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<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
--------
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Earliest Event Reported - May 24, 1996
ATC ENVIRONMENTAL INC.
----------------------
(Exact name of Registrant as specified in its charter)
Delaware 1-10583 46-0399408
- ---------------------------------------------------------------
(State or other (Commission (I.R.S. Employer
jurisdiction of File Number) Identification No.)
incorporation
or organization)
104 East 25th Street, 10th Floor
New York, New York 10010
- ----------------------------- ----------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (212) 353-8280
--------------
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<PAGE>
Item 2. Acquisition or Disposition of Assets.
Acquisition of American Testing and Engineering Corporation - On
May 24, 1996, ATC purchased certain assets and assumed certain
liabilities of American Testing and Engineering Corporation ("ATEC"), a
national environmental consulting firm. ATEC provides environmental
consulting and engineering services including risk assessments,
compliance audits, environmental remediation consulting, geotechnical,
materials testing, industrial hygiene and analytical services through a
large network of branch and regional offices. For its year ended
December 31, 1995, ATEC had revenues of $85,017,929 and a net loss of
($1,818,975), not including revenues from an excluded subsidiary.
The acquisition will be accounted for as a purchase. The assets
acquired include customer contract rights, customer lists, order
backlog, customer records, and certain tangible assets consisting of
accounts receivable, work in process and customer and certain other
deposits. Additionally, ATC executed an agreement to lease
substantially all of ATEC's equipment and executed several sublease
agreements for premises leased by ATEC. ATC also obtained non-
competition agreements with ATEC, a non-acquired subsidiary, and the
majority shareholder of ATEC.
The purchase price consideration consisted of $9,000,000 of cash
paid at closing and property and facility lease payments and non-
compete payment obligations of $6,000,000 payable during the first year
following the purchase. The Company also assumed liability for ATEC's
bank debt, approximately $11,025,000, its accounts payable, and certain
other recorded liabilities. The Company may offset up to $2,000,000 of
the cash consideration paid at close against future payment obligations
if certain minimum net revenues are not achieved during the first year
following the purchase. The Company is contingently liable to ATEC for
additional purchase consideration up to $10,750,000 if certain net
revenue levels are achieved and certain other conditions are met.
Amounts, if fully earned, would be paid as follows; $3,883,333 in
fiscal 1998, $3,873,333 in fiscal 1999, $1,293,334 in fiscal 2000 and
$1,700,000 in fiscal 2002.
Acquisition of 3D Information Services, Inc. - Effective May 28,
1996, ATC purchased certain assets and assumed certain specified
liabilities of 3D Information Services, Inc. ("3D"), a New Jersey based
information services company providing technical information system
consulting services in all phases of information system design,
development, maintenance and management in client server and mainframe
based environments. Its clients include major companies in the
telecommunications, financial services and pharmaceutical industries.
3D reported revenues and net income of $10,361,564 and $85,288
respectively, for its year ended December 31, 1995.
The acquisition will be accounted for as a purchase. Assets
purchased include customer contract rights, customer lists, order
backlog, customer records, employee contracts and tangible assets
including accounts receivable, unbilled work in process, field and
office supplies, and equipment. Consideration paid consisted of
$3,000,000 of cash at closing and a note payable for $2,500,000 payable
in three annual payments plus interest. In addition, ATC assumed
certain liabilities of approximately $490,000. ATC also entered into a
three year non-compete agreement with the majority stockholder.
Bank Credit Agreement - On May 24, 1996 the Company entered into a
$20,000,000 bridge credit facility with Chemical Bank and Atlantic Bank
of New York. Under the terms of the credit agreement, the Company may
borrow up to the amount of the facility, with interest payable monthly
at 1.75% above the adjusted Eurodollar rate (7.18% at May 24, 1996).
Amounts borrowed are due September 20, 1996. The Company anticipates
entering into a longer term agreement with the banks prior to the
maturity date of the credit agreement. The Company borrowed
approximately $14,025,000 in connection with the ATEC and 3D
acquisitions. The agreement contains certain restrictive covenants
which are consistent for this type of facility, including restrictions
on dividend payments.
ATC and its affiliates, officers and directors had no relationship
to ATEC or 3D prior to the execution not the purchase agreements . The
consideration paid for each transaction was based upon arm length
negotiations and was based in part on the assets purchased less
liabilities assumed and expected future results of operations and
resulting cash flows.
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Item 7. Exhibits and Financial Statements.
(a)(1) The required financial information for American testing and
Engineering Corporation will be filed within sixty dasy of
the due date of this Form 8-K.
(a)(1)(ii) 3D Information Services, Inc. Financial Statements as of
December 31, 1995 and Independent Auditors' Report.
(b) The required pro-forma information will be filed within sixty
days of the due date of this Form 8-K.
(c) Exhibits
10(a) Agreement of Sale and Purchase of Business Assets on May 24,
1996, among ATC Environmental, American Testing
and Engineering Corporation d/b/a/ ATEC Associates, Inc. and
Gerald D. Mann.
10(b) Assumption of Liabilities Agreement on May 24, 1996, among
ATC Environmental Inc., American Testing and Engineering
Corporation and Gerald D. Mann.
10(c) Master Equipment Lease Agreement on May 24, 1996, between ATC
Environmental Inc. and American Testing and Engineering
Corporation.
10(d) Master Sublease Agreement on May 24, 1996, between ATC
Environmental Inc. and American Testing and Engineering
Corporation covering premises leases at Indianapolis, IN,
Atlanta, GA and Dallas, TX.
10(e) Non-Competition Agreement on May 24, 1996, between ATC
Environmental Inc. and American Testing and Engineering
Corporation.
10(f) Mann Non-Competition Agreement on May 24, 1996, between ATC
Environmental Inc. and Gerald D. Mann.
10(g) WATEC Non-Competition Agreement on May 24, 1996, between ATC
Environmental Inc. and Waste Abatement Technology, LLP.
10(h) Security Agreement on May 24, 1996, among ATC Environmental
Inc., American Testing and Engineering Corporation and
Gerald D. Mann.
10(i) $500,000 Letter of Credit on May 24, 1996, from Chemical
Bank, N.A. against the account of ATC Environmental Inc. in
favor of American Testing and Engineering Corporation.
10(j) Agreement for the Sale and Purchase of Business Assets on May
28, 1996, among ATC In Sys Technology Inc., 3D Information
Services, Inc. and Ciro De Saro.
10(k) Assumption of Liabilities Agreements on May 28, 1996, between
ATC In Sys Technology Inc., 3D Information Services, Inc. and
Ciro De Sar.
10(l) Stockholders Non-Competition Agreements on May 28, 1996,
between ATC In Sys Technology Inc. and the stockholders
of 3D Information Services, Inc.
10(m) Three-year, $2,500,000 Promissory Note on May 29, 1996, from
ATC Environmental Inc. to 3D Information Services Inc.
10(n) Employment Agreement on May 29, 1996, between ATC
Environmental Inc. and Ciro De Saro.
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SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, the Registrant has duly caused this
Report to be signed on its behalf by the undersigned, thereunto duly
authorized.
ATC ENVIRONMENTAL, INC
----------------------
(Registrant)
June 6, 1996 By: /s/ RICHARD L. PRUITT
- ------------ ------------------------
(Dated) RICHARD L. PRUITT
Vice President and
Principal Accounting Officer
<PAGE>
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Stockholders of
3D Information Services, Inc.
We have audited the accompanying balance sheet of 3D
Information Services, Inc. as of December 31, 1995 and the
related statements of operations, stockholders' equity, and
cash flows for the year then ended. These financial statements
are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial
statements based on our audit.
We conducted our audit in accordance with generally accepted
auditing standards. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether
the financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used
and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We
believe that our audit provides a reasonable basis for our
opinion.
In our opinion, such financial statements present fairly, in
all material respects, the financial position of 3D Information
Services, Inc. as of December 31, 1995 and the results of its
operations and its cash flows for the year then ended in
conformity with generally accepted accounting principles.
May 2, 1996
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3D INFORMATION SERVICES, INC.
BALANCE SHEET
DECEMBER 31, 1995
- ------------------------------------------------------------------------
ASSETS
<TABLE>
<S> <C>
Current Assets:
Cash and cash equivalents $ 537,885
Trade accounts receivable 1,445,738
Prepaid expenses and other current assets 9,879
------------
Total Current Assets 1,993,502
Property and Equipment (Note B) 110,674
------------
$ 2,104,176
============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Current maturities of long-term debt
(Note C) $ 1,500
Accounts payable and accrued expenses 431,785
Unearned revenue 89,954
Deferred income taxes (Note D) 119,800
------------
Total Current Liabilities 643,039
Long-Term Debt, less current maturities
(Note C) 89,348
Stockholders' Equity:
Common stock, no par value, 5,000
shares authorized, issued and -
outstanding
Additional paid-in capital 49,050
Retained earnings 1,322,739
------------
Total Stockholders' Equity 1,371,789
$ 2,104,176
============
</TABLE>
See notes to finanical statements.
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3D INFORMATION SERVICES,INC.
STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 1995
- ----------------------------------------------------------------
<TABLE>
<S> <C>
Consulting Revenue $ 10,361,564
Permanent Placement Revenue 126,068
------------
Total Revenue 10,487,632
Cost of Revenues 8,392,626
Gross Profit 2,095,006
Operating Expenses:
Selling and recruiting 1,036,435
General and administrative 958,016
Depreciation and amortization 17,028
------------
2,011,479
Operating
Income 83,527
Nonoperating Expense (Income):
Interest expense 89
Interest income (16,864)
Investment real estate rental, net 7,893
Other, net (5,266)
------------
(14,148)
------------
Income Before Income Taxes 97,675
State Income Tax Expense (Note D) 12,387
Net Income $ 85,288
</TABLE>
See notes to financial statements.
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3D INFORMATION SERVICES, INC.
STATEMENT OF STOCKHOLDERS' EQUITY
YEAR ENDED DECEMBER 31, 1995
- ------------------------------------------------------------
<TABLE>
<S> <C> <C> <C> <C> <C>
Additional
Common Stock Paid-In Retained
Shares Amount Capital Earnings Total
Balance, January
1, 1995 5,000 $ - $49,050 $1,287,451 $1,336,501
Dividends - (50,000) (50,000)
Net income - - 85,288 85,288
----- ----- ------- ---------- ----------
Balance, December
31, 1995 5,000 $ - $49,050 $1,322,739 $1,371,789
===== ===== ======= ========== ==========
</TABLE>
See notes to financial statements.
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<PAGE>
3D INFORMATION SERVICES, INC.
STATEMENT OF CASH FLOWS
YEAR ENDED DECEMBER 31, 1995
- -----------------------------------------------------------------
<TABLE>
<S> <C>
Cash Flows From Operating Activities:
Net income $ 85,288
Adjustments to reconcile net income to
net cash from operating activities:
Depreciation and amortization 23,040
Provision for deferred income taxes 17,327
Changes in operating assets and
liabilities:
Accounts receivable (239,441)
Prepaid expenses (5,649)
Other assets 3,300
Accounts payable and accrued expenses 275,135
---------
Net Cash Flows From Operating Activities 159,000
Cash Flows From Investing Activities:
Purchase of property and equipment (769)
Cash Flows From Financing Activities:
Principal payments on long-term debt (1,352)
Dividends paid (50,000)
---------
Net Cash Flows From Financing Activities (51,352)
---------
Net Increase in Cash and Cash Equivalents 106,879
Cash and Cash Equivalents, Beginning of year 431,006
---------
Cash and Cash Equivalents, End of year $ 537,885
=========
</TABLE>
See notes to financial statements.
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<PAGE>
3D INFORMATION SERVICES, INC.
NOTES TO FINANCIAL STATEMENTS
YEAR ENDED DECEMBER 31, 1995
A. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Nature of Operations and Organization - 3D Information Services,
Inc. (the "Company") provides consultants, principally computer
programming, data processing development and maintenance
professionals, to clients on a contractual basis. Operations
are predominantly in New Jersey.
Revenue Recognition - The Company generally contracts for
services to customers on the basis of hourly or daily services
performed. Revenue is recognized as hourly or daily services
are performed in accordance with the terms of the contract.
Revenue billed prior to work being performed is recorded as
unearned revenue.
Significant Customers and Concentration of Credit Risk -
Revenues from a single customer comprise approximately 60% of
total revenues while revenues from 10 customers comprise 90% of
total revenues. These customers are generally Fortune 500
companies located in New Jersey.
Cash and Cash Equivalents - All highly liquid investments
purchased with a maturity of three months or less are considered
to be cash equivalents.
Property and Equipment - Property and equipment are carried at
cost. Depreciation is computed on the straight-line method over
the estimated useful lives of the assets, as follows:
Building 19 years
Office furniture and equipment 5 - 7 years
Automobiles 5 years
Income Taxes - The Company has elected to file its federal
income tax return under the provisions of Subchapter "S" of the
Internal Revenue Code and, accordingly, federal income taxes are
the responsibility of the shareholders. Therefore, the
statement of operations does not include a provision for federal
income taxes. However, the Company has elected special income
tax status for the State of New Jersey and is effectively being
treated as a "C" corporation. The income tax provision reflects
only income taxes relative to New Jersey.
Use of Estimates - The preparation of the financial statements
in conformity with generally accepted accounting principles
requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues
and expenses during the reporting period. Actual results could
differ from those estimates.
<PAGE>
<PAGE>
B. PROPERTY AND EQUIPMENT
Property and equipment consist of the following at December 31,
1995:
Land $ 20,017
Building 113,431
Offices furniture and equiptment 135,700
Automobiles 50,890
---------
320,038
Less accumulated deprection 209,364
---------
Promerty and equiptment, net $ 110,674
=========
C. LONG-TERM DEBT
Long-term debt consists of a mortgage note payable to a bank,
bearing 9.04% interest at December 31, 1995 and due in monthly
installments through 2016. Minimum annual repayment
requirements of principle and interest will approximates $9,300
per year.
The mortgage note is collateralized by real estate. In 1995,
the Company recorded and paid $8,483 of interest expense related
to this note, which is recorded in real estate expenses.
Fair Value - The carrying value of the Company's debt
approximates fair value. The fair value of the Company's long-
term debt is based on quoted market prices or the current rates
offered to the Company for debt of similar maturities.
D. INCOME TAXES
Income tax expense (benefit) consists of the following for the
year ended December 31, 1995:
Federal income taxes $ -
State income taxes:
Current (4,940)
Deferred 17,327
--------
$ 12,387
========
The State of New Jersey tax code allows corporations which have
elected Subchapter S status for federal income tax purposes to
elect to be taxed as "C" Corporations for state income tax
purposes. As a result, the Company pays state income taxes in
the State of New Jersey. The liability method is used to
measure deferred tax assets and liabilities in accordance with
Statement of Financial Accounting Standards No. 109, Accounting
for Income Taxes, based on temporary differences between
financial and taxable basis in assets and liabilities existing
at the balance sheet date for state income tax purposes.
The tax effects of temporary differences that give rise to a
significant portion of deferred tax liabilities at December 31,
1995 are the result of using the cash basis method of accounting
for income tax purposes. In 1995, income taxes of $2,913 were
refunded to the Company.
<PAGE>
<PAGE>
E. EMPLOYEE BENEFIT PLAN
The Company has a 401(k) savings plan for its eligible
employees. The Company matches 10% of the employee
contributions to the plan. The Company made contributions to
the plan of $12,261 in 1995.
F. SUBSEQUENT EVENT
The Company has entered into an asset sale agreement with ATC
Environmental, Inc. ("ATC") whereby it intends to sell to ATC
substantially all of its tangible and intangible business assets
and liabilities except for the state income tax liabilities
which will remain with the Company. The transaction is expected
to result in a gain on the sale.
<PAGE>
<PAGE>
AGREEMENT
FOR SALE AND PURCHASE
OF BUSINESS ASSETS
This AGREEMENT (the "Agreement"), dated as of the
24 th day of May 1996), is entered into by and among ATC
ENVIRONMENTAL INC., a Delaware corporation with its principal
place of business at 104 East 25th Street, New York, New York
10010 (the "Purchaser"); AMERICAN TESTING AND ENGINEERING
CORPORATION, an Indiana corporation with its principal place of
business at 8665 Bash Street, Indianapolis, IN 46256-1202 (the
"Seller"); and Seller's founder and principal shareholder, GERALD
D. MANN, a Florida resident, as an individual ("Mr. Mann").
The Purchaser desires to purchase certain business assets of
Seller in exchange for cash and other consideration as
hereinafter provided, and Seller and Mr. Mann desire to effect
such asset purchase through sale in accordance with the covenants
and terms of this Agreement.
I. SALE AND PURCHASE OF ASSETS
1.01 Basic Terms of Sale and Purchase of Assets
On the basis of the representations, warranties, covenants,
and agreements in this Agreement and subject to the terms and
conditions of this Agreement:
(a) At Closing, Seller agrees to sell, convey, assign, deliver
and transfer to Purchaser, and Purchaser agrees to acquire,
accept and purchase from Seller, all of Seller's properties and
assets (except those assets expressly excepted from this sale and
purchase in 1.01 (d)) including, but not limited to, the assets
as set forth below, tangible and intangible, personal and mixed,
known or unknown, vested or contingent, wherever any and all of
such properties and assets shall be located (such assets to be
purchased by Purchaser from Seller, whether or not itemized
below, are collectively referred to as the "Purchased Assets"):
(1) All of Seller's supply inventory, including but not
limited to field supplies, laboratory supplies, office
supplies, processing supplies, labeling supplies, packaging
and shipping materials and selling and promotional
materials.
(2) All of Seller's right, title and interest to its
telephone and fax numbers. Purchaser shall have the
exclusive right to apply for changes in such numbers or in
their location.
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<PAGE>
(3) All of Seller's interest in real property leases which
are assumed as Assumed Liabilities (as defined in 1.02)
("Assumed Premises Leases") and all rights to pre-payments
and/or deposits pertaining to the Assumed Premises Leases.
The Assumed Premises Leases are listed in Schedule
1.01(a)(3)(i) while the remaining real property leases of
Seller ("Non-Assumed Leases") are listed in Schedule
1.01(a)(3)(ii).
(4) All right, title and interest in and to all of Seller's
customer contracts and agreements, whether written or oral
("Customer Contracts"), customer business arrangements and
relationships. At Closing, Seller shall deliver copies of
all of the Customer Contracts by surrendering possession of
them to Purchaser at their then current location.
(5) All right, title and interest in contracts and
subcontracts of Seller other than Customer Contracts which
are assumed by Purchaser as Assumed Liabilities ("Assumed
Contracts").
(6) All right, title, and interest in, including the
exclusive right in perpetuity to the use of, the names "ATEC
Associates, Inc.," "ATEC," any other fictitious names
utilized as business names by Seller or any customarily
utilized portion or abbreviation thereof, either alone or in
conjunction with other words; and all right, title and
interest in any other trade names, trademarks, logos,
service names and service marks, the goodwill associated
therewith and all registrations and applications in
connection therewith associated with Seller's business
except the name "American Testing and Engineering
Corporation" (Schedule 1.01(a)(6) includes a list of names
to which Purchaser shall acquire a right of exclusive use
and a list of entities and names which Seller or its related
parties will retain).
(7) Seller's business records which exist on paper and on
any and all electronic media such as computer hard drives,
diskettes or magnetic tape, including (but not necessarily
limited to) accounting records, job files, invoices,
correspondence, sales records, technical records, customer
records and other data and records relating to sales,
customers, the Purchased Assets and the Assumed Liabilities,
as are necessary to enable Purchaser to carry out its
obligations under the Assumed Liabilities, to realize the
value from the Purchased Assets, and to conduct the business
associated with the Purchased Assets and Assumed Liabilities
("Records"). Seller shall deliver possession of the Records
at Closing (as defined in 8.01) at their then current
2<PAGE>
<PAGE>
location. Seller shall deliver to Purchaser a copy of the
AIMS system back-up tape for the date of execution of this
Agreement and a copy of the back-up tape as of the Effective
Time.
(8) All of Seller's right, title, interest or proprietary
interest claims in and to any patents or unpatented
proprietary technology or processes used by or developed for
use or sale by Seller (listed on Schedule 1.01(a)(8)).
(9) All of Seller's right, title, interest or proprietary
interest claims in and to all copyrights (listed on Schedule
1.01(a)(9)) and in and to all reports, forms, archives, data
bases, studies, methods, research, technical and other
books, manuals, videos, scripts, recordings, training
materials, journals, handbooks, and all other intellectual
property in whatever form used in Seller's business, whether
or not copyrighted or proprietary to Seller.
(10) All of Seller's right, title, interest or proprietary
interest claims in and to any and all business or technical
computer software associated with Seller's business or the
subject matter thereof and all system manuals and supporting
materials related to such software (each material software
system is listed on Schedule 1.01(a)(10)); provided that any
such software for which Seller is obligated to pay royalties
or license fees to a party not a party to this Agreement or
which contains assignability restrictions shall be acquired
by Purchaser only to the extent assumed as an Assumed
Liability.
(11) Seller's complete customer list and contact lists.
Upon execution of this Agreement and at Closing, Seller
shall deliver as Schedule 1.01(a)(11)(i) hereto a complete
list of all known past (within previous three years) and
current customers. The list shall include only such summary
information as is readily available on Seller's AIMS system.
Seller will provide no schedule of customer contacts. At
Closing, Seller will provide as Schedule 1.01(a)(11)(ii) a
schedule detailing its order backlog. This schedule will
include the customer's name, project name, order amount,
amount billed to date and backlog amount. Schedule
1.01(a)(11)(i) and (ii) will not be attached hereto but will
be delivered separately.
(12) Seller's vendor list and all of Seller's right, title
and interest in contracts with vendors which are assumed by
Purchaser as Assumed Liabilities.
(13) All accounts receivable and all unbilled work in
process (whether or not booked as revenue or included on any
schedule). An aging report of accounts receivable current
to the Effective Time (as defined in 8.01) shall be
provided as Schedule 1.01(a)(13)(i). An aging report of the
3<PAGE>
<PAGE>
work in process that will be recorded on the Closing Balance
Sheet (see 2.03) shall be provided on Schedule (a)(13)(ii).
Schedule 1.01(a)(13)(i) shall be provided to Purchaser on
the next business day following the Closing Date. Schedule
1.01(a)(13)(ii) shall be provided to Purchaser as part of
the Closing Financial Statements (as defined in 2.03(a)).
(14) All cash, securities, bank accounts, deposits,
proceeds, refunds (except income tax refunds), other
monetary or investment assets, prepaid expenses (including
any refunds thereof) and other current assets of Seller
(listed on Schedule 1.01(a)(14)).
(15) All of Seller's right, title and interest in those
specific personal property leases assumed as Assumed
Liabilities.
(16) Seller's construction in progress.
(17) All of Seller's rights under employment agreements with
employees who are not employed by Purchaser but without
warranty on the part of or recourse against Seller and with
full indemnification of Seller by Purchaser against any
claims of ex-employees against Seller as a result of
Purchaser's exercise or attempted exercise of rights under
such agreements as set forth in 1.03(b). This assignment
of rights shall not operate to shift any obligations under
such agreements to Purchaser except to the extent they are
expressly assumed as Assumed Liabilities under the
Assumption Agreement.
(18) To the extent assignable, all licenses, permits,
accreditations, registrations, approvals and the like of
governmental agencies and other licensing or accrediting
entities.
Seller agrees to use its best efforts to provide complete
information on the schedules provided for in this 1.01(a) on the
date provided. However, the omission of any item shall not
operate to exclude the omitted item from the sale, delivery and
assignment thereof (except in those cases where the asset is to
be acquired only to the extent a coupled liability is to be
assumed as an Assumed Liability in which case it will be deemed
included only if the liability is specifically assumed as an
Assumed Liability), and the omission of any item shall not
alleviate Purchaser's obligation to pay the purchase price so
long as Purchaser acquires actual possession and beneficial
ownership of the omitted item.
(b) As consideration for the Purchased Assets and the other
promises, agreements, warranties, and covenants hereof, the
Purchaser shall:
4<PAGE>
<PAGE>
(1) Assume the Assumed Liabilities under the Assumption
Agreement;
(2) Pay to Seller at Closing the sum of Five Hundred
Thousand and no/100 Dollars ($500,000.00). Such payment
shall be paid by wire transfer of immediately available
funds to the account of Seller at Bank One, N.A., Routing
No. 074000010, Account No. 611612847. Within thirty (30)
days following the Closing Date, Seller shall provide to
Purchaser the Closing Financial Statements (as defined in
2.03). At such time, a final adjustment to the cash
purchase price provided for in this section shall be made
equal to the amount by which Seller's Adjusted Net Equity
(as defined in 2.03(c)) as of the Effective Time exceeds or
is less than the warranted Adjusted Net Equity value of
$2,496,295.00 (see 11.02 and Schedule 2.03(b)). If the
final Adjusted Net Equity is less than $2,496,295.00, Seller
shall, within fifteen (15) days, refund the amount of such
difference to Purchaser. If the final Adjusted Net Equity
is greater than $2,496,295.00, Seller shall record such
additional amount as an addition to the pooled reserve
provided for in 4.21(b) for third-party claims and
associated expenses, including attorney fees. Purchaser
shall assume such reserve as an Assumed Liability and pay
such expenses as and when incurred by Seller upon the
presentation of invoices or other documentation evidencing
the cost as provided in 4.21. Within ten (10) days
following the sixth anniversary of the Closing Date,
Purchaser shall pay Seller the unconsumed balance of the
pooled reserve, plus interest for two years on such final
unconsumed balance at a rate equal to the mean of the
Fidelity Spartan Fund quoted rates for the fourth and sixth
anniversaries of the Closing Date, and shall bear no further
responsibility in respect of such claims except as they are
Assumed Liabilities.
(3) Perform the services described in 4.13.
(4) Pay the severance and termination notice reimbursement
as required by 4.07.
(c) The purchase price shall be allocated to the Purchased
Assets by agreement of the parties as set forth on Schedule
1.01(c), with final adjustments to conform to the Closing Balance
Sheet made by agreement between the parties within 45 days after
Closing.
(d) The Purchased Assets will not include the following
(collectively, the "Excluded Assets"):
(1) All of Seller's non-leased fixed assets of every type
and description. Fixed assets include (but are not
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necessarily limited to) all office and field equipment,
vehicles, inventory, furniture and fixtures.
(2) The right to repayment of advances to related parties.
(3) Intercompany account receivable/payable to Waste
Abatement Technology, L.P. ("WATEC") (if an account payable,
this is a liability and will not be assumed by Purchaser).
(4) Land in Oak Ridge, TN, Atlanta, GA, and Dallas, TX.
(5) Oak Ridge, TN, building.
(6) Lease deposits to Mann Realty Co.
(7) The cash value and rights to the proceeds of life
insurance policies on the life of Mr. Mann.
(8) Seller's investment and ownership in WATEC.
(9) The unconsumed remainder (determined after one year) of
the reserve for uncollectible accounts or bad debts.
(10) The unconsumed remainder (determined after six years) of
the pooled reserves or allowances set forth on Schedule 4.21.
(11) All federal, state or local income tax refunds (none of
which are recorded on the Interim or Closing Financial
Statements (as defined in 2.03(a)).
(12) The retained claims of Seller specified on Schedule
1.01(d)(12) (the "Retained Claims").
(13) All rights in those specific former accounts receivable
of Seller which were charged off prior to the Effective Time
and which are specifically listed on Schedule 1.01(d)(13).
(14) Seller's note receivable from Douglas Environmental.
(15) Mr. Mann's personal office furniture, memorabilia and
art works as listed on Schedule 1.01(d)(15).
(16) The assets identified under Seller's account no. 35-01
related to the business sometimes known as Raleigh Drilling.
(17) Deposits, pre-payments, fixtures, and tenant
improvements associated with Non-Assumed Leases.
(18) Records related to Seller's pending or threatened
litigation, proceedings, investigations or claims.
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(19) Loan to Major Jester.
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1.02 Liabilities of Seller and Purchaser
(a) Purchaser has not, and shall not be construed to have,
assumed, adopted or taken over any obligations, debts,
liabilities or responsibilities of Seller whatsoever, including
(but not limited to) liabilities for local, state or federal
taxes, except for: (i) the liabilities expressly assumed under
the assumption agreement to be delivered by Purchaser to Seller
at Closing (the "Assumption Agreement"), under this Agreement or
under any Related Agreement (as defined in 7.01) (collectively
the "Assumed Liabilities") and (ii) such future (i.e. post-
Effective Time) performance as is obligated under the terms and
conditions of Customer Contracts purchased hereunder, the
amendment or renegotiation of which Purchaser is free to pursue
in its sole discretion without adverse effect on Seller.
Notwithstanding Purchaser's acceptance of a Customer Contract and
the obligation of future performance, Seller, as its interests
are defined by such contracts or by law (which shall not be
altered or enlarged with respect to third parties by virtue of
this Agreement), shall retain responsibility and liability for
all obligations, performance and liability due, occurring or
accruing under all Customer Contracts prior to the Effective
Time, with Purchaser assuming all responsibility and liability
for obligations and performance due and performed after the
Effective Time and all liabilities arising out of such post-
Effective Time performance.
(b) Except for the Assumed Liabilities, Seller agrees to retain
full liability and responsibility for satisfaction of all its
debts or liabilities of any kind, whether known or unknown, fixed
or contingent and, pursuant to the provisions of 1.03, to
indemnify, defend, and hold Purchaser harmless from and against,
all of Seller's obligations, losses, liabilities, debts,
responsibilities or claims thereof (and the reasonable costs of
defense against claims thereof against Purchaser, including
reasonable attorneys' fees and settlement and defense expenses),
including (but not limited to) any and all liability for trade
payables and other accounts payable, federal, state or local
taxes, employment taxes, tort or contract claims, and employee
compensation or benefits. Seller expressly grants to Purchaser,
in addition to other remedies available to it at law or in
equity, a right of set-off against any payments to be made
hereunder to the extent provided in 1.04.
(c) Except for the Assumed Liabilities, Seller retains, and
Purchaser will not incur, any liability to or on behalf of
Seller's employees arising out of their employment with Seller or
out of Seller's acts or omissions (as distinguished from
Purchaser's acts or omissions, including without limitation its
decision to hire or not hire certain employees), including (but
not limited to) any liability: under ERISA or the Internal
Revenue Code; for obligations to, or arrangements with employees
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for wages, salary, bonuses, incentive compensation, vacation pay,
severance pay, insurance, or other benefits, or employee taxes;
for personal injury or property damage; or for discrimination,
harassment, or wrongful discharge under federal, state or local
laws.
(d) Except for the Assumed Liabilities, Seller retains and
Purchaser will incur no liability as a result of environmental
conditions associated with any real property ownership, leasing
or use by Seller prior to the Effective Time.
(e) Except to the extent assumed as an Assumed Liability,
Purchaser will not be subject to any debarment or other
limitation on bidding or contracting as a result of any
investigation or proceeding by a governmental agency based upon
any act, omission or improper conduct by Seller or persons for
whose acts or omissions Seller is responsible.
(f) The disclosure by Seller of any liability or any item or
matter that creates a liability in the future shall not result in
an assumption by, or shifting to, Purchaser of liability with
respect to such matter except to the extent that Purchaser has
expressly agreed to the assumption of such liability as an
Assumed Liability.
(g) The Purchaser appoints and ratifies the appointment of
Seller as its agent and attorney in fact, and Seller agrees to
accept and perform such appointment, to manage and perform all
operations in respect of the Purchased Assets and the business
associated therewith for the period from the Effective Time
through the close of business on the Closing Date. Purchaser
shall reimburse Seller for all of Seller's payroll costs for such
period, including all payroll expenses for such period for
Seller's employees who are not hired by Purchaser under 4.08,
and shall assume, and shall indemnify Seller pursuant to 1.03(b)
against, all liability, cost and expense associated with
operating the business for such period except for: (i) the
liability and expense associated with the termination of Seller's
employees to the extent such liability is not assumed by
Purchaser as an Assumed Liability; and (ii) any distributions or
non-ordinary course payments made by Seller during such period
which are not recorded on the Closing Balance Sheet.
1.03 Indemnity Against Liabilities, etc.
(a) In addition to Purchaser's other rights and remedies
available at law or in equity (and not by way of limitation),
Seller agrees to indemnify and hold harmless the Purchaser, its
subsidiaries ATC Management Inc., ATC Blattert Inc., ATC New
England Corp., and Hygeia ProScience Laboratories, Inc. (the
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"Subsidiaries") and their successors against and in respect of
any and all:
(1) Claims, suits, actions, proceedings (formal or
informal), governmental investigations, judgments,
deficiencies, set-offs, damages, settlements, liabilities,
and reasonable legal and other expenses (including
reasonable attorneys' fees) as and when incurred arising out
of or based upon any breach of any representation, warranty,
covenant, or agreement of Seller contained in this Agreement
or of Seller or any party other than Purchaser under any of
the Related Agreements;
(2) Debts or liabilities of any kind and claims, liens, set-
offs, suits, actions, and proceedings (formal and informal)
of persons or entities and related judgments, deficiencies,
damages, settlements, set-offs, liens, liabilities, and
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legal and other expenses (including reasonable attorneys'
fees) as and when incurred arising (i) out of the Purchased
Assets or the business associated therewith prior to the
Effective Time except to the extent expressly assumed by
Purchaser as Assumed Liabilities or (ii) out of or based
upon the acts, omissions, contractual performance or conduct
of the business of Seller whether before or after the
Effective Time, except to the extent expressly assumed by
Purchaser as Assumed Liabilities (including Purchaser's
assumption of liability for Seller's acts in 1.02(g)); and
(3) Any loss, damage or cost for which Seller has agreed to
indemnify Purchaser under any provision of this Agreement or
any Related Agreement.
(b) In addition to Seller's other rights and remedies available
at law or in equity (and not by way of limitation), Purchaser
agrees to indemnify and hold harmless the Seller, and its
affiliates Mann Technology Inc. and WATEC (the "Affiliates") and
their successors against and in respect of any and all:
(1) Claims, suits, actions, proceedings (formal or
informal), governmental investigations, judgments,
deficiencies, set-offs, damages, settlements, liabilities,
and reasonable legal and other expenses (including
reasonable attorneys' fees) as and when incurred arising out
of or based upon any breach of any representation, warranty,
covenant, or agreement of Purchaser contained in this
Agreement or any of the Related Agreements;
(2) Debts or liabilities of any kind and claims, liens, set-
offs, suits, actions, and proceedings (formal and informal)
of persons or entities and related judgments, deficiencies,
damages, settlements, set-offs, liens, liabilities, and
reasonable legal and other expenses (including reasonable
attorneys' fees) as and when incurred arising (i) out of the
Purchased Assets or the business associated therewith after
the Effective Time, except for Seller's debts or liabilities
not expressly assumed by Purchaser as Assumed Liabilities;
(ii) out of or based upon the acts, omissions, contractual
performance or conduct of the business of Purchaser whether
before or after the Effective Time; or (iii) out of the
Assumed Liabilities after the Effective Time; and
(3) Any loss, damage or cost for which Purchaser has agreed
to indemnify Seller under any provision of this Agreement or
any Related Agreement.
(c) The parties' respective indemnity obligations hereunder
shall be subject to the following:
(1) Seller and Purchaser shall each give the other prompt
notice of any allegedly indemnified item incurred, asserted
or threatened on the basis of which an indemnitee intends to
seek indemnification from an indemnitor as provided herein;
provided, however, that the obligation of an indemnitor
shall be reduced for the failure to give notice at any
particular time only to the extent that the indemnitor has
been actually prejudiced thereby. Any indemnitee shall have
the right (but not the obligation) to select and be
represented by counsel of its choice, to manage its own
legal representation or defense and to settle any claim,
debt or other indemnified matter hereunder.
(2) The parties' respective indemnity obligations hereunder
shall be limited to: (i) individual losses, claims, etc.
having a value of $5,000.00 or more (an "Indemnified
Claim"); and (ii) losses, claims, etc. after the first
$50,000.00, in the aggregate, of Indemnified Claims (the
"Indemnity Deductible"), in which event only the aggregate
amount of Indemnified Claim(s) in excess of the Indemnity
Deductible shall be subject to indemnification hereunder.
The following are not subject to either the Indemnified
Claim threshold or the Indemnity Deductible and are covered
from the first dollar over the reserved amount: (m)
Seller's warranty that accounts receivable and recorded work
in process, net of reserves, will be collected as specified
in 2.06(a); (n) Seller's warranty that there are no
unearned billings or receipts net of reserves for such
purpose as set forth in 2.06(a), 2.07(b) or 4.03; and (o)
the value of corrective services or goods provided by
Purchaser in accordance with 4.13.
(3) With respect to any claim for which an indemnitor shall
indemnify any indemnitee, the indemnitor shall be subrogated
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to all rights of indemnitees against any and all third
parties up to the amount paid by indemnitor to indemnitees
or set off against an indemnitor.
(4) No party shall be liable for that portion of any claim
for which an indemnitee actually receives the cost of
defense or insurance proceeds covering such claim (the
deductible pertaining to any such insurance shall not be
considered to be insurance proceeds or cost of defense).
(5) The indemnity agreements contained in this Agreement
shall inure only to the benefit of Purchaser and Seller,
respectively, (and their respective, Subsidiaries,
Affiliates and successors to the extent they are
indemnitees), and shall not be for the benefit of any other
person or entity. These indemnity provisions shall not be
construed to abrogate the corporate liability shield as
provided by law, to extend a right of action to any third
party not otherwise available, or to enlarge the underlying
liability of any indemnitor or indemnitee to any third
party.
(6) No indemnification claim or claim of set-off may be
brought after the seventh anniversary of the Closing Date.
1.04 Rights of Set Off
(a) Without limiting such other rights as it may have at law or
equity or by agreement, the Purchaser shall have the right to set
off against, and withhold from, any payment otherwise due to
Seller under this Agreement or to any party other than Mr. Mann
(or his successor, including Mann Technology, Inc.) under any
Related Agreement: (i) any amount owing from Seller to
Purchaser; (ii) any amount necessary to cure or remedy any
breach, default or deficiency of performance by Seller under this
Agreement or by any party (except Purchaser) under a Related
Agreement; (iii) any amount for which Purchaser (or its
Subsidiaries or their successors) is entitled to indemnification
under 1.03(a); and (iv) Purchaser's reasonable costs or expenses
(including reasonable attorneys' fees) related to (i), (ii) or
(iii). In-kind goods or services provided by Purchaser for which
Purchaser would be entitled to set-off if paid by Purchaser in
money shall be valued at Purchaser's Standard Rates (as defined
in 4.23). Purchaser shall have no right to set-off against
payments to Mr. Mann under the Consulting Services Agreement or
the Mann Non-Competition Agreement.
