research and development data,
know-how, methods of doing business, and technical information of
the Companies; financial information not previously recorded in
public releases or filings; information regarding costs, profits,
markets, sales, products, market studies and forecasts, pricing
policies, key personnel, other business affairs and methods,
customers and customer prospects, business plans, competitive
analyses, and prospects and opportunities (such as possible
expansions or contractions of business operations) which have been
discussed or considered by the Companies' management; the
substance of agreements with customers and others, marketing and
dealership arrangements, servicing and training programs and
arrangements, and customer lists; and information concerning
operational strengths or weaknesses of the Companies' operating
units, all to the extent not previously revealed to the public or
to the trade by the Companies' management.
(g) "Continuing Director" means any person who either (i) is a
Director on the date of this Agreement or (ii) was designated as a
Continuing Director by a majority of the Continuing Directors.
(h) "Director" means a member of the Board.
(i) "Entity" or "Entities" means and includes one or more
organizations of any kind or nature whatsoever, including, without
limitation, corporations, companies, partnerships, joint ventures,
sole proprietorships, and divisions.
(j) "Exchange Act" means the Securities Exchange Act of 1934, as
amended.
2. Employment.
The Company hereby employs Executive and Executive hereby accepts
such employment for the term set forth in Paragraph 4 below, subject
to and in accordance with all of the terms and conditions of this
Agreement. Executive shall initially hold the position of Senior
Vice President and General Manager, Engineered Products Group of the
Company and shall report to the Company's President; provided,
however, that the President, with the approval of the Company's Chief
Executive Officer, may change Executive's title and Executive's
responsibilities in the best interests of the Company and its
organizational development.
3. Duties and Responsibilities.
(a) Executive shall perform such duties and functions for the
Companies as are customarily performed by the Senior Vice
President and General Manager, Engineered Products Group, or such
other duties or functions as the Company's President, with the
approval of the Company's Chief Executive Officer, shall assign
Executive from time to time in the best interest of the Company to
maximize its growth and development. In the performance of his
duties, Executive shall comply with the policies and procedures of
the Company (presently in effect or as may be reasonably modified
or established hereafter) and be subject to the direction of the
Chief Executive Officer, the President, and the Board.
(b) Executive agrees to devote his entire normal working time,
attention, and energies to the performance of his duties.
Executive shall not directly or indirectly, alone or as a member
of any partnership, or as an officer, director, employee, or agent
of any Entity, be actively engaged in or concerned with any other
duties or pursuits (whether or not for gain, profit, or other
pecuniary advantage) which interfere with the performance of his
duties hereunder, or which may be inimical to or contrary to the
best interests of the Company. Nothing in this subparagraph (b)
shall be construed as preventing Executive from investing
Executive's personal assets in any way that does not either
require the rendering of services by Executive to or on behalf of
the Entities in which the investments are made or result in any
other conflict of Executive's interest or time.
(c) Executive shall use his best efforts, skills, and abilities to
promote the Company's best interests.
4. Term.
(a) Except as provided in subparagraph (b) immediately below,
Executive's employment under this Agreement shall commence on the
date of the occurrence of a Change of Control and shall continue
for a period of two (2) years from and after such date (the
"Initial Term"), subject, however, to prior termination as
provided in Paragraphs 7 and 8 of this Agreement. This Agreement
may be renewed or extended upon such terms and conditions as the
parties shall mutually agree to in a written instrument signed by
each of the parties hereto, but neither party hereto shall be
under any obligation to renew this Agreement.
(b) Executive's employment under this Agreement will not commence on
the date of the occurrence of a Change of Control if on the day
immediately prior to the Change of Control Executive is no longer
employed by the Company, unless Executive's employment by the
Company is terminated prior to the Change of Control at the request
of the individual or individuals or Entity or Entities acquiring
control of the Company.
5. Compensation.
During the Initial Term of Executive's employment under this Agreement,
Executive shall be paid by the Company an annual salary of at least
$180,000. The salary paid to Executive may be reviewed by the Board and
may be increased at the sole and unreviewable discretion of the Board,
which shall take into account the earnings and overall productivity of
the Company, available resources, the performance of Executive, the cost
of living, and such other factors as it deems relevant. The Board shall
have no obligation to make any adjustments in the salary of Executive.
The salary to be paid to Executive under this Agreement shall be payable
in equal monthly installments in accordance with the Company's customary
payroll practices.
6. Other Benefits.
(a) During the Initial Term of Executive's employment under this
Agreement, Executive shall be entitled to such vacations, and to
participate in any other fringe benefits provided by the Company
to its key employees (including any bonus, profit sharing,
pension, and health insurance plans in accordance with and subject
to the terms of such plans), as may be determined from time to
time by the Board.
