<PAGE> 1
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 Report (date of earliest event reported): August 31, 1998
STERICYCLE, INC.
(Exact name of registrant as specified in its charter)
Delaware 0-21229 36-3640402
(State or other juris- (Commission file (IRS employer
diction of incorporation) number) identification number)
1419 Lake Cook Road, Suite 410
Deerfield, Illinois 60015
(Address of principal executive offices)
Registrant's telephone number, including area code: (847) 945-6550
<PAGE> 2
ITEM 2. Acquisition or Disposition of Assets
As of August 31, 1998, Stericycle, Inc. (the "Company") acquired
substantially all of the assets of Medical Compliance Services, Inc., a Texas
corporation ("MCS-Texas"), and Medical Compliance Services, Inc., a New Mexico
corporation ("MCS-New Mexico") (MCS-Texas and MCS-New Mexico together,
"Sellers") used by Sellers in the regulated medical waste management business
that they conducted in western Texas and New Mexico, respectively.
The Company acquired these assets pursuant to an Asset Purchase Agreement
dated August 31, 1998 (the "Asset Purchase Agreement") entered into by the
Company, Sellers and Sellers' corporate parent, Rubbish Removal Incorporated, a
Texas corporation ("RRI"). The assets acquired included customer contracts,
trucks and other vehicles, containers, equipment and office furniture and
fixtures, but did not include any of Sellers' cash, accounts receivable or
assets used in the treatment of regulated medical waste.
The purchase price, which was the subject of arm's-length negotiation by
the parties, was $5,850,000 in cash paid at closing and the Company's assumption
of approximately $122,000 in liabilities of Sellers.
The source of funds for the Company's cash payment at closing was cash on
hand and $3,050,000 borrowed under the Company's revolving line of credit with
Silicon Valley Bank.
Pursuant to the Asset Purchase Agreement:
(a) the Company and JOS Enterprises, Ltd., a Texas limited
partnership and an affiliate of Sellers and RRI, entered into a
contract for the Company's purchase of the treatment and transfer
facility operated by MCS-New Mexico in Albuquerque, New Mexico (the
"Albuquerque Facility"), to be closed upon expiration of the term
of the medical waste processing agreement described in subparagraph (e);
(b) the Company, Sellers and RRI entered into an equipment
purchase and technology license agreement for the Company's purchase of
the chlorine dioxide waste treatment unit and equipment owned by
Sellers and operated by MCS-New Mexico at the Albuquerque Facility, and
the Company's licensing of the associated technology, to be closed upon
expiration of the term of the medical waste processing agreement described
in subparagraph (e);
(c) the Company and RRI entered into a two-year sublease of the
portion of a facility in El Paso, Texas that MCS-Texas had occupied;
(d) the Company and MCS-New Mexico entered into a sublease of a
2
<PAGE> 3
portion of the Albuquerque Facility for a term coinciding with the term
of the medical waste processing agreement described in subparagraph
(e); and
(e) the Company and Sellers entered into a medical waste
processing agreement for Sellers' processing and treatment of the
Company's regulated medical waste at the Albuquerque Facility for a
term of six months, which may be extended by Sellers for an additional
term of six months.
Closing of the real estate contract and the equipment purchase and technology
license agreement described in subparagraphs (a) and (b), pursuant to which the
Company will pay a total of $1,250,000 in cash, is subject to various conditions
precedent.
There was no material relationship between the Company (or any officer,
director or affiliate of the Company or any associate of any such officer or
director) and any of MCS-Texas, MCS-New Mexico or RRI.
The Company intends to use the assets acquired from Sellers in the conduct
of the Company's own regulated medical waste management business.
ITEM 7. Financial Statements and Exhibits
(a) Financial Statements of Businesses Acquired.
In accordance with Rule 3-05(b)(2)(i) of Regulation S-X (17 C.F.R.
210.3-05(b)(2)(i)), the Company is not required to file any of the financial
statements for Sellers that otherwise would be required to be filed for the
periods specified in Rule 3-05 of Regulation S-X.
(b) Pro Forma Financial Information
In accordance with Rule 11-01(c) of Regulation S-X (17 C.F.R.
210.11-01(c)), the Company is not required to file any of the pro forma
financial information that otherwise would be required to be filed pursuant to
Article 11 of Regulation S-X.
(c) Exhibits
A copy of the Asset Purchase Agreement dated August 31, 1998 entered into
by the Company, Sellers and RRI is filed as Exhibit 2.1 to this Report.
The copy filed omits the following schedules and exhibits:
Schedule of Assumed Liabilities
Schedule of Customer Contracts
Schedule of Other Assets
Schedule of Transportation Equipment
3
<PAGE> 4
Exhibit A - Form of Albuquerque Sublease
Exhibit B - Form of El Paso Sublease
Exhibit C - Form of Equipment Purchase and Technology License
Agreement
Exhibit D - Form of Medical Waste Processing Agreement
Exhibit E - Form of Noncompetition Agreement
Exhibit F - Form of Real Estate Contract
In accordance with Item 601(b)(2) of Regulation S-K (17 C.F.R.
229.601(b)(2)), the Company agrees to furnish supplementally a copy of any
omitted schedule or exhibit to the Commission upon its request.
4
<PAGE> 5
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
Date: September 15, 1998.
STERICYCLE, INC.
By /s/ Frank J.M. ten Brink
----------------------------
Frank J.M. ten Brink
Vice President, Finance
and Chief Financial Officer
5
<PAGE> 6
EXHIBIT INDEX
SEQUENTIALLY
EXHIBIT DESCRIPTION NUMBERED PAGE
2.1 Asset Purchase Agreement dated August 31, 1998 7
entered into by Stericycle, Inc., Medical Compliance
Services, Inc., a Texas corporation, Medical Compliance
Services, Inc., a New Mexico corporation, and Rubbish
Removal Incorporated, a Texas corporation
This exhibit omits the following schedules and exhibits:
Schedule of Assumed Liabilities
Schedule of Customer Contracts
Schedule of Other Assets
Schedule of Transportation Equipment
Exhibit A - Form of Albuquerque Sublease
Exhibit B - Form of El Paso Sublease
Exhibit C - Form of Equipment Purchase and Technology
License Agreement
Exhibit D - Form of Medical Waste Processing Agreement
Exhibit E - Form of Noncompetition Agreement
Exhibit F - Form of Real Estate Contract
In accordance with Item 601(b)(2) of Regulation S-K (17 C.F.R.
229.601(b)(2)), the Company agrees to furnish supplementally a copy of any
omitted schedule or exhibit to the Commission upon its request.
6
<PAGE> 1
ASSET PURCHASE AGREEMENT EXHIBIT 2.1
This Asset Purchase Agreement is entered into as of August 31, 1998 by
Stericycle, Inc., a Delaware corporation ("Buyer"), and Medical Compliance
Services, Inc., a Texas corporation ("Texas Med"), Medical Compliance Services,
Inc., a New Mexico corporation ("New Mexico Med"), and Rubbish Removal
Incorporated, a Texas corporation ("RRI").
Background
Texas Med and New Mexico Med ("Sellers") are in the business of collecting,
transporting, treating and disposing of regulated medical waste in Texas and New
Mexico. Sellers are wholly-owned subsidiaries of RRI.
Sellers desire to sell, and Buyer desires to purchase, certain of the
assets used in the conduct of Sellers' business upon the terms and subject to
the conditions of this Agreement.
Now, therefore, in consideration of their mutual promises and intending to
be legally bound, the parties agree as follows:
ARTICLE 1
DEFINITIONS
For purposes of this Agreement, the following terms have these meanings:
ACCOUNTS RECEIVABLE means a Seller's accounts receivable under Customer
Contracts.
AFFILIATE means, in respect of any Person, an entity that controls, is
controlled by or is under common control with that Person.
ALBUQUERQUE FACILITY means the Facility at 1920 1st Street, N.W.,
Albuquerque, New Mexico, owned by JOS Enterprises and currently leased and
operated by New Mexico Med.
ALBUQUERQUE SUBLEASE means the sublease between New Mexico Med and Buyer,
in the form of the attached EXHIBIT A, for Buyer's sublease of a portion of the
Albuquerque Facility for a term of six months, which shall be extended
automatically for a second six-month term if Sellers extend the term of the
Medical Waste Processing Agreement.
ASSUMED LIABILITIES is defined in Section 2.3(a).
7
<PAGE> 2
BOOKS AND RECORDS means books, records, ledgers, files, documents,
correspondence, lists, reports, creative materials, advertising and promotional
materials and other printed or written materials.
BUYER means Stericycle, Inc., a Delaware corporation.
CLAIMS PERIOD means the period in which an Indemnification Claim pursuant
to Section 10.1 or Section 10.2 may be asserted.
CLEANUP LIABILITY means any Liability under any Environmental Law for
corrective action, including any investigation, cleanup, removal, containment or
other remedial or response action or activity of the type covered by the federal
Comprehensive Environmental Response, Compensation and Liability Act of 1980.
CLOSING is defined in Section 3.1.
CLOSING DATE means the date that Closing occurs.
CLOSING DOCUMENTS means, in respect of a Party, the documents, instruments
and agreements that it is required to deliver at Closing pursuant to the terms
of this Agreement.
CONSENT means any approval, consent, ratification, waiver or other
authorization (including any Permit).
CONTEMPLATED TRANSACTION means the transactions contemplated by this
Agreement, including (i) Sellers' sale of the Hauling Assets to Buyer and
Buyer's purchase of the Hauling Assets from Sellers and (ii) the Parties'
execution, delivery and performance of their respective Closing Documents and
Other Closing Agreements (including, but not limited to, the Equipment Purchase
and Technology License Agreement and the Real Estate Contract).
CONTRACT means any legally binding contract, agreement, obligation, promise
or undertaking (whether written or oral, and whether express or implied).
CUSTOMER CONTRACT means a Contract with a customer of a Seller relating to
the Seller's collection, transportation, treatment or disposal of regulated
medical waste.
DEFAULT means, in respect of a Contract, a breach of or default under the
Contract, or the occurrence of an event which with notice or the passage of time
(or both) would constitute a breach of default or permit termination,
modification or acceleration of the Contract.
DISCLOSURE SCHEDULE means the disclosure schedule that the Selling Parties
8
<PAGE> 3
have delivered to Buyer concurrently with the execution of this Agreement by the
Parties.
DISCLOSURE SCHEDULE AMENDMENT means any amendment or supplement to the
Disclosure Schedule that the Selling Parties propose and that Buyer accepts in
writing.
EL PASO SUBLEASE means the sublease between RRI and Buyer, in the form of
the attached Exhibit B, for Buyer's sublease of a portion of the Facility that
Texas Med currently occupies at 5307 El Paso Drive, El Paso, Texas, for a term
of two years, subject to termination by Buyer upon 30 days' prior written Notice
as of any date on or after the first anniversary of the Closing Date.
EMPLOYEE BENEFIT PLAN means (i) an "employee pension plan" as defined in
Section 3(2) of ERISA, (ii) an "employee welfare benefit plan" as defined in
Section 3(1) of ERISA or (iii) any other employee benefit or fringe benefit plan
or program, whether established by a written agreement or other instrument or by
custom or informal understanding.