(b) Without limiting such other rights as it may have at law or
equity or by agreement, Seller shall have the right to set off
against, and withhold from, any payment otherwise due to
Purchaser under this Agreement or under any Related Agreement:
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(i) any amount owing from Purchaser to Seller; (ii) any amount
necessary to cure or remedy any breach, default or deficiency of
performance by Purchaser under this Agreement or under a Related
Agreement; (iii) any amount for which Seller (or its Affiliates
or their successors) is entitled to indemnification under
1.03(b); and (iv) Seller's reasonable costs or expenses
(including reasonable attorneys' fees) related to (i), (ii) or
(iii).
(c) Subject to the procedures of 1.04(e) below, it shall not be
necessary that a breach, default or Indemnified Claim or a
threatened breach, default or Indemnified Claim has resulted in
actual damage to a party for the party to exercise its set off
rights under this section, but rather a party shall have the
right to withhold payment to cover the future effects of any
breach, default, or Indemnified Claim or threatened breach,
default or Indemnified Claim pending actual conclusion of the
matter, provided that the party asserting the right of set-off
for a threatened loss shall have produced sufficient objective
evidence of facts and sufficient supporting legal authority for a
competent, experienced attorney to conclude that:
(1) Either the loss-threatening event has occurred or there
is a substantial probability that it will occur;
(2) There is a substantial probability that the occurrence
or probable occurrence will cause a loss;
(3) An action to hold the party liable for the loss could
withstand a motion to dismiss or a motion for summary
judgment.
(4) There is a substantial probability that the loss,
including associated attorney fees and costs of defense,
will be as great as the amount asserted for set-off;
(5) Either there is a substantial issue as to whether an
available insurance policy provides coverage for the claim
or there is a substantial potential that the insurance
coverage available will not be adequate in amount to pay the
portion of the loss asserted as a set-off; and
(6) If the set-off is not asserted at the present time,
insufficient funds will remain subject to set-off following
the next payment to enable the asserting party to protect
its interests.
If such loss or damage does not in fact occur, such party shall
then pay the withheld amount to the other party.
(d) Purchaser may not set off any amounts under this section
except to the extent that the pooled reserves provided for in
4.21
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are not available or are inadequate to cover the asserted amount.
(e) If the parties have a dispute involving the exercise of set-
off rights, including any issue as to insurance coverage or
liability exposure, then within ten (10) days, Seller and
Purchaser shall each obtain an opinion of independent counsel and
such opinion shall be used as a basis for mutual agreement as to
any charges first against the pooled reserves and second by set-
off under this section. If the parties are unable to agree
within thirty (30) days after the issue is first asserted, then
such issue shall be submitted to mediation in accordance with
Rule 2 of the Indiana Rules of Alternative Dispute Resolution as
amended. If mediation does not result in an agreed disposition
of the matter, then the dispute shall be resolved by binding
arbitration as provided under 10.15 of this Agreement. Pending
agreement or determination of a charge against pooled reserves
and/or a set-off, the amount asserted for set-off may be withheld
by the asserting party and shall not constitute a breach or
default under this Agreement or any Related Agreements, provided
that the withholding is reasonable as to amount and is undertaken
in good faith with a reasonable belief as to the entitlement to
the set-off. If the withholding is ultimately determined to have
been unreasonable or in bad faith (as opposed to simply
incorrect), the party withholding shall pay interest on the
portion wrongfully withheld at the average of the Chemical Bank
of New York's prime lending rates for each first day of a month
which occurs during the period for which interest is due.
II. REPRESENTATIONS AND WARRANTIES OF SELLER
As a material inducement to Purchaser to enter into this
Agreement, Seller represents and warrants to Purchaser as
follows:
2.01 Organization and Qualification
(a) Seller is a corporation which is validly existing under the
laws of the state of Indiana with the full power and authority to
enter into contracts, to sell its assets and to perform the other
agreements and covenants as provided in this agreement. Seller
is authorized to do business and is in good standing in each
jurisdiction in which it maintains an office or is required to be
qualified. Schedule 2.01(a) lists each such jurisdiction in
which Seller is authorized to do business. Seller is not, and
will not be as a result of executing and performing this
Agreement and related agreements, in violation or breach of, or
in default with respect to, any term of its certificate of
incorporation, by-laws or other charter document.
(b) Seller has no subsidiary or affiliated corporations or
entities other than those listed on Schedule 2.01(b).
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2.02 Capitalization and Shareholder Action
The stock or equity interests of Seller are not encumbered
or restricted in any way that will interfere with this
transaction, affect Purchaser's title to or beneficial use of the
Purchased Assets or subject Purchaser to liability to any
shareholder, except as recorded on the Closing Balance Sheet as a
liability.
2.03 Financial Condition
(a) Seller has delivered to the Purchaser and attached hereto as
Schedules 2.03(a)(1) through (4), respectively, true and correct
copies of the following: (i) audited balance sheets, statements
of income, statements of retained earnings, and statements of
cash flows of Seller for Seller's last three completed fiscal
years; and (ii) the unaudited balance sheet and statements of
income, retained earnings and cash flows of Seller for the period
from January 1, 1996 through March 31, 1996 ("Interim Financial
Statements"). Within thirty (30) days following the Closing Date,
Seller shall provide final unaudited balance sheet ("Closing
Balance Sheet") and statements of income, retained earnings and
cash flows of Seller for the period beginning January 1, 1996 and
ending on the Effective Time (the "Closing Financial Statements")
which shall be attached hereto as Schedule 2.03(a)(5).
The financial statements referred to in this 2.03 have been
prepared in accordance with generally accepted accounting
principles ("GAAP") consistently applied throughout the periods
involved (except for adjustments thereto which are known to and
expressly approved by Purchaser in writing), are correct and
complete in all respects, and are in accordance with the books
and records of Seller.
There is no fact presently known to Seller which could materially
and adversely affect the financial condition, results of
operations, business, properties, assets, liabilities, or future
business prospects of the business associated with the Purchased
Assets except as disclosed on the Schedules to 2.03 or the other
schedules to this Agreement; provided, however, that Seller
expresses no opinion as to political or economic matters of
general applicability (including the availability of government
funding except as to which Seller has knowledge).
(b) The computation of Adjusted Net Equity as of the Effective
Time as set forth on Schedule 2.03(b) will be correct and will be
provided to Purchaser in conjunction with the Closing Financial
Statements.
(c) "Adjusted Net Equity" means net equity shown on the Closing
Balance Sheet as adjusted by the adjustments set forth on
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Schedule 2.03(c).
(d) Upon executing and delivering such hold harmless agreements
as are deemed reasonably necessary by Seller's independent
accountants, Purchaser's in-house and independent accountants
shall be afforded free and full access to the non-proprietary
working papers and records used by Seller's independent
accountants and the working papers and records used by Seller's
in-house accountants in conducting their audit and in preparing
their unaudited Interim and Closing Financial Statements. If
there is a difference of opinion between the two accounting firms
as to the general acceptability of any of the accounting
principles followed in connection with such audit and report or
the results indicated thereby, the respective accountants shall
immediately confer in an effort to resolve such differences. If
the firms are unable to resolve a material difference, Purchaser
may at its option terminate this Agreement if Closing has not
occurred, or if Closing has occurred and such dispute involves
Closing Financial Statements delivered after Closing, the
difference shall be resolved by the indemnity, set-off and
dispute resolution provisions of 1.03, 1.04 and 10.15. The
rights and remedies of Purchaser set forth in this 2.03(d) shall
not accrue to Purchaser to the extent Seller's treatment of the
disputed item has been in accordance with GAAP consistently
applied and such audit has been conducted in accordance with
generally accepted auditing standards.
2.04 Tax and Other Liabilities
(a) Seller has filed all payroll and other federal, state,
local, and foreign tax returns required to be filed by it; has
afforded Purchaser the opportunity to review a true and correct
copy thereof for all periods since January 1, 1993; and has also
afforded Purchaser the opportunity to review a true and correct
copy of any report as to any audit or adjustments received by
Seller from any taxing authority during the past three years and
a statement describing the status of any litigation, governmental
or other proceeding (formal or informal), or audit or
investigation pending, threatened, or in prospect with respect to
any such report or the subject matter of such report.
(b) Except as disclosed on the Closing Financial Statements
or on any of the other liability disclosure schedules to this
Agreement, Seller has no liability of any nature, accrued or
contingent, including without limitation liabilities for payroll
and other employee taxes, federal, state, local, or foreign taxes
or liabilities to customers or suppliers. Seller has paid all
taxes, assessments, and other governmental charges payable or
remittable by it or levied upon it or its properties, assets, or
income, which are due and payable. Except for any specifically
Assumed Liabilities for taxes, Purchaser shall incur no
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liability, cost or expense in connection with Seller's federal,
state, local or employee-related taxes, including any cost or
expense arising from investigations, audits, proceedings or
actions taken by taxing authorities.
(c) Seller has paid or will pay all Seller's expenses,
taxes (except sales taxes), and other liabilities, resulting from
the preparation of, or the transactions contemplated by, this
Agreement. These costs will not be assumed by Purchaser except
to the extent they are included on the Closing Financial
Statements and expressly assumed as Assumed Liabilities.
2.05 Litigation and Claims
Except as set forth on Schedule 2.05: (i) there is no
material litigation, arbitration, claim, governmental or other
proceeding (formal or informal), or investigation pending or
threatened (or any basis therefore known to Seller) with respect
to Seller, the Affiliates or any of their business, properties,
or assets; (ii) Seller is not affected by any present or
threatened strike or other labor disturbance nor to the knowledge
of Seller is any union currently representing or attempting to
represent any employee of Seller as collective bargaining agent;
(iii) Seller is not in violation of, or in default with respect
to, any law, rule, regulation, order, judgment, or decree,
including any environmental laws or regulations. Schedule 2.05
shall set forth, among other matters, all past (previous three
years) and current citations, violations, fines, judgments,
decrees, orders, consent decrees or orders, and pending
proceedings of any type arising out of the alleged violation of
any federal, state or local criminal, bidding or procurement,
environmental, health and safety, licensing or labor law or
regulation or out of alleged deficiencies, negligence,
intentionally wrongful act or breach of contract in the
performance of services.
2.06 Accounts Receivable and Properties
Except as set forth on Schedule 2.06, Seller has good title
to all personal properties and assets used in its business or
owned by it free and clear of all liens, mortgages, security
interests, pledges, charges, encumbrances or claims
(collectively, "Liens").
(a) All accounts receivable and work in process of Seller
recorded on the Closing Balance Sheet are set forth on Schedule
1.01(a)(13)(i) and (ii), will have arisen from valid transactions
in the ordinary course of Seller's business and will be collected
by Purchaser, net of reserves for uncollectible accounts, within
one (1) year of the Closing Date utilizing best efforts employing
reasonable and customary collection procedures (i.e. measures
such as legal action, referral to outside collection agency or
mechanics liens shall not be required of Purchaser to conform to
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this standard). All accounts receivable and work in process of
Seller recorded on the Closing Balance Sheet were fully earned as
of the Effective Time, and Purchaser will have no performance
obligations for which it will not be entitled to bill (no account
receivable or work in process entry represents a pre-billing
except to the extent an allowance is reserved for it). 4.03
sets forth certain covenants of the parties with respect to the
collection of accounts receivable.
(b) All properties and assets, including Intangibles, owned,
leased, or licensed by Seller, not including supply inventory or
fixed assets which will be the subject of the Master Equipment
Lease Agreement (as defined in 7.01(b)), will be listed in
1.01(a) or on the schedules thereto. If a value for any of such
scheduled assets is recorded on the Closing Balance Sheet, Seller
shall provide a subsidiary property ledger detailing cost and net
book value with respect to all such properties current as of the
Effective Time. All such properties and assets owned by Seller
are reflected on the Closing Balance Sheet. Except as disclosed
on Schedule 2.06(b), each physical asset having a depreciated
value on Seller's books greater than five thousand dollars
($5,000.00) will be in fully operational condition as of the
Effective Time (except for normal wear and tear which is not such
as to affect their operability).
(c) Except as noted on Schedule 2.06(c), to the best knowledge
of Seller, no real property owned, leased, licensed, or used by
Seller lies in an area which is subject to zoning, use,
environmental or building code restrictions which would prohibit,
and, to the best knowledge of Seller, no state of facts relating
to the condition of any building or property or action or
inaction of a person or entity or the ownership, leasing,
licensing, use or regulation of any real or personal property
exists which would prevent the leasing and use after Closing of
such real property by Purchaser in the business in which Seller
is now engaged.
2.07 Contracts and Other Instruments
(a) Schedule 2.07(a) or the other schedules to this Agreement
set forth a true and correct listing of all material contracts,
other than Customer Contracts and contracts with subcontractors,
to which Seller is a party, including leases and licenses and all
supply, distribution, agency, financing or other arrangements and
understandings. Any of the foregoing not disclosed on the other
schedules to this Agreement are listed on Schedule 2.07(a). For
purposes of this 2.07(a) only, "material contract" means a
contract, including Customer Contracts, which provides for the
provision or purchase of goods or services in excess of $10,000
or requires performance by Seller for a period of more than
twelve months. With respect to Customer Contracts, "material
arrangement or understanding" includes any relationship between
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Seller and any customer or group of related customers, whether
formalized by binding written contract or not, from which Seller
derived more than $200,000 in the twelve months preceding the
Closing Date. Neither Seller nor, to Seller's knowledge, any
other party to any material contract, agreement, instrument,
lease, or license is now or is expected by Seller as of closing
to be in the future in violation or breach of, or in default with
respect to complying with, any material provision thereof, and to
Seller's knowledge, each such material contract, agreement,
instrument, lease, or license is in full force and is the legal,
valid, and binding obligation of the parties thereto and is
enforceable as to them in accordance with its terms, except as
disclosed on Schedule 2.07(a). Neither Seller nor any other
party to any material contract, arrangement or understanding has
given notice of termination or taken any action inconsistent with
the continuance of such material contract, arrangement or
understanding.
(b) Except for situations disclosed on Schedule 2.07(b) and for
the cost of correction of which an adequate reserve is or will be
recorded on the Closing Balance Sheet as a liability: all
services rendered and products supplied by Seller prior to the
Effective Time will have been in conformity with the scope of
performance defined by the contract or arrangement, and to the
reasonable satisfaction of the customer; no curative or
corrective work, replacements or payments are necessary to render
such performance legally or contractually sufficient; and all
costs for performance completed prior to closing shall have been
duly recorded as liabilities on the Closing Balance Sheet.
Billings by Seller on each contract to be acquired by Purchaser
as a Purchased Asset shall not, as of the Effective Time, have
constituted a greater percentage of total allowable billings
under such contract than the percentage of work performed prior
to the Effective Time shall have constituted of total work to be
performed under such contract. Except as so disclosed and
assumed as an Assumed Liability, no Customer Contract from which
amounts remaining to be billed exceed $25,000 will be a Loss
Contract. "Loss Contract" means a contract for which fully-
burdened costs to be incurred after the Effective time in
completing the contract, utilizing performance at industry
standards of skill, efficiency and competence, exceeds amounts
remaining to be billed under such contract after the Effective
Time.
(c) Seller enjoys peaceful and undisturbed possession under all
leases and licenses under which it is operating. Seller is not a
party to or bound by any contract, agreement, instrument, lease,
license, arrangement, or understanding, or subject to any charter
or other restriction, which has had, or to the knowledge of
Seller is likely in the future to have, a material and adverse
affect on the Purchased Assets or the operations or business
associated therewith. Since January 1, 1995, Seller neither has
had nor now has any contract, agreement, lease, license,
arrangement, or understanding with, any shareholder, any
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director, officer, or employee of Seller, or any other
corporation or enterprise in which Seller or Mr. Mann then had or
now has a five percent (5%) or greater equity or voting or other
substantial interest, other than such contracts and agreements as
so listed and specified on Schedule 2.07(c). There exists no
contract, agreement, right or understanding material to the
business or officers of Seller which is in the name of any
principal, officer, director, shareholder or any other person or
entity other than Seller except as disclosed and so identified on
Schedule 2.07(c).
(d) The backlog schedule provided as Schedule 1.01(a)(11)(ii) is
correct to the best of Seller's knowledge as of the Effective
Time, and, to the best of Seller's knowledge, the backlog items
listed on such schedule all represent actual commitments by
customers for the performance of services by Seller which are
either actual contractual commitments or actual written or verbal
communications of commitment received by Seller from the
customers to hire Seller for the performance of such services in
such amounts as are shown on the schedule. Seller does not,
however, warrant that particular backlog items will in fact be
realized by Purchaser.
2.08 Employees and Employee Liabilities
(a) Seller has set forth in Schedule 2.08(a) a list of all of
its pension, profit-sharing, option, other incentive plans, or
any other type of employee benefit plan (as defined in Section
3(3) of the Employee Retirement Income Security Act of 1974
("ERISA")), and all obligations to, or arrangements with,
employees for wages, salary, bonuses, incentive compensation,
vacations, severance pay, insurance, or other benefits. Seller
has furnished or made available to the Purchaser true and correct
copies of all documents evidencing such plans, obligations or
arrangements referred to in Schedule 2.08(a) (or written
summaries of such plans, obligations, or arrangements to the
extent not evidenced by documents) and true and correct copies of
all documents evidencing trusts relating to any such plans.
Seller has provided to Purchaser one or more true and correct
documents containing the name, position/title with Seller, and
present rate of compensation (whether in the form of salary,
bonuses, commissions, or other supplemental compensation now or
hereafter payable) of each director, officer, employee or sales
agent of Seller. All notices and performance required under
COBRA and other ERISA plans prior to the Effective Time have been
properly given and performed. Except as they are Assumed
Liabilities, all obligations, debts and liabilities associated
with Seller's employees, including all of the above-referenced
matters have been paid or discharged in full by Seller prior to
Effective Time or will be properly reflected as liabilities on
the Closing Balance Sheet.
(b) Except as set forth on Schedule 2.05, there is no
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litigation, arbitration, claim, governmental or other proceedings
(formal or informal), or investigation pending, or to Seller's
knowledge threatened, (or any basis for such known to Seller)
with respect to any such employee benefit plan, compensation
arrangement or the Seller's acts or omissions with respect to its
employees or its work environment.
2.09 Patents, Trademarks, Copyrights, etc.
Seller neither owns, nor has pending or is licensed under
(but only to the extent material), any patent, patent
application, trademark, trademark application, trade name,
service mark, copyright, franchise, or other intangible property
or asset ("Intangibles"), other than as described in the
Schedules to 1.01(a) or in the other schedules hereto, all of
which are in good standing and uncontested. Except as disclosed
on such schedules, no person other than Seller owns any interest
in any such Intangible. Neither any shareholder, any director,
officer, or employee of Seller, any relative or affiliate of any
shareholder or of any such director, officer, or employee, nor
any other corporation or enterprise in which any shareholder, any
such director, officer, or employee, or any such relative or
affiliate had or now has a five percent (5%) or greater equity or
voting or other substantial interest, possesses any Intangible
which relates to the business of Seller. Seller has neither
infringed, is infringing, or has received notice of infringement
of intangibles of others, including any software conveyed under
1.01(a)(10). To the knowledge of Seller, there is no
infringement by others of Intangibles of Seller.
2.10 Questionable Payments
Except as disclosed on Schedule 2.05, neither Seller nor any
director, officer, agent, employee, or other person acting on
behalf of Seller has, directly or indirectly: (a) used any
corporate funds for unlawful contributions, gifts, entertainment,
or other unlawful expenses relating to political activity; (b)
made any unlawful payment to foreign or domestic government
officials or employees or to foreign or domestic political
parties or campaigns from corporate funds; (c) violated any
provision of the Foreign Corrupt Practices Act of 1977; (d)
established or maintained any unlawful or unrecorded fund of
corporate monies or other assets; (e) made any false or
fictitious entry on the books or records of Seller; (f) made any
bribe, rebate, payoff, influence payment, kickback, or other
unlawful payment; or (g) made any unlawful bribe, kickback, or
other payment to any person or entity, private or public,
regardless of form, whether in money, property, or services, to
obtain favorable treatment in securing business or to obtain
special concessions, or to pay for favorable treatment for
business secured or for special concessions already obtained.
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2.11 Authority to Sell
Seller has all requisite power and authority to execute,
deliver, and perform this Agreement. All necessary corporate
proceedings of Seller, including all shareholder notice and
approvals required by law, have been or as of the Closing Date
will have been duly taken to authorize the execution, delivery,
and performance of this Agreement by Seller. This Agreement has
been duly authorized, executed, and delivered by Seller, has been
duly executed and delivered by Mr. Mann, constitutes the legal,
valid, and binding obligation of Seller (and Mr. Mann but only in
so far as any obligation is Mr. Mann's in accordance with the
express terms thereof), and is enforceable as to them in
accordance with its terms. Subject to the provisions of 4.15,
no consent, authorization, approval, order, license, certificate,
or permit of or from, or declaration or filing with, any
governmental authority, court or other tribunal or entity or
individual is required by Seller or Mr. Mann for the execution,
delivery, or performance of this Agreement by them. Also subject
to the provisions of 4.15, the execution, delivery, and
performance of this Agreement will not result in such breach(es)
of any agreement(s), instrument(s), lease(s), license(s),
arrangement(s), or understanding(s) as will in the aggregate
materially diminish the value of the Purchased Assets or
Purchaser's realization of the benefits thereof, or materially
violate or result in a breach of any term of the certificate of
incorporation (or other charter document or by-laws of Seller) or
violate, result in a breach of, or conflict with any law, rule,
regulation, order, judgment, or decree binding on Seller or Mr.
Mann or to which any of their operations, business, properties,
or assets are subject. Upon the Closing, Purchaser will have
good title to the Purchased Assets, free and clear of all liens,
security interests, pledges, charges, shareholders' agreements,
and encumbrances except those expressly assumed as Assumed
Liabilities.
2.12 Restricted Professional and Small
Business Set Aside Revenues
The gross revenues of Seller for each of the previous two
fiscal years and for the period from January 1, 1996 through
March 31, 1996 (the "Interim Period") received from: a)
professional services of any type which Purchaser would be
precluded from performing by laws or regulations pertaining to
regulation of professions or professional corporations (to the
extent that Seller has actual knowledge of Purchaser and its
business); or b) from contracts or subcontracts (or services
otherwise performed) under Small Business Set Aside or comparable
business-size or racial, gender or other class-restricted
programs of the Small Business Administration or other federal or
state agency were as set forth on Schedule 2.12.
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2.13 Loans to Insiders
Seller has no outstanding loans to shareholders, officers,
directors, employees or any other person or entity other than the
loans set forth on the Closing Balance Sheet.
2.14 Fictitious Names
Schedule 1.01(a)(6) sets forth each fictitious name utilized
by Seller within the past two years.
2.15 Absence of Undisclosed Liabilities
Except as set forth in the schedules to this Agreement or
the Closing Balance Sheet, Seller has no obligations or
liabilities of any kind, fixed, accrued or contingent which would
materially affect the value of the Purchased Assets or
Purchaser's title to the Purchased Assets or the business
associated therewith.
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2.16 Books and Records
The books and records of Seller are in all material respects
complete and correct.
2.17 Assets Free and Clear of Liens
Except for the Assumed Liabilities, the Purchased Assets and
Seller's fixed assets to be leased by Purchaser under the Fixed
Asset Lease Agreement will be free and clear of all Liens and
Seller will have procured and delivered at or prior to the
Closing proof of release and satisfaction of any of the foregoing
security interests or claims which are not assumed as Assumed
Liabilities.
2.18 Hazardous Materials - Lab and Field Samples
(a) Except as disclosed on Schedule 2.18(a), as of the Effective
Time, Seller is not in possession of, or responsible for the
care, custody or disposal of, any hazardous substances,
pollutants or contaminants (as those terms are defined in 42
U.S.C 9601 or under any applicable state or local law) or of any
petroleum wastes or asbestos-containing materials, except for
unused laboratory chemicals or other commercially packaged
supplies used in Seller's business. Schedule 2.18(a) sets forth
with respect to any such materials a description of the
composition, location, quantity, method of storage, nature of
Seller's responsibility, intended disposal or management plan and
all costs related to Seller's responsibilities thereto.
(b) Schedule 2.18(b) sets forth a complete list and description
of all stored laboratory or field samples upon which work has
been completed, including the location, composition, quantity,
method of storage, intended disposal or management plan for the
particular material, any contractual commitments related to
continuing custody, and all costs related to Seller's
responsibilities thereto.
2.19 Completeness of Disclosure
No representation, warranty or schedule by Seller in this
Agreement contains or on the date of the Closing will contain any
materially untrue statement of a material fact or omits or on the
Closing Date will omit to state a material fact necessary to make
the statements made not misleading. The information presented by
Seller on each of the schedules to this Agreement and in each of
the documents delivered or made available to Purchaser under any
of the representations, warranties or covenants of this Agreement
is substantially complete, true and correct.
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III. REPRESENTATIONS AND WARRANTIES OF PURCHASER
As a material inducement to Seller and Mr. Mann to enter
into this Agreement, Purchaser represents and warrants as
follows:
3.01 Organization and Good Standing
Purchaser is a corporation duly organized, validly existing
and in good standing under the laws of the State of Delaware, and
duly qualified to engage in business in the state of Indiana,
with full power and authority to enter into and perform each of
the transactions contemplated by this Agreement.
3.02 Execution and Performance Authorized
This Agreement and all other documents and agreements
contemplated hereunder have been duly executed and delivered by
the Purchaser, such execution and delivery and the consummation
by Purchaser of the transactions contemplated hereunder have been
duly authorized by all necessary corporate action, and no further
action is required by law, its corporate charter, bylaws or
otherwise to authorize all action to be taken by Purchaser with
respect to this Agreement and the consummation of the
transactions contemplated hereunder. The Agreement and the other
documents contemplated hereunder are binding and are enforceable
against Purchaser in accordance with their terms.
3.03 Absence of Litigation
Except as set forth on Schedule 3.03, there is no action,
lawsuit, proceeding or investigation of any kind or nature
pending or threatened against Purchaser before any court,
tribunal or administrative agency or board which might,
individually or in the aggregate, materially and adversely (i)
affect Purchaser's solvency or its ability to perform hereunder,
or (ii) render any one or more of the transactions contemplated
hereunder void or voidable.
3.04 No Other Default
The execution and delivery of this Agreement by Purchaser
and the consummation of the transactions contemplated hereunder
will not conflict with or violate or require any consent under
and will not result in any breach or termination of Purchaser's
corporate articles, bylaws or minutes or any agreement to which
Purchaser is a party or by which any of its property is subject
or by which it is bound.
3.05 Permits and Filings
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There is no requirement applicable to Purchaser to make any
further filing with, or to obtain any permit, authorization,
consent or approval of any third party or any governmental or
other regulatory authority as a condition of the lawful
consummation of the transactions contemplated under this
Agreement.
3.06 Absence of Lien
Except for the conditions specified elsewhere in this
Agreement, the monies to be paid by Purchaser under 1.01 shall
be paid by Purchaser and received by Seller free and clear of any
lien, charge or encumbrance arising out of any agreement or
instrument to which Purchaser is subject or by which their
properties are bound.
3.07 Solvency
At the Closing and after payment of the purchase price as
required under 1.01, Purchaser will be and will remain solvent
under all applicable federal and state laws and regulations.
Purchaser also agrees that it will not intentionally cause its
business to be conducted in a manner that results in its becoming
insolvent; provided, however, that consistent with the foregoing,
this covenant shall not restrict the future business decisions of
Purchaser which relate to the Purchased Assets or the business
associated therewith.
3.08 Corporate Documents
Purchaser has furnished to Seller its certificate of
incorporation and a certificate of good standing in Delaware
dated within thirty (30) days of the closing and evidence of
Purchaser's qualification as a foreign corporation in Indiana.
3.09 Disclosure of Discovered Facts
Prior to Closing, Purchaser shall have disclosed to Seller
the existence of any facts discovered by Purchaser in the course
of its due diligence which would render any of Seller's
representations or warranties materially untrue as of Closing.
IV. COVENANTS
In addition to the other covenants of this Agreement, Seller
and Purchaser agree as follows:
4.01 Conduct of Business Before Closing
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[ deleted as irrelevant ]
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4.02 Consent of Shareholders
At the Closing Seller shall provide evidence of shareholder
approval of this Agreement which meets all notice and other
requirements of Indiana law.
4.03 Collection of Accounts Receivable
(a) Any account receivable or work in process which is a
Purchased Asset and subject to 2.06(a), which has not been
collected by Purchaser within one (1) year, shall be deemed to be
uncollected and uncollectible by Purchaser except as Purchaser
shall otherwise agree in writing. Accounts or work in process
may also be deemed uncollectible by agreement of the parties as
provided in 4.03(b). All uncollected accounts and work in
process, net of the reserve for such purpose on the Closing
Balance Sheet, shall be remedied by set-off under 1.04 (or if
set-off is not available, then by indemnification and repayment).
Set-off shall be available to the Purchaser for uncollected
accounts or work in process at the earlier of: (i) one year
after the Closing Date or (ii) such time as the account is agreed
to be uncollectible under this section. Upon such remedy, the
account shall be re-assigned to Seller.
(b) Purchaser shall provide Mr. Mann with a semi-monthly aging
report of the purchased accounts receivable and work in process
together with contact log summary of problem accounts. If at any
time Purchaser determines that measures in addition to
Purchaser's customary collection procedures (e.g. measures such
as mechanics lien, legal action or referral to collection agency)
should be employed on a specific account to obtain collection,
Purchaser shall notify Seller in writing of the measures proposed
to be taken. If Seller agrees in writing that the proposed
extraordinary measures should be taken or if Seller itself deems
such action to be necessary without notice from Purchaser, Seller
shall notify Purchaser in writing of its agreement to such
measures. Seller's agreement to the employment of extraordinary
collection measures shall constitute its agreement to having the
cost of such measures first charged against the reserve for
uncollectible accounts and the excess, if any, set-off.
(c) At any time the parties may by mutual written agreement deem
an account uncollectible, Purchaser shall re-assign it to Seller
and charge it off of available reserves and set off the excess,
if any. Upon written notice to Purchaser, Seller may request to
have any account receivable which is uncollected as of six (6)
months after the date of the invoice(s) re-assigned to Seller.
Purchaser shall not unreasonably deny such request. Such request
by Seller for re-assignment shall constitute Seller's agreement
to a reduction in the reserve for uncollectible accounts by such
amount or, to the extent that the remaining reserve balance is
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thereby exceeded, to a set-off in such excess amount, which
Purchaser may exercise immediately.
4.04 Public Statements
Before Seller or Purchaser shall release any information
concerning this Agreement or the transactions contemplated by
this Agreement which is intended for or may result in public
dissemination thereof, they shall cooperate with the other party
hereto and shall furnish drafts of all documents or proposed oral
statements for comments, and shall not release any such
information without the written consent of the other party
hereto. Nothing contained herein shall prevent Purchaser or
Seller from making any release or furnishing any information if
required to do so by law or regulation, but even in such case,
the other party shall be given notice of the release and an
opportunity to comment on the contents.
4.05 Merger of 401(K) Plans
(a) Seller shall accrue and make all payments and contributions
to its 401(k) Plan (the "Plan") through the Effective Time.
Seller and Purchaser shall use their best efforts to cause the
Plan to be merged into Purchaser's Employee Savings Plan (the
"ATC Plan") at the soonest possible date on or after the Closing
Date, in accordance with the provisions of the Plan and the ATC
Plan (as such plans may be amended on or after the Closing Date
to permit the merger) and in accordance with the provisions of
ERISA, the Internal Revenue Code of 1986, as amended (the "Code")
and all applicable law. In connection with the merger of the
Plan into the ATC Plan, the parties further agree as follows:
(1) Seller shall cause each Participant's Account, as
defined in the Plan, to be completely vested as of the
Closing Date;
(2) Purchaser shall amend the ATC Plan, as of the Closing
Date, to permit the merger of the Plan into the ATC Plan and
to otherwise comply with all applicable law, including
compliance with the anti-cutback provisions of Section
411(d) of the Code;
(3) Seller shall cause any applicable conditions of the
Plan to be satisfied as of the Closing Date;
(4) On or before the Closing Date, Seller shall cause the
Plan to "spin-off" that portion of the assets of the Plan
necessary to comply with applicable law and the Plan with
respect to the participants in the Plan who are employees of
WATEC.
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(5) Seller shall cause the transfer of the balance of the
Plan's assets and liabilities to the ATC Plan as soon as
reasonably possible after and effective as of the Closing
Date, in accordance with the terms of the Plan, the ATC Plan
and any other requirements of applicable law.
(b) Seller and Purchaser shall use their best efforts to
complete the transfer of the assets of the Plan to the ATC Plan
prior to December 31, 1996, or within such other shorter period
of time as may be required under applicable law. Except with
respect to the portion of the Plan being "spun off," after the
Closing Date, Seller shall have no further obligations to make
contributions to the Plan or to perform any administrative or
other functions with regard to the Plan except for the actions
required to be taken by Seller under this section. Seller shall,
however, remain liable for any IRS penalties assessed with
respect to the Plan, any liability resulting from a determination
that pre-Closing contributions to the Plan were taxable or any
other liabilities arising from Seller's acts, omissions or
fiduciary responsibilities with respect to its Plan or Plan
participants.
4.06 Bankruptcy
Seller and Purchaser agree that for a period of one year
after the Closing, neither of them will file an application or
petition for voluntary bankruptcy under the United States
Bankruptcy Code or any application under any similar state or
federal statute.
4.07 Termination of Seller's Employees
Seller shall terminate all of its employees on or before the
Closing Date, except such administrative employees as are needed
to enable Seller to wind down its affairs and perform any
continuing employee benefit or other administrative functions.
Purchaser agrees to reimburse to Seller, within five (5) business
days of notification of the amount thereof and with appropriate
supporting documentation, any amount in excess of One Hundred
Sixty-One Thousand Five Hundred and no/100 Dollars ($161,500.00)
which Seller was required to pay and actually pays to its
terminated employees not hired by ATC: (i) under its standard
severance policy number 5520-1 (a copy of which is attached as
Schedule 4.07(i)) or (ii) under notice of termination provisions
under executed standard employment agreements of Seller (a copy
of which is attached as Schedule 4.07(ii)). Amounts under (i) do
not include payments to individuals not eligible to participate
or with severance arrangements outside or in addition to Seller's
standard severance policy number 5520-1 and payments to
terminated employees who have been offered, but declined,
employment with Purchaser on terms not materially less
advantageous to them than those under their employment with
Seller. Amounts under (ii) do not include payments to
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individuals with notice of termination arrangements outside of or
in addition to those provided under Seller's standard employment
agreements.
4.08 Hiring of Seller's Employees
Purchaser will have the right to hire any or all of Seller's
employees and will attempt to hire most of Seller's technical and
staff and support personnel. Although Purchaser's decision
whether to hire Seller's current employees lies solely within the
discretion of Purchaser, Seller and Mr. Mann agree to assist and
facilitate Purchaser's negotiations with Seller's employees. In
this regard, Mr. Mann will assist Purchaser in identifying any
key employees of Seller to whom Purchaser should direct special
attention and incentives. The negotiation of suitable terms with
employees lies in Purchaser's sole discretion and the decision
whether to hire any or all employees shall not relieve Seller and
Mr. Mann of any of their obligations hereunder; provided,
however, that Purchaser shall hire and maintain for a sufficient
period of time, a sufficient number of employees at each
establishment so that Seller does not violate the federal WARN
Act (29 U.S.C. 2101 et seq.) or any similar act under state
law. Those employees hired by Purchaser shall be offered the
same benefits and benefit options offered the employees of
Purchaser. Prior to hiring, Purchaser shall provide to each
employee it intends to hire a release of any claims such employee
may have against Seller for severance payments under Seller's
standard severance policy number 5520-1. Any special employment
letters to managerial or key employees shall contain the
provision on vacation carry-over. Except as set forth in 4.07,
Seller shall retain responsibility for termination and associated
termination costs or continued employment, as the case may be, of
any employees not hired by Purchaser and for all pre-closing
accrued liabilities to employees except those assumed as Assumed
Liabilities (see 2.08).
4.09 Transaction Costs and Expenses
Except as set forth in 4.07, the Purchaser, Seller and Mr.
Mann shall each bear and pay all of their respective costs, fees
and expenses incurred in connection with bringing about this
transaction including, without limitation, all legal, accounting,
auditing and appraisal fees in negotiating and preparing the
documents and in consummating, closing and carrying out the
transactions contemplated hereby, provided, however, that: (i)
except as provided otherwise in the Master Equipment Lease
Agreement (as defined in 7.01(b)) or the Premises Sublease
Agreements (as defined in 7.01(c)), Purchaser agrees to pay all
state and local sales taxes arising out of this transaction; and
(ii) Seller or Mr. Mann, as applicable, agree to pay all income
taxes and other transaction taxes or like governmental charges or
assessments related to this transaction. Seller agrees to
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indemnify Purchaser from and against any costs associated with
any assessment of taxes related to Seller's or Mr. Mann's income
or gains from this transaction whether or not intended or
foreseeable. Any costs to be charged to Seller shall be included
on the Closing Balance Sheet and reflected in the warranty of
Adjusted Net Equity made in 2.03(b).
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4.10 Information, Books and Records
(a) Each party shall provide to the other, with reasonable
promptness following a request in writing (not to exceed ten (10)
business days), such information and data with respect to
Seller's business before Effective Time and/or the Purchased
Assets as may from time to time be requested by the other party.
In the event either Purchaser or Seller is required to prepare
audited statements or to produce or compile information for a
government agency which requires access to information or for any
other reasonable purpose including the desire to verify any
information provided to the other party relative to this
agreement, the parties agree to allow the other party reasonable
access to records, including the non-proprietary working papers
of the other party's accountants, subject to standard hold
harmless agreements which may be required by such accountants,
and to provide reasonable cooperative assistance in the
preparation of reports, documents, etc. without charge except for
reimbursement of any actual, out-of-pocket expenses, exclusive of
the cost of in-house staff time. Notwithstanding the foregoing,
in the event that a party is or anticipates becoming a party to
litigation, this 4.10 or any other provision of this Agreement
shall not be construed to require such party to provide
information to the other which could prevent such party from
making a bona fide claim of attorney/client privilege or such
other privileges as may be applicable with respect to such
information.
(b) Neither party shall intentionally dispose of or destroy any
of the records of Seller in its possession except in conformity
with the procedures set forth in this section. If a party wishes
to dispose of or destroy any of such records, it shall first give
thirty (30) days prior written notice to the other party of the
action it intends to take, and the other party shall have the
right, at its option and expense, upon prior written notice to
the notifying party within such 30-day period, to take possession
of such affected records within 30 days after the date of the
notice of intent to take possession.