(b) During the Initial Term of Executive's employment under this
Agreement, there shall be established an Incentive Bonus Program
for Fiscal Years 1994 and 1995. In each such fiscal year,
Executive shall be eligible to earn up to $30,000.00 in bonuses,
calculated as follows:
(i) if Executive meets or exceeds the fiscal-year new orders
target for Executive's Operating Group, as set forth in
the approved business plan, Executive shall earn
$10,000.00;
(ii) if Executive meets or exceeds the fiscal-year contribution
margin target for Executive's Operating Group, as set
forth in the approved business plan, Executive shall earn
$10,000.00; and
(iii) if Executive meets or exceeds the fiscal-year cash flow
target for Executive's Operating Group, as set forth in
the approved business plan, Executive shall earn
$10,000.00.
Any Incentive Bonus earned during a fiscal year will be paid
during the first half of the following fiscal year and is subject
to reduction in accordance with subparagraph (c) immediately
below. The three targets applicable to Executive for Fiscal Year
1994 are set forth in Exhibit A to this Agreement. The three
targets applicable to Executive for Fiscal Year 1995 will be
established by the President of the Company, with the approval of
the Chief Executive Officer of the Company, after completion of
the Fiscal Year 1995 business plan and submission of the business
plan to the Board, and the President shall provide Executive a
written statement, in a form similar to Exhibit A, of the Fiscal
Year 1995 targets.
(c) If Executive is entitled to receive compensation under the
Company's Fiscal Year 1994 or 1995 Management Incentive Plan (or
such similar plan by whatever name it shall be known as), the
Incentive Bonus that Executive may be eligible for under
subparagraph (b) immediately above in Fiscal Year 1994 or 1995
shall be reduced as follows:
(i) if the actual total compensation payable to Executive
under the Management Incentive Plan is less than or equal
to thirty (30) percent of Executive's annual salary, then
Executive shall receive one hundred (100) percent of the
total Incentive Bonus earned in accordance with
subparagraph (b) immediately above;
(ii) if the actual total compensation payable to Executive
under the management Incentive Plan is greater than thirty
(30) percent but less than forty (40) percent of
Executive's annual salary, then Executive shall receive
only two-thirds of the total Incentive Bonus earned in
accordance with subparagraph (b) immediately above; or
(iii) if the actual total compensation payable to Executive
under the Management Incentive Plan is equal to or greater
than forty (40) percent of Executive's annual salary, then
Executive shall receive only one-third of the total
Incentive Bonus earned in accordance with subparagraph (b)
immediately above.
7. Termination of Employment by the Company for Death, Disability, or
Justifiable Cause, or by Executive Without Good Reason, or Upon
Expiration of the Initial Term .
(a) The Company shall have the right to terminate the Executive's
employment under this Agreement upon the occurrence any one or
more of the following events:
(i) the death of Executive (in which case said employment
terminates immediately upon death);
(ii) the "disability" of Executive (as hereinafter defined); or
(iii) the Board determines in its sole and unreviewable
discretion (acting reasonably and in good faith) that
"justifiable cause" (as hereinafter defined) exists for
the termination of Executive's employment.
Executive shall have the right to terminate Executive's employment
under this Agreement without "good reason" (as defined in
Paragraph 8 below) upon sixty (60) days' prior written notice to
the President of the Company. No such termination by Executive
shall be effective unless that notice has been given.
Except as provided in subparagraph (b) immediately below, upon
termination of the employment of Executive under any of the
circumstances set forth in this subparagraph (a), Executive's
entitlement to further compensation or other benefits under
Paragraphs 5 and 6 of this Agreement shall immediately cease.
(b) For the purposes of this Agreement, the term "disability" shall
mean the inability of Executive, due to illness, accident, or any
other physical or mental incapacity, to perform his duties or
fulfill his obligations under this Agreement in a normal manner for
a period of any three (3) consecutive months or for a total of six
(6) months (whether or not consecutive) in any twelve (12) month
period during the Initial Term of this Agreement, it being
understood that, notwithstanding any such inability to perform his
duties, Executive shall be entitled to receive his compensation as
provided herein until the termination of his employment for
disability. The Company shall provide Executive ten days' prior
written notice of any determination by the Board that Executive is
disabled.