ENVIRONMENTAL LIABILITY means any Cleanup Liability or any other Liability
under any Environmental Law or Occupational Safety and Health Law.
ENVIRONMENTAL LAW means the federal Comprehensive Environmental Response,
Compensation and Liability Act of 1980 and Resource Conservation and Recovery
Act of 1976 and any other Law or Order relating to or imposing Liability or
standards of conduct for the use, handling, generation, manufacturing,
distribution, processing, collection, transportation, transfer, storage,
treatment, disposal, clean-up, discharge or release of Hazardous Materials.
EQUIPMENT means machinery, equipment, spare parts, supplies, furniture,
fixtures and other items of tangible personal property of any type or kind (but
not including Truck Equipment and Leasehold Improvements).
EQUIPMENT LEASE means a Contract for the lease of Equipment or for the
purchase of Equipment under a conditional sales or title retention agreement.
EQUIPMENT PURCHASE AND TECHNOLOGY LICENSE AGREEMENT means the equipment
purchase and technology license agreement among Sellers, RRI and Buyer, in the
form of the attached Exhibit C, for the sale to Buyer of the chlorine dioxide
waste treatment unit currently operated by New Mexico Med at the Albuquerque
Facility.
ERISA means the Employee Retirement Income Security Act of 1974, as
amended, and the related regulations issued by the Internal Revenue Code and the
Department of Labor.
9
<PAGE> 4
EXCLUDED ASSETS means all of Sellers' assets other than the Hauling Assets
(as listed on the Schedules of Customer Contracts, Transportation Equipment and
Other Assets), including, but not limited to, Sellers' cash, cash equivalents
and marketable securities, Accounts Receivable and other receivables, deposits,
prepaid expenses, causes of action, Books and Records unrelated to the Hauling
Assets, and all tangible and intangible assets (including Permits) exclusively
used or useful in Sellers' Treatment Business.
EXCLUDED LIABILITIES is defined in Section 2.3(b).
FACILITY means, in respect of a Seller, any location or site that it
currently owns, leases, operates, occupies or uses, or that it formerly owned,
leased, operated, occupied or used, in the conduct of Sellers' Hauling Business.
FACILITY LEASE means, in respect of a Seller, a lease of or other right to
operate, occupy or use a Facility that the Seller currently leases, operates,
occupies or uses.
FINANCIAL STATEMENTS means (i) the consolidating schedules in respect of
Sellers to the audited financial statements of RRI for the years ended June 30,
1997, 1996 and 1995, (ii) each Seller's unaudited balance sheet as of June 30,
1998 and (iii) each Seller's unaudited income statement for the year ended June
30, 1998.
GAAP means United States generally accepted United States accounting
principles, applied on a basis consistent with the basis on which the Financial
Statements were prepared.
GOVERNMENTAL BODY means (i) any federal, state, local, municipal,
foreign or other government and (ii) any governmental or quasi-governmental body
of any kind (including any administrative or regulatory agency, department,
branch, commission or other entity).
HAULING ASSETS means:
(a) the Customer Contracts of Sellers listed on the Schedule of
Customer Contracts;
(b) the Transportation Equipment of Sellers listed on the
Schedule of Transportation Equipment (and Sellers' interest in all
Truck Leases to be identified on the Schedule); and
(c) the Other Assets of Sellers listed on the Schedule of Other
Assets.
The term "Hauling Assets" does not include (i) the chlorine dioxide waste
treatment unit currently operated by New Mexico Med at its Facility in
Albuquerque, New Mexico, (ii) any interest of Sellers in Permits or Trade
Secrets relating to this unit or (iii) any other Excluded Assets.
10
<PAGE> 5
HAZARDOUS ACTIVITY means the distribution, generation, handling, importing,
management, manufacturing, processing, production, refinement, Release, storage,
transfer, transportation, treatment or use of Hazardous Materials.
HAZARDOUS MATERIALS means any waste or other substance of any kind that is
or was listed, defined, designated or classified under any Law or Order as
hazardous, radioactive or toxic or as a pollutant or contaminant.
INDEMNIFIABLE LOSS means any loss, Liability, damage, diminution in value,
cost or expense (including reasonable attorneys' fees and costs of investigation
and litigation, except the fees and costs incurred by the Indemnified Party in
connection with a Third-Party Suit after the Indemnifying Party has assumed the
defense of the Suit in accordance with Section 10.7(c)).
INDEMNIFICATION CLAIM means a Party's written claim or demand for
indemnification pursuant to Sections 10.1 or 10.2. A single Indemnification
Claim may be asserted in respect of any number of matters.
INDEMNIFIED PARTY means the Party asserting an Indemnification Claim. As
used in this definition, "Party" means either Buyer or the Selling Parties.
INDEMNIFYING PARTY means the Party against whom an Indemnification Claim is
asserted. As used in this definition, "Party" means either Buyer or the Selling
Parties.
INTERNAL REVENUE CODE means the Internal Revenue Code of 1986, as amended.
JOS ENTERPRISES means JOS Enterprises, Ltd., a Texas limited partnership.
KNOWLEDGE means (i) actual awareness of a particular fact or other matter
or (ii) the awareness of a particular fact or other matter that a prudent
individual could be expected to possess after conducting a reasonable
investigation concerning the existence of that fact or other matter.
LAW means any law, ordinance, code, regulation or rule of any
Governmental Body or any principle or rule of common law.
LEASEHOLD IMPROVEMENTS means depreciable or amortizable improvements made
by (or on behalf of) the tenant under a lease of a Facility which belong to the
tenant and not to the landlord under the terms of the lease or by agreement of
the parties.
LIABILITY means any liability or obligation, whether known or unknown,
absolute or contingent, liquidated or unliquidated, or due or to become due.
11
<PAGE> 6
LIEN means any lien, security interest, claim, community property interest,
equitable interest, option, pledge, right of first refusal or other encumbrance
or restriction of any kind, including any restriction on use, voting, transfer,
receipt of income or exercise of any other attribute of ownership.
MARKS means registered and unregistered trademarks, service marks and
related applications, registrations and renewals, and trade names, assumed names
and logotypes.
MEDICAL WASTE PROCESSING AGREEMENT means the medical waste processing
agreement, in the form of the attached EXHIBIT D, for Sellers' treatment at the
Albuquerque Facility of all regulated medical waste that Buyer collects in the
State of New Mexico and the Counties of El Paso and Hudspeth, Texas, for a term
of six months, subject to being extended for a second six-month by written
Notice from Sellers to Buyer no later than 60 days prior to the expiration of
the initial six-month term.
NONCOMPETITION AGREEMENT means the noncompetition agreement between
Buyer and Sellers, RRI, JOS Enterprises, Otley Smith III, Otley Smith IV and
Linda Jones, in the form of the attached EXHIBIT E.
NOTICE means any notice, demand, charge, complaint or other communication
from any Person.
OBJECTION PERIOD is defined in Section 10.6(a).
OCCUPATIONAL SAFETY AND HEALTH LAW means the federal Occupational Safety
and Health Act of 1970, as amended, and any other Law or Order intended to
provide safe and healthful working conditions and to reduce occupational safety
and health hazards, and any governmental program designed to provide safe and
healthful working conditions.
ORDER means any order, judgment, decree, ruling, consent decree, settlement
agreement, stipulation, injunction or subpoena entered or issued by any court,
Governmental Body or arbitrator.
ORDINARY COURSE OF BUSINESS means, in respect of a Seller, an action taken
by it which (i) is consistent with its past practices and is taken in the
ordinary course of the normal day-to-day operations and (ii) is not required by
applicable Law or its Organizational Documents to be authorized by its board of
directors.
ORGANIZATIONAL DOCUMENTS means, in respect of a Party, its articles or
certificate of incorporation and its by-laws, each as amended to date.
OTHER ASSETS means the following assets of each Seller used or useful in
the
12
<PAGE> 7
conduct of Sellers' Hauling Business (specifically excluding any Excluded
Assets, among which are all tangible and intangible assets of Sellers' Treatment
Business):
(a) all Permits (but not including any Permits held by Sellers
for use only in the conduct of Sellers' Treatment Business);
(b) all Equipment (including, but not limited to, (i) all
containers and carts, including both reusable and corrugated
containers, liners, packaging materials and related supplies and (ii) a
current version of Sellers' proprietary programs used in its weighing
and bar coding systems and all weighing and bar coding systems and
equipment);
(c) its interest in all Equipment Leases;
(d) its interest in all Facility Leases (including, in the case
of New Mexico Med, the Facility Leases relating to its transfer
stations in Farmington, New Mexico, and Roswell, New Mexico, but not
including the Facility Lease relating to the Albuquerque, Facility
which is the subject of the Albuquerque Sublease, and, in the case of
Texas Med, not including the Facility Lease relating to its Facility in
El Paso, Texas, which is the subject of the El Paso Sublease);
(e) all Leasehold Improvements in respect of all Facility Leases;
(f) all Trade Secrets;
(g) all Patents and Marks;
(h) its interest as a beneficiary in all unexpired
confidentiality agreements and covenants not to compete;
(i) its interest in the goodwill of Sellers' Hauling Business
and in all telephone and telecopier numbers and related listings in
telephone books and directories;
(j) to the extent assignable, all warranties and guaranties
regarding the operation or performance of Transportation Equipment and
other Equipment;
(k) the originals or true and complete copies of all Books and
Records relating to any of the Hauling Assets;
(l) all other tangible and intangible assets used or useful in
the conduct of Sellers' Hauling Business (but not including the
Excluded Assets).
OTHER CLOSING AGREEMENTS means, in alphabetical order, the Albuquerque
13
<PAGE> 8
Sublease, El Paso Sublease, Equipment Purchase and Technology License Agreement,
Medical Waste Processing Agreement, Noncompetition Agreement and Real Estate
Contract, plus the employment and consulting agreements referred to in Section
3.2(c)(3).
PARTY means Buyer, either Seller or RRI, and PARTIES means Buyer, Sellers
and RRI.
PATENTS means all patents and patent applications and inventions and
discoveries that may be patentable.
PERMIT means any approval, consent, license, permit, registration,
certificate, waiver or other authorization issued, granted or otherwise made
available by any Governmental Body, including, but not limited to, any relating
to (i) the collection, transportation (including mailing), storage, treatment or
disposal of regulated medical waste or (ii) the operation of any facility to
handle, store, treat or dispose of regulated medical waste.
PERSON means any individual, corporation, general or limited partnership,
limited liability company, joint venture, association, organization, estate,
trust or other entity or any Governmental Body.
PURCHASE PRICE is defined in Section 2.1.
REAL ESTATE CONTRACT means the real estate contract between JOS Enterprises
and Buyer, in the form of the attached EXHIBIT F, for the sale to Buyer of the
Albuquerque Facility.