(c) Each party shall exercise reasonable care in the care,
custody and maintenance of the records of Seller in its
possession. A party shall be responsible for actual damage
caused to the other party only as a result of its negligence or
intentionally wrongful act in maintaining the records. Neither
party shall have liability to the other party or any other person
as a consequence of the non-existence of any record or such
party's inability to locate any record unless the loss or
destruction of the record is proven, by clear and convincing
affirmative evidence, to have been due to the allegedly
possessing party's negligence or intentional act.
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4.11 Addresses, Mail and Deliveries
Purchaser shall have the right to receive and open for
inspection all mail and deliveries addressed to any address to
the names of "ATEC Associates, Inc.," "ATEC" or otherwise
reasonably appearing from the outside to contain Purchased Assets
or documents which would customarily be received by the owner of
the Purchased Assets. Purchaser shall have the right to receive
and open for inspection all mail and deliveries delivered to its
premises (including the premises assumed hereunder) addressed to
"American Testing and Engineering Corporation" or any person who
was an employee or former employee of Seller unless it is clear
from the envelope that the contents belong to Seller or are
personal in nature. Purchaser and Seller shall each use their
best efforts to avoid opening mail or deliveries which rightfully
belongs to the other and shall turn over to the other any
property, including checks or money, belonging to the other
within twenty-four hours after determining its rightful
ownership. Purchaser shall have the exclusive right to apply for
change of address, change of telephone numbers or location of
telephone numbers applicable to the purchased names or Purchased
Assets (this shall not include change of address relating to the
name "American Testing and Engineering Corporation"). Seller
agrees to execute and return to Purchaser within three days after
receipt thereof such assignment or consent forms as Purchaser
requests to effect such changes of address, telephone number
location or telephone numbers.
4.12 Access and Cooperation for Due Diligence
Subject to the Confidentiality Agreement between Seller and
Purchaser, Seller shall make available to Purchaser's
representatives any and all information as Purchaser may request
to enable Purchaser to exercise due diligence in determining
whether this transaction is a prudent investment for Purchaser
and its shareholders, including reasonable access to all of the
properties, books, contracts, records and operations of Seller
and shall furnish Purchaser with all information, including
copies of books, contracts and records, concerning the Purchased
Assets, which Purchaser may reasonably request.
(a) With respect to the Customer Contracts, the customer list
and order backlog set forth in subparagraphs 1.01(a)(4) and
(11), Seller agrees that representatives of Purchaser may
contact, or be present when Seller's representatives contact,
such customers for the purpose of performing due diligence
inquiries, provided, however that all such contacts shall be
subject to the protective procedures outlined in this section and
the Confidentiality Agreement. Purchaser shall advise Seller
before making any contact with a customer. One or more
representatives designated by Seller for such purpose shall be
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present during any such contact to assist and monitor such
contacts. Without the express written permission of the other
party, during such contacts, neither party shall reveal the
identity of Purchaser, any of the terms of this Agreement nor the
fact that the transaction is in prospect of occurring.
(b) Subject to the Confidentiality Agreement, Purchaser shall
have the right to interview employees of Seller as necessary to
verify the order backlog, customer relationships and future
prospects, liabilities, technical and administrative systems and
employee capabilities and attitudes.
4.13 Corrective Services by Purchaser
As part of the purchase price (1.01(b)(2)), Purchaser
agrees to provide Seller up to three hundred thousand dollars
($300,000.00) worth of in-kind corrective action services to
assist in resolving claims made against Seller, Mr. Mann or
Purchaser for Seller's acts, omissions or contractual performance
prior to Effective Time or to correct a deficiency in services
performed by Seller prior to the Effective Time necessary to
preserve a customer relationship. Such services shall be valued
at Purchaser's Standard Rates as set forth in 4.23. If the
value of the corrective services for any one occurrence provided
exceeds ten thousand dollars ($10,000), Purchaser shall provide
Seller prompt written notice. Such services shall not be subject
to the Indemnified Claim threshold or the Indemnitee Deductible.
4.14 Related Agreements
Seller, Mr. Mann and Purchaser each agree to execute and
deliver at Closing the Related Agreements referenced in 7.01.
4.15 Assignment of Agreements - Benefits of
Ownership to be Provided Where Assignment or
Novation Not Possible
(a) Seller shall use its best efforts to attempt to secure (and
to assist Purchaser in securing) all consents and approvals
required to effect the assignment of the Customer Contracts and
other agreements to be transferred to Purchaser hereunder or
under the Assumption Agreement. Use of best efforts shall not
require Seller to pay funds to third parties for their agreement
to provide such a consent. Seller agrees that, upon the written
request of Purchaser, it will execute and return to Purchaser
each and every assignment, consent to assignment or novation, or
other document necessary to effect the transfer or execution of
any Customer Contract or other contract, asset or benefit to be
conveyed hereunder within two (2) business days after receipt of
such document. Seller's covenant in this regard shall be
absolute and not subject to any right of non-performance for any
reason, including breach by Purchaser, and Seller expressly
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acknowledges and agrees: (i) that this covenant is of critical
importance to Purchaser; (ii) that its breach will cause
Purchaser irreparable harm for which money damages alone will be
difficult of ascertainment and inadequate; and (iii) that in the
event of a breach hereof, Purchaser shall be entitled to
immediate equitable relief in the form of an emergency, summary
injunction or decree for specific performance without any
requirement for the posting of any bond or undertaking.
(b) Seller agrees that, as of the Closing Date, it will
designate one or more persons who will be authorized after
Closing to execute assignments, consents to assignment or
novation and other documents necessary to effect the transfer of
contracts, the Purchased Assets or the benefits thereof to
Purchaser in cases where such documents, in addition to those
executed and delivered at Closing, are required by a customer or
other third party to effect the transfer or confer the benefit.
Seller shall provide such persons, at Purchaser's cost, a
corporate seal of Seller to be used only for the purpose of
executing transfer documents. Seller will promptly notify
Purchaser in writing of any changes from time to time in the
identity of the persons so authorized. If the persons appointed
under this section are employees of Purchaser or its affiliate,
Purchaser shall indemnify Seller pursuant to 1.03 for any damage
caused to Seller as a result of such appointed persons acts or
omissions.
(c) With respect to any Customer Contract or Assumed Liability
to be conveyed hereunder to which Seller and Purchaser are not
able to obtain a consent to assign or novate or which are
otherwise not capable of assignment or novation, Purchaser shall
nevertheless be deemed to be entitled to all beneficial interest
in such Customer Contract or Assumed Liability as against Seller,
and Seller shall use its best efforts to: (i) subcontract such
Customer Contract or Assumed Liability to Purchaser on the same
terms and conditions as the original (except that Seller shall
retain all pre-closing liability as provided in 1.02 except as
assumed as an Assumed Liability); and/or (ii) cooperate in any
reasonable and lawful arrangement to provide to the Purchaser all
the benefits of such Customer Contract or Assumed Liability, such
as (but not limited to) re-hiring such of Purchaser's employees
on a part-time, temporary basis as are necessary to perform such
contractual obligations on Purchaser's behalf, provided Purchaser
pays all Seller's direct costs and expenses associated with such
re-hiring and work and assumes and indemnifies Seller against all
costs and liability associated with such re-hiring and
performance of services. Similarly, Purchaser shall cooperate
with Seller to ensure that Seller receives the benefit of the
assumption of the Assumed Liabilities by Purchaser.
4.16 Department of Defense Agreement
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(a) Seller has provided Purchaser with information regarding a
certain agreement being negotiated with the U.S. Department of
Defense ("DOD Agreement") a provision of which would require
Purchaser to agree to be bound by the DOD Agreement. It is the
mutual understanding and intent of the parties that (i) Seller
and Mr. Mann will execute and deliver to the Department of
Defense ("DOD") such documents as are necessary to assure that
Seller and Mr. Mann will no longer be actively engaged in the
environmental consulting and geo-technical consulting business
and that upon receiving such assurances, the DOD will not require
Seller to enter into the DOD Agreement; (ii) Purchaser will not
be required to, and will not enter into any agreement with the
DOD regarding this matter; and (iii) upon taking these actions,
the matter will be concluded on a basis satisfactory to both
parties. If such disposition can not be effected, the parties
agree to negotiate in good faith with each other to achieve a
mutually satisfactory and equitable resolution of this matter.
If agreement can not be achieved, this matter shall be resolved
pursuant to the dispute resolution provisions set forth in 10.15
of this Agreement.
4.17 Use of Proceeds to Pay Debts and Obligations
Seller shall use all proceeds received by it from the sale
of the Purchased Assets and the Related Agreements for the prompt
discharge of all of Seller's liabilities as they become due,
except for the Assumed Liabilities.
4.18 Retention of Health Plan Administrator -
Notice to Employees
(a) Purchaser shall be responsible for paying the costs
associated with Seller's health plan and plan administration only
to the extent such costs are assumed as Assumed Liabilities. For
a period of not less than one hundred twenty (120) days after
Closing, the Seller shall maintain in place its employee health
insurance plan administrator for the purpose of processing claims
for services performed under the plan prior to Closing. Seller
shall provide a notice by mail to all persons who were covered by
the plan on the Closing Date or within one year prior to the
Closing Date of the fact that the plan is being terminated, that
all claims must be filed within the ninety day period following
Closing or be waived and that Seller (and not Purchaser) is
responsible for all medical claims of Seller's employees.
Purchaser shall fund payments in connection therewith against the
pooled reserve described in 4.21(b), up to the unconsumed
balance of the reserve, on a basis which will allow Seller to
timely and efficiently pay such claims and related costs.
(b) "Costs associated with Seller's health plan" include COBRA
coverage and notice obligations (and any penalties or assessments
arising therefrom) accruing: (i) prior to the Effective Time for
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Seller's employees (and their dependents) who are hired by
Purchaser; or (ii) prior to or after the Effective Time for
Seller's employees (and their dependents) who not hired by
Purchaser. Upon Seller's termination of its health plan,
Purchaser agrees to perform, without charge, any of Seller's
residual COBRA notice and administrative responsibilities (except
those related to the employees of any Affiliate or their
dependents) after the Effective Time. This assumption of
administrative services shall not shift the liability for costs
associated with Seller's health plan. Seller agrees that any
information provided to Purchaser in connection with Purchaser's
performance of COBRA administration for Seller as provided in
this section will be accurate. Purchaser agrees to exercise due
care in carrying out its responsibilities to Seller under this
section.
4.19 Transition of Workers' Compensation
Seller has represented to Purchaser in Schedule 2.08(a) that
its workers' compensation plan is an occurrence form insurance
policy with the Aetna Insurance Company. Under such plan, Aetna
will be required to provide coverage and claims handling for all
of Seller's workers' compensation claims. Purchaser shall fund
the deductible and/or self-insured retention portion of claims
and the administrative expenses under such policy from the pooled
reserve described in 4.21 up to the unconsumed balance of the
reserve, on a basis which will allow Seller to timely pay such
expenses and comply with the terms and conditions of the policy,
the applicable administration agreement and applicable law.
4.20 Disposal of Hazardous Materials - Lab Samples
Except to the extent that Purchaser expressly assumes
responsibility therefor as Assumed Liabilities and reserves or
expenses for the costs thereof are recorded on the Closing
Balance Sheet and except for unused laboratory chemicals or other
commercially packaged supplies used in Seller's business, Seller
at its sole cost shall, prior to the Closing, dispose of:
(a) all hazardous substances (as defined in 2.19),
pollutants, contaminants, petroleum wastes and asbestos-
containing materials which are in its possession or for
which it has responsibility; and
(b) all laboratory samples upon which analysis has been
completed except those for which Seller is under a
contractual or other obligation imposed by law to retain
custody.
4.21 Reserves and Allowances
(a) To the extent such reserves or allowances are assumed
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as Assumed Liabilities, Purchaser shall be obligated to make
payments or reimbursements to or on behalf of Seller for amounts
recorded on Seller's Closing Balance Sheet as reserves or
allowances for anticipated expenses or liabilities. Such
payments shall be paid by Purchaser up to the recorded amount of
the reserve or allowance upon presentation of vendor invoices or
proof of payment approved in writing by Mr. Mann or by a person
designated by Mr. Mann in writing as authorized to submit
invoices for such purpose on Seller's behalf. Purchaser shall
have no liability to Seller or Mr. Mann as a result of paying any
expense so approved. Purchaser's payment or reimbursement of
expenses covered by Seller's reserves or allowances which are
Assumed Liabilities shall not be construed as any indication
whatsoever that Purchaser has assumed liability for Seller's
debts, liabilities or administrative responsibility, either for
the specific class covered by such reserve or in general, beyond
the amount of the recorded reserve except as such are themselves
assumed specifically as Assumed Liabilities.
(b) The specific reserves or allowances set forth on
Schedule 4.21 (which shall not include the reserve for bad debts
and uncollectible accounts receivable and work in process) shall
be treated by Purchaser and Seller as a pooled reserve account,
and the total amount of all such reserves shall be combined and
available for all purposes for which any of the reserves was
available, including the purpose of covering expenses or
liabilities associated with claims against Seller. The
unconsumed balance of the pooled reserve account shall be
refunded to Seller in accordance with 1.01(b)(2).
4.22 Reporting of Changes, Breaches and Status
Seller shall promptly advise Purchaser in writing prior to
Closing of (i) the occurrence of any event which renders any of
the representations or warranties set forth herein inaccurate in
any material respect, and (ii) the failure of Seller or Mr. Mann
to comply with or accomplish any of the covenants or agreements
set forth herein in any material respect. Seller shall also
provide Purchaser, promptly on becoming available, copies of all
operating and financial reports prepared by or for Seller with
respect to the business or operations of Seller.
4.23 Purchaser's Standard Rates
Whenever any goods or services are provided or procured by
Purchaser under any covenant of Purchaser hereunder to do so or
to correct or remedy Seller's breach, default, or deficiency of
performance under any representation, warranty, or covenant of
this Agreement, such goods or services shall be valued at
Purchaser's Standard Rates. "Purchaser's Standard Rates" means
the rate which Purchaser would charge an ordinary commercial
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customer for the particular class of services being performed or
the retail market price for goods supplied. Such rates shall not
exceed the rates which similar firms would charge for such goods
or services in the location in which they are being delivered.
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4.24 Security for Purchaser's Payment Obligations
As security for Purchaser's payment and indemnity
obligations under this Agreement and the Related Agreements which
fall due after Effective Time, Purchaser agrees to:
(a) Deliver to Seller at Closing a conditional, irrevocable bank
letter of credit on a bank chartered under the laws of the United
States in the amount of five hundred thousand dollars ($500,000)
payable on or before the fourth anniversary of Closing (the
"Letter of Credit"). The condition on drawing funds against such
letter of credit shall be that Purchaser has breached this
Agreement or a Related Agreement by failing to make a payment
when due under this Agreement or a Related Agreement (after
notice and opportunity to cure as provided therein). Purchaser's
non-payment due to its exercise of set-off rights in accordance
with the provisions of 1.04 shall not constitute a breach for
non-payment.
(b) Execute and deliver a Security Agreement in the form of
Exhibit 7.01(h).
4.25 Insurance after Closing
Prior to the Closing, Seller shall procure a three (3) year
extended reporting period under each of its pre-Closing insurance
policies which were written on a claims made basis or procured
other policies of equal coverage covering such three (3) year
period in order to ensure coverage for a three year period
against Seller's professional and other acts, omissions and
negligence. Such insurance shall have limits of not less than
$2,000,000 per occurrence and $5,000,000 in the aggregate with a
deductible not to exceed $250,000. Purchaser shall be named as
an additional insured under such policy(ies). On or before the
date hereof, Seller has provided Purchaser a copy of each policy
which was in effect as of the date of this Agreement. At
Closing, Seller shall deliver certificates evidencing the
insurance required by this section and a copy of each such
policy.
4.26 Hart-Scott-Rodino Filing
After reviewing relevant facts regarding Purchaser and
Seller and their operations, including Seller's audited financial
statements warranted under 2.03(a) and Purchaser's audited
financial statements, the parties have determined that no
notification relative to this Agreement and the transactions
contemplated herein is required under the Hart-Scott-Rodino
Antitrust Improvements Act of 1976, as amended.
4.27 Successor Payroll Issues
Purchaser shall be the successor employer to Seller for
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purposes of post-Closing FICA taxes and reporting, FUTA taxes and
reporting, and corresponding state payroll laws and regulations.
Purchaser agrees to perform the obligations of a successor
employer for such taxes and reporting purposes and will
indemnify, defend and hold Seller, the Affiliates and their
successors harmless from and against any and all liabilities or
obligations arising out of Purchaser's election to be treated as
a successor employer for such purposes or its failure to perform
or properly perform all of Purchaser's obligations as a successor
employer of Seller for the purposes set forth in this section,
including but not limited to completing accurately and completely
all Forms 941, 940, W-2 and W-3 related to obligations accruing
after Closing required of Purchaser in its status as successor
employer. Seller shall perform such obligations for pre-Closing
accruals. This section shall not be construed to imply that
Purchaser is liable as a successor employer or otherwise as a
successor to Seller for any purpose except for the limited
purposes set forth in this section.
V. CONDITIONS PRECEDENT TO SELLER'S AND
MR. MANN'S OBLIGATIONS
The obligation of Seller and Mr. Mann to close and to
perform the covenants and actions required of them on the Closing
Date shall be subject to the satisfaction or waiver on or prior
to the Closing Date of the following conditions precedent:
5.01 Truth of Representations and Warranties
Purchaser's representations and warranties contained in this
Agreement shall be true in all material respects at and as of the
Closing Date.
5.02 Performance
Purchaser shall have performed and complied in all material
respects with its obligations under this Agreement which are to
be performed or complied with by it prior to or on the Closing
Date.
5.03 Documents
Purchaser shall provide to Seller all of the documents and
shall perform such acts as are prescribed in Section 8.03 or
elsewhere in this Agreement.
5.04 Authorization
Any consent, approval, authorization, order or filing with
any court or governmental agency or administrative body required
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for the consummation of the transactions contemplated by this
Agreement shall have been obtained or made and shall be in effect
on the Closing Date.
5.05 Absence of Suit
No action, suit or proceeding before any court or any
governmental or regulatory authority shall have been commenced or
threatened against Purchaser, Seller or Mr. Mann or any of the
officers or directors of any of them, and no investigation by any
governmental or regulatory authority shall have been commenced,
against Purchaser, Seller or Mr. Mann or any affiliate, seeking
to restrain, prevent or change the transactions contemplated
hereby or challenging the validity or legality of any such
transactions, or seeking damages in connection with any of such
transactions.
5.06 Payment of Purchase Price
Purchaser shall have tendered the cash and other
consideration required to be paid or delivered at closing under
Section 1.01(b) or otherwise in amounts not less than such
amounts.
5.07 Assumption of Liabilities
The Purchaser shall have executed and delivered to Seller
and Mr. Mann an Assumption Agreement providing for the assumption
by the Purchaser of the Assumed Liabilities.
5.08 Execution of Related Agreements
The Purchaser shall have executed and delivered to Seller
and Mr. Mann each Related Agreement referenced in 7.01.
5.09 Opinion of Counsel
Purchaser shall have delivered to the Seller and Mr. Mann
before Closing the opinion of counsel to Purchaser, satisfactory
to counsel for the Seller.
5.10 Receipt of Approvals, etc.
All material approvals, consents and/or waivers that are
necessary to effect the transactions contemplated hereby shall
have been received.
5.11 Documents
Seller shall have received all of the documents required to
be delivered to it pursuant to Section 8.03 and elsewhere in this
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Agreement. Purchaser shall have delivered to the Seller at or
prior to the Closing such other documents (including certificates
of officers of Purchaser) as the Seller may reasonably request in
order to enable the Seller to determine whether the conditions to
their obligations under this Agreement have been met and
otherwise to carry out the provisions of this Agreement.
5.12 Review of Proceedings
All actions, proceedings, instruments, and documents
required to carry out this Agreement or incidental thereto and
all other related legal matters shall be subject to the
reasonable approval of the counsel to Seller and Mr. Mann, and
Purchaser shall have furnished such counsel such documents as
such counsel may have reasonably requested for the purpose of
enabling him to pass upon such matters.
5.13 No Governmental Action
There shall not have been any action taken, or any law,
rule, regulation, order, or decree proposed, promulgated,
enacted, entered, enforced, or deemed applicable to the
transactions contemplated by this Agreement by any federal,
state, local, or other governmental authority or by any court or
other tribunal, including the entry of a preliminary or permanent
injunction, which, in the reasonable judgment of the Seller or
Mr. Mann, (a) makes any of the transactions contemplated by this
Agreement illegal, (b) results in a delay in the ability of the
Seller or Mr. Mann to consummate any of the transactions
contemplated by this Agreement, (c) imposes material limitations
on the ability of Seller or Mr. Mann effectively to exercise its
or his rights hereunder or (d) otherwise prohibits, materially
restricts, or delays consummation of any of the transactions
contemplated by this Agreement or impairs the contemplated
benefits to Seller or Mr. Mann of the transactions contemplated
by this Agreement.
5.14 Bond Release
Purchaser shall have assumed as an Assumed Liability the
obligation to assume and hold Seller and Mr. Mann harmless from
all outstanding liability relative to those specific bonds and
associated security obligations which Purchaser has assumed as
Assumed Liabilities.
5.15 Execution of Related Agreements
Purchaser shall have executed and delivered to Seller or Mr.
Mann, as appropriate, the Related Agreements referenced in 7.01
and shall have delivered the Letter of Credit.
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VI. CONDITIONS PRECEDENT TO PURCHASER'S OBLIGATIONS
The obligation of the Purchaser to close and to perform the
covenants and actions required of it on the Closing Date are
subject to the satisfaction or waiver on or prior to the Closing
Date of the following conditions precedent:
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6.01 Truth of Representations and Warranties
Seller's representations and warranties contained in this
Agreement shall be true and correct in all material respects at
and as of the Closing Date as though such representations and
warranties were made at and as of the Closing Date.
6.02 Performance
As of the Closing, Seller, Mr. Mann and any other party
(other than Purchaser) to any Related Agreement shall have
performed and complied with all covenants and agreements and
satisfied all conditions required to be performed and complied
with by any of them at or before the Closing Date by this
Agreement or any of the Related Agreements.
6.03 Absence of Suit
No action, suit or proceeding before any court or any
governmental or regulatory authority shall have been commenced or
threatened against Purchaser, Seller or Mr. Mann or any
affiliate, associate, officer or director of any of them, and no
investigation by any governmental or regulatory authority shall
have been commenced, against Purchaser, Seller or Mr. Mann or any
affiliate, associate, officer or director of any of them, seeking
to restrain, prevent or change the transactions contemplated
hereby, or challenging the validity or legality of any such
transactions, or seeking damages in connection with any of such
transactions.
6.04 Receipt of Approvals, etc.
All material approvals, consents and/or waivers that are
necessary to effect the transactions contemplated hereby shall
have been received.
6.05 Authorization
Any consent, approval, authorization, order or filing with
any court or governmental agency or administrative body required
for the consummation of the transactions contemplated by this
Agreement shall have been obtained or made and shall be in effect
on the Closing Date.
6.06 Documents
Purchaser shall have received all of the documents required
to be delivered to it pursuant to Section 8.02 and elsewhere in
this Agreement. Seller shall have delivered to the Purchaser at
or prior to the Closing such other documents (including
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certificates of officers of Seller) as the Purchaser may
reasonably request in order to enable the Purchaser to determine
whether the conditions to their obligations under this Agreement
have been met and otherwise to carry out the provisions of this
Agreement.
6.07 Completion of Due Diligence Investigation
Purchaser shall have completed its investigation of the
Purchased Assets and business of Seller prior to the Closing Date
with Purchaser's accountants, attorneys and officers having been
afforded free access to perform due diligence investigations of
the books, records and operations of Seller and interviews with
Seller's sales and project management employees.
6.08 Opinion of Counsel
Seller shall have delivered to the Purchaser before Closing
the opinion of counsel to Seller, satisfactory to counsel for the
Purchaser.
6.09 Review of Proceedings
All actions, proceedings, instruments, and documents
required to carry out this Agreement or incidental thereto and
all other related legal matters shall be subject to the
reasonable approval of the counsel to the Purchaser, and Seller
shall have furnished such counsel such documents as such counsel
may have reasonably requested for the purpose of enabling him to
pass upon such matters.
6.10 No Governmental Action
There shall not have been any action taken, or any law,
rule, regulation, order, or decree proposed, promulgated,
enacted, entered, enforced, or deemed applicable to the
transactions contemplated by this Agreement by any federal,
state, local, or other governmental authority or by any court or
other tribunal, including the entry of a preliminary or permanent
injunction, which, in the reasonable judgment of the Purchaser,
(a) makes any of the transactions contemplated by this Agreement
illegal, (b) results in a delay in the ability of the Purchaser
to consummate any of the transactions contemplated by this
Agreement, (c) requires the divestiture by the Purchaser of any
of the Purchased Assets or of a material portion of the business
of the Purchaser and its subsidiaries taken as a whole, (d)
imposes material limitations on the ability of the Purchaser
effectively to exercise full rights of ownership of the Purchased
Assets or (e) otherwise prohibits, restricts, or delays
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consummation of any of the transactions contemplated by this
Agreement or impairs the contemplated benefits to the Purchaser
of the transactions contemplated by this Agreement.
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6.11 Minimum Sales, Net Income, and Net Worth
The percentages of Seller's gross revenues attributable to
professional services which Purchaser would be precluded from
performing by law, regulation or order or to WBE, Small Business
Set Aside and other business-size or other class dependent
contracts or subcontracts as disclosed in Section 2.12 shall not
exceed such as Purchaser shall reasonably determine will
materially negatively affect the future viability and
profitability of the business associated with the Purchased
Assets following Closing and the resulting ownership by
Purchaser.
6.12 Personnel
The Purchaser shall have secured on terms acceptable to it,
including in appropriate cases the securing of written employment
agreements, the employment of such of Seller's key employees and
a sufficient number of other employees as Purchaser shall
reasonably determine are necessary to viably operate and maintain
the business associated with the Purchased Assets, provided
Purchaser has used its best efforts to secure such personnel.
6.13 Execution of Related Agreements
Seller or Mr. Mann, as applicable, shall have executed and
delivered to Purchaser the Related Agreements referenced in
7.01.
6.14 Purchaser's Obtaining of Financing
Prior to Closing, Purchaser shall have been able to obtain
sufficient bank or other financing to enable it to pay the
consideration due under this Agreement and the Related
Agreements, to perform its obligations under the Assumed
Liabilities and the other covenants and obligations of this
Agreement and the Related Agreements and to retain sufficient
working capital to operate its business after Closing, provided
Purchaser has used its best efforts to obtain such financing.
VII. RELATED AGREEMENTS
7.01 Related Agreements
The following related agreements (the "Related Agreements")
shall be executed at Closing by the applicable parties:
(a) The Assumption Agreement, pursuant to which Purchaser shall
agree to assume and pay the scheduled Assumed Liabilities.
(b) The Master Equipment Lease Agreement under which Seller will
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agree to lease to Purchaser for a term of six (6) years with an
option to purchase at the end of such term, all of its fixed
assets, including all field and office equipment, vehicles,
furniture, fixtures and the like.
(c) Certain Premises Subleases covering each premises lease
which Purchaser agrees to sublease from Seller.
(d) The Consulting Services Agreement between Mr. Mann and
Purchaser pursuant to which Mr. Mann will agree to provide
transitional, technical and sales assistance to Purchaser for a
period of five (5) years after Closing.
(e) The ATEC Non-Competition Agreement between Seller and
Purchaser pursuant to which Seller will agree not to compete with
Purchaser for a period of seven (7) years after Closing.
(f) The Mann Non-Competition Agreement between Mr. Mann and
Purchaser pursuant to which Mr. Mann will agree not to compete
Purchaser for a period of twenty (20) years after Closing.
(g) The WATEC Non-Competition Agreement between WATEC and
Purchaser pursuant to which WATEC will agree not to compete with
Purchaser for a period of two (2) years after closing.
(h) The Security Agreement between Purchaser and Seller.
VIII. CLOSING
8.01 Closing, Closing Date and Effective Time
The Closing of the transactions contemplated hereunder (the
"Closing") shall take place on May 24, 1996 (the "Closing Date").
The effective time for the consummation of the transactions
contemplated in this Agreement to occur "at Closing" or "on the
Closing Date" shall be 12:00 a.m. EST on May 23, 1996 (the
"Effective Time").
8.02 Seller's Obligations at Closing
At or prior to the Closing, Seller shall deliver or cause to
be delivered to Purchaser, in form reasonably satisfactory to
Purchaser, the following:
(a) A Bill of Sale and Assignment substantially in the form set
forth in Exhibit 8.02(a), sufficient to effect and evidence the
transfer, conveyance and delivery of the Purchased Assets.
(b) An executed original of the Master Equipment Lease.
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(c) An executed original of each Premises Sublease.
(d) A release and satisfaction (or agreement to provide the
same) of each security interest, lien or encumbrance against any
of the assets except those: (i) for which Purchaser has
expressly assumed in full as an Assumed Liability either the
obligation underlying such security interest or the
responsibility for obtaining the release of such interest or (ii)
to which Purchaser has expressly consented.
(e) Certificates of insurance naming Purchaser as an additional
insured evidencing the three-year tail policy(ies) warranted
under 2.17.
(f) A resolution of Seller's Board of Directors authorizing the
execution, delivery and performance of this Agreement and all
Related Agreements by Seller. If shareholder approval is
required for Seller to effect this sale and the other agreements
hereof, proof of such approval shall accompany the resolution.
(g) All other schedules, certificates and other documents
required by this Agreement to be delivered on or before Closing.
(h) At any time or times on or after the Closing, Seller and Mr.
Mann shall execute, acknowledge, and deliver any and all further
assurances, documents, and instruments reasonably requested by
Purchaser in order to effectively convey the Purchased Assets and
all ownership of such assets free and clear of encumbrances or
title defects except as expressly authorized herein and shall
take all other actions consistent with the terms of this
Agreement that may reasonably be requested by Purchaser in order
to effectuate the purposes and intent hereof.
8.03 Purchaser's Obligations at Closing
At Closing, Purchaser shall deliver or cause to be delivered
to Seller and Mr. Mann, in form reasonably satisfactory to them,
all documents and instruments required to be delivered by
Purchaser to Seller or Mr. Mann by this Agreement and shall pay
the Purchase price payable at Closing pursuant to Section
1.01(b)(1).
In addition, at Closing Purchaser shall deliver or cause to
be delivered to Seller:
(a) A resolution of the Board of Directors of Purchaser
authorizing its execution, delivery and performance of this
Agreement.
(b) An executed original of the Assumption Agreement.
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(c) An executed original of the Consulting Services Agreement.
(d) An executed original of the ATEC Non-Competition Agreement
between Seller and Purchaser.
(e) An executed original of the Mann Non-Competition Agreement
between Purchaser and Mr. Mann.
(f) An executed original of the WATEC Non-Competition Agreement
between Purchaser and WATEC.
(g) The Letter of Credit.
(h) An executed original of the Security Agreement.
(h) At any time or times on or after the Closing, Purchaser
shall execute, acknowledge, and deliver any and all further
assurances, documents, and instruments reasonably requested by
Seller or Mr. Mann in order to effectively convey or assure
payment for the Purchased Assets and shall take any other action
consistent with the terms of this Agreement that may reasonably
be requested by Seller in order to effectuate the purposes and
intent hereof.
IX. TERMINATION
9.01 Termination
This Agreement may be terminated at any time prior to the
Closing Date:
(a) By Purchaser on the one hand or Seller and Mr. Mann acting
jointly on the other hand if there has been a material breach of
any representation, warranty, covenant or agreement contained in
this Agreement on the part of the party other than the party
seeking termination, and such breach has not been promptly cured.
(b) By either Purchaser or Seller and Mr. Mann acting jointly if
(i) there shall be any action taken, or any statute, rule,
regulation or order enacted, promulgated, issued or deemed
applicable to such transactions by any governmental entity which
would make the consummation of the transactions contemplated
hereunder illegal under the terms contemplated hereunder, or (ii)
any investigation or litigation by a governmental entity shall
have been commenced regarding the transactions contemplated by
this Agreement.
(c) By Purchaser if there shall be any action taken, or any
statute, rule, regulation or order enacted, promulgated, issued
or deemed applicable to its acquisition of the Purchased Assets
by any governmental entity, which would prohibit Purchaser's
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ownership or enjoyment of the benefits of all or a material
portion of the Assets, or compel Purchaser to dispose of or hold
separate all or a material portion of the Assets.
(d) By either party, if any condition, event or action has
occurred or not occurred other than through the breach of an
obligation hereof by a party, the occurrence or non-occurrence of
which gives the party a right of termination or non-performance
under any provision of this agreement.
9.02 Effect of Termination
(a) In the event of termination of this Agreement by either
Purchaser or Seller as provided in Section 9.01(b), (c) or (d),
this Agreement shall forthwith become void and there shall be no
liability or obligation on the part of Purchaser, Seller, Mr.
Mann or their respective officers or directors, except to the
extent that such termination results from the willful breach by a
party hereto of any of its representations, warranties, covenants
or agreements.
(b) If this Agreement is terminated pursuant to Section 9.01(a),
the terminating party shall be entitled to all remedies available
to it in law or at equity.
X. MISCELLANEOUS
10.01 Brokerage Fees
Neither the Purchaser, Seller nor Mr. Mann has consented to or
authorized any broker, or third party to act on its behalf,
directly or indirectly, as a broker or finder in connection with
the transaction contemplated by this Agreement. In the event any
claim is made for a broker's or finder's fee in connection with
the transactions contemplated hereunder, the party responsible
for retaining or securing said broker or finder shall be solely
responsible for the payment of any broker's or finder's fees
incurred as a result thereof. Further, the responsible
individuals shall indemnify the other party(ies) against any loss
or liabilities by reason of such broker's or finder's fees.
10.02 Further Actions
At any time and from time to time, each party agrees, at its
or his expense, to take such actions and to execute and deliver
such documents as may be reasonably necessary to effectuate the
transfer of the assets hereunder and the purposes of this
Agreement.
10.03 Availability of Equitable Remedies
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Since a breach of the provisions of this Agreement could not
adequately be compensated by money damages, any party shall be
entitled, either before or after the Closing, in addition to any
other right or remedy available to it, to an injunction
restraining such breach or a threatened breach and to specific
performance of any such provision of this Agreement, and the
parties hereby consent to the issuance of such an injunction and
to the ordering of specific performance without proof of
irreparable injury or uniqueness of the assets to be conveyed.
10.04 Survival
Except as otherwise provided herein, the covenants,
agreements, representations, and warranties contained in or made
pursuant to this Agreement, but not the conditions to Closing
contained in Articles V and VI, shall survive the Closing and any
delivery of the purchase price by the Purchaser irrespective of
any investigation made by or on behalf of any party.
10.05 Merger - Modification
The Agreement and the exhibits, schedules and Related
Agreements hereto set forth the entire understanding of the
parties with respect to the subject matter hereof, supersede all
existing agreements among them concerning such subject matter,
and may be modified only by a written instrument duly executed by
each party. Notwithstanding the foregoing, the Confidentiality
Agreement dated April 30, 1996, between the parties shall not be
superseded unless closing of this transaction occurs in fact and
shall remain in effect if this Agreement is terminated.
10.06 Notices
All notices, elections, payments, reports or other
correspondence required or permitted hereunder shall be in
writing and deemed to have been properly given or delivered when
personally delivered, mailed by certified mail or delivered by a
nationally recognized overnight express courier, postage fees
prepaid, to the party to whom directed at the below specified
addresses:
A. If to Seller and/or Mr. Mann:
American Testing and Engineering Corporation
and/or Mr. Gerald D. Mann
8653 Bash Street
Indianapolis, Indiana 46256-1202
Attn: Mr. Gerald D. Mann, President
with a copy sent in one of the prescribed manners to:
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John C. Stark, Esq.
Stark Doninger & Smith
50 South Meridian Street
Suite 700
Indianapolis, Indiana 46204
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B. If to Purchaser:
Mr. Morry F. Rubin, President
ATC Environmental Inc.
104 East 25th Street, 10th Floor
New York, NY 10010
with a copy sent in one of the prescribed manners to:
John Smith, Esq.
ATC Environmental Inc.
1515 East 10th Street
Sioux Falls, South Dakota 57103-1721
Any such notice shall be deemed given at the time of personal
delivery, three days after deposit with the mail or one day
following deposit with an overnight express courier. The address
of a party may be changed in accordance with the notice
provisions of this section.
10.07 Waiver
Any waiver by any party of a breach of any provision of this
Agreement shall not operate as or be construed to be a waiver of
any other breach of that provision or of any breach of any other
provision of this Agreement. The failure of a party to insist
upon strict adherence to any term of this Agreement on one or
more occasions will not be considered a waiver or deprive that
party of the right thereafter to insist upon strict adherence to
that term or any other term of this Agreement. Any waiver must be
in writing.
10.08 Binding Effect
The provisions of this Agreement shall be binding upon and
inure to the benefit of Seller, the Purchaser, and their
respective successors and assigns and Mr. Mann and his assigns,
heirs, and personal representatives, and shall inure to the
benefit of the indemnitees and their respective successors,
assigns, heirs, and personal representatives.
10.09 No Third-Party Beneficiaries
This Agreement does not create, and shall not be construed
as creating, any rights enforceable by any person not a party to
this Agreement (except as provided in Section 10.08).
10.10 Separability
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If any provision of this Agreement is invalid, illegal, or
unenforceable, the balance of this Agreement shall remain in
effect, and if any provision is inapplicable to any person or
circumstance, it shall nevertheless remain applicable to all
other persons and circumstances unless the result thereof would
result in an unjust modification of the balance of rights and
obligations hereunder.
10.11 Headings
The headings of this Agreement are solely for convenience of
reference and shall be given no effect in the construction or
interpretation of this Agreement.
10.12 Governing Law
To the extent permitted by law, this Agreement shall be
governed by and construed in accordance with the laws of the
state of Indiana without giving effect to conflict of laws. Each
of the parties hereby consents to the jurisdiction of the courts
of the state of Indiana, agrees to submit to service therefrom
and waives any claim it may have as to forum non conveniens in
connection with any action brought in the state of Indiana.
10.13 Separate Counterparts
This Agreement is being executed in several identical
counterparts, each one of which shall be considered an original
and all of which when taken together shall constitute but one
instrument.
10.14 Incorporation of Recitals, Exhibits and Schedules
All exhibits, schedules and Related Agreements attached
hereto are incorporated herein by this reference and expressly
made a part of this Agreement.