(c) For purposes of this Agreement, "justifiable cause" for
termination by the Company of Executive's employment shall means
any one or more of the following:
(i) any intentional breach by Executive of the performance of
any of his duties pursuant to this Agreement;
(ii) any intentional or negligent disclosure by Executive to
any person or Entity (other than the Companies) and other
than in the ordinary course of business of any Confidential
Information of the Companies;
(iii) any knowing violation or reckless disregard by Executive
of any law, governmental regulation, or judicial decree
which has caused substantial injury to the Companies,
financial or otherwise;
(iv) Executive's interference with or endeavor to entice away
from the Companies any client or customer, or
solicitation of employment of any of the Companies'
officers, directors, employees, or agents;
(v) Executive's conviction of a felony, as evidenced by a
binding and final judgment, order, or decree of a court of
competent jurisdiction, in effect after exhaustion or
lapse of all rights of appeal;
(vi) the commission by Executive of any act of fraud, or
material act of malfeasance, disloyalty, or breach of
trust against the Companies;
(vii) any attempt by Executive to secure any personal profit
(other than authorized compensation paid to Executive by
the Company) or convert any corporate opportunity to his
benefit in connection with the business of the Companies;
(viii) any failure by Executive to devote his entire normal
working time to the affairs of the Companies;
(ix) any activities of Executive that are determined to be
inimical to or contrary to the best interests of the
Companies; or
(x) the conduct or involvement by Executive in any business
other than the businesses of the Companies.
The Company shall provide Executive ten (10) days' prior written
notice of termination for justifiable cause; provided, however,
that the Company shall not be required to furnish any such prior
written notice in the event that the Board reasonably determines
in its sole and unreviewable discretion that immediate termination
of Executive without such prior written notice is necessary to
protect the best interests of the Companies. The written notice
shall set forth in reasonable detail the facts and circumstances
that are the basis for the termination for justifiable cause.
(d) If Executive is still employed under this Agreement at the end of
the Initial Term of this Agreement and if the parties hereto have
failed to reach a written agreement (signed by each of the parties
hereto) as to the continuation of Executive's employment,
Executive's employment under this Agreement will automatically
terminate upon expiration of the Initial Term. In such case:
(i) Executive's entitlement to further compensation or other
benefits under Paragraphs 5 and 6 of this Agreement shall
immediately cease upon expiration of the Initial Term; and
(ii) such termination shall be deemed a triggering event
entitling Executive to severance pay under the Company's
severance pay policy, but in no event shall the severance
pay due and payable to Executive be less than a total of
six (6) weeks' salary; provided, however, that Executive
shall not be entitled to any severance pay if (A)
Executive is provided by the Company, at least sixty (60)
days prior to the expiration of the Initial Term, a
written offer to renew this Agreement for at least an
additional one (1) year and Executive does not accept in
writing that offer at least thirty (30) days prior to the
expiration of the Initial Term, or (B) Executive remains
employed by any of the Companies.
8. Termination of Employment Under Other Circumstances.
(a) If (i) the Company terminates Executive's employment under this
Agreement other than for death, "disability", or "justifiable
cause", or Executive terminates Executive's employment under this
Agreement for "good reason" (as hereinafter defined), and (ii)
Executive does not remain employed by any of the Companies,
Executive shall:
(i) receive from the Company, within two (2) business days
after the termination, an amount in cash equal to the sum
of:
(A) all salary due and payable to Executive as of the
date of termination;
(B) pay for all accrued, but unused, vacation and sick
days through the date of termination;
(C) all salary that would have been due and payable to
Executive over the remaining period of the Initial
Term of this Agreement if Executive's employment had
not been terminated, based on Executive's annual
salary in effect at the date of termination. By way
of illustration, if Executive's annual salary at the
date of termination was $200,000.00 and the
termination occurred at the end of the seventh (7th)
month of the Initial Term, Executive would be
entitled to receive 17/24 x $400,000.00, or
$283,333.33; and
(D) all severance pay due and payable to Executive under
the Company's severance pay policy, but in no event
less than a total of six (6) weeks' salary, it being
understood that a termination under this
subparagraph (a), whether by the Company or
Executive, shall be deemed a triggering event
entitling Executive to severance pay under the
Company's severance pay policy;
(ii) receive from the Company all other benefits which
executive employees of the Company normally receive when
their employment is terminated by the Company without
"justifiable cause", which in no event shall be less than
the benefits such executive employees would have received
had their terminations occurred on the day immediately
preceding the Change of Control; and
(iii) with respect to any stock options for shares of the
Company's stock that Executive has been or may be
hereafter awarded, and notwithstanding the terms of the
Long-Term Incentive Compensation Plans under which these
options were or may be hereafter granted, be entitled to
fully exercise said stock options at any time up to and
including the ninetieth day after the expiration of the
remaining period of the Initial Term of this Agreement.