RELATED PARTY means, in respect of a Seller, (i) any Affiliate of the
Seller or (ii) any Person for which any officer or director of the Seller (or
any member of the officer's or director's family) serves as an officer,
director, partner, manager, executor, trustee or in a similar capacity or in
which any officer or director of the Seller (or any member of the officer's or
director's family) has an equity, beneficial or other financial interest (of
more than 3% of the issued and outstanding stock, in the case of a corporation,
or more than 3% of the capital and profits, in the case of a partnership). For
purposes of this definition, an officer's or director's "family" consists of any
child, grandchild, sibling, parent, grandparent, aunt, uncle, cousin, nephew or
niece of the officer or director, the spouse of any such individual, and any
trust for the benefit of any one or more of such individuals.
RRI means Rubbish Removal Incorporated, a Texas corporation.
SCHEDULE means the attached Schedule of Assumed Liabilities, Schedule of
Customer Contracts, Schedule of Other Assets or Schedule of Transportation
Equipment, as each of them may be modified or supplemented by written agreement
of the PARTIES. All Schedules are incorporated in and shall be considered
14
<PAGE> 9
part of this Agreement.
SCHEDULE OF ASSUMED LIABILITIES means the attached schedule of the
Liabilities of Sellers to be assumed by Buyer pursuant to Section 2.3(a)(2).
SCHEDULE OF CUSTOMER CONTRACTS means the attached schedule of the Customer
Contracts included in the Hauling Assets.
SCHEDULE OF OTHER ASSETS means the attached schedule of the Other Assets
included in the Hauling Assets.
SCHEDULE OF TRANSPORTATION EQUIPMENT means the attached schedule of the
Transportation Equipment included in the Hauling Assets.
SELLER means Medical Compliance Services, a Texas corporation, or Medical
Compliance Services, a New Mexico corporation, and SELLERS means both of them.
SELLERS' BUSINESS means Sellers' business of collecting, transporting,
treating and disposing of regulated medical waste in Texas and New Mexico.
SELLERS' HAULING BUSINESS means the portion of Sellers' Business relating
to the collection, transportation and disposal of regulated medical waste.
SELLERS' TREATMENT BUSINESS means the portion of Sellers' Business relating
exclusively to the treatment of regulated medical waste utilizing the chlorine
dioxide waste treatment unit currently operated by New Mexico Med at its
Facility in Albuquerque, New Mexico.
SELLING PARTY means a Seller or RRI, and SELLING PARTIES means Sellers and
RRI.
SUIT means any action, suit, proceeding, arbitration, audit, hearing or
investigation (whether civil, criminal, administrative or investigative in
nature, and whether formal or informal) by, before or in any court, Governmental
Body or arbitrator.
TAX means any federal, state, local, municipal or foreign income, gross
receipts, capital stock, profits, withholding, social security, unemployment,
real property, personal property, stamp, excise, occupation, sales, use, value
added, estimated or other tax (including any related interest, fines, penalties
and additions), whether disputed or not.
TAX RETURN means any return (including any information return), report,
statement, form or other document required to be filed with or submitted to any
Governmental Body in connection with the determination, assessment, collection
or payment of any Tax.
15
<PAGE> 10
THIRD PARTY SUIT means a Suit, demand or claim against a Party for which
the Party is entitled to indemnification under Sections 10.1(c) or 10.2(c), as
the case may be.
THREATENED means, in respect of a Suit, that Notice has been given, or an
other event has occurred or any other circumstance exists, that would lead a
prudent individual to conclude that the Suit is likely to be initiated or
otherwise pursued in the future.
TRADE SECRETS means trade secrets, know-how, confidential information,
computer source codes, programs and software (other than those that are
commercially available), technical information and data, process technology,
plans, drawings and blue prints.
TRANSPORTATION EQUIPMENT means automobiles, trucks, trailers and other
vehicles.
TRUCK LEASE means a Contract for the lease of Transportation Equipment or
for the purchase of Transportation Equipment under a conditional sales or title
retention agreement.
ARTICLE 2
THE TRANSACTION
2.1 PURCHASE PRICE. At Closing, Sellers shall sell and transfer the Hauling
Assets to Buyer, and Buyer shall purchase the Hauling Assets from Sellers, on
the terms and subject to the conditions of this Agreement. The purchase price
for the Hauling Assets (the "Purchase Price") shall be $5,850,000 in cash and
the assumption of certain Liabilities of Sellers as provided in Section 2.3(a).
2.2 PAYMENT. Buyer shall pay the cash portion of the Purchase Price to
Sellers at Closing in immediately available funds by means of:
(a) a wire transfer to each Person holding a Lien on any of the
Hauling Assets (other than a Lien listed on the Schedule of Assumed
Liabilities), in an amount sufficient to discharge or release the Lien;
and
(b) a wire transfer of the remaining balance of the cash portion
of the Purchase Price to an account designated by Sellers.
2.3 SELLERS' LIABILITIES. The following provisions shall apply in
respect of Buyer's assumption of Sellers' Liabilities:
(a) Buyer shall assume the following Liabilities of Sellers (the
16
<PAGE> 11
"Assumed Liabilities"):
1) all of Sellers' obligations accruing on or after the
Closing Date under Customer Contracts, Truck Leases, Equipment
Leases and Facility Leases listed on the Schedules of Customer
Contracts, Transportation Equipment and Other Assets; and
(2) the Liabilities of Sellers listed on the Schedule of
Assumed Liabilities (in no event exceeding $140,000 in the
aggregate).
At Closing, Buyer and Sellers shall pro rate (i) any amounts prebilled by
Sellers under Customer Contracts listed on the Schedule of Customer
Contracts and (ii) any rent or other expenses allocable to a period
following Closing which Sellers paid or incurred prior to Closing under the
Truck Leases, Equipment Leases and Facility Leases listed on the Schedules
of Customer Contracts, Transportation Equipment and Other Assets.
(b) With the sole exception of the Assumed Liabilities, Buyer
shall not assume any Liabilities of Sellers (or of RRI) of any kind.
The excluded Liabilities (the "Excluded Liabilities") include (but are
not limited to):
(1) any Liability to vendors or suppliers;
(2) any Liability to any lender or lessor;
(3) any Liability for income, payroll, sales, use or other Taxes;
(4) any Liability for salary, wages, bonuses, vacation pay, sick
pay, severance pay or other compensation due to employees and
consultants and other independent contractors;
(5) any Liability under or in respect of any Employee Benefit
Plan;
(6) any Liability for a failure to comply with the continuation
health care requirements of Sections 601-608 of ERISA and Section 4980B
of the Internal Revenue Code;
(7) any Liability for personal injury or property damage;
(8) any Liability under any Permit;
(9) any Cleanup Liability or other Environmental Liability in
respect of an event occurring or condition first existing prior to the
Closing Date; and
(10) any Liability under any pending or Threatened Suit.
17
<PAGE> 12
ARTICLE 3
CLOSING
3.1 CLOSING. The closing of the Contemplated Transaction ("Closing") shall
take place at 10:00 a.m. Chicago time on August 31, 1998 at the offices of
Buyer's counsel, Johnson and Colmar, at 300 South Wacker Drive, Chicago,
Illinois, or at any other time and place, or in any other manner (e.g., the
exchange of signed documents by overnight courier service), that the Parties may
agree on.
3.2 CLOSING EVENTS. At Closing, the following events shall take place, all
of which shall be considered to take place concurrently:
(a) DELIVERIES BY SELLERS. Sellers or Selling Parties shall make
the following deliveries to Buyer:
(1) Sellers shall deliver a bill of sale and assignment
conveying the Hauling Assets to Buyer;
(2) Each Selling Party shall deliver a certificate, signed
by a duly authorized officer, certifying on behalf of the Selling
Party that its representations and warranties in Article 4 are true
and correct at Closing as if made at and as of Closing;
(3) Each Selling Party shall deliver an incumbency certificate,
signed by a duly authorized officer and containing a specimen
signature or signatures, regarding the officer or officers signing all
documents delivered at Closing in its name;
(4) Each Selling Party shall deliver a copy, certified to
Buyer as true and complete by an authorized officer, of
resolutions duly adopted by its board of directors authorizing
(i) its execution, delivery and performance of this Agreement
and each of the Other Closing Agreements to which it is a party
and (ii) approving the sale of Sellers' Hauling Business in
accordance with the terms of this Agreement;
(5) Selling Parties shall deliver an opinion of their
counsel, Scott, Hulse, Marshall, Feuille, Finger & Thurmond, in
form and substance reasonably satisfactory to Buyer and its
counsel, regarding the due organization of the Selling Parties
and their due authorization of the Contemplated Transaction;
(6) Sellers shall deliver a payoff letter, addressed to
Buyer, from each Person holding a Lien on any of the Hauling
Assets (other than a Lien listed on the Schedule of Assumed
Liabilities) indicating the
18
<PAGE> 13
amount sufficient to discharge or release the Lien; and
(7) Sellers shall deliver any other documents and instruments that
Buyer or its counsel may reasonably request.
(b) DELIVERIES BY BUYER. Buyer shall make the following deliveries to
Sellers:
(1) Buyer shall make the wire transfers of the cash portion of the
Purchase Price required by Section 2.2;
(2) Buyer shall deliver an assumption agreement assuming the
Assumed Liabilities;
(3) Buyer shall deliver a certificate, signed by a duly
authorized officer of Buyer, certifying that the representations
and warranties in Article 5 are true and correct at Closing as if made
at and as of Closing;
(4) Buyer shall deliver an incumbency certificate, signed by a
duly authorized officer of Buyer and containing a specimen
signature or signatures, regarding the officer or officers of
Buyer signing all documents delivered at Closing in its name;
(5) Buyer shall deliver a copy, certified to Sellers as
true and complete by an authorized officer of Buyer, of
resolutions duly adopted by the board of directors of Buyer
authorizing its purchase of Sellers' Hauling Business, including
its execution, delivery and performance of this Agreement and
each of the Other Closing Agreements; and
(6) Buyer shall deliver an opinion of its counsel, Johnson
and Colmar, in form and substance reasonably satisfactory to
Sellers and their counsel regarding the due organization of
Buyer and its due authorization of the Contemplated Transaction.
(7) Buyer shall deliver any other documents and instruments that
Sellers or their counsel reasonably may request.
(c) OTHER CLOSING AGREEMENTS. The appropriate parties enter into
the following agreements:
(1) Buyer and JOS Enterprises shall enter into the Real
Estate Contract;
(2) Buyer, Sellers and RRI shall enter into the Equipment
Purchase and Technology License Agreement;
19
<PAGE> 14
(3) Buyer and each of Otley Smith III, Otley Smith IV and Linda
Jones shall enter into a separate employment or consulting
agreement upon mutually acceptable terms;
(4) Buyer and Sellers, RRI, JOS Enterprises, Otley Smith
III, Otley Smith IV and Linda Jones shall enter into the
Noncompetition Agreement;
(5) Buyer and RRI shall enter into the El Paso Sublease;
(6) Buyer and New Mexico Med shall enter into the
Albuquerque Sublease; and
(7) Sellers and Buyer shall enter into the Medical Waste
processing Agreement.
(d) CLOSING DOCUMENTS. All Closing Documents delivered at Closing
pursuant to Sections 3.2(a) and (b) shall be in form and substance
reasonably satisfactory to the Parties and their respective counsel.