10.15 Mediation and Arbitration
In the event there shall arise any dispute or claim in law
or equity arising out of this Agreement or any breach thereof or
any resulting transaction between the parties under this
Agreement, the parties agree that such dispute shall be first
submitted to mediation in accordance with Rule 2 of the Indiana
Rules of Alternative Dispute Resolution, as amended. If
mediation does not result in an agreed disposition of the matter,
then the dispute shall be resolved by binding arbitration in
accordance with Rule 3 of the Indiana Rules of Alternative
Dispute Resolution, as amended (Rule 3). The parties agree that
unless prohibited by Rule 3, the dispute shall be submitted to
and decided by one (1) neutral, law-trained arbitrator selected
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in accordance with the selection procedures of Rule 3 at a
location mutually agreed to in writing by the parties or if they
cannot agree, at the office of Purchaser in Indianapolis, Indiana
and conducted in accordance with Rule 3 and not by court action
except as provided by Indiana law for judicial review of binding
arbitration awards with appropriate recovery of costs, attorney's
and arbitration fees being apportioned by the arbitrator.
Judgment of the award rendered by the arbitrator may be entered
in any court having jurisdiction thereof. The arbitrator shall
base his decision and award on proper application of Indiana law
and shall not employ a decisional method of compromising
proposals or "splitting down the middle."
10.16 Non-Working Dates
When any date on which payment or any other performance is
due under this agreement falls on a Saturday, Sunday or national
holiday, such payment or performance shall be due on the next
business day following such date.
10.17 Opportunity to Cure
All parties to this Agreement shall be afforded a period of
five (5) days following notice thereof to cure any alleged breach
of this Agreement unless the loss threatened by such breach is of
such gravity to require immediate action.
XI. DEFINED WORDS AND PHRASES
11.01 Convention for Definition of Terms
Words used in this Agreement shall have their ordinary
meaning unless specifically defined in this Agreement. Where a
word or phrase appears in quotation marks within parentheses
(whether or not listed in 11.02), the word or phrase in
quotation marks shall have the meaning throughout this Agreement
(unless a more limited scope is specified or is obvious from the
context) defined by the definition immediately preceding and in
apposition to the quoted word or phrase. Most (but not all)
defined words or phrases are delineated as such by the use of
capitalized first letters.
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IN WITNESS WHEREOF, the parties have duly executed this
Agreement as of the date set forth in the opening paragraph
hereof.
ATC ENVIRONMENTAL INC. AMERICAN TESTING AND
ENGINEERING CORPORATION
By /s/ Nicholas J. Malano By /s/ Gerald D. Mann
------------------------------ ----------------------------
Nicholas J. Malino Gerald D. Mann
Senior Vice President President
Date: May 24, 1996 Date: May 24, 1996
----------------------- ----------------------
/s/ Gerald D. Mann
----------------------
GERALD D. MANN
/s/ Gerald D. Mann
-----------------------
Gerald D. Mann
May 24, 1996
Date:------------------
59
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ASSUMPTION AGREEMENT
THIS ASSUMPTION AGREEMENT (this "Assumption Agreement") is
entered into this 24th day of May, 1996, by and among ATC
ENVIRONMENTAL INC., a Delaware corporation, whose principal place
of business is at 104 East 25th Street, 10th Floor, New York, NY
10010 ("Purchaser") and AMERICAN TESTING AND ENGINEERING
CORPORATION, an Indiana corporation, whose principal place of
business is at 8653 Bash Street, Indianapolis, IN 46256-1202
("Seller"); and Seller's founder and principal shareholder,
GERALD D. MANN, an Indiana resident ("GDM").
RECITALS
A. Concurrent herewith, Purchaser, Seller and GDM have
entered into an Agreement for Sale and Purchase of Business
Assets, dated May 24, 1996 ("Purchase Agreement"), in which
Purchaser has agreed to purchase and/or lease with an option to
purchase, substantially all of Seller's assets.
B. As a material inducement to Seller and GDM to enter
into the Purchase Agreement, Purchaser has agreed to assume
certain liabilities and obligations of ATEC in connection with
its business and/or assets.
NOW, THEREFORE, in consideration of the above premises and
the consideration payable under the Purchase Agreement and the
Related Agreements (as defined under the Purchase Agreement), the
receipt and sufficiency of which is hereby acknowledged,
Purchaser, Seller and GDM do hereby agree as follows:
1. Assumption of Liabilities by Purchaser. Purchaser
assumes and agrees to pay and discharge, effective from and after
the date hereof, the specifically identified debts, obligations
and liabilities listed on Schedule "A" hereto (collectively
referred to herein as the "Assumed Liabilities") with the payment
schedule as indicated thereon. Any debt, liability or obligation
that is not set forth on Schedule "A" is not assumed by Purchaser
and is retained by Seller or GDM, as the case may be. If there
is attached hereto a schedule of non-assumed liabilities, the
omission of any item thereon shall not be construed to mean or
imply that the item is an assumed liability.
2. Substitution and Release of Seller and GDM. Purchaser
agrees to use its best efforts to cooperate with Seller and GDM
in attempting to obtain from the obligees of the Assumed
Liabilities (other than current trade payables) formal written
releases of Seller and/or GDM from liability under the specified
Assumed Liabilities. Purchaser shall, however, have no
responsibility other than its commitment of best efforts under
this section to
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obtain the novation of, the consent to substitute Purchaser for
Seller and/or GDM as the obligor(s) on, or the release of Seller
and/or GDM from, the Assumed Liabilities, and if Seller and/or
GDM desires to obtain such novation, substitution or release, it
shall be the responsibility of Seller and/or GDM to achieve this
(Purchaser will, however, cooperate in this effort in good faith
with its best efforts as provided in this paragraph 2). The
inability of Seller and Purchaser to obtain formal releases,
novations, or assignments of the Assumed Liabilities shall not,
however, diminish Purchaser's responsibility to assume and
perform the obligations of the Assumed Liabilities, provided
Seller cooperates with Purchaser in setting up arrangements,
whether formal or informal, that enable Purchaser to perform the
Assumed Liabilities.
3. Indemnity by Purchaser. Purchaser agrees to indemnify
and defend Seller and GDM in accordance with Purchaser's
indemnity covenant set forth in 1.03 of the Purchase Agreement
from and against any and all debts, losses, damages, costs or
expenses, including without limitation, reasonable attorney's
fees and other defense costs, resulting or arising from or
incurred in connection with Purchaser's failure to perform and
fully discharge the Assumed Liabilities.
4. Capitalized Terms. All capitalized terms in this
Assumption Agreement not defined otherwise herein shall have the
meaning ascribed to them in the Purchase Agreement unless the
context plainly indicates that such meaning is inappropriate.
5. Further Instruments. The parties hereto agree that
they will execute any and all other documents or legal
instruments that may be necessary or required to carry out and
effectuate all of the provisions hereof.
6. Governing Law. This Assumption Agreement, and all
matters relating hereto, including any matter or dispute arising
out of this Assumption Agreement, shall be interpreted, governed,
and enforced according to the laws of the State of Indiana, and
the parties hereto consent to resolve such disputes in accordance
with the jurisdiction and dispute resolution provisions of
10.15 of the Purchase Agreement.
7. Incorporation of Recitals and Schedule. The above
recitals and the schedule(s) attached hereto are incorporated
herein by reference and expressly made a part of this Assumption
Agreement.
8. Dispute Resolution. All disputes hereunder between the
parties shall be resolved in accordance with Section 10.15 of the
Asset Purchase Agreement.
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IN WITNESS WHEREOF, the parties have caused this Assumption
Agreement to be executed on the date first set forth above.
ATC ENVIRONMENTAL INC. AMERICAN TESTING AND
ENGINEERING CORPORATION
By: /s/ Nicholas J. Malino /s/ Gerald D. Mann
------------------------- By:-------------------------
Nicholas J. Malino, Gerald D. Mann,
Senior Vice President President
ATC ATEC
/s/ Gerald D. Mann
____________________________
Gerald D. Mann
GDM
Page 3 of 3
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MASTER EQUIPMENT LEASE AGREEMENT
This Master Equipment Lease Agreement, dated May 24, 1996
("Agreement"), is by and between American Testing and Engineering
Corporation, an Indiana corporation ("Lessor"), and ATC Environmental
Inc., a Delaware corporation ("Lessee").
Recitals
A. Lessor and Lessee entered into an Agreement for Sale and Purchase
of Business Assets, dated May 24, 1996 ("Purchase Agreement"), pursuant
to which Lessee will purchase certain assets and assume certain
liabilities of Lessor.
B. The Purchase Agreement provides that, concurrent with the
closing of the transactions contemplated by the Purchase Agreement,
Lessor and Lessee (collectively, the "Parties") will enter into this
Agreement.
Terms
In consideration of the foregoing and the mutual covenants and
obligations set forth in this Agreement and for other good and valuable
consideration, the receipt and sufficiency of which are hereby
acknowledged by each of the Parties, Lessor and Lessee, each intending to
be legally bound, agree as follows:
ARTICLE I. LEASING
1.1. Lessor agrees to lease to Lessee, and Lessee agrees to lease
from Lessor, the equipment and other fixed assets listed in Exhibit A
attached hereto and by reference made a part hereof (collectively, the
"Equipment"). Exhibit A also lists the location (city and state) where
each item of Equipment is permanently located as of the date of this
Agreement.
ARTICLE II. TERM, RENT AND PAYMENT
2.1. The term of this Agreement ("Term") shall begin on the date of
this Agreement ("Origination Date") and end on the sixth anniversary of
the date of this Agreement or such earlier date as this Lease shall be
terminated pursuant to its terms ("Termination Date").
2.2. Rent shall be paid to Lessor at 8653 Bash Street, Indianapolis,
Indiana 46256 or at such other address as shall have been designated by
Lessor to Lessee in accordance with the notice provisions set forth in
Section 18.2 of this Agreement. If rent is not paid within fifteen (15)
days of its due date, Lessee shall pay a late charge of one percent (1%)
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of the amount of such rent but not exceeding the lawful maximum;
provided, however, that such late payment(s) and late charge(s) shall be
accepted at the option of Lessor and, until acceptance, nothing shall
prejudice the right of Lessor to declare a default hereunder for non-
payment of rent. All sums due under this Agreement shall be without
relief from valuation and appraisement laws.
2.3. Rent for the Equipment shall be due and payable as follows:
(a) on the date of this Agreement, $3,000,000, and (b) monthly in arrears
on the first day of each month in the amount of (i) $298,333.33 per month
for months 1 through 12 of the Term, (ii) $215,833.33 per month for
months 13 through 24 of the Term, and (iii) $215,000.00 per month for
months 25 through 36 of the Term. No rent payments are due hereunder
from months 37 through 72.
2.4. Lessor shall have the option of terminating this Agreement at
the end of any lease year by giving written notice thereof to Lessee at
least 30 days prior to the end of such lease year. Upon such
termination, Lessor shall reimburse to Lessee an amount of money equal to
the amount by which the amount of rent paid to the termination date
exceeds the amount of rent earned to that date, assuming the rent paid or
to be paid pursuant to Section 2.3 is earned equally over the anticipated
six (6)-year term of this Agreement.
2.5. Lessee shall have the option of terminating this Agreement at
the end of the first lease year or any lease year thereafter if, during
Lessee's most recent completed fiscal year, Lessee, using its best
efforts, shall not have generated from the Equipment, the Purchased
Assets (as defined in the Purchase Agreement) and the business acquired
from Lessor pursuant to the Purchase Agreement and agreements related
thereto (collectively, the "Acquired Business"), at least $30 million in
annualized gross revenue ("Revenue Target"). In the event Lessee shall
have disposed of or no longer be actively engaged in any portion of the
Acquired Business, the Revenue Target shall be prorated to reflect the
same. In order to exercise this option, Lessee shall give Lessor written
notice at least 30 days prior to the end of the lease year. Lessee shall
not be obligated to make any further rent payments after the lease
termination, but all payments paid or due to have been paid on or before
the lease termination date pursuant to Section 2.3 will be deemed to have
been fully earned by Lessor.
III. LOCATION OF EQUIPMENT
3.1. During the Term, the Equipment shall be located at locations
owned or leased from time to time by Lessee, except for temporary periods
during which field equipment shall be taken from such location for use or
maintenance or as otherwise agreed in writing by Lessor. Lessee agrees
annually or as otherwise reasonably requested by Lessor to notify Lessor
in writing of any change in the permanent location of any piece of
Equipment from the location listed in Exhibit A or the last address of
which Lessee shall have advised Lessor for such Equipment. Lessee
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acknowledges that Lessor will rely on such information in filing sales
tax returns and paying sales taxes in connection with the Equipment.
IV. TITLE TO EQUIPMENT
4.1. Title to the Equipment shall at all times during the Term
remain in Lessor exclusively. Until an event of default, Lessee shall be
entitled to possession. Lessee, at its own expense, shall protect and
defend the title of Lessor from and against claims asserted based on acts
or omissions of Lessee or its agents and shall give Lessor prompt notice
of any other challenges to such title of which it receives notice.
Lessee shall keep the Equipment and this Agreement free and clear from
all attachments, liens, encumbrances, claims and charges of every kind
(except those caused by Lessor), shall give Lessor immediate written
notice thereof and shall indemnify and save Lessor harmless from any loss
or damage caused thereby. The Equipment is and shall remain personal
property during the term of this Agreement, irrespective of its use or
manner of attachment to realty. Except as such may exist on the
Origination Date, Lessee will not cause or permit the Equipment to be
installed into realty or attached to realty in such manner that it might
become subject to any lien or right of any person or entity having an
interest in such realty.
4.2. At all times during the Term, Lessor shall keep the Equipment
free and clear of all liens, mortgages, attachments, security interests,
pledges, changes, encumbrances and claims arising from the acts or
omissions of Lessor except for the protective security filings by Lessor
under Section 18.1 of this Agreement ("Liens"). If any Lien shall be
asserted against the Equipment or if any bankruptcy or insolvency
proceedings shall be instituted against Lessor, Lessee's obligation to
make any lease payments shall be delayed until such Lien is removed or
proceeding dismissed; provided, however, that all rights which would have
accrued during the pendency of any Lien but for the provisions of this
section shall become immediately due and payable upon such removal or
dismissal. Upon removal of such Lien or dismissal of such proceeding,
all amounts which otherwise would have been due during the pendency of
such Lien or proceeding shall immediately become due and payable. If the
Lien is not removed within sixty (60) days, Lessee shall have the right
to clear such Lien and set off amounts reasonably expended by Lessee
therefor.
V. TAXES AND REGISTRATION
5.1. Lessee shall have no liability for sales taxes or its
equivalent ("Sales Taxes") due as a result of the transactions described
in this Agreement or federal, state or local taxes which are on or
measured by the net income or gross receipts of Lessor. Lessee shall
report and pay promptly all other taxes, registrations, fees and
assessments due, assessed or levied against the Equipment (or the
leasing, possession, use or operation thereof), or Lessee by any foreign,
federal, state or local government or taxing authority during or related
to the Equipment or this Agreement (including, without limitation,
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penalties, fines or interest thereon) during the Term (collectively,
"Other Taxes"). For clarification, Lessee shall be responsible for
payment of personal property or like taxes only to the extent that
taxable value is calculated according to historical means of personal
property assessment (e.g., based on depreciated original cost). Upon
request, Lessor shall (i) reimburse Lessee upon receipt of written
request for reimbursement of any Sales Taxes charged or assessed against
Lessee or (ii) submit to Lessee written evidence of Lessor's payment of
Sales Tax. Lessee shall (i) reimburse Lessor upon receipt of written
request for reimbursement for any Other Taxes charged to or assessed
against Lessor, (ii) submit to Lessor written evidence of Lessee's
payment of Other Taxes, and/or (iii) on all reports or returns, show
Lessor's ownership of the Equipment, and send a copy thereof to Lessor.
Lessor hereby designates Lessee as its attorney-in-fact for the sole
purpose of registration of any and all vehicles included as Equipment.
VI. REPORTS AND INSPECTION
6.1. Upon notification thereof, Lessee and Lessor shall immediately
notify each other in writing of the attachment of any tax or other Lien
to the Equipment and of the full particulars thereof.
6.2. Lessee shall permit Lessor to inspect the Equipment during
normal business hours.
6.3. Lessee shall promptly and fully report to Lessor in writing if
the Equipment is lost or damaged (where the estimated repair costs would
exceed ten percent (10%) of its then fair market value), or is otherwise
involved in an accident causing personal injury or property damage.
VII. USE AND OPERATION
7.1 Lessee agrees that the Equipment shall be used solely in the
conduct of its business and in a manner complying with all applicable
federal, state, and local laws and regulations.
7.2 Lessee shall not assign, mortgage, sublet or hypothecate the
Equipment, or the interest of Lessee hereunder without Lessor's prior
written consent.
VIII. MAINTENANCE; MODIFICATIONS
8.1. Lessee, at its sole expense, shall maintain the Equipment in
good operating order, repair, condition and appearance in accordance with
manufacturer's recommendations, normal wear and tear excepted. Lessee
shall not remove the existing Equipment plates, tags or identifying
labels showing Lessor's ownership and shall promptly affix such
identification to any replacement Equipment under Section 11.1.
8.2. Lessee shall not, without the prior written consent of Lessor,
affix or install any accessory, equipment or device on the Equipment if
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such addition will impair the originally intended function or use of the
Equipment. All additions, repairs, parts, supplies, accessories,
equipment, and devices furnished, attached or affixed to the Equipment
which are not readily removable shall be made only in compliance with
applicable law, including Internal Revenue Service guidelines, and shall
become Equipment, as defined herein.
8.3. Any alterations or modifications to the Equipment that may,
during the term hereof, be required to comply with any law, rule or
regulation shall be made at Lessee's expense.
IX. LOSS OR DAMAGE
9.1. Lessee hereby assumes and shall bear the entire risk of any
loss, theft, damage to, or destruction of, the Equipment. Lessee shall
not be released from the payment of any rent or any sum which may become
due hereunder by reason of any loss of or damage to the Equipment except
to the extent such shall have resulted from a breach of Lessor's warranty
set forth in Section 17.2(b). Lessee agrees that Lessor shall not incur
liability to Lessee for any loss of business, loss of profits, expenses,
or any damages resulting to Lessee by reason of any delay caused by any
non-performance, defective performance or breakdown of the Equipment.
9.2 Lessee acknowledges that this is a master lease agreement and
that the consideration provided under this Agreement relates to the
Equipment in aggregate and that such consideration is less than that
which would have been charged had each item of Equipment been valued
individually. Accordingly, in the event any one or more items of
Equipment becomes lost, stolen, destroyed, damaged, inoperable or
otherwise defective after the Origination Date, Lessor shall be under no
obligation to replace or repair such Equipment, nor shall there be any
reduction in the consideration to be paid under Sections 2.2 or 11.1 or
otherwise by Lessee under this Agreement.
9.3. The Parties acknowledge that the Equipment includes certain
leasehold improvements and fixtures (collectively, "Leasehold
Improvements") related to certain real estate leases assumed by Lessee
and certain real estate sublet by Lessee from Lessor (collectively, "Real
Estate Agreements"). The Leasehold Improvements are being leased to
Lessee hereunder to the extent permitted by, and subject to the
provisions of, the appropriate Real Estate Agreement. To the extent
permitted by, and subject to the provisions of, the appropriate Real
Estate Agreement, upon the conclusion of the term of such agreement, the
Leasehold Improvements may be removed and relocated by Lessee, provided
that Lessee shall be liable for any damage which may have been caused by
such removal and relocation.
X. INSURANCE
10.1. Lessee agrees, at its expense, to keep all the Equipment
insured for such amounts and against such hazards as Lessor reasonably
may require, including, but not limited to, insurance for damage to or
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loss of the Equipment and liability coverage for personal injuries, death
or property damage, with Lessor named as additional insured and with a
loss payable clause in favor of Lessor, as its interest may appear,
irrespective of any breach of warranty or other act or omission of
Lessee. All such policies shall be with companies, and on terms
reasonably satisfactory to Lessor. Lessee agrees to deliver to Lessor
evidence of insurance satisfactory to Lessor. With respect to a
liability claim against Lessor, Lessee hereby appoints Lessor as Lessee's
attorney-in-fact to make proof of loss and claim for insurance with
respect to the Equipment, and to make adjustments with insurers and to
receive payment of and execute or endorse all documents and instruments
in connection with payments made as a result of such insurance policies.
Any expense of Lessor in adjusting or collecting insurance shall be borne
by Lessee. Lessee will not make adjustments with insurers except
(a) with respect to claims for damage to the Equipment where the repair
costs do not exceed ten percent (10%) of its fair market value, or
(b) with Lessor's written consent. Lessor shall, at its option, apply
proceeds from property damage insurance (after deduction of any
applicable expenses), to repair or replace the Equipment or any portion
thereof, or satisfy any obligation of Lessee to Lessor hereunder. To the
extent Lessor purchases replacements for any Equipment, such replacements
shall be deemed to be Equipment and shall be governed by the terms of
this Agreement.
XI. PURCHASE OPTION/LEASE TERMINATION
11.1. As long as no material default exists and termination shall
not have resulted from an exercise by Lessee of its termination rights
under Section 2.5, Lessee may purchase all, but not less than all, of the
Equipment on an AS IS basis for a cash consideration of One Million Seven
Hundred Thousand and no/100 Dollars ($1,700,000.00) as of the Termination
Date. The parties agree that such price is an agreed good faith estimate
of the value of the Equipment as of such date. The option to purchase
shall be exercised by Lessee giving to Lessor, at least sixty (60) days
before the Termination Date, written notice of Lessee's intention to
exercise such option.
11.2. Unless Lessee exercises the purchase option described in
Section 11.1, as of the Termination Date, regardless of the cause of such
termination, Lessee shall, at its expense: (a) perform any repairs
required to place each item of Equipment in good working order; (b) cause
the Equipment to be de-installed, disassembled and crated by a person
acceptable to Lessor, and (c) return the Equipment to a location Lessor
shall direct.
XII. DEFAULT
12.1. Lessor may in writing declare this Agreement in default upon
any of the following events: (a) Lessee breaches its obligation to pay
rent or any other sum when due and fails to cure the breach within five
(5) days after notice thereof, provided that an act of default shall not
be deemed to have occurred hereunder relative to a dispute regarding the
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exercise of set-off rights during the pendency of proceedings under
Section 1.04 of the Purchase Agreement in connection therewith;
(b) Lessee breaches any of its insurance obligations; (c) Lessee breaches
any of its other obligations and fails to cure that breach within ten
(10) days after notice thereof; (d) any representation or warranty made
by Lessee in connection with this Agreement shall be false or misleading;
(e) Lessee becomes insolvent or ceases to do business as a going concern;
(f) the Equipment is illegally used; or (g) a petition is filed by or
against Lessee under any bankruptcy or insolvency laws.
12.2. After default, Lessee, without further demand, shall pay to
Lessor all rent, Purchase Consideration and other sums due or to become
due under this Agreement, together with costs of collection and
reasonable attorneys' fees. In the event all such payments (including
Purchase Consideration) are not promptly made, title to the Equipment
shall be vested in Lessor. Lessee shall promptly, at its expense:
(a) perform any repairs required to place each item of Equipment in good
working order for its intended purpose; (b) cause the Equipment to be de-
installed, disassembled and crated by a person acceptable to Lessor, and
(c) return the Equipment to a location Lessor shall direct. Lessor may,
but shall not be required to, sell the Equipment at private or public
sale, in bulk or in parcels, with or without notice, and without having
the Equipment present at the place of sale; or Lessor may lease, dispose
of or keep idle the Equipment; and Lessor may use Lessee's premises for
any or all of the foregoing without liability for rent, costs, damages or
otherwise. The proceeds of sale, lease or other disposition, if any,
shall be applied in the following order of priorities: (a) to pay all of
Lessor's costs, charges and expenses incurred in taking, removing,
holding, repairing and selling, leasing or disposing of Equipment; (b) to
pay Lessor all sums due from Lessee hereunder (with sums for Purchase
Consideration being applied last); and (c) any surplus shall be retained
by Lessor. Lessee promptly shall pay any deficiency.
12.3. These remedies are cumulative, and any may be exercised in
lieu of or in addition to each other or any remedies at law or in equity.
Lessee waives notice of sale or other disposition, the time and place
thereof, and the manner and place of any advertising. Waiver of any
default shall not be a waiver of any other default.
XIII. ASSIGNMENT
13.1. Neither Lessor nor Lessee may assign this Agreement without
the other party's prior written consent, which consent from Lessee shall
not be unreasonably denied or delayed but which Lessor may grant or deny
in its sole discretion. Lessee and Lessor hereby waive and agree not to
assert against any such assignee any defense, set-off, recoupment claim
or counterclaim which it has or may at any time have against the other
party for any reason whatsoever, except to the extent specifically
provided in this Agreement or the Purchase Agreement.
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XIV. NET LEASE; NO SET-OFF
14.1. This Agreement is a net lease. Lessee's obligation to pay
rent and other amounts due shall be absolute and unconditional. Lessee
shall not be entitled to any abatement or reductions of, or set-offs
against, the rent or other amounts due, except to the extent specifically
provided in the Purchase Agreement or this Agreement. This Agreement
shall not terminate or affect the obligations of Lessee by reason of any
defect in or damage to, or loss of possession, use or destruction of, the
Equipment.
XV. INDEMNIFICATION
15.1. Lessee agrees to indemnify and hold harmless Lessor, its
Affiliates (as defined in the Purchase Agreement) and their successors
from and against any and all losses, damages, penalties, injuries,
claims, actions and suits, including reasonable attorneys' fees
(collectively, "Damages"), arising out of (i) the ownership of Equipment
during the Term, and the delivery, lease, possession, maintenance, use,
condition, return or operation of the Equipment; (ii) the condition of
the Equipment sold or disposed of after use by Lessee; or (iii) the
breach of any representation, warranty or covenant of Lessee hereunder.
Lessee shall defend any actions based on this provision.
15.2. Lessor agrees to indemnify and hold hereunder Lessee, its
Subsidiaries (as defined in the Purchase Agreement) and their successors
from and against any and all Damages arising out of the breach of any
representation, warranty or covenant of Lessor hereunder.
XVI. DISCLAIMER
16.1. EXCEPT AS SPECIFICALLY SET FORTH IN SECTION 17.2, LESSOR DOES
NOT MAKE, AND HAS NOT MADE, ANY WARRANTY OR REPRESENTATION, AND
SPECIFICALLY DISCLAIMS ANY SUCH WARRANTY OR REPRESENTATION, EITHER
EXPRESS OR IMPLIED, WRITTEN OR ORAL, WITH RESPECT TO THE EQUIPMENT,
INCLUDING ANY WARRANTY AS TO DESIGN, COMPLIANCE WITH SPECIFICATIONS,
QUALITY OF MATERIALS OR WORKMANSHIP, MERCHANTABILITY, FITNESS FOR ANY
PURPOSE, USE OR OPERATION, SAFETY, PATENT, TRADEMARK OR COPYRIGHT
INFRINGEMENT, OR TITLE.
XVII. REPRESENTATIONS AND WARRANTIES OF LESSEE AND LESSOR
17.1. Lessee hereby represents and warrants to Lessor that on the
Origination Date hereof:
(a) Lessee has adequate power to enter into, and perform
under, this Agreement and all related documents (collectively,
"Documents") and is duly qualified to do business as necessary to
carry on its business and operations.
(b) The Documents have been duly authorized, executed and
delivered by Lessee and constitute valid, legal and binding
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agreements, enforceable in accordance with their terms.
(c) No approval, consent or withholding of objections is
required from any governmental authority with respect to the
execution by Lessee of the Documents.
(d) The execution and performance by Lessee of the
Documents will not: (i) violate any judgment, order, law or
regulation applicable to Lessee or any provision of Lessee's
Articles of Incorporation or By-Laws; or (ii) result in any
breach of, constitute a default under or result in the creation
of any lien, charge, security interest or other encumbrance upon
the Equipment pursuant to any indenture, mortgage, credit
agreement or other instrument to which Lessee is a party.
(e) There are no suits or proceedings pending or threatened
in court or before any administrative agency against Lessee which
would adversely affect Lessee's ability to fulfill its
obligations hereunder.
(f) Lessee is and will be validly existing and in good
standing under the laws of the state of its incorporation.
(g) The Equipment will at all times be used for commercial
or business purposes.
17.2. Lessor hereby represents and warrants to Lessee that on the
date hereof:
(a) Lessor has good, clear and sufficient title to the
Equipment, free and clear of all Liens other than those imposed
in connection with the Assumed Liabilities, as defined in the
Purchase Agreement.
(b) Each item of Equipment having a depreciated value on
Lessor's books greater than Five Thousand and no/100 Dollars
($5,000.00) will be in fully operational condition (except for
usual wear and tear which is not such as to affect their
operability.)
(c) Lessor has adequate power to enter into, and perform
under, the Documents and is duly qualified to do business as
necessary to carry on its businesses and operations.
(d) The Documents have been duly authorized, executed and
delivered by Lessor and constitute valid and binding agreements,
enforceable in accordance with their terms.
(e) No approval, consent or withholding of objections is
required from any governmental authority with respect to the
execution by Lessor of the Documents.
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(f) The execution and performance by Lessor of the
Documents will not: (i) violate any judgment, order, law or
regulation applicable to Lessor or any provision of Lessor's
Articles of Incorporation or By-Laws; or (ii) result in any
breach of, constitute a default under, or result in the creation
of any lien, change, security interest or other encumbrance upon
the Equipment pursuant to any indenture, mortgage, credit
agreement or other instrument.
(g) There are no suits or proceedings pending or threatened
in court or before any administrative agency against Lessor which
would adversely affect Lessor's ability to fulfill its
obligations hereunder.
(h) Lessor is and will be validly existing under the laws
of its state of incorporation.
XVIII. MISCELLANEOUS
18.1. Lessee authorizes Lessor to execute and file protective
financing statements signed only by Lessor on the Equipment and agrees
that any filing fees incurred shall be paid by Lessee. Lessee agrees,
upon Lessor's request, to execute any instrument necessary or expedient
for filing, recording or perfecting the interest of Lessor.
18.2. Time is of the essence under this Agreement. All notices
required to be given hereunder shall be deemed adequately given if sent
by registered or certified mail or nationally recognized overnight
courier service to the addressee at its address stated herein, or at such
other place as such addressee may have designated in writing. Notice
shall be deemed given three (3) business days after mailing or one (1)
business day after delivery to an overnight courier service. This
Agreement and any Schedule hereto constitute the entire agreement of the
parties with respect to the subject matter hereof. No variation or
modification of this Agreement or any waiver of any of its provisions or
conditions shall be valid unless in writing and signed by an authorized
representative of the Parties hereto.
18.3. Any rent or other amount not paid to Lessor when due hereunder
(subject to Lessee's set off rights under the Purchase Agreement) shall
bear interest at the lesser of twelve percent (12%) per annum or the
maximum rate allowed by law. Any provisions in this Agreement and any
Schedule which are in conflict with any statute, law or applicable rule
shall be deemed omitted, modified or altered to conform thereto.
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18.4. This Agreement shall be governed by the laws of the State of
Indiana, without giving effect to its choice of laws provisions,
regardless of the location from time to time of the Parties or the
Equipment.
IN WITNESS WHEREOF, Lessee and Lessor have caused this Agreement to
be executed by their duly authorized representatives as of the date first
above written.
LESSOR: LESSEE:
AMERICAN TESTING &
ENGINEERING CORPORATION ATC ENVIRONMENTAL INC.
By: /s/ Gerald D. Mann By: /s/ Nicholas J. Malino
--------------------------- ---------------------------
Gerald D. Mann, President Nicholas J. Malino
Senior Vice President
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MASTER SUBLEASE
(Indianapolis, Dallas, Atlanta)
THIS SUBLEASE, dated May 24, 1996, is by and between
American Testing and Engineering Corporation, an Indiana
corporation ("Sublessor"), and ATC Environmental Inc., a Delaware
corporation ("Sublessee").
Recitals
Sublessor and Mann Realty Co., an Indiana corporation
("Master Lessor"), have entered into three (3) Lease Agreements,
each dated May 24, 1996 ("Master Leases"), copies of which are
attached hereto as Exhibit A, pursuant to which Sublessor leases
from Master Lessor certain real property more particularly
described in Section 1 of each Master Lease (collectively, the
"Premises"). Sublessor and Sublessee have entered into an
Agreement for Sale and Purchase of Business Assets, dated May 24,
1996 ("Purchase Agreement"), pursuant to, or in connection with,
which Sublessee is purchasing from Sublessor certain assets and
assuming certain liabilities of Sublessor. The Purchase
Agreement contemplates that Sublessor and Sublessee
(collectively, the "Parties") will enter into this Agreement
concurrent with the closing of the transactions described in the
Purchase Agreement.
Terms
In consideration of the mutual covenants set forth herein
and for other good and valuable consideration, the receipt and
sufficiency of which the Parties hereby acknowledge, Sublessor
and Sublessee, each intending to be legally bound, agree as
follows:
1. Sublease. Sublessor hereby subleases the Premises to
Sublessee, and Sublessee hereby subleases the Premises from
Sublessor, at the rental and upon all of the terms and conditions
set forth herein.
2. Term. The term of this sublease ("Term") shall
commence on the date of this Sublease ("Commencement Date") and
end on the tenth anniversary hereof or such earlier date as it
shall be terminated pursuant to the terms of this Sublease
("Termination Date").
3. Options to Terminate.
(a) Sublessee shall have the option to terminate
this Sublease as to any of the Premises sublet
hereunder on the fourth anniversary of the date of this
Agreement or every successive anniversary date
thereafter during the Term ("Option Termination Date")
if, no later than six (6) months prior to the Option
Termination Date,
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Sublessee shall have provided to Sublessor a written
notice which includes a certificate of an authorized
officer of Sublessee certifying that, as to the
property for which the Sublease is to be terminated,
during Sublessee's then most recently completed fiscal
year, using Sublessee's best efforts, Sublessee has not
recorded at least $24,888,000, $9,468,000 or
$22,775,000 in net revenue from Sublessee's
Indianapolis, Dallas or Atlanta operations,
respectively. Upon the termination of this Sublease in
accordance with its terms as to any of the Premises,
all obligations of Sublessee relative to such Premises
shall terminate except for those which shall have
accrued on or before such termination date.
(b) Sublessor shall have the option of
terminating this Sublease at the end of any lease year
by giving written notice thereof to Sublessee at least
30 days prior to the end of such lease year.
4. Basic Rent. Sublessee shall pay rent and other
payments equal to the rent and other payments to be paid by
Sublessor to Master Lessor under each Master Lease
("Consideration") at the same time as provided in each Master
Lease. Sublessee shall pay the Consideration directly to Master
Lessor and, on request, shall provide evidence of such payment to
Sublessor.
5. Rent Premium. In addition to the Consideration,
Sublessee shall pay to Sublessor as additional consideration, at
such address as Sublessor shall designate in writing from time to
time, a rent premium in the amount of $4,500,000.00, which shall
be payable in installments as follows:
Monthly in arrears during months 1-12 $ 51,750.00
Monthly in arrears during months 13-48 $107,750.00
Notwithstanding anything in this Sublease to the contrary, all
rent premium will be deemed earned when paid or to be paid
hereunder regardless of whether Sublessee exercises its option to
terminate this Sublease pursuant to the provisions of Section 3.
6. Master Leases.
(a) This Sublease is, and at all times shall be,
subject and subordinate to each Master Lease.
(b) The terms, conditions and respective
obligations of Sublessor and Sublessee to each other
under this Sublease shall be the terms and conditions
of each Master Lease except as set forth in Sections 5
(regarding rent premium) or 6(g) (regarding certain
taxes) of this Sublease or provisions, if any, of any
Master Lease which are directly contradicted by this
Sublease, in which case the terms of the Sublease shall
control over the Master Lease. Therefore, for the
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purposes of this Sublease, wherever in a Master Lease
reference is made to the lessor thereunder, it shall be
deemed to mean the Sublessor herein, and wherever in a
Master Lease reference is made to the lessee
thereunder, it shall be deemed to mean the Sublessee
herein.
(c) During the Term and for all periods
subsequent for obligations which have arisen before the
Termination Date, Sublessee hereby expressly assumes
and agrees to perform and comply with, for the benefit
of Sublessor and Master Lessor, each and every
obligation of Sublessor which accrues under each Master
Lease during the Term. Such obligations are referred
to herein as "Sublessee's Assumed Obligations."
(d) Sublessee shall hold Sublessor free of and
harmless from all liability, judgments, costs, damages,
claims or demands, including, without limitation,
reasonable attorneys' fees, arising out of Sublessee's
failure to comply with or perform Sublessee's Assumed
Obligations or its additional obligations to Sublessor
set forth herein.
(e) Sublessor shall hold Sublessee free of and
harmless from all liability, judgments, costs, damages,
claims or demands, including, without limitation,
reasonable attorneys' fees, arising out of Sublessor's
failure to comply with or perform Sublessor's
obligations to Sublessee set forth herein.
(f) Sublessor represents and warrants to
Sublessee that attached hereto as Exhibit A is a true
and correct copy of each Master Lease, as currently in
effect, and that Sublessor is not in default thereunder
nor, to Sublessor's knowledge, is Master Lessor in
default thereunder.
(g) Notwithstanding anything in this Agreement to
the contrary, Seller shall pay all sales taxes due as a
result of this Sublease. Further, Sublessee shall be
liable for property or similar taxes pursuant to the
provisions of Section 6(b) of this Agreement only to
the extent that such are calculated according to
historical means of real property assessment.
7. Deposit.
(a) Sublessee has paid to Sublessor a deposit
("Deposit") in the amount of $2,000,000.00. The
Deposit may be commingled with any other funds of
Sublessor and Sublessor, except as specifically
provided below, shall not be required to repay the
Deposit to Sublessee or to account to Sublessee in any
manner as to the Deposit. No interest shall be payable
to Sublessee with regard to the
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Deposit. Any portion of the Deposit not refunded in
accordance with the provisions set forth below shall be
treated as additional rent premium paid by Sublessee to
Sublessor.
(b) Sublessee may be entitled to a return of all
or a portion of the Deposit but only under the specific
provisions of this Section 7. The portion, if any, of
the Deposit which shall be returned to Sublessee shall
equal the product of (i) 0.4055 and (ii) the difference
between the Projected Net Revenue (as hereinafter
defined) and the Actual Net Revenue (as hereinafter
defined) ("Deposit Refund"); provided, however, in no
event shall the Deposit Refund exceed the amount of
$2,000,000.00 and in the event Actual Net Revenue
exceeds Projected Net Revenue, there shall be no
Deposit Refund. No Deposit Refund shall be paid by
Sublessor while there is an uncured default by
Sublessee under this Sublease, the Purchase Agreement
or any other document executed in connection with the
Purchase Agreement. Sublessor shall be entitled to set-
off, in accordance with the provisions of Section 1.04
of the Purchase Agreement, any such default, until
cured, against any payments of Deposit Refund which are
or may become due and owing during the pendency of a
default. Sublessee shall have no right, title or
interest in and to the Deposit until all conditions of
this Section 7 are met with respect to payment to
Sublessee of the Deposit Refund.