(b) For purposes of this Agreement, "good reason" for Executive to
terminate Executive's employment under this Agreement shall mean
any one or more of the following:
(i) both (A) without Executive's prior written consent, (1)
the assignment by the Company to Executive of duties and
responsibilities that are not at least substantially
equivalent to Executive's duties and responsibilities with
the Company immediately prior to the date of the Change of
Control, except in connection with the termination of
Executive's employment under this Agreement pursuant to
Paragraph 7 of this Agreement, or (2) the failure by the
Company to continue Executive in a position that is at
least substantially equivalent to the position held by
Executive with the Company immediately prior to the date
of the Change of Control, except in connection with the
termination of Executive's employment under this Agreement
pursuant to Paragraph 7 of this Agreement, and (B) the
continuance thereof for a period of twenty (20) days after
written notice thereof to the Company from Executive;
(ii) a failure by the Company to pay, or a reduction by the
Company of, the annual salary required to be paid to
Executive under Paragraph 5 of this Agreement;
(iii) a failure by the Company to pay any Incentive Bonus
required to be paid to Executive under Paragraph 6 of this
Agreement;
(iv) a failure by the Company to provide Executive with (A) the
opportunity to participate, on terms no less favorable
than those in effect for other executives holding a
similar position, in all of the Company's benefit and
executive compensation plans and programs or their
equivalent or (B) all other fringe benefits, or their
equivalent, from time to time in effect for the benefit of
other executives holding a similar position;
(v) without Executive's prior written consent, (A) the
relocation by the Company of the principal place of
Executive's employment to a location that is more than 100
miles from Executive's principal place of employment
immediately prior to the date of the Change of Control or
(B) the imposition by the Company of travel requirements
on Executive which are not substantially consistent with
the travel requirements applicable to Executive
immediately prior to the date of the Change of Control; or
(vi) any breach of Paragraph 15 of this Agreement by the
Company.
(c) If the Company terminates Executive's employment under this
Agreement other than for death, "disability", or "justifiable
cause", the Company shall provide Executive at least ten (10)
days' prior written notice of that termination, and no such
termination shall be effective unless that notice has been given.
The notice shall set forth in reasonable detail the facts and
circumstances that are the basis for the termination.
(d) At least sixty (60) days prior to the termination by Executive of
Executive's employment under this Agreement for "good reason",
Executive shall provide the President of the Company with written
notice of Executive's intention to terminate Executive's
employment, and no such termination shall be effective unless that
notice has been given. The notice shall set forth in reasonable
detail the facts and circumstances that are the basis for the
termination.
(e) If Executive's employment by the Company is terminated prior to a
Change of Control at the request of the individual or individuals
or Entity or Entities acquiring control of the Company, the
provisions of this Paragraph 8 shall apply as if a Change of
Control had occurred just prior to the date of termination.
9. No Mitigation.
Executive shall not be required to mitigate damages or the amount of any
payment provided for under this Agreement by seeking other employment or
otherwise, and payments and benefits due Executive under Paragraph 8(a)
of this Agreement shall not be subject to offset in respect of any
Claims which the Company has or may have against Executive. Without
limiting the generality of the foregoing, no payment otherwise required
under this Agreement shall be reduced because of any payment received by
Executive in connection with other employment of or other services
rendered by Executive after the date of termination of Executive's
employment under this Agreement.
10. Inventions, Discoveries, Etc.
(a) Executive shall promptly and fully disclose to the Company (with all
necessary detail for a complete understanding of the same) all
developments, know-how, discoveries, inventions, improvements,
concepts, ideas, writings, formulae, processes, and methods (whether
copyrightable, patentable, or otherwise) made, received, conceived,
acquired, or written by Executive (whether or not at the request of
or upon the suggestion of the Company) during the period of his
employment with any of the Companies, solely or jointly with others
(whether or not during working hours), in connection with or relating
to any activities of the Companies or any of their customers known
to him as a consequence of his employment (collectively referred to
as the "Subject Matter").
(b) Executive hereby assigns and transfers, and agrees to assign and
transfer, to the Company, all his right, title, and interest in and
to the Subject Matter. Executive further agrees to deliver to the
Company any and all drawings, notes, specifications, and data
relating to the Subject Matter and to execute, acknowledge, and
deliver all such further papers, including applications for
copyrights, patents, and similar protected ownership rights, as may
be necessary to obtain copyrights, patents, and similar protected
ownership rights with respect to the Subject Matter in any and all
countries and to vest title to any such copyrights, patents, and
similar protected ownership rights in the Company. Executive shall
assist the Company in obtaining such copyrights, patents, or similar
protected ownership rights during the period of his employment with
any of the Companies and any time thereafter and agrees to assist
the Company and to testify in its behalf in any prosecution or
litigation involving any of the Subject Matter during the period of
his employment with any of the Companies, and at any time
thereafter, in accordance with the provisions of subparagraph (c)
immediately below.
(c) At any time subsequent to the termination of Executive's employment
with any of the Companies or the expiration or termination of this
Agreement, if the Company requests in writing that Executive assist
the Company with respect to obtaining any patents, copyrights, or
similar protected ownership rights, or that Executive assist the
Company or testify in its behalf in connection with any prosecution
or litigation relating to the Subject Matter, the Company shall
reimburse Executive for Executive's reasonable out-of-pocket
expenses in connection with such assistance or testimony. In the
event the Company shall request Executive's assistance or testimony
as set forth hereunder, the Company agrees to use its best efforts to
assure that such assistance or testimony will neither require a
major or unreasonable portion of Executive's time nor substantially
interfere with his then current employment or business activities.