(e) FUTURE DELIVERIES. Sellers and Buyer agree to deliver to the
other Party following Closing any additional documents or instruments
that the Party reasonably requests to evidence and confirm the transfer
of the Hauling Assets to Buyer and assumption of the Assumed
Liabilities by Buyer.
ARTICLE 4
SELLING PARTIES' REPRESENTATIONS AND WARRANTIES
In order to induce Buyer to enter into this Agreement, the Selling Parties
jointly and severally represent and warrant to Buyer that the statements in this
Article 4 are true and correct as of the date of this Agreement, and will be
true and correct at Closing as if made at and as of Closing, except (i) to the
extent that any statement in this Article 4 is qualified or limited by an
exception in the Disclosure Schedule or may be qualified or limited by an
exception in a Disclosure Schedule Amendment, in which event the qualification
or limitation shall be effective retroactive to the date of this Agreement, and
except (ii) to the extent that any statement in this Article 4 refers to a
Schedule that is subsequently modified or supplemented by written agreement of
the Parties, in which event the statement shall be given effect, retroactive to
the date of this Agreement, as and the Schedule in question is modified or
supplemented by written agreement of the Parties.
4.1 AUTHORITY. Each Selling Party has the absolute and unrestricted right,
power, authority and capacity to execute and deliver this Agreement and its
Closing Documents and to perform its obligations under this Agreement, its
Closing Documents and the Other Closing Agreements to which it is a party. Each
Selling
20
<PAGE> 15
Party's execution, delivery and performance of this Agreement, its Closing
Documents and the Other Closing Agreements to which it is a party has been duly
authorized by all necessary corporate action.
4.2 ENFORCEABILITY. This Agreement constitutes a legal, valid and binding
obligation of each Selling Party, enforceable against it in accordance with its
terms (except as enforcement may be limited by applicable bankruptcy, insolvency
or similar Laws affecting the enforcement of creditors' rights generally, and by
legal and equitable limitations on the availability of specific remedies).
Upon each Selling Party's execution and delivery of its Closing Documents
and the Other Closing Agreements to which it is a party, each Selling Party's
Closing Documents and the Other Closing Agreements to which it is a party will
constitute legal, valid and binding obligations of the Selling Party,
enforceable against it in accordance with their respective terms (except as
enforcement may be limited by applicable bankruptcy, insolvency or similar Laws
affecting the enforcement of creditors' rights generally, and by legal and
equitable limitations on the availability of specific remedies).
4.3 ORGANIZATION. Each Selling Party is a corporation duly organized,
validly existing and in good standing under the laws of its state of
incorporation, with full corporate power and authority to conduct its business
as it is now being conducted, to own or use the properties and assets that it
purports to own or use, and to perform its obligations under all Contracts.
Except as disclosed in Section 4.3 of the Disclosure Schedule, each Seller
is duly qualified to do business as a foreign corporation and is in good
standing under the laws of each state or other jurisdiction in which either the
ownership or use of the properties owned or used by it, or the nature of the
activities conducted by it, requires qualification.
4.4 NO VIOLATION. Except as disclosed in Section 4.4 of the Disclosure
Schedule, neither the execution, delivery and performance of this Agreement by
the Selling Parties nor the consummation the Contemplated Transaction will,
either directly or indirectly (and with or without Notice or the passage of time
or both):
(a) violate or conflict with any Selling Party's Organizational
Documents or any resolution adopted by its board of directors or
shareholders;
(b) result in a breach of or default under any Customer Contract;
(c) result in the imposition or creation of a Lien upon any of the
assets owned or used by either Seller;
(d) violate or conflict with, or give any Governmental Body or other
21
<PAGE> 16
Person the right to challenge the Contemplated Transaction or to obtain
any other relief under, any Law or Order to which a Selling Party may be
subject; or
(e) violate or conflict with, or give any Governmental Body the
right to revoke, withdraw, suspend, cancel, terminate or modify, any
Permit issued to or held by either Seller.
4.5 NO CONSENT REQUIRED. Except for (i) the consent of the landlord or
owner to New Mexico Med's assignment to Buyer of New Mexico Med's Facility
Leases for the transfer stations in Farmington, New Mexico, and Roswell, New
Mexico, or (ii) as disclosed in Section 4.5 of the Disclosure Schedule, the
execution, delivery and performance of this Agreement by the Selling Parties and
the consummation of the Contemplated Transaction do not require any Notice to,
filing with, Permit from or other Consent of any Governmental Body or other
Person.
4.6 FINANCIAL STATEMENTS. Sellers have delivered copies of the
Financial Statements to Buyer. Each Seller's consolidating schedules included in
the Financial Statements fairly present in all material respects its financial
condition, results of operations and cash flows as of the dates indicated and
for the years then ended, in conformity with GAAP applied on a consistent basis.
Each Seller's unaudited balance sheet and income statement included in the
Financial Statements fairly present in all material respects its financial
condition as of June 30, 1998 and its results of operations for the year then
ended, in conformity with GAAP (applied on a basis consistent with the Seller's
consolidating schedules included in the Financial Statements).
4.7 ASSETS. Sellers own all of the Hauling Assets free and clear of any
Liens except for (i) Hauling Assets that are subject of Truck Leases, Equipment
Leases and Facility Leases listed on the Schedules of Transportation Equipment
and Other Assets, (ii) Liens that will be discharged or released at Closing and
(iii) Liens listed on the Schedule of Assumed Liabilities. Except for the
Excluded Assets, the Hauling Assets constitute all of the tangible and
intangible assets used or useful in the conduct of Sellers' Hauling Business.
Subject to Buyer's making the wire transfer or transfers that Buyer is required
to make pursuant to Section 2.2(a), Sellers will deliver good title to all of
the Hauling Assets at Closing, free and clear of all Liens except for Liens
listed on the Schedule of Assumed Liabilities.
4.8 CUSTOMER CONTRACTS. The Schedule of Customer Contracts will be a true
and complete list of all of Sellers' Customer Contracts as of Closing. At least
five days prior to Closing, Sellers shall deliver to Buyer true and complete
copies of all written Customer Contracts listed and any related written
amendments. Except as disclosed in Section 4.8 of the Disclosure Schedule, as of
Closing:
(a) each Customer Contract listed on the Schedule of Customer
Contracts will be valid, binding and enforceable in accordance with its
terms
22
<PAGE> 17
by the Seller who is a party to the Contract (except as enforcement may be
limited by applicable bankruptcy, insolvency or similar Laws affecting the
enforcement of creditors' rights generally, and by legal and equitable
limitations on the availability of specific remedies);
(b) each Seller will have performed all of its obligations up to
Closing under each Customer Contract listed on the Schedule of Customer
Contracts to which it is a party; and
(c) neither the Seller nor, to the Seller's Knowledge, the
customer will be in Default in any material respect under any Customer
Contract listed on the Schedule of Customer Contracts to which the
Seller is a party.
4.9 TRANSPORTATION EQUIPMENT. The Schedule of Transportation will be a
true and complete list of all of Sellers' Transportation Equipment as of
Closing.
4.10 CONDITION. The Transportation Equipment and other tangible assets
included in the Hauling Assets are in sufficient condition and repair to
continue to be operated in substantially the same manner that they were operated
by Sellers during the 12-month period ending July 14, 1998.
4.11 LEASES. At least five days prior to Closing, Sellers shall deliver to
Buyer true and complete copies of all Truck Leases, Equipment Leases and
Facility Leases to be listed on the Schedules of Transportation Equipment and
Other Assets. Except as disclosed in Section 4.11 of the Disclosure Schedule, as
of Closing:
(a) each lease listed will be valid, binding and enforceable in
accordance with its terms by the Seller who is a party to the lease
(except as enforcement may be limited by applicable bankruptcy,
insolvency or similar Laws affecting the enforcement of creditors'
rights generally, and by legal and equitable limitations on the
availability of specific remedies);
(b) each Seller will have performed all of its obligations up to
Closing under each lease listed to which it is a party; and
(c) neither the Seller nor, to the Seller's Knowledge, the
lessor will be in Default in any material respect under any lease
listed to which the Seller is a party.
4.12 PERMITS. The Schedule of Other Assets to be agreed to pursuant to
Section 3.2(c) will include a true and complete list of all Permits relating to
the conduct of Sellers' Hauling Business that Sellers hold as of Closing, and no
other Permits will be required for the lawful conduct of Sellers' Hauling
Business as currently conducted. At least five days prior to Closing, Sellers
shall deliver to Buyer true and complete copies of all Permits listed. Except as
set forth in Section 4.11 of the Disclosure Schedule:
23
<PAGE> 18
(a) all of the Permits listed will be valid and in force as of
Closing;
(b) Sellers have conducted Sellers' Hauling Business in
compliance with the Permits listed;
(c) no event has occurred or circumstance exists that (with or
without Notice or the passage of time or both) could (i) constitute or
result in either Seller's violation of or failure to comply with any
Permit listed or (ii) result in the revocation, withdrawal, suspension,
cancellation, termination or material modification of any Permit
listed;
(d) neither Seller has received any written or oral Notice from
any Governmental Body or other Person regarding (i) any actual, alleged
or potential violation of or failure to comply with any Permit listed
or (ii) any actual, proposed or potential revocation, withdrawal,
suspension, cancellation, termination or modification of any Permit
listed; and
(e) Sellers have duly filed on a timely basis all applications
required to be filed for the renewal of the Permits listed and have
duly made on a timely basis all other filings required to have been
made in respect of the Permits listed.
4.13 PATENTS, MARKS AND TRADE SECRETS. With the exception of the trade
names "Medical Compliance Services" and "Med Compliance Services" and the
logotype described in the Schedule of Other Assets, neither Seller owns or uses
(under license or otherwise) any Patents or Marks in the conduct of Sellers'
Hauling Business, and neither Seller has interfered with, infringed on,
misappropriated or otherwise violated a Patent or Mark of any other Person. Each
Seller has taken all actions reasonably necessary or appropriate to protect its
Trade Secrets.
4.14 UNDISCLOSED LIABILITIES. Except as disclosed in Section 4.14 of the
Disclosure Schedule, neither Seller has any Liabilities as of the date of this
Agreement or will have any Liabilities as of the Closing Date except for (i)
Liabilities reflected on its unaudited balance sheet as June 30, 1998 included
in the Financial Statements and (ii) Liabilities that have arisen since June 30,
1998 in the Ordinary Course of Business.
4.15 TAXES. Each Seller has filed all Tax Returns that it was required to
file. All of these Tax Returns were correct and complete, and all Taxes owed for
any prior period (whether or not shown on a Tax Return) have been paid. Each
Seller has withheld and paid all Taxes that the Seller was required to withhold
and pay in respect of compensation or other amounts paid to any employee or
independent contractor. Neither Seller had any delinquent Taxes as of June 30,
1998, and the reserve for Taxes reflected on its unaudited balance sheet as of
June 30, 1998 included in the Financial Statements was adequate for all unpaid
Taxes. Neither
24
<PAGE> 19
Seller has extended the time in which to file any Tax Return, waived the statute
of limitations for any Tax or agreed to any extension of time for a Tax
assessment or deficiency.