(c) A portion of the Deposit Refund, if any is
due, shall be paid by Sublessor to Sublessee within
fifteen (15) days after the end of the second, third
and fourth lease years, and with respect to the payment
due after the end of the first lease year (if any),
within fifteen (15) days after agreement by and between
the parties as to the total amount of the Deposit
Refund, in the following percentages:
(i) At the end of the first
lease year, Fifty-Eight percent (58%) of the
Deposit Refund;
(ii) At the end of the second
lease year, Fifteen percent (15%) of the
Deposit Refund;
(iii) At the end of the third
lease year, Fifteen percent (15%) of the
Deposit Refund; and,
(iv) At the end of the fourth
lease year, Twelve percent (12%) of the
Deposit Refund.
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For purposes of this subsection (c), a lease year shall
be a calendar year beginning on the Commencement Date
or an anniversary of the Commencement Date.
(d) The term Projected Net Revenue shall mean the
amount of $63,500,000.00.
(e) The term Actual Net Revenue shall mean the
gross revenue generated from the offices of Sublessee
in the cities listed in Exhibit B attached hereto for
the one (1) year period beginning on June 1, 1996 and
ending on May 31, 1997 minus revenue from contracts of
Purchaser in existence on the date prior to the Closing
Date (the "Excluded Contracts"), minus payments made to
subcontractors not affiliated with Sublessee which are
directly attributable to the generation of the gross
revenue, such as subcontractor labor, outside
laboratory, outside drilling services, and other direct
expenses (except those for the Excluded Contracts)
including travel, equipment rental and related costs,
performance bond costs and outside print and
reproduction services. Sublessor shall use its best
efforts to maximize Actual Net Revenue. On a quarterly
basis during that year, Sublessee shall deliver to
Sublessor within sixty (60) days after the end of each
quarter, a statement of Sublessee's calculation of net
revenues for the preceding quarter. After the end of
the first lease year, Sublessee shall deliver to
Sublessor a statement of Sublessee's calculation of
Actual Net Revenue and Deposit Refund. This statement
from Sublessee shall include a notice that Sublessor
shall have a period of thirty (30) days after receipt
of the statement to request an audit of the
calculations contained in the statement and of all
supporting documentation. Sublessor shall then have a
period of thirty (30) days after receipt of that
statement to send to Sublessee a request to perform an
audit of Sublessee's calculations at Sublessor's
expense. Sublessor shall then proceed promptly with
that audit and use best efforts to complete such audit
within sixty (60) days after Sublessee makes its books
and records available to Sublessor. Sublessor shall
cooperate with such audit in all reasonable respects,
including allowing access to its employees, its books
and records and cooperation in contacting
subcontractors. Such audit shall be performed by
Coopers & Lybrand, L.L.P. or such other public
accounting firm or such other party as is acceptable to
Sublessor and Sublessee.
8. Use. Sublessee shall use the Premises only for a
purpose permitted under the Master Lease.
9. Default. In the event Sublessee defaults under this
Sublease, and Sublessee shall fail to cure such default within
the applicable periods of time provided in each Master Lease to
cure a
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breach, Sublessor shall be entitled to exercise all of the rights
and remedies available to the Master Lessor under each Master
Lease, including, without limitation, all remedies available at
law or in equity. Such remedies shall be cumulative and in
addition to any other remedies Sublessor may have at law or in
equity.
10. Notices. Notices or communications required or
permitted to be given under this Sublease shall be in writing and
shall be delivered or given to the respective parties by
registered or certified mail, return receipt requested, or by
recognized overnight courier, at the following addresses, unless
a party otherwise designates in writing:
Sublessor: American Testing and Engineering Corporation
8653 Bash Street
Indianapolis, Indiana 46256
Att'n: Gerald D. Mann, President
with a copy sent in the same manner to:
John C. Stark, Esq.
Stark Doninger & Smith
50 South Meridian Street, Suite 700
Indianapolis, Indiana 46204-3542
Sublessee: John Smith, Esq.
ATC Environmental Inc.
1515 E. 10th Street
Sioux Falls, SD 57103
Notices mailed pursuant to this paragraph shall be deemed to be
given three (3) business days (or, if given by overnight courier,
one (1) business day) after the date of mailing. Notices
delivered in person shall be deemed given at time of receipt.
11. Governing Law. This Sublease shall be governed by and
construed in accordance with the laws of the State of Indiana,
without giving effect to its choice of laws provisions.
12. Binding Effect. This Sublease shall be binding upon,
and inure to the benefit of, the parties hereto and their
respective agreed successors and assigns.
13. Controlling Agreement. This Sublease sets forth the
entire agreement of the parties hereto with respect to Lessee's
subletting of the Premises. In the event of an inconsistency
between a Master Lease and the provisions of this Sublease, the
provisions of this Sublease shall control.
14. Amendments. This Sublease may be amended only pursuant
to an instrument in writing signed by an authorized
representative of each of the parties hereto.
6<PAGE>
<PAGE>
15. Dispute Resolution. All disputes hereunder between the
parties shall be resolved in accordance with Section 10.15 of the
Asset Purchase Agreement.
IN WITNESS WHEREOF, Sublessor and Sublessee have caused this
Sublease to be executed as of the day and year first above
written.
AMERICAN TESTING AND ATC ENVIRONMENTAL INC.
ENGINEERING CORPORATION
By: ___________________________ By: ___________________________
Gerald D. Mann, President Nicholas J. Malino, Senior
Vice President
CONSENT OF MASTER LESSOR
Mann Realty Co. hereby consents to, and agrees to be bound
by, the terms of the foregoing Sublease.
MANN REALTY CO.
/s/ Gerald D. Mann
Date: May 24, 1996 By: ______________________________
Gerald D. Mann,
General Partner
7
<PAGE>
<PAGE>
AMTEC NON-COMPETITION AGREEMENT
THIS AGREEMENT, dated as of the 24th day of May, 1996,
between ATC ENVIRONMENTAL INC., a Delaware corporation with its
principal place of business at 104 East 25th Street, New York,
New York 10010 ("ATC") and AMERICAN TESTING AND ENGINEERING
CORPORATION, an Indiana corporation with its principal place of
business at 8665 Bash Street, Indianapolis, Indiana 46256-1202
("Amtec").
1. Conditions Precedent. Conditions precedent to the
commencement and continued existence of this Non-Competition
Agreement (this "Agreement") and all terms hereof are: (i) the
delivery and closing of an Agreement for Sale and Purchase of
Business Assets (the "Asset Purchase Agreement"), each and every
Related Agreement referenced in the Asset Purchase Agreement and
Bill of Sale and Assignment from Amtec to ATC conveying (or
leasing as applicable) to ATC the specific business assets of
Amtec and (ii) the actual consummation of such transaction
resulting in the acquisition of such Amtec assets by ATC (the
"Asset Purchase"). If the Asset Purchase Agreement shall be
lawfully terminated or rescinded by any party thereto due to the
fault of a party other than ATC, then this Agreement shall
likewise terminate.
2. Term. The term of this Agreement shall commence on the
date first set forth above and will continue thereafter for a
period of seven (7) years.
3. Payment. For its performance throughout the full term
of the restrictive covenants of Section 4. and the other
obligations of this Agreement, ATC will:
(a) Cash at Closing. Pay Amtec Four Hundred
Ninety Thousand and no/100 Dollars ($490,000.00) on the
date of execution hereof. This payment will be made by
wire transfer to the account of Seller at Bank One,
Indianapolis, N.A., routing number 074000010, account
number 611612847.
(b) Anniversary Payment. Pay Amtec One Million
Eight Hundred Thousand and no/100 Dollars
($1,800,000.00) on the first anniversary date of the
date of execution of this Agreement. This payment will
be made by wire transfer to the account set forth in
(a).
1 of 4
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<PAGE>
4. Restrictive Covenants. Amtec agrees, in consideration
of the payments made by ATC hereunder, to abide strictly by the
following covenants. Amtec agrees that for a period of seven (7)
years after Closing (one year after the last payment due under
the Fixed Asset Lease executed as a Related Agreement), it will
not (except for test drilling as now performed by James Mann
under the name of "Raleigh Drilling" - Account No. 35-01 for the
customers and in the territory now served):
(a) Non-Competition. Within the regulated zone,
either directly or indirectly, perform for hire the
same or similar services in which ATC or Amtec are
engaged or own, or participate in, be employed by, or
serve as a consultant or other agent or contractor to
or for any business or enterprise (including any entity
consisting of only Gerald D. Mann or members of the
Mann family), other than ATC, engaged in the same or
similar fields of services as ATC, without the express
written consent of ATC. The "regulated zone" means all
areas within the fifty states of the United States and
all counties in the State of California listed on
Schedule 4(a) in which Amtec conducts business. The
fields in which ATC or Amtec are engaged include (but
are not necessarily limited to): asbestos testing,
design and consulting; lead testing, design and
consulting; environmental assessments and risk
assessments; remedial investigations; remedial action
consulting, planning and design; soil and groundwater
remediation; asbestos and general analytical laboratory
services; industrial hygiene consulting; air quality
testing, design and consulting; environmental and
facilities management software development and
distribution; civil and geo-technical engineering; and
geo-technical and materials testing.
(b) Non-Disclosure. Use for its benefit, or
disclose, communicate or divulge to, or use for the
direct or indirect benefit of, any person, firm,
association or company other than ATC or its
affiliates, any information regarding the business
methods, business policies, procedures, techniques,
research or development projects or results, trade
secrets, customers or clients or any other confidential
information relating to or dealing with the business
operations of ATC, the purchased assets or the business
associated with the Asset Purchase.
(c) Non-Solicitation - Employees. Either
directly or indirectly, for itself or any person or
entity other than ATC, hire or induce or attempt to
influence any employee or former employee of ATC or its
affiliates to terminate such employment. An employee
of ATC shall be considered a "former employee" for a
period of one (1) year following termination of
employment with ATC.
Page 2 of 4
<PAGE>
<PAGE>
(d) Non-Solicitation - Customers. Within the
regulated zone, and, with respect to any customer with
whom it has developed a relationship or about whom it
acquired knowledge of its needs, preferences, pricing
or other information of material competitive value,
within any location where that customer is doing
business, directly or indirectly on behalf of itself or
any third party, make any sales contact with, or
solicit or accept business from, any customers of ATC
or its affiliates or of Amtec, provided however, that
this restriction shall apply only to products or
services which are competitive with those of ATC or its
affiliates.
(e) Use of Names. Except for the benefit of ATC
and its affiliates, use the name "ATEC Associates,
Inc.," "ATEC," any of the other names listed in Section
1.01(a)(6) as conveyed for the exclusive use of ATC, or
any customarily utilized portion or abbreviation
thereof as a business name, either alone or in
conjunction with other words or represent to any
potential client that they are the "old" or "real"
ATEC.
5. Definitions. Except as otherwise defined in this
Agreement or as the context otherwise plainly requires, terms
used herein shall have the same meaning as in the Asset Purchase
Agreement. Undefined terms shall have their ordinary meaning.
The term "participate in" means "directly or indirectly, for its
own benefit or for, with, or through any other person or entity,
own manage, operate, control, loan money to, or participate in
the ownership (except as a non-controlling owner of less than 5%
of the stock of a publicly-held corporation), management,
operation, or control of, or be connected as a director, officer,
employee, partner, consultant, agent, independent contractor, or
otherwise with, or acquiesce in the use of his name in." The
term "participate in" does not include the interest of Gerald D.
Mann or members of the Mann family or Amtec in the WATEC limited
partnership which is governed by the WATEC Non-Competition
Agreement executed on this date.
6. Reasonable and Necessary. Amtec agrees that the
provisions of this Agreement are reasonable in scope and duration
and are necessary to protect the bona fide confidential business
information purchased by ATC from Amtec and to protect the value
of the Purchased Assets, the associated good will and ATC's
interest therein. Amtec agrees that it has either had offices or
has actively and substantially performed services throughout the
entire United States and that this area is therefore a necessary
and reasonable coverage area. Amtec expressly agrees that the
customer names and other customer and business information
purchased by ATC from Amtec is proprietary, and it agrees that a
breach of any of these provisions will cause irreparable harm for
which money damages alone will not be sufficient compensation and
that ATC
Page 3 of 4
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<PAGE>
shall have available to it, in addition to any other remedies
available by law, equitable remedies, including the remedy of
injunction, to enjoin the breach or threatened breach of the
provisions of this paragraph 6.
7. Non-Assignability. Amtec shall not let, transfer, or
assign, voluntarily or by operation of law, or otherwise, this
Agreement or any part thereof, or any amounts due or to become
due hereunder, without the prior written consent of ATC.
8. Entire Agreement. This Agreement sets forth the entire
understanding of the parties with respect to the subject matter
hereof, supersedes all memoranda or existing agreements among
them concerning such subject matter, and may be modified only by
a written instrument duly executed by each party.
9. Dispute Resolution. All disputes hereunder between the
parties shall be resolved in accordance with Section 10.15 of the
Asset Purchase Agreement.
WHEREFORE, the parties have executed this Agreement on the
date first set forth above.
ATC ENVIRONMENTAL INC. AMERICAN TESTING AND
ENGINEERING CORPORATION
By: /s/ Nicholas J. Malino By: /s/ Gerald D. Mann
-------------------------- --------------------------
Nicholas Malino, Gerald D. Mann,
Senior Vice President President
ATC Amtec
Page 4 of 4
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<PAGE>
MANN NON-COMPETITION AGREEMENT
THIS AGREEMENT, dated as of the 24th day of May, 1996, among
ATC ENVIRONMENTAL INC., a Delaware corporation with its principal
place of business at 104 East 25th Street, New York, New York
10010 ("ATC"), GERALD D. MANN, a resident of the State of Florida
whose address is 28 Casa Mar Lane, Naples, Florida 33940 ("GDM"),
and MANN TECHNOLOGY, INC., an Indiana corporation with its
principal place of business at 8665 Bash Street, Indianapolis,
Indiana 46256-1202 ("MTI").
1. Conditions Precedent. Conditions precedent to the
commencement and continued existence of this Non-Competition
Agreement (this "Agreement") and all terms hereof are: (i) the
delivery and closing of an Agreement for Sale and Purchase of
Business Assets (the "Asset Purchase Agreement"), the Consulting
Services Agreement between GDM and ATC, each and every Related
Agreement referenced in the Asset Purchase Agreement, and Bill of
Sale and Assignment from American Testing and Engineering
Corporation ("ATEC") to ATC conveying (or leasing as applicable)
to ATC the specified business assets of ATEC and (ii) the actual
consummation of such transaction resulting in the acquisition of
such ATEC assets by ATC (the "Asset Purchase"). If the Asset
Purchase Agreement or any of the Related Agreements shall be
lawfully terminated or rescinded by any party thereto due to the
fault of a party other than ATC, then this Agreement shall
likewise terminate.
2. Term. The term of this Agreement shall commence on the
date first set forth above and will continue thereafter for a
period of twenty (20) years.
3. Payment. For its performance throughout the full term
of the restrictive covenants of Section 4. and the other
obligations of this Agreement, ATC will:
(a) Cash at Closing. Pay GDM Two Million and
no/100 Dollars ($2,000,000.00) on the date of execution
hereof. This payment will be made by wire transfer to
the account named Gerald D. and Edna E. Mann at First
Union National Bank of Florida, routing number
ABA 063000021, account number 3090007751657.
(b) Amortization of Consideration. ATC deems the
consideration paid to GDM as earned by him at an annual
rate of One Hundred Thousand and no/100 Dollars
($100,000.00); provided, however, GDM shall not be
required to return any portion of such consideration in
Page 1 of 5
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<PAGE>
the event that this Agreement shall be terminated,
whether for cause or otherwise, and the remedies
against GDM of ATC shall be limited to actual damages
or appropriate equitable relief against GDM, including
injunction. This limitation shall not necessarily
prohibit the refund of consideration in the case of a
rescission ab initio of the transactions contemplated
by the Purchase Agreement and the Related Agreements.
4. Restrictive Covenants. GDM agrees, in consideration of
the payments made by ATC hereunder, to abide strictly by the
following covenants. GDM agrees that for a period of twenty (20)
years after Closing, he will not:
(a) Non-Competition. Within the regulated zone,
either directly or indirectly, perform for hire the
same or similar services in which ATC or ATEC are
engaged or own, or participate in, be employed by, or
serve as a consultant or other agent or contractor to
or for any business or enterprise (including any entity
consisting of only GDM or members of the Mann family),
other than ATC, engaged in the same or similar fields
of services as ATC, without the express written consent
of ATC. The "regulated zone" means all areas within
the fifty states of the United States and all counties
in the State of California listed in Schedule 4(a)
attached hereto. The fields in which ATC or ATEC are
engaged include (but are not necessarily limited to):
asbestos testing, design and consulting; lead testing,
design and consulting; environmental assessments and
risk assessments; remedial investigations; remedial
action consulting, planning and design; soil and
groundwater remediation; asbestos and general
analytical laboratory services; industrial hygiene
consulting; air quality testing, design and consulting;
environmental and facilities management software
development and distribution; civil and geo-technical
engineering; and geo-technical and materials testing.
ATC acknowledges that GDM has ownership interests in
Mann Realty Co. d/b/a D.B. Mann Development Co. which
develops, owns and manages real estate and is not in
competition with ATC or ATEC. In addition, GDM has an
ownership interest in MTI which is the general partner
of Waste Abatement Technology, L.P. ("WATEC"), which is
subject to a separate non-competition agreement with
ATC.
(b) Non-Disclosure. Use for his benefit, or
disclose, communicate or divulge to, or use for the
direct or indirect benefit of, any person, firm,
association or company other than ATC or its
affiliates, any information regarding the business
methods, business policies, procedures, techniques,
research or development
Page 2 of 5
<PAGE>
<PAGE>
projects or results, trade secrets, customers or
clients or any other confidential information relating
to or dealing with the business operations of ATC, the
Purchased Assets or the business associated with the
Purchased Assets as defined under the Asset Purchase
Agreement.
(c) Non-Solicitation - Employees. Either
directly or indirectly, for himself or any person or
entity other than ATC, hire or induce or attempt to
influence any employee or former employee of ATC or its
affiliates to terminate such employment. An employee
of ATC shall be considered a "former employee" for a
period of one (1) year following termination of
employment with ATC.
(d) Non-Solicitation - Customers. Within the
regulated zone, and, with respect to any customer with
whom he has developed a relationship or about whom he
acquired knowledge of its needs, preferences, pricing
or other information of material competitive value,
within any location where that customer is doing
business, directly or indirectly on behalf of himself
or any third party, make any sales contact with, or
solicit or accept business from, any customers of ATC
or its affiliates or of ATEC, provided however, that
this restriction shall apply only to products or
services which are competitive with those of ATC or its
affiliates.
(e) Use of Names. Except for the benefit of ATC
and its affiliates, use the name "ATEC Associates,
Inc.," "ATEC," any of the other names listed in
Section 1.01(a)(6) of the Purchase Agreement as
conveyed for the exclusive use of ATC, or any
customarily utilized portion or abbreviation thereof as
a business name, either alone or in conjunction with
other words or represent to any potential client that
they are the "old" or "real" ATEC.
5. Definitions. Except as otherwise defined in this
Agreement or as the context otherwise plainly requires, terms
used herein shall have the same meaning as in the Asset Purchase
Agreement. Undefined terms shall have their ordinary meaning.
The term "participate in" means "directly or indirectly, for his
own benefit or for, with, or through any other person or entity,
own manage, operate, control, loan money to, or participate in
the ownership (except as a non-controlling owner of less than 5%
of the stock of a publicly-held corporation), management,
operation, or control of, or be connected as a director, officer,
employee, partner, consultant, agent, independent contractor, or
otherwise with, or acquiesce in the use of his name in." The
term "participate in" does not include ATEC's, MTI's or GDM's
(and his family) interest in WATEC which is governed by the
WATEC Non-Competition Agreement executed on this date.
Page 3 of 5
<PAGE>
<PAGE>
6. Reasonable and Necessary. GDM agrees that the
provisions of this Agreement are reasonable in scope and duration
and are necessary to protect the bona fide confidential business
information purchased by ATC from ATEC and to protect the value
of
the Purchased Assets, the associated good will and ATC's interest
therein. GDM agrees that it has either had offices or has
actively and substantially performed services throughout the
entire United States and that this area is therefore a necessary
and reasonable coverage area. GDM agrees that because of his
principal position in ATEC with access to all proprietary
information and with key customer relationships, the restrictive
covenants of him personally herein are necessary and reasonable
for the protection of the Purchased Assets. GDM expressly agrees
that the customer names and other customer and business
information purchased by ATC from ATEC is proprietary, and it
agrees that a breach of any of these provisions will cause
irreparable harm for which money damages alone will not be
sufficient compensation and that ATC shall have available to it,
in addition to any other remedies available by law, equitable
remedies, including the remedy of injunction, to enjoin the
breach or threatened breach of the provisions of this
paragraph 6.
7. Non-Assignability. GDM shall not let, transfer, or
assign, voluntarily or by operation of law, or otherwise, this
Agreement or any part thereof, or any amounts due or to become
due hereunder, without the prior written consent of ATC.
8. Entire Agreement. This Agreement sets forth the entire
understanding of the parties with respect to the subject matter
hereof, supersedes all memoranda or existing agreements among
them concerning such subject matter, and may be modified only by
a written instrument duly executed by each party.
9. Disability or Death of GDM. In the event of the
disability or death of GDM, MTI shall be responsible through its
officers and employees for the performance of the duties and
responsibilities of GDM during the remaining term of this
Agreement.
10. Separability. If any provision of this Agreement is
invalid, illegal, or unenforceable, the balance of this Agreement
shall remain in effect and the arbitrator shall have authority to
modify such provision to render it lawful, unless the result
thereof would result in an unjust modification of the balance of
rights and obligations hereunder. Notwithstanding the foregoing,
no modification shall require GDM to refund any portion of the
Consideration.
11. Dispute Resolution. All disputes hereunder between the
parties shall be resolved in accordance with Section 10.15 of the
Asset Purchase Agreement.
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<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement
by duly authorized officers in the case of ATC and MTI and caused
it to be dated as first above written.
ATC ENVIRONMENTAL INC.
By: /s/ Nicholas J. Malino By: /s/ Gerald D. Mann
----------------------- ----------------------------
Nicholas J. Malino, Gerald D. Mann
Senior Vice President
ATC GDM
MANN TECHNOLOGY, INC.
By: /s/ Gerald D. Mann
--------------------------
Gerald D. Mann, President
MTI
Page 5 of 5
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WATEC NON-COMPETITION AGREEMENT
THIS AGREEMENT, dated as of the 24th day of May, 1996,
between ATC ENVIRONMENTAL INC., a Delaware corporation with its
principal place of business at 104 East 25th Street, New York,
New York 10010 ("ATC") and WASTE ABATEMENT TECHNOLOGY, L.P., an
Indiana limited partnership with its principal place of business
at 1300 Williams Drive, Suite B, Marietta, Georgia 30066
("WATEC").
1. Conditions Precedent. Conditions precedent to the
commencement and continued existence of this Non-Competition
Agreement (the "Agreement") and all terms hereof are: (i) the
delivery and closing of an Agreement for Sale and Purchase of
Business Assets (the "Asset Purchase Agreement'), each and every
Related Agreement referenced in the Asset Purchase Agreement and
Bill of Sale and Assignment from ATEC to ATC conveying (or
leasing as applicable) to ATC the specific business assets of
ATEC and (ii) the actual consummation of such transaction
resulting in the acquisition of such ATEC assets by ATC (the
"Asset Purchase"). If the Asset Purchase Agreement or any of the
Related Agreements shall be lawfully terminated or rescinded by
any party thereto due to the fault of a party other than ATC,
then this Agreement shall likewise terminate.
2. Term. The term of this Agreement shall commence on the
date first set forth above and will continue thereafter for a
period of the shorter of five (5) years or so long as the Mann
family and/or ex-employees of ATEC shall have ownership interests
directly or indirectly in WATEC ("Term").
3. Consideration. The consideration provided by ATC for
the restrictive covenants and other obligations of WATEC
hereunder is the sum of Ten Thousand and no/100 Dollars
($10,000.00) to be paid on execution hereof and ATC's execution
and performance of the Asset Purchase Agreement and the Related
Agreements. American Testing and Engineering Corporation
("ATEC"), WATEC's limited partner and ninety-nine percent (99%)
equity owner, and Gerald D. Mann, the owner of WATEC's general
partner Mann Technology, Inc., are both principal beneficiaries
of the consideration to be paid by ATC under the Asset Purchase
Agreement.
4. Restrictive Covenants. WATEC agrees to strictly abide
by the following restrictive covenants. WATEC agrees that, for
the Term, it will not:
Page 1 of 3
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<PAGE>
(a) Non-Competition. Within the regulated zone,
either directly or indirectly, perform for hire the
consulting services in which either ATC or ATEC are
engaged or own, or participate in, be employed by, or
serve as a consultant or other agent or contractor to
or for any business or enterprise other than ATC,
engaged in such consulting services, without the
express written consent of ATC. The "regulated zone"
means all area within the fifty states of the United
States and all counties in the State of California
listed on Schedule 4(a) attached hereto. The
consulting services in which ATC or ATEC are engaged
include (but are not necessarily limited to): asbestos
testing, design and consulting; lead testing, design
and consulting; environmental assessments and risk
assessments; remedial investigations; remedial action
consulting, planning and design; asbestos and general
analytical laboratory services; industrial hygiene
consulting; air quality testing, design and consulting;
environmental and facilities management software
development and distribution; civil and geo-technical
engineering; and geo-technical and materials testing.
WATEC shall not be precluded from performing:
(i) environmental remediation contracting or general
contracting services or (ii) design and consulting
services, even of the kinds performed by ATC (or
formerly by ATEC), to the extent such services are
incidental on a project to primary remediation or
general contracting services.
(b) Non-Solicitation - Employees. Either
directly or indirectly, for itself or any person or
entity other than ATC, hire or induce or attempt to
influence any employee or former employee of ATC or its
affiliates or any employee or former employee of ATEC
(except such former employees of ATEC whom WATEC hired
prior to April 23, 1996, and former employees of ATEC
who were not offered employment by ATC), to terminate
such employment. An employee of either ATC or ATEC
shall be considered a "former employee" for a period of
one (1) year following termination except as to
employees not offered employment by ATC.
(c) Use of Names. Except for the benefit of ATC
and its affiliates, use the name "ATEC Associates,
Inc.,"
"ATEC," any of the other names listed in
Section 1.01(a)(6) of the Purchase Agreement as conveyed
for the exclusive use of ATC, or any customarily utilized
portion or abbreviation thereof as a business name,
either alone or in conjunction with other words or
represent to any potential client that they are the "old"
or "real" or ATEC.
Notwithstanding the foregoing, the covenants of WATEC shall
only apply as long as the Mann family and/or ex-employees of ATEC
shall have ownership interests directly or indirectly in WATEC.
Page 2 of 3
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<PAGE>
4. Definitions. Except as otherwise defined in this
Agreement or as the context otherwise plainly requires, terms
used herein shall have the same meaning as in the Asset Purchase
Agreement. Undefined terms shall have their ordinary meaning.
The term "participate in" means "directly or indirectly, for its
own benefit or for, with, or through any other person or entity,
own, manage, operate, control, loan money to, or participate in
the ownership (except as a non-controlling owner of less than 5%
of the stock of a publicly-held corporation), management,
operation, or control of, or be connected as a director, officer,
employee, partner, consultant, agent, independent contractor, or
otherwise with, or acquiesce in the use of his name in."
5. Reasonable and Necessary. WATEC agrees that the
provisions of this Agreement are reasonable in scope and duration
and are necessary to protect the bona fide confidential business
information purchased by ATC from ATEC and to protect the value
of the Purchased Assets, the associated good will and ATC's
interest therein. WATEC agrees that because of its relationship
to ATEC and its employees and position of confidence and access
to information and relationships, these covenants are reasonable
and necessary to protect ATC's interest in the Purchased Assets.
WATEC expressly agrees that the customer names and other customer
and business information purchased by ATC form ATEC are
proprietary, and it agrees that a breach of any of these
provisions will cause irreparable harm for which money damages
alone will not be sufficient compensation and that ATC shall have
available to it, in addition to any other remedies available by
law, equitable remedies, including the remedy of injunction, to
enjoin the breach or threatened breach of the provisions of this
section.
6. Entire Agreement. This Agreement sets forth the entire
understanding of the parties with respect to the subject matter
hereof, supersedes all memoranda or existing agreements among
them concerning such subject matter, and may be modified only by
a written instrument duly executed by each party.
7. Dispute Resolution. All disputes hereunder between the
parties shall be resolved in accordance with Section 10.15 of the
Asset Purchase Agreement.
WHEREFORE, the parties have executed this Agreement on the
date first set forth above.
ATC ENVIRONMENTAL INC. WASTE ABATEMENT TECHNOLOGY,
L.P.
By: /s/ Nicholas J. Malino By: /s/ Gerald D. Mann
------------------------- ----------------------------
Nicholas J. Malino, Gerald D. Mann, President
of
Senior Vice President Mann Technologies, Inc.,
General Partner
ATC WATEC
Page 3 of 3
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<PAGE>
SECURITY AGREEMENT
This Security Agreement, dated May 24, 1996, is by
ATC Environmental Inc., a Delaware corporation ("Debtor"), in
favor of American Testing and Engineering Corporation, an Indiana
corporation ("Secured Party").
Recitals
Debtor, Secured Party and Gerald D. Mann, principal
shareholder of Secured Party ("Mr. Mann"), have entered into an
Agreement for Purchase and Sale of Business Assets, dated May 24,
1996 ("Purchase Agreement"), which contemplates (i) the purchase
and sale of certain business assets of Secured Party, (ii) the
assumption by Debtor of certain debts and obligations of Secured
Party, including, without limitation, those assumed pursuant to
an Assumption Agreement of even date herewith among Debtor,
Secured Party and Mr. Mann ("Assumption Agreement"), (iii) the
execution and delivery of a Master Equipment Lease Agreement
between Debtor and Secured Party ("Equipment Lease Agreement"),
(iv) the execution and delivery of Sublease Agreements for
various properties being sublet by Secured Party to Debtor
(collectively, the "Sublease Agreements"), (v) the execution and
delivery of noncompetition agreements (collectively, the
"Noncompetition Agreements") between (A) Debtor and Secured
Party, (B) Debtor and Mr. Mann, and (C) Debtor and Waste
Abatement Technology, L.P., an Indiana limited partnership which
is an affiliate of Secured Party ("WATEC"), and (vi) the
execution and delivery of a Consulting Services Agreement
("Consulting Agreement") among Debtor, Mr. Mann and Mann
Technology, Inc., an Indiana corporation ("MTI"). The Purchase
Agreement, Assumption Agreement, Equipment Lease Agreement,
Sublease Agreements, Noncompetition Agreements and Consulting
Agreement are hereinafter collectively referred to as the
"Agreements."
Terms
In consideration of the foregoing and for other good and
valuable consideration, the receipt and sufficiency of which the
Parties hereby acknowledge, Debtor and Secured Party, each
intending to be legally bound, hereby agree as follows:
1. Debtor hereby grants and transfers to Secured Party a
security interest in all assets of Debtor listed in Exhibit A
attached hereto and by reference made a part hereof, whether now
existing or after-acquired, wherever located, together with all
replacements, proceeds (including tort claims and insurance),
products and accessories thereof (hereinafter collectively
referred
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to as the "Collateral"), to secure the payment of all
indebtedness owed by Debtor to Secured Party pursuant to the
provisions of the Agreements and pursuant to the transactions
contemplated thereby, and any other present or future obligations
of Debtor to Secured Party. Debtor agrees to pay the principal
of and interest, if any, on any such indebtedness when the same
shall become due and payable.
Debtor warrants, represents and covenants that the
Collateral is now or will be located and will be kept only in the
jurisdictions and business locations listed in Exhibit B attached
hereto (collectively, the "Locations"); that, subject to the
provisions of Section 1 of this Agreement, except for a first
lien and security interest in the Collateral which has been, or
will be, given by Debtor in favor of its primary lending
institution (or institutions acting jointly) or such other
primary lender with whom Debtor may re-finance its debt (the
"Lender") and a prior lien and security interest in favor of
R.E. Blattert & Associates, Inc. ("Associates") or Robert E.
Blattert in assets which Purchaser acquired from Associates,
Debtor has clear and unencumbered title to the Collateral now in
its possession; that, except for the liens described in this
paragraph, and except for incidental equipment lease security
interests which in the aggregate are not material, no financing
statement or lien instrument covering all or any portion of the
Collateral has been voluntarily or involuntarily executed,
recorded or filed; and that the Collateral is now or will be used
primarily for business use in the operation of its environmental
consulting business.
TERMS, CONDITIONS AND AGREEMENTS
1. The security interest in the Collateral hereby granted
shall continue until full performance by Debtor of all conditions
and obligations hereunder and under the Agreements and until all
outstanding present or future indebtedness of Debtor to Secured
Party has been paid in full. Debtor shall be entitled to
possession of the Collateral until default, but shall use the
Collateral in a careful and prudent manner, maintain the
Collateral in good repair, pay all taxes and other charges
thereon when due, and defend the Collateral at all times against
any claims during the duration of this Agreement. Except for
temporary periods in connection with the operation of Debtor's
business in the ordinary course, Debtor shall not permit the
Collateral to be removed from the Locations without the prior
written consent of Secured Party; provided, however, that
transfer of any Collateral from one location listed in Exhibit B
to another location so listed shall not require Secured Party's
consent and provided further that the non-permanent use of
Equipment or other Collateral in the ordinary course at bona fide
job locations not listed on Exhibit B shall not require Secured
Party's consent. Debtor shall give prompt written notice to
Secured Party of any transfer, sale, pledge, assignment, or any
other process or action taken or pending, voluntary or
Page 2 of 5
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<PAGE>
involuntary, whereby a third party is to obtain or is attempting
to obtain possession of or any interest in the Collateral.
Secured Party shall have the right to inspect the Collateral at
all reasonable times, and upon periodic written request, no more
frequently than quarterly, Debtor shall provide Secured Party
with a complete listing by name, address, and debt amount of
Debtor's account debtors. Secured party agrees to hold such
information in strict confidence and not to use such information
for any purpose other than as contemplated by this Agreement or
to disclose such information to any person except in connection
with the enforcement by Secured Party of its rights under this
Agreement. At its option, but without obligation to Debtor and
without relieving Debtor from any default, Secured Party may
discharge taxes, liens or other encumbrances levied or placed
upon the Collateral, may maintain and pay insurance thereon, and
may order and pay for any necessary repairs or maintenance
thereon, for which Debtor upon demand agrees to reimburse Secured
Party for amounts expended, with interest thereon at a rate equal
to the mean of the Fidelity Spartan Fund quoted rates for the
date on which such payment first shall have become due and the
date on which it shall have been paid.
2. Debtor shall fully insure the Collateral, for the
benefit of both Secured Party and Debtor, against loss or damage
by fire, theft and other casualties by comprehensive extended
coverage insurance in kinds, amounts and with companies
reasonably satisfactory to Secured Party and naming Secured Party
as an additional insured. Any such policy or policies shall
contain a standard clause providing for cancellation only upon
written notice to Secured Party as its interest may appear.
Debtor shall, upon request by Secured Party, furnish a
certificate of such insurance to Secured Party.
3. Time, and each of the terms, conditions and agreements,
are of the essence of this Agreement. Debtor agrees that any of
the following shall constitute an event of default under this
Security Agreement: (a) the failure of Debtor to timely pay any
indebtedness secured hereby (subject to the set-off procedures
and rights set forth in Section 1.04 of the Purchase Agreement)
or to perform any condition or obligation contained herein;
(b) any untrue statement, representation, or warranty made by
Debtor herein; (c) any failure of Debtor to give required notice;
(d) the insolvency of Debtor or its failure or inability to pay
debts as they mature in the ordinary course of business, an
assignment by Debtor for the benefit of its creditors, the
appointment of a receiver for Debtor or the Collateral, or the
filing of any petition to adjudicate Debtor as bankrupt; (e) the
dissolution of Debtor; or (f) any default of Debtor under its
lending and/or security arrangement with any person or entity
which has a lien on any of the Collateral senior to that of
Secured Party (including, without limitation, Lender and
Associates). Debtor agrees to notify Secured Party in writing if
any event of default has
Page 3 of 5
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<PAGE>
occurred. Upon any event of default, Secured Party, at its
option and without notice or demand, shall be entitled to declare
the indebtedness secured hereby immediately due and payable,
enter the premises at which the Collateral is located to take
immediate possession of the Collateral or to render the
Collateral unusable, and shall be entitled to exercise all rights
and remedies of a secured creditor under Indiana or other
applicable law, including notification to account debtors to make
payment to Secured Party; provided, that an act of default shall
not be deemed to have occurred hereunder relative to a dispute
regarding the exercise of set-off rights during the pendency of
proceedings under Section 1.04 of the Purchase Agreement in
connection therewith. Upon request, Debtor shall assemble and
make the Collateral available to Secured Party at a place to be
designated by Secured Party which is reasonably convenient to
both parties. Upon repossession, at its option, Secured Party
may propose to retain the Collateral in satisfaction of the
obligation or may sell the Collateral at public or private sale
in accordance with the Uniform Commercial Code as adopted in
Indiana or any other applicable statute. In the further event
that Secured Party shall dispose of any or all of the Collateral
after default, the proceeds of disposition shall be first applied
in the following order: (a) to the reasonable expenses of
retaking, holding, preparing for sale, selling and the like;
(b) to the reasonable attorneys' fees and legal expenses incurred
by Secured Party; and (c) to the satisfaction of the indebtedness
secured by this security interest. Debtor agrees to release and
hold harmless Secured Party from any and all claims arising out
of the repossession of the Collateral provided Secured Party has
acted in good faith. No waiver of any default or failure or
delay to exercise any right or remedy by Secured Party shall
operate as a waiver of any other default or of the same default
in the future or of any right or remedy with respect to the same
or any other occurrence. All rights and remedies of Secured
Party herein specified are cumulative and are in addition to, not
in limitation of, any rights and remedies Secured Party may have
by law or under the Agreements or otherwise. Debtor expressly
waives any otherwise applicable requirement of exhaustion or
marshalling of the Collateral.