11. Non-Disclosure of Confidential Information.
(a) Executive shall not during his employment with any of the Companies
(nor at any time following termination of such employment or
expiration or termination of this Agreement), directly or
indirectly, intentionally or negligently disclose to or permit to be
known by any person or Entity any Confidential Information acquired
by him during the course of or in connection with his employment by
any of the Companies relating to (i) the Companies, (ii) the
officers, directors, employees, or agents of the Companies, (iii)
any client or customer of the Companies, or (iv) any Entity owned or
controlled, directly or indirectly, by any of the foregoing, or in
which any of the foregoing has a beneficial interest.
(b) All Confidential Information, regardless of how recorded, relating
to the Companies shall be the exclusive property of the Companies,
and Executive shall use his best efforts to prevent any publication
or disclosure thereof. Upon termination of Executive's employment
with any of the Companies or the expiration or termination of this
Agreement, all documents, records, reports, writings, and other
similar documents containing Confidential Information (including any
and all copies thereof) then in Executive's possession or control
shall be returned and left with the Company.
12. Right to Injunctive and Other Relief.
Executive recognizes that the services to be rendered by him to any of
the Companies are of special, unique, unusual, extraordinary, and
intellectual character, involving skill of the highest order, and that
such services are of special and particular value, the loss of which
cannot be adequately compensated for in damages. Executive further
agrees and declares that, because of his important role with the
Companies to date, clients' or customers' association of Executive with
the Companies, and the personal relationships Executive has with many of
such clients or customers, Executive's services to the Companies are
unique and extraordinary. In the event of a breach of any provision of
Paragraph 10 or 11 of this Agreement by Executive, the Companies shall
be entitled to injunctive relief and any other legal or equitable
remedies from a court of competent jurisdiction. Executive acknowledges
and agrees that any such breach will cause irreparable injury to the
Companies and that money damages will not provide an adequate remedy to
the Companies. In any action for injunctive relief, Executive shall not
be entitled to interpose a defense that the Companies have an adequate
remedy in a court of law. Executive agrees that the Companies may
recover by appropriate action the amount of the actual damages caused
the Companies by any failure, refusal, or neglect of Executive to
perform his agreements, representations, and warranties contained in
this Agreement. The remedies provided in this Agreement shall be deemed
cumulative and the exercise of one shall not preclude the exercise of
any other remedy at law or in equity for the same event or any other
event.
13. No Conflicting Agreements.
Executive represents and warrants that he is not a party to any
agreement, contract, or understanding, whether of employment or
otherwise, which would in any way restrict or prohibit him from
undertaking or performing his employment and other obligations in
accordance with the terms and conditions of this Agreement. Executive
further agrees to indemnify and hold harmless the Companies and their
past and present officers, directors, employees, agents, owners,
stockholders, representatives, and attorneys from and against and in
respect of any and all Claims alleging that (a) Executive is so
restricted or prohibited or (b) the Companies have committed a wrongful
act in negotiating with, and employing the services of, Executive.
14. Notices and Calendar Days.
All notices, requests, demands, and other communications provided for by
this Agreement shall be in writing and shall be personally delivered or
mailed (by registered or certified mail, return receipt requested,
postage prepaid) to the address of the party to whom intended as
specified below or to such different address as such party may have
fixed by a notice sent in accordance with this Paragraph.
(a) If to the Company, at:
Air & Water Technologies Corporation
P.O. Box 1500
Somerville, NJ 08876
Attention: President
with a copy to: General Counsel
(b) If to Executive, at:
R.D. Drive 4, Box 278B
Washington, NJ 07882
Any such notices shall be effective upon receipt, if personally
delivered, or three business days after mailing, if mailed.
Unless otherwise expressly provided, all references in this Agreement to
"days" mean "calendar days".
15. Assignability and Binding Effect.
(a) This Agreement shall inure to the benefit of and shall be
binding upon the heirs, executors, administrators, successors,
and legal representatives of Executive, and shall inure to the
benefit of and be binding upon the Company and its successors,
assigns, and legal representatives, but the obligations of
Executive may not be delegated and Executive may not assign,
transfer, pledge, encumber, hypothecate, or otherwise dispose
of this Agreement, or any of his rights under this Agreement,
and any such attempted delegation or disposition shall be null
and void and without effect. This Agreement shall also inure
to the benefit of the Companies and the Other Defendants (as
defined in Paragraph 19 below) and their respective heirs,
executors, administrators, successors, assigns, and legal
representatives.