4.16 NO MATERIAL ADVERSE CHANGE. Since June 30, 1998, there has not been
any material adverse change in the business, condition, operations, assets or
prospects of either Seller, and no event has occurred or circumstance exists
that could result in a material adverse change.
4.17 EMPLOYEE BENEFITS. No event has occurred or condition exists in
respect of any Employee Benefit Plan currently or formerly maintained by either
Seller (or RRI) that could result in the imposition of any liability on Buyer
under ERISA or the Internal Revenue Code. Except to the extent required by
Section 4980B of the Internal Revenue Code, neither Seller provides health or
other welfare benefits to any retired or former employee or is obligated to
provide health or other welfare benefits to any active employee following his or
her retirement or other termination of service. Neither Seller contributes to or
has ever been required to contribute to any "multiemployer plan" (as defined in
Section 3(37) of ERISA), or has incurred any "withdrawal liability" (as defined
in Section 4021 of ERISA) in respect of any multiemployer plan or withdrawn from
any multiemployer plan in a "complete withdrawal" or a "partial withdrawal" (as
respectively defined in Sections 4203 and 4205 of ERISA).
4.18 COMPLIANCE. Except as disclosed in Section 4.18 of the Disclosure
Schedule:
(a) Each Seller is, and has been at all times since June 30,
1995, in full compliance with each Law and Order that is or was
applicable to it or to the conduct of Sellers' Hauling Business or the
ownership or use of any of the Hauling Assets.
(b) No event has occurred or circumstance exists that (with or
without Notice or the passage of time or both) could (i) constitute or
result in either Seller's violation of or failure to comply with any
applicable Law or Order or (ii) give rise to any legal obligation of
either Seller to undertake or bear all or any portion of the cost of
any remedial action of any kind.
(c) Since June 30, 1995, neither Seller has received any written
or oral Notice from any Governmental Body or other Person regarding (i)
any actual, alleged or potential violation of or failure to comply with
any applicable Law or Order or (ii) any actual, alleged or potential
obligation of the Seller to undertake or bear all or any portion of the
cost of any remedial action of any kind.
4.19 LEGAL PROCEEDINGS. Except as disclosed in Section 4.19 of the
Disclosure Schedule, there are no pending Suits in which either Seller is a
party or which
25
<PAGE> 20
otherwise relate to or affect either Seller or Sellers' Hauling Business or the
Hauling Assets. None of the Suits disclosed in Section 4.18 of the Disclosure
Schedule, if any, could have a material adverse effect on Sellers' Hauling
Business or the Hauling Assets. Except as disclosed in Section 4.19 of the
Disclosure Schedule, to the Selling Parties' Knowledge, (i) no event has
occurred or circumstance exists that may give rise to or serve as a basis for
any Suit to be brought or Threatened against either Seller, and (ii) there is no
Threatened Suit that challenges the Contemplated Transaction or could have the
effect of preventing, delaying, making illegal or otherwise interfering with the
Contemplated Transaction. At least five days prior to Closing, Sellers shall
deliver to Buyer copies of all pleadings, correspondence and other documents
relating to each Suit disclosed in Section 4.19 of the Disclosure Schedule.
4.20 ABSENCE OF CERTAIN EVENTS. Except as disclosed in Section 4.20 of the
Disclosure Schedule, since June 30, 1998:
(a) neither Seller has sold, leased or disposed of any of its
assets used or useful in conduct of Sellers' Hauling Business except in
the Ordinary Course of Business;
(b) no Seller has entered into any Contract relating to Sellers'
Hauling Business except in the Ordinary Course of Business;
(c) except for Contracts which expired in accordance with their
terms or were terminated in the Ordinary Course of Business, there has
been no termination, acceleration or modification of any Contract
relating to Sellers' Hauling Business to which either Seller is or was
a party or by which it is or was bound;
(d) neither Seller has imposed or permitted any Lien on any of
its assets used or useful in conduct of Sellers' Hauling Business;
(e) neither Seller has delayed or postponed (beyond its normal
practice) payment of its vendor accounts payable and other Liabilities;
(f) neither Seller has cancelled, compromised, waived or
released any claim or right outside of the Ordinary Course of Business;
(g) neither Seller has experienced any material damage,
destruction or loss to any of its assets used or useful in conduct of
Sellers' Hauling Business (whether or not covered by insurance);
(h) neither Seller has changed the base compensation or other
terms of employment of any of its employees except in the Ordinary
Course of Business;
26
<PAGE> 21
(i) neither Seller has entered into any Contract to do any of
the matters described in the preceding clauses (a)-(h); and
(j) there has been no other transaction, occurrence or event
involving Sellers' Hauling Business except in the Ordinary Course of
Business.
4.21 ENVIRONMENTAL MATTERS. Except as disclosed in Section 4.21 of the
Disclosure Schedule:
(a) Each Seller is, and has been at all times, in substantial
compliance with all applicable Environmental Laws, except where the
failure to comply would not have, or would not have had, a material
adverse effect on the Seller or Sellers' Hauling Business. Neither
Seller (nor any other Person for whose conduct either Seller may be
held responsible) has received, and to the Selling Parties' Knowledge,
there is no basis to expect either Seller (or any other Person for
whose conduct either Seller may be held responsible) to receive, any
Notice from any Governmental Body, any private citizen acting in the
public interest, the current or prior owner or operator of any current
or former Facility, or any other Person, of (i) the Seller's actual or
potential violation or failure to comply with any other Environmental
Law or (ii) the Seller's actual or potential Cleanup Liability or other
Environmental Liability.
(b) Neither Seller (nor any other Person for whose conduct
either Seller may be held responsible) has any Cleanup Liability or
other Environmental Liability in respect of any current or former
Facility, any property adjoining any current or former Facility or any
assets used or useful in the conduct of Sellers' Hauling Business in
which the Seller has or had an interest.
(c) Except for Hazardous Materials stored or used in the
Ordinary Course of Business and in compliance with all applicable
Environmental Laws, there are no Hazardous Materials at any current
Facility (whether or not in storage tanks or other containers). Except
for Hazardous Activities conducted in the Ordinary Course of Business
and in compliance with all applicable Environmental Laws, neither
Seller (nor any other Person for whose conduct either Seller may be
held responsible) has permitted or conducted any Hazardous Activity at
any current or former Facility.
(d) There has been no Release or threatened Release by any
Seller or, to the Selling Parties' Knowledge, any other Person of any
Hazardous Materials at or from any current or former Facility or any
property adjoining any current or former Facility.
At least five days prior to Closing, Sellers will deliver copies to Buyer of all
reports, studies, analyses, tests or monitoring possessed or initiated by either
Seller relating to Hazardous Materials or Hazardous Activities at any current or
former Facility or
27
<PAGE> 22
compliance by any Seller (or any other Person for whose conduct a Seller may be
held responsible) with applicable Environmental Laws.
4.22 EMPLOYEES. Section 4.22 of the Disclosure Schedule contains a
complete and accurate list of the following information for each Seller's
employees, including employees on leave of absence or layoff status: name;
job title; current base compensation; changes in base compensation after
December 31, 1996; bonuses paid after December 31, 1996; and accrued vacation.
No employee of either Seller is a party to or is otherwise bound by any
Contract or arrangement, including any confidentiality, noncompetition or
proprietary rights agreement, that would prevent him or her from becoming an
employee of Buyer following Closing or otherwise limit or restrict the scope of
his or her duties as an employee of Buyer.
4.23 LABOR RELATIONS. Neither Seller is or has been a party to any
collective bargaining agreement or other labor Contract. Neither Seller is
experiencing, or has experienced at any time since June 30, 1995, and to the
Selling Parties' Knowledge, there is no basis to expect either Seller to
experience: (i) any strike, slowdown, picketing or work stoppage by or lockout
of its employees; (ii) any Suit relating to the alleged violation of any Law or
Order relating to labor relations or employment matters (including, but not
limited to, any charge or complaint filed by an employee or union with the
National Labor Relations Board, the Equal Employment Opportunity Commission or
any comparable Governmental Body; (iii) any other labor or employment dispute;
or (iv) any organizational activity or application for certification of a
collective bargaining agent.
4.24 CERTAIN PAYMENTS. Neither Seller, nor any officer, director, employee
or agent of either Seller, or any other Person associated with or acting for or
on behalf of either Seller, has directly or indirectly made or paid any
contribution, gift, bribe, rebate, payoff, kickback or other payment (whether in
money, property or services or any other form) to any Person (i) in order to
gain or pay for favorable treatment in obtaining business or special concessions
for either Seller or (ii) in violation of any Law.
4.25 RELATED PARTIES. Except as disclosed in Section 4.25 of the
Disclosure Schedule, no Related Party of either Seller has, or had at any time
since June 30, 1995, a direct or indirect financial or other interest in any
customer whose Customer Contract is listed on the Schedule of Customer
Contracts.
4.26 BROKER'S FEE. No Selling Party has any Liability for any fees,
commissions or similar payments to any broker, finder or agent in respect of the
Contemplated Transaction.
4.27 DISCLOSURE.
(a) As qualified or limited by the exceptions in the Disclosure
Schedule (as it may be amended by any Disclosure Schedule Amendment),
and solely as
28
<PAGE> 23
so qualified or limited, and except to the extent that any statement
refers to a Schedule that has not yet been agreed to, no statement in
this Article 4 is untrue or omits to state any material fact necessary to
make the statement, in light of the circumstances in which made, not
misleading. When read in conjunction with this Article 4, no statement in
the Disclosure Schedule (as it may be amended by any Disclosure Schedule
Amendment) is untrue or omits to state any material fact necessary to make
any statement in this Article 4 or in the Disclosure Schedule itself, in
light of the circumstances in which made, not misleading.
(b) No Notice given pursuant to Section 6.5 will contain an
untrue statement or omit to state a material fact necessary to make any
statement in the Notice, in light of the circumstances in which made,
not misleading.
(c) All copies of documents delivered by Sellers to Buyer under this
Agreement have been or will be true and complete copies of the originals.
(d) Except as disclosed in this Article 4 or the Disclosure Schedule
(as it may be amended by any Disclosure Schedule Amendment), there is no
fact known to the Selling Parties that has specific application to Sellers
(other than general economic or industry conditions) and that has had or,
as far as the Selling Parties reasonably can foresee, could have a material
adverse effect on Sellers' Hauling Business or the Hauling Assets.
ARTICLE 5
BUYER'S REPRESENTATIONS AND WARRANTIES
In order to induce the Selling Parties to enter into this Agreement, Buyer
represents and warrants to the Selling Parties that the statements in this
Article 5 are true and correct as of the date of this Agreement and will be true
and correct at Closing as if made at and as of Closing.
5.1 AUTHORITY. Buyer has the absolute and unrestricted right, power and
authority to execute and deliver this Agreement and its Closing Documents and to
perform its obligations under this Agreement and its Closing Documents. Buyer's
execution, delivery and performance of this Agreement and its Closing Documents
has been duly authorized by all necessary corporate action.
5.2 ENFORCEABILITY. This Agreement constitutes the legal, valid and
binding obligation of Buyer, enforceable against it in accordance with its terms
(except as enforcement may be limited by applicable bankruptcy, insolvency or
similar Laws affecting the enforcement of creditors' rights generally, and by
legal and equitable limitations on the availability of specific remedies).