4. The lien and security interest granted pursuant to this
Agreement shall be subordinate to the security interest in the
Collateral held by the Lender from time to time and the security
interest in that portion of the Collateral acquired on or about
January 13, 1995 from Associates or Robert E. Blattert, and shall
be subordinate to no other liens, security interests,
encumbrances or claims except for incidental equipment lease
security interests which in the aggregate shall not be material.
Secured Party agrees to execute a subordination agreement
substantially in the form attached hereto as Exhibit C with any
Lender.
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<PAGE>
5. Debtor authorizes Secured Party to execute and file
financing statements signed only by Secured Party on the
Collateral covered by this Agreement. Filing fees incurred shall
be borne by Debtor. Debtor agrees, in addition, to execute and
deliver any other certificate and forms, including any
certificate of title to a motor vehicle with the security
interest of the Secured Party noted thereon, required by Secured
Party which are necessary to assure compliance with the laws of a
particular jurisdiction in which Debtor resides, to whom the
Collateral is shipped or in which the Collateral is to be used.
6. This Agreement and all rights and liabilities hereunder
shall inure to the benefit of and be binding upon Secured Party
and Debtor, their respective successors, assigns, heirs and legal
representatives. This Agreement shall be construed in accordance
with the laws of the State of Indiana without regard to its
conflict of interest laws.
7. Any notice required by this Agreement shall be deemed
sufficient when mailed by certified mail or deposited with a
nationally recognized overnight courier to Debtor at ATC
Environmental Inc., 1515 E. 10th Street, Sioux Falls, SD 57103-
1721, Attention: John Smith, Esq., or to Secured Party at
8653 Bash Street, Indianapolis, IN 46256-1202, Attention:
Gerald D. Mann, President, with a copy sent in the same manner to
John C. Stark, Esq., Stark Doninger & Smith, Suite 700, 50 South
Meridian Street, Indianapolis, IN 46204, or to such other address
as may be designated by either Debtor or Secured Party in
writing. Notice shall be effective three (3) business days after
mailing if by certified mail or one (1) business day after
deposit if sent by overnight courier. Debtor by its signature
agrees that any modification or rescission of this Agreement
shall be ineffective unless in writing and signed by both Secured
Party and Debtor. Notice of the acceptance of this Agreement by
Secured Party is hereby waived by Debtor.
8. All disputes hereunder between the parties shall be
resolved in accordance with the provisions of Section 10.15 of
the Asset Purchase Agreement.
IN WITNESS WHEREOF, Debtor has caused this Security
Agreement to be executed by its duly authorized officer on the
day and in the year first above written.
ATC
ENVIRONMENTAL INC.
By: ______________________________
Its ______________________________
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<PAGE>
EXHIBIT A
Each and all of the following, whether presently existing or
after-acquired, are pledged by Debtor as Collateral in favor of
Secured Party. Each of the following shall have the respective
meanings as defined by Article 9 of the Uniform Commercial Code
as adopted and in effect as of the date hereof:
1. Accounts;
2. Accounts Receivable and Contract Rights;
3. Deposit Accounts;
4. Inventory;
5. Equipment;
6. Documents;
7. Instruments;
8. Goods, including certificates of title;
9. Chattel Paper;
10. General Intangibles;
11. Fixtures; and
12. All proceeds and products of all of the above,
including tort claims and insurance.
<PAGE>
<PAGE>
Chemical Bank
Trade Services Group
P.O. Box 44 Church Street Station
New York, NY 10008-0044
APPLICANT
ATC ENVIRONMENTAL, INC.
104 E. 25TH ST. 10TH FL
NEW YORK, NY 10010
ATT: MORRY F. RUBIN
Beneficiary
AMERICAN TESTING AND ENGINEERING AMOUNT USD 500,000.00
CORPORATION 8635 BASH STREET (FIVE HUNDRED THOUSAND AND 00/100
INDIANAPOLIS, IN 46256-1202 UNITED STATES DOLLARS)
ATT: MR. GERALD D. MANN, PRESIDENT
GENTLEMEN:
WE HEREBY ESTABLISH OUR IRREVOCABLE STANDBY LETTER OF CREDIT
NO. T-255633 IN YOUR FAVOR FOR AN AGGREGATE AMOUNT NOT TO
EXCEED THE AMOUNT INDICATED ABOVE, EXPIRING AT OUR COUNTERS
IN NEW YORK WITH OUR CLOSE OF BUSINESS ON JUNE 30, 1997.
THIS LETTER OF CREDIT IS AVAILABLE WITH CHEMICAL BANK, NEW
YORK AGAINST PRESENTATIONS OF YOUR DRAFT AT SIGHT DRAWN ON
CHEMICAL BANK, NEW YOUR WHEN ACCOMPANIED BY THE DOCUMENTS
INDICATED HEREIN.
BENEFICIARY'S DATED STATEMENT PURPORTEDLY SIGNED BY ONE OF
ITS OFFICIALS READING: "THE AMOUNT OF THIS DRAWING
USD.........UNDER CHEMICAL BANK LETTER OF CREDIT NUMBER T-
255633 REPRESENTS FUNDS DUE US AS BY REASON OF ATC
ENVIRONMENTAL INC'S FAILURE TO MAKE PAYMENT DUE PURSUANT TO
THE AGREEMENT FOR SALE & PURCHASE OF BUSINESS ASSETS
("AGREEMENT") OR RELATED AGREEMENTS ("RELATED AGREEMENTS")
AS DEFINED THEREIN BETWEEN BENEFICIARY AND ATC ENVIRONMENTAL
INC., DATE MAY.........., 1996 WE FURTHER CERITIFY THE
FOLLOWING:
(A) ATC ENVIRONMENTAL INC., HAS FAILED TO CURE THE PAYMENT
IN BREACH, AFTER NOTICE AND OPPORTUNITY TO CURE, TO THE
EXTENT REQUIRED IN THE AGREEMENT OR RELATED AGREEMENT AS
APPROPRIATE.
(B) ATC ENVIRONMENTAL INC.'S NON-PAYMENT WAS NOT
ATTRIBUTABLE TO ITS ASSERTION OF A RIGHT OF SET-OFF PURSUANT
TO THE AGREEMENT OR A RELATED AGREEMENT THAT IS EITHER
UNDISPUTED OR FOR WHICH THE PROCEDURE FOR RESOLVING DISPUTED
RIGHTS TO SET-OFF PROVIDED FOR IN THE AGREEMENT IS PENDING."
ALL DRAFTS MUST INDICATE: "DRAWN UNDER CHEMICAL BANK NEW
YORK LETTER OF CREDIT NO. T-255633.
IT IS A CONDITION OF THIS IRREVOCABLE LETTER OF CREDIT THAT
IT SHALL BE AUTOMATICALLY EXTENDED FOR AN ADDITIONAL PERIOD
OF ONE YEAR FROM THE PRESENT OR EACH FUTURE EXPIRATION DATE,
UNLESS AT LEAST 30 DAYS PRIOR TO SUCH DATE WE SEND YOU
NOTICE IN WRITING BY REGISTERED MAIL OR HAND DELIVERY AT THE
ABOVE ADDRESS, THAT WE ELECT NOT TO RENEW THIS LETTER OF
CREDIT FOR SUCH ADDITIONAL PERIOD. HOWEVER IN NO EVENT
SHALL THIS LETTER OF
T-255633- -001-L1-01-
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<PAGE>
Chemical Bank
Trade Services Group
P.O. Box 44 Church Street Station
New York, NY 10008-0044
APPLICANT
ATC ENVIRONMENTAL INC.
104 E. 25TH ST 10TH FL
NEW YORK, NY 100100
ATT: MORRY F. RUBIN
Beneficiary
AMERICAN TESTING AND ENGINEERING AMOUNT USD 500,000.00
CORPORATION 8635 BASH STREET (FIVE HUNDRED THOUSAND AND 00/100
INDIANAPOLIS, IN 46256-1202 UNITED STATES DOLLARS)
ATT: MR. GERALD D. MANN, PRESIDENT
CREDIT BE EXTENDED BEYOND THE FINAL EXPIRY DATE OF JUNE 30,
2000 ANY SUCH NOTICE SHALL BE EFFECTIVE WHEN SENT BY US AND
UPON SUCH NOTICE TO YOU, YOU MAY DRAW DRAFTS ON US AT SIGHT
FOR AN AMOUNT NOT OT EXCEED THE BALANCE REMAINING IN THIS
LETTER OF CREDIT WITHIN THE THEN
APPLICABLE EXPIRY DATE. ACCOMPANIED BY YOUR DATED STATEMENT
PURPORTEDLY SIGNED BY ONE OF YOUR OFFICIALS READING "THE
AMOUNT OF THIS DRAWING USD.............UNDER CHEMICAL BANK
LETTER OF CREDIT NUMBER T-255633 REPRESENTS FUNDS DUE US AS
WE HAVE RECEIVED NOTICE FORM CHEMICAL BANK OF THEIR DECISION
NOT TO EXTEND LETTER OF CREDIT NUMBER T-255633 FOR AN
ADDITIONAL YEAR ALL CORRESPONDENCE AND ANY DRAWINGS
PRESENTED IN CONNECTION WITH THIS LETTER OF CREDIT MUST ONLY
BE PRESENTED TO US AT CHEMICAL BANK, 55 WATER STREET, 17TH
FLOOR, ROOM 1708, NEW YORK 10041, ATTENTION: STANDBY LETTER
OF CREDIT DEPARTMENT. CUSTOMER INQUIRY NUMBERS ARE (212)
638-3473 AND (212) 638-3321.
EXCEPT AS OTHERWISE EXPRESSLY STATED HEREIN, THIS CREDIT IS
SUBJECT TO THE UNIFORM CUSTOMS AND PRACTICE FOR DOCUMENTARY
CREDITS, 1993 REVISION, ICC PUBLICATION NO. 500.
V. MARINACCIO
Assistant Vice President
T-255633- -001-L1-01- /s/ V. MARINACCIO
-------------------------
Authorized Signature
<PAGE>
<PAGE>
May 28, 1996
AGREEMENT
FOR SALE AND PURCHASE
OF BUSINESS ASSETS
AGREEMENT, dated the 28th day of May, 1996 (the "Closing
Date) among ATC InSys Technology Inc., a Delaware corporation
with its principal place of business at 104 East 25th Street, New
York, New York 10010 (the "Purchaser"); ATC Environmental Inc., a
Delaware Corporation with its principal place of business at 104
East 25th Street, New York, New York 10010 (the "Guarantor"); 3D
INFORMATION SERVICES INC., a New Jersey corporation with its
principal place of business at Vantage Court, 200 Cottontail
Lane, Somerset, NJ 08873, (the "Seller") and Seller's majority
stockholder, CIRO DESARO, a New Jersey resident, as an individual
("Mr. DeSaro"). The term "Seller" shall include Mr. DeSaro if and
to the extent that Mr. DeSaro holds a personal interest in the
assets to be conveyed hereunder.
The Purchaser desires to purchase certain business assets of
Seller in exchange for cash and other consideration as
hereinafter provided, and Seller and Mr. DeSaro desire to effect
such asset purchase through sale and the covenants and terms of
this agreement. Guarantor, the parent corporation of Purchaser,
hereby guarantees the full and timely performance of all of
Purchaser's obligations hereunder and under the Promissory Note
(as hereinafter defined), including but not limited to
Purchaser's payment obligations and indemnification obligations
hereunder.
I. SALE AND PURCHASE OF ASSETS
1.01 Basic Terms of Sale and Purchase of Assets
On the basis of the representations, warranties, covenants,
and agreements in this Agreement and subject to the terms and
conditions of this Agreement:
(a) At Closing, Seller agrees to sell, convey, assign, deliver
and transfer to Purchaser and Purchaser agrees to acquire,
accept and purchase all of Seller's properties and assets
(except those assets expressly excepted from this sale and
purchase in 1.01(d)) including, but not limited to, the
assets as set forth below, tangible and intangible, personal
and mixed, known or unknown, vested or contingent, wherever
any and all of such properties and assets shall be located
(such assets to be purchased by Purchaser from Seller,
whether or not itemized below, are collectively referred to
herein as the "Purchased Assets"):
(1) All of Seller's supply inventory including but not
limited to field and office supplies, processing
1<PAGE>
<PAGE>
supplies, labeling supplies, packaging and shipping
materials and selling and promotional materials (no
schedule listing supply inventory has been included).
(2) All of Seller's tangible assets, including all
furniture, fixtures, office and field production
equipment, computers, computer software and inventory
(such tangible assets are listed in Schedule
1.01(a)(2) hereto).
(3) All of Seller's right, title and interest to its
telephone numbers (including fax numbers). Purchaser
shall have the exclusive right to apply for changes
in telephone numbers or in location of telephone
numbers.
(4) All of Seller's interest in the real property lease
which is assumed as an Assumed Liability ("Assumed
Premises Lease") and all rights to fixtures, tenant
improvements, pre-payments and/or deposits pertaining
to the Assumed Premises Lease.
(5) All right, title and interest in and to all of
Seller's customer contracts and agreements, whether
written or oral (listed in Schedule 1.01(a)(5)
hereto) ("Customer Contracts") and customer business
arrangements and relationships. At closing, Seller
shall deliver a copy of each such contract (copies
may be delivered by surrendering possession of such
contracts to Purchaser at their then current
location).
(6) All interest in those contracts and subcontracts of
Seller other than Customer Contracts which are
assumed by Purchaser as Assumed Liabilities ("Assumed
Contracts").
(7) All of Seller's right, title, and interest in, if
any, the names "3D Information Services Inc.," "3D"
or any other fictitious names utilized as business
names by Seller or any customarily utilized portion
or abbreviation thereof, either alone or in
conjunction with other words; and all of Seller's
right, title and interest in any other trade names,
trademarks, logos, service names and service marks,
the goodwill associated therewith and all
registrations and applications in connection
therewith associated with Seller's business.
(8) Copies of such of Seller's business records,
including (but not necessarily limited to) accounting
records, job files, invoices, correspondence, sales
records, technical records, litigation and claims
files, customer records and other data and records
relating to sales, customers, the Purchased Assets
and the Assumed Liabilities, as are necessary to
enable Purchaser to carry out its obligations under
the Assumed Liabilities, to realize the value from
the Purchased Assets, and to conduct the business
associated with the Purchased Assets and Assumed
Liabilities ("Records").
2<PAGE>
<PAGE>
(9) All of Seller's right, title, interest or proprietary
interest claims, if any, in and to any patents or
unpatented proprietary technology or processes used
by or developed for use or sale by Seller (Schedule
1.01(a)(9)).
(10) All of Seller's right, title, interest or proprietary
interest , if any, claims in and to all copyrights
(Schedule 1.01(a)(10)) and to all reports, forms,
archives, data bases, studies, methods, research,
technical and other books, journals, handbooks, etc.
and Seller's rights in and to all other intellectual
property in whatever form used in Seller's business,
whether or not copyrighted or proprietary to Seller.
(11) All of Seller's right, title, interest or proprietary
interest claims, if any, in and to any and all
business or technical computer software associated
with Seller's business or the subject matter thereof
(Schedule 1.01(a)(11)); provided that any such
software for which Seller is obligated to pay
royalties or license fees to a party not a party to
this agreement or which contain assignability
restrictions, shall be acquired by Purchaser only to
the extent assumed as an Assumed Liability.
(12) Seller's complete customer and contact lists and
order backlog. At closing, Seller shall deliver as
Schedule 1.01(a)(12) hereto a list of all known past
and current: (i) customers and (ii) customer
prospects on whom Seller maintains a record of
contacts made. The list shall include at a minimum,
to the extent readily available to Seller, the
complete name, address, contact person, any quantity,
credit, price or other term of contract with them and
any contracts then in effect.
Seller will also provide in Schedule 1.01(a)(12) a
schedule detailing its order backlog. This schedule
will include the customer's name, total billings
expected, and amount billed to date. The term
"backlog" means indications of customer intent to
hire the performance of services by Seller which are
either formal contractual commitments or are written
or verbal commitments. Backlog does not include
accounts receivable or work completed but unbilled as
of the date of closing or mere expectations of work.
(13) Seller's vendor list (schedule not included).
Contracts with vendors shall be assumed by Purchaser
only to the extent assumed as Assumed Liabilities.
(14) All accounts receivable (an aging of which shall be
provided as Schedule 1.01(a)(14) as of the close of
business on the business day prior to the Closing
Date) and all unbilled work in process (whether or
not booked as revenue or included on any schedule).
Any work in process included on the stub period
3<PAGE>
<PAGE>
balance sheet shall be estimated on Schedule
1.01(a)(14) separately from the accounts receivable.
(15) Cash in the amount of $73,318.93 (to be wired by
Seller to Purchaser's account within 24 hours of
receipt by Seller of Purchaser's wire transfer as set
forth in 1.01(b)(2)) and all deposits, proceeds,
refunds (except income tax returns), transferring
custodial responsibilities for Seller's 401k account,
prepaid expenses (including any refunds thereof), and
other current assets of Seller (Schedule
1.01(a)(15)). This will not include any bank account
that may be established by Seller for the purpose of
receiving payments that it may receive pursuant to
this Agreement from Purchaser or other income that
Seller may receive in connection with excluded assets
and remain entitled to subsequent to Closing.
(16) All of Seller's interest in tangible assets subject
to leases assumed as Assumed Liabilities (such leased
tangible assets are listed on the schedule of Assumed
Liabilities to the Assumption Agreement ("Assumed
Leased Assets" or "Assumed Asset Leases")). Either
schedule 1.01(a)(16) or the schedule of Assumed
Liabilities shall include the information specified
in 2.06(b) with respect to Assumed Leased Assets.
(17) The non-competition, non-solicitation, confidentiali
ty and other restrictive covenants between Seller and
employees or other parties listed on Schedule
1.01(a)(17).
Seller agrees to use its best efforts to provide complete
information on the schedules provided for in this 1.01(a)
on the date of execution hereof. However, the omission of
any item shall not operate to exclude the omitted item from
the sale, delivery and assignment thereof (except in those
cases where the asset is to be acquired only to the extent a
coupled liability is to be assumed as an Assumed Liability
(e.g. Assumed Premises Leases) in which case it will be
deemed included only if the liability is specifically
assumed as an Assumed Liability), and the omission of any
item shall not alleviate Purchaser's obligation to pay the
purchase price so long as Purchaser acquires actual
possession and beneficial ownership of the omitted item.
(b)As consideration for the Purchased Assets and the other
promises, agreements, warranties, and covenants hereof,
including expressly the non-competition/non-solicitation
covenants hereof, the Purchaser shall:
(1) Enter into the Related Agreements; and
4<PAGE>
<PAGE>
(2) Pay to Seller at Closing the sum of Three Million
Dollars ($3,000,000.00). Such payment shall be paid
by wire transfer of immediately available funds in
accordance with instructions provided by Seller; and
(3) Execute and deliver at closing a three-year promis
sory note in the form of Attachment 1.01(b)(3) (the
"Note") evidencing Purchaser's obligation to pay to
Seller, over the next three (3) years, an additional
Two Million Five Hundred Thousand Dollars
($2,500,000.00) in twelve equal quarterly
installments plus interest at a rate of 8.25% on the
unpaid balance. Payments will be made on the day of
the month prior to the day of closing every third
month for the thirty-six months succeeding the date
of closing unless Purchaser shall, at its sole
discretion, elect to pre-pay all or part of the
remaining balance at an earlier date. In the event of
such pre-payment, any remaining payments will be
adjusted to provide for equal quarterly payments over
the remaining term of the note.
Either at Closing or within thirty (30) days following the
Closing Date, Seller shall provide to Purchaser final stub
period financial statements through the Closing Date
pursuant to 2.03 hereof. Should Purchaser not wish to
assume any liability to be listed on the final stub period
financial statement, Purchaser shall notify Seller and such
liability shall not be included in the computation of the
final stub period financial statement. Any liability listed
in the final stub period financial statement shall be
assumed by Purchaser. At such time, a final adjustment to
the cash purchase price provided for in this section shall
be made equal to the amount by which Seller's Adjusted Net
Asset Value as of the Closing Date exceeds or is less than
the warranted Adjusted Net Asset Value of $1,400,000.00 (see
2.03). If the final Adjusted Net Asset Value is less than
$1,400,000.00, Seller shall, within fifteen (15) days,
refund the amount of such difference to Purchaser. If the
final Adjusted Net Asset Value is greater than
$1,400,000.00, Purchaser shall, within fifteen (15) days,
pay the amount of such difference to Seller as additional
purchase price.
(c)The purchase price shall be allocated to the purchased
assets based on the values for each asset group set forth
below:
Asset Group Allocation
1. Property, Plant and Equipment $77,381
2. Supplies and other current assets $1,241,541
3. Work in Progress $279,047
4. Intangibles $4,100,000
The allocations set forth herein have been established
through arms length negotiations between Seller and
Purchaser. The allocations set forth above shall be adjusted
based on final numbers as set forth in the final stub period
financial statements.
5<PAGE>
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(d)The Purchased Assets will not include the following:
(1) The Condominium and related mortgage for the premises
located at 43 Alexandria Way, Basking Ridge, New
Jersey.
(2) The 1991 735i BMW vehicle
(3) Seller's federal, state or local income tax refunds
and claims therefor (none of which are recorded on
the interim or stub period financial statements).
(4) The retained tort, contract or insurance claims of
Seller specified on Schedule 1.01(d)(5) (the
"Retained Claims").
(5) The consideration delivered by Purchaser to Seller
pursuant to this Agreement.
(6) Seller's corporate minute books and stock records and
financial, tax and accounting records relating to
periods prior to the Closing Date except that
Purchaser is entitled to copies of certain Records
pursuant to 1.01(a)(8).
(7) Personal effects of Mr. DeSaro and of Seller's
stockholders, officers and employees in so far as
these are not included as assets in calculating the
Net Asset Value of the Seller pursuant to 2.03.
(8) Prepaid insurance in so far as this is not treated as
an asset in calculating the Net Asset Value of the
Seller pursuant to 2.03.
1.02 Liabilities of Seller and Purchaser
(a) Purchaser has not, and shall not be construed to have,
assumed, adopted or taken over any obligations, debts,
liabilities or responsibilities of Seller whatsoever,
including (but not limited to) liabilities for local, state
or federal taxes, except for the Assumed Liabilities
expressly assumed under the Assumption Agreement attached
hereto as Exhibit 1.02 and except such future (i.e. post-
closing) performance as is obligated under the terms and
conditions of Customer Contracts and Assumed Contracts
purchased hereunder, the amendment or renegotiation of which
Purchaser is free to pursue in its sole discretion.
Notwithstanding Purchaser's acceptance of a Customer
Contract and the obligation of future performance, Seller,
as its interests are defined by such contracts or by law
(which shall not be altered or enlarged with respect to
third parties by virtue of this agreement), shall retain
responsibility and liability for all work performed or goods
supplied pursuant to all Customer Contracts prior to
closing. Seller agrees that it will retain full liability
and responsibility for satisfaction of all its debts or
liabilities of any kind, whether known or unknown, fixed or
contingent, except those so assumed by Purchaser hereunder.
Except for the Assumed Liabilities, Seller agrees to retain
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and, pursuant to the provisions of 1.03, to indemnify,
defend, and hold Purchaser harmless from, all of Seller's
obligations, losses, liabilities, debts, responsibilities or
claims thereof (and the costs of defense against claims
against Purchaser including reasonable attorneys fees and
settlement and defense costs), including (but not limited
to) any and all liability for trade payables and other
accounts payable, federal, state or local taxes, employment
taxes, tort or contract claims, and employee compensation or
benefits, and Seller expressly grants to Purchaser, in
addition to other remedies available to it at law or equity,
a right of set-off against any payments to be made hereunder
as provided in 1.04 (subject to Seller's right to object
thereto as described in 1.04) to the extent that any of
Seller's non-assumed debts or liabilities are attempted to
be enforced against Purchaser.
1.03 Indemnity Against Liabilities, etc.
(a) In addition to Purchaser's other rights and remedies
available at law or equity (and not by way of limitation),
Seller and Mr. DeSaro (the "Indemnitor") agrees to indemnify
and hold harmless the Purchaser, and its affiliated
entities, successors, officers, directors, controlling
persons (if any), employees, agents, and stockholders, in
each case past, present, or as they may exist at any time
after the date of this Agreement (the "Indemnitees") against
and in respect of any and all:
(1) Claims, suits, actions, proceedings (formal or
informal), investigations, judgments, deficiencies,
set-offs, damages, settlements, liabilities, and
legal and other expenses (including reasonable legal
fees and expenses of counsel chosen by any
Indemnitee) as and when incurred arising out of or
based upon any breach of any representation,
warranty, covenant, or agreement of Seller or Mr.
DeSaro contained in this Agreement or any of the
Related Agreements; and
(2) Debts or liabilities of any kind and claims, liens,
set-offs, suits, actions, and proceedings (formal and
informal) of persons or entities and related judg
ments, deficiencies, damages, settlements, set-offs,
liens, liabilities, and legal and other expenses
(including reasonable legal fees and expenses of
counsel chosen by any Indemnitee) as and when
incurred arising (i) out of the Purchased Assets or
the business associated therewith prior to Closing or
(ii) out of or based upon the acts, omissions,
contractual performance or conduct of the business of
Seller or Mr. DeSaro whether before or after Closing,
except debts or liabilities expressly assumed by
Purchaser as Assumed Liabilities in the Assumption
Agreement.
(b) In addition to Seller's and Mr. DeSaro's other rights and
remedies available at law or equity (and not by way of
limitation), Purchaser (the "Indemnitor") agrees to
indemnify and hold harmless the Seller and its affiliated
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entities, successors, officers, directors, controlling
persons (if any), employees, agents, and stockholders, in
each case past, present, or as they may exist at any time
after the date of this Agreement (the "Indemnitees") against
and in respect of any and all:
(1) Claims, suits, actions, proceedings (formal or
informal), investigations, judgments, deficiencies,
set-offs, damages, settlements, liabilities, and
legal and other expenses (including reasonable legal
fees and expenses of counsel chosen by any
Indemnitee) as and when incurred arising out of or
based upon any breach of any representation,
warranty, covenant, or agreement of Purchaser
contained in this Agreement or any of the Related
Agreements; and
(2) Debts or liabilities of any kind and claims, liens,
set-offs, suits, actions, and proceedings (formal and
informal) of persons or entities and related
judgments, deficiencies, damages, settlements, set-
offs, liens, liabilities, and legal and other
expenses (including reasonable legal fees and
expenses of counsel chosen by any Indemnitee) as and
when incurred arising (i) out of the Purchased Assets
or the business associated therewith after Closing,
except for Seller's debts or liabilities not
expressly assumed by Purchaser as Assumed Liabilities
in the Assumption Agreement; (ii) out of or based
upon the acts, omissions, contractual performance or
conduct of the business of Purchaser whether before
or after Closing; or (iii) out of the Assumed
Liabilities after the Closing Date.
(c) The representations and warranties contained in or made
pursuant to this Agreement, and the parties respective
obligations to indemnify hereunder, shall survive for a
period of three years after the Closing.
(d) The parties' respective indemnity obligations hereunder
shall be subject to the following:
(1) An Indemnitee shall give the Indemnitor prompt notice
of any allegedly indemnified item incurred, asserted
or threatened on the basis of which such Indemnitee
intends to seek indemnification from Indemnitor as
provided herein, provided however that the obligation
of Indemnitor shall be reduced for the failure to
give notice at any particular time only to the extent
that Indemnitor has been actually prejudiced thereby.
(2) If an allegedly indemnified event involves the claim
of any third party, the Indemnitor shall have the
sole control over, subject to its consideration of
the interest of Indemnitee, and shall assume all
expense with respect to, the defense, settlement,
adjustment or compromise of any claim as to which
this provision requires it to indemnify the other
party provided that (i) the Indemnitee may, if it so
desires, employ counsel at its own expense to assist
in the handling of such claim and the reasonable
expenses incurred by the Indemnitee in employing such
counsel shall be borne by the Indemnitor only if the
Indemnitor shall have failed to: assume the defense
of such claim; fails to adequately assume the
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defense of Indemnitee's interest, shall have a
conflict of interest which prevents counsel from
zealously representing the interests of both the
Indemnitor and the Indemnitee, or fails to take
reasonable efforts to settle such claim, and (ii) the
Indemnitor shall obtain the prior written approval of
the Indemnitee, which shall not be unreasonably
withheld or delayed, before entering into any
settlement, adjustment or compromise of such claim or
ceasing to defend against such claim, if pursuant
thereto or as a result thereof, there would be
imposed injunctive or other relief against the
Indemnitee or the Purchased Assets.
(3) In no event shall the Indemnitee be subject to any
liability or limitation of any right or remedy for
any settlement made without its consent. In no event
shall an Indemnitor be liable for any sum in excess
of a proposed settlement if consent to such
settlement is unreasonably withheld by the other
party. No party shall consent to the entry of any
judgment or enter into any settlement which does not
include as a term thereof the giving by the claimant
or plaintiff to the Indemnitor and Indemnitee of a
release from all liability with respect to such claim
or litigation.
(4) The parties' respective indemnity obligations
hereunder shall be limited to: (i) individual
losses, claims, etc. having a value of $1,000.00 or
more (an "Indemnified Claim"); and (ii) losses,
claims, etc. after the first $10,000.00 in the aggre
gate, of Indemnified Claims (the "indemnity deduc
tible"), in which event only the aggregate amount of
Indemnified Claim(s) in excess of the indemnity
deductible shall be subject to indemnification
hereunder. The following are not subject to either
the Indemnified Claim threshold or the indemnity
deductible and are covered from the first dollar: (a)
Seller's warranty that accounts receivable, net of
reserves, will be collected (2.06(a)); (b) Seller's
warranty that there are no unearned billings or
receipts net of reserves for such purpose (2.07(b));
and (c) amounts Purchaser must expend or billing
adjustments Purchaser must make to correct deficient
pre-Closing Date service performance in a manner
consistent with Seller's past business practices.
Anything in this Agreement to the contrary
notwithstanding, the obligation of Seller and Mr.
DeSaro to indemnify Purchaser for any and all
Indemnified Claims pursuant to this Section or any
other provision of this Agreement or any of the
Related Agreements ( including but not limited to the
foregoing items) shall be limited to and shall not
exceed $4,000,000.00 in Indemnified Claims on a
cumulative basis and Seller and Mr. DeSaro shall not,
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under any circumstances, be obligated to indemnify
Purchaser against any further liabilities once Seller
and Mr. DeSaro shall have made aggregate payments in
respect of such indemnification of $4,000,000.00 (
irrespective of whether such payments have been made
to Purchaser or to third parties and irrespective of
whether such payments are in respect of judgments,
settlements, attorneys' fees, costs, expenses or
otherwise) . With respect to Mr. DeSaro, his maximum
potential liability in connection with the foregoing
shall be limited to the actual distributions of
proceeds from this transaction received by Mr. DeSaro
from Seller, net of taxes, provided that Mr. DeSaro
shall take all actions necessary to file the
appropriate tax returns or amendments to incorporate
any amounts required to be paid hereunder and to the
extent that he receives any refunds or tax savings,
his maximum obligation hereunder shall be increased
by such amount.
(5) With respect to any claim for which an Indemnitor
shall indemnify any Indemnitee, the Indemnitor shall
be subrogated to all rights of Indemnitees against
any and all third parties up to the amount paid by
Indemnitor to Indemnitees.
(6) No party shall be liable for that portion of any
claim for which an Indemnitee actually receives
insurance proceeds covering such claim (the
deductible pertaining to any such insurance shall not
be considered to be insurance proceeds).
(7) The indemnity agreements contained in this Agreement
shall inure only to the benefit of Purchaser and
Seller respectively and those persons or entities
included as "Indemnitees" in this 1.03 by virtue of
their relationship to Purchaser or Seller,
respectively, and shall not be for the benefit of any
other person or entity. These indemnity provisions
shall not be construed to abrogate the corporate
liability shield as provided by law, to extend a
right of action to any third party not otherwise
available, or to enlarge the underlying liability of
any Indemnitor or Indemnitee to any third party.
1.04 Rights of Set Off
(a) Without limiting such other rights as it may have at law or
equity or by agreement, the Purchaser shall have the right
to set off against, and withhold from, any payment otherwise
due to Seller and Mr. DeSaro under this Agreement or to any
party under any Related Agreement: (i) any amount owing
from Seller to Purchaser; (ii) any amount necessary to cure
or remedy any breach, default or deficiency of performance
by Seller under this Agreement or by any party (except
Purchaser) under a Related Agreement; (iii) any amount for
which Purchaser (or any Indemnitee identified with
Purchaser) is entitled to indemnification hereunder; and
(iv) Purchaser's costs or expenses (including reasonable
attorney fees) related to (i), (ii) or (iii). In-kind goods
or services provided by Purchaser for which Purchaser would
be entitled to set-off if paid by Purchaser in money shall
be valued at Purchaser's Cost.
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(b) It shall not be necessary that a breach, default or
threatened breach or default has not yet resulted in actual
damage to a party for the party to exercise its set off
rights hereunder, but rather a party shall have the right to
withhold payment to cover the future effects of any breach,
default or threatened breach or default where the party has
a reasonable belief that loss or damage will occur in the
future as a result thereof, provided that the amounts set
off are reasonably based on the expected loss or damage and
that if such loss or damage does not in fact occur, such
party shall then pay the withheld amount plus interest
thereon at the average of the Prime rate quoted in the New
York Times for the first day on which such a rate is
published in each month for which interest is due. Provided
the party setting-off gives five days written notice and
opportunity to cure to the other party, the set-off and
withholding of money shall not constitute a breach or
default under this agreement or the Promissory Note pending
the final resolution of any dispute as to entitlement or
amount.
(c) In the event Purchaser desires to exercise its rights to set-
off hereunder, after the notice required by 1.04(b) above
(which notice shall include, with reasonable specificity,
the basis for Purchaser's claim), Purchaser shall deliver
the set-off amount ("Set-Off Funds") to a neutral third
party mutually agreed upon in writing by the Seller, Mr.
DeSaro and the Purchaser (the "Escrow Agent"). The Escrow
Agent shall deposit the Set-Off Funds in an insured,
segregated, interest-bearing account. The Escrow Agent shall
hold the Set-Off Funds in escrow until such time as Escrow
Agent receives written notice as hereinafter provided.
Escrow Agent shall deliver the Set-Off Funds, and interest
thereon, promptly upon delivery of and in accordance with
either (i) a joint written notice of Purchaser, Seller, and
Mr. DeSaro providing instructions therein, or (ii) written
notice of Purchaser, Seller or Mr. DeSaro providing
instructions therein and certifying that the dispute with
respect to any or all Set-Off Funds has been determined and
resolved by entry of a final order, decree or judgment of a
court of competent jurisdiction (the time for appeal
therefrom having expired and no appeal having been
perfected) or consent to entry of a judgment concerning an
Indemnified Claim, which notice shall be accompanied by a
copy of such order, decree or judgment certified by the
clerk of such court. If the amount payable to Purchaser in
satisfaction of a disputed indemnified claim, as determined
in accordance with the preceding sentence is in excess of
the amount of the Set-Off Funds, an additional amount
necessary to satisfy such indemnified claim shall be
delivered by the Seller to the Purchaser, subject to the
limitations set forth in 1.03(d)(4). If such amount payable
is less than the amount of the Set-Off Funds with respect
thereto, the excess amount shall be released by the Escrow
Agent to the Seller. In the event that the Escrow Agent
shall be uncertain as to the duties or rights under this
Agreement or shall receive from either Purchaser, Seller or
Mr. DeSaro instructions with respect to the Set-Off Funds
which, in Escrow Agent's opinion are in conflict with any
provision of this Agreement, the Escrow Agent shall notify
the parties of that fact and shall be entitled to refrain
from taking any action in accordance with such instructions
other than to retain the Set-Off Funds until the Escrow
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Agent shall have been instructed otherwise in a writing
signed by all parties or by a final order of a court of
competent jurisdiction, whichever occurs first. Purchaser
and Seller agree to share equally in the costs of
maintaining this Escrow Account.
II. WARRANTIES OF SELLER
As a material inducement to Purchaser to enter into this
Agreement, Seller represents and warrants to the Purchaser as
follows:
2.01 Organization and Qualification
(a) Seller is a corporation in good standing under the laws of
the state of New Jersey with the full power and authority to
enter into contracts, to sell its assets and to perform the
other agreements and covenants as provided in this
agreement. Seller is authorized to do business and is in
good standing in each jurisdiction in which it maintains an
office. The certificate of incorporation and by-laws of
Seller and all amendments thereto provided to Purchaser at
Closing are each as presently in effect, are true and
correct copies and have been certified by the president of
the corporation. Seller is not, and will not be as a result
of executing and performing this Agreement and related
agreements, in violation or breach of, or in default with
respect to, any term of its certificate of incorporation, by-
laws or other charter document.
(b) Seller has no subsidiary or affiliated corporations or
entities other than those listed on Schedule 2.01(b).
2.02 Capitalization
The authorized capital stock and all other equity interests
of Seller of whatsoever type or description are owned of record
and beneficially in accordance with a table in the following form
set forth in Schedule 2.02:
Name of Stockholder Number of Shares
------------------ ----------------
The stock or equity interests are not encumbered or restricted in
any way that will interfere with this transaction, affect
Purchaser's title to or beneficial use of the Purchased Assets or
subject Purchaser to liability to any stockholder, except as
recorded on the stub period balance sheet as a liability.
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2.03 Financial Condition
(a) Seller has delivered to the Purchaser and attached hereto as
Schedule 2.03 true and correct copies of the following: (i)
audited balance sheets, statements of income, statements of
retained earnings, and statements of cash flows of Seller
for Seller's last completed fiscal year; (ii) reviewed
balance sheets, statements of income, statements of retained
earnings, and statements of cash flows of Seller for
Seller's two previously completed fiscal years; and (iii)
the unaudited balance sheet and statements of income,
retained earnings and cash flows of Seller for the stub
period beginning on the date after the date of the last
audited statements and ending as close as practicable to the
Closing Date of this Agreement (the "interim period
financial statements"). Within thirty (30) days following
the Closing Date, Seller shall provide final unaudited
balance sheet and statements of income, retained earnings
and cash flows of Seller for the stub period beginning on
the date after the last audited statements and ending on the
Closing Date (the "stub period" and "stub period financial
statements").
The financial statements referred to in Section 2.03 have
been prepared in accordance with generally accepted
accounting principles consistently applied throughout the
periods involved (except for adjustments thereto which are
disclosed on Schedule 2.03, are correct and complete in all
material respects, and are materially in accordance with the
books and records of Seller. Except as specifically
described elsewhere in Schedule 2.03, from the date of the
interim period financial statements to the date of Closing:
(1) There has been no material adverse change in the
financial condition, results of operations, proper
ties, assets or liabilities and no material adverse
change in the business or to the Seller's knowledge
or belief, future prospects.