(b) If the Company shall be merged into or consolidated with another
Entity, the provisions of this Agreement shall be binding upon and
inure to the benefit of the Entity surviving the merger or
resulting from the consolidation. The Company shall require any
successor, whether direct or indirect, by purchase, merger,
consolidation, or otherwise, to all or substantially all of the
business or assets of the Company, by agreement in form and
substance satisfactory to Executive, expressly to assume and agree
to perform this Agreement in the same manner and to the same
extent that the Company would have been required to perform this
Agreement if no succession had taken place. The provisions of
this Paragraph 15 shall continue to apply to each subsequent
employer of Executive bound by this Agreement in the event of any
merger, consolidation, or transfer of all or substantially all of
the business or assets of that subsequent employer.
16. Complete Understanding.
This Agreement constitutes the complete understanding between the
parties with respect to the employment of Executive hereunder, and no
statement, representation, warranty or covenant has been made by either
party with respect thereto except as expressly set forth herein. This
Agreement shall not be altered, modified, amended, or terminated except
by written instrument signed by each of the parties hereto.
17. Governing Law.
This Agreement and all provisions hereof shall be governed by and
construed in accordance with the laws of the State of New Jersey.
18. Severability.
Should any part, term, or provision of this Agreement be declared or be
determined by any court or tribunal of competent jurisdiction to be
illegal, invalid, or unenforceable, the legality, validity, and
enforceability of the remaining parts, terms, or provisions shall not be
affected thereby, and said illegal, unenforceable, or invalid part,
term, or provision shall be deemed not to be a part of this Agreement.
19. Arbitration.
(a) Except as provided in subparagraph (b) immediately below, any and
all Claims arising out of or relating to (i) this Agreement, (ii)
any breach of any provision of this Agreement, (iii) Executive's
employment at any time with any of the Companies, and/or (iv) the
termination of Executive's employment with any of the Companies
shall be settled by arbitration. Such arbitration proceeding
shall be conducted pursuant to the Employment Dispute Resolution
Rules of the American Arbitration Association ("AAA") then in
effect, by a single arbitrator, and shall be held in Somerset
County, New Jersey. The arbitrator shall not have the power to
award punitive damages. The cost of the arbitration proceeding
and the reasonable costs and attorneys' fees of the prevailing
party shall be paid by the non-prevailing party, with the dollar
amount of these costs and fees to be fixed by the arbitrator. The
judgment upon the award rendered by the arbitrator may be entered
in any court having competent jurisdiction thereof.
(b) Nothing in subparagraph (a) immediately above shall be construed
or interpreted to preclude the Companies from filing suit in a
court of competent jurisdiction in order to enforce their rights
and remedies under Paragraphs 10, 11 and/or 12 of this Agreement.
In any such suit, the court is empowered to and shall resolve any
dispute as to whether the Claims asserted by any of the Companies
are within the scope of Paragraphs 10, 11, and/or 12 of this
Agreement, and the court shall not refer such dispute to
arbitration under subparagraph (a) immediately above.
(c) With respect to the Claims of Executive that are within the scope
of subparagraph (a) above, if Executive has the same, similar, or
related Claims against any of the Companies' employee benefit
plans, trusts, committees, or boards or against any past or
present officers, directors, employees, agents, owners,
stockholders, trustees, fiduciaries, administrators, sponsors,
representatives, or attorneys of the Companies or the Companies'
employee benefit plans, trusts, committees, or boards
(collectively referred to as the "Other Defendants"), and if
Executive seeks to litigate such Claims against the Other
Defendants in a civil action or any other proceeding (including
before an administrative agency), Executive agrees that any or all
of said Other Defendants may compel Executive to arbitrate his
Claims against them pursuant to the terms of this Paragraph 19.
(d) The arbitrator selected by the parties pursuant to the AAA rules
shall have expertise in private industry employee relations and
shall hear and determine the case promptly. The burden of
persuasion shall at all times be upon the party seeking relief.
(e) In the event Executive files suit in a court of competent
jurisdiction and asserts that certain Claims are not subject to
arbitration under this Paragraph 19 because of the limitation on
the power of the arbitrator to award punitive damages (the
"Limitation"), the parties agree that they will request the court
to resolve that legal issue on an expedited basis, and if the
court rules in favor of Executive on the Limitation issue, the
parties agree as follows:
(i) the arbitration shall proceed as if this Paragraph 19 did
not contain such Limitation;
(ii) the parties will request the court to enter judgment in
favor of Executive on the Limitation issue, at which time
the Company may appeal that ruling;
(iii) in the event the arbitrator determines that Executive is
entitled to punitive damages, the punitive damages aspect
of the arbitrator's award will be stayed pending the
exhaustion or lapse of all rights of appeal of the Company
under subparagraph (e)(ii) immediately above; and
(iv) in the event an appellate court rules in favor of the
Company on the Limitation issue, the arbitrator shall
vacate the award of punitive damages.