Upon Buyer's execution and delivery of Buyer's Closing Documents and
the
29
<PAGE> 24
Other Closing Agreements, they will constitute legal, valid and binding
obligations of Buyer, enforceable against it in accordance with their respective
terms (except as enforcement may be limited by applicable bankruptcy, insolvency
or similar Laws affecting the enforcement of creditors' rights generally, and by
legal and equitable limitations on the availability of specific remedies).
5.3 ORGANIZATION. Buyer is a corporation duly organized, validly existing
and in good standing under the laws of the State of Delaware, with full
corporate power and authority to conduct its business as it is now being
conducted.
5.4 NO VIOLATION. Neither Buyer's execution, delivery and performance
of this Agreement nor its consummation the Contemplated Transaction will give
any Person the right to prevent, delay or otherwise interfere with the
Contemplated Transaction pursuant to: (i) Buyer's Organizational Documents; (ii)
any resolution adopted by Buyer's board of directors; (iii) any Law or Order to
which Buyer may be subject; or (iv) any Contract to which Buyer is a party or by
which it is bound.
5.5 NO CONSENT REQUIRED. Except as disclosed in the attached Schedule 5.5,
Buyer's execution, delivery and performance of this Agreement and consummation
of the Contemplated Transaction do not require any Notice to, filing with,
Permit from or other Consent of any Governmental Body or other Person.
5.6 NO SUITS. There is no pending or, to Buyer's Knowledge, Threatened Suit
that challenges or seeks damages or other relief in connection with the
Contemplated Transaction or that could have the effect of preventing, delaying,
making illegal or otherwise interfering with the Contemplated Transaction.
5.7 BROKER'S FEE. Buyer does not have any Liability for any fees,
commissions or similar payments to any broker, finder or agent in respect of the
Contemplated Transaction.
5.8 DISCLOSURE. No statement in this Article 5 is untrue or omits to state
any material fact necessary to make the statement, in light of the circumstances
in which made, not misleading.
ARTICLE 6
EVENTS PRIOR TO CLOSING
6.1 CONDUCT OF BUSINESS. Pending Closing (to-wit, from the date of this
Agreement until Closing), Sellers shall conduct Sellers' Hauling Business only
in the Ordinary Course of Business and (ii) to use their best efforts to
maintain Sellers' Hauling Business substantially intact and preserve its
goodwill and advantageous relationships with customers, employees, suppliers and
other Persons having business dealings with Sellers. Neither Seller shall (i)
take any affirmative action that results in the occurrence of an event described
in Section 4.20 or (ii) fail to take
30
<PAGE> 25
any reasonable action within its control that would avoid the occurrence of an
event described in Section 4.20.
6.2 ACCESS TO INFORMATION. Pending Closing, Sellers shall (i) give Buyer
and its representatives access during normal business hours (but without
unreasonable interference with operations) to each Seller's offices and current
Facilities and to its books and records and other documents, (ii) make each
Seller's officers and key employees available for questioning and (iii)
otherwise cooperate with Buyer in its due diligence activities. Sellers shall
furnish Buyer and its representatives with all information and copies of all
documents concerning Sellers, Sellers' Hauling Business and the Hauling Assets
that they reasonably may request. Sellers shall permit Buyer and its
representatives to contact each Seller's principal customers and shall cooperate
with Buyer to facilitate those contacts.
6.3 SELLERS' FILINGS. As promptly as practicable after the date of this
Agreement, Sellers shall give each Notice, make each filing, and obtain each
Permit or other Consent listed on Schedule 4.5 of the Disclosure Schedule or
otherwise required of Sellers for consummation of the Contemplated Transaction.
To the extent that the cooperation of Sellers is necessary or, in Buyer's
reasonable judgment, desirable, Sellers shall cooperate with Buyer in regard to
all Notices, filings and Permits and other Consents listed on Schedule 5.5.
6.4 BUYER'S FILINGS. As promptly as practicable after the date of this
Agreement, Buyer shall make give each Notice, make each filing, and obtain each
Permit or other Consent listed on Schedule 5.5 or otherwise required of Buyer
for consummation of the Contemplated Transaction. To the extent that the
cooperation of Buyer is necessary or, in Sellers' reasonable judgment,
desirable, Buyer shall cooperate with Sellers in regard to all Notices, filings
and Permits and other Consents listed on Schedule 4.5 of the Disclosure
Schedule.
6.5 NOTICE OF DEVELOPMENTS. Pending Closing, the Selling Parties shall
promptly give Notice to Buyer of: (i) any fact or circumstance of which the
Selling Parties become aware that causes or constitutes an inaccuracy in or
breach of any of their representations and warranties in Article 4 as of the
date of this Agreement; (ii) any fact or circumstance of which the Selling
Parties become aware that would cause or constitute an inaccuracy in or breach
of any of their representations and warranties in Article 4 if their
representations and warranties were made on and as of the date of occurrence or
discovery of the fact or circumstance; (iii) any breach of or default under
Section 6.1 or any of Sellers' other obligations in this Article 6; or (iv) the
occurrence of any event that may make satisfaction of any of the conditions in
Section 8.1 impossible or unlikely.
6.6 NO NEGOTIATIONS. Pending Closing, the Selling Parties shall not,
directly or indirectly solicit, initiate or encourage any inquiries or proposals
from, discuss or negotiate with, provide any non-public information to, or
consider the merits of any unsolicited inquiries or proposals from any Person
(other than Buyer) relating to
31
<PAGE> 26
any transaction involving (i) the sale of Sellers' Hauling Business or Sellers'
Treatment Business or of any assets used or useful in the conduct of Sellers'
Hauling Business or Sellers' Treatment Business (other than in the Ordinary
Course of Business), (ii) the sale of capital stock of any Selling Party or
(iii) any merger, consolidation, business combination or similar transaction
involving any Selling Party.
ARTICLE 7
EVENTS SUBSEQUENT TO CLOSING
7.1 ACCOUNTS RECEIVABLE. Sellers' Accounts Receivable, which are not
included in the Hauling Assets, will be collected by Sellers. To the extent that
a Party receives payment from a customer whose Customer Contract is listed on
the Schedule of Customer Contracts in respect of services rendered by another
Party (i.e., if Buyer receives payment from a customer in respect of services
rendered by either Seller prior to Closing, or if either Seller receives payment
from a customer in respect of services rendered by Buyer after Closing), the
Party receiving payment shall remit the payment to the Party who rendered the
services no later than 30 days after the payment is received. In the case of any
payment relating to services rendered both before and after Closing, the Party
receiving payment shall remit the portion in respect of services rendered by
another Party to that Party no later than 30 days after the payment is received.
7.2 COOPERATION. To the extent that the Contemplated Transaction entails or
would be considered to entail the transfer of a Permit, Truck Lease, Equipment
Lease, Facility Lease or other Contract for the transfer of which any required
consent or approval has not been obtained, or for which the transfer is
prohibited by applicable Law, the closing of the Contemplated Transaction shall
not operate as a transfer of the Permit, Truck Lease, Equipment Lease, Facility
Lease or other Contract, or constitute an attempt to do so, notwithstanding any
apparent transfer at Closing. Following Closing, the Parties shall use
reasonable efforts in cooperation with one another to obtain any required
consent or approval or a waiver of any prohibition on transfer. Pending the
actual transfer of the Permit, Truck Lease, Equipment Lease, Facility Lease or
other Contract, the parties agree to make appropriate economic payments and
adjustments to put themselves in the same economic position that they would have
been if the transfer had actually taken place at Closing. In this regard, each
Seller's performance obligations in respect of any such Permit, Truck Lease,
Equipment Lease, Facility Lease or other Contract shall be considered
subcontracted to Buyer. If any Permit, Truck Lease, Equipment Lease, Facility
Lease or other Contract still cannot be assigned or transferred despite the
parties' efforts following Closing in accordance with this Section 7.3, Buyer
and Sellers agree to negotiate in good faith a mutually acceptable resolution
regarding the Permit, Truck Lease, Equipment Lease, Facility Lease or Contract.
7.3 TRANSITION ASSISTANCE. Following Closing, Sellers shall assist Buyer
with
32
<PAGE> 27
Buyer's initial contact with Sellers principal customers. Sellers shall also
provide reasonable other transition assistance to Buyer at its request (and
without charge, except for Sellers' actual out-of-pocket expenses) for a period
of six months following Closing.
7.4 CHANGE OF NAMES. Promptly following Closing, each Seller shall change
its corporate name to a name which is not likely to be confused with "Medical
Compliance Services" or "Med Compliance Services."
ARTICLE 8
CONDITIONS TO CLOSING
8.1 BUYER'S CONDITIONS. Buyer's obligation to purchase the Hauling Assets
and to take the other actions required to be taken by Buyer at Closing is
subject to the satisfaction of each of the following conditions prior to or at
Closing:
(a) there was no inaccuracy in or breach of any of the Selling
Parties' representations and warranties in Article 4 as of the date of
this Agreement, and there would be no inaccuracy in or breach of any of
the Selling Parties' representations and warranties if they were made
again at and as of Closing;
(b) the Selling Parties have executed and delivered all of their
respective Closing Documents and all of the Other Closing Agreements to
which they are parties, have delivered all of the other documents that
they are required to deliver prior to or at Closing, and have performed
all of their other obligations under this Agreement that they are
required to perform prior to or at Closing;
(c) each of the other parties to the Other Closing Agreements
(other than Buyer) has executed and delivered each Other Closing
Agreement to which it is a party;
(d) Buyer has obtained the consent of the landlord or owner, or
is reasonably confident that it will obtain the consent of the landlord
or owner, to New Mexico Med's assignment to Buyer of New Mexico Med's
Facility Leases for the transfer stations in Farmington, New Mexico,
and Roswell, New Mexico;
(e) each Permit or other Consent listed on Schedule 4.5 of the
Disclosure Schedule or otherwise required to be obtained by Sellers for
consummation of the Contemplated Transaction has been obtained and is
in full force;
(f) each Permit or other Consent listed on Schedule 5.5 has been
obtained and is in full force;
33
<PAGE> 28
(g) since the date of this Agreement, no Suit has been initiated
or Threatened that challenges or seeks damages or other relief in
connection with the Contemplated Transaction or that could have the
effect of preventing, delaying, making illegal or otherwise interfering
with the Contemplated Transaction;
(h) Buyer's consummation of the Contemplated Transaction will
not violate any Law enacted, adopted or formally proposed or introduced
since the date of this Agreement, or any Order entered or issued since
the date of this Agreement, to which Buyer is or will become subject.
Buyer may waive any condition specified in this Section 8.1 by a written waiver
at any time prior to or at Closing.