(2) The operations and business of Seller have been
conducted in all respects only in the ordinary course
in accordance with past practice.
(3) There has been no accepted purchase order or
quotation, arrangement, or understanding for future
sale of the products or services of Seller which
Seller has reason to believe as of the date of
closing will not be profitable and which could have a
material adverse effect on Seller's financial
condition or the net stockholders' equity to be
conveyed herein.
(4) Seller has not suffered losses (whether or not
covered by insurance) having in the aggregate a
material effect or waived any right of material
value.
(5) Seller has not authorized, declared, paid, or
effected any dividend or other distribution in
respect of its capital stock, any direct or indirect
redemption, purchase, or other acquisition of any
such stock or any bonus or other payment to
employees, officers or directors other than payment
of regular compensation and expense reimbursements in
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the ordinary course. This shall not apply to any
special distributions or contributions of capital
that may be made to ensure that the net worth of
Seller at time of closing is equal to the documented
amount of $1,400,000.
There is no fact known to Seller which materially adversely
affects or in the future, to Seller's knowledge or
reasonable belief, may materially and adversely affect the
financial condition, results of operations, business,
properties, assets, liabilities, or future prospects of the
business associated with the Purchased Assets except as
disclosed on Schedule 2.03; provided, however, that Seller
expresses no opinion as to political or economic matters of
general applicability.
(b) Seller's Adjusted Net Assets as of the Closing Date is not
less than $1,400,000.00. In the event of a breach of this
representation, Purchaser's sole remedy shall be the
purchase price adjustments as described in 1.01 (b).
(c) "Adjusted Net Assets" means the assets transferred less the
liabilities assumed as shown on the final stub period
balance sheet.
(d) The Purchaser's in-house and independent accountants shall
be afforded free and full access to the working papers (to
the extent permitted by Seller's accountants) and records
used by Seller's independent and in-house accountants in
conducting their audit and in preparing their unaudited stub
period statements. If there is a difference of opinion
between the two accounting firms as to the general
acceptability of any of the accounting principles followed
in connection with such audit and report or the results
indicated thereby, the respective accountants shall
immediately confer in an effort to resolve such differences.
If the firms are unable to resolve their differences of
opinion, the firms shall designate a third independent "Big
Six" accounting firm. The fees and costs incurred in
retaining such third independent accounting firm shall be
shared equally by the Purchaser and the Seller. The
determination of such third independent accounting firm
shall be final and binding upon the parties for purposes of
preparing the unaudited stub period statements and
determining the Adjusted Net Asset Value.
2.04 Tax and Other Liabilities
(a) Seller has filed all payroll and other federal, state,
local, and foreign tax returns required to be filed by it;
has delivered to the Purchaser a true and correct copy
thereof and Purchaser acknowledges receipt thereof; and
Seller has delivered to the Purchaser, and Purchaser
acknowledges receipt of, a true and correct copy of any
report as to any audit or adjustments received by Seller
from any taxing authority during the past five years and a
statement describing the status of any litigation,
governmental or other proceeding (formal or informal), or
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audit or investigation pending, or, to Seller's knowledge,
threatened, or in prospect with respect to any such report
or the subject matter of such report.
(b) Except as disclosed on the stub period financial
statements provided pursuant to 2.03 or on Schedule 2.04,
Seller has no liability of any nature, accrued or
contingent, including without limitation liabilities for
payroll and other employee taxes, federal, state, local, or
foreign taxes or liabilities to customers or suppliers,
other than the liabilities which will be reflected on the
stub period financial statements. Seller has paid all taxes,
assessments, and other governmental charges payable or
remittable by it or levied upon it or its properties,
assets, or income, which are due and payable. Except for any
specifically Assumed Liabilities for taxes, Purchaser shall
incur no liability, cost or expense in connection with
Seller's federal, state, local or employee-related taxes,
including any cost or expense arising from investigations,
audits, proceedings or actions taken by taxing authorities.
(c) Seller has paid or will pay all Seller's expenses, taxes
(except sales taxes), and other liabilities, resulting from
the preparation of, or the transactions contemplated by,
this Agreement. These costs will not be assumed by Purchaser
except to the extent they are included on the interim and
stub period financial statements and expressly assumed as
Assumed Liabilities.
2.05 Litigation and Claims
Except as set forth on Schedule 2.05, there is no
litigation, arbitration, claim, governmental or other proceeding
(formal or informal), or investigation pending, or, to Seller's
knowledge, threatened, or in prospect (or any basis therefore
known to Seller) with respect to Seller, any affiliated entity or
any of their business, properties, or assets. Seller is not
affected by any present or , to Seller's knowledge, threatened
strike or other labor disturbance nor to the knowledge of Seller
is any union currently representing or attempting to represent
any employee of Seller as collective bargaining agent. Seller is
not in material violation of, or in default with respect to, any
material law, rule, regulation, order, judgment, or decree,
including any environmental laws or regulations. Among the other
matters required to be disclosed under this section, Schedule
2.05 shall set forth all past (previous three years) and current
citations, violations, fines, judgments, decrees, orders, consent
decrees or orders, and pending proceedings of any type arising
out of the alleged violation of any material federal, state or
local criminal, bidding or procurement, environmental, health and
safety, licensing or labor law or regulation or out of alleged
deficiencies, negligence, intentionally wrongful act or breach of
contract in the performance of services. Except for liabilities
assumed under the Assumption Agreement, Purchaser will incur no
liability for any of the above as a result of this transaction.
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2.06 Accounts Receivable and Properties
Except as set forth on Schedule 2.06 or regarding the assets
excluded from the Purchased Assets identified in 1.01(d) or
except as Purchaser has expressly assumed such lien, etc. as an
Assumed Liability, Seller has good title to all personal
properties and assets transferred by this Agreement or included
in the calculation of Adjusted Net Asset Value or owned by it
free and clear of all liens, mortgages, security interests,
pledges, charges, and encumbrances.
(a) All accounts receivable and work in process of Seller
recorded on the interim period balance sheet or to be
recorded on the stub period balance sheet (all of which are
shown on Schedule 1.01(a)(14)) arose from valid transactions
in the ordinary course of Seller's business and will be
collected within one (1) year of the closing by Purchaser
utilizing reasonable and customary collection procedures
(e.g. measures such as legal action or mechanics liens shall
not be required of Purchaser). Any account which has not
been so collected within one year shall be conclusively
deemed to be uncollected and uncollectible by Purchaser. All
uncollected accounts shall be remedied by Seller by set-off
hereunder (or if set-off is not available, by
indemnification and repayment). Upon such remedy, the
accounts shall be assigned to Seller. All accounts
receivable of Seller to be shown on the stub period balance
sheet were fully earned as of the date of closing, and
Purchaser will have no performance obligations for which it
will not be entitled to bill (no account receivable
represents a pre-billing except to the extent an allowance
is reserved for it).
Upon written notice to Purchaser, Seller may request to have
any account receivable which is uncollected as of three (3)
months after Closing re-assigned to Seller. Purchaser shall
not unreasonably deny or delay such request. Such request
by Seller for re-assignment shall constitute Seller's
agreement to a set-off in such amount, which Purchaser may
exercise immediately unless remedied by Seller by repayment.
All payments received by Purchaser shall be deemed to be in
payment of an account receivable of Seller shown on the stub
period balance sheet, unless otherwise indicated by the
account debtor or otherwise readily identifiable as being
payment of a post-Closing Date receivable, and Purchaser
shall take no actions to have the account debtor so
designate otherwise in order to frustrate the collection of
the accounts receivable.
Upon reassignment of any accounts receivable to Seller,
Seller shall have the right, in its sole discretion, to
collect the balance thereof by any method it desires,
including suit or other third-party collection methods.
(b) Attached as the schedules to 1.01, or as the Schedule of
Assumed Leased Assets to the Assumption Agreement, are lists
of all material properties and assets owned, leased, or
licensed by Seller (not including supply inventory), and,
with respect to such properties and assets leased or
licensed by Seller, a description of such lease or license.
All such properties and assets (including Intangibles) owned
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by Seller are reflected on the interim period balance sheet.
Except as disclosed on Schedule 2.06(b), each physical asset
having a depreciated value on Seller's books greater than
five thousand dollars will be in operational condition as of
Closing (except for normal wear and tear which is not such
as to affect their operability), has been routinely
maintained and, to Seller's knowledge, has no defects which
will render it unable to be used in the ordinary course as
of the Closing Date.
(c) Except as noted on Schedule 2.06(c), to Seller's knowledge,
no real property owned, leased, licensed, or used by Seller
lies in an area which is subject to zoning, use,
environmental or building code restrictions which would
prohibit, and no state of facts relating to the condition of
any building or property or action or inaction of a person
or entity or the ownership, leasing, licensing, use or
regulation of any real or personal property exists or, to
Seller's knowledge will or is likely to exist which would
prevent the leasing and use after Closing of such real
property by Purchaser in the business in which Seller is now
engaged. Purchaser will incur no liability as a result of
environmental conditions associated with any real property
ownership, leasing or use by Seller prior to closing.
2.07 Contracts and Other Instruments
(a) Schedule 2.07 and the Schedules described in Section 1.01
set forth all material contracts to which Seller is a party,
including leases and licenses and all supply, distribution,
agency, financing or other arrangements and understandings.
Seller has furnished to the Purchaser, upon Purchaser's
request, the following: (i) true copies of all written
contracts, agreements, and instruments; (ii) true copies of
all leases and licenses; and (iii) true written descriptions
of all non-written supply, distribution, agency, financing,
or other arrangements or understandings. Any of the
foregoing not disclosed on the Schedules described in 1.01
are listed on Schedule 2.07. Neither Seller nor, to
Seller's knowledge, any other party to any such contract,
agreement, instrument, lease, or license is now or is
expected as of closing by Seller to be in the future in
violation or breach of, or in default with respect to
complying with, any material provision thereof, and each
such contract, agreement, instrument, lease, or license is
in full force and is the legal, valid, and binding
obligation of the parties thereto and is enforceable as to
them in accordance with its terms, except as disclosed on
Schedule 2.07. Neither Seller nor any other party to any
such arrangement or understanding has given notice of
termination or taken any action inconsistent with the
continuance of such arrangement or understanding. All of
Seller's benefits of all contracts and arrangements,
including Customer Contracts (and non-binding customer
arrangements included on the backlog schedule) will be fully
transferred to Purchaser as a result of this transaction to
the extent transferable (the benefits of contracts which
become obligations of Purchaser only if assumed as an
Assumed Liability will only be transferred if so assumed as
an Assumed Liability). Seller represents that it shall make
best efforts to transfer such benefits including the
covenants set forth in 4.13, and Seller shall not make any
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claim or receive any benefit by virtue of the fact that any
such contracts or benefits are non-transferable. Seller also
represents that all Customer Contracts are for the delivery
of professional personal consulting services and not for the
delivery of products or working software.
(b) Except for situations disclosed on Schedule 2.07(b) and for
the cost of correction of which an adequate reserve is
recorded on the interim period balance sheet as a liability:
all services and products performed or supplied by Seller
prior to closing were complete and proper, within the scope
of performance defined by the contract or arrangement, and,
to Seller's knowledge, to the satisfaction of the customer;
no curative or corrective work, replacements or payments are
necessary to render such performance legally or
contractually sufficient; and all costs for performance
completed prior to closing have been duly recorded as
liabilities on the interim period financial statements or
will be duly recorded as liabilities on the stub period
financial statements. Except as disclosed on Schedule
2.07(b), billings by Seller on each contract to be acquired
by Purchaser as a Purchased Asset have not constituted a
greater percentage of total allowable billings under such
contract than the percentage of work performed prior to
closing has constituted of total work to be performed under
such contract. Except as so disclosed and assumed as an
Assumed Liability, no Customer Contract to be acquired as a
Purchased Asset has been sold at less than cost.
(c) Seller enjoys peaceful and undisturbed possession under all
leases and licenses under which it is operating. Seller is
not a party to or bound by any contract, agreement,
instrument, lease, license, arrangement, or understanding,
or subject to any charter or other restriction, which has
had, or to the knowledge of Seller is likely in the future
to have, a material adverse affect on the Purchased Assets
or the operations or business associated therewith. Except
as disclosed on Schedule 2.07(c), Seller has neither engaged
within the last five years in, is engaging in, nor intends
to engage in any transaction with, nor has had within the
last five years, now has, or intends to have any contract,
agreement, lease, license, arrangement, or understanding
with, any Stockholder, any director, officer, or employee of
Seller, any relative or affiliate of any Stockholder or of
any such director, officer, or employee, or any other
corporation or enterprise in which Seller, any such
director, officer, or employee, or any such relative or
affiliate then had or now has a five percent (5%) or greater
equity or voting or other substantial interest, other than
such contracts and agreements as so listed and specified on
Schedule 2.07(c). There exists no contract, agreement,
right or understanding material to the business or officers
of Seller which is in the name of any principal, officer,
director, stockholder or any other person or entity other
than Seller except as disclosed and so identified on
Schedule 2.07(c).
(d) The backlog items listed on the backlog schedule as part of
Schedule 1.01(a)(12) hereto all represent actual commitments
by clients for the performance of services by Seller which
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are either actual contractual commitments or actual written
or verbal communications of commitment received by Seller
from the client to hire Seller for the performance of such
services in such amounts as are shown on the schedule.
2.08 Employees and Employee Liabilities
(a) Seller has set forth in Schedule 2.08 a description of all
of its pension, profit-sharing, option, other incentive
plans, or any other type of employee benefit plan (as
defined in Section 3(3) of the Employee Retirement Income
Security Act of 1974 ("ERISA")), and all obligations to, or
arrangements with, employees for wages, salary, bonuses,
incentive compensation, vacations, severance pay, insurance,
or other benefits. Seller has furnished to the Purchaser
true and correct copies of all documents evidencing such
plans, obligations or arrangements referred to in Schedule
2.08 (or written summaries of such plans, obligations, or
arrangements to the extent not evidenced by documents) and
true and correct copies of all documents evidencing trusts
relating to any such plans, and Purchaser acknowledges
receipt thereof. Schedule 2.08 also contains a true and
correct statement of the names, relationship with Seller,
present rates of compensation (whether in the form of
salary, bonuses, commissions, or other supplemental
compensation now or hereafter payable), and aggregate
compensation for the last completed fiscal year and for the
interim period of each director, officer, employee or sales
agent of Seller. All obligations, debts and liabilities
associated with all of the above have been properly
reflected as liabilities on the warranted financial
statements provided in 2.03.
(b) Except for the Assumed Liabilities assumed by Purchaser
under the Assumption Agreement, Purchaser will not incur any
liability to or on behalf of Seller's employees arising out
of their employment with Seller or out of Seller's acts or
omissions (as distinguished from Purchasers acts or
omissions after closing), including (but not limited to) any
liability: under ERISA or the Internal Revenue Code; for
obligations to, or arrangements with employees for wages,
salary, bonuses, incentive compensation, vacation, severance
pay, insurance, or other benefits, or employee taxes; for
personal injury; or for discrimination, harassment, or
wrongful discharge under federal, state or local law.
Except as disclosed in Schedule 2.08(b), there is no
litigation, arbitration, claim, governmental or other
proceedings (formal or informal), or investigation pending,
or to Seller's knowledge threatened, or any basis therefore
known to Seller with respect to any such employee benefit
plan, compensation arrangement or the Seller's acts or
omissions with respect to its employees or its work
environment.
2.09 Patents, Trademarks, Copyrights, etc.
Seller neither owns nor has pending, or is licensed under,
any patent, patent application, trademark, trademark application,
trade name, service mark, copyright, franchise, or other
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intangible property or asset, other than as described in the
Schedules to 1.01(a) or in Schedule 2.09, all of which are in
good standing and uncontested. The Schedules to 1.01(a) and 2.09
together accurately set forth a description of any intangibles
owned by Seller and with respect to intangibles licensed by
Seller from or to a third party, a description of such license.
This Schedule shall note any financial value associated with
these intangible assets that has been included in the calculation
of Adjusted Net Asset Value. Except as disclosed on such
schedules, to Seller's knowledge, no person other than Seller or
such licensers own any interest in any such intangible. Neither
any stockholder, any director, officer, or employee of Seller,
any relative or affiliate of any stockholder or of any such
director, officer, or employee, nor any other corporation or
enterprise in which any stockholder, any such director, officer,
or employee, or any such relative or affiliate had or now has a
five percent (5%) or greater equity or voting or other
substantial interest, possesses any intangible which relates to
the business of Seller except as such interest is disclosed on
Schedule 2.09. There is no right under any intangible necessary
to the business of Seller as presently conducted or as it
contemplates conducting, except such as are so designated in
Schedules 1.01(a) or 2.09. To Seller's knowledge, Seller has
neither infringed, is infringing, or has received notice of
infringement of intangibles of others (this warranty expressly
covers any software conveyed under 1.01(a)(9)). To the
knowledge of Seller there is no infringement by others of
intangibles of Seller. As far as Seller can foresee, there is no
intangible of others transferred hereunder, the loss of which
may materially adversely affect the financial condition, results
of operations, business, properties, assets, liabilities, or
future prospects of Seller.
2.10 Questionable Payments
Except as disclosed on Schedule 2.10, neither Seller, any
director, officer, agent, employee, or other person associated
with or acting on behalf of Seller, nor any stockholder has,
directly or indirectly: (a) used any corporate funds for unlawful
contributions, gifts, entertainment, or other unlawful expenses
relating to political activity; (b) made any unlawful payment to
foreign or domestic government officials or employees or to
foreign or domestic political parties or campaigns from corporate
funds; (c) violated any provision of the Foreign Corrupt
Practices Act of 1977; (d) established or maintained any unlawful
or unrecorded fund of corporate monies or other assets; (e)
knowingly made any false or fictitious entry on the books or
records of Seller; (f) made any bribe, rebate, payoff, influence
payment, kickback, or other unlawful payment; or (g) made any
unlawful bribe, kickback, or other payment to any person or
entity, private or public, regardless of form, whether in money,
property, or services, to obtain favorable treatment in securing
business or to obtain special concessions, or to pay for
favorable treatment for business secured or for special
concessions already obtained. Neither Purchaser nor the
Purchased Assets will be subject to any debarment or other
limitation on bidding or contracting as a result of any of the
foregoing or like improper conduct.
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2.11 Authority to Sell
Seller has all requisite power and authority to execute,
deliver, and perform this Agreement. All necessary corporate
proceedings of Seller have been or as of the Closing Date will
have been duly taken to authorize the execution, delivery, and
performance of this Agreement by Seller acting through Mr. DeSaro
and other duly authorized officers. This Agreement has been duly
authorized, executed, and delivered by Seller, has been duly
executed and delivered by Mr. DeSaro, constitutes the legal,
valid, and binding obligation of Seller (and Mr. DeSaro but only
in so far as any obligation is Mr. DeSaro's in accordance with
the express terms thereof), and is enforceable as to them in
accordance with its terms. Except as disclosed on Schedule 2.11,
no consent, authorization, approval, order, license, certificate,
or permit of or from, or declaration or filing with, any
governmental authority, court or other tribunal or entity or
individual is required by Seller or Mr. DeSaro for the execution,
delivery, or performance of this Agreement by them. The
execution, delivery, and performance of this Agreement will not
result in such breach(es) of any agreement(s), instrument(s),
lease(s), license(s), arrangement(s), or understanding(s) as will
in the aggregate materially diminish the value of the Purchased
Assets or Purchaser's realization of the benefits thereof, or
materially violate or result in a breach of any term of the
certificate of incorporation (or other charter document or by-
laws of Seller) or violate, result in a breach of, or conflict
with any material law, rule, regulation, order, judgment, or
decree binding on Seller or Mr. DeSaro or to which any of their
operations, business, properties, or assets are subject. Upon
the Closing, Purchaser will have good title to the Purchased
Assets, free and clear of all liens, security interests, pledges,
charges, stockholders' agreements, and encumbrances except those
expressly assumed as Assumed Liabilities and except for such
other liens and interests as may be granted by the Purchaser.
2.12 Restricted Professional and Small Business Set
Aside Revenues
The gross revenues of Seller for each of the previous two
fiscal years and for the stub period, received from: a)
professional services of any type which Purchaser would be
precluded from performing by laws or regulations pertaining to
regulation of professions or professional corporations; or b)
from contracts or subcontracts (or services otherwise performed)
under Small Business Set Aside or comparable business-size or
racial, gender or other class-restricted programs (e.g. WBE
contracts) of the Small Business Administration or other federal
or state agency were as set forth on Schedule 2.12.
2.13 Loans to Insiders
Seller has not made any loans to stockholders, officers,
directors, employees or any other person or entity other than the
loans set forth on Schedule 2.13.
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2.14 Fictitious Names
Schedule 2.14 sets forth each fictitious name utilized by
Seller and lists the jurisdictions in which each such name is
registered. Except as set forth on Schedule 2.14, Seller has not
done business under any name and has not registered any names in
any jurisdiction other than its corporate name.
2.15 Absence of Undisclosed Liabilities
Except as set forth in the schedules to this Agreement or
the stub period balance sheet, Seller has no obligations or
liabilities of any kind, fixed, accrued or contingent which would
materially affect the value of the Purchased Assets or
Purchaser's title to the Purchased Assets or the business
associated therewith.
2.16 Books and Records
Except as described in Schedule 2.16, the books and records
of Seller are in all material respects complete and correct.
Seller and Purchaser shall retain responsibility and liability
for care and custody of business records that remain in their
respective possession. The liability of Seller and Purchaser for
loss, theft or destruction of records in their respective
possession that may be required by the other party shall be
limited to costs that may actually be incurred for reconstruction
of the lost, stolen or destroyed records up to a cumulative
maximum cost of $100,000. Seller and Purchaser shall have no
responsibility or liability whatsoever for consequential damages
that may be suffered by the other party as a result of any such
loss, theft or destruction. Seller and Purchaser agree to retain
their respective records for a period of seven years following
the date of closing.
2.17 Banking Matters
Seller represents that there are no direct deposits, lockbox
or similar arrangements for the payment by Seller's customers
into Seller's bank accounts.
2.18 Assets Free and Clear of Liens
The Purchased Assets will be free and clear of all liens,
security interest, claims or encumbrances or any nature or
description except for the Assumed Liabilities, and Seller will
have procured and delivered at or prior to the Closing proof of
release and satisfaction of any of the foregoing security
interests or claims which are not assumed as Assumed Liabilities.
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2.19 Conditions to Consents
Except as disclosed on Schedule 2.19, Seller has not made
any agreement or understanding as a condition for obtaining any
consent, authorization, approval, order, license, certificate, or
permit required for the consummation of the transactions
contemplated by this Agreement.
2.20 Completeness of Disclosure
No representation or warranty by Seller or Mr. DeSaro in
this Agreement contains any materially untrue statement of a
material fact or omits to state a material fact necessary to make
the statements made not misleading.
III. REPRESENTATIONS AND WARRANTIES OF PURCHASER AND GUARANTOR
As a material inducement to Seller and Mr. DeSaro to enter
into this Agreement, Purchaser and Guarantor represent and
warrant as follows:
3.01 Organization and Good Standing
Purchaser and Guarantor are corporations duly organized,
validly existing and in good standing under the laws of the State
of Delaware, and duly qualified to engage in business in the
State of New Jersey, with full power and authority to enter into
and perform each of the transactions contemplated by this
Agreement.
3.02 Execution and Performance Authorized
This Agreement and all other documents and agreements
contemplated hereunder have been duly executed and delivered by
the Purchaser, such execution and delivery and the consummation
by Purchaser of the transactions contemplated hereunder have been
duly authorized by all necessary corporate action, and no further
action is required by law, its corporate charter, bylaws or
otherwise to authorize all action to be taken by Purchaser with
respect to this Agreement and the consummation of the
transactions contemplated hereunder. The Agreement and the other
documents contemplated hereunder are binding and are enforceable
against Purchaser in accordance with their terms.
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3.03 Absence of Litigation
There is no action, lawsuit, proceeding or investigation of
any kind or nature pending or threatened against Purchaser before
any court, tribunal or administrative agency or board which
might, individually or in the aggregate, materially and adversely
(i) affect Purchaser's solvency or its ability to perform
hereunder, or (ii) render any one or more of the transactions
contemplated hereunder void or voidable.
3.04 No Other Default
The execution and delivery of this Agreement by Purchaser
and the consummation of the transactions contemplated hereunder
will not conflict with or violate or require any consent under
and will not result in any breach or termination of Purchaser's
corporate articles, bylaws or minutes or any agreement to which
Purchaser is a party or by which any of its property is subject
or by which it is bound.
3.05 Permits and Filings
There is no requirement applicable to Purchaser to make any
filing with, or to obtain any permit, authorization, consent or
approval of any third party or any governmental or other
regulatory authority as a condition of the lawful consummation of
the transactions contemplated under this Agreement. Purchaser
represents that, after reviewing relevant facts regarding
Purchaser and Seller and their operations, including Seller's
audited financial statements warranted under 2.03(a), Purchaser
has determined that a filing under the Hart-Scott-Rodino
Antitrust Improvements Act of 1976 relating to the transactions
contemplated by this Agreement is not necessary or required.
Purchaser agrees to indemnify and hold harmless and defend Seller
and/or Mr. DeSaro individually against any and all penalties
which may be assessed against Seller and/or Mr. DeSaro as a
result of a breach of this representation.
3.06 Absence of Lien
The monies to be paid by Purchaser under 1.01 shall be
paid by Purchaser and received by Seller free and clear of any
lien, charge or encumbrance arising out of any agreement or
instrument to which Purchaser is subject or by which their
properties are bound.
3.07 Solvency
At the Closing and after payment of the purchase price as
required under 1.01, Purchaser and Guarantor will be and will,
for so long as there remains an outstanding balance due to Seller
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pursuant to the Promissory Note, remain solvent under all
applicable federal and state laws and regulations. Purchaser and
Guarantor also agrees that they will not intentionally cause
their business to be conducted in a manner that results in their
becoming insolvent; provided, however, that consistent with the
foregoing, this covenant shall not restrict the future business
decisions of Purchaser and Guarantor which relate to the
Purchased Assets or the business associated therewith.
3.08 Financial Condition of Purchaser and Guarantor
Following the consummation of the transactions contemplated
by this Agreement, Purchaser and Guarantor will have sufficient
capital and property remaining to conduct their businesses and to
fulfill their obligations to Seller hereunder. Purchaser and
Guarantor shall jointly, after the Closing and for so long as
there remains an outstanding balance due to the Seller pursuant
to the Promissory Note, maintain net stockholder equity equal to
at least two times the outstanding value of the Promissory Note.
IV. COVENANTS
4.01 Intentionally omitted
4.02 Release by Stockholders
Seller shall make reasonable efforts to deliver to Purchaser
at or after the Closing a consent and release from each
stockholder of Seller in the form of Exhibit 4.02. Failure of
Seller to provide such documents shall not be deemed a default
under this Agreement.
4.03 Intentionally omitted
4.04 Non-Competition
(a) Effective as of the Closing Date, Seller and Mr. DeSaro
agree, in consideration of the obligations of the Purchaser
hereunder, to strictly abide by the following covenants.
Seller and Mr. DeSaro agree that for a period of three (3)
year after closing, they will not, directly or indirectly:
(1) disclose, communicate or divulge to, or use for the
direct or indirect benefit of any person, firm,
association or company, other than Guarantor,
Purchaser or their affiliates any information which
is not otherwise available regarding the business
methods, business policies, procedures, techniques,
research or development projects or results, trade
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secrets, customers or clients, or any other
confidential information relating to or dealing with
the business operations of Seller or the Purchased
Assets, made known to them or learned or acquired by
them while employed by Seller.
(2) for themselves or any other person or entity other
than Purchaser, hire or induce or attempt to
influence any employee of Guarantor or Purchaser or
their affiliates to terminate such employment.
(3) make any sales contact with, or solicit or accept
business from any customers of Purchaser or entities
who were customers of Seller during the three years
prior to closing, without regard to the location of
the business, provided, however, that this
restriction shall apply only to products or services
which are competitive with those of Seller at the
time of Closing.
(4) engage in any business within New York, New Jersey,
Connecticut, Pennsylvania or Florida on behalf of
themselves or any party other than Guarantor or
Purchaser in the fields from which the Seller has
historically derived revenues, or otherwise compete
with the business transferred to Purchaser hereunder.
These fields would include (but are not necessarily
limited to) general management consulting;
recruitment of technical data processing staff as
consultants (distinguished from in-house recruitment
of employees); application and system programming;
software engineering and management; analytical,
technical and programming support for the development
and maintenance of data processing systems; design,
installation and configuration of computer networks;
development, testing, documentation, implementation
and support of database systems; beta-testing,
analysis, programming and implementation of
centralized, multi-user office automation software
and hardware; remote or hosted network management
services; and support of communication related
circuit or routing equipment.
(5) except for the benefit of Purchaser, use the name 3D
or represent to any potential client that they are
representing the business transferred to Purchaser
hereunder.
(b) Seller and Mr. DeSaro agree that the provisions of this
Section are reasonable in scope and duration and are
necessary to protect Purchaser's bona fide confidential
business information, both that developed internally and
that purchased from Seller, and to give value to the
Purchased Assets and the goodwill associated therewith and
to protect Purchaser. Seller and Mr. DeSaro agree that the
customer names and other customer and business information
of the Purchaser and such information purchased by Purchaser
from Seller is proprietary, and they agree that a breach of
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any of these provisions will cause irreparable harm for
which money damages alone will not be sufficient
compensation and that Purchaser shall have available to it,
in addition to any other remedies available by law,
equitable remedies, including the remedy of injunction, to
enjoin the breach or threatened breach of the provisions of
this section.
(c) Purchaser agrees that, in the event it has defaulted on its
obligations under the Promissory Note, and such default
remains uncured after notice and opportunity to cure under
the terms of the Promissory Note, Mr. DeSaro will be
released from the provisions of this 4.04 and from the non-
competition and non-solicitation provisions of his
employment agreement provided he is not then employed by the
Purchaser or an affiliate or successor.
4.05 Bankruptcy
Seller and Purchaser agree that for a period of one year
after the Closing, neither of them will file an application or
petition for voluntary bankruptcy under the United States
Bankruptcy Code or any application under any similar state or
federal statute.
4.06 Termination of Seller's Employees
Seller shall terminate all of its employees as of or before
the Closing Date, except such administrative employees as are
needed to enable Seller to wind down its affairs and perform any
continuing employee benefit or other administrative functions.
4.07 Hiring of Seller's Employees
Purchaser shall have the right to hire any or all of
Seller's employees. Although Purchaser's decision whether to
hire Seller's current employees lies solely within the discretion
of Purchaser, Seller and Mr. DeSaro agree to assist and
facilitate Purchaser's negotiations with Seller's employees. In
this regard, Mr. DeSaro will assist Purchaser in identifying any
key employees of Seller to whom Purchaser should direct special
attention and incentives. The negotiation of suitable terms with
employees lies in Purchaser's sole discretion and the decision
whether to hire any or all employees shall not relieve Seller and
Mr. DeSaro of any of their obligations hereunder; provided,
however, that Purchaser shall hire and maintain for a sufficient
period of time, a sufficient number of employees at each
establishment so that Seller does not violate the federal WARN
Act (29 U.S.C. 2101 et seq.) or any similar act under state
law. Seller shall retain responsibility for termination and
associated termination costs or continued employment, as the case
may be, of any employees not hired by Purchaser and for accrued
vacation and all other pre-closing accrued liabilities to
employees except those assumed as Assumed Liabilities (see
2.08).
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4.08 Transaction Costs and Expenses
The Purchaser, Seller and Mr. DeSaro shall each bear and pay
all of their respective costs, fees and expenses incurred in
connection with bringing about this transaction including,
without limitation, all legal, accounting, auditing and appraisal
fees in negotiating and preparing the documents and in
consummating, closing and carrying out the transactions
contemplated hereby. Notwithstanding the forgoing, the parties
acknowledge that Seller shall be responsible for up to $6,000 of
the costs and expenses for the services of Deloitte & Touche, LLP
incurred in connection with the audit of financial statements
delivered to Purchaser pursuant to this Agreement, and Purchaser
is responsible for all costs and expenses in excess of this
amount. Any costs to be charged to Seller shall be included on
the stub period balance sheet and reflected in the warranty of
Adjusted Net Asset Value made in 2.03(b).
4.09 Access to Information and Records
Each party shall provide to the other, with reasonable
promptness following a request in writing (not to exceed ten (10)
business days), such information and data with respect to
Seller's business before Closing and/or the Purchased Assets as
may from time to time be requested by the other party. In the
event either Purchaser or Seller is required to prepare
statements or to produce or compile information for a government
agency which requires access to information or for any other
reasonable purpose including the desire to verify any information
provided to the other party relative to this agreement, the
parties agree to allow the other party reasonable access to
records, including the working papers of the other party's
accountants (to the extent permitted by such accountants), and to
provide reasonable cooperative assistance in the preparation of
reports, documents, etc. without charge except for reimbursement
of any actual, out-of-pocket expenses, exclusive of the cost of
in-house staff time. Notwithstanding the foregoing, in the event
that a party is or anticipates becoming a party to litigation,
this 4.09 or any other provision of this Agreement shall not be
construed to require such party to provide information to the
other which could prevent such party from making a bona fide
claim of attorney/client privilege or such other privileges as
may be applicable with respect to such information.
4.10 Addresses, Mail and Deliveries
Purchaser shall have the right to receive and open for
inspection all mail and deliveries addressed to any address to
the names of "3D Information Services, Inc." or "3D" or otherwise
reasonably appearing from the outside to contain Purchased Assets
or documents which would customarily be received by the owner of
the Purchased Assets. Purchaser shall have the right to receive
and open for inspection all mail and deliveries delivered to its
premises (including the premises assumed hereunder) addressed to
"3D Information Services, Inc." or any person who was an employee
or former employee of Seller unless it is clear from the envelope
that the contents belong to Seller or are personal in nature.
Purchaser and Seller shall each use their best efforts to avoid
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opening mail or deliveries which rightfully belongs to the other
and shall turn over to the other any property, including checks
or money, belonging to the other within twenty-four hours after
determining its rightful ownership. Purchaser shall have the
exclusive right to apply for change of address, change of
telephone numbers or location of telephone numbers applicable to
the purchased names or Purchased Assets. Seller agrees to
execute and return to Purchaser within three business days after
receipt thereof such assignment or consent forms as Purchaser
reasonably requests to effect such changes of address, telephone
number location or telephone numbers.
4.11 Intentionally Omitted
4.12 Related Agreements
Seller, Mr. DeSaro and Purchaser each agree to execute, to
deliver at Closing and to faithfully and fully perform the
Related Agreements referenced in 7.01. Failure to deliver the
stockholder non-competition agreements referred to in 7.01(b)
shall not be considered a default.
4.13 Assignment of Agreements - Benefits of
Ownership to be Provided Where Assignment or
Novation Not Possible
(a) Seller and Mr. DeSaro shall use their best efforts to secure
(and to assist Purchaser in securing) all consents and
approvals required to effect the assignment of the Customer
Contracts and other agreements to be transferred to
Purchaser hereunder or under the Assumption Agreement.
Seller and Mr. DeSaro agree that upon the written request of
Purchaser, they will execute and return to Purchaser each
and every assignment, consent to assignment or novation, or
other document reasonably necessary to effect the transfer
or execution of any Customer Contract or other contract,
asset or benefit to be conveyed hereunder within two (2)
business days after receipt of such document provided that
such documents are reasonable in form and substance.
Seller's and Mr. DeSaro's covenant in this regard shall be
absolute and not subject to any right of non-performance for
any reason, including breach by Purchaser, and Seller and
Mr. DeSaro expressly acknowledges and agrees: (i) that this
covenant is of critical importance to Purchaser; (ii) that
its breach will cause Purchaser irreparable harm for which
money damages alone will be difficult of ascertainment and
inadequate; and (iii) that in the event of a breach hereof,
Purchaser shall be entitled to immediate equitable relief in
the form of an emergency, summary injunction or decree for
specific performance without any requirement for the posting
of any bond or undertaking.
(b) Seller agrees that at Closing, John J. Goodwin and John J.
Smith shall have a limited power of attorney to act on
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Seller's behalf for the limited purpose of executing
assignments, consents to assignment or novation and other
documents necessary to effect the transfer of contracts, the
Purchased Assets or the benefits thereof to Purchaser in
cases where such documents, in addition to those executed
and delivered at Closing, are required by a customer or
other third party to effect the transfer or confer the
benefit. This limited power of attorney shall take effect
automatically in the event Seller fails to execute and
return such documents to Purchaser within two business days
in accordance with 4.13(a). Purchaser shall indemnify
Seller pursuant to 1.03 for any damage caused to Seller as
a result of such persons' acts or omissions.
(c) With respect to any Customer Contract or Assumed Liability
to be conveyed hereunder to which Seller and Purchaser are
not able to obtain a consent to assign or novate or which
are otherwise not capable of assignment or novation,
Purchaser shall nevertheless be deemed to be entitled to all
beneficial interest in such Customer Contract or Assumed
Liability as against Seller, and Seller shall use its best
efforts to: (i) subcontract such Customer Contract or
Assumed Liability to Purchaser on the same terms and
conditions as the original (except that Seller shall retain
all pre-closing liability as provided in 1.02 except as
assumed as an Assumed Liability); and/or (ii) cooperate in
any reasonable and lawful arrangement to provide to the
Purchaser all the benefits of such Customer Contract or
Assumed Liability, such as (but not limited to) re-hiring
such of Purchaser's employees on a part-time, temporary
basis as are necessary to perform such contractual
obligations on Purchaser's behalf, provided Purchaser pays
all Seller's costs and expenses associated with such re-
hiring and work and assumes and indemnifies Seller against
all costs and liability associated with such sub-
contracting, re-hiring and performance of services.
4.14 Intentionally Omitted
4.15 Use of Proceeds to Pay Debts and Obligations
Seller shall use all proceeds received from the sale of the
Purchased Assets and the Related Agreements for the prompt
discharge of all of Seller's liabilities when they become due
except for the Assumed Liabilities.
4.16 Continuation of Health Benefits
Purchaser shall offer health insurance benefits to all
employees of Seller that are now eligible to participate in
Seller's health insurance benefit program.