The procedures set forth in this subparagraph (e) shall also apply
in the event Executive seeks relief in some other tribunal, such
as an administrative agency, and the Company files a civil action
to compel arbitration.
20. Waiver.
It is agreed that a waiver by either party of a breach of any provision
of this Agreement shall neither operate nor be construed as a waiver of
any subsequent breach hereof, or as a waiver of a breach of any other
provision.
21. Survival.
All representations and warranties herein shall survive any termination
of Executive's employment or termination or expiration of this
Agreement, and the termination of Executive's employment or the
termination or expiration of this Agreement shall not affect the
enforceability of Paragraphs 10, 11, 12, 13, and 19 of this Agreement,
which Paragraphs shall survive the termination or expiration of this
Agreement or the termination of Executive's employment.
22. Other Documents.
The parties agree to execute and deliver all such further instruments
and take such other and further action as may be reasonably necessary or
appropriate to carry out the provisions of this Agreement.
23. Paragraph Headings.
The paragraph headings contained in this Agreement are for reference
purposes only and shall not affect in any way the meaning or
interpretations of this Agreement.
IN WITNESS WHEREOF, the parties hereto set their hands as of the day and year
first above written.
AIR & WATER TECHNOLOGIES CORPORATION
By /s/ Arthur L. Glenn
--------------------------------
Witness:
-------------------------
/s/ Robert H. Cardell
-----------------------------------
Robert H. Cardell
Witness:
-------------------------
EXHIBIT A
EXECUTIVE RETENTION AGREEMENT
BETWEEN
ROBERT H. CARDELL
AND
AIR & WATER TECHNOLOGIES CORPORATION
For Fiscal Year 1994, the approved business plan targets for purposes of
Paragraph 6 of the Agreement are as follows:
1. New Orders $
2. Contribution Margin $
3. Cash Flow $
<TABLE>
<CAPTION>
AIR & WATER TECHNOLOGIES CORPORATION
COMPUTATION OF PER SHARE EARNINGS
(in thousands except per share amounts)
1994 1993 1992
---------- ----------- ---------
<S> <C> <C> <C>
Primary Earnings (Loss) Per Share:
1. Income (loss) from continuing operations $ (210,991) $ 4,783 $ (15,759)
2. Less preferred dividends (1,245) --- ---
---------- ----------- ---------
3. Income (loss) from continuing operations
applicable to common shareholders (212,236) 4,783 (15,759)
4. Income (loss) from discontinued operations (42,787) (10,338) 5,723
5. Extraordinary item (8,000) --- ---
---------- ---------- ---------
6. Net loss applicable to common shareholders $ (263,023) $ (5,555) $ (10,036)
---------- ---------- ---------
7. Weighted Average shares Outstanding 27,632 24,815 24,812
---------- --------- ---------
8. Earnings (loss) per share from continuing
operations (3/7) $ (7.68) $ .20 $ (.63)
9. Earnings (loss) per share from discontinued
operations (4/7) (1.55) (0.42) .23
10. Loss per share on extraordinary item (5/7) (.29) --- ---
---------- ---------- ---------
11. Net loss per share $ (9.52) $ (.22) $ (.40)
========== ========== =========
Fully Diluted Earnings (Loss) Per Share:
12. Line 3. above $ (212,236) $ 4,783 $ (15,759)
13. Add back preferred dividends 1,245 --- ---
14. Add back interest, net of tax, on assumed
conversion of the Company's 8% Convertible Debentures 9,200 9,200 9,200
---------- ---------- ---------
15. Income (loss) from continuing operations (201,791) 13,983 (6,559)
16. Income (loss) from discontinued operations (42,787) (10,338) 5,723
17. Extraordinary item (8,000) --- ---
---------- ---------- ---------
18. Net income (loss) $ (252,578) $ 3,645 $ (836)
---------- ---------- ---------
19. Weighted average shares outstanding (Line 7) 27,632 24,815 24,812
20. Add additional shares issuable upon
assumed conversion of preferred shares from date of issuance 1,802 --- ---
21. Add additional shares issuable upon
assumed conversion of the Company's 8% Convertible Debentures 3,833 3,833 3,833
---------- ---------- ---------
22. Adjusted weighted average shares outstanding 33,267 28,648 28,645
---------- ---------- ---------
23. Earnings (loss) per share from continuing
operations (15/22)* $ (6.07) $ .49 $ (.23)
24. Earnings (loss) per share from discontinued
operations (16/22) (1.29) (.36) .20
25. Loss per share from extraordinary item (17/22) (.23) ---- ----
---------- ---------- ---------
26. Net income (loss) per share (18/22)* $ (7.59) $ .13 $ (.03)
========== ========== =========
__________
* Fully diluted earnings (loss) per share are not presented as the assumed conversion of the Company's Convertible
Preferred and Convertible Debentures is anti-dilutive.