8.2 SELLERS' CONDITION. The obligation of Sellers to sell the Hauling
Assets and the obligation of the Selling Parties to take the other actions
required to be taken by the Selling Parties at Closing is subject to the
satisfaction of each of the following conditions prior to or at Closing:
(a) there was no inaccuracy in or breach of any of Buyer's
representations and warranties in Article 5 as of the date of this
Agreement, and there would be no inaccuracy in or breach of any of
Buyer's representations and warranties if they were made again at and
as of Closing;
(b) Buyer has executed and delivered all of its Closing Documents and
all of the Other Closing Agreements, has delivered all of the other
documents that it is required to deliver prior to or at Closing, and has
performed all of its other obligations under this Agreement that it is
required to perform prior to or at Closing; and
(c) each of the other parties to the Other Closing Agreements
(other than a Selling Party) has executed and delivered each Other
Closing Agreement to which it is a party;
(d) the Selling Parties' consummation of the Contemplated
Transaction will not violate any Law enacted, adopted or formally
proposed or introduced since the date of this Agreement, or any Order
entered or issued since the date of this Agreement, to which any
Selling Party is or will become subject.
The Selling Parties may waive any condition specified in this Section 8.2 by a
written waiver at any time prior to or at Closing.
ARTICLE 9
TERMINATION
34
<PAGE> 29
9.1 TERMINATION EVENTS. This Agreement may be terminated prior to Closing:
(a) by either Buyer or the Selling Parties, upon Notice to the
other Party, if the other Party breaches or defaults in the performance
of any material obligation under this Agreement and the breach or
default is not waived;
(b) by Buyer, upon Notice to the Selling Parties, if (i) any of
the conditions in Section 8.1 is not satisfied as of Closing or (ii)
satisfaction of any condition in Section 8.1 is or becomes impossible
(other than as a result of Buyer's failure to perform its obligations
under this Agreement) and Buyer does not waive satisfaction of the
condition;
(c) by the Selling Parties, upon Notice to Buyer, if (i) any of
the conditions in Section 8.2 is not satisfied as of Closing, (ii)
satisfaction of any condition in Section 8.2 is or becomes impossible
(other than as a result of the Selling Parties' failure to perform
their obligations under this Agreement) and the Selling Parties do not
waive satisfaction of the condition or (iii) Buyer does not accept in
writing any amendment or supplement to the Disclosure Schedule that the
Selling Parties propose; or
(d) by written agreement of the Parties.
9.2 EFFECT OF TERMINATION. Each Party's right of termination under
Section 9.1 is in addition to any other rights that the Party may have under
this Agreement or otherwise, and the exercise of a right of termination shall
not be considered an election of remedies. Notwithstanding the termination of
this Agreement pursuant to Section 9.1, the Parties' obligations under
Section 11.5 shall survive and continue indefinitely.
ARTICLE 10
INDEMNIFICATION
10.1 INDEMNIFICATION BY SELLERS. The Selling Parties jointly and severally
agree to indemnify Buyer against and hold it harmless from any Indemnifiable
Loss that it may suffer or incur which is caused by, arises out of or relates
to:
(a) any inaccuracy in or breach of any representation and
warranty made by the Selling Parties in Article 4 or in the certificate
that Sellers delivered at Closing pursuant to Section 3.2(a)(2);
(b) any breach or default by the Selling Parties in the
performance of any of their obligations under this Agreement;
35
<PAGE> 30
c) any Suit, demand or claim against Buyer by another Person
which arises out of or relates to the assets, business or conduct of
either Seller prior to Closing; or
(d) any Excluded Liabilities (including, but not limited to, any
Environmental, Tax or other Liability of either Seller of any kind
which was incurred or accrued, arose or relates to an event occurring
or condition first existing prior to Closing).
These indemnification obligations shall extend to claims made against Buyer's
officers, directors, employees, agents and Affiliates.
10.2 INDEMNIFICATION BY BUYER. Buyer agrees to indemnify the Selling
Parties against and hold them harmless from any Indemnifiable Loss that they or
any one of them may suffer or incur which is caused by, arises out of or relates
to:
(a) any inaccuracy in or breach of any representation and
warranty made by Buyer in Article 5 or in the certificate that Buyer
delivered at Closing pursuant to Section 3.2(b)(3);
(b) any breach or default by Buyer in the performance of any of
its obligations under this Agreement;
(c) any Suit, demand or claim against Sellers by another Person
which arises out of or relates to the assets, business or conduct of
any Seller subsequent to Closing;
(d) any Environmental, Tax or other Liability of Buyer of any
kind which is incurred or accrues, arises or relates to an event
occurring or condition first existing subsequent to Closing; or
(e) any Assumed Liability.
These indemnification obligations shall extend to claims made against the
Selling Parties' respective officers, directors, employees, agents and
Affiliates.
10.3 THRESHOLD AND CAP. The following thresholds shall apply in respect of
Indemnification Claims:
(a) In respect of Indemnification Claims under Sections 10.1(a)
or (b) or Sections 10.2(a) or (b), the Indemnified Party shall not be
entitled to indemnification until the aggregate amount for which
indemnification is sought exceeds $25,000. If this threshold is
reached, the Indemnified Party may assert an Indemnification Claim for
the portion of the Claim in excess of $25,000 and may assert any
subsequent Indemnification Claim without regard
36
<PAGE> 31
to any threshold amount.
(b) In respect of Indemnification Claims under Sections 10.1(c)
or (d) or Sections 10.2(c) or (d), no threshold shall apply to the
assertion of any Indemnification Claim.
The aggregate Liability of the Selling Parties under Section 10.1 shall not at
any time exceed (i) the Purchase Price less (ii) the aggregate amount of
Indemnifiable Losses that the Selling Parties previously have paid.
10.4 CLAIMS PERIOD. An Indemnification Claim may be asserted only during
the relevant Claims Period. The Claims Period shall begin on the date of this
Agreement and continue in effect indefinitely or expire as follows:
(a) for an Indemnification Claim pursuant to Section 10.1:
(1) the Claims Period for an Indemnification Claim
pursuant to Section 10.1(a) in respect of the Selling Parties'
representations and warranties in Sections 4.7 and 4.26 shall
continue in effect indefinitely;
(2) the Claims Period for an Indemnification Claim
pursuant to Section 10.1(a) in respect of the Selling Parties'
representation and warranty in Section 4.14 shall expire 90 days
after the expiration of the applicable Tax statute of
limitations;
(3) the Claims Period for an Indemnification Claim
pursuant to Section 10.1(a) in respect of the selling Parties'
representations and warranties in Article 4 (other than those in
Sections 4.7, 4.14 and 4.26) shall expire on the first
anniversary of the Closing Date (except in the case of an
Indemnification Claim on the basis of actual fraud or
intentional misrepresentation, for which the Claims Period shall
continue indefinitely);
(4) the Claims Period for an Indemnification Claim
pursuant to Section 10.1(b) shall expire on the first
anniversary of the Closing Date (except in the case of an
Indemnification Claim in respect of Sellers' obligations under
this Article 10 or under Section 11.5, for which the Claims
Period shall continue indefinitely); and
(5) the Claims Period for an Indemnification Claim
pursuant to Sections 10.1(c) or (d) shall continue indefinitely.
(b) for an Indemnification Claim pursuant to Section 10.2:
(1) the Claims Period for an Indemnification Claim
pursuant to Section 10.2(a) in respect of Buyer's
representations and warranties in
37
<PAGE> 32
Article 5 shall expire on the first anniversary of the Closing
Date (except in the case of an Indemnification Claim on the basis
of actual fraud or intentional misrepresentation, for which the
Claims Period shall continue indefinitely);
(2) the Claims Period for an Indemnification Claim
pursuant to Section 10.2(b) shall expire on the first
anniversary of the Closing Date (except in the case of Buyer's
obligations under this Article 10 or under Section 11.5, for
which the Claims Period shall continue indefinitely); and
(3) the Claims Period for an Indemnification Claim pursuant to
Sections 10.2(c) or (d) shall continue indefinitely.
If an Indemnification Claim is asserted within the applicable Claims Period, the
indemnification obligation of the Indemnifying Party shall continue in force in
respect of the Indemnification Claim until the Indemnification Claim is finally
resolved, regardless of the expiration of the Claims Period in the meanwhile.
10.5 NOTICE OF CLAIM. The Indemnified Party may assert an Indemnification
Claim by giving Notice of the Indemnification Claim to the Indemnifying Party
during the applicable Claims Period. The Indemnified Party's Notice shall
provide reasonable detail of the facts giving rise to the Indemnification Claim
and a statement of the Indemnified Party's Indemnifiable Loss or an estimate of
the amount of the Indemnifiable Loss that the Indemnified Party reasonably
anticipates that it will suffer or incur. The Indemnified Party may amend or
supplement its Indemnification Claim at any time (and more than once) by Notice
to the Indemnifying Party.
If or to the extent that the Indemnification Claim is not in respect of a
Third Party Suit, Section 10.6 shall apply. If or to the extent that the
Indemnification Claim is in respect of a Third Party Suit, Section 10.7 shall
apply.
10.6 RESOLUTION OF CLAIM.
(a) If the Indemnifying Party does not object to an
Indemnification Claim by the Indemnified Party during the 30-day period
following receipt of the Indemnified Party's Notice of its
Indemnification Claim (the "Objection Period"), the Indemnified Party's
Indemnification Claim shall be considered undisputed, and (subject to
the threshold and cap under Section 10.3) the Indemnified Party shall
be entitled to recover the full amount of its Indemnifiable Loss (or
estimate of its Indemnifiable Loss) from the Indemnifying Party.
(b) If the Indemnifying Party gives Notice to the Indemnified
Party within the Objection Period that the Indemnifying Party objects
to the
38
<PAGE> 33
Indemnified Party's Indemnification Claim, the Indemnifying Party and the
Indemnified Party shall attempt in good faith to resolve their differences
during the 30-day period following the Indemnified Party's receipt of the
Indemnifying Party's Notice of its objection (the "Resolution Period"). If
they fail to resolve their disagreement during the Resolution Period,
either of them may unilaterally submit the disputed Indemnification Claim
for binding arbitration before the American Arbitration Association in
Chicago, Illinois, in accordance with its rules for commercial arbitration
in effect at the time. The award of the arbitrator or panel of arbitrators
may include attorneys' fees to the prevailing party, and judgment on the
award may be entered in the United States District Court for the Northern
District of Illinois, the Circuit Court of Cook County, Illinois, or in any
other court of competent jurisdiction.
10.7 THIRD PARTY SUITS.
(a) The Indemnified Party shall promptly give Notice to the
Indemnifying Party of any Third Party Suit (which may be given by Notice of
an Indemnification Claim in respect of the Third Party Suit). The
Indemnified Party's failure or delay in giving this Notice shall not
relieve the Indemnifying Party from its indemnification obligations under
this Article 10 in respect of the Third Party Suit (except to the extent
that the Indemnifying Party suffers or incurs a loss by reason of the
Indemnified Party's failure or delay).
(b) Subject to Section 10.7(c), the Indemnified Party shall
control the defense of any Third Party Suit. The Indemnifying Party shall
be entitled to copies of all pleadings and, at its expense, may participate
in (but not control) the defense and employ its own counsel.