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4.17 Transition of Worker's Compensation and 401(K)
Plans
Purchaser will provide Workers' Compensation benefits to all
employees of Seller in accordance with applicable legal
requirements for the period after Closing. To the extent
permitted by the applicable plan documents, Purchaser shall merge
Seller's 401(k) Plans into Purchaser's or Guarantor's 401(k) Plan
in conformance with applicable laws and regulations as of the day
of Closing. Purchaser shall hold Seller and Mr. DeSaro harmless
from and against any and all liabilities or obligations arising
out of Purchaser's failure to perform or properly perform all of
Purchaser's obligations arising out of any such merger.
4.18 Successor Payroll Issues
Purchaser shall be the successor employer to Seller for
purposes of post-Closing FICA taxes and reporting, FUTA taxes and
reporting, and corresponding state payroll laws and regulations.
Purchaser agrees to perform the obligations of a successor
employer for such taxes and reporting purposes and will
indemnify, defend and hold Seller harmless from and against any
and all liabilities or obligations arising out of Purchaser's
failure to perform or properly perform all of Purchaser's
obligations as a successor employer of Seller for the purposes
set forth in this section, including but not limited to
completing accurately and completely all Forms 941, 940, W-2, W-
3, related to obligations accruing after Closing required of
Purchaser in its status as successor employer. Seller shall
perform such obligations for pre-Closing accruals. This section
shall not be construed to imply that Purchaser is liable as a
successor employer or otherwise as a successor to Seller for any
purpose except for the limited purposes set forth in this
section. Seller does not represent or warrant that Purchaser
will, in fact, be treated as the successor employer but Seller
will not take any affirmative actions that would reasonably be
expected to compromise Purchaser's ability to be treated as a
successor employer.
4.19 Intentionally Omitted
4.20 Purchaser's Cost
Whenever any goods or services are provided or procured by
Purchaser under any covenant of Purchaser hereunder to do so or
to correct or remedy Seller's breach, default, or deficiency of
performance under any representation, warranty, or covenant of
this Agreement, such goods or services shall be valued at
Purchaser's Cost. "Purchaser's Cost" means Purchaser's actual,
out-of-pocket cost of goods, materials or contracted services and
direct cost of labor which shall include payroll taxes and all
other variable direct costs associated with the labor provided.
Purchaser shall use reasonable efforts to minimize Purchaser's
costs incurred in connection with this Agreement to the extent
that any such costs may be included within an Indemnified Claim.
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V. CONDITIONS PRECEDENT TO SELLER'S AND MR. DESARO'S
OBLIGATIONS
The obligation of Seller and Mr. DeSaro to close and to
perform the covenants and actions required of them on the Closing
Date shall be subject to the satisfaction at or prior thereto of
the following conditions precedent:
5.01 Truth of Representations and Warranties
Purchaser's and Guarantor's representations and warranties
contained in this Agreement shall be true in all material
respects at and as of the Closing Date as though such
representations and warranties were made at and as of the Closing
Date.
5.02 Performance
Purchaser shall have performed and complied in all material
respects with its obligations under this Agreement which are to
be performed or complied with by it prior to or on the Closing
Date; and the Seller shall have received certificates signed by
Purchaser dated the date of the Closing to that effect in form
satisfactory to Seller.
5.03 Documents
Purchaser shall provide to Seller all of the documents and
shall perform such acts as are prescribed in Section 8.03 or
elsewhere in this Agreement.
5.04 Authorization
Any consent, approval, authorization, order or filing with
any court or governmental agency or administrative body required
for the consummation of the transactions contemplated by this
Agreement shall have been obtained or made and shall be in effect
on the Closing Date.
5.05 Absence of Suit
No action, suit or proceeding before any court or any
governmental or regulatory authority shall have been commenced or
threatened against Purchaser, Seller or Mr. DeSaro or any of the
officers or directors of any of them, seeking to restrain,
prevent or change the transactions contemplated hereby or
challenging the validity or legality of any such transactions, or
seeking damages in connection with any of such transactions.
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5.06 Payment of Purchase Price
Purchaser shall have tendered the cash and other
consideration required to be paid or delivered at closing under
Section 1.01(b) or otherwise in amounts not less than such
amounts.
5.07 Assumption of Liabilities
The Purchaser shall have executed and delivered to Seller
and Mr. DeSaro an Assumption Agreement in the form of Attachment
1.01(d) hereto providing for the assumption by the Purchaser of
the Assumed Liabilities.
5.08 Execution of Related Agreements
The Purchaser shall have executed and delivered to Seller
and Mr. DeSaro each Related Agreement referenced in 7.01.
5.09 Opinion of Counsel
Purchaser shall have delivered to the Seller before Closing
the opinion of counsel to Purchaser, satisfactory to counsel for
the Seller, in the form of Exhibit 5.09.
VI. CONDITIONS PRECEDENT TO PURCHASER'S OBLIGATIONS
The obligation of the Purchaser to close and to perform the
covenants and actions required of it on the Closing Date are
subject to the satisfaction at or prior thereto of following
conditions precedent:
6.01 Truth of Representations and Warranties
All representations and warranties of Seller and Mr. DeSaro
contained in this Agreement shall be accurate in all material
respects when made and as of the Closing Date regardless of
knowledge or lack thereof on the part of Seller or Mr. DeSaro
(except as otherwise provided herein) or changes beyond their
control.
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6.02 Performance
As of the Closing, Seller, Mr. DeSaro and any other party
(other than Purchaser) to any Related Agreement shall have
performed and complied with all covenants and agreements and
satisfied all conditions required to be performed and complied
with by any of them at or before such time by this Agreement or
any of the Related Agreements; and the Purchaser shall have
received certificates signed by Seller dated the date of the
Closing to that effect in form satisfactory to Purchaser.
6.03 Absence of Suit
No action, suit or proceeding before any court or any
governmental or regulatory authority shall have been commenced or
threatened, and no investigation by any governmental or
regulatory authority shall have been commenced, against
Purchaser, Seller or Mr. DeSaro or any affiliate, associate,
officer or director of any of them, seeking to restrain, prevent
or change the transactions contemplated hereby, or challenging
the validity or legality of any such transactions, or seeking
damages in connection with any of such transactions.
6.04 Receipt of Approvals, etc.
All approvals, consents and/or waivers that are necessary to
effect the transactions contemplated hereby shall have been
received.
6.05 Authorization
Any consent, approval, authorization, order or filing with
any court or governmental agency or administrative body required
for the consummation of the transactions contemplated by this
Agreement shall have been obtained or made and shall be in effect
on the Closing Date.
6.06 Documents
Purchaser shall have received all of the documents required
to be delivered to it pursuant to Section 8.02 and elsewhere in
this Agreement. Seller shall have delivered to the Purchaser at
or prior to the Closing such other documents (including
certificates of officers of Seller) as the Purchaser may
reasonably request in order to enable the Purchaser to determine
whether the conditions to their obligations under this Agreement
have been met and otherwise to carry out the provisions of this
Agreement.
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6.07 [Intentionally Omitted]
6.08 Opinion of Counsel
Seller shall have delivered to the Purchaser before Closing
the opinion of counsel to Seller, satisfactory to counsel for the
Purchaser, in the form of Exhibit 6.08.
6.09 Accountant's Letter
Seller shall deliver to the Purchaser on the day prior to
the date of the Closing, a letter from the independent certified
public accountants of Seller, addressed to the Purchaser, in form
and substance satisfactory to the accountants and counsel for
Purchaser, stating in effect:
(a) That they are independent certified public accountants with
respect to Seller; and
(b) That, on the basis of a review of Seller's latest available
unaudited interim financial statements (but not an
examination made in accordance with generally accepted
auditing principals), inquiries to certain officers and
other employees of Seller responsible for financial and
accounting matters, and other specified procedures and
inquiries, nothing has come to their attention that has
caused them to believe that:
(1) There was any material decrease in the net current
assets or net tangible stockholders' equity of Seller
as compared with the amounts to be shown in the stub
period financial statements, other than as disclosed
in this Agreement or such decrease (which shall be
set forth in such letter) as the Purchaser in its
sole discretion shall accept or
(2) There was any material decrease in revenues or income
of Seller from those to be reflected on the stub
period financial statements, other than as disclosed
in this Agreement or any such decrease (which shall
be set forth in such letter) as the Purchaser in it
sole discretion shall accept.
(c) For purposes of this section, materiality is defined as any
amounts exceeding $25,000.
6.10 Intentionally Omitted
6.11 No Governmental Action
There shall not have been any action taken, or any law,
rule, regulation, order, or decree proposed, promulgated,
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enacted, entered, enforced, or deemed applicable to the
transactions contemplated by this Agreement by any federal,
state, local, or other governmental authority or by any court or
other tribunal, including the entry of a preliminary or permanent
injunction, which (a) makes any of the transactions contemplated
by this Agreement illegal, (b) results in a delay in the ability
of the Purchaser to consummate any of the transactions
contemplated by this Agreement, (c) requires the divestiture by
the Purchaser of any of the Purchased Assets or of a material
portion of the business of the Purchaser and its subsidiaries
taken as a whole, (d) imposes material limitations on the ability
of the Purchaser effectively to exercise full rights of ownership
of the Purchased Assets or (e) otherwise prohibits, restricts, or
delays consummation of any of the transactions contemplated by
this Agreement or impairs the contemplated benefits to the
Purchaser of the transactions contemplated by this Agreement.
6.12 Intentionally Omitted
6.13 Repayment of Loans
The loans identified in Schedule 2.13 owed to Seller shall
have been repaid at or prior to the Closing in full or the
Purchaser, in its sole discretion, shall have consented in
writing to alternate arrangements for the repayment thereof.
6.14 Execution of Related Agreements
Seller or Mr. DeSaro, as applicable, shall have executed and
delivered to Purchaser the Related Agreements referenced in
7.01.
VII. RELATED AGREEMENTS
7.01 Related Agreements
The following related agreements (the "Related Agreements")
shall be executed at Closing by the applicable parties:
(a) The Assumption Agreement in the form of Exhibit 1.02 hereto,
pursuant to which Purchaser shall agree to assume and pay
the scheduled Assumed Liabilities.
(b) The Stockholders Non-Competition Agreement between the
Stockholders and Purchaser in the form of Exhibit 7.01(b)
pursuant to which the Stockholders will agree not to compete
Purchaser for a period of one year after Closing.
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(c) The Three Year Promissory Note (the "Note").
(d) An Employment Agreement between Purchaser and Mr. DeSaro
pursuant to which Mr. DeSaro will be employed by Purchaser
after Closing.
VIII. CLOSING
8.01 Closing and Closing Date
The Closing of the transactions contemplated hereunder (the
"Closing") shall take place at 11:00 a.m. on May 28th at the
offices of ATC ENVIRONMENTAL INC. at 104 E. 25th Street, 10th
Floor, New York, NY 10010-2917 (the "Closing Date"), or on such
other date, time and place as the parties hereto may mutually
agree upon in writing.
8.02 Seller's Obligations at Closing
At or prior to the Closing, Seller shall deliver or cause to
be delivered to Purchaser, in form reasonably satisfactory to
Purchaser, the following:
(a) A Bill of Sale substantially in the form set forth in
Attachment 8.02(a) and sufficient to effect and evidence the
transfer, conveyance and delivery of the Purchased Assets.
(b) An assignment of all contracts, leases, licenses,
certificates, names or other registrations or instruments
intended to be transferred to Purchaser hereunder. Seller
agrees to execute, for no further consideration, such
additional assignments as clients or other parties to
instruments to be conveyed hereunder shall reasonably
require to effect the transfer thereof.
(c) A release and satisfaction (or agreement to provide the
same) of each security interest, lien or encumbrance against
any of the assets except those for which Purchaser has
expressly assumed in full as an Assumed Liability either the
obligation underlying such security interest or the
responsibility for obtaining the release of such interest.
(d) A certificate or certificates, executed by the chief
executive officer of Seller certifying that: (i) all
representations and warranties of Seller contained in this
Agreement are true and correct in all material respects in
accordance with their terms at and as if made as of the
Closing Date; and (ii) there has been full compliance in all
material respects by Seller with all of their covenants and
agreements in this Agreement.
(e) A resolution of Seller's Board of Directors authorizing the
execution, delivery and performance of this Agreement and
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all Related Agreements by Seller. If stockholder approval
is required for Seller to effect this sale and the other
agreements hereof, proof of such approval shall accompany
the resolution.
(f) All other schedules, certificates and other documents
required by this Agreement to be delivered on or before
Closing.
(g) At any time or times on or after the Closing, Seller and Mr.
DeSaro shall execute, acknowledge, and deliver any and all
further assurances, documents, and instruments reasonably
requested by Purchaser in order to effectively convey the
Purchased Assets and all ownership of such assets free and
clear of encumbrances or title defects except as expressly
authorized herein and shall take all other actions
consistent with the terms of this Agreement that may
reasonably be requested by Purchaser in order to effectuate
the purposes and intent hereof.
8.03 Purchaser's Obligations at Closing
At Closing, Purchaser shall deliver or cause to be delivered
to Seller and Mr. DeSaro, in form reasonably satisfactory to
them, all documents and instruments required to be delivered by
Purchaser to Seller or Mr. DeSaro by this Agreement and shall pay
the Purchase price payable at Closing pursuant to Section
1.01(b).
In addition, at Closing Purchaser shall deliver or cause to
be delivered to Seller:
(a) Its certificate, executed by an authorized officer
certifying that: (i) all representations and warranties of
Purchaser contained in this Agreement are true and correct
in all material respects in accordance with their terms at
and as if made as of the Closing Date; (ii) there has been
full compliance in all material respects by Purchaser with
all of its covenants and agreements in this Agreement; and
(iii) approval of Purchaser's shareholders is not required
for Purchaser's execution and performance of this Agreement
and the Related Agreements.
(b) A resolution of the Board of Directors of Purchaser and
Guarantor authorizing their execution, delivery and
performance of this Agreement.
(c) An executed original of the Assumption Agreement.
(d) Executed original(s) of the Stockholders Non-Competition
Agreement between Purchaser and Stockholders.
(e) Executed Three Year Promissory Note
(f) An executed original of the Employment Agreement between
Purchaser and Mr. DeSaro.
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(g) At any time or times on or after the Closing, Purchaser
shall execute, acknowledge, and deliver any and all further
assurances, documents, and instruments reasonably requested
by Seller or Mr. DeSaro in order to effectively convey or
assure payment for the Purchased Assets and shall take any
other action consistent with the terms of this Agreement
that may reasonably be requested by Seller in order to
effectuate the purposes and intent hereof.
IX. [Intentionally Omitted]
X. MISCELLANEOUS
10.01 Brokerage Fees
Neither the Purchaser, Seller nor Mr. DeSaro has consented to or
authorized any broker, or third party to act on its behalf,
directly or indirectly, as a broker or finder in connection with
the transaction contemplated by this Agreement. In the event any
claim is made for a broker's or finder's fee in connection with
the transactions contemplated hereunder, the party responsible
for retaining or securing said broker or finder shall be solely
responsible for the payment of any broker's or finder's fees
incurred as a result thereof. Further, the responsible party
shall indemnify the other party(ies) against any loss or
liabilities by reason of such broker's or finder's fees.
10.02 Further Actions
At any time and from time to time, each party agrees, at its
or his expense, to take such actions and to execute and deliver
such documents as may be reasonably necessary to effectuate the
transfer of the assets hereunder and the purposes of this
Agreement.
10.03 Availability of Equitable Remedies
Since a breach of the provisions of this Agreement could not
adequately be compensated by money damages, any party shall be
entitled, either before or after the Closing, in addition to any
other right or remedy available to it, to an injunction
restraining such breach or a threatened breach and to specific
performance of any such provision of this Agreement, and the
parties hereby consent to the issuance of such an injunction and
to the ordering of specific performance without proof of
irreparable injury or uniqueness of the assets to be conveyed.
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10.04 Survival
Except as otherwise provided herein, the covenants,
agreements, representations, and warranties contained in or made
pursuant to this Agreement shall survive the Closing and any
delivery of the purchase price by the Purchaser irrespective of
any investigation made by or on behalf of any party.
10.05 Merger - Modification
The Agreement and the Attachments, Exhibits, Schedules and
Related Agreements hereto set forth the entire understanding of
the parties with respect to the subject matter hereof, supersede
all existing agreements among them concerning such subject
matter, and may be modified only by a written instrument duly
executed by each party.
10.06 Notices
All notices, elections, payments, reports or other
correspondence required or permitted hereunder shall be in
writing and deemed to have been properly given or delivered when
personally delivered, mailed by certified mail or delivered by a
nationally recognized overnight express courier, postage fees
prepaid, to the party to whom directed at the below specified
addresses:
A. If to Seller and/or Mr. DeSaro:
Mr. Ciro DeSaro, President
3D Information Services, Inc.
6 Rowlands Road
Flemington, NJ 08822
with a copy to:
Mark H. Chazin, Esq.
Gebhardt & Kiefer
1318 Route 31
CN 4001
Clinton, NJ 08809
B. If to Purchaser and/or Guarantor:
For Purchaser:
Mr. John J. Goodwin, President
ATC InSys Technology Inc.
104 East 25th Street
New York, NY 10010
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For Guarantor
Mr. Morry Rubin, President & CEO
ATC Environmental Inc.
104 East 25th Street
New York, NY 10010
With a copy to:
Mr. John J. Smith, Esq.
ATC Environmental Inc.
PO Box 1148
1515 East 10th Street
Sioux Falls, SD 57101
Any such notice shall be deemed given at the time of personal
delivery, three days after deposit with the mail or one day
following deposit with an overnight express courier. The address
of a party may be changed in accordance with the notice
provisions of this section.
10.07 Waiver
Any waiver by any party of a breach of any provision of this
Agreement shall not operate as or be construed to be a waiver of
any other breach of that provision or of any breach of any other
provision of this Agreement. The failure of a party to insist
upon strict adherence to any term of this Agreement on one or
more occasions will not be considered a waiver or deprive that
party of the right thereafter to insist upon strict adherence to
that term or any other term of this Agreement. Any waiver must
be in writing.
10.08 Binding Effect
The provisions of this Agreement shall be binding upon and
inure to the benefit of Seller, the Purchaser, the Guarantor and
their respective successors and assigns and Mr. DeSaro and his
assigns, heirs, and personal representatives, and shall inure to
the benefit of the Indemnitees and their respective successors,
assigns, heirs, and personal representatives.
10.09 No Third-Party Beneficiaries
This Agreement does not create, and shall not be construed
as creating, any rights enforceable by any person not a party to
this Agreement (except as provided in Section 10.08).
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10.10 Separability
If any provision of this Agreement is invalid, illegal, or
unenforceable, the balance of this Agreement shall remain in
effect, and if any provision is inapplicable to any person or
circumstance, it shall nevertheless remain applicable to all
other persons and circumstances unless the result thereof would
result in an unjust modification of the balance of rights and
obligations hereunder.
10.11 Headings
The headings of this Agreement are solely for convenience of
reference and shall be given no effect in the construction or
interpretation of this Agreement.
10.12 Governing Law; Venue; Jurisdiction
To the extent permitted by law, this Agreement shall be
governed by and construed in accordance with the laws of the
State of New Jersey without giving effect to conflict of laws.
The parties acknowledge that New Jersey is the proper forum for
the litigation of any dispute arising out of or in connection
with this Agreement and the transactions contemplated hereby and
hereby consent to the exercise of jurisdiction over them by the
courts of the State of New Jersey and agree that any service upon
them under the procedures of the New Jersey "long arm" court rule
and/or law will be proper to give jurisdiction to the courts of
the State of New Jersey.
10.13 Separate Counterparts
This Agreement is being executed in several identical
counterparts, each one of which shall be considered an original
and all of which when taken together shall constitute but one
instrument.
10.14 Incorporation of Recitals, Exhibits and
Schedules
All exhibits, schedules and Related Agreements attached
hereto are incorporated herein by this reference and expressly
made a part of this Agreement. For the purposes of this
Agreement, disclosure of information or statements made under any
schedule or exhibit to this Agreement shall constitute disclosure
under this Agreement and any and all other schedules or exhibits
to this Agreement or in any Related Agreements where such
information or statements may be deemed to be relevant.
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10.15 Non-Working Dates
When any date on which payment or any other performance is
due under this agreement falls on a Saturday, Sunday or national
holiday, such payment or performance shall be due on the next
business day following such date.
10.16 Opportunity to Cure
All parties to this Agreement shall be afforded a period of
five (5) days following notice thereof to cure any alleged breach
of this Agreement unless the loss threatened by such breach is of
such gravity to require immediate action.
IN WITNESS WHEREOF, the parties have duly executed this
Agreement as of the date set forth in the opening paragraph
hereof.
ATC InSys Technology Inc. 3D Information Services Inc.
/s/ John J. Goodwin /s/ Ciro DeSaro
By ___________________________ By__________________________
John J. Goodwin, President Ciro DeSaro, President
May 28, 1996 May 28, 1996
Date:------------------------- Date:-----------------------
ATC Environmental Inc.
/s/ Ellen B. Miller /s/ Ciro DeSaro
By: -------------------------- ----------------------------
Ellen B. Miller, Counsel Ciro DeSaro, Individually
May 28, 1996 May 28, 1996
Date:------------------------- Date: ----------------------
43
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ASSUMPTION AGREEMENT
THIS ASSUMPTION AGREEMENT ("Assumption Agreement") is
entered into this 28th day of May, 1996, by and among ATC
InSys Technology Inc., A Delaware corporation ("Purchaser"),
ATC Environmental Inc., a Delaware corporation
("Guarantor"), and 3D Information Services, Inc., a New
Jersey Corporation ("Seller")
RECITALS
A. Concurrent herewith, Purchaser, Guarantor, Seller
and Ciro DeSaro have entered into an Agreement For Sale and
Purchase of Business Assets dated May 28, 1996 ("Sale
Agreement") in which Seller has agreed to sell certain of
its assets to Purchaser.
B. As a material inducement to Seller to enter into
the Sale Agreement, Purchaser has agreed to assume certain
of their liabilities and obligations in connection with the
business and/or assets.
NOW, THEREFORE, in consideration of the above promises and
other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, Purchaser and
Seller do hereby agree as follows:
1. Assumption of Obligations by Purchaser. Purchaser
assumes and agrees to pay and discharge, effective from and
after the date hereof, the specifically identified debts,
obligations and liabilities listed on Schedule "A" hereto
(collectively referred to as the "Obligations"). In case of
a conflict between this Assumption Agreement and the Sale
Agreement, the Sale Agreement shall control.
2. Substitution and Release of Seller. Purchaser
agrees to use its best efforts to obtain a substitution of
itself as the obligated party under, and a release by the
other party of the Seller from all liability under, such
specified Obligations as the Seller shall request. Because
the Purchaser can not compel third party action, however,
Purchaser shall incur no liability to Seller for not
accomplishing any such substitution, novation , consent to
substitute or release of Seller from Obligations.
3. Indemnity by Purchaser and Guarantor. Purchaser
and Guarantor agree to indemnify and defend Seller in
accordance with the Indemnity provisions of 1.03 of the
Sale Agreement from and against any and all debts, costs or
expenses, including without limitation, reasonable
attorney's fees, resulting or arising from or incurred in
connection with Purchaser's failure to perform and discharge
the Obligations for which it receives the benefits.
Purchaser shall incur no liability for Obligations for which
it is unable to receive the benefits.
4. Meaning of Terms. All terms in this Agreement
shall have the meaning ascribed to them in the Sale
Agreement unless defined herein or unless the context
plainly requires otherwise.
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5. Further Instruments. The parties hereto agree
that they will execute any and all other documents or legal
instruments that may be necessary or required to carry out
and effectuate all of the provisions hereof.
6. Governing Law. This Agreement, and all matters
relating hereto, including any matter or dispute arising out
of the Agreement, shall be interpreted, governed, and
enforced according to the Laws of the State of New Jersey,
and the parties hereto consent to the jurisdiction of any
appropriate court in the State of New Jersey.
7. Incorporation of Recitals and Schedule. The above
recitals and the schedule attached hereto are incorporated
herein by reference and expressly made a part of this
Agreements.
IN WITNESS WHEREOF, the parties have hereunto set their
hands on the date hereof.
ATC InSys Technology Inc. 3D Information Services,
Inc.
By: /s/ John J. Goodwin By: /s/ Ciro DeSaro
-------------------------- ----------------------
John J. Goodwin, President Ciro DeSaro, President
ATC Environmental Inc.
By: /s/ Ellen Miller
----------------------------
Ellen Miller, Counsel
<PAGE>
<PAGE>
RELEASE, WAIVER OF CLAIMS AND CONSENT OF STOCKHOLDER
For good and valuable consideration, the receipt and
adequacy of which is hereby acknowledged, the undersigned
hereby releases to ATC InSys Technology Inc., ATC
Environmental Inc., and their successors, licensees and
assigns, exclusively, irrevocably and forever, all of its
right, title and interest of every kind and nature
whatsoever, in the assets to be sold to ATC InSys Technology
Inc. The undersigned hereby waives any and all claims
against the Purchased Assets for any past compensation,
bonus, distribution, dividend or other consideration or
claim for payment from any cause that may have otherwise
been due before, at or after the date of closing. The
undersigned consents to the sale of the Assets to ATC InSys
Technology Inc.
IN WITNESS WHEREOF, this Release and Waiver has been
executed on this day of , 1996
____________________________________
Signature
Name
Signed in the presence of:
____________________________________
Witness
<PAGE>
<PAGE>
Stock Holders Non-Competition Agreement
Non-Competition Agreement dated as of_____________. by and
between ATC InSys Technology Inc., a Delaware corporation (
the "Purchaser") and ____________________ an individual
residing at _____________________________________ .
WHEREAS, 3D Information Services, Inc. a New Jersey
corporation and Mr. DeSaro, the principal stockholder (the
"Seller") have entered into an Asset Purchase Agreement
dated May 28, 1996 for the sale of substantially all of the
Seller's business assets to the Purchaser (the "Purchased
Assets"); and
WHEREAS, the Purchaser desires to protect the continuing
value of the Purchased Assets; and
NOW, THEREFORE, in consideration of the promises and mutual
representations, warranties, covenants and agreements set
forth herein and upon the terms and subject to the
conditions set forth herein, _______________ hereby agrees
to strictly abide by the following covenants for a period of
one (1) year after closing:
(a) The undersigned hereby agrees, it will not directly or
indirectly:
(1) disclose, communicate or divulge to, or use
for the direct or indirect benefit of any person, firm,
association or company, other than ATC Environmental Inc.,
Purchaser or their affiliates any information which is not
otherwise available regarding the business methods, business
policies, procedures, techniques, research or development
projects or results, trade secrets, customers or clients, or
any other confidential information relating to or dealing
with the business operations of Seller or the Purchased
Assets, made known to them or learned or acquired by them
while employed by Seller.
(2) for themselves or any other person or entity
other than Purchaser, hire or induce or attempt to influence
any current employee of ATC Environmental Inc. or Purchaser
or their affiliates to terminate such employment.
(3) except for the benefit of Purchaser, use the name
3D or represent to any potential client that they are
representing the business transferred to Purchaser
hereunder.
b) The undersigned hereby agrees that the provisions of this
Agreement are reasonable in scope and duration and are necessary
to protect Purchaser's bona fide confidential business
information, both that developed internally and that purchased
from Seller, and to give value to the Purchased Assets and the
goodwill associated therewith and to protect Purchaser. The
undersigned hereby agrees that the customer names and other
customer and business information of the Purchaser and such
information purchased by Purchaser from Seller is proprietary,
and they agree that a breach of any of these provisions will
cause irreparable harm for which money damages alone will not be
sufficient compensation and that Purchaser shall have available
to it, in addition to any other remedies available by law,
equitable remedies, including the remedy of injunction, to enjoin
the breach or threatened breach of the provisions of this
Agreement.
_________________________
Stockholder Signature
Witness:
_____________________________
ATC InSys Technology Inc.
/s/ John J. Goodwin
- ----------------------------
John J. Goodwin, President
<PAGE>
<PAGE>
PROMISSORY NOTE
U.S. $2,500,000.00 New York, New York
May 28, 1996
NOTICE TO HOLDER/ASSIGNS: PLEASE TAKE NOTICE THAT THIS
PROMISSORY NOTE IS SUBJECT TO CERTAIN CONDITIONS INCLUDING SET-
OFF RIGHTS OUTLINED IN SECTION 12 OF THIS PROMISSORY NOTE.
FOR VALUE RECEIVED, ATC INSYS TECHNOLOGY INC., a
Delaware corporation with a principal place of business at 104
East 25th Street, New York, New York 10010 (the "Borrower") and
ATC ENVIRONMENTAL INC., a Delaware corporation with a principal
place of business at 104 East 25th Street, New York, New York
10010 (the "Guarantor") (collectively, the "Makers"), promise to
pay in lawful monies of the United States of America to the order
of 3D INFORMATION SERVICES INC., a New Jersey corporation with
its principal place of business at Vantage Court, 200 Cottontail
Lane, Somerset, New Jersey 08873 or its assigns (the "Holder") or
at such place as the Holder from time to time may designate in
writing, the principal sum of TWO MILLION FIVE HUNDRED THOUSAND
DOLLARS ($2,500,000.00) or such principal amount then
outstanding, together with interest thereon, as hereinafter
provided, computed from the date hereof, during the three year
period from the date hereof in the following manner and upon the
following terms and conditions:
1. Interest Rate. The unpaid principal amount from
time to time outstanding shall bear interest at the rate of
interest per annum equal to eight and one-quarter percent (8 1/4%).
2. Payments. Principal and interest thereon shall be
paid in twelve (12) equal, consecutive quarterly payments of
principal and interest combined in an amount of Two Hundred
Thirty-Seven Thousand Three Hundred and Seven Dollars and Thirty-
Two Cents ($237,307.32) each, commencing on August 28, 1996 and
quarterly installments thereafter shall be due on the like day of
November, February, May and August thereafter through final
payment on May 28, 1999, which shall include all remaining unpaid
principal, accrued interest, late charges, penalties, and costs
of collection, if any. An amortization schedule describing the
principal and interest payments is attached hereto as Schedule A.
3. Late Charge. Any payment not made within ten (10)
days after the payment due date, shall be accompanied by a late
charge of five percent (5%) of the amount of such payment to
repay the Holder's additional expenses in handling delinquent
payments.
4. Application of Payments. Any failure or delay by
the Makers in making principal and interest payments hereunder
shall not discharge or relieve the Makers of the obligation to
make such payment nor shall it act as a waiver of the Holder's
rights hereunder. All payments, howsoever designated by the
1<PAGE>
<PAGE>
Makers, are to be applied first on account of penalties, late
fees and costs of collection, if any, then on account of interest
on the unpaid principal balance of this Promissory Note, and the
remainder of such payments, if any, on account of the unpaid
principal balance.
5. Renewal Notes. This Promissory Note includes any
renewals, extensions, modifications, replacements or restatements
thereof.
6. Waivers. The Makers:
(i) waive presentment, demand, notice of demand,
protest and notice of protest in connection with the delivery,
acceptance, performance, default or enforcement of this
Promissory Note, of any endorsement or guaranty of this
Promissory Note or of any document or instrument evidencing any
security for payment of this Promissory Note;
(ii) consent to any and all delays, extensions,
renewals or other modifications of this Promissory Note or
waivers of any term hereof or release or discharge by the Holder
of the Makers or release, substitution or exchange of any
security for the payment hereof or the failure to act on the part
of the Holder or any indulgence shown by the Holder, from time to
time and in one or more instances, (without notice to or further
assent from the Makers) and agree that no such action, failure to
act or failure to exercise any right or remedy, on the part of
the Holder shall in any way affect or impair the obligations of
the Makers or be construed as a waiver by the Holder of, or
otherwise affect, any of the Holder's rights under this
Promissory Note, under any endorsement or guaranty of this
Promissory Note or under any document or instrument evidencing
any security for payment of this Promissory Note; and
(iii) agree to pay, on demand, all costs and
expenses of collection of this Promissory Note or of any
endorsement or any guaranty hereof, if any, and/or the
enforcement of the Holder's rights with respect to, or the
administration, supervision, preservation, protection of, or
realization upon, any property securing payment hereof, including
reasonable attorneys' fees.
7. Defaults. Any one or more of the following events
which remains uncured after receipt of written notice thereof in
accordance with the terms of this Paragraph 7 shall constitute a
default under this Promissory Note:
(i) the failure of Makers to pay or perform any
of their obligations, liabilities or indebtedness to the Holder,
whether under this Promissory Note or any other agreement, note
or instrument now or hereafter existing, including without
limitation the Agreement for Sale and Purchase of Business Assets
dated May 28, 1996 among Makers, Holder and Ciro DeSaro ("Mr.
DeSaro") (the "Purchase Agreement"), within thirty (30) days of
its due date, whether at maturity or by acceleration, or the date
by which it should have been performed;
2<PAGE>
<PAGE>
(ii) a proceeding being filed or commenced
against any of the Makers for dissolution or liquidation of any
of the Makers, or the voluntarily or involuntary termination or
dissolution of any of the Makers;
(iii) insolvency of, business failure of, the
appointment of a custodian, trustee, liquidator or receiver for
or for any of the property of, or an assignment for the benefit
of creditors by or the filing of a petition under bankruptcy,
insolvency or debtor's relief law, or for any readjustment of
indebtedness, composition or extension by or against either of
the Makers; or
(iv) sale of substantially all the assets of
Borrower and/or transfer of controlling interest of either
Borrower or Guarantor. This shall not be deemed to apply to any
public offering of shares of either of the Makers.
Upon the occurrence of any one or more of the
foregoing events, the Holder shall provide written notice (the
"Notice") to the Makers setting forth with specificity the exact
nature of the purported default whereupon the Makers shall have
the right to cure the default as follows: (x) in the event of a
default in a payment obligation, within ten (10) days of receipt
of the Notice, or (y) in the event of any other curable default,
within thirty (30) days of receipt of the Notice.
8. Remedies. Upon occurrence of a default under this
Promissory Note, the Holder may, at its option, exercise any one
or more of the following remedies, all of which shall be
cumulative and not alternative:
a. Acceleration. The Holder may declare the
total unpaid principal balance under this Promissory Note or
under any other obligations or indebtedness to the Holder of the
Makers, and any endorser, surety or guarantor to be immediately
due and payable.
b. Default Rate. The Holder may declare the
interest rate on this Promissory Note to be increased to the
lesser of (i) five percent (5%) per annum in excess of the
interest rate provided above, or (ii) the maximum rate allowable
under law (the "Default Rate"), and may impose the Default Rate
of interest on the obligations remaining outstanding.
c. In the event of an uncured default under the
terms of this Promissory Note, the restrictions of Mr. DeSaro as
set forth in Section 4.04 of the Purchase Agreement and the non-
solicitation and non-competition provisions of Mr. DeSaro's
Employment Agreement shall automatically terminate and be of no
further force and effect, provided that Mr. DeSaro is no longer
employed by Borrower or its successors.
3<PAGE>
<PAGE>
d. Other Remedies. The Holder may exercise any
other right or remedy provided for in any other document,
instrument or agreement evidencing, securing or otherwise
relating to the indebtedness evidenced hereby in accordance with
the terms thereof or under the Uniform Commercial Code or other
applicable law, all of which rights and remedies shall be
cumulative and not alternative.
e. Costs of Collection. The Makers shall pay all
reasonable costs of collection of any and all sums not paid as
agreed under the terms of this Promissory Note, including but not
limited to all reasonable costs, charges, counsel fees, paralegal
and legal assistant fees, disbursements and court costs incurred
by the Holder, whether or not suit has been commenced, and the
same shall be added to the principal sum due hereunder and shall
bear interest at the Default Rate.
9. Representation. The Borrower and Guarantor agree
that as long as any portion of this Promissory Note remains
unpaid, the Guarantor agrees to maintain sufficient reserves to
service the Note by either maintaining cash, cash equivalents or
available unused bank line of credit equal to the balance of the
current portion of this Promissory Note. Notwithstanding these
reserves, the Makers shall maintain a net stockholder equity
equal to at least two times the outstanding value of this
Promissory Note. A breach of this representation shall be deemed
to be a default of this Promissory Note in accordance with
Section 7 above. With each payment under the terms of this
Promissory Note, Makers shall provider a letter certifying that,
as of the prior quarter, Makers were in compliance with this
paragraph and they have no reason to believe that they are not in
compliance with this paragraph at the time of payment.
10. Partial Invalidity. In the event any one or more
of the provisions of this Promissory Note shall for any reason be
held to be invalid, illegal or unenforceable, in whole or in part
or in any respect, or in the event that any one or more of the
provisions of this Promissory Note operate or would prospectively
operate to invalidate this Promissory Note, then and in either of
those events, such provision or provisions only shall be deemed
null and void and shall not affect any other provision of this
Promissory Note and the remaining provisions of this Promissory
Note shall remain operative and in full force and effect and
shall in no way be affected, prejudiced or disturbed thereby.
11. Prepayment. This Promissory Note may be prepaid
in whole or in part at any time without penalty. Any partial
prepayments shall be credited in the inverse order of their due
date, subject to the above provisions governing application of
payments. The making of partial prepayments shall not diminish,
postpone or delay in any way the responsibility of the Makers to
make all other payments when due hereunder.
12. Set-Off. The Makers' obligation to make payment
hereunder is subject to set-off pursuant to and in accordance
4<PAGE>
<PAGE>
with the terms of the Purchase Agreement. Holder agrees that set-
off of funds due and payment of such funds into escrow in
accordance with the procedures set forth in Section 1.04 of the
Purchase Agreement shall not be deemed to be a default under this
Promissory Note.
13. Joint and Several Liability. The liability of the
Makers hereunder shall be joint and several.
14. Amendment. This Promissory Note may not be
changed orally, but only by an agreement in writing signed by the
parties.
15. Governing Law and Consent to Jurisdiction. This
Promissory Note is delivered in and shall be construed under the
laws of the State of New Jersey in any litigation in connection
with, or enforcement of, this Promissory Note. The Makers
consent to and confer personal jurisdiction on the courts of the
State of New Jersey or of the Federal Government, and expressly
waive any objections as to venue in any of such courts, and agree
that service of process may be made on the Makers by mailing a
copy of the summons to their respective addresses.
5<PAGE>
<PAGE>
16. Successors and Assigns. The provisions herein
contained shall bind the Makers and their successors and inure to
the benefit of the Holder and its successors and assigns. This
Promissory Note may not be assigned nor negotiated by the Makers
or either of them.
IN WITNESS WHEREOF, the Makers have caused this
Promissory Note to be executed on the day and year first above
written.
WITNESS: ATC INSYS TECHNOLOGY INC.
By: /s/ John J. Goodwin
- ---------------------------- ----------------------------
John J. Goodwin, President
WITNESS: ATC ENVIRONMENTAL INC.
By: /s/ Ellen B. Miller
----------------------------
Ellen B. Miller, Counsel
6