</TABLE>
SUBSIDIARIES OF
AIR & WATER TECHNOLOGIES CORPORATION
Company State of Incorporation
------- ----------------------
Asbestos Control Services, Inc. Delaware
AWT Air & Water Technologies, Canada, Inc. Canada
AWT Capital, Inc. Delaware
AWT Management Company, Inc. Delaware
AWT Plastic Recycling, Inc. Delaware
AWT Taiwan, Inc. Delaware
Cardinal Dismantlement Services, Inc. Delaware
Chesapeake Sunrise Marketing Corporation Delaware
Cottrell Environmental Sciences, Inc. New Jersey
CUSCO, Inc. Massachusetts
Custodis-Cottrell, Inc. New Jersey
Custodis-Cottrell Canada, Inc. Canada
Custodis-Cottrell International, Inc. Delaware
Custodis-Ecodyne, Inc. Delaware
Falcon Abatement, Inc. Delaware
Falcon Associates, Inc. Pennsylvania
Falcon, Inc. New Jersey
Flex-Kleen Corporation Delaware
KVB Research, Inc. California
Lerman Design Corp. New Jersey
M&E Auburn, Inc. Delaware
M&E II, Inc. Delaware
M&E Pacific, Inc. Delaware
MEPAC Services, Inc. Delaware
Merscot Inc. Delaware
Merscot II, Inc. Delaware
Metcalf & Eddy, Inc. Delaware
Metcalf & Eddy de Panama, S.A. Panama
Metcalf & Eddy de Puerto Rico, Inc. Delaware
Metcalf & Eddy International, Inc. Delaware
Metcalf & Eddy of Massachusetts, Inc. Delaware
Metcalf & Eddy of Michigan, Inc. Michigan
Metcalf & Eddy of New York, Inc. New York
Metcalf & Eddy of Ohio, Inc. Ohio
Metcalf & Eddy Services, Inc. Delaware
Metcalf & Eddy Technologies, Inc. Delaware
Organic Resources Management Corporation Delaware
Organic Resources Management of New York City, Inc. New York
PIECO, Inc. Florida
Power Application & Mfg. Co. Delaware
PQ Energy, Inc. Louisiana
Production Rentals, Inc. Louisiana
Professional Services Group, Inc. Minnesota
ProTek Environmental Services, Inc. Delaware
REECO-Australia, Pty.
REECO-Italia, S.P.A.
REECO-Strom, A/S Denmark
Regenerative Environmental Equipment Co., Inc. New Jersey
Rental Tools, Inc. Louisiana
Research-Cottrell, Inc. New Jersey
Research-Cottrell (Belgium), S.A.
Research-Cottrell (Canada) Ltd. Canada
Research-Cottrell (Deutschland) GmbH
Research-Cottrell Energy Companies, Inc. Delaware
Research-Cottrell Intermediate Holding Corporation Delaware
Research-Cottrell International, Inc. New Jersey
Research-Cottrell S.A.R.L. France
Research-Cottrell Technologies, Inc. California
Som-Trell, Inc. New Jersey
Thermal Transfer Corporation Pennsylvania
Vee-Six, Inc. Delaware
Zecco, Inc. Massachusetts
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Air & Water Technologies Corporation:
As independent public accountants, we hereby consent to the incorporation of
our report included in this Form 10-K, into the Company's previously filed
Form S-8 Registration Statement File No. 33-36327.
/s/ ARTHUR ANDERSEN LLP
Roseland, New Jersey
January 30, 1995
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
The schedule contains summary financial information extracted from the
consolidated balance sheets and consolidated statements of operations and is
qualified in its entirety by reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> OCT-31-1994
<PERIOD-END> OCT-31-1994
<CASH> 11,021
<SECURITIES> 0
<RECEIVABLES> 86,601
<ALLOWANCES> 6,067
<INVENTORY> 20,405
<CURRENT-ASSETS> 188,316
<PP&E> 75,197
<DEPRECIATION> 32,184
<TOTAL-ASSETS> 602,938
<CURRENT-LIABILITIES> 239,522
<BONDS> 245,984
<COMMON> 32
0
12
<OTHER-SE> 74,337
<TOTAL-LIABILITY-AND-EQUITY> 602,938
<SALES> 522,573
<TOTAL-REVENUES> 522,573
<CGS> 413,324
<TOTAL-COSTS> 413,324
<OTHER-EXPENSES> 152,938
<LOSS-PROVISION> 2,930
<INTEREST-EXPENSE> 23,103
<INCOME-PRETAX> (210,187)
<INCOME-TAX> 998
<INCOME-CONTINUING> (210,991)
<DISCONTINUED> (42,787)
<EXTRAORDINARY> (8,000)
<CHANGES> 0
<NET-INCOME> (261,778)
<EPS-PRIMARY> (9.52)
<EPS-DILUTED> (7.59)
</TABLE>