(c) The Indemnifying Party may assume control of the defense of
a Third Party Suit at any time during the course of the Third Party Suit if
all of the following conditions are (and remain) satisfied:
(1) the Third Party Suit seeks only money damages and does
not seek injunctive or other equitable relief against the
Indemnified Party;
(2) the Indemnifying Party unconditionally acknowledges in
writing to the Indemnified Party that the Indemnifying Party is
obligated to indemnify the Indemnified Party in full in respect
of the Third Party Suit (except for any matters which are not
subject to indemnification under this Agreement);
(3) the Indemnifying Party is not in default in any of its other
obligations under this Article 10;
39
<PAGE> 34
(4) the counsel chosen by the Indemnifying Party to defend
the Third Party Suit is reasonably satisfactory to the Indemnified
Party;
(5) the Indemnifying Party furnished the Indemnified Party with
a letter of credit, surety bond or similar security reasonably
satisfactory to the Indemnified Party in an amount sufficient to
secure the Indemnifying Party's potential indemnification Liability
to the Indemnified Party in respect of the Third Party Suit;
(6) the Indemnifying Party actively and diligently defends
the Third Party Suit; and
(7) the Indemnifying Party consults with the Indemnified
Party in respect of the Third Party Suit at the Indemnified
Party's reasonable request.
If the Indemnifying Party assumes the defense of the Third Party Suit, the
Indemnified Party shall be entitled to copies of all pleadings and, at its
expense, may participate in (but not control) the defense and employ its
own counsel.
(d) Regardless of whether the Indemnified Party or the Indemnifying
Party controls the defense of a Third Party Suit, both Parties shall
cooperate in its defense.
(e) The Indemnified Party's settlement of a Third Party Suit in
which the Indemnified Party controls the defense shall also be binding
on the Indemnifying Party, in the same manner as if a final judgment in
the amount of the settlement had been entered by a court of competent
jurisdiction, if, as part of the settlement, the Indemnifying Party
receives a binding release providing that any Liability of the
Indemnifying Party in respect of the Third Party Suit is being
satisfied as part of the settlement. The Indemnified Party shall give
the Indemnifying Party at least 30 days' prior Notice of any proposed
settlement, and during this 30-day period the Indemnifying Party may
assume the defense of the Third Party Suit in accordance with Section
10.7(c). If the Indemnifying Party assumes the defense, the Indemnified
Party shall not make proposed settlement.
(f) The Indemnifying Party may settle a Third Party Suit in
which the Indemnifying Party controls the defense only if the following
conditions are satisfied:
(1) the terms of settlement do not require any admission
by the Indemnified Party or Indemnifying Party in respect of any
matters subject to indemnification under this Article 10 that,
in the Indemnified Party's reasonable judgment, would have an
adverse effect on the
40
<PAGE> 35
Indemnified Party's business; and
(2) as part of the settlement, the Indemnified Party
receives a binding release providing that any Liability of the
Indemnified Party in respect of the Third Party Suit is being
satisfied as part of the settlement.
(g) The Indemnified Party's failure to defend a Third Party Suit
shall not relieve the Indemnifying Party of its indemnification
obligation under this Article 10 if the Indemnified Party gives the
Indemnifying Party at least 30 days' prior Notice of the Indemnified
Party's intention not to defend the Third Party Suit and affords the
Indemnifying Party the opportunity to assume the defense (without
having to satisfy the conditions in Section 10.7(c)).
ARTICLE 11
MISCELLANEOUS
11.1 EXPENSES. Each Party shall pay its own expenses in connection with
the negotiation and preparation of this Agreement and consummation of the
Contemplated Transaction. In the event of termination of this Agreement prior to
Closing (pursuant to Section 9.1), each Party's obligation to pay its own
expenses shall be subject to any right of recovery as a result of a breach of or
default under this Agreement by the other Party or Parties.
11.2 DISCLOSURE SCHEDULE. Nothing in the Disclosure Schedule (or any
Disclosure Schedule Amendment) shall be considered adequate to constitute an
exception to a representation and warranty in Article 4 unless the Disclosure
Schedule identifies the representation and warranty and adequately describes the
exception. Any exception to a particular representation and warranty which is
adequatelydescribed in the Disclosure Schedule (or any Disclosure Schedule
Amendment) shall be considered an exception to all other applicable
representations and warranties.
11.3 PARTIES' REVIEW. Any Knowledge acquired by a Party as a result of any
due diligence or other review or investigation in connection with the
negotiation and execution of this Agreement and consummation of the Contemplated
Transaction shall not limit that Party's right to rely on the other Party's or
Parties' representations and warranties in this Agreement or circumscribe that
Party's entitlement to indemnification under Article 10. A Party acquiring
actual Knowledge prior to Closing that one or more of the other Party's or
Parties' representations and warranties is inaccurate in any material respect
shall give Notice to the other Party or Parties of the relevant facts.
11.4 PUBLICITY. Any public announcement or similar publicity regarding to
this Agreement or the Contemplated Transaction shall be issued, if at all, as,
when
41
<PAGE> 36
and in the manner that Buyer determines (and in this regard, the Selling Parties
shall not to make any public disclosure of this Agreement or the Contemplated
Transaction prior to Closing). At the Sellers' request, Buyer shall consult with
Sellers regarding the manner in which each Seller's employees, customers and
suppliers and others having dealings with the Seller will be informed of the
Contemplated Transaction at or after Closing.
11.5 CONFIDENTIALITY. Pending Closing, Buyer and the Selling Parties shall
maintain in confidence, and shall cause their respective directors, officers,
employees, agents and advisors to maintain in confidence, and use only for the
purposes contemplated by this Agreement, all written, oral or other information
obtained in confidence from the other Party or Parties in connection with this
Agreement or consummation of the Contemplated Transaction. If the Contemplated
Transaction is not consummated, each Party shall return or destroy so much of
this information as exists in written or tangible form as the other Party or
Parties reasonably requests.
11.6. NOTICES. All Notices under this Agreement shall be in writing and
sent by certified or registered mail, overnight messenger service, telecopier or
personal delivery, as follows:
(a) if to Buyer, to:
Stericycle, Inc.
1419 Lake Cook Road
Suite 410
Deerfield, Illinois 60015
Attention: Mr. Frank J.M. ten Brink
Vice President, Finance
and Chief Financial Officer
Telecopier: (847) 945-6583
with a required copy to:
Johnson and Colmar
300 South Wacker Drive
Suite 1000
Chicago, Illinois 60606
Attention: Craig P. Colmar, Esq.
Telecopier: (312) 922-9283
(b) if to any of the Selling Parties, to:
Rubbish Removal Incorporated
5309 El Paso Drive
El Paso, Texas 79905
42
<PAGE> 37
Attention: Mr. Ron Acton
Executive Vice President
Telecopier: 915) 778-8359
with a required copy to:
Scott, Hulse, Marshall, Feuille,
Finger & Thurmond, P.C.
Commerce Bank Building
201 East Main Street
11th Floor
El Paso, Texas 79901
Attention: Myron D. Brown, Esq.
Telecopier: (915) 546-8333
All Notices sent by certified or registered mail shall be considered to have
been given three business days after being deposited in the mail. All Notices
sent by overnight courier service, telecopier or personal delivery shall be
considered to have been given when actually received by the intended recipient.
A Party may change its address for purposes of this Agreement by Notice in
accordance with this Section 11.6.
11.7 FURTHER ASSURANCES. The Parties agree (i) to furnish upon request to
each other such further information, (ii) to execute and deliver to each other
such other documents and (iii) to do such other acts and things, as the other
Party or Parties reasonably request for the purpose of carrying out the intent
of this Agreement and the documents and instruments referred to in this
Agreement.
11.8 WAIVER. The rights and remedies of the Parties are cumulative and not
alternative. Neither the failure nor any delay by any Party in exercising any
right, power or privilege under this Agreement or the documents referred to in
this Agreement shall operate as a waiver of that right, power or privilege, and
no single or partial exercise of any right, power or privilege shall preclude
any other or further exercise of that right, power or privilege or the exercise
of any other right, power or privilege. All waivers shall be in writing signed
by the Party to be charged with the waiver, and no waiver that may be given by a
Party shall be applicable except in the specific instance for which it is given.
11.9 ENTIRE AGREEMENT. This Agreement supersedes all prior agreements
between the Parties with respect to its subject matter (including the letter of
understanding between the Parties dated July 14, 1998) and constitutes (together
with the agreements and documents referred to in this Agreement) a complete and
exclusive statement of the terms of the agreement between the Parties with
respect to its subject matter. This Agreement may not be amended except by a
written agreement signed by the Party to be charged with the amendment.
43
<PAGE> 38
11.10 ASSIGNMENT. No Party may assign any of its rights under this
Agreement without the prior written consent of the other Party or Parties, with
the exception that Buyer, without being released from any of its obligations
under this Agreement, may assign any of its rights to any wholly-owned
subsidiary.
11.11 NO THIRD PARTY BENEFICIARIES. Nothing in this Agreement shall be
considered to give any Person other than the Parties any legal or equitable
right, claim or remedy under or in respect of this Agreement or any provision of
this Agreement. This Agreement and all of its provisions are for the sole and
exclusive benefit of the Parties and their respective heirs, legal
representatives, successors and permitted assigns.
11.12 SEVERABILITY. If any provision of this Agreement is held invalid or
unenforceable by a court of competent jurisdiction, the other provisions of this
Agreement shall remain in full force and effect. Any provision of this Agreement
which is held invalid or unenforceable only in part shall remain in full force
and effect to the extent not held invalid or unenforceable.
11.13 CAPTIONS. The captions of articles and sections of this Agreement are
for convenience only and shall not affect this the construction or
interpretation of this Agreement.
11.14 CONSTRUCTION. As used in this Agreement, the term "regulated medical
waste" does not include chemotherapeutic or pathological waste." All references
in this Agreement to "Section" or "Sections" refer to the corresponding section
or sections of this Agreement. All words used in this Agreement shall be
construed to be of the appropriate gender or number as the context requires.
Unless otherwise expressly provided, the word "including" does not limit the
preceding words or terms.
11.15 COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be considered an original copy of this
Agreement and all of which, when taken together, shall be considered to
constitute one and the same agreement.
11.16 GOVERNING LAW. This Agreement shall be governed by the Laws of the
State of Texas without regard to conflicts of laws principles.
11.17 BINDING EFFECT. This Agreement shall apply to, be binding in all
respects upon and inure to the benefit of Parties and their respective
successors and permitted assigns.
*
*
44
<PAGE> 39
In witness, the Parties have executed this Agreement.
STERICYCLE, INC.,
a Delaware corporation
By /s/ Frank J.M. ten Brink
-------------------------------------
Frank J.M. ten Brink
Vice President, Finance
and Chief Financial Officer
MEDICAL COMPLIANCE SERVICES, INC.,
a Texas corporation
By /s/ Ron Acton
-------------------------------------
Name: Ron Acton
Title: Chief Executive Officer
MEDICAL COMPLIANCE SERVICES, INC.,
a New Mexico corporation
By /s/ Ron Acton
-------------------------------------
Name: Ron Acton
Title: Chief Executive Officer
RUBBISH REMOVAL INCORPORATED,
a Texas corporation
By /s/ Ron Acton
Name: Ron Acton
-------------------------------------
Title: Executive Vice President
